QUESTION:
What is
Margin of Safety (MOS)?
ANSWER:
Margin of safety
is used in break-even analysis to indicate the amount of sales that are above
the break-even point. In other words, the margin
of safety indicates the amount by which a
company's sales could decrease before the company will become unprofitable.
QUESTION:
What
is Break –Even Point?
SOLUTION:
The
break-even point (BEP) in economics, business, and specifically
cost accounting, is the point at which total cost and total revenue are
equal: there is no net loss or gain, and one has "broken even."
QUESTION:
What is the DIFFERENCES between Financial and Management Account?
SOLUTION:
Management
accounting is presented internally, whereas financial accounting is meant for
external stakeholders. Although financial management is of great importance to
current and potential investors, management accounting is necessary for
managers to make current and future financial decisions. Financial accounting
is precise and must adhere to Generally Accepted Accounting Principles (GAAP),
but management accounting is often more of a guess or estimate, since most
managers do not have time for exact numbers when a decision needs to be made.
TYPES
OF BUDGET
The types of budgets
found in a typical manufacturing business are:
a. Sales
Budget
b. Selling
and distribution costs budget
c. Administration
cost budget
d. Debtors
budget
e. Finished
Goods stock budget
f. Production
budget
g. Material
usage budget
h. Machine
utilization budget
i. Material
purchases budget
j. Direct
Labour budget
k. Creditors
budget
l. Production
overhead budget
m. Cash
budget
n. Capital
expenditure budget
o. Research
and development budget
p. Master
budget i.e. budgeted statement of profit and loss and statement of financial
position sheet. Note that all the budgets from A to P above are known as
functional budgets. Thus functional
budgets are segmented on; functional activities of the organization. The master budget is prepared from summaries
of the functional budgets.
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