Book Principles of Accounting PDF

For Professional BBA Students ( Principles of Finance) of
all universities and Colleges.
Principles of Accounting
Questions & Solutions
Written by-
Mohammad Salim Hossain
B.Com(Hons),M.Com(Accounting), MBA major in Finance(BOU)
Assistant Professor & Head, Department of Business Administration
Model Institute of Science & Technology (MIST), Gazipur.
Examiner of National University (BBA & MBA Program)
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DEDICATED TO -
ALLAH
Preface to First Edition
Bismillahir Rahmanir Rahim.
Alhamdulilah. I have great pleasure in placing the book
"Principles of Finance" for students of BBA(Hons). and other
professionals. Finance is undergoing a renaissance in response to
technological changes, globalization and growing risk
management concerns. In these challenging times, Principles of
Finance will be helpful to make tactical decision in business
concern, from this point of view I have just written this book.
The Primary objective of this book is to provide the basic
concepts and applications of Principles of Finance to the needs of
students appearing in the examinations of BBA (Hons), &
professional examinations. Most of the information is collected from
website and questions of different years in National university.
I have tried my best to make this book in a simple
language, most systematic manner and free from errors and
omission. I will be grateful if the mistakes and deficiencies are
pointed out to me by the readers. Constructive criticisms and
suggestions for improvement are most welcome.
Mohammad Salim Hossain
E-mail: salimmist@yahoo.com
Mobile: 01711-385824
Detailed Syllabus
First Year / First Semester
1102 PRINCIPLES OF ACCOUNTING
1. Introduction: What is accounting? Building Blocks of Accounting -

Ethics, Assumptions, Equations, Transaction Analysis, Financial
Statements.
2. Recording Process: The Accounts, Steps in the Recording Process,
Journal, Ledger, Trial Balance.
3. Adjustment Process: Timing Issues, Basics :of Adjusting Entries,
Adjusted Trial Balance and Financial Statements, Alternative
Treatment of prepaid Expenses and Unearned Revenues.
4. Completion of Accounting Cycle: Using a Work sheet. Closing the
Books, Reversing Entries and Correcting Entries, Classified Balance
Sheet.
5. Accounting for Merchandising Operations: Merchandising
Operations, Recording Purchases of Merchandise, Recording Sales of
Merchandise, Completing Accounting Cycle, Forms of Financial
Statements - Multiple and Single Step Income Statement
-Classified Balance Sheet, Work Sheet of a Merchandiser.
6. Inventories: Inventory Basics, Periodic Inventory System, Inventory
Costing Under a Periodic Inventory System, LCM, Inventory Errors,
Statement Presentation and Analysis, LIFO, FIFO, Average cost
Method.
7. Accounting Information Systems: Basic Concepts of Accounting
Information Systems, Subsidiary Ledgers, Special Journals.
8. Internal Control and Cash: Internal Control, Cash Control, Use of
a Bank, Reporting Cash.
Book Recommended 1. J J Weygandt, D E Keiso, and P D Kimmel,
Accounting Principle, 8th Edition, Wiley and Sons, Inc.
Contents
SL.NO. Name of Question & solution Pages
1. Suggestions
1. BBA Question & Solution -2004
10. Chapter wise theory
11. Exercise
BBA-1102
Chapter wise Theory suggestions
Principles of Accounting
1. Introduction
1. Define accounting? 2009,2008,2007,2011 What is the importance of
accounting in business? 2010 Distinguish between bookkeeping and
accounting.
2. Who are the users of accounting information? 2009,2008
3. What is GAAP?2007 Discuss various important principles.
4. Describe four accounting principles with example.
5. Discuss the ethical issues of accounting.
6. Accounting is a very responsible profession- explain.
7. What is the basic accounting equation?2008,2007 Discuss the elements
of accounting equation. 2010
8. What items affect owner’s equity?2008, 2007 What is owner’s equity?
Discuss the elements
of owner’s equity.
9. Define the terms of assets liabilities and owners equity.2007
10. Briefly describe four assumptions that underlie the financial
accounting structure.2010
11. State two generally accepted accounting principles that relate to
adjusting the accounts.2009
12. Why is ethics a fundamental business concept?2007
13.Explain the monetary unit and economic entity assumptions.2007
14.“The primary purpose of accounting is to produce information that is
useful in making
investment and credit decisions” Explain.2004
15.Describe the two main qualitative characteristics of useful financial
information? Explain.2004
16. Discuss the image of accounting.2011
17. What are the essential characteristics of an event to be a transaction?
2011
18. Define accounting cycle. Mention the various phases of accounting
cycle. 2011
19. Discuss any five concepts and conventions. 2011
20. Accounting is ingrained in our society and it is vital to our economic
system. Do you agree?
Explain.
2. The Recording Process
1.What are the basic steps in the recording process?
2.What are the golden rules of double entry system? 2011
3.What is accounting cycle? 2007State the steps of accounting cycle.2010
4.What is journal? What are the advantages of using a journal in the
recording process?
5.What is Posting? What is Trial Balance. What are the limitation of a trail
balance? 2007
6. “Depreciation is the allocation of cost” – Do you agree? Why? 2009
7. What is the purpose of an adjusted trial balance? How is an adjusted
trail balance prepared?2004
3. The Adjustment Process
1.What is adjusting entries?2011 What are the purposes of adjusting
entries?
2.State two generally accepted accounting principles that relate to
adjusting the accounting.?
3.What is closing entries?
4.What is income statement? Mention its uses?
5.Explain the terms fiscal year, calendar year and interim periods.
6.Why does the accrual basis financial statements provide more useful
information than that of the cash basis financial statement? 2004
7. What are the different type of adjusting entries? Explain with
examples.2010,2008,2007
8. Distinguish between cash basis and accrual basis of accounting.
2009,2008,2007
9. State the rules regarding the adjustment of “ Adjustment entries” 2011
10. Distinguish between a reversing entry and an adjusting entry. Are
reversing entry required?
4. Completion of Accounting Cycle (Work Sheet)
1.What is work sheet? What are the objects of preparing work sheet?
2004 Is it mandatory in accounting? 2008
2. What is post closing trial balance? What is reversing entries ?
3. Distinguish between reversing entry and adjusting entry.
4. What is closing entries? Discuss in brief the closing process of
temporary accounts.2010
5.Is worksheet a part of accounting cycle? Explain the purpose of
worksheet.2009
6. What are the entries an organization needs to prepare for closing its
books of accounts at the end of each accounting period? 2009
7. What are the content and purpose of a post closing trail balance? 2011
8.What is retain earning statement? Why it is prepare? 2011
5. Accounting for Merchandising Operations
1 What is income statement? Mention its classes.
2 What do you mean by financial statements?
3 What is cash flow statement? Discuss its importance.
4 How does the Single-step form of income statement differ form the
multi-step form?
5 What is a classified Balance sheet? Discuss the different categories of
assets according to classified balance sheet. 2010,2008
6 What is periodic Inventory system? Mention its various advantages.
7 What is perpetual inventory system? Mention its various advantages.
8 Distinguish between perpetual and periodic inventory method.
9 Define FOB shipping point, FOB destination and Contra revenue
accounts.2010
10 Describe the different systems to account for merchandise inventory.
2010
11 Why the merchandise inventory account is usually required to adjust at
end of the year? Explain.2009
12 Explain the meaning of the credit terms i) 2/10,n/30,( ii) 1/10, EOM,
(iii) n/30. 2009, 2007
13 What are the main difference between accounting for merchandise
operations and accounting for service oriented organization?2004
6. Inventories
1. What are some of the reasons that may cause management to use gross
profit method and retail method of estimating inventory?2009
2.Discuss the importance of inventory valuation.2099
3.What are the methods of issuing materials? When and Why we will use
LIFO or FIFO method? 2009
4. How would you determine inventory quantities? 2011
7. Accounting Information Systems
1.What is an accounting information system? 2011
2.What is subsidiary ledger? Discuss the nature and advantages of
subsidiary ledger.2010,2008
3.Distinguish between mechanized accounting system and manual
accounting system.
4.What is special Journal? Mention its classes and uses.
5.What is subsidiary and General ledger?
6. Describe the two constraints inherent in the presentation of
accounting information.2004
7. “ An Accounting information system applies only to a manual system ’’
Do you agree? Explain. 2011
8. Internal Control and Cash
1. Discuss the principles of internal control used generally by business
organization.2010
2. What is reconciliation of bank accounts? Why reconciliation is
required?2010
3. What is internal control? Briefly explain the principles of effective
internal control?2008
B.B.A PART-1 (1ST SEMESTER) EXAMINATION, 2004
1102
PRINCIPLES OF ACCOUNTING
Time—3 hours Full marks—60
[N.B.—The figures in the right margin indicate full marks. Answer FOUR
questions from part A and FOUR questions from part B.]
Part A
Marks
1."The primary purpose of accounting is to produce information that is
useful in making investment and credit decisions." Explain. 5
2. (a) Why do accrual basis financial statements provide more
useful information than cash basis statements? 2.5
(b) What is the purpose of an adjusted trial balance? How is an
adjusted trial balance prepared? 2.5

3.What is work sheet? Discuss its uses. 5
4.What are the two main qualitative characteristics of useful
financial information? Explain. 5

5.Describe the two constraints inherent in the presentation of
accounting information. 5
6.What are the main differences between accounting for
merchandising operations and accounting for service oriented
organization? 5
Part B
Marks
7.The unadjusted trial balance of 31st December, 2004 is given below :—
10
Jaba and Company
Unadjusted Trial Balance
As at 31st December, 2004
Particulars Debit Credit

Taka Taka
Cash 20,000
Accounts Receivable 5,000
Prepaid Insurance 3,000
Supplies 4,000
Equipment 25,000
Accounts Payable 10,000
Unearned Revenue 6,500
Jaba's Capital 19,000
Jaba's Drawings 1,500
Commission Revenue 30,000
Utility Expenses 600
Salaries Expenses 6,400
65,500 65,500
Other Information:—
Supplies on hand at the end of the period Tk. 2800
Prepaid insurance of Tk. 1,500 expired during the year.
Commission revenue earned but not received Tk. 5,000.
Salaries accrued amounting to Tk. 1,600.
Depreciation is to be charged on equipment @ 10%.
Required:—
Prepare adjusting entries for December 31, 2004.
(ii) Prepare adjusted Trial Balance.
(iii) Prepare necessary closing entries.
Marks
8. (a) Presented below the component of Nitu Company's
5
Income Statement. Determine the missing figures:—
Condition-1 Condition-2 Condition-3

Sales 1, 50,000 2, 00,000 ?
Cost of goods sold ? 1, 25,000
95,000
Gross profit 90,000 ? 80,000
Operating Expense ? 46,000
Net Income 27,000 31,000 ?
(b) Information relating to Samsu and Co. is presented

5
below :—
May 2 Purchased Merchandise from Sajib and Co. for Tk. 50,000,
terms 2/10, n/30, FOB Shipping Point.
5 Paid freight cost of Tk. 5,000 on merchandise purchased
from Sajib and Co.
9 Purchased office equipment on account for Tk. 70,000.
12 Returned merchandise to Sajib and Co. and granted an allowance for
Tk. 4,000.
12 Paid amount due to Sajib and Co.
30 Received full amount from data and Co.
Required:—Prepare Journal Entries to record the transactions on the

books of Samsu and Co. Under periodic and perpetual inventory system.
9. The year ended Trial Balance for Ronzu Wholesale company presented
below:-
Ronzu Wholesale Company
Trial Balance
December 31, 2004
Particulars Debit Taka Credit
Taka
Cash 20,000
Account receivable 50,000
Merchandise inventory 15,000
Office supplies 9,000
Office equipment 60,000
Accumulated depreciation – Office 15,000
Equipment 4,000
Prepaid rent 35,000
Notes payable 70,000
Ronzu’s Capital 3,500
Ronzu’s drawings 1,70,000
Sales 15,000
Sales discount 1,00,000
Purchase 12,000
Purchase return and allowance 18,000
Salaries expenses 9,000
Rent expenses 4,500
Insurance expenses 2,500
Freight out 3,500
Heating and lighting 12,000
General reserve
3,14,000 3,14,000
Adjustment data:-
1. Merchandise inventory actually on hand Tk. 30,000.
2. Expired rent Tk. 2,200
3. Depreciation on office equipment @ 10% per annum
4. Uncollectible account expense of Tk. 1,000 is to be written off
5. Outstanding salaries of Tk. 1,500 for the period.
6. Office supplies on hand Tk. 4,500.
Other Data:-
Salaries expense is 70% selling and 30% administration
Required: - Prepare a multiple step income statement, owner’s equity
statement and a classified balance sheet as of December 31, 2004
10. The following information available with a trial balance of Panna
Fashion House:- Panna Fashion House
Trial Balance
December 31, 2004
Particulars Debit Credit Taka

Taka
Cash 20,000
Accounts receivable 60,000
Merchandise inventory 2,50,000
Supplies 70,000
Buildings 80,000
Equipment 78,000
Accumulated Depreciation – Equipment 8,000
Accounts payable 47,500
Panna’s Capital 5,00,000
Panna’s Drawings 3,000
Sales 2,90,000
Sales return and allowances 15,000
Purchases 1,45,000
Purchase discount 14,500
Salaries expense 33,000
Repair expense 9,000
Gas and oil expense 16,000
Miscellaneous expense 20,000
Freight in 12,000
8,60,000 8,60,000
Other information:-
By a physical investigation it is found that supplies was Tk. 30,000 at the
end of the period
Merchandise inventory was Tk. 2, 40,000 of end of the period.
Panna withdrew merchandise of Tk. 15,500 for personal use.
Expired insurance during the year Tk. 10,000.
Estimated depreciation on equipment of Tk.7, 000.
Unpaid salaries were Tk.5, 000.
Required: - Prepare a ten column work sheet

Marks
11. On May 31, 2004, Prime Enterprise Limited had a cash 10
balance per books of Tk. 6,781.50. The bank statement on that date
showed a balance of Tk. 8,679:60. A comparison of the bank
statement with the cash account revealed the following facts:—
The statement included a debit memo of Tk.30 for bank charges.
b)An amount of Tk.836.15 was deposited in the bank on May 12.
The cash book incorrectly recorded the amount as Tk.846.15. However,
the bank statement shows the correct amount.
(c)Outstanding checks at May 31 totaled Tk. 1,276.25
Deposits in transit were Tk.1, 936.15.
(d)The company issued a check for Tk.685 to Timberland Ltd.

The check duly cleared the bank in May but it was incorrectly
recorded in the cash book for Tk.658.
The bank collected a Tk.3, 000 note receivable for the
company on May 31 along with a Tk.80 interest. The bank charged a
collection fee of Tk.20.
f).Prime's customers directly paid Tk.600 into this bank
account.
g).On May 31 the bank statement showed an NSF charge of Tk.700
for a check issued by John Lewis, a customer to Prime Enterprise.
(h) May interest credited to Prime Enterprise's account Tk.65.
(i) During May, the bank paid a total of Tk.400 as direct debits to
Prime's utility providers (i.e., electricity, telephone, etc.).
Required: — A Bank Reconciliation Statement for Prime Enterprise
Limited at May 31, 2004
12. The unadjusted Trial Balance of tower Holdings Ltd. At December 31,
2004 was as:- Tower Holdings Ltd.
Trial Balance
December 31, 2004
Accounts items Debit Credit
Taka Taka
Cash 25,400
Prepaid insurance 1,600
Investments 5,000
Land 2,76,000
Preliminary expenses 4,000
Buildings 1,97,000
Accumulated depreciation 84,000
Buildings equipment 83,500
Accumulated depreciation – equipment 52,400
Taxes payable 17,000
Bank loan 80,000
Tower holdings Ltd. Capital 2,60,500
Tower holdings Ltd. Drawings 4,600
Sales 9,93,825
Sales discount 4,100
Cost of goods sold 7,09,000
Utilities expense 19,000
Repair expense 6,000
Gas and oil expense 7,000
Insurance expense 3,500
Advertisement expense 15,000
Interest expense 46,000
Supplier 7,500
Traveling expense 1,500
Interest on investments 175
15,70,900 15,70,900
Adjustment data:-
The investment carry and annual interest rate of 7 percent. Interest for the
second half of 2004 has not been received.
Preliminary expenses are being written off in 5 years. It has already been
written off for last three years. That is, the balance must be written off in
2years.
The bank loan was obtained on 1 July 2004. It carries an interest rate of 15
percent. The interest expense recognized in the trial balance exclusively
relates to this loan.
Depreciation for the year is Tk.15, 000 on buildings and Tk.12, 000 on
equipment.
Interest of Tk.2, 000 is due and unpaid on notes payable at December 31.
Salaries accrued but unpaid Tk.3,000
Utilities bill received after pre-paring the trial balance Tk.1, 200 (the
amount is still unpaid).
Provision for bad and doubtful debts 3 percent of accounts receivable.
Supplies in hand Tk.2, 500.
Required:-
a. Pass necessary journal entries to record the above adjustments.
b. Prepare and Adjusted Trial Balance.
BBA-2004
Part-B
Ans. to the question No:7
Req: (i) Jaba and Company
Adjusting entries
Cr
Date Explanation Ref. Dr (Tk)
(Tk)
Dec.31 Supplies exp. 1,200
Supplies(4,000-2,800) 1,200
[To record supplies exp.]
Dec 31 Insurance exp. 1,500
Pre Paid insurance 1,500
[To record insurance exp.]
Dec 31 Accounts Receivable 5,000
[To record commission Revenue]
Dec 31 Salaries exp. 1,600
Salaries Payable 1,600
[To record unpaid salaries]
Dec 31 Dep. exp.-Equipment 2,500
Accumulated dep.-Equipment 2,500
( 25000 × 10% )
[To record depreciation exp.]
Req: (ii) Jaba and Company
Adjusted Trial Blance
As at Dec.31. 2004
SL.No. Accounts Title Ref Dr. (Tk.) Cr (Tk.)
1 Cash 20,000
2 Accounts 10,000
3 Receivable(5000+5000) 3,5000
4 Commission 1,500
5 Revenue(30000+5000) 1,500
6 Pre Paid insurance(3000-1500) 2,800
7 Insurance exp. 1,200
8 Supplies(4000-1200) 25,000
9 Supplies exp. 10,000
10 Equipment 6,500
11 Accounts Payable 19,000
12 Unearned Revenue 1,500
13 Juba’s Capital 600
14 Juba’s Drawings 8,000
15 Utilities exp. 1,600
16 Salaries exp.(6400+1600) 2,500
17 Salaries Payable 2,500
Depreciation exp.-Equipment
Accumulated dep.-Equipment 74,600 74,600
Req (iii) Jaba and Company
Closing entries
Cr
Date Explanation Ref. Dr (Tk)
(Tk)
Dec.3 Income summary 13,800
Supplies exp. 1,200
Utilities exp. 600
Salaries exp 8,000
Dep. exp.-Equipment 2,500
[To close all exp.]
Dec 31 Income summary 35,00
[To close commission revenue] 0
Juba’s Capital 1,500
Dec 31 Juba’s Drawings
[To close Drawings] 1,500
Income summary
Juba’s capital 21,200
Dec 31 [To close net income]
21,20
0
Ans. to the quest No: 8 (a)

Nitu Company
Cal. Of the Missing figures
Income Statement
Explanation Condition-1 Condition-2 Condidtion-3
Sales 1,50,000 2,00,000 1,75,000
Less. cost of goods sold 60,000 1,25,000 95,000
Gross Profit 90,000 75,000 80,000
Operating exp. 63,000 44,000 46,000
Net income 27,000 31,000 34,000
8.(b) In the book of Samsu and co.
Journal entries
(Periodic system)
Dr Cr
Date Explanation Ref.
(Tk) (Tk)
May purchase 50,000
2 Accounts payable 50,000
[Purchase merchandise inventory on
account]
”2 Freight in 5,000
Cash 5,000
[Paid freight on shipping point terms]
”9 Office Equipment 70,000
[Purchase office equipment on
account] 4,000
” 12 Accounts payable 4,000
Purchase return and allowance
[Merchandise inventory return to
Sajib]
Cash
Purchase discount ( 46,000 × 2% ) 45,080
[Paid to Sajib and Co. Within 920
discount period]
” 30 Cash
Accounts Receivable
[Cash received from Lata and Co.]
Journal entries
(Perpetual system)
Dr Cr
(Tk) (Tk)
May Merchandise Inventory 50,000
[Purchase merchandise inventory on
”5 account] 5,000
Merchandise Inventory 5,000
Cash
”9 [Paid freight] 70,000
Office Equipment 70,000
Accounts payable
[Purchase office equipment on 4,000
” 12 account] 4,000
Accounts payable
Merchandise Inventory
[Merchandise inventory return to 46,000 45,080
” 12 Sajib] 920
Accounts payable
Cash
” 30 [Paid to Sajib and Co.with in discount
period]
Cash
Accounts Receivable
[Cash received from Lata and Co.]
Ans. to the question No: 9
Workings:
Net Sales:
Sales 1,70,000
Less. sales discount 15,000
1,55,000
Net Purchase:
Purchase 1,00,000
Less. purchase return 12,000
88,000
3) Cost of goods sold:
Opening inventory 15,000
Add. Net Purchase 88,000
1,03,000
Less. Ending inventory 30,000
73,000
4) Dep. Of office equipment = ( 60,000 × 10% ) = 6,000
Income Statement
For the year ended 31 Dec. 2004
Explanation Tk. Tk.
Net sales(W-1) 1,55,000
Less: Cost of goods sold (W-3) 73,000
Gross Profit 82,000
Operating exp:
Selling exp.
Salaries exp. (18,000 × 70% ) = (12,600 + 1050) 13,650
Rent exp. ( 9,000 + 2200 ) 11,200
Freight out 2,500
Bad debts exp. 1,000
Administrative exp.
Salaries exp. (18,000 × 30% ) = ( 5,400 + 450 ) 5,850
Insurance exp. 4,500
Heating and Lighting 3,500
Dep. exp.-Office equipment 6,000
Office supplies exp. 4,500
52,700
29,300
Net income
Owner’s Equity Statement
Explanation Tk.
Ronzu’s Capital 70,000
Add: Net income ____29,300__
_
Less: Ronzu’s Drawings 99,300
____3,500__
__
95,800
============

Balance Sheet
As at 31 Dec. 2004
Explanation Tk. Tk.
Assets:
Current assets:
Cash 20,000
Accounts Receivable (50,000-1000) 49,000
Office supplies (9,000 – 4,500) 4,500
Prepaid rent (4,000- 2,200) 1,800
Ending inventory 30,000
Fixed assets:
Office equipment
60,000 39,000
Less. Accumulated Dep.(15,000 + 6,000) 21,000
Liabilities and O.E 1,44,300

