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Discuss The Nature, Behaviour & Purpose of Cost Accounting

University: University of Wales

  • Unit No: 6
  • Level: Post Graduate/University
  • Pages: 42 / Words 10392
  • Paper Type: Assignment
  • Course Code: LCBB4001
  • Downloads: 147
Question :

 This assessment will cover following questions:

  • Discuss the nature, behaviour, and purpose of cost accounting, and implement cost accounting concepts, techniques, and methods to business transactions.
  • Monitor the basic principles of accounting with the use of relevant software.
  • Prepare financial statements from initial data, which is dealing with both routine and non-routine transactions and analyse financial statements with confidence.
Answer :

INTRODUCTION

In present time, the elements and components that are used to record the entire accounting information within accurate books is known as accounting fundamental (Mitra, 2016). This consists of accounting standards, definitions, dual abstractions, going concern, terms of money, etc. specific accounting is assisted by accounting jargon to deal with complex situation. The report covers the definition, action and intent of cost accounting which is used to address different situation of business by implementing managerial accounting strategies. Suitable software is used to address basic financial concepts and to compile financial statements using regular and semi-routine activities. Review of the financial report is being performed after the registration of these documents.

The report covers different task in which various particular accounts are being prepared like Journal entries, ledger, trail balance, trading account, balance sheet which help to define the financial position. These statements help to discuss the overall profitability of company by evaluating the total liabilities and capital to generate income. In addition, last task covers the revenue and capital expenditure and actual difference to determine the variance.

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TASK 1

Journal entries

Date

Particulars

Debit (£)

Credit (£)

April, 5

Cash A/c

300.00

 

To Capital a/c

300.00

   

April, 7

Purchase a/c

200.00

 

To cash a/c

200.00

   

April, 8

Cash a/c

   

To Loan from Tatiana

 

250.00

 

April, 15

Motor van a/c

150.00

 

To cash a/c

150.00

   

April, 20

Cash A/c

350.00

 

To sales a/c

350.00

   

April, 28

Rent a/c

50.00

 

To cash a/c

50.00

   

April, 29

Loan a/c

200.00

 

To Cash A/c

200

   

April, 30

Drawings a/c

60.00

 

To cash a/c

60.00

   

(a) Ledger accounts

Cash a/c

Date

Particular

Amount

Date

Particular

Amount

05/04/18

To capital a/c

300.00

07/04/18

By purchase

200.00

08/04/18

To loan form Tatiana

250.00

15/04/18

By Motor van

150.00

20/04/18

To sales

350.00

28/04/18

By rent

50.00

29/04/18

By loan paid

200.00

     

30/04/18

by Drawing

60.00

     

30/04/18

By closing balance

240.00

     

900.00

   

900.00

   

Capital a/c

Date

Particular

Amount

Date

Particular

Amount

30/04/18

To drawing

60.00

05/04/18

By cash

300.00

30/04/18

To closing balance

240.00

     

300.00

   

300.00

   

Purchase a/c

Date

Particular

Amount

Date

Particular

Amount

07/04/18

To cash

200.00

30/04/18

By trading a/c

200.00

200.00

   

200.00

   

Loan a/c

Date

Particular

Amount

Date

Particular

Amount

29/04/18

To cash

200.00

08/04/18

By cash

250.00

30/04/18

To closing balance

50.00

     

250.00

   

250.00

   

Motor van

Date

Particular

Amount

Date

Particular

Amount

15/04/16

To cash

150.00

30/04/16

By closing balance

150.00

150.00

   

150.00

Sales a/c

Date

Particular

Amount

Date

Particular

Amount

30/04/16

To Trading a/c

350.00

20/04/18

By cash

350.00

350.00

   

350.00

   

Rent a/c

Date

Particular

Amount

Date

Particular

Amount

28/04/18

To cash

50.00

20/04/18

By P&l ac

50.00

50.00

   

50.00

   

Drawing a/c

Date

Particular

Amount

Date

Particular

Amount

30/04/18

To cash a/c

60.00

30/04/18

By capital a/c

60.00

60.00

   

60.00

   

(b) Trial Balance

Particulars

Debit (£)

Credit (£)

Cash A/c

240.00

 

