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: 223

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

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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Discuss The Nature, Behaviour & Purpose of Cost Accounting

INTRODUCTION