IPS Academy

Institute of Business Management and Research, Indore (M.P.)

(NAAC A++ Accredited, UGC Autonomous Institute)

Assignment

Assignment of Accounting for Managers

Academic Year 2024-2025
Student Name – Hari Vikramaditya Singh Parihar
Computer Code – 68857

Class/Section – MBA I ,A
 1.Explain the entire process and each steps of accounting by use of
diagram.
ANSWER :
The Process of Accounting
The meticulous recording, categorization, summary,
and reporting of financial transactions is known as
accounting. To effectively manage their finances,
businesses need to understand this process. Below is a
detailed explanation of each step in the accounting
process, along with an accompanying example.
Identify Transactions:

You seem to be asking about figuring out transactions, but I need a

little more background information before I can help you effectively.
Do you want to categorize financial transactions, research transaction
trends, or pursue other objectives? Please provide more details!.

Journal Articles:

You seem to be interested in diary writing! Are you

looking for writing inspiration, journal entry examples,
or journal writing tips? Let me know how I may be of
assistance.

To the ledger, add:

Following their recording, journal entries are next

posted to the general ledger. The ledger organizes all
transactions by account, allowing businesses to track
each account's balance over time. For example, each
cash transaction will be classified under the cash
account in the ledger. The journal amounts are
transferred to the appropriate ledger accounts at this
point. A comprehensive view of each account must be
created in order to make financial data analysis easier.
Due to the fact that it aggregates all transactions
related to specific accounts, publishing to the ledger
also makes financial statement preparation easier. Maintaining
trustworthy financial records requires precision in this stage.

Trial Equilibrium:
.Usually used in fields like economics, chemistry, or physics, "trial
equilibrium" describes an initial or experimental condition of balance
in a system. Could you elaborate on the particular element that
interests you? For instance, are you searching for ideas related to
chemical processes, economic models, or something else entirely?

Modifying Entries:
It looks like you want to modify some entries. Could you provide
more details about what you need help with? Are these entries in a
document, a database, or something else?

Trial Balance Adjusted:

An modified trial balance must be prepared following the completion
of the adjusting inputs. All of the accounts are included in this
document along with their most recent balances following any
necessary modifications. The cornerstone for creating financial
statements is the adjusted trial balance, which guarantees that all
required adjustments have been taken into consideration.
It must balance, with total debits equal total credits, just like the
original trial balance. In order to confirm that all financial data is
correct and current, this step is essential. Any differences at this
point to point mistakes in the previous phases or the modifying
entries. In the end, the adjusted trial balance ensures that financial
reports accurately depict the company's financial situation.

Reports on finances:
Important information about a company's performance and financial
status may be found in its financial reports. Typical forms of financial
reports include the following:

1. **Income Statement**: - Displays earnings, costs, and profits for a

certain time frame.

2. **Balance Sheet**: - Shows equity, liabilities, and assets as of a

certain date.
Aids in assessing the financial standing of the business.

3. **Cash Flow Statement**: - Monitors the inflow and outflow of

funds over time.

Final Entries:

In order to reset the balances of temporary accounts, such revenues

and costs, to zero, closing entries are made at the conclusion of the
accounting period. In order to prepare the accounts for the
upcoming accounting period, this stage is essential. The amounts of
these temporary accounts are moved to the retained profits account
in the balance sheet's equity column as part of closing entries. This
procedure guarantees that the income statement only shows the
performance of the current period, in addition to preparing the
accounts for the next one. Since they affect retained profits and offer
a seamless transition between accounting periods, accurate closing
entries are essential for maintaining consistency in financial
reporting.

Balance after Closing the Trial:

Making a post-closing trial balance is the last stage in the accounting

process. Following the closing entries, this document contains a list
of all the permanent accounts along with their balances. As a last
check, the post-closing trial balance makes sure that all temporary
accounts have been closed correctly and that the books are in
balance. It assists in verifying that the accounting documents are
correct and prepared for the upcoming accounting quarter. Errors
may have happened during the closure procedure if the post-closing
trial balance is not balanced. Since it establishes the foundation for
the accounting operations in the next period and contributes to the
preservation of the integrity of the financial records, precision in this
stage is crucial.

In conclusion

A thorough structure that guarantees accurate financial reporting

and analysis is the accounting process. From transaction
identification to financial statement preparation, every stage is
interrelated and, in the end, offers a comprehensive efficient
financial management and decision-making, it is essential to
comprehend this procedure.
2.Give the meaning of final accounts. What are the
objectives behind making final accounts?

