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BTMC-138: Managerial Accounting and Finance in Tourism

BTMC-138: Managerial Accounting and Finance in Tourism

IGNOU Solved Assignment Solution for 2023-24

If you are looking for BTMC-138 IGNOU Solved Assignment solution for the subject Managerial Accounting and Finance in Tourism, you have come to the right place. BTMC-138 solution on this page applies to 2023-24 session students studying in BAVTM courses of IGNOU.

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Assignment Code: BTMC-138/TMA/2022-23

Course Code: BTMC-138

Assignment Name: Managerial Accounting and Finance in Tourism

Year: 2023-2024

Verification Status: Verified by Professor



Section-A


Answer the following in about 500 words each.


Q1) What do you mean by term ‘Subsidiary Books’? What are the advantages of subsidiary books? Explain Single column cash book with format of the same.

Ans) Subsidiary Books, also known as Subsidiary Day Books, are specialized accounting books used to record specific types of transactions. These books are subsidiary to the main accounting journal and help in maintaining a systematic and detailed record of transactions.


Types of Subsidiary Books:

a) Cash Book: Records all cash transactions.

b) Purchase Book: Records credit purchases of goods.

c) Sales Book: Records credit sales of goods.

d) Purchase Return Book: Records the return of goods purchased.

e) Sales Return Book: Records the return of goods sold.

f) Bills Receivable Book: Records bills of exchange received.

g) Bills Payable Book: Records bills of exchange issued.

h) Journal Proper: Records transactions that do not fit into the above categories.


Subsidiary books play a crucial role in the efficient management of a business's financial transactions, offering several advantages. Firstly, they facilitate automatic classification of transactions, ensuring that transactions of the same nature are recorded in designated books. For instance, credit purchases of goods find their place in the purchases book, streamlining the organization of financial data.


Secondly, subsidiary books simplify the referencing process. Instead of searching through the entire journal, users can quickly locate specific transactions by referring to the appropriate subsidiary book.

Thirdly, the division of the journal into various subsidiary books supports the division of work among multiple individuals. This division enhances the prompt recording of transactions, saving time and improving overall efficiency. Fourthly, subsidiary books allow for more detailed recording of transactions compared to what would be feasible in a single, general book. This detailed information aids in a more comprehensive understanding of each transaction.


Fifthly, assigning specific subsidiary books to responsible individuals facilitates accountability. Each person is entrusted with maintaining a particular book, ensuring it is kept up-to-date and in order. This helps in fixing responsibility for any discrepancies or errors. Sixthly, subsidiary books streamline the checking process. In the event of a Trial Balance discrepancy, locating errors becomes relatively straightforward, as the transactions are segregated by type in subsidiary books.


Cash Book is a crucial subsidiary book for firms with many cash transactions. The Cash Book is a main entry book and Cash Account. An additional ledger Cash Account is unnecessary. The Cash Book records debits and credits like a ledger. It balances like a ledger account. Cash Books can be simple, double, or triple column. Each kind tracks cash transactions, debtor receipts, creditor payments, and expenses including salaries, wages, rent, and taxes. The Cash Book is essential for firms to track and verify cash positions. The Single Column Cash Book records all business cash receipts and payments. Its name, "One Column Cash Book," comes from its single amount column on each side. This financial record represents the Cash Account in the ledger and is a book of prime entry.


The simplified structure organises all monetary transactions, including receipts and payments. The Single Column Cash Book simplifies recording by separating debit and credit entries into one column. This ease of use helps organisations track cash transactions accurately and efficiently. A separate Cash Account in the ledger is unnecessary with the Single Column Cash Book, a basic financial record-keeping tool. Its debit side records cash receipts and credit side records cash payments, like a ledger account. Financial reporting accuracy and completeness are ensured by balancing. A business's financial management relies on the Single Column Cash Book, which clearly shows cash transactions. Its single-column style makes cash-related operations easy to access and analyse for firms.

Q2) Explain the different methods of calculating depreciation value with a suitable example.

Ans) The concept of depreciation is an essential component of accounting procedures all around the world, and it is firmly established in the legislation that govern financial reporting and taxes. It is a statutory provision that is mandated by the laws of the Income Tax, and it is universally accepted by accountants as a normal method in the process of keeping accurate account books. When calculating depreciation, the primary goal is to take into account the natural deterioration of assets over time, which is the result of wear and tear that is incurred as a result of continuous commercial use. In essence, the accounting system creates a financial provision for the replacement or upgrade of an asset through renovations and repairs by assigning a specific percentage of the asset's value to be gradually worn down. This allocation determines the amount of the asset's value that will be gradually worn down. As a consequence of this, depreciation becomes an essential component of the process of financial management for any organisation that is now profitable.


Straight-Line Method:

Using the Straight-Line Method, an annual deduction is made from the initial value of the asset, and the amount of the deduction is a predetermined percentage that is specified by statutory restrictions. It is necessary to maintain this deduction on an annual basis in order to calculate the net depreciated value of the asset at the conclusion of each fiscal year. Due to the fact that it is straightforward and reliable, the Straight-Line Method is a well-liked option for a wide range of materials.


Example: Consider a machine purchased for $50,000 with an estimated useful life of 10 years and no residual value. Using a straight-line depreciation rate of 10%, the annual depreciation would be \frac{50,000}{10} = $5,000. Therefore, at the end of each year, $5,000 would be deducted from the original cost until the machine's book value reaches zero after 10 years.


Written Down Value (WDV) Method:

A specified percentage of the asset's written-down value at the beginning of the year is calculated using the WDV Method. This percentage is determined in accordance with the standards that govern the financial industry. The value that was calculated is then subtracted from the WDV of the asset at the beginning of the year in order to arrive at the WDV that was calculated at the end of the year. Through a process of extension, this WDV at the end of the year becomes the WDV at the beginning of the next year. Due to the fact that this method is known for displaying a higher depreciation in the initial years, it is suited for assets that undergo a significant fall in value early on in their useful life.