Current Liabilities 35,000
Notes payable 1,500
Salaries payable 95,800
Owner’s equity
Others liability 12,000
General Reserve
1,44,300
Ans. to the que. No. 10

Workings:
Adjusting
Supplies exp. 40,000
Supplies 40,000
(70,000-30,000)
(ii) Ending inventory 2,40,000
Income summary 2,40,000
Income summary 2,50,000
Opening inventory 2,50,000
(iii) Pana;s withdraws 15,500
Purchase 15,500
(iv) Insurance exp. 10,000
(v) Dep. exp.-equipment 7,000
Accumulated dep.-equipment 7,000
(vi) Salaries exp. 5,000
Ans. to the question no: 10
Panna Fashion
Worksheet
Dec. 31, 2004
Income
Trial Balance Adjustments Adjusted T/B Balance Sheet
Accounts Statement
Titles Dr. Cr. Dr. Cr. Dr.(Tk) Cr.(Tk) Dr. Cr. Dr. Cr.
(Tk) (Tk) (Tk) (Tk) (Tk) (Tk) (Tk) (Tk)
Cash 20000 100 20000 20000
Accounts 60000 60000 60000
receivable
Merch. 25000 25000
Inventory 0 0
Supplies 70000 40000 30000 30000
Prepaid 22000 10000 12000 12000
insurance
Buildings 80000 80000 80000
Equipment 78000 78000 78000
Acc.Dep- 8000 7000 15000 15000
equipment
Accounts 47500 47500 47500
payable
Pannas 50000 500000 50000
Capital 0 0
Pannas 30000 15500 45500 45500
Drawings
Sales 29000 290000 29000
0 0
Sales return 15000 15000 15000
& allowance
Purchase 14500 15500 129500 12950
0 0
Purchase 14500 14500 14500
discount
Salaries exp. 33000 5000 38000 38000
Repair exp. 9000 9000 9000
Gas & oil 16000 16000 16000
exp.
Miscellaneo 20000 20000 20000
us exp.
Freight in 12000 12000 12000
Supplies 40000 40000 40000
exp.
Income 25000 24000 250000 240000 25000 24000 24000
summary 0 0 0 0 0
Ending 24000 240000
inventory 0
Insurance 10000 10000 10000
exp.
Dep.exp.- 7000 7000 7000
equipment
Salaries 5000 5000 5000
payable
Net loss 2000 2000
Total 111200 111200 54650 54650 56750 56750
0 0 0 0 0 0
Ans. To the question no: 12
Tower Holdings Ltd.
Adjusting entries
Debit Credit
Tk. Tk.
2004 Interest Receivable 175
Dec.31 Interest Revenue 175
[To record interest revenue]
31 Amortization of preliminary exp. 2,000
Preliminary exp. 2,000
[To record written off preliminary
31 exp.] 1,400
Interest exp. 1,400
Interest payable (6,000 – 4,600)
 6
 80,000 × 15% × 
 12 
[To record unpaid interest] 15,00
31 Dep. exp.- Building 0 15,000
Accumulated dep.-Building
Dep. exp.- Equipment 12,00 12,000

Accumulated dep.- Equipment 0
[To record depreciation on Building
& Equipment]
31 Interest exp.
Interest payable 2,000 2,000
[To record unpaid interest]
31 Salaries exp.
Salaries payable 3,000 3,000
31
Utilities exp.
1,200 1,200
Utilities payable
[To record unpaid utilities]
31
Bad debts exp.
1,128 1,128
Allowance for doubtful a/c
31
[To record bad debts exp.]
Supplies exp. 5,000
Supplies (7,500 – 2,500) 5,000
Tower Holdings Ltd.

Adjusted trial Balance
Dec.31, 2004
Debit Credit
SL.No. Accounts title Ref.
Tk. Tk.
1 Cash 25400
2 Accounts Receivable 37600
3 Merchandise inventory 90000
4 Prepaid insurance 1600
5 Investment 5000
6 Land 276000
7 Preliminary exp.(4,000 – 2,000) 2000
8 Amortization preliminary exp. 2000
9 Building 197000
10 Acc. Dep.-Building 99000
11 (84,000+15,000) 15000
12 Depreciation exp.-Building 83500
13 Equipment 12000
14 Depreciation exp.- Equipment 64400
15 Acc. Dep.- Equipment 50000
16 (52,400+12,000) 37500
17 Notes Payable 17000
18 Accounts Payable 80000
19 Tax Payable 260500
20 Bank loan 4600
21 Tower Holding Ltd.- Capital 993825
22 Tower Holding Ltd.- Drawings 4100
23 Sales 709000
24 Sales discount 72000
25 Cost of goods sold 3000
26 Salaries exp.(69,000+9,000) 20200
27 Salaries Payable 1200
28 Utilities exp. (19,000+1,200) 6000
29 Utilities Payable 7000
30 Repair exp. 3500
31 Gas & Oil exp. 15000
32 Insurance exp. 8000
33 Advertising exp. 3400
34 Interest exp. (4,600+3,400) 5000
35 Interest Payable 2500
36 Supplies exp. 1500
37 Supplies (7,500 - 5,000) 175
38 Traveling exp. 350
39 Interest Receivable 1128
40 Interest Revenue(175+175) 1128
41 Bad debts exp. 4500
Allowance for doubtful a/c 16,11,303 16,11,303
Difference in trial
balance/Suspense a/c
B.B.A PART-I (FIRST SEMESTER) EXAMINATION,2005

PRINCIPLE PF ACCOUNTING
1102
Time-3 hours
Full marks-70
[N.B.-Figures in the right margin indicate full marks. Answer all questions
from part-A, two question from part B and four questions from part-C]
Part-A Marks
(Answer all questions) 1 × 10 = 10
(i) The document that is prepared to authorize payment for all acquisitions
of goods or services by a company is called-
a purchase requisition
a purchase order
credit note
a voucher
(ii) Depreciation is one kind of-
(a) allocation
(b) revaluation
(c) replacement
(d) appreciation
(iii) Accounting principles-
(a) are universally and eternally true
(b) often change to meet the needs of emerging and changing financial
conditions
(c) are passed by the Supreme Court
(d) are a part of national constitution
(iv) The Balance Sheet reveals-
the financial position of an organization over a period of time
the fair market value of assets and liabilities
the financial position of an organization at a specific point of time
the profitability of organization at a point of time
(v) Fixed assets are recorded according to which accounting principle?
Full disclosure
Current markets price
Historical cost
Conservatism
(vi) Which of the following transaction will affect one side of the
accounting equation?
Purchase of inventory in cash
Payments of accounts payable
Borrow from a bank
Additional investment by the owners
(vii) Accounts that normally have debit balances are-
Assets, expenses and revenue
Assets, expenses and owner’s equity
Assets, expenses and losses
Assets, liabilities and revenues
(viii) Adjustments of un-earned service revenue to service revenue-
have an assets and revenues account relationship
increase assets and increase revenues
decrease liabilities and increase revenues
decrease liabilities and decrease revenues
(ix) Sales discount are recorded-
at the time of the sale
when the receivable is collected period to the end of the discount period
when the receivable is collected after the discount period
at the time of the month-end closing entry
(x) Which of the following would not be included in ending inventory?
Goods in transit purchased FOB shipping point
Goods in on consignment
Goods in transit sold FOB destination
Goods out on consignment.
Part-B Marks
(a) Identify and describe the steps in the accounting process. 3
(b) Why accounting is called the language of business? 3
(c) “Accounting is ingrained in our society and it is vital to our economic 4
system.” Do you agree? Explain.
(a) What is basic accounting equation? What are the elements of an 2
accounting equation?
(b) Mr. Rahman opened a law office. Mr. Rahman, Attorney at law on July
31, the balance sheet showed cash Tk. 8,000, Accounts Receivable
Tk.3,000, Supplies Tk. 1,000 , Office Equipment Tk. 10,000, Accounts
Payable Tk. 8,400 and Mr. Rahman, Capital Tk. 13,600. During August the
following transactions occurred:-
(i) Collected Tk.2,800 of accounts receivable.
(ii) Paid Tk.5,400 cash on accounts payable.
(iii) Earned revenues of Tk.15,000 of which Tk.6,000 is collected
in cash and the balance is due in September.
(iv) Purchase additional office equipment for Tk.2,000; paying
Tk.800 in cash and the balance on account.
Paid salaries Tk. 6,000; rent Tk. 1,800 and advertising expenses Tk.700
Withdrew Tk.1,100 in cash for personal use.
Received Tk.4,000 from Standard bank-money borrowed on a notes
payable.
Incurred utility expenses for month on account Tk.500.
Required:- 8
Prepare a tabular analysis of the August transactions beginning with July 31
balances. The column heading should be as fallows: Cash + Accounts
Receivable + Supplies + Office Equipment = Accounts Payable + Notes
Payable + Mr. Rahman, Capital
(a) “ An adjusting entry may affect more than one balance sheet or income
statement.” Do you agree? Why or why not?
(b) Radison company started his own consulting firm. Radison
company. on June 1, 2005. The Trial balance at June 30 is as follows:-
Radison Company
Trial Balance
June 30, 2005
Taka taka
Cash 7,150
Supplies 2,000
Unearned Service Revenue 4,000
Radison, Capital 21,750
Service Revenue 7,900
Rent expenses 1,000
38,150 38,150
Others data:-
Supplies on hand at June 30, are Tk. 1,100.
A utility bill for Tk. 300 has not been recorded and will not be paid until
next month.
The insurance policy is for a year.
Tk. 2,500 of unearned service revenue has been earned at the end of the
month.
Salaries of Tk. 1,500 are accrued.
The office equipment has a 5 years life no salvage value. It is being
depreciation at Tk. 250 per month for 60months
Invoices responding Tk. 2,000 of services performed during the month have
not been recorded as of June 30.
Required:-
Prepared the adjusting entries for the month of June. 3
5
Prepared an adjusted trial balance at June 30. 2005.
Part-C
5. The October Bank Statement for Lockheed Company indicates a balance
on October 31 of Tk. 6942.14. On other hand in the books of Lockheed
Company the balance is Tk. 4,811.82. Upon comparing the statement with
cash records, the following facts were developed:-
A deposit in the amount of Tk. 552.00 was mailed to the bank on October
31 and has not yet been recorded by the bank.
Five checks issued in October or prior months have not yet been paid by the
bank, as follows:
Check No. Date Amount
551 Sep 14 300.00
576 Oct 30 81.36
578 Oct 31 1,000.00
579 Oct 31 740.00
580 Oct 31 261.00
The deposit for cash sales of October 6 was incorrectly recorded in

Lockheed Company’s records as Tk. 650.00. The bank correctly recorded
the deposit as Tk. 600.00.
Among the returned checks was a credit memorandum showing that the
bank had collected a promissory note from A. Jacobs in the amount of Tk.
560.00 plus Tk. 40.00 in interest on the note. A
Debit memorandum was also enclosed for the Tk. 10.00 collection fee. No
entry had been made on Lockheed Company’s records.
Also returned with the bank statement was NSF check for Tk. 256.28. This
check had been received from a customer named Arthur. The NSF check
from Arthur was not reflected in the company’s accounting records.
A debit memorandum was enclosed for the regular monthly service change
of Tk. 25.00. This charge was not yet recorded by Lockheed Company.
Interest earned by the company on the average balance was reported as Tk.
51.24.
Required:-
(i) Construct a bank reconciliation statement as an October 31.
(ii) Give the journal entries required.
6.(a) “A work sheet is a permanent accounting record and its use is required
in the accounting cycle.” Do you agree? Explain.
(b) ABC Electric Constructing Company has the following trial balance as
of August 31, 2005:-
ABC Electric Constructing Company
Trial balance
August 31, 2005
Taka Taka
Cash 10,800
Store Supplies 2,600
Equipment 1,20,000
Capital 60,000
Drawing 2,000
Advertising expenses 800
1,54,600 1,54,600
Others data consists of the following:-
(i) Insurance expired at the rate of Tk. 400.
(ii) There are Tk. 2,000 supplies on hand at August 31.
(iii) Monthly depreciation on the notes equipment Tk. 1,800.
Interest of Tk. 1,000 on the notes payable has accrued during August.
Salaries accrued but not paid Tk. 600.
Required:- 8
Enter the trial balance on a work sheet and complete the work sheet.
7. Students Book Housing distributes books to retail stores and extends
credit terms of 3/10, n/30 to all its customers. At the end of June, Students
inventory consisted of 250 books purchased at Tk. 2,000. During the month
of July the following merchandising transactions occurred:-
July 1 Purchased 160 books on account for Tk. 7 each from
Chowdhury Publishers, FOB destination, terms 2/10, n/30. The appropriate
party also made cash payment of Tk. 200 for the freight on this data.
3 sold 120 books from beginning inventory on account to
Mallik Brothers for Tk. 1,200.
6 10 books returned to Chowdhury Publishers.
9 Paid Chowdhury Publishers in full.
15 Received payment in full from Mallik Brothers.
17 Sold 120 books from July 1 purchase on account to Mokarrram
Book House for Tk. 9 each.
18 Purchased 110 books on account for Tk 6 each from Angle
Publishers, FOB shipping point, terms 1/10, n/30. The appropriate party
also made cash payment of Tk 150 for the freight on this date.
20 Granted Mokarram Book House Tk 90 credit for 10 books
returned.
24 Received payment in full from Mokarram Book House.
31 Paid Angle Publishers in full.
You are required to pass the Journal Entries for the month of July for
Students Book House using perpetual inventory system. 10
8. Following is the trial balance of Mr. Chowdhury Enterprise as at

December 31, 2005:-
Mr. Chowdhury Enterprise
Trial Balance
as at December 31, 2005
Accounts TitleDebit Amount Credit Amount
Taka Taka
Accounts Receivable 30,000.00
Cash 37,500.00
Accounts payable 20,000.00
Capital 1,00,000.00
Machinery 60,000.00
Purchases 50,000.00
Sales 90,000.00
Rent Expenses5,000.00
Advertising Expenses 4,000.00
Apprenticeship Premium 6,000.00
Merchandise Inventory (Jan.1, 2005) 25,000.00
Return 3,000.00 2,000.00
Insurance expenses 7,000.00
Supplies 6,000.00
Allowance for doubtful accounts 400.00
6% Notes Payable 20,000.00
Investments (Long-term) 10,000.00
Gain on sale of fixed assets 1,600.00
Carriage Inwards 2,500.00
2,40,000.00 2,40,600.00
Additional information:-
(i) Merchandise inventory at December 31, 2005, cost Tk. 35,000.00.
(ii) Insurance has been covered for two years of which one year has
expired.
Supplies on hand Tk. 500.00 at the end of the year.
Maintain an allowance of 5% on accounts receivable for doubtful accounts.
Repair expense of Tk. 2,000.00 has been debited to machinery at the
beginning of the year. Depreciated machinery @ 10% p.a.
Interest is due for the whole year on notes payable.
Interest accrued on investments is Tk. 500.00.
You are required to prepare multiple-step Income Statement, Owner’s
Equity Statement for the year ended December 31, 2005 and Classified
Balance Sheet as on that date.
9. (a) What are the major objectives in accounting for inventories? 2
(b) You are provided with the following information for Keya Inc for the
month ended June 30, 2005. Keya uses the periodic method for inventory:-
Date Description Quantity Unit cost or
Selling price
Taka
____
June 1 Beginning inventory 50 60
4 Purchase 170 64
10 Sales 140 90
11 Sales Return 20 90
18 Purchase 70 68
18 Purchase Return 10 68
25 Sales 100 95
28 Purchase 40 72
Required:-
Calculate (i) Ending inventory; (ii) Cost of goods sold;
(iii) Gross profit; (iv) Gross profit rate under the following methods:
LIFO; (2) FIFO; (3) Average Cost
Compare results for the three cost flow assumptions.
Write short notes (any five) :-

(i) Generally Accepted Accounting Principles;
(ii) Unearned Revenue;
Accounting Information System;
FOB destination;
Book Value
Accrual-basis Accounting;
Revenue recognition principle.
BBA-2005
Ans. to the que. No.3(b)
Mr. Rahman (Tabular Analaysis)
For the month of August 30, 2005
A = L + O.E
A/c Office Notes A/c
Date Supplie Remarks
Cash Receivabl Equipme payabl Payabl capital
s
e nt e e
July31 8,000 3,000 1,000 10,000 8,400 13,600 Investment
Augus
t +2,80 (2,800)
(i) 0 (5,400)
(ii) (5400 +9,000 +15,00 Earned Rev.
(iii) ) +2,000 +1,200 0
(iv) +6,00 Salaries,Rent,Advt.ex
(v) 0 (8,500) p.
(vi) (800) +4,000 (1,100) Withdrawn
(vii) (8500 +500
(viii) ) (500) Utilities exp on a/c
(1100
)
+4,00
0
5,000 9,200 1,000 12,000 4,000 4,700 18,500

27,200 27,200
Ans. to the que. No. 4 ( b)
Req: (a) Radison company
Adjusting Journal Entries
Date Explanation Ref. Debit Credit
2005 Supplies exp.(2000-1100) 900
Jun30 Supplies 900
[To record supplies expense]
” 30 Utilities exp. 300
Utilities payable 300
[To record utilities expense]
” 30 Insurance exp. ( 3000 ÷ 12) 250
Prepaid Insurance 300
[To record prepaid insurance expired]
” 30 Unearned Service Revenue 2,50
Service Revenue 0 2,500
[To record Unearned Service Revenue
” 30 earned]
Salaries exp. 1,50 1,500
Salaries payable 0
[To record unpaid salaries expense]
” 30 Depreciation Exp.-Office equipment 250
Accumulated dep.-Office equipment 250
[To record depreciation exp. on office
” 30 equipment] 2,000
Service revenue 0
[To record service revenue on account
Radison company
Req: (b) Adjusted Trial Balance
June 30, 2005
Debit Credit
Sc. No. Accounts Title Ref
(Tk.) (Tk.)
1 Cash 7,150
2 Accounts Receivable 8,000
3 Pre Paid insurance 2,750
4 Supplies 1,100
5 Office Equipment 15,000
6 Accumulated dep.-Off. Equipment 250
7 Accounts Payable 4,500
8 Utilities payable 300
9 Salaries payable 1,500
10 Unearned Service Revenue 1,500
11 Radison’s Capital 21,750
12 Service Revenue 12,400
13 Salaries exp. 5,500
14 Rent Exp. 1,000
15 Depreciation exp.-Off. Equipment 250
17 Utilities exp. 300
18 Supplies exp. 900
Totals 42,200 42,200
Ans: Adjusted Trial Balance Total 42,200

Ans. to the Que. No. 6(b)
Adjusting entries
Workings:
(i) Insurance exp. 400
(ii) supplies exp. 600
Supplies 600
(2600-2000)
(iii) Dep.exp-Equipment 1,800
Accumulated dep-Equipment 1,800
(iv) Interest exp. 1,000
Interest payable 1,000
(v) salaries exp. 600
Salaries payable 600
[N.B.-Assume work sheet prepare as one month]

Ans. to the question No:6 (b)
ABC Electric contracting company
Work Sheet
For the month ended August 31, 2005
Income
Accounts Statement
Titles Dr. Cr. Dr. Cr. Dr. Cr.
Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk)
(Tk) (Tk) (Tk) (Tk) (Tk) (Tk)
Cash 10800 10800 10800
A/c
5600 5600 5600
Receivable
Prepaid
4800 400 4400 4400
insurance
store Supplies 2600 600 2000 2000
Equipment 120000 120000 120000
Accounts
4800 4800 4800
payable
Notes payable 70000 70000 70000
Capital 60000 60000 60000
Drawings 2000 2000 2000
Service
19800 19800 19800
Revenue
Salaries exp. 6400 600 7000 7000
Utilities exp. 1600 1600 1600
Advertising
800 800 800
exp.
Insurance exp. 400 400 400
Supplies exp. 600 600 600
Dep.exp.Equip
1800 1800 1800
ment
Acc.dep.Equip
1800 1800 1800
ment
Interest exp. 1000 1000 1000
Interest
1000 1000 1000
payable
Salaries
600 600 600
payable
Net income 6600 6600
Total 1,54,600 1,54,600 4,400 4,400 1,58,000 1,58,000 19,800 19,800 1,44,800 1,44,800
Students bank house
Journal entries
(Perpetual inventory system)
(Cost per Book = 2000 ÷ 250 = 8 )
July Merchandise Inventory 1,120
1 Accounts payable (160× 7 ) 1,120
[Purchase M.I on account FOB
destination] 1,200
” 3 Accounts Receivable 1,200
Sales
[Sold M.I on account] 960
Cost of goods sold 960
Merchandise Inventory (120× 8)
[To record cost of goods sold 70
” 6 Accounts payable 70
Merchandise Inventory (10× 7 )
[M.I return to Chowdhury Publishers] 1,050
Cash 21
[Paid to Accounts Payable less 1,200
discount] 1,200
” 15 Cash
Accounts Receivable
[Cash received from Malik &brothers in 1,080
” 17 full] 1,080
840
Accounts Receivable (120× 9)
840
Sales
[Sold M.I to Mokarram books House]
660
Cost of goods sold
660
Merchandise Inventory (120× 7 )
[To record cost of goods sold]
” 18 Merchandise Inventory
Accounts Payable (110× 6) 150
[Purchase M.I on account] 150
” 18 Merchandise Inventory
Cash 90
[Paid Freight in cash] 90
” 20 Sales return
Accounts Receivable 70
70
Cost of goods sold (10× 7 ) 960.3
” 24 Cash 0 990
Sales discount 29.70
Accounts Receivable (1080 − 90)
[Cash received from Mokarram books
” 31 House] 660
Accounts Payable 660
Cash
[Cash paid to accounts payable less
discount]
Ans. to the question No. 8

Workings:
Net Sales:
Sales 90,000
Less. sales discount 3,000
87,000
Net Purchase:
Purchase 50,000
48,000
Add. Carriage inward 2,500
50,500
75,500
40,500

Income Statement
Explanation Tk. Tk.
Net sales(W-1) 87,000
Gross Profit 46,000
Operating and Other exp.
Rent exp. 5,000
Advertising exp. 4,000
Insurance exp. (7,000-3,500) 3,500
Supplies exp. (6,000-500) 5,500
Repair exp. 2,000
Dep. exp.-Machinery 5,800
New allowance for doubtful a/c
1500 1,100
Less. Old allowance for doubtful a/c 400
Other income: (6,000)
Apprenticeship premium (1,600)
Gain on sales of fixed assets
Non operating exp: 1,200