Capital a/c

300.00

 

Purchase a/c

200.00

 

Loan a/c

50.00

 

Motor van a/c

150.00

 

Rent a/c

50.00

 

Sales a/c

350.00

 

Drawings a/c

60.00

 

700.00

700.00

 

(c) Final Statements of maxim

Statement of profit & loss a/c

 

Particulars

Amount

Sales a/c

350.00

Less – Cost of goods sold

100.00

Gross Profit

250.00

Less – Expenses

 

Rent a/c

50.00

Net Profit

200.00

Statement of Financial position as at April, 30

Amount

Non Current assets

   

Motor van

150.00

 

Current Assets

   

Cash A/c

240.00

 

Inventory

100.00

340.00

Total Assets

490.00

 

Capital a/c

300.00

 

Add – Net Profit

200.00

 

Less – Drawings

60.00

440.00

Current Liabilities

   

Short term loan

50.00

 

Total Liabilities

490.00

 

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TASK 2

(a) Ledgers accounts of Pendo

Loan from Sergei a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 27

To cash a/c

350

Jan, 4

By cash a/c

1000

Jan, 31

To Balance c/d

650

     

1000

1000

       

Feb, 1

By Balance b/d

650

     

(b) Trial balance of Pendo

Trial Balance at 31 January

Particulars

Debit (£)

Credit (£)

Cash a/c

4025

 

Capital a/c

5000

 

Motor van a/c

600

 

Purchase a/c

1300

 

Loan from Sergei a/c

650

 

Motor van expenses a/c

200

 

Sales a/c

800

 

Storage expenses a/c

150

 

Drawings a/c

175

 

6450

6450

 

(c) Income statement of Pendo

TASK 3

(a) Ledger accounts of Mafuta

Cash a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 1

To Balance b/d

343

Jan, 5

By Wages a/c

12

Jan, 7

To Smith's a/c

18

Jan, 9

By Max's a/c

21

Jan, 11

To Sales a/c

64

Jan, 14

By Wages a/c

14

Jan, 21

To Sales a/c

110

Jan, 14

By Purchases a/c

75

Jan, 23

To Harvey's a/c

25

Jan, 15

By Rich's a/c

162

Jan, 28

To Sales a/c

84

Jan, 20

By Fixtures and fittings a/c

32

Jan, 31

To Sales a/c

31

Jan, 21

By Wages a/c

17

Jan, 23

By office expenses a/c

3

     

Jan, 28

By Wages a/c

15

     

Jan, 31

By Balance c/d

323

     

674

674

       

Feb, 1

To Balance b/d

323

     

Capital a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 1

To Payables

33

Jan, 1

By Cash in hand a/c

343

Jan, 31

To balance c/d

1049

By Inventory

458

 

By Furniture and fittings

198

       

By Receivables

83

       

1082

1082

       

Fixtures and fittings a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 1

To Balance b/d

198

Jan, 31

By Balance c/d

230

Jan, 20

To cash a/c

32

     

230

230

       

Feb, 1

To Balance b/d

230

     

Sales a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 31

To Trading a/c

412

Jan, 2

By Harvey's a/c

124

Jan, 11

By Cash a/c

64

     

Jan, 21

By Cash a/c

110

     

Jan, 28

By Cash a/c

84

     

Jan, 31

By Cash a/c

30

     

412

412

       

Wages a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 5

To cash a/c

12

Jan, 31

Profit and loss a/c

58

Jan, 14

To cash a/c

14

     

Jan, 21

To cash a/c

17

     

Jan, 28

To cash a/c

15

     

58

58

       

Purchase a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 5

To Rich's a/c

150

Jan, 31

By Trading a/c

225

Jan, 14

To cash a/c

75

     

225

225

       

Office Expenses a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 23

To cash a/c

3

Jan, 31

Profit and loss a/c

3

Receivables from Smith's a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan,1

To Balance b/d

18

Jan, 7

By Cash a/c

18

Receivables from Harvey's a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 1

To Balance b/d

39

Jan, 23

By Cash a/c

25

Jan, 2

To Sales a/c

124

Jan, 31

By Balance c/d

138

163

163

       

Feb, 1

To Balance b/d

138

     

