UNIT-1
INTRODUCTION
INTRODUCTION TO MANAGMENT ACCOUNTING
(INCLUDING COST CONCEPTS, COST REDUCTION, COST CONTROL ANDCOST MANAGMENT )
Review Questions
A. OBJECTIVE TYPE AND MULTIPLE CHOICE QUESTIONS
1. From the following alternatives, write serially the correct answer along with its serial number against each bit :
(i) On the basis of material used, financial analysis can be classified as :
(a) External and Internal Analysis
Answer:
(b) Horizontal and Vertical Analysis
Answer:
(c) Static Analysis and Dynamic Analysis
Answer:
(ii) Horizontal analysis is also known as:
(a) Dynamic Analysis
Answer:
(b) Static Analysis
Answer:
(c) External Analysis
Answer:
(d) Internal Analysis
Answer:
(iii) Comparative financial statement is a tool of
(a) Ratio Analysis
Answer:
(b) Financial Analysis
Answer:
(c) Trend Analysis
Answer:
(d) Fund Flow Analysis
Answer:
Financial Statements Analysis
(v) Financial statement analysis based upon:
(a) Monetary information
(b) Non-monetary information
(c) Both monetary and non-monetary information (d) None of these.
[Ans. (1) (a). (1) (a), (ii) (b), (iv) (a)]
2. State whether each of the following statements is True or False:
(i) The term financial analysis includes both 'analysis and interpretation.
(ii) On the basis of modus operandi, financial analysis can be classified as external analysis and internal analysis.
(iii) Vertical analysis refers to the comparison of financial data of a company for several years.
(iv) Horizontal analysis is also known as 'static analysis'.
(v) Comparative statements are the form of horizontal analysis.
(vi) Common-size statements and financial ratios are the two tools employed in vertical analysis.
[Ans.(1) True (ii) True (fi) False; (ii) False; (iv) False; (v) True; (vi) True.]
3. From the following alternatives, write serially the correct answer alongwith its serial number against each bit:
(a) One of the techniques of financial statement analysis is:
(i) Profit and Loss Account
Answer:
(ii) Comparative Statement
Answer:
(iii) Balance Sheet
Answer:
(iv) Profit and Loss Appropriation Account
Answer:
(b) One of the techniques of financial statement analysis is:
(i) Balance Sheet
Answer:
(ii) Comparative Balance Sheet
Answer:
(iii) Profit and Loss Account
Answer:
(iv) Profit and Loss Appropriation Account
Answer:
(c) One of the following which is not a technique of financial statement analysis is:
(i) Common-size statement.
Answer:
(iii) Cash flow statement
Answer:
(ii) Comparative statement
Answer:
(iv) Position statement
Answer:
(d) Horizontal analysis refers to the comparison of:
(i) Financial data of a company for several years
(ii) Financial statements of one accounting period
(iii) Both (i) and (ii)
(iv) None of the (i) and (ii)
[Ans. (a) (ii); (b) (ii); (c) (iv); (d) (i)]
B. SHORT ANSWER TYPE QUESTIONS
1. What is financial analysis'?
Answer:
2. What are the types of financial analysis?
Answer:
3. Compare horizontal and vertical analysis.
Answer:
4. What is the procedure of analysis and interpretation of financial statements?
Answer:
5. Write a brief note on comparative statements.
Answer:
6. What is trend analysis?
Answer:
7. Explain common-size statements.
Answer:
8. What are the limitations of financial statement analysis?
Answer:
9. What is meant by intra-firm comparison?
Answer:
10. Give a specimen of Comparative Income Statement
Answer:
11 explain the meaning of the following terms within 2-3 sentences each:
(a) Horizontal analysis (b) Common-size statement
(c) Cross sectional analysis (d) Financial analysis
Answer:
12. Write the difference between traditional approaches and modern approaches of financial statement analysis.
Answer:
13. What is common size statement analysis?
Answer:
C. ESSAY TYPE QUESTIONS
1. What do you understand by the analysis and interpretation of financial statements ? Discuss their utility and significance to the management and others who are interested in the business.
Answer:
2. What are the different methods used for the analysis and interpretation of financial statements.
Answer:
3. What is common-size balance sheet and income statement ? Explain the technique of preparing the common-size balance sheet.
Answer:
4. What is the importance to management of comparative statements? Illustrate your answer with particular reference to Comparative Revenue statements and state briefly how these statements are prepared.
Answer:
5. Explain the usefulness of trend percentages in interpretation of financial performance of a company.
6. "Analysis without interpretation is meaningless and interpretation without analysis is impossible." Discuss.
Answer:
7. State the different types of financial analysis and discuss the limitations of analysis and interpretation of financial statements.
Answer:
8. "Analysis without interpretation is meaningless and interpretation without analysis is misleading." Elucidate the statement. Explain the significance of financial statement analysis.
Answer:
9. (a) Write short notes on techniques of financial statement analysis.
Answer:
(b) Distinguish between traditional approach and modern approach to financial statement analysis.
Answer:
10. Explain the methods used in financial statement analysis.
Answer:
Type-Bharat Kalita