Example: Suppose the WDV of a vehicle at the beginning of the year is $30,000, and the depreciation rate is 15%. In this case, the annual depreciation would be 30,000 \times 0.15 = $4,500. Subtracting this from the beginning WDV gives the end-of-year WDV, which then serves as the beginning WDV for the following year.


Section-B


Answer the following in about 250 words each.


Q3) Describe accounting as an information system.

Ans) Accounting serves as an integral component of an organization's information system, encompassing both financial and non-financial data. Its core function involves the identification, measurement, and communication of economic information, enabling informed judgments and decisions by users.

The major purpose of accounting is to supply critical information to a wide variety of users, which includes consumers, employees, investors, creditors, and government bodies, among other groups. It is also important to note that accounting is associated with broader social responsibility because of the extensive usefulness it provides to a variety of stakeholders.


Accounting is often divided into two primary subfields: managerial accounting and financial accounting. Both of these subfields are distinct from one another. The compilation of general-purpose reports for external users, including as shareholders, creditors, financial analysts, and government regulators, is an essential part of the process of financial accounting. The evaluation of the overall business operations and the state of the finances is the primary focus of external users.


On the other hand, managerial accounting is designed to meet the informational requirements of managers working within an organisation. As an illustration, a production manager may look for reports on unit production in order to evaluate the performance of workers, whereas a sales manager might examine the profitability of products in order to find ways to improve sales methods. Due to the fact that they contain sensitive and proprietary information, managerial accounting reports, in contrast to financial reports, are typically not extensively disseminated beyond the organisation.


Q4) What do you mean by double entry system? Distinguish it from single entry system.

Ans) The double-entry system is a fundamental accounting method that records each financial transaction in at least two accounts—debit and credit. It adheres to the accounting equation, where assets equal liabilities plus equity. In this system, every transaction has a dual effect on the financial position of a business, ensuring that the accounting equation remains balanced. One account is debited to reflect an increase, while another is credited to denote a decrease. This system enhances accuracy, transparency, and the ability to track the financial health of an organization.


Distinguishing Double Entry from Single Entry System:

Q5a) Distinguish between: Outstanding Expenses and Unexpired Expenses.

Ans) Distinguishing from outstanding expenses from unexpired expenses:

Q5b) Distinguish between: Provision for Discount on Debtors and Provision for Discount on Credit.

Ans) Distinguishing from provision for discount on debtors from provision for discount on credit:

Section-C


Answer the following in about 100 words each.


Q6) What is profit-volume ratio?

Ans) The profit-volume ratio, also known as the contribution margin ratio, is a financial metric that expresses the relationship between the contribution margin (sales minus variable costs) and total sales revenue. It is calculated by dividing the contribution margin by the total sales. This ratio provides insights into the profitability of a business at different levels of activity, helping assess the impact of changes in sales volume on overall profit. A higher profit-volume ratio indicates a greater proportion of each sale contributing to profit, highlighting the business's ability to cover fixed costs and generate income as sales volume fluctuates.


Q7) What is the basic benefit of using the DuPont form of financial statement analysis?

Ans)The DuPont form of financial statement analysis provides a concise and comprehensive way to assess a company's return on equity (ROE). By breaking down ROE into its three components—profit margin, asset turnover, and financial leverage—it offers a nuanced understanding of the factors influencing a company's overall performance. This method allows stakeholders to pinpoint specific areas where the company excels or needs improvement. The DuPont analysis enables a more precise identification of the sources of return, facilitating strategic decision-making and guiding efforts to enhance profitability by focusing on the key drivers influencing ROE.


Q8) Write short notes on ‘Working Capital’.

Ans) Working capital refers to the funds a company uses to manage its day-to-day operational needs, covering short-term expenses like salaries, inventory, and bills. Calculated as the difference between current assets (e.g., cash, receivables) and current liabilities (e.g., payables, short-term debt), it reflects a firm's liquidity and short-term financial health. Maintaining a healthy working capital ensures smooth operations and the ability to meet short-term obligations. Efficient working capital management is crucial for sustaining business operations, supporting growth, and avoiding liquidity crises. It is a key metric for assessing a company's operational efficiency and financial resilience.


Q9) What are the three categories of assets? Explain anyone.

Ans) Assets are typically categorized into three main groups: current assets, fixed assets, and intangible assets.

a) Current Assets: These are short-term assets that can be converted into cash within a year. Examples include cash, accounts receivable, and inventory.

b) Fixed Assets: These are long-term, tangible assets held for business use and not intended for sale. Examples include property, plant, equipment, and vehicles.

c) Intangible Assets: These lack physical substance but hold economic value. Intellectual property, trademarks, patents, and goodwill are examples. Goodwill, specifically, represents the premium paid for an acquired company beyond its tangible assets' fair value and is reported on the balance sheet. Goodwill reflects brand reputation and customer relationships.


Q10) List the key activities of a financial manager?

Ans) A financial manager plays a pivotal role in ensuring the financial health of an organization. Key activities include financial planning to meet long-term goals, budgeting to allocate resources effectively, and managing cash flow to meet short-term obligations. They assess investment opportunities, analyse financial data, and make strategic decisions to maximize shareholder value. Risk management involves identifying and mitigating financial risks. Financial managers also engage in capital structure decisions, determining the mix of debt and equity. Additionally, financial reporting and compliance ensure transparency, while strategic financial analysis guides decision-making. Overall, financial managers contribute to sustainable growth and profitability.

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