Rift Valley University
Post graduate program
Financial and Management Accounting
Individual assignment
1. Management Accounting Versus Financial Accounting.
Management accounting differs from financial accounting in a number of ways.
Indicate whether each of the following characteristics relates to management
accounting (MA) or financial accounting (FA):
1. Publically reported
2. Forward looking
3. Usually confidential
4. Complies with accounting standards
5. Reports past performance
6. Uses physical measures as well as monetary ones for reports
7. Focus on business decision making
8. Driven by user needs
2. The Balanced Scorecard: Stakeholder Values.
In the balanced scorecard approach, stakeholder groups with different perspectives
value different performance goals. Sometimes, however, they may be interested in the
same goal. Indicate which stakeholder groups—financial (F), learning and growth (L),
internal business processes (P), and customers (C)— value the following performance
goals:
1. High wages
2. Safe products.
3. Low-priced products
4. Improved return on investment
5. Job security
6. Cost-effective production processes
3. XYZ Co. wants to know if its profitability performance has increased from 2009 to 2010.
The company had net income of $48,000 in 2009 and $50,000 in 2010. Total assets were
$480,000 at the end of 2009, and $560,000 at the end of 2010. Calculate return on
assets(ROA) for 2009 and 2010 and Comment on the results.
4. The accountant for ABC Company makes the assumptions or performs the activities in
the list that follows. Tell which of these concepts of Accrual accounting most directly
relates to each assumption or action: (a) periodicity, (b) going concern, (c) matching rule,
(d) revenue recognition, (e) deferral, and (f) accrual.
1. In estimating the life of a building, assumes that the business will last indefinitely.
2. Records a sale when the customer is billed.
Dr Takele Fufa, Ast.professor, Addis Ababa University, College of Business and Economics
takele.fufa@aau.edu.et......or takelefufa@gmail.com
3. Postpones the recognition of a one-year insurance policy as an expense by initially
recording the expenditure as an asset.
4. Recognizes the usefulness of financial statements prepared on a monthly basis even
though they are based on estimates.
5. Recognizes, by making an adjusting entry, wages expense that has been incurred but
not yet recorded.
6. Prepares an income statement that shows the revenues earned and the expenses
incurred during the accounting period.
5. On December 1st Mr X began an auto repair shop, Mr X Quality Automotive. The following
information about December’s transactions, accounts, and adjustment data is available.
Transactions
Dec. 1 Mr X contributed $50,000 cash to the business in exchange for capital.
1 Purchased $10,800 of equipment paying cash.
1 Paid $4,500 for a 9-month insurance policy starting on December 1.
9 Paid $18,000 cash to purchase land to be used in operations.
10 Purchased office supplies on account, $3,000.
19 Borrowed $28,000 from the bank for business use. Mr X signed a note payable to the bank in the
name of the business.
22 Paid $800 for advertising expenses.
26 Paid $1,000 on account.
28 The business received a bill for utilities to be paid in January, $280.
31 Revenues earned during the month included $17,500 cash and $2,700 on account.
31 Paid employees' salaries $3,600 and building rent $700. Record as a compound entry.
31 The business received $1,440 for auto screening services to be performed next month.
31 Mr X withdrew cash of $3,000.
Accounts
Cash; Accounts Receivable; Office Supplies; Prepaid Insurance; Equipment; Accumulated
Depreciation-Equipment; Land; Accounts Payable; Utilities Payable; Interest Payable; Unearned
Revenue; Notes Payable; Mr X, Capital; Mr X, Withdrawals; Service Revenue; Salaries Expense;
Rent Expense; Utilities Expense; Advertising Expense; Supplies Expense; Insurance Expense;
Interest Expense; and Depreciation Expense-Equipment.
Adjustment Data
A. Office Supplies used during the month, 600.
B. Depreciation for the month, $180.
C. One-month insurance has expired.
D. Accrued Interest Expense, $75.
Dr Takele Fufa, Ast.professor, Addis Ababa University, College of Business and Economics
takele.fufa@aau.edu.et......or takelefufa@gmail.com
Requirements:
a. Prepare the journal entries and post to the T-accounts.
b. Prepare an unadjusted trial balance.
c. Prepare the adjusting entries and post to the T-accounts.
d. Prepare an adjusted trial balance.
e. Prepare the income statement, the statement of owner's equity, and a
classified balance sheet.
f. Prepare the closing entries and post to the T-accounts.
g. Prepare a post-closing trial balance.
6. Accounting is traditionally seen as fulfilling three functions: Scorekeeping, Attentiondirecting and Problem-solving. Explain.
7. Why does the Accounting system used for financial statement preparation not always
provide the information that managers need for decision-making purposes?
8. Identify Managerial Accounting techniques that have been developed to meet
information needs in the new business environment like value chain analysis, strategic
positioning analysis, Activity- based management, Activity -based costing.