ANSWER :
Final Accounts' Significance
A collection of financial statements known as final accounts are
created at the conclusion of an accounting period to provide an
overview of a company's financial situation and performance. The
income statement, balance sheet, and cash flow statement are the
three main parts of these accounts.

Income Statement:
This report shows summarizing its sales and costs over a given time
period. It comprises all operational and other revenues as well as
costs such as interest, taxes, operating expenditures, and cost of
products sold.

Balance Sheet:
situation as of a specific date is shown in this statement. Using the
accounting formula, which reads Assets = Liabilities + Equity, it lists
the assets, liabilities, and equity. This helps stakeholders understand

Reasons for Creating Final Accounts

Assessment of Performance:

Evaluating a given time period is one of the main goals of creating

final accounts. The income statement gives information about
profitability by highlighting the money made and the costs incurred.
Stakeholders can determine whether the company is reaching its
financial objectives by contrasting the performance of the current
year with that of prior periods or planned amounts. By identifying
strengths and shortcomings, this assessment assists management in
making well-informed decisions on operations and investments.

Evaluation on the Financial Situation:

. For stakeholders to evaluate solvency and liquidity, the balance

sheet's information on assets, liabilities, and equity is essential.
Stakeholders can ascertain whether the company has the resources
to full fill its responsibilities by looking at the balance sheet. Making
decisions about financing, investments, and financial strategies need
this knowledge in order to keep the company competitive and viable.

Observance of Legal Obligations:

Businesses are frequently required by law to prepare final accounts

in order to ensure adherence to accounting standards and legislative
rules. Many governments require businesses to keep accurate
accounting records and generate financial statements using
International .

Encouraging the Making of Decisions:

Final accounts are essential for helping different stakeholders make

well-informed decisions. The income statement and balance sheet
provide management with information that helps with operational
enhancements and strategic planning. Final accounts are used by
creditors and investors to decide on creditworthiness, funding, and
investments. Stakeholders may better evaluate risks and
opportunities and match actions with their financial goals when they
have access to fast and accurate financial information.

Comparing Performance:

Comparing performance internally and externally is made possible by

final accounts. Businesses can assess growth and profitability trends
internally by comparing their present performance to that of prior
years. Final accounts give external stakeholders the ability to assess
how well the company is performing in comparison to rivals or
industry standards. These kinds of comparisons are crucial for
evaluating market share and competitive positioning, which aids
businesses in creating improvement plans.

Accrued costs:

Costs that have been incurred but not yet paid are known as accrued
expenditures. For instance, $2,000 must be recorded as an expense
in December's financial records if a business owes workers $2,000 for
labour completed in December but will not pay them until January.
In accordance with the matching principle, this adjustment
guarantees that the cost is recorded in the appropriate accounting
period.

Earned Income:
Earnings that have been recorded but not yet paid out in cash are
known as accrued revenues. For instance, revenue must be recorded
in December's financial accounts if a business completes $5,000
worth of consulting work in December but isn't paid until January.
This entails crediting a revenue account and debiting an accounts
receivable account. Revenue is recorded in the period in which it is
earned thanks to this adjustment.

Unearned Revenue:
Payments made prior to the provision of services are referred to as
unearned revenue. For example, a business cannot instantly record
the entire amount as income if it gets $3,000 in advance for services
that would be rendered over a three-month period. Instead, it would
recognize $1,000 as income per month for three months after first
recording the $3,000 as a liability (unearned revenue). The revenue
recognition when the service is delivered is reflected in this
adjustment.
.
In conclusion
In order to accomplish a number of goals that benefit stakeholders,
final accounts are crucial for summarizing a company's financial
performance and position. They help with financial assessment,
performance comparison, legal compliance, performance appraisal,
and informed decision-making. To guarantee the correctness and
dependability of final accounting, adjustments are essential. These
adjustments include depreciation, accrued and prepaid costs,
accrued revenues, and unearned revenues. Businesses may provide
stakeholders a comprehensive picture of their financial health and
help them make choices by correctly compiling final accounts and
making the required changes.

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3.Describe the errors which are not found after the total
of trial balance is matched
ANSWER :

A crucial device in accounting, the trial balance acts as an early

verification of the ledger accounts' correctness by confirming that
the total debits and credits match one another. Certain flaws might
still go undetected even if the trial balance has been matched. The
following are some of the main types of errors that could occur.
Commission Mistakes

Errors of commission are inaccurate entries that affect the trial

balance totals. If $1,000 is entered as a debit to the Sales account
instead of the Accounts Receivable account, for example, both
accounts will display incorrect amounts; yet, the trial balance will still
balance because both sides of the transaction are affected.

