103.

Descriptive Questions:

1.How do you differentiate between fixed and variable costs? Provide real-world
examples of each and explain how understanding cost behavior can aid in decision-
making.

2. What are the different methods of allocating overhead costs? Discuss the
advantages and disadvantages of each method, and when would you use one over
the other?

3. How does ABC differ from traditional costing systems? Explain the benefits of
using ABC and the challenges associated with its implementation.

A} Read the hypothetical text given and answer the following questions: Raman
Shankar Reddy, an Ex-Indian cricketer decided to start a cricket academy to train
the young enthusiastic players down south. With the support and guidance of his
family, he started the Star cricket academy at Tirunelveli township area on 1st April
2020. The land was donated by his grandfather worth Rs. 10,00,000 as per his will.
His father Shankar donated Rs.5,00,000 for the construction and running of the
academy. He spent Rs.3,00,000 on the construction of the pavilion. 200 players of
Tirunelveli joined the academy, and they paid a yearly subscription of Rs.1200 each.
10 players paid in advance for the next year 2021 -22. Raman Reddy appointed a
well-experienced coach for them, the coach fee amounted to Rs. 1,20,000 p.a. The
maintenance expenses amounted to Rs.75,000. Bats and balls purchased during the
year amounted to Rs.14,000. Closing stock of bats and ball amount to Rs.1000.

1. Identify the Primary source of income for the academy & which Profession iis it
related?

2. The amount of subscription to be credited to income and expenditure account

———— & what is the exact amount of yearly subscription ?

The liability towards advance subscription & amounted to construction of the

pavilion:
Identify amount charged to the Income and Expenditure account for bats and balls
consumed during the year & Closing stock of bats & Ball
B } Samarth and Jayesh started with Cash 10,000 and Machinery 1,00,000. They
decided to set up a production line for PPE kits for. the protection from Covid 19
virus. As their demand rose, they decided to buy one more piece of machinery. For
the same, they took bank overdraft and purchased the machinery. The quality of the
company’s product was extremely high and therefore, it could develop a reputation
for itself in the market and business was flourishing. After 1.5 years, their old
machinery became obsolete, so they decided to sell the same. They sold it and got
some cash proceeds. To further increase the brand presence among the concerned
stakeholders, they decided to run advertisements from the cash proceeds of
machinery sold. As more and more customers demanded their product, they
decided to launch a discount for bulk purchases. The discount was not to be
recorded in the books of accounts. This campaign was successful, and they earned a
lot of profits from the same.

Q1. Which type of discount is being discussed in the last part of the passage?

Q2. Which asset is discussed in the line, “The quality of the company’s product was
very high and therefore, it could develop a reputation for itself in the market and
business was flourishing”?

Q3. Which type of liability is discussed in the passage?

Q4. What was the capital initially invested?

Q5. Identify the receipt which is involved in the passage apart from initial capital
invested)

C} Ram and Shyam are two friends who both have just attended their first class of
accountancy. The friends were intrigued by the different branches of accounting and
their widespread application. Ram personally liked the branch of accounting in
which fund flow statement and budgetary control is used and that branch helps in
planning and controlling of operations. As the concept of accounting was further
explored, they began discussing the different users of accounting. Ram said that he
finds it interesting that even the employees demand information relating to
business. Shyam said he finds more interesting the fact that even competitors want
information on the relative strengths and weaknesses of the enterprise and for
making comparisons, Shyam further said that even accounting helps owners to
compare one year’s costs, expenses, and sales with those of other years. However,
they were quite shocked by the fact that the management-worker relations were not
taken into consideration in the accounting. Meanwhile, Ram and Shyam had an
argument at the end of the discussion. Ram was saying that accounting is an art
whereas Shyam was saying that accounting is a science. Their teacher came in and
said something to them which made them stop the argument.

Q1. What might their teacher have said to solve their argument?

Q2. Shyam talked about which type of users of accounting.

Q3. Which limitation of accounting is being talked about by them?

Q4. Which advantage of accounting is being talked about by Shyam in the last part
of the first para?

Q5. Which branch of accounting is liked by Ram?

D} Rahul started the business of running an agency of Cutting Tools products a year
back. He is new to the business, although he researched well. He took suggestions
from his family members and friends who run different types of businesses. The
agency business was quite an easy one as it just included receiving manufactured
and packed goods from FMCG products manufacturing companies and then getting
the goods distributed to the retailers as per the demand of products. Rahul
appointed two employees to help him in the business. He gave the responsibility for
recording the sale of the products to one of the employees. The employee had no
knowledge of accounting, so he simply recorded the cash sales and did not record
any credit sales. Although Rahul had recorded transactions, yet he was unable to
know the profit and loss from his business. He also had to apply to the bank for
financial assistance as he wanted to expand his business. When Rahul approached
the bank to apply for a loan, he was asked for the financial report of his business
which depicted the profit or loss of the business. Rahul was in a complex situation
and wanted to improve the situation so that he could focus on his business with the
right approach.

Identify the knowledge which employee don’t have & employee did not record the
one of the following
Choose Which of the two entries are involved in above case.

Identify the situation & Rahul applied for which loan.