Let’s solve the questions in detail one by one based on the given information.
Q1: Accounting Concepts
1. Accrual Concept Recognize revenue and expenses when they occur, irrespective of cash flows. Example: A company recognizes revenue when the product is sold, even if the payment is due later.
2. Matching Concept Expenses should be recognized in the same period as the revenue they help generate. Example: If a company sells a product in December, the costs incurred in manufacturing it (even from earlier months) must be reported in December.
3. Prudence Concept Anticipate losses but not gains. Avoid overstating assets or income. Example: If inventory may lose value, record a provision for this loss immediately.
Q2: Cost Accounting
Definition: Cost accounting tracks and analyzes the costs associated with production or operations to optimize efficiency and profitability.
Elements of Cost: 1. Material Costs: Costs of raw materials consumed during production. 2. Labor Costs: Wages paid to workers directly involved in production. 3. Overheads: Factory Overheads (e.g., rent, utilities, maintenance). Administrative Overheads (e.g., salaries of office staff). Selling & Distribution Overheads (e.g., marketing, delivery costs).
Q3: Cost of Production
Data Provided: Particulars Amount (₹) Raw Material Consumed 40,800 Direct Labour Not mentioned (assume ₹10,000) Factory Labour ₹5,000 Factory Supervision Charges ₹2,000 Factory Rent & Lighting ₹4,400 Oil for Machinery ₹1,200 Depreciation (Factory) ₹1,100 Office Overheads (Salary) ₹15,000 Miscellaneous Office Expenses₹7,000 Particulars Amount (₹) Selling & Distribution Expenses ₹2,000 Step 1: Calculate Total Factory Cost: Factory Cost = Raw Material + Direct Labour + Factory Expenses = 40, 800 + 10, 000 + (5, 000 + 2, 000 + 4, 400 + 1, 200 + 1, 100) = ₹64, 500
Step 2: Add Office Overheads:
Total Cost of Production = Factory Cost + Office Overheads = 64, 500 + (15, 000 + 7, 000) = ₹86, 500
Number of Units 88, 500 = = ₹88.50 per unit 1, 000
Q4: FIFO (Closing Inventory)
Data Provided: Date Units PurchasedPrice per Unit (₹) 05/04/2021300 12 08/04/2021350 13 09/04/2021150 15 10/04/2021250 17 Assume 600 units were sold. Under FIFO:
1. 300 units @ ₹12 → ₹3,600
2. 300 units @ ₹13 → ₹3,900
Remaining Inventory:
50 units @ ₹13 = ₹650
150 units @ ₹15 = ₹2,250 250 units @ ₹17 = ₹4,250 Closing Inventory Value = ₹650 + ₹2, 250 + ₹4, 250 = ₹7, 150
Q5: Ratios Data Provided: Particulars Amount (₹) Current Liabilities 50,000 Current Assets 1,06,000 Inventories 20,000 Advance Taxes 5,000 Prepaid Expenses 19,000 Share Capital 80,000 Reserves & Surplus 20,000 Long-term Borrowings1,00,000 Fixed Assets 80,000 Liquidity Ratio: Current Assets - Inventories - Prepaid Expenses Liquidity Ratio = Current Liabilities 1, 06, 000 − 20, 000 − 19, 000 67, 000 = = = 1.34 50, 000 50, 000
