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Table of Contents
- Machinery Account
- 1st January 2000 $ 52000
- Buy Decision Making In Management Accounting paper online
- Computing Depreciation
- 1) Machinery
- 2) Computer
- 3) Truck
- Cash Account
- Depreciation Account
- Computer Account
- Truck account
- Question 2 a
- Jane Ltd
- Question 2 b
- Question 3
- Information Systems
- Lean Production
- Total Quality issues in accounting
- Case findings
- Question 4
- Mauro Manufacturing Ltd Schedule of cost of goods manufactured
- For the year ended 31st December 2010
- Raw material inventory on 1st /01/ 2010 $43,000
- Mauro Manufacturing Ltd Balance Sheet as at 31st December
- Sierra Star
- Budget
- January 1st 2010 to February 28th 2010
- Workings
- Question 5. b
- Cash budget
- Sierra Star
- Estimated statemet of cash receipt and disbusmnts
- For two month ended January 31st and February 28th
- Related Accounting essays
Machinery Account
1st January 2000 $ 52000
Dr Cr
| Date/year | details | Cost in $ | Date/year | Details | Cost in $ | |
| 1st January 2000 | Cash account | 52000 |
31st December 2000 |
Depreciation charge | $5200 | |
| 31st December 2000 | Balance carried down | 46800 | ||||
| 31st December 2000 | $ 52000 | 31st December 2000 | $ 52000 | |||
Computing Depreciation
1) Machinery
Depreciation charge = (Cost of the machine less residual value)/ useful life
$52000/10= $5200 per year
Balance carried down = machinery cost less depreciation charge for the year
= (52000-5200) = $46800
2) Computer
$49000/7= $ 7000 p.a
The Computer lasted for only six month to 30th June 2000 the depreciation charge will therefore be half of $ 7000. This is $3500.
3) Truck
Depreciation Charge= $(27000-3000)/8= $3000
Cash Account
Dr Cr
| Date/ year | Details | Cost in $ | Date/year | Details | Cost in $ |
| 30th June 2000 | Computer account | 31000 | 1st January 2000 | Machinery account | 52000 |
| 31st December 2000 | Balance carried down | 21000 | |||
| 31st December 2000 | $52000 | 31st December 2000 | $ 52000 | ||
Depreciation Account
Dr Cr
| Date/ year | Details | Cost in $ | Date/year | Details | Cost in $ |
31st December 2000 |
Machinery account | $5200 | 31st December 2000 | Balance carried down | $5200 |
| 31st December 2000 | $5200 | 31st December 2000 | $5200 | ||
| 31st December 2006 | Truck account | $3000 | 31st December 2006 | Balancing figure | $3000 |
| 31st December 2006 | $3000 | 31st December 2006 | $3000 | ||
| 31st December 2007 | Computer Account | $3500 | 31st December 2007 | Balancing figure | $3500 |
Computer Account
Dr Cr
| Date/ year | Details | Cost in $ | Date/year | Details | Cost in $ |
| 1st January 2007 | Balance brought down | 49000 | 30th June 2007 | Cash account | 31000 |
| 31st December 2007 | Depreciation charge to 30th June | $3500 | |||
| 31st December 2007 | Balance carried down | $14500 | |||
| 31st December 2007 | $ 49,000 | $ 49,000 |
Truck account
Dr Cr
| Date/ year | Details | Cost in $ | Date/year | Details | Cost in $ |
| 1st January 2006 | Cash Account | 27000 | 31st December 2006 | Truck residual value | $ 3000 |
| 31st December 2006 | Truck account | $3000 | |||
| 31st December 2006 | Balance carried down | 21000 | |||
| 31st December 2006 | $ 27000 | $ 27000 |
Source: Robertson, 2009
Question 2 a
PPE average age can be computed as total PPE average value divided by depreciation charge.