Interest exp.
Non operating income: (500) 20,000

Interest Revenue 26,500
Net income

Explanation Tk.
Ronzu’s Capital 1,00,000
Add: Net income 26,500
1,26,500

Balance Sheet
As at 31 Dec, 2005
Explanation Tk. Tk.
Current assets:
Less. allowance for doubtful a/c
1,500 28,500
Cash 37,500
Supplies
6,000
500
Less. supplies exp. 5,500
3,500
Interest Receivable 35,000
Ending inventory
Fixed assets:
Machinery 60,000
Less. Repair exp.
2,000 1,67,700
58,000
Less. Depreciation 5,800
52,200
Investment (Long term)
10,000
Liabilities and O.E
Current Liabilities
Accounts payable 1,67,700
Notes payable
Owner’s equity 20,000
1,200
1,26,500
Ans. to the que.No. 9
(b) (1) Keya Inc.
(Under LIFO method)
Receipts Issue / sales Balance
Date Explanation
Units Rate Amount Units Rate Amount Units Rate Amount
2005
Beginning inventory 50 60 3,000 50 60 3000
June 1
50 60 3000
”4 Purchase 170 64 10880
170 64 10880
50 60 3000
” 10 Sales 140 90 12600
30 64 1920
50 60 3000
” 11 Sales Return (20) 90 {1800)
50 64 3200
50 60 3000
” 18 Purchase 70 68 4760 50 64 3200
70 68 4700
50 60 3000
” 18 Purchase Return (10) 68 (680) 50 64 3200
60 68 4080
50 60 3000
” 25 Sales 100 95 9500
10 64 640
50 60 3000
” 28 Purchase 40 72 2880 10 64 640
40 72 2880
320 20,840 220 20,300 100 6,520
(i) Ending inventory 100 units Tk. 6,520
(ii) Cost of goods sold = Cost of goods available for sale – Value of
ending inventory
= 20,840 – 6,520
= 14,320
(iii) Gross Profit = Net sales – Cost of goods sold
= 20,300 – 14,320
= 5,980
Gross Pr ofit
(iv) Gross Profit Rate = × 100
Netsales
5,980
= ×100
20,300
= 29.45 %
2) Keya Inc.
(Under FIFO method)
Date Explanation
2005
Beginning inventory 50 60 3000 50 60 3000
June 1
50 60 3000
”4 Purchase 170 64 10880
170 64 10880
” 10 Sales 140 90 12600 80 64 5120
” 11 Sales Return (20) 90 {1800) 100 64 6400
100 64 6400
” 18 Purchase 70 68 4760
70 68 4760
100 64 6400
” 18 Purchase Return (10) 68 (680)
60 68 4080
” 25 Sales 100 95 9500 60 68 4080
60 68 4080
” 28 Purchase 40 72 2880
40 72 2880
320 20,840 220 20,300 100 6,960
ending inventory
= 20,840 – 6,960
= 13,880
= 20,300 – 13,880
= 6,420
Gross Pr ofit
Netsales
6,420
= ×100
20,300
= 31.63 %
3) Keya Inc.
(Average method)
Date Explanation
2005 Beginning
50 60 3000
June1 inventory
63.090
”4 Purchase 170 64 10880 220 13880
9
63.090
” 10 Sales 140 90 12600 80 5047
9
63.090
” 11 Sales Return (20) 90 {1800) 100 6309.09
9
” 18 Purchase 70 68 4760 170 65.112 11069.09
” 18 Purchase Return (10) 68 (680) 160 65.112 10418
” 25 Sales 100 95 9500 60 65.112 3907
” 28 Purchase 40 72 2880 100 67.87 6787
270 20,840 220 20,300 100 6,787
ending inventory
= 20,840 – 6,787
= 14,053
= 20,300 – 14,053
= 6,787
Gross Pr ofit
Netsales
6,787
= × 100
20,300
= 33.43 %
B.B.A PART-I (FIRST SEMESTER) EXAMINATION, 2006

[According to the New syllabus]
PRINCIPLE PF ACCOUNTING
Code No. 1102
Time-3 hours
Full marks-70
[N.B.-The Figures in the right margin indicate full marks. Answer all
questions from part-A, any four two questions from part B and any four
questions from part-C]
Part-A Marks
1× 10 = 10
Write the correct answer of the following question:-
The first part of the accounting process is-
(a) Communication (b) Identifying
(c) Processing (d) Recording
(ii) The primary criterion by which accounting information can be
judged is-
(a) Consistency (b) Predictive value
(c) Decision-usefulness (d) Comparability
(iii) Which of the following financial statements is prepared as of a
specific date?
(a) Balance sheet (b) Income statement
(c) Owner’s equity statement (d) Statement of cash-
flows
(iv) Expenses paid and recorded as assets before they used are
called-
(a) Accrued expenses (b) Interim expenses
(c) Prepaid expenses (d) Unearned expenses
(v) A revenue account-
(a) is increased by debits (b) is decreased by credits
(c) has a normal balance of a debit (d) is increased
by credits
(vi) A ledger-
(a) contains only assets-and liability accounts
(b) should show accounts maintained by a company
(c) is a collection of the entire group of accounts maintained by a
company
(d) is a book of original entry
(vii) Outstanding salaries is-
(a) an expenses (b) an assets
(c) a liability (d) Revenue
(viii) Which of the following accounts will normally appear in the
ledger of a merchandising company that uses a perpetual inventory
system?
(a) Purchase (b) Freight-in
(c) Cost of Goods Sold (d) Purchase Discounts
(ix) The principle dictating that efforts (expenses) be matched with
accomplishments (revenues) is that-
(a) Matching principle (b) Cost principle
(c) Periodicity principle (d) Revenue recognition
principle
(x) FOB shipping point means that the-
(a) goods are placed free on board to the buyer’s place of
business (b) buyer pays the freight
(c) seller pays the freight
(d) common carrier pays the freight
Part B
2.Briefly describe four assumptions that underlie the financial
accounting structure.
3. Who are the users of accounting information? Why it is necessary to
the Investors, Creditors and Tax authority?
4. (a) What are the essential characteristics of a transaction?
(b) Classify the transaction on the basis of exchange of cash with
example.
5. Pass adjusting journal entries on December 31, 2006 for the following
transactions:-
Charge annual depreciation of Machinery @ 10% on cost price. Cost
price is Tk. 50,000; accumulated depreciation is Tk. 5,000 of that
machine
Administrative Manager is to be allowed a commission @ 10% on net
profit before charging his commission. The net profit before charging
commission is Tk. 50,000.
On December 20, 2006 goods costing Tk. 5,000 were destroyed by fire.
The insurance company admitted a claim up to 80% of that loss.
Ending inventory valued at: Market price Tk. 80,000; Cost price
Tk. 75,000.
Make an allowance for bad and doubtful debts @ 10% on account
receivable, where accounts receivable balance is Tk. 50,000.
6. (a) What is Bank Reconciliation Statement?

(b) Describe three principles of Accounting Information
Systems.
7. (a) Describe the advantages and disadvantages of FIFO and

LIFO inventory cost methods.
(b) Explain the term (i) FOB shipping (ii) FOB destination.
Part C
8. Mr. Ali started his own consulting firm-“Ali Consulting” on July 01,
2006. The following transactions occurred during the month of July,
2006:-
July 1 He invested Tk. 50,000 cash and Tk. 10,000 books on
engineering.
Paid office rent for three months in advance @ Tk. 3,000 per month.
Purchased office supplies on credit Tk. 2,000.
Received cash for service provided Tk. 25,000.
Withdrew Tk. 1,500 cash from business for personal use.
Performed services to the clients on account Tk. 25,000.
Paid utility bill for month of July Tk. 1,500.
Received cash Tk. 23,000 for services provided on account on July 15
31 One month’s office rent had become expired and treated as expenses
31 Paid cash for insurance premium for 3 months in advance including
current month Tk. 1,500.
You are required to prepare a tabular analysis of the transactions using

appropriate account titles and arrange them in the format of accounting
equation.
9. (a) What is purchase discount lost? Show the difference between

periodic and perpetual inventory system.
(b) Purchase and sales transactions of the tops and bottoms Boutique are
listed below:-
May 1 Purchase merchandise on account Tk. 3,000; terms 2/10,
n/30.
7 Paid for merchandise purchased on May 1.
10 Purchased merchandise on account, Tk. 5,000; terms
1/10, n/30.
11 Returned part of merchandise purchased on may 10, Tk.
200
14 Sold merchandise on accounts, Tk. 2,000; terms 2/10,
n/30.
25 Paid amount owed on May 10, purchase.
27 Received payment for sold may 14.
28 Sold merchandise on account Tk. 4,000, terms 2/10,
n/30,
cost of goods sold is Tk. 3,500.
31 Received payment for goods sold May 28.
Required:
Make journal entries to record the transactions, using perpetual
and periodic inventory system.
10. The following is the trial balance of Hanif Enterprise as on

December 31, 2006.
Hanif Enterprise
Trial Balance
December 31, 2006
Account titles Debit Credit

Tk. Tk.
Accounts receivable and payable 15,000 13,600
Notes receivable and payable 6,000 4,000
Furniture 30,000
Accumulated depreciation- Furniture 6,000
Equipment 60,000
Accumulated depreciation- Equipment 12,000
Hanif’s Capital 73,000
Hanif’s Drawing 10,000
Allowance for doubtful debts 400
10% mortgage loan 15,000
Cash 20,000
Utilities expense 3000
Apprenticeship premium 15,000
Beginning inventory 20,000
Merchandise purchase 75,000
Sales 130,000
Purchases return and allowance 5,000
Sales return and allowance 3,000
Delivery expense 2,000
Rent expense 4,000
General expense 6,000
Selling expense 13,000
Total 2,74,000 2,74,000
The following adjustments are to be accounted for:

Ending inventory Tk.30, 000.
Accrued salaries expense Tk. 1,500
Depreciation on furniture and equipment is to be

provided for @10% per annum
Make an allowance for bad debts at the rate of 6% on accounts

receivable.
Apprenticeship premium received on first January, 2006 for a period of
five years.
Hanif withdraw goods worth Tk. 1,500 from business for personal use.
Rent prepaid is Tk 1,000.
Required:
Prepare a multiple step income statement, owner’s equity
statement for the year ended December 31, 2006 and classified balance
sheet as on that date.
11. Merchandise Transactions of BRAC Ltd. During the month of
March, 2006 were as follows:
March 1 Beginning inventories 24 units Tk. 10 per unit.

3 Sold 12 units at Tk. 23.50 per unit.
10 Purchase 40 units at Tk. 12 per unit.
12 Sold 20 units at Tk. 24 per unit.
25 Purchased 40 units at the rate of 12.50 per
unit.
Assume all sales and purchases are made on credit.
Required:
Using the data above, calculate the value of ending inventory and
cost of goods sold for the month of march, 2006 using FIFO method
under a perpetual inventory systems and find out gross profit.
12. The following Trial Balance and additional date are for Shohag
Paribahan Pvt. Ltd.
Shohag Paribahan Pvt. Ltd.
Trial Balance
December 31, 2006
Accounts Titles Debit Credit
Taka Taka
Land 1,00,000
Buildings 1,60,000
Accumulated
depreciation- Buildings 40,000

Accumulated 16,000
depreciation – office
equipment
Cash 1,10,000
Accounts receivable 1,50,000
Prepaid advertising 20,000
Notes receivable 14,000
Salaries expense 1,26,000
Traveling expense 110000
Interest income 1,000
Capital 3,37,000
Service revenues 3,55,000
Supplies 5,000
Total 8,84,000 8,84,000
Additional Data:
A supply on hand at the end of the accounting period is Tk. 3,000.
Interest expense paid in advance is Tk. 1,000.
Accrued interest income is Tk. 2,000.
Insurance expenses paid for 15 months starting from January 1, 2006.
Expire prepaid advertising is Tk. 18,000.
The buildings have an expected life o9f 40 years with no salvage value.
The office equipment has an expected life 10 years with no salvage
value.
You are required to prepare a 10 column work sheet for the year ended
de4cember 31, 2006.
13. Write short notes:

Owner’s equity.
Classified balance sheet.

Cash and accrual basis of accounting.
The accounting equation.
Special Journal.
Bank reconciliation statement.
BBA
Solution-2006
Adjusting entries
Dr Cr
(Tk) (Tk)
2006
Dec.31 Depreciation exp-Machinery 5,000
Accumulated dep.-Machinery 5,000
[To record depreciation exp]
Dec 31 Managers commission 5,000
Managers commission payable 5,000
[To record managers commission]
Dec 31 i)Accidental loss/Goods Destroyed 5,000
by fire 5,000
purchase/cost of goods sold
[Goods destroyed by fire adjusted]
4,000
ii) Insurance company 1,000
Income statement 5,000
Goods destroyed by fire
Dec 31 [To record insurance claim and 75,000
actual loss] 75,000
Dec 31 Ending inventory / Stock 5,000
Purchase / cost of goods sold 5,000
Bad debts exp.
Allowance for doubtful accounts
[To record bed debts exp.]
Part-C
Ans. to the question no. 8
Mr. Ali
Tabular Analysis
For the month of July, 2006
A = L + O.E
Date A/c Suppli Pre Paid Pre A/c Remarks
Cash Books capital
Rec. es Rent Paid Payable
insuran
2006 50,00 10,000 +60,0 Invested
July: 0 9,000 00
1 (9,00 2,000 +2,000
” 3 0)
” 4 +25,0 Service
” 10 25,00 25,000 00 Revenue
” 11 0 (1,500
” 15 (1,50 (23,000 ) Withdraw
” 16 0) ) (3,000) 25,000 Service Rev.
” 17 3,000 (1,50 on a/c
” 31 (1,50 0) Utilities exp.
” 31 0)
23,00 (3,00 Rent exp.
0 0) Insurance
(1,500 exp.
(4,50 )
0)
81,50 2,000 10,000 2,000 6,000 3,000 2,000 1,02,5

0 00
1,04,500 1,04,500
Ans. to the question no: 9 (b)
Top and Brothers
Journal entries
(Perpetual system)
Dr Cr
(Tk) (Tk)
May Merchandise inventory 3,000
[Purchases merchandise inventory on
accounts]
”7 Cash 2,940
Merchandise inventory 60
( 3000× 2% )
[Paid to accounts payable less. 5,000
” 10 discount] 5,000
Merchandise inventory
Accounts payable 200
” 11 [Purchase merchandise inventory on 200
account]
” 14 Merchandise inventory 2,000
[Return merchandise inventory to a/c
payable] 1,800
Sales
Cost of goods sold 5,000

” 25 [Sold merchandise inventory on a/c
and record cost of goods sold] 2,000
Accounts payable
” 27 Cash 2,000
[Paid to a/c payable out of discount
period] 4,000
Cash
” 28 A/c Receivable 3,500 4,000
[Cash received from a/c receivable less 3,500
discount]
A/c Receivable
Sales
” 31 [Sold merchandise inventory on 4,000
account and record cost of goods sold]
Cash
Sales discount ( 4000× 2% )
A/c Receivable
[Cash received from A/c receivable
less discount]
Journal entries
(Periodic inventory system)
Dr Cr
(Tk) (Tk)
May purchase 3,000
[Purchases merchandise inventory on
accounts]
”7 Cash 2,940
Purchase discount ( 3000× 2% ) 60
[Paid to accounts payable less.
discount] 5,000
” 10 Purchase 5,000
Accounts payable
[Return merchandise inventory to a/c
” 11 payable] 200
” 14 [Return merchandise inventory to a/c 2,000
payable] 2,000
Accounts receivable
Sales 5,000
” 25 [Sold merchandise inventory on a/c 5,000
and record cost of goods sold]
” 27 Cash 2,000
[Paid to a/c payable out of discount
period]
Cash 4,000
[Cash received from a/c receivable less
discount]
” 31 Sales 80
[Sold merchandise inventory on 4,000
account and record cost of goods sold]
Cash
Sales discount
Accounts Receivable
[Cash received from A/c receivable
less discount]
Ans. to the question No.10

Workings:
Net Sales:
Sales 1,30,000
Less. sales return 3000
1,27,000
Net Purchase:
Purchase 75,000
70,000
Less. personal withdraw 1500
68,500
88,500
58,500
4) Depreciation on Furniture = 30,000 × 10% = 3,000
5) Depreciation on Equipment = 60,000 × 10% = 6,000
6) New allowance for doubtful a/c = 15,000 × 6% = 900
Hanif Enterprise
Income Statement
For the year ended 31,Dec. 2006
Explanation Tk. Tk.
Net sales(W-1) 1,27,000
Gross Profit 68,500
Utilities exp. 3,000
Delivery exp. 2,000
Rent exp. (4,000-1,000) 3,000
General exp. 6,000
Salaries exp. 7,000
Add. Due 1,500 8,500
Selling exp. 13,000
Dep. exp.-Furniture 3,000
Dep. exp.-Equipment 6,000
New allowance for doubtful a/c 900 9,000
Less. Old allowance for doubtful a/c 400
500
Non operating exp:
Interest exp. 1,500
Non operating income:
App. Premium 15,000
Less. advance 12,000 (3,000) 43,500
Net income 25,000

Hanif Enterprise
Explanation Tk.
Hanif;s Capital 73,000
98,000
Less. Hanif’s Drawings 10,000
88,000
Less. Personal withdrawn 1,500
86,500
Hanif Enterprise
As at 31 Dec, 2006
Explanation Tk. Tk.
Assets:
Current assets:
Less. allowance for doubtful a/c
900 14,100
Notes Receivable 6,000
Cash 20,000
Prepaid Rent 1,000
Fixed assets:
Furniture 30,000
Less. Acc. Dep.(6000+3000) 9,000
21,000
Equipment 60,000
1,34,100
Less. Acc.Dep.(12000+6000) 18,000
42,000
Liabilities and O.E
Current Liabilities
Accounts payable
Notes payable
Mortgage payable 13,600
Advance apprenticeship premium 15,000
Owner’s equity 1,500 1,34,100
12,000
86,500
Ans. to the question No:11
BRAC Ltd.
Store ledger
(Under FIFO method)
Date Explanation Receipt / Purchase Issue / sales Balance
2006
Beginning
March 24 10 240 24 10 240
inventory
1
” 3 Sold 12 23.5 282 12 10 120
12 10 120
” 10 Purchase 40 12 480
40 12 480
” 12 Sold 20 24 480 32 12 384
” 20 Sold 18 24 432 14 12 168
14 12 168
” 25 Purchase 40 12.5 500
40 12.5 500
” 31 Sold 20 24 480 34 12.5 425
1,220 1674 34 425
Value of Ending inventory 34 Units Tk. 425
Cost of goods sold = cost of goods available for sale – value of ending
inventory
= 1,220 – 425
= 795
Gross Profit = Net sales – cost of goods sold
= 1674 – 795
= 879
Ans. To the que.: 12
Workings:
Adjusting:
Supplies exp. 2,000
Supplies 2000
(5,000 – 3,000)
(b) Advance interest 1,000
Interest exp. 1,000
© Interest Receivable 2,000
Interest income 2,000
(d) Prepaid insurance 1,200
 6000 
 ×3
 15 
(e) Advertising exp. 18,000
(f) Dep. Exp.- Building 4,000
Acc. Dep- Building 4,000
 1,60,000 
 
 40 
(g) Dep. Exp.- Equipment 8,000
Acc.Dep.- Equipment 8,000
 80,000 
  = 8000
 10 
Shohag Paribahan Pvt. Ltd.
Work Sheet
Dec. 31, 2006
Income
Accounts Statement
Titles Dr. Cr.
Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk)
(Tk) (Tk)
1,00,00 1,00,00 1,00,00
Land
0 0 0
1,60,00 1,60,00 1,60,00
Building
0 0 0
Acc.dep.-
40,000 4,000 44,000 44,000
Building
Office
equipme 80,000 80,000 80,000
nt
Acc.dep.-
Off.
16,000 8,000 24,000 24,000
Equipme
nt
1,10,00 1,10,00 1,10,00
Cash
0 0 0
A/c 1,50,00 1,50,00 1,50,00
receivabl 0 0 0
e
Insurance
6,000 1,200 4,800 4,800
exp.
Prepaid
18,00
advertisi 20,000 2,000 2,000
0
ng
Notes
receivabl 14,000 14,000 14,000
e
Salaries 1,26,00 1,26,00 1,26,00
exp. 0 0 0
Traveling 1,10,00 1,10,00 1,10,00
exp. 0 0 0
Interest
1,000 2,000 3,000 3,000
income
Interest
3,000 1,000 2,000 2,000
exp.
Accounts
60,000 60,000 60,000
payable
Notes
75,000 75,000 75,000
payable
3,37,00 3,37,00 3,37,00
Capital
0 0 0
Service 3,55,00 3,55,00 3,55,00
Revenue 0 0 0
Supplies 5,000 2,000 3,000 3,000
Supplies
2,000 2,000 2,000
exp.
Advance
1,000 1,000 1,000
interest
Interest
Receivab 2,000 2,000 2,000
le
Prepaid
1,200 1,200 1,200
insurance
Advertisi 18,00
18,000 18,000
ng exp. 0
Dep.exp.
4,000 4,000 4,000
-Building
Dep.
Exp.-
8,000 8,000 8,000
equipme
nt
Net
83,200 83,200
income
Total 8,84,000 8,84,000 36,200 36,200 8,98,000 8,98,000 3,58,000 3,58,000 6,23,200 6,23,200
BBA FIRST YEAR FIRST SEMESTER EXAMINATION,2007
Subject code: 1102
Examination code:106
Time- 3 hours
Full marks- 70
[N.B- The figures in the right margin indicate full marks. Answer all
questions from part A, any four questions from Part B and any four
questions from part c.]
Part A
Marks
1. Writte the correct answer of the following questions:---------
The term debit indicates---
Right
Assets
Left
Both left and right
Service provided by a public account included----

Internal auditing, budgeting and management consulting
Auditing, budgeting and management consulting
Auditing, budgeting and cost accounting
Auditing, taxation and management consulting
Accrued revenue is-----

An expense
An asset
A liability
Revenue
Which of the following is not part of the recording process?

