Important Points for IC 89 - Management Accounting Exam

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  • Capital budgeting which is one of the apprising techniques of investment decisions can be defined as " The firms decision to invest its current assets most efficiently and effectively in the long-term projects and activites with the objective of earning good Return on Investment (ROI).
  • Capital Budgeting has been defined by financial experts in the following terms: It is "Long term planning for making and financing proposed capital outlay" and "Capital budgeting represents the plans for the appropriation and expenditure for fixed assets during the budget period".
  • Mandatory Investments are required to be made to comply with statutory or regulatory requirements.
  • The payback period is the length of total time required to recover the initial investment or outlay on the project.
  • The Net Present Value of a project is the sum of the present values of all the cash flows(both positive and negative) that are expected to arise over the life of the project.
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Management Accounting

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