Correcting Errors
Compensating errors occur when two or more faults cancel each
other out. For example, if a $500 overstatement of expenses is offset
by a $500 overstatement of income, the trial balance may still be
balanced. The overall effect on the financial accounts is erroneous,
even if the totals match.

Errors in the initial entry

Several problems occur when a transaction is initially

recorded inaccurately. For instance, if a $300 payment
is made in error, the trial balance might still be in
balance.

Errors in the computation

Errors may occur when computing balances, such as

when totals are calculated incorrectly. For example,
even if the balances of the individual accounts are
different, the trial balance will still equal.

Journal Entry Errors

If a journal entry is made with the correct accounts but

the amounts are incorrect, imbalances may appear in
some accounts even if the trial balance is still satisfied.
For example, both accounts may show totals that
balance with the trial balance but deceive the genuine
figures if an input should be $1,000 but is recorded as
$1,500.

Transposition Error
This happens when a number's digits are transposed or inverted. For
instance, if two entries are made improperly, the trial balance can
still balance even if a $540 transaction is recorded as $450. However,
the financial reporting will be inaccurate as a result of this
inaccuracy.

Incorrect Account Utilization

If the debits and credits are recorded in equal quantities, a
transaction that is sent to the incorrect account can still balance the
trial balance. The trial balance will still match, but the accounts will
be incorrectly displayed, for instance, if a $500 cash sale is
inadvertently recorded in the Accounts Receivable account rather
than the Cash account.

In conclusion
A trial balance may have a variety of mistakes even when it seems to
be balanced. The accuracy of financial reporting and decision-making
may be severely impacted by these mistakes. Businesses should use
routine review procedures, reconciliations, and audits to find and fix
these mistakes in order to reduce these risks. For accountants and
other financial professionals to keep accurate and trustworthy
financial records, they must comprehend the nature of these
mistakes.

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4.What do you mean by depreciation? Explain the methods of

depreciation.
ANSWER :
Depreciation definition.
It symbolizes the asset's degradation, obsolescence, or
drop in value brought on by use in business operations.
Depreciation is a key accounting concept because it
allows businesses to spread out an asset's cost over a
number of years and balance the cost and income
during the item's useful life. Because it is possible to
write off depreciation as a

Methods of Depreciation

There are several methods for calculating depreciation,

and each has advantages and applications that vary
depending on the type of asset and business
requirements. The following are the most widely used
methods:

The Straight-Line Method

The formula is depreciation expenditure = asset cost −

salvage value.

Realistic Life

Depreciation Cost = Useful Life

Cost of the Asset − Salvage Value

Declining Balance Method

The calculation is Depreciation Cost = Book Value at

Year's Start × Depreciation Rate.

Book Value at the Beginning of the Year × Depreciation

Rate = Depreciation Cost

Modified Accelerated Cost Recovery System (MACRS)

The MACRS technique is mostly used for taxation in the
United States. It allows for a larger depreciation
deduction in the early years of an asset's life. It assigns
different asset types a fixed recovery period and
imposes a predetermined rate of depreciation.

Diverse depreciation rates distributed during the first

few years of a five-year property, for example, allow
businesses to recover expenses more quickly than they
would with straight-line depreciation.

To sum up

Businesses can select the method that best fits their

operational reality and financial objectives by being
aware of the different approaches—straight-line, falling
balance, units of production, sum-of-the-years'-digits,
and MACRS. Correct application of these strategies
ensures more accurate financial reporting and efficient
asset management.

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5.Give the meaning of budgetary control. What are the types of
budgets and how they are prepared ?
ANSWER :
Definition of Budgetary Control

Budgetary control is a systematic approach to

managing an organization's finances by developing
budgets, comparing them to actual performance, and
taking the necessary corrective action as necessary. It
works as a tool for organizing, coordinating, and
managing financial operations inside a corporation. The
primary objectives of budgetary control are to facilitate
decision-making, monitor financial performance, and
ensure that resources are allocated efficiently.

Types of Budgets

Many budget kinds are used in budgetary control, and

each one serves a certain purpose inside an
organization. The following are the most common
types:

Operational Budget
The operational budget provides specifics on the
expected revenue and expenses associated with the
day-to-day activities of the business. It includes
detailed estimates for sales, manufacturing costs,
administrative expenses, and other operating costs,
and often includes a fiscal year.

Spending Plan for Sales

For a specific time period, the sales budget predicts

expected revenue and sales volumes. It serves as the
foundation for other budgets, such as the production
and operating budgets.

Production Budget
The number of units required to meet inventory
requirements and sales targets is determined by the
production budget. It helps companies organize their
industrial processes and allocate resources.

Organizations may better manage their finances and

match resources with strategic goals with the aid of this
methodical approach.

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