Analyzing transactions
Preparing an income statement
Entering transactions in a journal
Posting transactions
Unearned revenue is ----
an expense
An asset
a liability
Revenue
Each of the following is a major type of adjusting entries
except--------------
earned revenue
Accrued expense
accrued revenues
unearned revenues
Cost of goods sold--------------
an expense
An asset
a liability
revenue
current assets are listed--------
by importance
by longevity
by liquidity
by alphabetically
Which of the following appears on both a single-step and a multiple-
step income statement?
Gross profit
cost of goods sold
income from operations
merchandise inventory
If a customer returns goods for credit an entry is normally made in the
----------
sales journal
general journal
cash receipts journal
cash payments journal
2. (a) What is accounting?
(b) Why is ethics a fundamental business concept?
3. (a) what is meaning of GAAA?

(b) Explain the monetary unit and economic entity assumptions.
4. (a) What are the major types of adjusting entries?

(b) Determine the missing amounts from the following
information’s:------
Alpha company
January 1,2006 Taka

Assets 2,00,000
Liabilities a
Owner’s equity 1,00,000
December 31,2006
Assets b
Liabilities 60000
Owner’s equity changes in year
Additional investment 20,000
Drawings 10,000
Total revenue c
Total expense 4,00,000
5 (a.) what is a trial balance and what is its primary purpose?

b. what are the limitations of a trial balance?
6. (a) Define the terms assets, liabilities and owner’s equity.

( b. )what items does affect owner’s equity?
7. (a). Explain the meaning of the credit terms 2\10 .n\30

( b.) explain the income measurement process in a merchandizing
company.
8. The following transactions took place during the month of April,
2007 on account of brother’s corporation, Dhaka:----
April 1 Invested TK.10, 00,000 cash to start the business.

3 paid TK 4,000 cash for office rent.
7 purchase office equipment for TK 25,000cash
9 incurred TK 30,000 of advertising cost in the Bangladesh
times: on account
paid TK 6,000 cash for office supplies
Withdrawn TK 20,000 cash for personal use of the owner.
paid the “Bangladesh times” due on advertising on April 9
paid employee salaries TK22,000
28. performed services to the clients on account tk. 35.000.
30. Received provided on account April 28.
Required :
Prepare a tabular analysis of the transactions using appropriate
account titles and arrange them in the format of accounting equation.
9. Mr. Firoj is a licensed architect. During the first month of the

operation of his business, the following events and transactions
occurred.-
June 1 invested tk. 50.000 cash.

Hired a secretary-receptionist at a salary of tk.5,000 per month.
Paid office rent for the month tk. 2.000.
Purchased architectural supplies on account from Dhaka Company
tk.20000.
10. Completed blueprints on a carport and billed client tk.
3,000 for services.
20. Received tk.5,000 cash for services completed and
delivered to salma and co.
30. Paid secretary reception for the month tk.5000.
30. Paid tk. 1,000 to Dhaka Company for accounts payable
due.
Instructions: a) Journalize the transactions.

b) Post to the ledger accounts.
c) Prepare a trial balance on June 30, 2008.
10. The following particulars are extracted from the books of Diamond
Traders relating to the year ended December 31.2006:-
Account Titles Debit Taka Credit Taka
Cash 22,500
Prepaid rent 12,000
Land 50,000
Building 60,000
Accumulated depreciation building 12,000
Equipment 12,000
Accumulated depreciation equipment 2000
Capital 80,000
Drawings 10,000
Services revenues 73,000
Electricity expense 500
Office expense 1,500
Interest expense on notes payable 500
2,00,000 2,00,000
Adjustments:
30 months Notes payable issued on January 1, 2006at the rate of interest
10/
Accrued office expense tk 800
Prepaid insurance has been expired @ tk 100 per month.
Unearned services revenue tk 2,000 include in service revenue.
Prepaid rent paid on January 1,2006for 24 months period.
Prepaid advertising paid on March 31, 2006for 12 months period.
depreciation on equipment tk 1,000 and on building tk 5,000 p.a
Prepare 10 column work sheet.
11.The trial balance of Rebeka fashion center contained the following

accounts at December 31,the end of the company’s fiscal year:----
Rebeka Fashion Center
Trial Balance
December31,2006
Account titles Debit Credit

Taka Taka
Cash 29,000
Store supplies 6,200
Store Equipment 87,000
Accumulated Depreciation store equipment 22,000
Delivery equipment 50,000
Accumulated depreciation delivery equipment 6,000
Rebeka’s capital 1,10,000
Rebaka’s drawing 12,000
Sales 7,60,000
Sales returns and allowances 8,800
Cost of goods sold 1,97,400
Salaries expense (administrative) 1,40,000
Advertising expense 24,400
Utilities expense (administrative) 14,000
Repair expense (administrative) 12,100
Rent expense (administrative) 21,000
Adjustment data:
(i) Store supplies on hand totaled tk3,200
(ii) Depreciation is Tk 8,000 on the store equipment and tk 4,000 on the
delivery equipment.
(iii) Interest of tk 4,000 is accrued on notes payable at december31.
iv)Merchandise inventory actually on hand is tk 44,400
v) Tk 25,000 of notes payable are due for payment next year
12. Eagle heart company has the following inventory. Purchases and
sales data for the month of March, 2007:-----
Inventory: march 1 200 units @Tk.4.00 tk 800

Purchases:
March 10 500 units @Tk.4.50 tk 2250
March 20 400 units @TK 4.75 tk 1900
March 30 300 units @tk 5.00 tk 1500
Sales:
March 15 500 units
March 25 400 units
The physical inventory system determines count on March 31 shows

500 units on hand.
Under a personal inventory system determine the cost of inventory on

hand at March 31and the cost of goods sold for March under the FIFO
method and LIFO method and average cost method.
13. Writes shorts notes (any four) :

Accounting Equation
Balance Sheet
Accounting Cycle
Materiality Concept
FIFO
Depreciation
Accrual Vs. Cash-basis Accounting
BBA-2007
Ans. to the question No:4 (b)
Part B
Alpha Company
January 1, 2006
We know that, Here,
A = L+ O.E A = Assets
=) 2,00,000 = L + 1,00,000 L = Liabilities
=) L = 1,00,000 O.E = Owner’s
equity
Dec. 31, 2006
We know that,
A = L+ O.E
=) A = 60,000 + 2,00,000
∴ A= 2,60,000
Owner’s equity changes in year:

Ending O.E = Opening O.E + Additional investment +Net income -
Drawings
=) 2,00,000 = 1,00,000 + 20,000 + (Total revenue – Total expense)
- 10,000
=) 2,00,000 = 1,20,000 + Total Revenue – 4,00,000 – 10,000
=) –Total Revenue = 1,20,000 -4,00,000 -10,000 -2,00,000
=) –Total Revenue = - 4,90,000
∴ Total Revenue = 4,90,000
Part C
Brothers Corporation ,Dhaka
Tabular analysis
For the month of April, 2007
A = L + O.E
Date Remarks
Cash A/c Rec. Supplies Equipment A/c Payable capital
April 1 +10,00,000 +10,00,000 Investment
3 (4,000) (4,000) Rent exp.
7 (25,000) +25,000
9 +30,000 (30,000) Advertising exp.
14 (6,000) +6,000
19 (20,000) (20,000) Withdraw
22 (30,000) (30,000)
26 (22,000) (22,000) Salaries exp.
28 +35,000 +35,000 Service Revenue
30 +35,000 (35,000)
9,28,000 Nill 6,000 25,000 Nill 9,59,000

9,59,000 9,59,000
Ans.to the question No:9
Mr. Firoj
Req: (a) Journal entries
June 1 Cash 50,000
Firoj’s Capital 50,000
[Cash received by owner]
”1 No entry
”2 Office rent exp. 2,000

Cash 2,000
[Paid office rent]
”3 Architectural supplies 2,000
[Purchase supplies on account]
[Service performed on account]
Cash 5,000
” 20 Service Revenue
[Service performed in cash] 5,000
Salaries exp. 5,000
” 30 Cash
[Paid salaries secretary receptionist] 5,000
” 30 Cash
[Paid to Dhaka company] 1,000
Req: (b) Ledger
Firoj’s Capital
Date Explanation Ref Debit Credit Balance

June 1 50,000 50,000
Office rent exp.

June 2 2,000 2,000
Architectural supplies
June 3 2,000 2,000
Accounts payable
June 3 2,000 2,000
30 1,000 1,000
Accounts Receivable
June 10 3,000 3,000
Service Revenue
June 10 3,000 3,000
20 5,000 8,000
Cash
June 1 50,000 50,000
2 2,000 48,000
20 5,000 53,000
30 5,000 48,000
30 1,000 47,000
Salaries exp.
June 30 5,000 5,000
Req: (c) Mr. Firaj
Trial Balance
June 30, 2008
Acc ..
Accounts Title Ref Debit Credit
No.
1 Cash 47,000
2 Foroj’s Capital 50,000
3 Office Rent exp. 2,000
4 Architectural supplies 2,000
59,000 59,000

Workings:
(i) Interest exp. 1,500
Interest payable 1,500 (2000-500)
(ii) Office exp. 800
Office exp. payable 800
(iii) Insurance exp. 1,200
(iv) Service Revenue 2,000
(v) Rent exp. 6,000
Prepaid Rent 6,000
 12,000 
  × 12
 24 
(vi) Advertising exp. 6,000

Prepaid Advertising 6,000
 8000 
 ×9
 12 
(vii) Dep. exp.-Equipment 1,000
Accumulated dep.-Equipment1,000
Dep. exp.-Building 5,000
Accumulated dep.-Building 5,000
Dimond Traders
Work Sheet
Dec.31, 2006
Income
Statement
Accounts Titles
Cr. Dr. Cr.
Dr.(Tk) Cr.(Tk) Dr.(Tk) Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk)
(Tk) (Tk) (Tk)
Cash 22,500 22,500 22,500
Prepaid
8,000 6,000 2,000 2,000
Advertising
Prepaid Rent 12,000 6,000 6,000 6,000
Land 50,000 50,000 50,000
Building 60,000 60,000 60,000
Acc.dep-
12,000 5,000 17,000 17,000
Building
Equipment 12,000 12,000 12,000
Acc.dep.-
2,000 1,000 3,000 3,000
Equipment
Notes payable 20,000 20,000 20,000
Accounts
13,000 13,000 13,000
payable
Capital 80,000 80,000 80,000
Drawing’s 10,000 10,000 10,000
71,00
Service Revenue 73,000 2,000 71,000
0
20,00
0
Prepaid
2,000 1,200 800 800
Insurance
Office Supplies 1,000 1,000 1,000
Electricity exp. 500 500 500
Office exp. 1,500 1,500 1,500
Interest exp. 500 1,500 2,000 2,000
Interest payable 1,500 1,500 1,500
Office exp. 800 800 800
Office exp.
800 800 800
payable
Insurance exp. 1,200 1,200 1,200
Unearn Service
2,000 2,000 2,000
Rev.
Rent exp. 6,000 6,000 6,000
Advertising exp. 6,000 6,000 6,000
Dep.exp.-
1,000 1,000 1,000
Equipment
Dep.exp.-
5,000 5,000 5,000
Building
Net income 27,00 27,000
0
Total 2,00,000 2,00,000 23,500 71,000 71,000 1,64,300 1,64,300

23,500 2,08,300 2,08,300
Ans. to the Que. No: 11
Workings:
Net Sales:
Sales 7,6,0000
Less. sales return 8,800
7,51,200
Net Purchase: Nill

Add. Net Purchase Nill
44,700
300
∴ Total cost of goods sold
= 4,97,400 + 300
= 4,97,700
Income Statement
For the year ended 31, Dec. 2006
Explanation Tk. Tk.
Net sales(W-1) 7,51,200
Less: Cost of goods sold (W-3) 4,97,700
Gross Profit 2,53,500

Selling exp.:
1 12,000
Rent exp.  
2
Dep. exp.-Delivery Equipment 4,000
Administration exp.
Salaries exp. 1,40,000
Repair exp. 12,100
Delivery exp. 16,700
1
Rent exp.   12,000
2
Depreciation exp.-Store Equipment 8,000
Supplies exp. 3,000
Non-operating exp:
Interest exp. 4,000 2,50,200
Net income 3,300
For the year ended 31,Dec.2006
Explanation Tk.
Rebek’s Capital 1,10,000
Less. Rebek’s Drawings 12,000

1,01,300

Balance Sheet
As at Dec. 2006
Explanation Tk. Tk.
Assets:
Current assets:
Cash 29,000
Store Supplies (6,200 – 3,000) 3,200
Fixed assets:
Store equipment 87,000
Less. Acc. Dep.(22,000 + 8,000) 30, 000 57,000
Delivery equipment 50,000
Less. Acc.Dep.(6,000 + 4,000) 10,000
40,000 3,07,300
Liabilities and O.E
Current Liabilities
Long term liability:

Notes payable
Owner’s equity 25,000
1,01,300 3,07,300
_______
Ans. to the que. No: 12
Store ledger
(Under FIFO method)
Receipt / Purchase Issue / sales Balance
Date Explanation
March .1 Opening inventory 200 4 800 200 4 800
200 4 800
” 10 Purchase 500 4.5 2250
500 4.5 2250
200 4 800
” 15 Sales 200 4.5 900
300 4.5 1300
200 4.5 900
” 20 Purchase 400 4.75 1900
400 4.75 1900
200 4.5 900
” 25 Sales 200 4.75 950
200 4.75 950
200 4.75 950
” 30 Purchase 300 5 1500
300 5 1500
6,450 4000 500 2450
Value of Ending inventory Tk. 2,450

Cost of goods sold = cost of goods available for sale – value of ending inventory
= 6,450 – 2,450
= 4,000
Store ledger
(Under LIFO method)
Date Explanation
March Opening
200 4 800 200 4 800
.1 inventory
200 4 800
” 10 Purchase 500 4.5 2250
500 4.5 2250
” 15 Sales 500 4.5 2250 200 4 800
200 4 800
” 20 Purchase 400 4.75 1900
400 4.75 1900
” 25 Sales 400 4.75 1900 200 4 800
200 4 800
” 30 Purchase 300 5 1500
300 5 1500
6,450 4150 500 2300
Value of Ending inventory Tk. 2,300

Cost of goods sold = cost of goods available for sale – value of ending inventory
= 6,450 – 2,300
= 4,150
BBA FIRST YEAR, FIRST SEMESTER EXAMINATION, 2008
Subject Code: 1102 Examination Code: 601
Time—3 hours
Full marks—70
[N.B.—The figures in the right margin indicate full marks. Answer any
five questions from Part A and any four questions from Part B.J
Part A
Marks
1. (a) What is accounting? 2
(b) Who are the users of accounting? 4
2. (a) What is the basic accounting equation? 2
(b) What items affect owner's equity? 4
3. (a) What is worksheet? 2
(b) What are the major sections in a classified balance sheet? 4
4. (a) Distinguish between cash basis and accrual basis. 3
(b) Briefly explain the major types of adjusting entries. 3
5. (a) What do you mean by worksheet? 2
(b) Why worksheet is prepared? Is it mandatory in accounting? 4
6.(a) What is accounting information system? 2
(b) What is subsidiary ledger? What are the advantages of 4
maintaining subsidiary ledgers?
7. (a) What is internal control? 2
(b) Briefly explains the principles of effective internal control? 4
8. Mr. Salman started his own consulting firm, Salman Consulting on

January 1, 2008. The following transactions occurred during the month
of January.
January 1 Salman invested Tk. 20,000 cash in the business.

2 Purchased office equipment for Tk. 15,000. Salam paid
Tk. 5,000 cash and signed a note payable for the remaining
balance.
3 Paid Tk. 1000 for office rent for the month.
5 Performed Tk. 10,000 of services on account.
10 Withdraw Tk. 500 cash for personal use.
12 Purchased supplies for Tk. 300 on account.
14 Received a cash payment of Tk. 7,000 for services
provided on January 5.
18 Incurred Tk.500 of advertising cost in the Bangladesh
Observer on account.
21 Received a cash payment of Tk. 5,000 for service
provided.
23 Made cash payment of Tk. 3,000 on the note payable.
25 Paid Tk. for utilities.
30 Paid Bangladesh Observer amount due on January 18.
31 paid Tk. 2,000 for employee salaries.
Instructions:
Show the effects of the previous transactions on the accounting equation
using the suitable format.
Prepare an income statement for the month of January.
Prepare a balance sheet at January 31, 2008.ssss
9 (a) what is FOB destination?

(b) By considering the following unadjusted Trial Balance and
adjustments prepare a 10 column worksheet for singer Bangladesh
Ltd:-
Singer Bangladesh Ltd.
Unadjusted Trial Balance
December 31, 2007
Particulars Debit Taka Credit

Taka
Cash 40,000
Prepaid rent 6,200
Buildings 2,50,000
Accumulated depreciation- Building 25,250
Long term note payable 24,000
Owner’s Capital 1,96,650
Drawings of owner 30,000
Sales revenue 1,56,000
Wages expenses 45,860
Rent expense 2,640
Property tax expense 4,600
Other revenues 40,000
Unearned revenue 13,000
4,60,700 4,60,7
00
Adjustments:
An inventory count shows Tk. 4,500 of office supplies on hand at the
end of the year.
Rent expenses for the year was Tk. 5,000.
Estimated depreciation on building for the year was Tk. 10,000.
Accrued Wages for the year was Tk. 8,000.
Uncollected and unbilled service revenue for the year was Tk. 20,000.
The interest @ 12% on long term note payable was due for 7 months.
10. You are provided with following information for City Ltd. For the
month ended June 30. 2008. City Ltd. Uses the periodic method for
inventory:-
Date Description Quantity Unit cost or
Selling Price
June 1 Beginning inventory 25 60
4 Purchase 85 64
10 Sale 70 90
11 Sale return 10 90
18 Purchase 35 68
18 Purchase return 5 68
25 Sale 40 95
28 purchase 20 72
Instructions: Calculate the followings

Ending inventory
Cost of goods sold.
Gross profit and
Gross profit rate under each of the following methods:- (a) LIFO (b)
FIFO
11. Sohana started her own consulting firm, named consult Sohana, on
January 1. 2008. During the first month of operation the following
transactions occurred.
January 1 Sohana invested Tk. 10000 in cash in the business.

10 Paid Tk. 800 for the monthly rent.
15 Purchased office equipment of account Tk. 3000
19 Rendered consulting services to the clients for cash Tk. 1500.
22 Borrowed Tk. 700 cash on a not payable.
25 Rendered consulting services to the clients on credit Tk. 2000.
28 Paid monthly salary Tk. 500.
29 Paid monthly utilities Tk. 400.
30 Paid Tk. 1000 for equipment purchased on January 15.
31 Cash received Tk. 1000 for services rendered on January 25.
31 Sohana withdrew Tk. 200 from business for personal use.
Required:
Prepare Journal for the above transaction in the books of Consult
Sohana.
Prepare ledgers in the books of Consult Sohana from the Journal.
Prepare Trial Balance in the books of Consult Sohana as January 31.
2008
12. Consult Sonia Ltd. Is a provider of taxation services. The following

unadjusted Trial Balance has been taken from the books of accounts of
consult Sonia Ltd.:-
Consult Sonia Ltd.
Trial Balance
August 31, 2008
Accounts Titles Debit Taka Credit Taka
Cash 5,400
Supplies 1,300
Equipment 60,000
Sonia, Capital 30,000
Sonia, Drawings 1,000
Consulting Fees 14,900
Salary expense 3,200
Advertising expense 400
77,300 77,300
Adjustments:-
Insurance expires at the rate of Tk. 150 per month.
A supply on hand at the month is Tk. 300.
Monthly depreciation on the equipment is Tk. 900.
Interest accrued on the note is Tk. 500.
Salaries accrued Tk. 1,000.
Consulting services provided but it has not been recorded Tk. 1,000.
Required:
Journalize the adjusting entries for month in the books of consult Sonia
Ltd.
Prepare adjusted Trial balance as at August 31, 2008.
13. The following adjusted Trial Balance has been taken from the books
of accounts of the Rupa Trading and co.
Rupa Trading and co.
Adjusted Trial Balance

