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SUBJECT: Financial & Cost Accounting
Q1. Differentiate between idle cost and standard cost?
Answer: – Normal costing is used to value manufactured products with the actual materials costs, the actual direct labor costs, and manufacturing overhead based on a predetermined manufacturing overhead rate. These three costs are referred to as product costs and are used for the cost of goods sold and for inventory valuation. If there is a difference between 1) the overhead costs assigned or applied to products, and 2) the overhead costs
Q2. What is a trial balance? Explain its objective.
Answer: – Trial Balance is a list of closing balances of ledger accounts on a certain date and is the first step towards the preparation of financial statements. It is usually prepared at the end of an accounting period to assist in the drafting of financial statements. Ledger balances are segregated into debit balances and credit balances. Asset and expense accounts appear on the debit side of the trial balance whereas liabilities, capital and income
Q3. Distinguish between Accrual basis of accounting and cash basis of accounting.
Answer:- Accrual accounting does not consider cash when recording revenue; in most cases, goods must be transferred to the buyer in order to recognize earnings on the sale. An accrual journal entry is made to record the revenue on the transferred goods as long as collection of payment is expected.
- In accrual accounting, expenses incurred in the same period that revenues are earned are also accrued for with a journal entry. Same as revenues, the recording of the expense is unrelated to the payment of cash.
- For a seller using the cash method
Q4. Standard costing is a valuable aid to management discuss. State in brief limitation of standard costing?
Answer: – Standard costing is an important subtopic of cost accounting. Standard costs are usually associated with a manufacturing company’s costs of direct material, direct labor, and manufacturing overhead.
Rather than assigning the actual costs of direct material, direct labor, and manufacturing overhead to a product, many manufacturers assign the expected or standard cost. This means that a manufacturer’s inventories and cost of goods sold will begin with
Q5. Define Budgetary Control and explain the pre-requisites for its successful introduction and implementation?
Answer:- Budgetary Control:- Budgetary control is the process of developing a spending plan and periodically comparing actual expenditures against that plan to determine if it or the spending patterns need adjustment to stay on track. This process is necessary to control spending and meet various financial goals. Governments rely heavily on budgetary control to manage their spending activities, and this technique is also used by companies as well as
Q6. How the total cost, variable cost and marginal cost differ from each other?
Answer:-Total Cost: is what it costs to operate at some particular rate of output.
Total cost can be divided into two portions: Fixed Cost and Variable Cost.
Fixed Cost: Fixed Cost is the part of the budget that stays the same regardless of whether you produce a lot, a little bit, or even if you produce zero. Overhead
Q7. What are the advantages of cost audit?
Answer:-
- Cost audit provides reliable cost data for managerial decisions.
- Cost audit helps management to regulate production.
- Cost audit acts as an effective managerial tool for the detection of errors, frauds and irregularities so that reliable and smooth functioning of the system is continued.
- Cost audit reduces the cost of
Q8. Which are the different ways by which the cost can be analyzed?
Answer:-
THREE TYPES OF COST ANALYSIS IN EVALUATION:
Cost allocation, cost-effectiveness analysis, and cost-benefit analysis represent a continuum of types of cost analysis which can have a place in program evaluation. They range from fairly simple program-level methods to highly technical and specialized methods. However, all have specialized and technical aspects. If you are not already familiar with these methods and the language used, you should plan to work with a consultant or read some more in-depth texts (see some suggested references at the end of this discussion) before deciding to attempt them.
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