9. PQR is the accounting intern for, a firm that has many small clients that need monthly accounting services.
Ray has been asked by the partner in charge to analyze the asset section of firms’s balance sheets which follow:
Cash
Accounts receivable, net
Inventory
Other current assets
Total current assets
Property, plant & equipment, net
Other assets
Total assets
2011
$2,500
35,000
85,000
3,400
125,900
180,000
2012
$3,900
40,000
122,000
4,110
170,010
230,000
15,000
$320,900
26,000
$426,010
Required
Prepare a common-size analysis of the assets section of the firms balance sheet for 2011 and 2012.Round all
percentage answers to one decimal place
Dr Takele Fufa, Ast.professor, Addis Ababa University, College of Business and Economics
takele.fufa@aau.edu.et......or takelefufa@gmail.com
10. The following information has been taken from the accounting records of ABC Corporation for
last year.
Management wants these data organized in a better format so that financial statements can be prepared
for the year.
Required: 1. Prepare a schedule of cost of goods manufactured.
2. Compute the cost of goods sold
3. Prepare an income statement.
11. List any four functions of management. Explain what type of cost management information is
appropriate for each.
12. Changes in the business environment have altered the nature of competition and the
types of techniques managers use to succeed in their businesses. These changes include
(1) an increase in global competition; (2) lean manufacturing; (3) advances in
information technologies, the Internet, and enterprise resource management; (4) a
Dr Takele Fufa, Ast.professor, Addis Ababa University, College of Business and Economics
takele.fufa@aau.edu.et......or takelefufa@gmail.com
greater focus on the customer; (5) new forms of management organization; and (6)
changes in the social, political, and cultural environment of business. Management
accountants have responded to the above six changes in the contemporary business
environment with 13 methods that are useful in implementing strategy in these
dynamic times. The first six methods focus directly on strategy implementation—the
balanced scorecard/strategy map, value chain, activity-based costing, business
intelligence, target costing, and life-cycle costing. The next seven methods focus on
strategy implementation through a focus on process improvement—benchmarking,
business process improvement, total quality management, lean accounting, the theory
of constraints, enterprise sustainability, and enterprise risk management. Describe each
briefly.
13. Why does an emphasis on accounting limit an understanding of the broader importance
of management control? What contribution can non-financial performance
management make to our understanding of management control within organizations?
14. XYZ company’s projected profit for the coming year is as follows;
Total
Sales………………. ……… $ 200,000
Less Variable exp…………$120,000
Contribution margin………$ 80,000
Less: Fixed costs…………..$ 64,000
Operating margin………….$ 0
per unit
$ 20
$ 12
$8
Based on the above data, Determine;
1. The breakeven point in units
2. The breakeven point in dollars
3. The contribution margin ratio
15. PQS Corporation manufactures and sells a seasonal product that has peak sales
in the third quarter. The following information concerns operations for Year 2—the
coming year—and for the first two quarters of Year 3:
a. The company’s single product sells for $8 per unit. Budgeted sales in units for the
next six quarters are as follows (all sales are on credit):
Dr Takele Fufa, Ast.professor, Addis Ababa University, College of Business and Economics
takele.fufa@aau.edu.et......or takelefufa@gmail.com
b. Sales are collected in the following pattern: 75% in the quarter the sales are made,
and the remaining 25% in the following quarter. On January 1, Year 2, the company’s
balance sheet showed $65,000 in accounts receivable, all of which will be collected
in the first quarter of the year. Bad debts are negligible and can be ignored.
c. The company desires an ending finished goods inventory at the end of each quarter
equal to 30% of the budgeted unit sales for the next quarter. On December 31, Year
1, the company had 12,000 units on hand.
d. Five pounds of raw materials are required to complete one unit of product. The
company requires ending raw materials inventory at the end of each quarter equal to
10% of the following quarter’s production needs. On December 31, Year 1, the
company had 23,000 pounds of raw materials on hand.
e. The raw material costs $0.80 per pound. Raw material purchases are paid for in
the following pattern: 60% paid in the quarter the purchases are made, and the
remaining 40% paid in the following quarter. On January 1, Year 2, the company’s
balance sheet showed $81,500 in accounts payable for raw material purchases, all of
which will be paid for in the first quarter of the year.
Required: Prepare the following budgets and schedules for the year, showing both
quarterly and total figures:
1. A sales budget and a schedule of expected cash collections.
2. A production budget.
3. A direct materials budget and a schedule of expected cash payments for purchases of
material.
END!
Date of submission……………………………. February 10/2021.
Dr Takele Fufa, Ast.professor, Addis Ababa University, College of Business and Economics
takele.fufa@aau.edu.et......or takelefufa@gmail.com