Management Accounting Essay

725 Words 3 Pages
1. Given here are a few situations:
a. Inventory is recorded at its purchase price.
b. Financial Statements are prepared on an annual basis. c. Personal and business transactions are separately maintained.
d. Expenses are recognized in the same period as the related revenues.
e. The death of the chief executive officer of the company is not recorded in accounts.
f. In case of doubt, it is considered better to understate rather than overstate income.
g. Assets are not stated at their liquidation value.
h. The accounting records only events that affect the financial position of the entity and at the same time can be reasonably determined in monetary terms.
i. Same
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Using Accounting Equation, Answer the following independent Questions. a) New Company’s assets are ₹ 250 lakh and its external liabilities are of ₹ 100 lakh, determine the amount of owner’s Equity.

Owner’s Equity (250-100) ₹ 150 lakh.

b) Royal Industries has total assets of ₹ 100 lakh and owners’ Equity of ₹ 70 lakh, Compute the amount of external liabilities.
The Amount of External Liabilities are (100-70) ₹ 30 lakh.

c) Small Enterprise has following amounts appearing in Balance Sheet as at 31st December, 2014:
Capital ₹ 50 lakh, Reserves and undistributed profits ₹ 15 lakh, and total external liabilities ₹ 35 lakh, Determine the amount of total assets.
Balance Sheet As on 31st December, 2014
ASSETS ₹ LIABILITIES & OWNER’S EQUITY ₹
Assets 1, 00, 00,000 Capital 50, 00,000 Reserves and undistributed profits 15, 00,000 External liabilities 35, 00,000 =============== ============ 1, 00, 00,000 1, 00,

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