In this article all the essential aspects of MTTM-5 are covered in each unit, so especially when you’re preparing for the exam or even for the assignment going through this article, it will be beneficial. So stay tuned to this article to learn about the MTTM-5.
MTTM-5 Accounting and Finance for Managers
Define Accounting
Accounting refers to the process of analyzing and summarizing money in a structured way. Many organizations and businesses do accounting to keep a record and to understand how much money came and how much gone, that is why accounting is considered important in terms of business and individual aspects. And it is the best formula to manage the money.
Explain the Role and Activities of an Accountant.
Here are some roles and activities of an accountant:-
- The accountant’s role is to keep a record of sales, purchases, and expenses of an organization these things should be on tips so that when owners ask for checks accountant should able to explain them.
- The accountant maintains the balance sheet and cash flow statement.
- An accountant helps to assist in creating budgeting based on financial goals.
- They also help the manager or owner that how appropriate taxes have to be paid and how much it has to be paid legally.
- Accountants generally stay updated on what financial laws and regulations have changed or any new law has come, and then immediately they inform their manager or owner.
- They also ensure that the ITR file has to be filed on time.
- Accountants also perform external and internal audits for the company to ensure everything is running smoothly.
What is Accounting Personnel?
Accounting personnel refers to the personnel who ensure recording expenses, calculating taxes, preparing financial statements, financial records, etc. They have many documents as proof and record of how much money is spent, how much money came, and how much money is left.
What do you mean by Accounting Framework?
Accounting frameworks refer to rules and guidelines that provide appropriate structure for presentation, accounting practices, financial information, and procedures in a systematic manner. It helps the company to maintain accurate data, records, and management that may come into use in the future. It also helps in measuring the financial transactions.
What is a Balance Sheet?
The balance sheet is a financial sheet that tells about the company’s assets, liabilities, and equity. Without a balance sheet accounting is incomplete as it plays a very important role in configuring how these three things are balanced appropriately and legally.
Explain the Uses of Balance Sheet.
Here are some uses of Balance sheet:-
- The balance sheet is used to check how strong and healthy is the organization and if the organization’s asset is more and liabilities is less then it’s a good signal.
- Any party before investing in the company always see the balance sheet to understand the company’s financial structure and see how many assets the company has.
- If the company wants any kind of Loan from the bank then the bank also first sees the balance sheet of the company, and assets as well and then decides whether he has to lend money or not.
- The owner of the company sees that day-by-day assets are decreasing then uses the balance sheet to make good and important decisions. He can also see multiple balance sheets to compare how the financial structure changed.
- The balance sheet is very helpful and useful as to plan the future of the company, owners generally use a balance sheet only.
What is a Current Asset?
It means that any asset that can be easily converted into cash within a year. In a company, these kinds of assets are important for to daily operation of the business. Usually, a company uses short-term assets to pay off short-term debts and to cover other expenses. Example of current assets includes- cash, insurance, inventory, prepaid expenses, etc.
What is Fixed Assets?
It means that any asset that is for a long period of more than a year or more is up to one year. Fixed assets have a longer lifespan as compared to current assets. Example of a fixed asset includes- land, building, machinery, etc. And fixed asset helps businesses plan for replacement to represent their financial structure on the balance sheet and fixed assets are also very helpful and useful for the company.
What are some Indirect Expenses?
Here are some indirect expenses:-
- The indirect expense includes office rent, office maintenance cost, electricity, water, etc.
- Employees who work in your organization have to be paid some amount of fixed salary, salary for guard, etc.
- In an office, there are many expenses like everyone wants tea or coffee in the morning and evening, files, paper, diary, pen, stapler and stapler pins, charts, folders, chairs, computer or laptop, etc.
- Insurance coverage cost is also considered an indirect expense of the office.
- Lots of expenses are required for advertising and marketing and we know that in a business, marketing of the product is a very important factor that we cannot deny to spend because we have to reach to a wide range of audience.
- Repairing of the printer, camera, and other machines also required expense and they also come in indirect expense.
What do you mean by gross profit?
Gross profit is the profit that is used to measure the profit of the company by subtracting the cost of the goods sold from its total revenue. It is used to measure how a company’s sales have been converted into profit. Gross profit is the essential factor for the company to check how the company is doing well and how much profit is generated by the company as well.
Name some components of the total cost.
Some components of total cost include Fixed cost, Variable cost, Semi variable costs, Direct cost, Indirect cost, Operating costs, Production cost, Nonproduction cost, Opportunity cost, Sunk cost, Capital cost, Depreciation, Interest cost, Taxes, etc.
What do you mean by cost sheet?
A cost sheet is a sheet or document which in detail tells us about the expenses such as raw materials, manufacturing, production, and labor. A cost sheet helps us to analyze and to control the cost of the extra expenses and by looking at the cost sheet we also come to know that our cost is being spent on the right expenses and according to that also in future how cost has been spend or not we get an idea so cost plays a very important role.
What is Budget?
A budget is a financial statement or plan states that how much we have, how to spend, and how much to save for the future. It helps to control expenses like electricity and water bills, office maintenance costs, machinery, equipment, insurance, etc.
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FAQs
What are the 5 types of financial statements?
The 5 types of financial statements are Income Statement, Balance Sheet, Cash Flow Statement, Statement of Changes in Equity and Notes to Financial Statements.
What are the golden rules of accounting?
Who is the father of accounting?
The father of accounting is Luca Pacioli.
What are the three types of accounting?
The three types of accounting are cost, managerial and financial accounting.
Conclusion
Mttm-5 is all about Accounting and Finance for Managers. This post covers topics like Define Accounting,Role and Activities of an Accountant, Accounting Personnel, What do you mean by Accounting Framework, Balance Sheet, Uses of Balance Sheet, Current Asset, Fixed Assets, some Indirect Expenses, gross profit, some components of the total cost, cost sheet and budget. Here you will find the all important aspects of MTTM-5 for exam preparation and assignment.