December 31, 2007
Debit Accounts Titles Credit

Accounts Titles Taka Taka
Cash 20,800 Accumulated dep.- 52,500
Account receivable 50,300 building 42,900
Prepaid insurance 2,400 Accumulated dep.- 176,600
Equipment 1,10,000 equip 5,000
Buildings 1,90,000 Rupa, capital 4,000
Cost of goods sold 4,12,700 Interest revenue 80,000
Depreciation exp.- 10,400 Interest payable 78,700
Buildings 12,700 Mortage payable 4,800
Depreciation exp.- 28,000 Accounts payable 6,28,000
Equipment. 9,200 Property tax payable 5,300
Rupa Drawing 32,000 Sales 1,000
Insurance expense 11,000 Sales commission
Office Salaries 12,000 payable
expenses 76,000 Utilities payable
Sales salaries expense 15,500
Merchandise 6,000
inventory
Property tax expense
Sales commission
expense
Sales return and
allowance
10,78,800 10,78,800
Additional Data:-
Insurance expense and utilities expense are 60% selling and 40%
administration.
Tk. 20000 of the mortage is due for payment in the next year.
Depreciation on building and property tax expense are administration
expense.
Depreciation on equipment is a selling expense.
Required:
1. Prepare a multi-step income statement.
2. Prepare a statement of owner’s equity.
3. Prepare a classified balance sheet.
BBA-2008
Req: (i) Mr. Salman Consulting
Tabular Analysis
For the month of January, 2008
Date A = L + O.E Remarks
A/c
Cash A/c Rec. Equipment Supplies Notes payable capital
payable
July 1 +20,000 +20,000 Investment
2 (5,000) +15,000 +10,000
3 (1,000 (1,000) Rent exp.
5 +10,000 +10,000 Service Rev.
10 (500) (500) Withdraw
12 +300 +300
14 +7,000 (7,000)
18 +500 (500) Adv. exp.
21 +5,000 +5,000 Service Rev.
23 (3,000) (3,000)
25 (200) (200) Utilities exp.
30 (500) (500)
31 (2,000) (2,000) Salaries exp.
19,800 3,000 15,000 300 300 7,000 30,800
38,100 38,100
Req: (ii) Mr. Salman Consulting
Income Statement
For the year ended July 31, 2008
Explanations Tk. Tk.
Less. Expenses:
Rent exp. 1,000
Advertising exp. 500
Utilities exp. 200
11,300
Mr. Salman Consulting
Balance Sheet
As at July 31, 2008
Explanations Tk. Tk.
Assets:
Cash 19,800
Equipment 15,000
Supplies 300
38,100
Liabilities and O.E:
Notes payable 7,000
O.E:
Capital 20,000
Add. Net income 11,300
31,300
30,800
Less. Withdraw 500 38,100
Ans. to the que. No: 9 (b)
Singer Bangladesh Ltd.
Work Sheet
Dec. 31 2007
Trial Balance Adjustments Adjusted T/B Income Statement Balance Sheet
Accounts Titles Dr. Cr. Dr. Cr.
Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk)
(Tk) (Tk) (Tk) (Tk)
40,00
Cash 40,000 40,000
0
Office supplies 8,900 4,400 4,500 4,500
Prepaid Rent 6,200 5,000 1,200 1,200
2,50,0 2,50,00 2,50,00
Building
00 0 0
25,25 10,00
Acc.dep.-Building 35,250 35,250
0 0
A/c Payable 5,800 5,800 5,800
Long term notes 24,00
24,000 24,000
payable 0
1,96,6 1,96,65 1,96,65
Owner’s Capital
50 0 0
Drawings of 30,00
30,000 30,000
owner 0
1,56,0 1,56,00 1,56,00
Sales Revenue
00 0 0
45,86
Wages exp. 8,000 53,860 53,860
0
Rent exp. 2,640 5,000 7,640 7,640
13,20
Insurance exp. 13,200 13,200
0
Property tax exp. 4,600 4,600 4,600
11,80
Utilities exp. 11,800 11,800
0
32,00
0
40,00 20,00
Others Revenue 60,000 60,000
0 0
20,00
A/c Receivable 5,500 25,500 25,500
0
Unearned 13,00
13,000 13,000
Revenue 0
10,00
Advertising exp. 10,000 10,000
0
Office supplies
4,400 4,400 4,400
exp.
Dep. exp.- 10,00
10,000 10,000
Building 0
Wages payable 8,000 8,000 8,000
Interest exp. 1,680 1,680 1,680
Interest payable 1,680 1,680 1,680
Net income 36,280 36,280
4,60,7 4,60,7 49,080 49,080 5,00,380 5,00,380 2,16,000 2,16,000 3,21,200 3,21,200
Total
00 00
Working Notes:
Adjustments:
(i) Office supplies exp. 4,400
(8,900 – 4,500)
(ii) Rent exp. 5,000
Prepaid Rent 5,000
(iii) Dep. exp. – Building 10,000
Acc. Dep.- Building 10,000
(iv) Wages exp. 8,000
Wages payable 8,000
(v) Accounts Receivable 20,000
(vi) Interest exp. 1,680
 7
 24,000 × 12% × 
 12 
Ans. to the que.No. 10
(a) LIFO Method
City Ltd.
Periodic inventory system
For the month of June 30, 2008
Date Explanation
June .1 Opening inventory 25 60 1500 25 60 1500
25 60 1500
” 4 Purchase 85 64 5440
85 64 5440
25 60 1500
” 10 Sales 70 90 6300
15 64 960
25 60 1500
” 11 Sales return (10) 90 (900)
25 64 1600
25 60 1500
” 18 Purchase 35 68 2380 25 64 1600
35 68 2380
25 60 1500
” 18 Purchase return (5) 68 (340) 25 64 1600
30 68 2040
25 60 1500
” 25 Sales 40 95 3800
15 64 960
” 28 Purchase 20 72 1440 25 60 1500
15 64 960
20 72 1440
160 10420 100 9,200 60 3,900
(i) Ending inventory (LIFO) = 3,900
(ii) Cost of goods sold = cost of goods available for sale – value of
ending inventory
= 10,420 – 3,900
= 6,520
(iii) Gross Profit = Net sales – cost of goods sold
= 9,200 – 6,520
= 2,680
Gross Pr ofit
Netsales
2,680
= × 100
9,200
= 29.130 %
(a) (2) FIFO Method
(i) City Ltd.
Ending Inventory
Date Explanation
June .1 Opening inventory 25 60 1500 25 60 1500
25 60 1500
” 4 Purchase 85 64 5440
85 64 5440
” 10 Sales 70 90 6300 40 64 2560
” 11 Sales return (10) 90 (900) 50 64 3200
50 64 3200
” 18 Purchase 35 68 2380
35 68 2380
50 64 3200
” 18 Purchase return (5) 68 (340)
30 68 2040
10 64 640
” 25 Sales 40 95 3800
30 68 2040
10 64 640
” 28 Purchase 20 72 1440 30 68 2040
20 72 1440
160 10420 100 9,200 60 4,120
(i) Ending inventory (FIFO) = 4,120
(ii) Cost of goods sold = cost of goods available for sale – value of
ending inventory
= 10,420 -4,120
= 6,300
(iii) Gross Profit = Net sales – cost of goods sold
= 9,200 – 6,300
= 2,900
Gross Pr ofit
Netsales
2,900
= × 100
9,200
= 31.522 %
Ans. to the Que.No.11
In the Books of Consult Sohana
Journal entries
Dr Cr
Date Explanation Ref
(Tk) (Tk)
Jan 1 Cash 10,000
Shohana’s Capital 10,000
[Cash invested by owner in his
” 10 business] 800
Rent exp. 800
Cash
” 15 [Paid to rent] 3,000
Accounts payable
” 19 [Purchase office equipment on
account] 1,500
Cash 1,500
” 22 Service Revenue 700
[Service 4revenue to customer in 700
cash]
” 25 Cash 2,000
Notes Payable 2,000
[Money borrowed on a notes
” 28 payable] 500
Consulting Revenue
” 29 [Service rendered to customer on 400
account] 400
Salaries exp.
Cash 1,000
” 30 [Paid to salaries] 1,000
Utilities exp.
” 31 Cash 1,000
[Paid to the utilities exp.] 1,000
Accounts Payable
” 31 Cash 200
[Paid to accounts payable] 200
Cash
Accounts Receivable
[Cash received from a/c receivable]
Sohana’s withdraw
Cash
[Withdraw by sohana in his
personal use]
Req: (ii) In the Books of counsult Sohana
Ledger
Cash account
2008
January 1 10,000 10,000
10 800 9,200
19 1,500 10,700
22 700 11,400
28 500 10,900
30 1,000 9,900
31 1,000 10,900
31 200 10,700
Sohan’s Capital
January 1 10,000 10,000
Rent exp.
January 10 800 800
Office equipment
January15 3,000 3,000
Accounts payable
January 15 3,000 3,000
30 1,000 2,000
Service revenue
January 19 1,500 1,500
Notes payable
January 22 700 700
Accounts receivable
January 25 2,000 2,000
31 1,000 1,000
Consulting revenue
January 25 2,000 2,000
Salaries exp.
January 28 500 500
Sohan’s withdraw
January 31 200 200
Req: (iii) In the Books of consult Sohan

Trial Balance
January 31, 2008
Acc ..No. Accounts Title Ref Debit Credit
1 Cash 10,700
2 Sohan’s Capital 10,000
3 Rent exp. 800
4 Office equipment 3,000
7 Notes Payable 700
9 Consulting Revenue 2,000
10 Salaries exp. 500
11 Sohan’s withdraw 200
16,200 16,200
Req:(a) Ans. to the Que.No: 12

In the Books of Consult Sonia’s Ltd.
Adjusting entries
For the month of August 31, 2008
Date Explanation Ref Dr (Tk) Cr (Tk)
[To record insurance exp.]
Supplies (1300 – 300) 1,000
31 Depreciation exp.-equipment 900
Accumulated dep.-equipment 900
[To record depreciation exp.]
31 Interest exp. 500
Interest payable 500
[To record interest on notes payable]
Consulting fees 1,000
[To record consulting revenue]
Req: (b) In the Books of Consult Sonia’s Ltd.

August 31, 2008
SL.No. Accounts Title Ref Debit Credit
1 Cash 5,400
2 Accounts Receivable (2,800 +1,000) 3,800
3 Consulting fees (14,900 + 1,000) 15,900
4 Prepaid insurance (2,400 – 150) 2,250
6 Supplies (1,300 – 1,000) 300
8 Equipment 60,000
9 Notes payable 30,000
11 Sonia Capital 30,000
12 Sonia Drawings 1,000
13 Salaries exp. 200
14 Salaries payable 1,000
15 Utilities exp. 800
17 Depreciation exp.- Equipment 900
18 Accumulated dep.-Equipment 900
19 Interest exp. 500
20 Interest payable 500
80,700 80,700
Ans. to the Que.No: 13

Rupa Trading and Co.
Income Statement
Explanation Tk. Tk.
Net sales(W-1) 6,22,000
Operating exp.
Selling exp.:
Depreciation exp.-Equipment 12,700
Insurance exp. ( 9,200 × 60% ) 5,520
Utilities exp. (12,000 × 60% ) 7,200
Sales salaries exp. 76,000
Sales commission exp. 15,500
Administration exp.
Depreciation exp.-Building 10,400
Property tax exp. 4,800
Insurance exp. ( 9,200 × 40% )
Office salaries exp. 3,680
32,000
Utilities exp. (12,000 × 40% )
4,800
Non-operating exp:
Interest exp. 11,000
Non- operating income:
Interest Revenue (5,000) 1,78,600
30,700
Net income

Rupa’s Capital 1,76,600
2,07,300
Less. Rupa’s Drawings 28,000
1,79,300
Balance Sheet
As at Dec. 2006
Explanation Tk. Tk.
Assets:
Current assets:
Cash 20,800
Fixed assets:
Equipment 1,10,000
Less. Accumulated Dep. 42,900
Building 1,90,000
67,100
Less. Accumulated Dep. 52,500
3,53,100
Liabilities and O.E: 1,37,500
Current Liabilities:
Interest payable
Mortgage payable
Property tax payable 60,000
Sales commission payable 78,700
Utilities payable 4,800
5,300
Long term liability: 1,000
Mortgage payable
20,000
1,79,300
Working:
Net sales:
Sales 6,28,000
Less. Sales return 6,000
6,22,000
Note: Merchandise inventory treated as current assets.
BBA FIRST YEAR, FIRST SEMESTER EXAMINATION, 2009
Subject Code: 1102 Examination Code: 601
Time—3 hours Full marks—70
[N.B.—The figures in the right margin indicate full marks. Answer any five questions
from part-A and any four questions from part-B.J
Part A
Marks
1. (a) Define Accounting. 2
(b) Who are external users of accounting information? What 4
uses of financial accounting information are made by (i)
Shareholders; (ii) Creditors?
2. (a) Is worksheet a part of accounting cycle? Explain the 3
purpose of worksheet.
(b) What are the entries an organization needs to prepare for 3
closing its books of accounts at the end of each accounting period?
3. (a) Distinguish between cash basis and accrual basis of 3
accounting.
(b) State two generally accepted accounting principles that 3
relate to adjusting the accounts.
4. (a) Why the merchandise inventory account is usually 3
required to adjust at end of the year? Explain.
(b) Explain the meaning of the credit terms (i) 2/10, n/30, 3
(ii) 1/10 EOM, (Hi) n/30.
5. (a) What are some of the reasons that may cause 3
management to use gross profit method and retail method of
estimating inventory?
(b) Discuss the importance of inventory valuation. 3
"Depreciation is the allocation of cost"—Do you agree? Why? 6
What are the methods of issuing materials? When and why 6
we will use LIFO or FIFO method?
Part B Marks
8. Mr. Sanaf started his own consulting firm, Sanaf
Consulting, on May 1, 2008. The trial balance at May 31, 2008
is as follows :— .
Sanaf Consulting
Trial Balance
May 31,2008
Account Titles Debit (Tk.) Credit (Tk.)
Cash 6,500
Supplies 1,500
Office Furniture 12,000
Sanaf Capital 19,100
Salaries Expense 3,000
Rent Expense 1,000
Total : 31,600 31,600
In addition to those accounts listed on the trial balance, the chart of accounts for
Sanaf Consulting also contains the following accounts : Accumulated
Depreciation-Office Furniture, Travel Expense Payable, Salaries Payable,
Depreciation Expense-Office Furniture, Insurance Expense, Travel expense
and Supplies Expense.
Other Informations:—
(i) Tk. 700 of supplies has been used during the month;
(ii) The office furniture has a 10-years life with no salvage value;
(Hi) Travel expense incurred but not paid on May 31, 2008, Tk. 300;
(iv) The insurance policy is for two years;
(v) Tk. 500 of the balance of unearned service revenue account remains unearned
at the end of the month;
(vi) May 31 is a Tuesday, and employees are paid on Fridays. Sanaf Consulting has
three employees, who are paid Tk. 250 for a 5-days workweek;
(vii) Invoice representing Tk. 1,500 of services provided during the month have not
been recorded as of May 31, 2008.
Required : Prepare a 10-column worksheet for Sanaf Consulting.
9. You are provided with the following information for Ideal Corporation for the
month ended June 30, 2009 :—
Date Description Quantity in Unit cost or

Units Selling price
June 01 Beginning inventory 50 (Tk.)
10
05 Purchase 100 12
08 Sales 80 23
10 Sales return 10 ?
15 Purchase 30 16
16 Purchase return 05 9
20 Sales 75 23
30 Purchase 10 18
Required :
Using the data above calculate the (i) cost of goods sold, (ii) 10
ending inventory, (Hi) gross profit for the month of June, 2009 using (a) FIFO; and
(b) Weighted-Aver age cost method under a perpetual inventory system.
10. Lewis Company’s chart of accounts includes the following selected accounts :—
101 Cash 401 Sales
112 Accounts Receivable 414 Sales discount
120 Merchandise Inventory 505 Cost of Goods sold
301 J. Lewis, Capital
On June 01 the Accounts receivable ledger of Lewis Company showed the following
balances : Bernard & Sons Tk. 3,500; Farely Co. Tk. 1,900; Grinnel Bros. Tk.
1,600 and Masquoketa Co. Tk. 1,300.
The June transactions involving the receipt of cash were as follows :—
June 1 The owner, J. Lewis, invested additional cash in the business Tk. 10,000
June 3 Received check in full from Masquoketa Co. less 2% cash discount;
June 6 Received check in full
June7 Made cash sale of Merchandise totaling Tk. 6,135 The cost of the
merchandise sold was Tk. 4,090
June 9 Received check in full from Bernard & Sons less 2% cash discount;
June 11 Received cash refund from a supplier for damaged
merchandise Tk. 320
June 15 Made cash sales of merchandise totaling Tk.
4,800. The cost of the merchandise sold was Tk, 3,200
June 20 Received check in full from Grinnel Bros. Tk. 1,600
Required :-
(a) Journalize the transactions above in a cash receipts
Journal.
Prepare Accounts Receivable Control Account and its Subsidiary
ledger accounts.
11. Raffi Traders started his own delivery service. The following 10
transactions occurred during the month of June :—
1.Raffi invested Tk. 20,000 cash in his business;
2Purchased a delivery van for Tk. 10,000. Raffi
paid Tk. 3000 in cash and signed a note payable
for the remainder balance;
3Paid 800 for office rent;
4.Performed 5,400 of service on account;
5.Withdrew Tk. 300 cash for personal use;
6.Purchase supplies for Tk. 350 on account;
7.Receive a cash payment of Tk. 750 for services
provided on June 5;
8.Purchase gasoline for Tk. 100 on account;
9.Receive a cash payment of Tk. 1,500 for services provided;
10.Made cash payment of Tk. 500 on the note
payable;
11.Paid Tk. 250 for utilities;
12.Paid for the gasoline purchased on account on
June 17.
13.Paid Tk. 500 for employees salaries.
Required : You are required to show the effects of the above
transactions on accounting equation.
12. Auhon opened a business on September 2009. During the

first month of operation the following transactions occurred :—
September
1 Invested Tk. 20,000 cash in the business;
2.Paid Tk.1,000 cash for store rent for the month September;
3.Purchased washer and dryer for 25,000 paying Tk. 10,000 in cash
and signing a 15,000 six month 125 notes payable;
4.Paid Tk. 1200 for one year accident policy;
10 Received bill from the daily news for advertising the opening of the
business Tk. 200;
20 Withdrew Tk., 700 cash for personal use;
30. Determine that cash receipts for laundry services for the month were
Tk. 6,200.
Instructions:
Journalize the September transactions;
Open ledger accounts and post the September
transactions;
Prepare a trial balance at September 30, 2009.
13. The Trial balance of Navana Ltd. for the year ending Dec. 10
31, 2008 is shown below:—
Navana Ltd. Trial Balance
Dec. 31, 2008
Accounts TitleDebit (Tk.) Credit (Tk.)
Cash 30,000
Accounts receivables 55,200
Equipment 70,000
Land 14,000
Accumulated depreciation-Equipment 20,000
, Sales revenue 4,
82,000
Sales returns and allowances 9,200
Capital 1,
00,600
Purchase 3, 44,000
Freight in 10,000
Purchase returns and allowance 2,400
Purchase discounts 4,000
Interest' 14,000
Utilities 12,200
Total: 6, 71,400 6, 71,400
Other information:
(1) Merchandise inventory on hand at Dec. 31, 2008 is
Tk. 80,000;
(2) Prepaid salaries Tk. 4,000;
Insurance expired Tk. 2,000 during the year;
Provide depreciation @ 10% on equipment.
Requirements :
(a) Prepare a Multiple steps income statements for the year ended on
Dec. 31, 2008;
(b) Prepare a classified balance sheet as at Dec. 31, 2008.
BBA- 2009
Ans. to the Que. No: 8
1) Supplies exp. 700

Supplies 700
2) Dep. exp.-Furniture 100

Accumulated dep.-Furniture 100
3) Travel exp. 300

Travel payable 300
4) Insurance exp. 150

Pre paid insurance 150
 3600 
  ×1
 24 
5) Unearn Service Revenue 2,500
6) Salaries exp. 150

Salaries payable 150
 250 
 ×3
 5 
7) Accounts Receivable 1,500
Sanaf Consulting
Work Sheet
For the month of May.31, 2008
Income
Trial Balance adjustments Adjusted T/B Balance sheet
Explanation statement
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 6,500 6,500 6,500
A/C Receivable 4,000 1,500 5,500 5,500
Prepaid Insurance 3,600 150 3,450 3,450
Supplies 1,500 700 800 800
12,00 12,00 12,00
Office Furniture
0 0 0
A/c Payable 3,500 3,500 3,500
Unearn Ser. Rev. 3,000 2,500 500 500
19,10 19,10
Sanaf Capital 19,100
0 0
10,00
Service Revenue 6,000 4,000 10,000
0
Salaries exp. 3,000 150 3,150 3,150
Rent exp. 1,000 1,000 1,000
Supplies exp. 700 700 700
Dep.exp.-
100 100 100
Furniture
Acc.dep.- 100 100 100
Furniture
Travel exp. 300 300 300
Travel payable 300 300 300
Insurance exp. 150 150 150
Salaries payable 150 150 150
Net income 4,600 4,600
Total 31,600 31,600 5,400 5,400 33,650 33,650 9,700 9,700 28,250 28,250
Ans. to the que no: 9 (a)
Indeal corporation
Store ledger
(Under FIFO method)
Date Explanation
2009
Beginning inventory 50 10 500 50 10 500
June 1
50 10 500
” 5 Purchase 100 12 1,200
100 12 1,200
” 08 Sales 80 23 1840 70 12 840
” 10 Sales return (10) 23 (230) 80 12 960
80 12 960
” 15 Purchase 30 16 480
30 16 480
80 12 960
” 16 Purchase return (5) 16 (80)
25 16 400
5 12 60
” 20 Sales 75 23 1725
25 16 400
5 12 60
” 30 Purchase 10 18 180 25 16 400
10 18 180
135 2,280 145 3,335 40 640
Cost of goods sold:
Cost of goods available for sale = 2,280
Less: Value of Ending inventory = __640__
1,640
========
Ending unit 40 Tk.-640
Gross profit = Net sales – Cost of goods sold

= 3,335 – 1,640
= 1,695
9 (b) Ideal corporation
(Under Weighted Average cost method)
Date Explanation
June 1 Beginning inventory 50 10 500 50 10 500
” 5 Purchase 100 12 1,200 150 11.333 1700
” 08 Sales 80 23 1840 70 11.333 793
” 10 Sales return (10) 23 (230) 80 11.333 906.64
” 15 Purchase 30 16 480 110 12.609 1387
” 16 Purchase return (5) 16 (80) 105 12.609 1324
” 20 Sales 75 23 1725 30 12.609 378
” 30 purchase 10 18 180 40 13.95 558
2,280 3335 40 558
Cost of goods sold = cost of goods available for sale – value of Ending
inventory
= 2,280– 558
= 1,722
(ii) Ending inventory 40 unit Tk. 558
(iii) Gross profit = Net sales – Cost of goods sold

= 3,335 – 1,722
= 1,613
Grossaprofit
(iv) Gross Profit rate = × 100
Netsales
1,613
= × 100
3,335
= 48.36 %
Ans. to the Que No: 10

Lewis Company
Cash Receipt Journal
Cost of
Sales
Accou Other good
Accoun Disco
Cash nts Sales s sold Dr
Da ts R unts
Recei Acco Mercha
te credite ef
Dr vable Cr unts ndise
d Cr
Cr Cr Invento
ry Cr
Ju
n J.Lews, 3 10,000 10,00
1 Cap 0 1,274 26 1,300 0
3 Maquo 1 1,862 38 1,900
6 Co. 6,135 6,135 1,090
7 Farley 3,430 70 3500
9 Co. 320
11 4,800 4,800 320 3,200
15 Block& 1 1,600 1,600
20 Sons 2
Merchi. 0
Inv
Green
Bros.
29,421 ( 134 8,300 10,935 ( 10,320 7,590
Foot
101) (414) (112) 401) (505)
Cross foot 29,555 29,555
Lewis Company
General journal
Accounts Receivable
June 1 Balance 8,300
30 CR1 8,300 0
Accounts Receivable
Subsidiary Ledger
Bernard & Sons
9 CR1 3,500 0
Farley Co.
6 CR1 1,900 0
Grinnell Bros.
June 1 Balance 1600
20 CR1 1,600 0
Maquoketa Co.
3 CR1 1,300 0
Raffi Traders
For the month of June
Tabular Analysis
Date A = L + O.E Remarks
Delivery A/c Notes A/c
Cash Supplies Capital
1 Van Receivable payable payable
2 +20,000 +20,000 Investment
3 (3,000) +10,000 7,000
4 (800) (800) Rent exp.
5 5,400 +5,400 Ser. Rev.
6 (300) (300) Withdraw
7 +350 +350
8 +750 (750)
9 +100 (100) Gasoline
10 +1,500 +1,500 exp.
11 (500) (500) Ser. Rev.
12 (250) (100) (250) Utilities
13 (100) exp.
(500) (500) Salaries
exp.
16,800 10,000 4,650 350 6,500 350 24,950
31,800 31,800
Ans. to the que.No: 12
Req: (a) Auhon
Journal entries
Dr Cr
Date Explanation Ref
(Tk) (Tk)
2009 Cash 20,000
Sep.1 Auhon’s Capital 20,000
2 business] 1,000
Rent exp. 1,000
Cash
3 [Paid to rent] 25,000
Washer and dryer 10,000
Cash 15,000
Notes payable
[Purchase Washer and dryer in cash and
4 on notes payable] 1,200
Cash
10 [Paid one year account policy] 200
Advertising exp. 200
Accounts Payable
20 [Receive advertising bill from daily 700
news] 700
withdraw
30 Cash 6,200
[Withdraw by owner for his personal 6,200
use]
Cash
Laundry Service Revenue
[Cash received from laundry Service]
Req: (b) Ledger
Cash
2009
Sep. 1 20,000 20,000
2 1,000 19,000
3 10,000 9,000
4 1,200 7,800
20 700 7,100
30 6200 13,300
Authon Capital
Sep. 1 20,000 20,000
Rent exp.
Sep. 2 1,000 1,000
Washer and dryer

