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The document provides a series of management accounting questions and answers, covering key concepts such as current ratio, break-even point, and budgeting. It differentiates between management accounting and financial accounting, highlighting their distinct focuses and purposes. Additionally, it discusses features of marginal costing and various financial techniques like trend analysis.

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17 views

Useful notes

The document provides a series of management accounting questions and answers, covering key concepts such as current ratio, break-even point, and budgeting. It differentiates between management accounting and financial accounting, highlighting their distinct focuses and purposes. Additionally, it discusses features of marginal costing and various financial techniques like trend analysis.

Uploaded by

sankeerthkv3
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Management Accounting Questions & Answers

PART A (1 Mark Each)

1. What is current ratio?


The current ratio is a liquidity ratio that measures a companys ability to pay short-term obligations. It
is calculated as:
Current Ratio = Current Assets / Current Liabilities

2. List out two examples for financing activities.


- Issuance of shares or bonds
- Borrowing or repayment of loans

3. What is Break Even Point?


The break-even point is the level of sales at which total revenues equal total costs, resulting in
neither profit nor loss. It is calculated as:
Break Even Point (Units) = Fixed Costs / (Selling Price per Unit Variable Cost per Unit)

4. Define Management Accounting.


Management accounting is the process of preparing financial reports and analyses to assist
managers in making business decisions. It focuses on budgeting, forecasting, and cost
management.

5. What is budgeting?
Budgeting is the process of creating a financial plan that estimates income and expenses over a
specific period.

6. What is cash outflow?


Cash outflow refers to the movement of money out of a business, such as payments for expenses,
loans, or asset purchases.

7. What is contribution?
Contribution refers to the difference between sales revenue and variable costs, which contributes to
covering fixed costs and generating profit.
Contribution = Sales Revenue Variable Costs

8. What is trend analysis?


Trend analysis is a financial technique used to examine patterns in financial data over time to
identify growth, decline, or stability trends.

PART B (3 Marks Each)

9. Differentiate between management accounting and financial accounting.


- **Management Accounting** focuses on internal decision-making and includes budgeting, cost
analysis, and performance evaluation.
- **Financial Accounting** is concerned with preparing financial statements for external stakeholders
like investors and regulators.

10. What are the features of marginal costing?


- Considers only variable costs in decision-making.
- Fixed costs are treated as period costs and not allocated to products.
- Helps in profit planning and decision-making.

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