2 MARKS
1. Define Management Accounting
Management accounting involves the identification, measurement, analysis, and
interpretation of financial data to help managers make informed business
decisions. It focuses on internal financial planning, budgeting, and performance
evaluation.
2. Compare Horizontal and Vertical Analysis
Basis
Horizontal Analysis
Vertical Analysis
Definition
Compares financial data
over different periods.
Analyzes each component of a financial
statement as a percentage of a base
figure.
Focus
Trend analysis over
time.
Proportional analysis within a single
period.
Purpose
Identifies growth trends
and changes.
Helps in assessing financial structure.
3. Distinguish between Budgetary Control and Standard Costing
Aspect
Budgetary Control
Standard Costing
Definition
Process of setting budgets and
comparing actual performance.
Predetermined costs used for cost
control and variance analysis.
Scope
Covers all aspects of financial
planning.
Focuses only on cost elements.
Purpose
Ensures efficient resource
allocation.
Controls costs and improves
efficiency.
4. Relationship Between Management, Cost, and Financial Accounting
●​ Financial Accounting records and reports historical financial data for
external stakeholders.​
●​
Cost Accounting analyzes production costs to control expenses.​
●​
Management Accounting uses both cost and financial data to support
decision-making.​
They are interconnected, as management accounting relies on cost and
financial accounting for accurate data.​
5. How is Financial Statement Analysis Useful to the Financial Manager?
Financial statement analysis helps a financial manager:
●​ Assess profitability, liquidity, and solvency.​
●​ Make informed investment and financing decisions.​
●​ Identify trends and potential financial risks.​
●​
Improve resource allocation and strategic planning.​
6. Define Fund Flow Statement
A fund flow statement shows the movement of funds (sources and uses)
between two balance sheet dates. It helps analyze financial health by identifying
how funds are generated and utilized.
7. Objectives of Budgetary Control
●​ Planning: Establishing financial goals and allocating resources.​
●​ Coordination: Aligning various departments with overall business
strategy.​
●​ Control: Monitoring actual performance against budgets.​
●​
Efficiency: Reducing waste and improving financial discipline.​
8. Opening inventory Rs 50,000, Inventory turnover ratio 4 times. Gross
profit 20% of sales. Closing inventory was 2 times in comparison to
opening inventory. Calculate sales.
9. You are required to calculate break even volume using the following
data; profit Rs 5,000 (20% of sales) P/V ratio 50%.
10. Given that the cost standards for materials consumption are 40 kgs
at Rs 10 per kg. Compute the variances when actuals are 48 kgs at Rs
12 per kg.
11. Working Capital Rs 7,20,000; Creditors Rs 40,000; other Current
Liabilities Rs 2,00,000. Calculate Current Ratio