Sep. 3 2,500 2,500
Notes payable
Sep. 3 15,000 15,000
Prepaid insurance
Sep. 4 1,200 1,200
Advertising exp.
Sep. 10 200 200
Accounts Payable
Sep. 10 200 200
Withdraw
Sep. 20 700 700
Laundry Service Revenue
Sep. 30 6,200 6,200
Req: I Auhon
Trial Balance
For the month of Sep.30, 2009
Acc ..No. Accounts Title Ref Debit Credit
1 Cash 13,300
2 Rent exp. 1,000
3 Washer and dryer 25,000
4 Notes payable 15,000
5 Authon Capital 20,000
6 Prepaid insurance 1,200
8 Accounts Payable 200
9 Withdraw 700
10 Laundry Service Revenue 6,200
41,400 41,400
Ans. To the question No.13

Workings:
Net Sales:
Sales 4,82,000
Less. Sales return 9,200
4,72,800
Less. Sales discount 7,800
4,65,000
Net Purchase:
Purchase 3,44,000
Less. Purchase return 2,400
3,41,600
Less. Purchase discount 4,000
3,37,600
Add. Freight in 10,000
3,47,600
Cost of goods sold:

Add. Net Purchase 3,47,600
4,07,600
3,27,600
Navana Ltd.
Income Statement
For the year ended 31,Dec. 2008
Explanation Tk. Tk.
Net sales(W-1) 4,65,000
Salaries exp. 41,000
Less. Prepaid 4,000 37,400
Utilities esp. 12,200
Depreciation exp.-Equipment 7,000
Non operating exp:

Interest exp. 14,000
72,600
Net income 64,800
Navana Ltd.
Explanation Tk.
Capital 1,00,600
1,65,400
Req: (b) Navana Ltd.
Balance Sheet
As at 31, Dec 2008
Explanation Tk. Tk.
Assets:
Current assets:
Cash 30,000
A/c Receivable 55,200
Prepaid insurance (3600 – 2000) 1,600
Prepaid salaries 4,000
Fixed assets:
Equipment 70,000 43,000
Less. Acc.Dep.-Equipment(20000 + 7000) 14,000
27000
Land 2,27,800
62,400
Liabilities and O.E 1,65,400
Current Liabilities
Accounts payable
BBA FIRST YEAR FIRST SEMESTER EXAMINATION, 2010
PRINCIPLE OF ACCOUNTING (1102)
Time- 3hours
Full marks- 70
[N.B- The figures in the right margin indicated full marks. Answer any
five questions from Part one and four from from Part two].
Part One
Marks- 6 × 5 = 30
(a) What is accounting? What is the importance of accounting in
business? 3
(b)What is the basic accounting equation? Discuss the elements of the
basic accounting equation. 3
2. (a) Explain in short the accounting cycle. 3
(b) What is a closing entry? Discuss in brief the closing process of
temporary accounts. 3
3. (a) What are the different types of adjusting entries? Explain with
examples. 3
(b) What is a classified balance sheet? Discuss the different categories
of assets according to classified balance sheet. 3
4. (a) Describe the different systems to account for merchandise
inventory. 3
(b) Define the following concepts:- 3
(i) FOB destination; (ii) FOB shipping point; (iii) Contra revenue
accounts.
5. (a) Discuss the principle of internal control used generally by
business organizations. 4
(b) What is reconciliation of bank accounts? Why reconciliation is
required? 2
6. Briefly describe four assumptions that underline the financial
accounting structure. 6
7. (a) What is Accounting Information System? 3
(b) Discuss the nature and advantages and advantages of subsidiary
ledger.
3
Marks- 10 × 4 = 40
M/s Harun Traders started its delivery business on August 2010. In the
month, the following transactions occurred:-
August 1 Mr. Harun, the owner, invested Tk. 1,50,000 in the business.
2 Purchased a delivery van for Tk. 50,000 paying Tk. 20,000 in cash
and singing a Tk. 30,000 note. Occupied an office and Tk. 5,000 cash as
rent.
10 Purchase supplies of Tk. 3,500 in cash.
Performed delivery service of Tk. 9,000 on acoount.
18 Received cash payment of Tk. 5,000 for August 15 transaction.
23 Performed delivery services for cash, Tk,. 6,000
Paid Tk. 1,500 cash for trade license fees.
31. Paid utilities expense, Tk 2,000 and salaries expenses, Tk.
5,000 in cash.
Required:-
Journalize the above transaction with proper explanation. 4
Post the journal entries in the respective ledger accounts. 6
The trial balance of Razib Repairing Services on October 31, 2010 is as

the following:
Razib Repairing Services
Trial Balance
October 31,2010
Dr.(Tk) Cr.(Tk.)
Cash 48,800
Office Supplies 20,000
Repair equipment 1,50,000
Unearned service revenue 14,000
Salaries Payable 5,000
Owner’s capital 1,86,000
Repair service revenue 75,000
Rent expense 5,000
3,14,000 3,14,000
By examining the books of original of entry, it was revealed that:
i)The insurance is for one year starting from March 1.
(ii) A count of supplies shows Tk. 6,000 of unused supplies.
(iii) The store equipment has a salvage value of Tk. 10,000 and an
estimated life of 10 years.
(iv) The unearned revenue of Tk. 9,000 has been earned by October 31.
(v) Salaries of Tk. 3,000 is accrued and unpaid on October 31.
Required:
(a) Journalize the adjusting entries with proper explanations.
(b) Post the journal entries into the respective T-accounts.
c) Prepare an adjusted trial balance.
After the first month of operation, the adjusted trial balance of Marine
Enterprise was the following:-
Marine Enterprise
September 30, 2010
Dr.(Tk) Cr(Tk.)
Cash 54,000
Supplies 10,000
Equipment 6,00,000
Accumulated depreciation – Equipment 9,000
Notes payable 4,00,000
Owner’s capital 3,00,000
Owner’s drawings 10,000
Service revenue 49,000
Supplies expense 3,000
Depreciation expense 9,000
7,87,000 7,87,000
Required :
Marks 5
Prepare a classified balance sheet assuming that Tk. 350,000
of notes payable is long-term.
Prepare an income statement of Marine Enterprise for
2
September 2010.
Journalize the closing entries. 3
11. Ready-Set-Go distributes suitcases to retail stores and
10
extends credit terms of 1/10, n/30 to all of its customers. At the end of
July, R-S-G’s inventory consisted of 40 suitcases purchased at Tk. 30
each. During the month of July the following merchandising
transactions occurred:—
July 1 Purchased 50 suitcases on account for Tk. 30 each from Trunk
Manufactures, FOB destination, terms 2/10, n/30. The appropriate
party also made a cash payment of Tk. 100 for freight on this date.
3 Sold 40 suitcases on account to Satchel World for Tk. 55 each.
9 Paid Trunk Manufacturers in full.
12 Received payment in full from Satchel World.
17 Sold 30 suitcases on account to The Going Concern for Tk. 55 each.
18 Purchased 60 suitcases on account for Tk. 1,700 from Holiday
Manufacturers, FOB shipping point, terms 1/10, n/30. The appropriate
party also made a cash payment of Tk. 100 for freight on this date.
Received Tk. 300 credit (including freight) for 10 suitcases returned
to Holiday Manufacturers.
Received payment in full from The Going Concern.
22 Sold 45 suitcases on account to Fly-By-Night for Tk. 55 each.
Paid Holiday Manufacturers in full.
Granted Fly-By-Night Tk. 220 credit for 4 suitcases returned costing
Tk. 120.
Instructions :
Journalize the transactions for the month of July for Ready-Set-Go
using a Perpetual inventory system.
12. The chart of accounts of Dutch Company Includes the 10

Marks
following selected accounts :—
112 Accounts Receivable 401 Sales
120 Merchandise Inventory 412 Sales Return and
Allowance
126 Supplies 505 Cost of Goods Sold
157 Equipment 610 Advertising Expense
201 Accounts Payable
In May the following selected transactions were completed. All
purchases and sales were on account except as indicated. The cost of all
merchandise sold was 65% of the sales price :—
May 2 Purchased merchandise from Van Houk Company Tk. 9,500.
3 Received freight bill from. Ruden freight on Van Houk purchase Tk.
360.
5 Sales were made to Ellie Company Tk. 1,980, Cornells Bros. Tk.
2,700 and Jan Company Tk. 1,500.
8 Purchased merchandise from Tulip Company Tk. 8,000 and Zeider
Company Tk.8,700.
10 Received credit on merchandise returned to Zeider Company Tk.
500.
Purchased supplies from Sandvoort Supply Tk. 900. •-
Purchased merchandise from Van Houk Company Tk. 4,500 and
Tulip Company Tk. 7,200.
Returned supplies to Sandvoort Supply, receiving credit Tk. 100.
Received freight bills on May 16 purchases from Ruden Freight
Tk. 500.
20 Returned merchandise to Van Houk Company receiving
credit Tk. 300.
23 Made sales to Cornelis Bros. Tk. 2,400 and to Jan Company Tk.
3,100.
Received bill for advertising from Amster Advertising Tk. 900.
Granted allowance to Jan Company for merchandise damaged in
shipment Tk. 200.
Purchased equipment from Sandvoort Supply Tk. 250.
Instructions :
Journalize the transactions above in a purchase journal, a sales journal,
and a general journal.
13. On October 31, 2009, M/s Khan & Co. had a cash balance per
books of Tk. 678,150^ The bank statement’from One Bank Ltd.
On the same day showed a balance of Tk. 640,460. A comparison
of the statement with the cash account revealed the following facts
:—(i) The statement included a debit memo of Tk. 4,000 for the
printing of additional company checks.
(ii) Cash sales of Tk. 83,615 on October 12 was deposited on the
bank. The cash receipt journal entry and the deposit slip were
incorrectly made for Tk. 89,615. The bank credited M/s Khan &
Co. for the correct amount.
(Hi) Outstanding checks at October 31 totalled Tk. 57,625 and
deposits in transit were Tk. 191,615.
(iv) On October 18, the company issued check no. C-011817 for
Tk. 68,500 to Mollah Traders. The check, which was cleared in
October by the bank, was incorrectly journalized and posted by
M/s Khan & Co, for Tk. 65,800.
A Tk. 250,000 note receivable was collected by the bank for M/s
Khan & Co. on October 31 plus Tk. 8,000 interest. The bank
charged a collection fee of Tk. 2,000. No interest has been accrued
on the note.
(vi) Included with the cancelled checks, was a check issued by
Star Enterprise to M/s Karim & Sons, for Tk. 80,000 that was
incorrectly charged to M/s Khan & Co. by the bank.
On October 31, the bank statement showed an NSF charge of Tk.
68,000 for a check issued by Sojib Enterprise, a customer, to M/s
Khan & Co. on account.
Required :
Prepare the bank reconciliation statement at October 2009 31,
b)Prepare the necessary adjusting entries for M/s Khan & Co. at
October 31, 2009.
BBA-2010
Ans. To the que.No: 8
Req: (a) M/S Harun Traders
Journal entries
Date Explanation Ref. Dr (Tk) Cr (Tk)
2010
Aug.1 Cash 1,50,00
Mr. Harun’s Capital 0 1,50,000
” 2. business]
Delivery Van 50,000 20,000
Cash 30,000
Notes payable
[Purchased delivery van by cash
and signing a note]
” 10. Supplies
Cash 3,500 3,500
[Purchase supplies in cash]
” 15. Accounts Receivable
Service Revenue 9,000 9,000
[Service provided on account]
Cash
” 18. Accounts Receivable 5,000 5,000
[Cash received from accounts
receivable]
Cash
” 23. Service Revenue 6,000 6,000
[Service provided in cash]
Trade license fees
Cash
” 27. [Paid license fees in cash] 1,500 1,500
Utilities exp.
Salaries exp.
” 31. Cash 2,000
[Paid utilities and salaries exp. in 5,000 7,000
cash]
Ledger
Req(b) Cash
Date Accounts Title Ref. Dr (Tk) Cr (Tk) Balance
2010
Aug1 1,50,000 1,50,000
”2 20,000 1,30,000
” 10 3,500 1,26,000
” 18 1,31,500
” 23 5,000 1,37,500
” 27 6,000 1,500 1,36,000
” 31 7,000 1,29,000
Delivery Van
Aug 2 50,000 50,000
Notes Payable
Aug 2 30,000 30,000
Supplies
Aug 10 3,500 3,500
Accounts Receivable
Aug 15 9,000 9,000
18 5,000 4,000
Mr. Harun Capital

Aug 1 1,50,000 1,50,000
Service Revenue
Aug 15 9,000 9,000
23 6,000 15,000
Trade license fees

Aug 27 1,500 1,500
Utilities exp.
Aug 31 2,000 2,000
Salaries exp.
Aug 31 5,000 5,000

Req: (a) Razib Repairing Services
Date Explanation Ref. Dr Cr (Tk)
(Tk)
Oct.31 Prepaid Insurance 12,000
[To record prepaid insurance
” 31 expired] 14,000
Office Supplies exp. 14,000
Office Supplies
” 31 [To record supplies exp.] 11,667
Dep.exp.-Store equipment 11,667
Accumulated dep.-Store
” 31 equipment 9,000
[To record dep. Exp.] 9,000
Unearn service Revenue
” 31 Service Revenue 3,000
[Unearn service Revenue has been 3,000
earn]
Salaries exp.
Salaries payable
Insurance exp.
Oct. Bal. 18,000 31. 12000 Oct 31 12,000
31.Bal c/d 6000
Req: (b) 18,000 18,000
Prepaid insurance
Supplies Supplies exp.

Oct.31. 20,000 31. 14000 Oct.31. 14000
31. Bal. 6,000
20,000 20,000
Dep.exp.-Equipment Acc.Dep.-Equipment
Oct.31. 11,667 Oct.
11,667
Unearned Service Revenue Service Revenue

Oct.31. 9,000 Oct.31. 14,000 Oct.31.Bal 84,000
Oct.31.Bal 75,000
31.Bal. 5000 31.
9000
14,000 14,000 84,000
84,000
Salaries exp. Salaries

Payable
Oct.31.Bal 31,000 31. Bal 34,000 31. Bal 8,000 Bal.
5,000
31, 3,000 31. 3,000
34,000 34,000 8,000
8,000
Cash Repair equipment

Oct.31.Bal 48,000 Oct.31. 19,000
A/c Payable A/c Receivable

Oct.31. Bal. 34,000 Oct.31.Bal. 35,200
Owners Capital Rent exp.

Oct.31.Bal 1,86,000 Oct.31.Bal. 5,000
Utilities exp.
Oct.31.Bal. 6,000
Req: (c)
Razib Repairing Services
Oct.31,2010
Date Accounts Title Ref. Dr (Tk) Cr (Tk)
1. Prepaid Insurance 6,000
2. Insurance exp. 12,000
3. Supplies 6,000
4. Supplies exp. 14,000
5. Dep.exp.-Equipment 11,667
6. Acc.dep.-Equipment 11,667
7. Unearn Service Revenue 5,000
8. Service Revenue 84,000
9. A/c Receivable 35,200
10. Salaries exp. 34,000
11. Salaries payable 8,000
12. Cash 48,800
13. Repair equipment 1,50,000
14. A/c payable 34,000
15. Capital 1,86,000
16. Rent exp. 5,000
17. Utilities exp. 6,000
3,28,667 3,28,667
========== ==========
Req:(a) Marine Enterprise
Balance Sheet
Sep.30,2010
Explanation Tk. Tk.
Current assets:
Cash 54,000
Supplies 10,000
Fixed assets:
Equipment 6,00,000
Less-Accumulated depreciation 9,000 5,91,000
7,05,000
Liability: & O.E

Current liability:
Long term liability: 3,50,000

Notes payable
2,76,000
O.E
7,05,000
Marine Enterprise
Req. (b) Income statement
For the year ended Sep 30,2010
Explanation Tk. Tk.
Revenue:
Less: Operating & Other exp.:

Supplies exp. 3,000
Dep. exp. 9,000
Non operating exp.:
Interest exp. 5,000
___________ 63,000
14,000
Net loss ==========
Marine Enterprise
For the year ended Sep 30, 2010
Explanation Tk.
Owners Capital 3,00,000
Less: Net loss 14,000___
2,86,000
Less: Withdrawn 10,000___
2,76,000
==========
Marine Enterprise
Req: (c) Closing entries
Date Explanation Ref. Dr. Tk. Cr. Tk.
2010
Sep.30 Service Revenue 49,000
Income Summary 49,000
[To close service revenue]
” 30 Income Summary 63,000
Supplies exp. 3,000
Dep. exp. 9,000
[To close all expenses] 5,000
” 30 Capital 14,000
Income Summary 14,000
[To close Net loss]
” 30 Capital 10,000
Drawings 10,000
[To close drawings]

Journal entries
(Perpetual Inventory System)
July1 Merchandise inventory 1,500
[To record goods purchased on account
from Trunk Manufacturer]
3 Accounts receivable 2,200
Sales 2,200
[to record goods sold on account to
Satchel World]

Cash 1470
[To record paid the creditor less
12 discount] 2,178
Cash 22
Accounts Receivable
[To record cash received from A/c
17 receivable at discount] 1,650
Sales
[To record goods sold on account to the
going concern]
900
Cost of goods sold 900
18 [To record cost of goods sold] 1,800
Cash
[To record goods purchased on account 300
20 from Holiday Manufacturer] 300
Accounts Payable
[To record goods return to Holiday
21 Manufacturers] 1,633.
Cash 5
Sales discount 16.5 1,650
Accounts Receivable
[To record cash receivable from A/c
22 receivable at discount]
Accounts Receivable 2,475 2,475
Sales
[To record goods sold on account to
Fly-By-Night]
Cost of goods sold 1,350 1,350
30 [To record cost of goods sold]
Accounts Payable 1,400 1,400
Cash
[To record paid the creditor without
31 discount] 220 220
Sales return & allowance
Accounts Receivable
[To record return of goods] 120 120
Cost of goods sold
Ans. to the que.No: 12
Req: (a) Dutch Company
Purchase Journal
Merchandise
Other Accounts Inventory
Date Accounts Credited Ref.
Dr. Dr.
A/c Payable Cr.
May
2 Van Houk company 9,500
3 Ruden Freight 360
8 Tulip company 8,000
8 Zeider company 8,700
15 Sandvoort supply 900 900
16 Van Houk company 4,500
16 Tulip company 7,200
18 Ruden company 500
25 Amster advertising 900 900
28 Sandvoort supply 250 250
2,050 40,810
( ×) (120)( 201)
Dutch Company
Sales Journal
Date Accounts Debited Ref. Other Accounts Merchandise
Inventory
Dr. Dr.
A/c Payable Cr.
May
5 Ellie company 1,980 1,287
5 Cornelis Bros. 2,700 1,755
5 Jan company 1,500 975
23 Cornelis Bros. 2,400 1,560
23 Jan company 3,100 2,015
11,680 7,592
(112)( 401) ( 505)
Dutch Company
General Journal Entries
May10 Accounts Payable-Zeider company 500
[To record purchase returns and
17 allowances] 100
Accounts Payable-Sandvoort Supply 100
Supplies
20 [To record supplies returns and 300
allowances] 300
Accounts Payable-Van Houk company
26 Merchandise inventory 200
[To record purchase returns and 200
allowance]
Sales return and allowances
Accounts Receivable-Jan company
[To record sales returns and allowances]
BBA FIRST YEAR FIRST SEMESTER EXAMINATION, 2011
Subject Code: 1102 (Principles of Accounting)
Time—3 hours
Full marks—70
[N.B,—The figures in the right margin indicate full marks. Answer any five questions
from part A and any four questions from part B.J
Part A—Short Questions
Marks—6x5=30
Marks
1. (a) What is accounting? Discuss the image of accounting. 3
(b) What are the golden rules of double entry system? 3
2. (a) What are the essential characteristics of an event to be a 3
transaction?
(b) Define accounting cycle. Mention the various phases of 3
Accounting cycle.
(a) Discuss any five concepts and conventions. 3
(b) "Accounting as a information system", Explain. 3
(a) State the rules regarding the adjustment of "Adjustment 3
entries".
(b) What do you mean by "Adjustment entries"? 3
5. (a) What are the content and purpose of a post-closing trial 3
balance?
(b) Distinguish between a reversing entry and an adjusting 3
entry. Are reversing entries required?
6. (a) Accounting is ingrained in our society and it is vital to our 3
economic system. Do you agree? Explain.
(b) What is retain earning statement? Why it is prepare? 3
7. (a) "An accounting information system applies only to a 3
manual system." Do you agree? Explain.
(b) How would you determine inventory quantities? 3
Part B—Broad Questions

Marks - 10x4=40
Marks 10
8. James Barger opened law office on July 1st . On July 31st the 10 the
balance sheet showed Cash Tk. 4,000, Account Receivable Tk. 1,500, Supplies Tk.
500, Office Equipment Tk. 5,000, accounts payable Tk. 4,200 and James Barger capital
Tk. 6,800. During August the following transactions occurred:—
.
Collected Tk. 1,400 of account receivable.
Paid Tk. 2,700 cash on accounts payable.
Earned revenue of Tk. 7,500 of which Tk. 3,000 is collected
in cash the balance is due in September.
Purchased additional office equipment for Tk. 1,000, paying
Tk. 400 in cash and the balance is due in September.
Paid salaries Tk. 2,500 rent for August Tk. 900 and
Advertising expense Tk. 350.
(f) Withdrew Tk. 550 in cash for persona! use.
(g) Received Tk. 2,000 from Standard Chartered Bank—money borrowed on a note
payable,
(h) Incurred utilities expenses for month on account Tk. 250.
Instructions:
Prepare a tabular analysis of the August transactions beginning with July balances.
9. The trial balance of Jan. and Sons is as follows: — Marks 10
Trial Balance
Debt Balance Taka Credit Balance Taka

Drawing 3,600 Capital 45,000
Purchase 55,300 Purchases Returns 1,300
Sales Returns 1,900 Sales 80,900
Merchandise Inventory 12,000 Rent Income 1,000
Carriage In 1,000 Commission Income 200
Office Salaries Expense 6,000 Allowance for bad debts 150
Rent and Taxes Expense 1,200 Allowance for depreciation
Sales Salaries Expense 2,200 Furniture Tk. 200
Carriage on Sales 1,400 Building Tk. 500 700
Advertising Expense 700 Accounts payable 12,450
Insurance Expense 1,800 Notes payable 3,000
Sundry Office Expense 200 Loan on Mortgage 10,000
Furniture 6,500 (Payable on 30th June,
Accounts Receivable 26,000 2003)
Cash in hand 900
Cash at Bank 14,000
Building 20,000
1,54,700 1,54,700
Adjusting data:
Merchandise Inventory on 31 st December, 2010 Tk. 18,000.
Carry forward for prepaid Insurance Tk. 450.
Interest on Mortgage loan accrued Tk. 500.
Office salaries accrued but not paid Tk. 600.
Depreciation to be provided.
Furniture Tk. 200, Building Tk. 500.
Increase allowance for bad debts to Tk. 1,190 on Accounts
Receivable.
Goods taken by the proprietor for private use Tk. 100.
Required:
Prepare a ten column worksheet.
Marks 10
10. Maria Gonzalez opened a veterinary business in Nashville,
Tennesse, on August 1. On August 31, the balance sheet showed
cash Tk. 9,000, Accounts Receivable Tk. 1,700, Supplies Tk. 600, Office Equipment Tk.
6,000. Accounts Payable Tk. 3,600 and M. Gonzalez Capital Tk. 13,700. During
September the following Transactions occured:—
Paid Tk. 2,900 cash on accounts payable.