Receivables from Moon's a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 1

To Balance b/d

26

Jan, 31

By Balance c/d

26

Feb, 1

To Balance b/d

26

     

Payable to Rich's a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 15

To cash a/c

162

Jan, 1

By Balance b/d

12

Jan, 5

By purchase a/c

150

     

162

162

       

Payable to Max's a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 9

To cash a/c

21

Jan, 1

By Balance b/d

21

Inventory a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jan, 1

To Balance b/d

458

Jan, 31

By Trading a/c

458

Jan, 31

To Trading a/c

374

Jan, 31

By Balance c/d

374

Feb, 1

To Balance b/d

374

     

(b) Trial balanceof Mafuta

Trial Balance at 31 January

Particulars

Debit (£)

Credit (£)

Cash in hand a/c

323

 

Capital a/c

1049

 

Fixtures and fittings a/c

230

 

Sales a/c

412

 

Wages a/c

58

 

Purchase a/c

225

 

Office expenses a/c

3

 

Receivables a/c

 

Harvey

138

 

Moon

26

 

Inventory a/c

458

 

1461

1461

 

(c) Financial position statement of Mafuta

Statement of Profit and Loss

For the month ended 31 January

Particulars

Amount (£)

Sales

412

Less- Cost of goods sold

309

Gross profit

103

Less – Expenses

 

Wages

58

Office Expenses

3

Net Profit

42

Statement of Financial position at 31 January

Particulars

Amount (£)

Non current assets

 

Fixtures and fittings

230

Current assets

 

Inventory

374

Trade receivables (138+26)

164

Cash

323

Total Assets

1091

Capital account

 

Add – Net Profit

42

Total Liabilities

1091

Working Note: Cost of goods sold = Opening inventories + Purchase – Closing stock

= 458 + 225 – 374 = 309

TASK 4

(a) Ledger accountsof Ricardo

Sales a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun, 27

To Trading a/c

28500

Jun, 2

By Claire – Receivable a/c

8500

Jun, 14

By Hywel – Receivable a/c

9000

     

Jun, 20

By Cash a/c

6000

     

Jun, 24

By Mandy – Receivable a/c

5000

     

28500

28500

       

Sales Returns a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun, 22

To Claire – Receivables

1000

Jun, 27

By Trading a/c

1000

Purchase a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun, 13

To Georgina – Payable a/c

12000

Jun, 27

By Trading a/c

16500

Jun, 21

To Andrew – Payable a/c

4500

     

16500

16500

       

Cash a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun, 20

To Sales a/c

6000

Jun, 25

By Georgina – Payable a/c

11160

Jun, 24

To Claire – Receivable

7125

Jun, 27

By Andrew – Payable a/c

4410

Jun, 25

To Hywel – Receivables

9000

Jun, 27

By Balance c/d

6555

22125

22125

       

To Balance b/d

6555

       

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Discount allowed a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun,24

To Claire – Receivable

375

Jun, 27

By Profit and loss a/c

375

Discount received a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun, 27

To Profit & loss a/c

930

Jun, 25

By Georgina – Payable a/c

840

Jun, 27

By Andrew – Payable a/c

90

     

930

       

930

Claire – receivable a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun, 2

To Sales a/c

8500

Jun, 22

By Sales return a/c

1000

Jun, 24

By Cash a/c

7125

     

Jun, 24

By Discount allowed a/c

375

     

8500

8500

       

Hywel – receivable a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun, 14

To Sales a/c

9000

Jun, 25

By Cash a/c

9000

Mandy – receivables a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun, 24

To Sales a/c

5000

Jun, 27

By Balance c/d

5000

To Balance b/d

5000

       

Georgina – payable a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun, 25

To Cash a/c

11160

Jun, 13

By Purchase a/c

12000

Jun, 25

To Discount received a/c

840

     

12000

12000

       

Andrew – payable a/c

Date

Particular

Amount (£)

Date

Particular

Amount (£)

Jun, 27

To Cash a/c

4410

Jun, 21

By Purchase a/c

4500

Jun, 27

To Discount received a/c

90

     

4500

4500

       

(b) Trial balance of Ricardo

Trial balance at 27 June of Ricardo

Particulars

Debit

Credit

Sales a/c

28500

 

