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 Cash-flow statement and Fund-flow statement are conceptually same. Do you agree? Explain with hypothetical example.
Solution:
No Cash-flow statement and Fund-Flow statement are conceptually not same, because of the following reasons:-
1. Fund-flow statement is based on accrual basis of accounting while cash-flow statement is based on cash basis of accounting.
2. Fund-flow statement is concerned with how Working Capital position on total financial resources position based on wider concept of fund, changes over a period of time.
Cash Flow statement on the other hand is concerned with the change in cash position of the firm over the period of time.
3. Fund-flow statement is useful or intermediate and long range financial planning while cash-flow statement is suitable for immediate future cash planning.
4. The Cash-flow statement is studied with opening Cash and bank balance to which are added all cash inflows. From this total all cash outflows are deducted to arrive at closing Cash and Bank balance. But fund flow statement is not started with opening working capital balance. Here all sources over application of fund are taken or increase in working capital while excess of application over sources of fund is taken as decrease in working capital.
 Write down in your own words the basic premises on which marginal costing concept is has been developed out of the three parameters Pv Ratio, BEP and Margin of safety. Which parameter would you prefer for inter firm comparison and why?
Solution:
Marginal costing is a technique of product costing based on the concept of marginal cost. Here costs are segregated variable and fixed portions. It is the variable cost only which is assigned with the product. Fixed cost; being period cost having no relation with change in volume of output are excluded from the cost of product. Only variable or marginal cost is sensitive to the change in output...