Collected Tk. 1,300 on accounts receivable.
Purchased additional office equipment for Tk. 2,100,
paying Tk. 800 in cash and the balance on account.
Earned revenue of Tk. 8,000 of which Tk. 2,500 is paid in
cash and the balance is due in October.
Withdrew Tk. 1,000 cash for personal use.
Paid salaries Tk. 1,700 rent for September Tk. 900 and
advertising expense Tk. 300.
Incurred utilities expenses for month on account Tk. 170.
Received Tk. 10,000 from capital Bank-money borrowed on
a note payable.
Required: Show the effects of the transactions on accounting equation in a tabular form
using appropriate head of money columns.
11. (a) Furnished below are the selected transactions of Shahin 4

Company during July of the current year:—
July 2 Purchased merchandise on account from Hermanson at a cost of

Tk. 30,000. FOB shipping point, terms 2/10, n/30.
5 Paid freight charges of Tk. 1,500 on merchandise purchased
from Hermanson on July 02.
7 Returned damaged goods costing Tk. 3,000 to Hermanson.
8 Sold merchandise to Shohag costing Tk. 10,000
on account for Tk. 14,000, terms 1/10, n/30.
14 Paid Hermanson the balance due related to July 02
purchases.
15 Received the balance due from Shohag.
Required: Journalize the July transactions using perpetual inventory system. (No
explanation is required.)
Marks
(b) Nishan Ltd. is a retailer operating in Dhaka. Nishan uses the 6
Perpetual inventory method. All sales returns from customers result in the goods being
returned to inventory, the inventory is not damaged. Assume that there are no credits
transactions, all amounts are settled in cash. You have been given the following
particulars for Nishan Ltd. for the month of January, 2011:—
Date Particulars Quantity Unit cost (Tk)
December 31 Ending Inventory 150 units 27
June 3 Purchase 110 units 31
6 Sales 160 units 50
8 Sales Return 20 units 50
10 Purchase 85 units 34
11 Purchase Return 25 units 34
15 Sales 60 units 55
17 Purchase 110 units 38

Required: Compute (i) Cost of goods sold (ii) Ending inventory (Hi) Gross profit (iv)
Gross profit rate by using LIFO method.
12. Account balances taken from the ledger of the Ideal Company on December 31, 2010:
— Marks 10
Ideal Company
Trial Balance
December 31,2010
Account titles Amount
(Tk.)
Building 82,000
Accumulated depreciation—building 29,800
Allowance for doubtful accounts 1,380
Capital stock 2,00,000
Cash 24,000
Dividends 14,000
Purchases 1,40,940
Interest revenue 660
Inventory January 1, 2010 84,800
Land 69,600
Long term investment 22,600
Office expenses 16,480
Retained earnings January 1, 2010 14,040
Sales 2,56,000
Sales Return 8,760
Selling expenses 54,240
Supplies expenses 4,200
Payroll taxes 7,980
Marks
Adjustments on December 31, 2010 are as follows:—
The inventory on hand is Tk. 90,720.
The allowance for doubtful accounts is to be increased to a
balance of Tk. 3,000.
Buildings are depreciated at the rate of 5% per year.
Accrued sellings expenses are Tk. 3,840.
There are supplies of Tk. 780 on hand.
Prepaid insurance relating to 2011 totals Tk. 720.
Income tax is estimated to 30% of the income before
income tax.
Out of mortgage payable Tk. 10,600 payable in 2010.
Required:
a)Prepare an income statement for the year ended December
31, 2010.
b.)A balance sheet on December 31, 2010.
13. Write the following short notes: — 2.5x4=10

Projected Financial Statement;
Break-even analysis;
Accounting Equation;
Liquidity and profitability ratios.
BBA- 2011
Ans. to the que. no: 8
James Barger
Tabular Analysis:-
For the month of July
A = L + O.E
Date A/c Notes A/c Remarks
Cash Supplies Equipment Capital
Receivable Payable Payable
4,000 1,500 500 5,000 4,200 6,800 Investment
1
+1,400 (1,400)
2
(2,700 (2,700)
3
) +4,500 +7,500 Earned Revenue
4
+3,000 +1,000 +600
5
(400) (3,750 Salaries,Rent,Advt.
6
(3,750 ) Withdrawn
7
) +2,000 (550)
8
(550) +250 Utilities exp. an a/c
9
+2,000 (250)
3,000 4,600 500 6,000 2,000 2,350 9,750

14,100 14,100
========= =========
Jan and Sons
Work sheet
Trial Balance Adjustments Adjusted T/B Income Statement Balance Sheet
Accounts Titles
Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk) Dr.(Tk) Cr.(Tk
Drawing 3600 100 3700 3700
urchases 55300 100 55,200 55,200
ales Return 1900 1900 1900
Merchandise
12000 18,000 12000 18,000 18,000
nventory
Carriage in 1000 1000 1000
Office salary exp. 6000 600 6600 6600
Rent & Taxes
1200 1200 1200
xp.
ales Salaries
2200 2200 2200
xp.
Carriage on sales 1400 1400 1400
Advertising exp. 700 700 700
nsurance exp. 1800 450 1350 1350
undry office
200 200 200
xp.
urniture 6500 6500 6500
A/c Receivable 26000 26000 26000
Cash in hand 900 900 900
Cash at Bank 14000 14000 14000
Building 20000 20000 20000
Capital 45000 45000 45000
urchase Return 1300 1300 1300
ales 80900 80900 80900
Rent income 1000 1000 1000
Commission
200 200 200
ncome
Allowance for
150 1040 1190 1190
ad debts
Allowance for
200 200 400 400
ep: Furniture
Allowance for
500 500 1000 1000
ep: Building
A/c Payable 12450 12450 12450
Notes payable 3000 3000 3000
oan of Mortgage 10000 10000 10000
ncome summary 12,000 18,000 12,000 18,000 12,000 18,000
re-Paid
450 450 450
nsurance
nterest exp. 500 500 500
nterest payable 500 500 500
alaries payable 600 600 600
Dep.exp.Furniture 200 200 200
Dep.exp.Building 500 500 500
Bed debts exp. 1040 1040 1040
Net income 15410 15410
otal 1,54,700 1,54,700 33,390 33,390 1,75,540 1,75,540 1,0,1400 1,01400 89,550 89,550
Ans. to the que. no: 10
Maria Gonzalez
For the month of Sep.
Tabular Analysis
A = L + O.E
Date A/c A/c Remarks
Cash Supplies Equipment N/P Capital
Rec. Payable
1 9,000 1,700 600 6,000 3,600 13,700 Investment
1 (2,900) (2,900)
2 +1,300 (1,300)
3 (800) +2,100 +1,300
4 +2,500 +5,500 +8,000 Earned Rev.
5 (1,000) (1,000)
6 (2,900) (2,900) Withdraw
7 +170 (170) Salaries, Rent,&
8 +10,000 +10,000 Advertising Exp.
15,200 5,900 600 8,100 10,000 2,170 17,630 Utilities exp.
29,800 29,800
Ans. to the que. No:11 (a)
Shahin company
Journal entries
Date Explanation Ref. Dr (Tk) Cr (Tk)
2 Merchandise inventory 30,000
A/c Payable 30,000
5 Merchandise inventory 1,500
Cash 1,500
7 A/c Payable 3,000
8 A/c Receivable 14,000
Sales 14,000
14 A/c Payable 27,000
Cash 27,000
15 Cash
A/c Receivable 140
14,000
11. (b) Nishan Ltd.
Store ledger
(Under LIFO method)
Date Explanation
2011
Ending inventory 150 27 4,050 150 27 4,050
Dec.31
150 27 4,050
June:31 Purchase 110 31 3,410
110 31 3,410
” 6 Sales 160 50 8,000 100 27 2,700
” 8 Sales Return (20) 50 (1,000) 120 27 3,240
120 27 3,240
” 10 Purchase 85 34 2,890
85 34 2,890
120 27 3,240
” 11 Purchase Return (25) 34 (850)
60 34 2,040
” 15 Sales 60 55 3,300 120 27 3,240
120 27 3,240
” 17 Purchase 110 38 4,180
110 38 4,180
280 13,680 200 10,300 230 7,420
=== ===== === ===== === =====
Cost of goods sold:
Cost of goods available for sales = 13,680
Less: Value of Ending inventory = 7,420__
6,260
========
Ending inventory 230 units Tk.-7,420
Gross profit = Net sales – Cost of goods sold

= 10,300 – 6,260
= 4,040
 Gross Pr ofit 
Gross profit rate =   × 100
 NetSales 
 4,040 
=  × 100
 10,300 
= 39.22 %
12.
Working Notes:
Net Sales:
Sales 2,56,000
Less: Sales return __8,760_
2,47,240
=========
Net purchase
Purchase 1,40,940
Cost of goods sold:
Opening inventory = 84,800
Add: Net purchase = _1,40,940_
2,25,740
Less: Ending inventory = __90,720
1,35,020
Ideal company
Income Statement
Explanation Tk. Tk.
Net sales 2,47,24
Less: Cost of goods sold (W-3) 0
1,35,02 1,12,220
Gross Profit 0
Operating and other exp:
Less: Pre paid exp. ___720_
Office exp.
Selling exp. (54,240 + 3,840) 720
Supplies exp. (4,200 - 780) 16,480
Payroll exp. 58,080
Bad debt to exp. 3,420
Dep. exp- Building 7,980
1,620
Non operating exp. 4,100
Interest exp.
Non operating income:
Interest Revenue 2,640
94,380
Net income before tax (660) 17,840
Less: Income tax 30 % 5,352
Net income after tax 12,488
========
Ideal company
Retained earning Statement
Explanation Tk.
Balance b / d 14,040
Add: Net income _12,488_
26,528
Less: Dividend 14,000
12,528
Ideal company
Balance Sheet
As at 31 Dec. 2010
Explanation Tk. Tk.
Assets:
Current assets:
A/c Receivable 77,200
Less: Allowance for doubtful a/c 3,000 74,200
Cash 24,000
Supplies on hand 780
Prepaid insurance 720
Fixed assets:
Building
82,000
Less: Accumulated dep.(29,800 + 4,100) 48,100
69,600
33,900
22,600 3,30,720
Land
Long term investment
2,00,000
Share capital & liabilities:
Capital stock
Current liability: 46,000
A/c Payable 10,600
Selling exp. payable 5,352
Tax payable
Long term liability: 52,400 3,30,720
Retained earning Balance
Chapter One
Introduction
Study Objectives—after studying the chapter, you should be able to:
Define accounting? (2007, 2008, 2009, 2010, 2011)
What is the importance of accounting in business? (2010)
Distinguish between bookkeeping and accounting.
Who are the users of accounting information? (2008,2007 2009)
Why is ethics a fundamental business concept? 2007
Briefly describe four assumptions that underlie the financial accounting structure. 2010
Describe the accounting Conventions /Constraints / Principles.
What is the basic Accounting Equation? 2007, 2008 Discuss the elements of accounting equation. 2010
Define Business transaction.
Features of Transactions.
Describe the Financial statement.
Explain the monetary unit and economic entity assumptions? 2007
Discuss the ethical issues of accounting.
Importance and necessity of Accounting.
Define Owners Equity. What items affect owner’s equity? 2007, 2008
Discuss the Images of Accounting 2011
What is GAAP?(2007) Discuss various important principles.
Define the terms of assets liabilities and owners equity. 2007
Chapter-1 Introduction
Question 1: Define accounting. (2007, 2008, 2009, 2010, 2011)
Answer: Accounting may be defined as the collection, compilation an systematic recording of business
transactions in terms of money, the preparation of financial reports, the analysis and interpretation of these
reports and the use of these reports for the information and guidance of management.
Some important definitions are as follows:
According to Weygandt, Kieso and Kimmel, “Accounting is an information system that identifies records
and communicates the economic events of an organization to interested users.”
According to the American Institute of Certified Public Accountants (AICPA):
“Accounting is the part of art of recording, classifying and summarizing in a significant manner and in
terms of money, transactions and events, which are, in part at least, of a financial character and interpreting
the result thereof,”
According to the American Accounting Association (AAA):
“Accounting refers to the process of identifying, measuring and communicating economic information to
permit informed judgments and decisions by users of the information”
From the above discussion at last we can say, “Accounting is a discipline, well-equipped with techniques
and methods through which all types of transactions measurable in terms of money or money’s worth, can
be recorded, classified and summarized in a proper and systematic way.”
Question 2: What is the importance of accounting in business? (2010)

Answer:
The importance and necessity of Accounting are felt essential in trade and commerce. The necessity of
Accounting arises where financial transactions occur. In the light of multi-purpose uses and utilities of
Accounting its necessity and importance are stated below:
(1) Finding out profit and loss: One of the main objects of trade and commerce is to earn profit. Accounts
are to be kept properly to know whether the business concern has made profit or loss during a particular
period.
Exhibiting financial condition: After every year ending the financial position of a business concern can be
known with the help of Accounting. The actual financial position of a particular business concern on a
particular date can be known through balance sheet..
Comparative analysis: Comparative analysis of various information of a business concern is very much
needed to run the business successfully. It is possible to determine the financial position and trend of
making profit from the past and
particular business concern if the accounts are maintained correctly.
Cost Control: It is very much needed to maintain cost accounts to control the products cost. The role of cost
accounting is very important in cost determination and cost control.
Finding out tax: Income tax is determined on the basis of income of a business concern. To pay income tax is a
mandatory for all business concerns. So reliable income statement is to be prepared following the scientific
method of recording transactions on the
income tax of a business concern for a particular period is fixed.
VAT fixation: In the present day world VAT system has been introduced in many countries including
Bangladesh. It is necessary to keep accounts of a business concern for a particular period to determine the
amount of VAT that is to be paid.
Prevention of fraud and forgery: Fraud and forgery can't be prevented if accounts are maintained properly.
Maintaining of accounts properly influences the morality of employees positively and this restricts the trend
of fraud and forgery.
Decision making: Many people term Accounting as information supply system. Because accounting mainly
keeps accurate information of a business organization. For planning and making decision by the management
various information is needed.
Control over cost: Minimization of expenses under different heads is the best way of development of a
business. A businessman can be aware of daily expenditure of his business through accurate accounting
system.
10) Loan taking: On many occasions the business organization is to take loan from banks or other financial
institutions for running business. Loan giving institutions want to study the financial statements of a particular
business concern to be sure of its debts repaying capability before sanctioning loan.
Question 3: Distinguish between bookkeeping and accounting.

Answer:
Difference between Bookkeeping and Accounting are as follows:-
Bookkeeping Accounting
1. It is the recording stage of 1. It is the summarizing phase of
an accounting system. an accounting system.
2. It is one of the functions of 2. It is the basis for business
accounting. language.
3. Persons responsible for 3. Persons responsible for
bookkeeping are called accounting are called
bookkeepers. accountings.
4. It does not require any 4. It is requires special
special professional professional knowledge.
knowledge.
5. Bookkeeper is not an 5. Accountant is independent
independent personnel. personnel.
6. Primary source of 6. Financial statements are
information of the financial prepared in accordance with
statement is the accounting rules and
bookkeeping record. regulation.
7. Complete picture of the 7. Complete picture of the
business cannot be found business can be found from the
from the bookkeeping accounting records.
records.
8. It does not help in 8. Legal formalities can be
complying with legal complied with the help of
formalities. accounting.
9. It does not provide any 9. It provides ready information
ready information to take to take managerial decision.
managerial decision.
10 It is merely a recording 10 It has several branches, e.g.
. process, thus have no . financial accounting, cost
branch. accounting and management
accounting etc.
Question 4: Who are the users of accounting information? (2008, 2007,2009)

Answer:
1. Internal users: Personnel who use accounting information for making plan and to operate or to run the
business, those uses are generally treated as internal users, this are as follows:
a) Owners:
The owners provide funds for the operations of a business and they want to know whether their funds are
being properly used or not.
b) Managers:
To manage smooth operation of business, accounting information is needed different level of mangers. Such
as production managers collects those information that ensure the target production. Like these, all managers
in different level of organization, work to accomplish their daily business activities.
c) Employees and personnel:
Employees and different level personnel of the organization seek accounting information to determine and to
analyze their relative matters, such as any discrepancies in the process of determining their wages, salaries
and other facilities. So they can bargain with their moral and ethical issues.
d) Management:
Management is the art of getting things done through others; the management should ensure that the
subordinates are doing work properly. Accounting information is an aid in this respect because it helps a
manager in appraising the performance of the subordinates.
Two of the most important functions of management are planning and controlling.
2. External users:
The external parties cannot parties cannot participate in decision making process and operational level of the
organization, but they have an interest in the organization. So different types of external users seek the
accounting information for their own interest, they are:
a.)Investors:
By relying on the accounting information, investors can be ensured about their invested amount in
organization and they can take decision about re-investment in the organization.
b) Creditors:
Creditors are interested about the risk ness of granting credit.
c) Consumers/Customers:
Consumers always want the highest quality with lowest price. So they always want to establish their right
and demand to the organization.
d)Government:
Government seeks accounting information for greater benefit. By using accounting information government
determine the income tax, sales tax etc.
e) Regulatory bodies:
Regulatory bodies like chambers of commerce and industries, Securities and Exchange Commissions,
federal chambers association etc. need accounting information for overall welfare of the business
organization.
Question 5.Why is ethics a fundamental business concept? 2007
Answer : The standards of conduct by which one's actions are judged as right or wrong, honest or dishonest,
fair or not fair, are' ethics. Effective financial reporting depends on sound ethical behavior. To sensitize you to
ethical situations and to give you practice at solving ethical dilemmas.
When analyzing these various ethics cases, as well as experiences in your own life, it is useful to apply the
three steps outlined are given below:-
1. Recognize an ethical situation and the ethical issues involved.

Use your personal ethics to identify ethical situations and issues. Some businesses and professional
organizations provide written codes of ethics for guidance in some business situations.
2. Identify and analyze the principal elements in the situation.

Identify the stakeholders— persons or groups who may be harmed or benefited. Ask the question: What are
the responsibilities and obligations of the parties involved?
3. Identify the alternatives, and weigh the impact of each alternative on various stakeholders.
Select the most ethical alternative, considering all the consequences. Sometimes there will be one right
answer. Other situations involve more than • one right solution; these situations require an evaluation of
each and a selection of the best alternative.
Question 6. Briefly describe four assumptions that underlie the financial accounting structure. 2010
Answer: The major underlying assumption or concepts are as follows:

i) Accounting/ Business Entity Concept:
According to this concept, business and owner is separate and the one business is separate from another
business. This Principles requires every business to be accounted for separately and distinctly from its owner
or owners.
ii) Going Concern concept:
This concept assumes that an entity will continue to operate indefinitely and will not be sold or liquidated.
This concepts requires accountants to prepare financial statements under the assumptions that the business
will continue operating instead of being put up for sale or closed.
iii)Money measurement concept/ Assumption:
Measuring unit concept specifies that a monetary unit(such as taka) be to be used, instead of physical or
other unit of measurement to measure and record of an entity’s economic activity.
iv) Accounting period concept:
A business runs for indefinite period of time. So we are not supposed to prepare the financial statement at
the end of the indefinite period. According to this concept, we need to prepare the financial statements after
dividing that indefinite period to a small period of time, generally a year. The period for which we prepare
the financial statements is called the accounting period.
v)Cost concept:
The cost concept states that assets are initially recorded at the amount paid to acquire the assets.
vi)Matching concept:
According to this concept, expenses are to be matched with revenue to determine net income.
vii) Revenue Recognition/ Realization Concept:

This concept states that revenue should be recorded when the services are performed or the goods are sold.
The revenue recognition principle requires two conditions: the revenue must be earned, and realized.
Question 7.Describe the accounting Conventions/Constraints/Principles.
Answer: Accounting Conventions/Constraints/Principles are as follows

i) Accounting is the language of a business. It provides information to the users for making economic
decision. The more information will have to the users, the more reliable decision can be made. This
principles states that, information is to be fully disclosed for reliable decision making.
ii) Cost benefit convention:
The cost benefit consideration involves deciding the benefit of including optional financial information in
financial statements exceeds the cost of providing the information.
iii)Materiality convention:
According to this convention, information is to be presented according to relative importance. Non-relevant
information is not to be shown in the financial statement.
iv)Conservatism convention:
Conservatism means being cautious or prudent and making sure that new assets and net income are not
overstated. According to this convention assets and income should be stated in their respective lower value
rather than higher value. Accountants will tend to show lower amount of profit rather than higher profit.
v)Timeliness:
One of the efficient accounting conventions is the timeliness. The general users of financial statements can
expert that the respective company would publish their financial statements on time. Timeliness is an
ingredient of relevance.
vi) Industry practice:
Practical consideration may require departure from the basic accounting principles discussed above the
unique characteristics or peculiar nature of some industries and business concern require the use of different
accounting methods and procedures to produce realistic and useful financial reporting.
vii)Consistency:
Consistency generally requires that a company use the same accounting principles and reporting practices
through time.
viii)Articulation:
This concept states that the financial statements are fundamentally related and articulate with each other.
Question 8. What is the basic Accounting Equation? 2007, 2008 Discuss the elements of accounting
equition.2010
Answer: Accounting transaction takes place within a framework called accounting equation. The
accounting equation states that the economic resources of a specific entity are equal to the claims on those
resources. Another term used to refer to the claims on resources is equities. The accounting equitation is also
called the Balance sheet equation.
Assets=Liabilities +Owner’s equity.
Elements of Accounting Equation

An accounting equation has the following three elements.
1. Assets: Assets are defined as being 'probable future economic benefits obtained or controlled by
a particular entity as a result of past transactions or events' and are also commonly called 'economic
resources'. Example: Equipment, Land Building etc.
2. Liabilities: Liabilities are defined as 'probable future sacrifices of economic
benefits arising from present obligations of a particular entity to transfer assets or provide services
to other entities in the future as a result of past transactions or events'.
Example: Accounts Payable, Mortgage Payable, Notes Payable etc.
3. Owners Equity: Owners Equity is the owner's interest or claim in an entity. It is the residual
interests in the assets in the reporting entity after deduction of its liabilities. It is the excess of assets
over liabilities and the amount of owner's investment in a business, including profit from successful
operations, which have been retained in the business. The owner's equity in a company is called the
shareholders equity.
Example: Capital, Net Revenue, Reserve Fund etc.
Question 9. Define Business transaction:

Answer: In accounting the basis of recording is t he economic event. So non-economic event is not recorded
in accounting. Any event that brings changes in the financial position of the business is the transaction.
So transaction can be defined as the recordable event, which brings a change in the business.
According to Hermanson says, “Transaction is recordable happenings or events that effect the assets,
liabilities, owner’s equity, revenues and expenses of an entity.”
In short the monetary events can be termed as transitions.”
Question 10.Describe the Features of Transactions.