Barnaby Ltd
PPE average age = 3,360,000/1,420,000= (2.366) an average age of about 2years and 4month
Barnaby Ltd Asset turnover ratio= Sales / Average Total assets
=10,300,000/4,480,000= 2.3 times
Barnaby ltd asset useful life = Total average assets/ Depreciation expenses
= 4,480,000/420,000 = 10.7 years
Jane Ltd
Barnaby ltd Average age of PPE assets = Average Total PPE assets/ Depreciation Charge (Expense)
= 2,000,000/130/000= 15.3 years
Asset Turnover ratio= Sales / Average Total assets
=12,600,000/3,750,000= 3.36 times
Computing Jane’s ltd asset average useful life = Total average assets/ Depreciation expenses
= 3,750,000/ 130,000 = 28.8 years
Question 2 b
Since Jane’s asset turnover ratio (3.36 years) is higher compared to Barnaby ltd which has an asset turn over ratio of about 2.3 years. This gives it a better chance of using the assets to generate sales.
Basing on the computed results, it remains evident that Jane ltd depreciates its assets over a longer period of time 28.8 years as per the calculation compared to 10.7 years. This causes the depreciation expense to be lower and ultimately boosting profits to a higher compared to Barnaby limited.
Question 3
The management accounting has a role of dealing with issues of internal rather than the external, cost measures and income issues of accounting. Therefore contemporary accounting issues targets the internal firm issues that are costs and income issues of financial accounting. Information systems has rapidity altered the nature and practice of management accounting with this the internal financial health of the firm is well assessed giving a true picture of business performance (Kajipet, 2000). For instance it deals with the estimation of forthcoming costs; assess cost effectiveness of management policies and procedures. Hence, there are many issues that affect contemporary accounting:
Information Systems
The revolution of the computer age has immensely transitioned the nature of accounting and management as a whole. Modernized organizations have gained pace and have embraced computerization as a mechanism to be cost effectiveness. There through linking financial information of the organization that is financial accounting facets, internal data, consumer information, stakeholder’s data and supplies in one system. This improved how viewing of data by anyone who is aware of the system. Integration of computing is hence eradicating management accounting (Kimmel, 2010).
Lean Production
Through being cost effective and being able to cut down costs in organizations various firms for instance Toyota has engulfed just-in-time production. Through this deliveries of materials that are to be used are made on the same day of production. Moreover assembled products are also shipped to the consumer simultaneously (Chadwick, L. (1998).
Total Quality issues in accounting
Most integrated systems have continually linked financial and management operations among other issues of quality management in accounting over internal and external ideas of any given organization. The quality management concept has measureable issues addressed in trying to eliminate the distinction between these kinds of streams (Lucey, 2003). However, developing of a streamlined accounting system does not necessarily build specified areas of expertise, but rather work closely with both financial and management accounting concepts in financing projects while evaluating internal practices (Chadwick, 1998).
Stay Connected
Quality information is based on competitive advantage for an organization. For accounting information systems, quality of information given is imperative to success of any system in place. In our discussion we discuss important issues that remain important to any accounting system. Management or any organization in the contemporary world focuses on systemic issues (Kajipet, 2000). This is contrary to the previous years. For instance, accounting information system marks one of the most critical systems in organization, with increased change being done well utilized. Despite all these accounting changes taking place, organizations have to improve on an approach that puts such systems at forefront in generating accurate accounting and management information, these remains important considering both systems and human related factors to effectively manage their financial systems for improved decision making.
Case findings
Importance of data quality issues have to be addressed by organization leadership. It therefore remains evident that data quality is regarded a priority in any organization as revealed in the both Jane’s and Barnaby limited. For improved accounting information and decision making, there have to be well monitored data accuracy. This could prove important when information given is used in forecasting (Kajipet, 2000).
Question 4
a.)