Purchase a/c

16500

 

Cash a/c

6555

 

Sales return a/c

1000

 

Mandy – Receivable

5000

 

Discount allowed a/c

930

 

Discount Received a/c

375

 

29430

29430

 

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TASK 5

Capital Expenditure 

Capital expenditure is money being used by company to develop and purchase fixed assets like properties, plant, infrastructure, land and building. It is also observed that capital spending is continuous expenditure which is spent on completing asset activities and expanding a current underlying asset service life (Niroomandi and et. al, 2012). That is used by the business to make capital investments and programs. Organizations often allow this kind of monetary outlay to eventually increase the scale of existing activities. In financial terms, it is taken into consideration whenever the asset is newly obtained and the expenditure increases the service life of such an additional capital resource. It is crucial to understand that cash spent on the repairing or replacement of buildings is not deemed capital investment and must be recorded on the income statement when it is actually paid.

Revenue Expenditure 

The expenses which are related to the day to day of operations and management of a business to display impact on current reporting year (DeBerardinis and Chandel, 2016). Revenue expenses are define by its design that are receive for fulfilling day to day needs of a corporation with in the current accounting year. This expenditure consists of those products and services that are useful for the company but that are used in less than a year and that offer market benefits in order to maximize business-generating ability. In general, these spending are the extra expense that occur due to an additional assets but at the same time it do not add value and useful life of respective asset.

Basic difference between these revenue and capital expenses are discussed below:

Basis

Revenue Expenses

Capital Expenses

Meaning

It is the actual spending of company which is received during daily activity.

Capital expenditure is the cost of buying assets of the company.

Earning Capacity

It support to preserve the actual ability of assets to generate income during an accounting year.

This investment helps in growing the company's earning capacity.

Benefits

It provide benefit for shorter time basically for one year (Henderson and et. Al, 2015).

The capital expenditure gains are spread over several years, such as more than one fiscal year.

Recording in accounts

These are basically recorded in annual income statements of company.

All those spending which is being made on capital items are posted into balance sheet.

Time frame

These are constant and recurring in nature which is mainly for shorter time frame.

Capital spending is one-time and non-recurring in existence. It has to do with long periods of time as it will increase efficiency (Kidwell and et. al, 2013).

Nature of expenditure

All those expenses which are spend on fixed assets after its usage is known as revenue expenses.

Whenever money is invested on purchasing assets of the company that are considered as capital expenditure.

Assets

The spending on income may not consequence in the acquisition of assets and is considered expenditure on everyday activities

The result of capital spending in the purchase of properties and used to make profits and selling if they become useless for the company.

International accounting standard

These type of expenses are recorded into IAS 16.

Mainly capital expenses are posted in he accounting record by considering international accounting standard 18 (Drake, Guest and Twedt, 2014).

Capital and revenue spending are essential for the company's growth and the generation of income. These both beneficial to the company in the current situation and benefit the economy to gain income in the potential future. Each spending gives advantages to the businesses as they manage their workflows with the aid of the income investment company. So capital expenditure allows in the following years to generate income so buy an estate.

CONCLUSION

In the end of the report, it is founded that accounting fundamental are regarded as the components that support company in order to record, determine and summarise entire financial information into meaningful financial statements. By analysing different annual reports exact nature, scope and behaviour of cost accounting technique is determined. Each and every financial document is prepared by implementing accurate accounting standard so that information evaluated from these statements are beneficial for external and internal parties.

REFERENCES

  • Mitra, A., 2016. Fundamentals of quality control and improvement. John Wiley & Sons.
  • Niroomandi, S. and et. al, 2012. Accounting for large deformations in real-time simulations of soft tissues based on reduced-order models. Computer Methods and Programs in Biomedicine. 105(1). pp.1-12.
  • Henderson, S. and et. Al, 2015. Issues in financial accounting. Pearson Higher Education AU.
  • DeBerardinis, R. J. and Chandel, N. S., 2016. Fundamentals of cancer metabolism. Science advances. 2(5). p.e1600200.
  • Kidwell, L. A. and et. al, 2013. Developing learning objectives for accounting ethics using Bloom's taxonomy. Accounting Education. 22(1). pp.44-65.
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