Multiple Choice Questions (MCQ's) of Accounting

[maani]

Hi kamran bhai / awais

sales volume cannot be taken as a principal budget factor if production capacity is limited for a given period, in this case the principal budget factor will be your limited production capacity....and here production budget must be prepared first and then all other budgets will be linked to this....

in case production capacity is limited, production can be budgeted in a way that excess product is produced in the periods of lower demand, this excess stock will used to cater the periods in which demand is expected to be higher....other alternatives may be used....

[awaisaftab]

Manni Bhayee

Infract the plant capacity can also be taken as Principle Budget Factor or limiting factor if the production cannot be increased beyond a certain limit in near future and the expected sale is much more than the production capacity. There are certain other factors which can be considered as limiting factor for instance availability of raw material etc. But in general speaking sales budget is prepared first and budgeted sales considered as principle budget factor as you have mentioned in replying my question.

Here the question of increasing production capacity can also be raised. If a business wants to increase production capacity then it has certain alternatives for instance number of shifts can be increased or additional plant and machinery can be installed but in many cases if the production capacity needed to be increased then the Fixed overhead do not remain constant. It also makes more difficult the whole budgetary process.


Regards,

Awais

[kamranACA]

Awais/Maani,

In practical terms, one has to assess the limitation factors first of all whenever preparing such budgets or forecasts etc.

In all decision making processes it is vital. If some one comes to you and ask he wants to start a business, your first question would be how much investment you plan. When he tells you, you will ask which sector you prefer.....and then so on. You have to identify the limitation factor and then proceed within its boundries. One cannot ignore or bypass this vital factor merely for the reason that a particular book has mentioned something weird.

While preparing zero-based budget this gets more and more importance. In incremental budgets one may have certain prejudiced way out to the issue.

Regards,


KAMRAN.

[wasim akram]

Dear Kamran, Awais and Maani
I m new and glad to see your academic strength. Due to certian limitation I may not share my understanding in large but definitly will try to update my undertanking from intellectuals like yours. I bit dishearted when I did not receive any comment from any member on my query dt 25-02-09 read as follows.
A private ltd company took over the business on "as is and where is basis " of a Firm through an agreement. Firm owns immoveable assets which are equitabley mortgaged with bank against outstanding fund / non fund based facilities. Comapany approached the bank to change the title of borrower i.e Firm to Company. Bank is of the opinion that till the change of title deed of the property, it is impossible and It is not easy to release property documents in the presence of outstanding balance and firm has to clear its dues first. Then bank will release property documents and It take at least 15-20 days to get altered the title of property from "Patwari etc ".

My questions are
1- what are the ways company can proceed further to achieve its goal within shortest period and without clearing outstanding balance of the bank ?
2- Can company operate L/C using non fund based facilities enjoyed by the firm? If yes then how?
3- What is Cross counter Guarantee and how is it excercised?
4- What are the convincing arguements for bank?

Keeping in view that Directors of the company were the partners of the firm. pl quote and guide with practical approach.

I could not understand the reason why professionals like Mr. Kamran did not guided me. Till now, I m looking forward even to order me to delete.
As far as concept of sharing ideas is concerned. I think it is very good and would be better if we share knowledge on ISA'S one by one & Sections of CO, ITO etc.
As far as the querry Which Budget is prepared first.
a.Sales Budget b.Cost Budget c.Manufacturing Budget d.Production Budget
In my opinion simple answar is Sales Budget. becoz sales is independent rather that cost and secondly whenever we prepare budget of any item first we see it over all demand then capacity to be installed or installed to meet demand and so on.
Regards to you all.

Wasim Hanjra

[awaisaftab]

Dear Kamran,Mani and Wasim

In fact I was discussing the above issue in relation to MCQ's. While answering to MCQ's the most probable and the most applicable answer is selected. If MCQ's come in Cost Accounting paper of ICAp then you cannot write long explanator note or can even write that some other factors can also be used as limiting or principle budget factor. Rather the answer sales budget choosen by you shall be considered only as good.

Regards,

Awais

[kamranACA]

Awais,

I know what answer has been suggested by writers in their books and I also know the reasoning explained by them. Certainly I am also supposed to know what exam approach should be specially in case of MCQs.

I only explained the situation that what happens in practical terms. It is for the knowledge sharing beyond the very purpose of this thread.

You are practically handling an accounts department. Try ever to make a budget or forecast or projection without defining the limitation factor. You will come to know what my explanation was meant for.

Regards,


KAMRAN.

[awaisaftab]

Dear Kamran,

I was not only addressing you. I am agree with you that budgeting is a difficult process and many problems are faced when one actuall make budgets.I think many of my previous posts I have given full explaination.
I have worked with an audit and accounting consultancy firm and I have remained involved in the process of preparation of budgets for many partner NGO's of an international NGO, which was our client.


Regards,
Awais Aftab

[kamranACA]

Good to know Awais.

Regards,

[wasim akram]

THANKS
F......O........R.........U..........M.........
IS MEHFIL K ADAB KA PERHAPS MUJHAY ....................

[awaisaftab]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by wasim akram</i>
<br />THANKS
F......O........R.........U..........M.........
IS MEHFIL K ADAB KA PERHAPS MUJHAY ....................
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">


Har Bat pe Meri Kehte ho tum k tu kia ha

Tum hi batao K yeh ANDAZE ZUFTUGU Kia Ha



Regards

Awais Aftab

[shafiqb9]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by wasim akram</i>
<br />Dear Kamran, Awais and Maani
I bit <b>dishearted</b> when I did not receive any comment from any member on my query dt 25-02-09 read as follows.

<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

[(]SORRY[(] FOR WASIM AKRAM

[V]YOUR ARE IGNORED AGAIN.[^]

[wasim akram]

Nahee hay ulfat meeras aqal waloon ke
Tinkay khak ban kar ujala kartay han

[awaisaftab]

Hadsa Aj Aisa Huwa Roshni keS her Main !!!
Charte Suraj Pe Diay ki hukumrani Ho gayee

[danishayub_76]

Dear All.

I want to learn about depreciation methods and rates used in financial reporting. IAS 16 explains the methods to be adopted for depreciation including Straight line method, declining balance method and units of production method. My question is that what provisions and rates are metnioned in Companies ordinance 1984 in this regard. or in other words What companies Ordinance 1984 says regarding depreciation methods and rates.
Awaiting for your response.

Danish Ayub

[wasim akram]

CO 1984 is silent and left it over to the Board of Directors to adopt policy regarding depreciation method and rates. CO required only to disclose policies regarding provisions, changes in policies etc and disclosure of effects due to change in policies.