Mauro Manufacturing Ltd Schedule of cost of goods manufactured
For the year ended 31st December 2010
Direct Material:
Raw material inventory on 1st /01/ 2010 $43,000
Add: purchases of raw material $206800
Raw material available for use $249,800
Less: raw materials as at December 31st $(39600)
Raw material used $ 210,200
Direct labor: $250,600
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Manufacturing Overhead:
Indirect material -
Indirect labor $35,410
Total manufacturing overhead $ 35,410
Total manufacturing costs $ 286,010
Add: Work-in-process inventory, January 1st $25,240
Subtotal $311,250
Deduct: work-in-progress inventory, December 31 $(23,600)
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Cost of goods manufactured $ 287,650
4 b.
Mauro Manufacturing Ltd Income Statement for the Year Ended 31st December
Sales revenue 890,900
Less: Sales Returns -
Sales Allowance -
Sales discount (10,120)
Net sales $880,780
Opening inventory $76,000
Add: Purchases $206,800
Less: Freight-in on raw m. purchase $ (5640)
Cost of goods available for sale $ 277,160
Less: Closing inventory $(83,200)
Cost of goods sold $ (193,960)
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Gross Profit $686,820
Expenses:
Factory managers’ salary $60,000
Factory rates and taxes $10100
Factory repairs $4500
Factory power $ 36,000
Office power expenses $ 8,600
Depreciation on Factory $ 18,090
Factory Insurance $ 5,400
Freight-in on raw m. purchase $ 5640
Total expenses $(148,330)
Net profit $ 538,490
4 c.)
Mauro Manufacturing Ltd Balance Sheet as at 31st December
Current assets $ $
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Finished goods Inventories 83,200
Account receivable 45,000
Cash 15,000
Total Assets $143,200
Current liabilities
Factory machinery depreciation 18,090
Net profit for the year ended 45,630
Equity and Capital (suspense account) 79,480
Total Capital, Equity and Liabilities $143,200
Source: Drever, 2007
Question 5 b.
Sierra Star
Budget
January 1st 2010 to February 28th 2010
Category Actual Budget Difference
January
Sales $525,000 $157,500 $ 368,000
Direct materials purchases $ 142,500 $ 151,200 $ (8700)
February
Sales $600,000 $60,000 $540,000
Direct material Purchases $ 165,000 $ 151,200 $13,800
Manufacturing overhead $ 90,000 - $90,000
Selling and Administrative Expenses $ 112,500 - $ 112,500
Direct Labor $ 142,500 - $ 142,500
Workings
Computation Budget value January February
Cash Sales (30%* 525,000/2) / 20 %*( 600,000/2) $ 157,500 $60,000
November December
Credit sales (30 %*300,000/2)/ (20%*450,000/2) $ 45,000 $ 45000
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Direct material purchases (40%*142,500) (60%*142,000) $ 57,000 $ 151,200
+ (165,000*40%)
Source: Weygandt, 2009
Question 5. b
Cash budget
Sierra Star
Estimated statemet of cash receipt and disbusmnts
For two month ended January 31st and February 28th
| Months | January | February |
| Cash Sales | $ 157,500 | $ 60,000 |
| Proceed Sales from investments | - | $ 5,000 |
| Interest receivable | $ 3, 000 | - |
| Debtors | $ 45, 000 | $ 45,000 |
| Total Receipts | $ 205,500 | $ 110,000 |
| Disbursment Payments | - | $20,000 |
| Cash purchases | $ 57,000 | $ 151,200 |
| Creditors | - | - |
| Less: Total Payments | $ 57000 | $ 171,200 |
| Net receipts/ Payments | $ 148,500 | $ (61,200) |
| Add : opening balance | $ 60,000 | $ 50,000 |
| Closing Balance | $ 202,500 | $11,200 |
Total Recipts = (Cash sale + Proceed Sales from investments + Debtors + Interest receivable )
Total Payments = (Disbursment Payments + Cash purchases)
Closing Balance = (Total Receipts + Net reciepts/ Payment)
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