Answer: Following are the features of transactions:
(i) To be a transaction, there is to be changes in the financial position.
(ii) The events in the transaction are to be measurable in monetary unit.
(iii)According to the dual aspect concept, every transaction should have double effect.
(iv) The event in the transactions should no the dependent on another. It is to be complete and independent.
(v) The transactions may be visible or invisible are some transactions like depreciation, which is not visible.
(vi)Historical events are those events tarred past. In accounting transactions are always historical events.
These are: probable future events.
(vii) Every transaction is to be supported by entry evidence. Otherwise it cannot be treated as transactions.
Question 11. Describe the Financial statement.

Answer: 1. Income statement:
The income statement, sometimes called an earnings statement, reports the profitability of a business
organization. In accounting profitability is measured for a period of time, such a month or a year, by
comparing revenues generated with the expenses incurred to produce these revenues. If the revenues of
period exceed the expenses of the same period, net income results. Thus,
Net income=Total Revenues - Total expense
2.The Statement of owners equity:
One of the purposes of the statement of owner’s equity is to connect the income statement and balance sheet.
The statement of owner’s equity explains the changes that occurred in the owner’s capital balance sheet.
3. Balance Sheet:
Balance sheet shows the financial position of a business organization. It lists the company’s assets, liabilities
and owner’s equity as of a specific moment in time.
4. Statement of Cash flows:
The statement of cash flow describes where cash come from and where it went during the period.
Question 12. Explain the monetary unit and economic entity assumptions.2007
Answer: Monetary Unit Assumption:-

The monetary unit assumption states that only transaction data that can be expressed in terms of money be
included in the accounting records. For example, the value of a company president is not reported in a
company's financial records because it cannot be expressed easily in dollars.
An important corollary to the monetary unit assumption is the assumption that the unit of measure remains
relatively constant over time. This point will be discussed in more detail later in this chapter.
Economic Entity Assumption
The economic entity assumption states that the activities of the entity be kept separate and distinct from the
activities of the owner and of all other economic entities. For example, it is assumed that the activities of
IBM can be distinguished from those of other computer companies such as Apple, Dell, and
HcwIctM'iii'k.irel.
Question 13: Discuss the ethical issues of accounting.

Answer:
In accounting there are many ethical issues that are to be considered by the accountant. The accounting
professional bodies regulate the accounting profession. There are many professional organizations around
the world that have codes of ethics, or code of professional conduct to regulate the accounting profession.
Most of these codes have been evaluated and revised in recent years. Ethics is important in accounting
because accountants often are required to make decisions that have ethical implications. The activities
performed by accountants have a profound impact on many individuals, businesses, and other institutions.
An accountant’s decisions can affect such things as the amount of money a company distributes to its
stockholders, the price a buyer pays for a business enterprise, the compensation levels of managers and
executives, the success or failure of specific products and divisions, and the amount of taxes paid by and
individual or a business. These are important, as managers will have to work in the best interest of the
investors. Professional accountants, like C.A, CMA, and CPA are the persons in safeguarding the interest of
the investors.
Since the professional accountants are the members of the professional body. So they are required to comply
with the regulations of that particular professional body. Finding anything unethical their membership may
be terminated.
Question 14:Describethe Importance and necessity of Accounting
Answer: The importance and necessity of Accounting are felt essential in trade and commerce. The
necessity of Accounting arises where financial transactions occur. In the light of multi-purpose uses and
utilities of Accounting its necessity and importance are stated below:
1. Finding out profit and loss: One of the main objects of trade and commerce is to earn profit. Accounts
are to be kept properly to know whether the business concern has made profit or loss during a particular
period.
2. Exhibiting financial condition: After every year ending the financial position of a business concern can
be known with the help of Accounting. The actual financial position of a particular business concern on a
particular date can be known through balance sheet
3.Comparative analysis: Comparative analysis of various information of a business concern is very much
needed to run the business successfully. It is possible to determine the financial position and trend of
making profit from the past and
particular business concern if the accounts are maintained correctly.
Cost Control: It is very much needed to maintain cost accounts to control the products cost. The role of cost
accounting is very important in cost determination and cost control.
Finding out tax: Income tax is determined on the basis of income of a business concern. To pay income tax is a
mandatory for all business concerns. So reliable income statement is to be prepared following the scientific
method of recording transactions on the
income tax of a business concern for a particular period is fixed.
VAT fixation: In the present day world VAT system has been introduced in many countries including
Bangladesh. It is necessary to keep accounts of a business concern for a particular period to determine the
amount of VAT that is to be paid.
Prevention of fraud and forgery: Fraud and forgery can't be prevented if accounts are maintained properly.
Maintaining of accounts properly influences the morality of employees positively and this restricts the trend
of fraud and forgery.
Decision making: Many people term Accounting as information supply system. Because accounting mainly
keeps accurate information of a business organization. For planning and making decision by the management
various information is needed.
Control over cost: Minimization of expenses under different heads is the best way of development of a
business. A businessman can be aware of daily expenditure of his business through accurate accounting
system.
10) Loan taking: On many occasions the business organization is to take loan from banks or other financial
institutions for running business. Loan giving institutions want to study the financial statements of a particular
business concern to be sure of its debts repaying capability before sanctioning loan.
Question 15: Define Owners Equity. What items affect owner’s equity? 2007, 2008
Answer: Owners Equity: Owners Equity is the owner's interest or claim in an entity. It is the residual
interests in the assets in the reporting entity after deduction of its liabilities. It is the excess of assets
over liabilities and the amount of owner's investment in a business, including profit from
successful operations, which have been retained in the business. The owner's equity in a company is
called the shareholders equity.
Following are the example of some items which effects the owner's equity:
Capital Investment: It is the initial and additional contribution by the owner to the business.
Drawings: It is the opposite of the capital investment. It is the money or anything that can be measured
in monetary terms withdrawn by the owners.
Revenues: The revenues are inflows or other enhancements or savings in inflows of economic benefits or
service potential in the form of increases in assets or reduction in liability other than those relating to
contribution by owner that result in an increase in equity during the reporting period.
Expenses: Expenses is the consumption or losses of economic benefits or service potential in the form of
reduction in assets or increases in liability of the reporting entity other than those relating to distributions
to equity participants, which results in a decrease in equity during the accounting period.
Question :16 Discuss the Images of Accounting. 2011

Answer: In respect to the uses and practical application of Accounting, the images of accounting can be
classified in the following six categories.
(a) Accounting as the Language of Business: The users of financial accounting information are the
interested parties out side the business known as stakeholder group. The users of such information include
shareholders, creditors or suppliers, customer government, SEC and society. The interested parties receive
that information in a variety of forms. In that sense accounting is called the language of business.
(b) Historical or Stewardship Functions: The recording, classifying, summarizing and analyzing the
transactions of an enterprise is the basic functions of accounting. The accounting performs the recording,
classifying, summarizing and analyzing functions of a business to be reported.
(c) Accounting as Current Economic Reality: Accountants sometimes argues for the economic reality
rather than the historical cost system. Under the historical cost system the transactions are entered in the
actual cost involved.. For example expenses are deducted from the revenue earned in a particular year.
(d) Accounting as an Information System: Accounting is an information system; it provides information
to the users of that information to make economic decision. The system of collecting and processing
transactions data and delivering financial information to the user of such information is known as the
accounting system.
(e) Accounting as a Commodity: Accounting itself provides various services to the interested parties. For
example accounting presents data to the various users in their speculative form..
(f) Accounting as an Ideology: Accounting is an ideological phenomenon in the society. By providing a
legal foundation accounting is considered as an ideological phenomenon.
(g) Accounting as a controlling mechanism: Manager exercises the management functions by using
the accounting information, which is the controlling mechanism of accounting.
(h) Accounting as an ethical profession: Every organizational progress depends on proper accounting
activities. To be accounting activities proper, it is to be neutral and thus ethical.
Question 17: What is GAAP?(2007) Discuss various important principles.

Answer: Generally Accepted Accounting Principles Professional bodies have developed an overall set of
standards and Procedures that apply to the preparation of financial statements. GAAP are the foundation and
"ground rules" for financial reporting. These Principles provide the general framework determining what
information is included in financial statements and how this information is to be Presented. In short financial
statements are prepared in accordance with GAAP.
So the definition of GAAP can be provided as follows:-
Following are some famous definition of GAAP:
According to Ahmed Belkoui, one of the five best accountants in the
world, "GAAP are those principles that guide accounting practice".
According to Eric Kohler, "GAAP are the general rules followed by
accountants."
According International Accounting Standards Committee (IASC), "GAAP are the standard that indicates
how to report economic events."
According to the AICPA, "GAAP are the constitution for accountants
and the canons of their art."
Question 18: Define the terms of assets liabilities and owners equity.2007
Answer:1. Assets: Assets are defined as being 'probable future economic benefits obtained or controlled
by a particular entity as a result of past transactions or events' and are also commonly called 'economic
resources.
Example: Equipment, Land Building etc.
2. Liabilities: Liabilities are defined as 'probable future sacrifices of economic benefits arising from present
obligations of a particular entity to transfer assets or provide services to other entities in the future as a result
of past transactions or events'.
Example: Accounts Payable, Mortgage Payable, Notes Payable etc.
3. Owners Equity: Owners Equity is the owner's interest or claim in an entity. It is the residual interests in
the assets in the reporting entity after deduction of its liabilities. It is the excess of assets over liabilities and
the amount of owner's investment in a business, including profit from successful operations, which
have been retained in the business. The owner's equity in a company is called the shareholders equity.
Chapter Two
Recording Process
1. Define Accounting Cycle. 2007,2011
2. State the steps of accounting cycle. 2010, 2011
3. Define Journal.
4.Objects and Advantages of Journal
What is Ledger
Define events
What are the Differences between events and transaction?
Describe the steps in the Recording Process
What do you mean by Debit and Credit?
What is a Trial Balance? 2007
Describe the characteristics of Trial Balance
What are the objects of Trial Balance?
Describe the limitations of Trial Balance 2007
What are the advantages of Trail Balance?
Define double entry system. Write down the debit / Credit rules.
Question 1.Define Accounting Cycle. 2007,2011

Answer: Accounting is a statutory working process in determining financial results. The statutory rules of
accounting require systematic and successive recording of business transactions. The process of recording of
transactions occurs repeatedly. The successive working process of accounting method is called accounting
cycle.
Meigs & Meigs say, “The sequence of accounting procedures, used to record, classify and summarize
accounting information, is often termed. The accounting cycle. The term 'cycle' indicates that these
procedures must be repeated continuously to enable the business to prepare new up-to-date financial
statements at reasonable intervals."
At last we can say the accounting process takes place in cyclic order it is called accounting cycle.
Question 2. State the steps of accounting cycle. 2010,2011
Answer: The various steps or phases of an accounting cycle are shown in the following diagram along with
explanation: In fact accounting cycle is the stage wise expression of accounting activities of an organization.
The maximum ten steps of accounting cycle are shown below in a diagram.
1. Identification of
Transaction
10. Reversing Entries 2. Journalizing
9. Post-closing 3. Posting to
Trial Balance Ledger Accounts
8. Closing Entries 4. Preparation of

Trial Balance
7. Preparation of
Financial Statement 5. Adjusting Entries
6. Adjusting
Trial Balance
Work Sheet (Optional)
Question 3. Define Journal

Answer: The word 'Jour' means day journal has been derived from the word jour. The world Journal means
day book or daily book of accounting. Journal is called subsidiary book,
The book where in the transactions are recorded in a chronological order of dates after determining the debit
account and credit account of transactions with explanation is called journal.
From the above discussion it can be said that, the book of accounts, where after determining the credit
accounts of the transactions occurred in an organization are first recorded in chronological order of dates
with brief explanation, is called journal.
Question 4.What are the Objects and Advantages of Journal?
Answer: Objects and advantages of journal are as follows:-
(1) Detail descriptions of transactions are available in journal.
(2) It is the primary and basic book for recording transactions.
(3) It is the daily book of transactions.
(4) From various subsidiary journals necessary information can be known easily.
(5) Increases efficiency in accounting tasks.
(6) It helps distribution of accounting tasks among the employees according to their efficiency. Help to
minimize errors. As various subsidiary journals are maintained, they become smaller in size and can be
handled easily. Possibility of omission of transactions - recording is removed.
(7) It is used as future reference.
(8) Ledger can be kept briefly and in a neat and clean manner.
(9) It helps rectification of errors.
Question 5.What is Ledger?

Answer: Ledger is the book wherein various entries of journal are posted in brief permanently according to
debit and credit under separate heads of accounts is called ledger.
Some definitions of ledger propounded by some famous writers are stated below
Willium Pickles says, "Ledger is the destination of all entries made in the subsidiary book or journals."
Arthur Field House says, "Ledger is the permanent store house of all the transactions."
L. C. Croper says, "The book in which a trader's transactions are recorded in a classified permanent form is
called the Ledger."
From the above discussion we can say that the book wherein all the transactions of business organizations
are recorded in a classified permanent form under different heads of accounts transferring them from journal
is called ledger.
Question 6. Define events.
Answer: An event is any happenings, whether it involves money or not. Events are of two types.
1. Monetary events: The event, which involves the money, is the monetary events. Such as, purchase of
furniture for business amounting to Tk.5,000.
2. Non-monetary events: The event, which does not involve the money, is the non-monetary events. Such
as appointment of a cashier with a monthly salary of Tk.5,000.
Accounting is not concerned with any events which does not involve money.
Question 7. What are the Differences between events and transactions?

Answer: Differences between events and transactions are as follows:
Events Transactions
1. Every happening in the 1. Every events that changes the
everyday life is an event. financial position of the business, is a
transaction.
2. All events are not 2. All transactions are events.
transactions.
3. The scope of event is 3 The scope of transactions are narrow.
wide.
4. Dual aspect is not needed 4. Dual aspect is needed for a
for an event. transaction.
5. The earnings of profit is 5. The earning of profit is the main
not the objectives of all objectives of the business transaction.
events.
Question 8. Describe the steps in the Recording Process
Answer: The basic steps in the recording process are as follows:-
(1) Analyzing the Transactions: The sequence of the events in the receive process begins with the
transactions. Evidence of the transaction supported by documents, which is called voucher. This supposed
analyzed to determine the effects of the transactions.
(2) Entering the Transactions in the Books of Accounts: Thetransactier.5are there after is entered in the
journal. Every transaction is recorded it .the journal on the basis of dual aspect. The chronological order: A
transaction is also maintained in the journals.
(3) Posting the Transactions to the Ledger: Ledger is the permanent record of the all transactions and is
prepared by posting or transferring to the particular ledger. In this way the recording process ends.
In conclusion analyzing the transactions, journalizing and posting to the ledger are the basic three steps in
the recording process.
Question 9. What do you mean by Debit and Credit?

Answer: The word debit came from Latin word debitum; it means writing something at the left hand side of
an account.
The word credit came form the Latin word, credere; it means to write something at the right-hand side of the
account.
The word debit and credit does not carry any significance. These are just an indicator of the left or right
hand side of an account. Debit and credit be written as Dr. and Cr. in short respectively.
Question 10. What is a Trial Balance? 2007
Answer: A trail balance is a statement which is, prepared at a particular date with the ledger account
balances to test the arithmetical accuracy of the ledger accounts and also to facilitate preparation of financial
statements is called a trial balance. A trial balance contains the columns - serial number of ledger accounts,
Account tittles, Ledger folio, debit balance and credit balance.
Some definition are as follows:
R.N. Carter says, "A trial balance is a schedule or a list of balances both debit and credit extracted from the
accounts in the ledger and including the cash and bank balances from the cash book.”
According to J.R. Batliboi, "A trial balance may be defined as a statement of debit and credit balances
extracted from the ledger with a view to testing the arithmetical accuracy of the books."
Question 11. Describe the characteristics of Trial Balance.

Answer: The trial balance contains the following features:-
(a) Trial balance is neither an account nor a part of it. It is a statement containing all balances of ledger
accounts.
(b) It is not recorded in any book of account. Trial balance is prepared in a separate sheet or paper.
(c) A trial balance is prepared with the balances of accounts at the end of a particular accounting period. A
trial balance is prepared before preparation of financial statements at the end of accounting period.
(d) The statement contains all kinds of accounts, irrespective of their classifications, such as assets liabilities,
income-expenses etc. It helps testing arithmetical accuracy of accounts.
Question 12. What are the objects of Trial Balance?

Answer: Although trial balance is not an account, it is prepared to fulfill the following objects:-
(i) The main object of trial balance is to proof the arithmetical accuracy of accounts.
(ii) It is prepared to check whether the debit and credit accounts of each transaction have been recorded
properly.
(iii) For convenient preparation of financial statements trial balance is prepared bringing debit and credit
ledger balances together.
(iv) To proof accurate balancing of ledger account.
(v) To detect mistakes in the process of accounts, if any.
(vi) To provide information to the proper authority in time.
(vii) To compare the balances of various ledger accounts of current year with those previous year.
Question 13. Describe the limitations of Trial Balance. 2007

Answer: The totals of debit and credit money columns of trial balance are same it, is presumed that the
accounting process is accurate. But the agreement of both debit and credit money columns of trial balance
does, not necessarily prove that there is no error in the accounting process.
Because there might have some undetected errors despite the agreement of trial balances. These are called
the limitations of trial balance.
Question 14. What are the advantages of Trial Balance?
Answer: Following are the various advantages of Trial Balance:
1. Ensures the equal debits and credits.
2. Discovers the errors in journalizing.
3. Helps to find the errors of posting.
4. Locates the errors in ledger accounts.
5. Laps in preparing the financial statements.
6. Helps to make the adjustment for the non-recordable transactions.
7. Helps to find the missing amount of an account in special case.
8. Ells to test the mathematical accuracy of the recording process.
Question :15. Define double entry system. Write down the debit / Credit rules.
Ans.:- Double entry system: Double entry system means that the both side (Dr & Cr) of every account
should be recognized and recorded.
The basis of double entry system is every debit must have its corresponding credit. There the term,
“Corresponding” means “equal” and opposite” i.e.
Debit = Credit
Debit and Credit rules: Under the double entry system the dual effect of the double transaction is recorded
in appropriate accounts. It is a logical method for recording transaction. It also offers a means of proving the
accuracy of the recorded amounts.
After recording all transaction the amount of debit and the amount of credit will be equal.
There are some rules of debit and credit for assets, liabilities, owner’s equity or owner’s capital,
revenues, expense, drawings. They are-
Assets: For assets, increases in assets must be recorded in Debit side and the normal balance of Assets are
Debit.
Debit Credit Normal Balance
Increase Decrease Debit
Liabilities: Increases in Liabilities must be recorded in Credit sides and decreases in Liabilities must be
recorded in Debit said and the normal balance of Liabilities are Credit.
Decrease Increase Credit
Owner’s equity of capital: Increases in capital must be recorded in credit side and Decreases in capital must
be recorded in Debit side and it’s normal balance is Credit.
Revenues: Increases in revenues must be recorded in Credit side and decreases in revenues must be
recorded in Debit side and it’s normal balance is Credit.

Expense: Increases in expenses in expenses must be recorded in Debit side and decreases in expense normal
balance is Debit.
Drawings: Increases in Drawings and decreases in Drawings must be recorded respectively in Debit side
and Credit side and its normal balance is Debit.
Chapter Three
Adjustment Process
1. Define adjusting entries
2. Distinguish between cash basis accounting and accrual basis of accounting. 2007,2008,2009
3. Why does the accrual basis financial statement provide more useful information than that of cash basis
financial statement? 2004
4.Explain the accrual basis of accounting
5.Explain the time period assumption
6. Explain why adjusting entries are needed
7.Identify the major types of adjusting entries
8.Prepare adjusting entries for deferrals (prepayments)
9.Prepare adjusting entries for accruals
10.Describe the nature and purpose of an adjusted trial balance
11.Prepare adjusting entries for the alternative treatment of prepayments
Question 1. Define adjusting entries.

Answer: Adjusting entries are journal entries made at the end of an accounting period to change the
balances of certain accounts to reflect economic activity that has taken place but not yet been recorded that
is know as adjusting entries.
In other word, the entries required at the end of accounting period to record internal transactions are called
adjusting entries.
Question 2. Distinguish between Cash basis and accrual basis of accounting. 2007, 2008,2009
There are two bases of accounting treatment : cash basis & accrual basis of accounting.
The cash basis of accounting recognizes revenues, when cash is received and recognizes expenses, when
cash is paid out.
On the contrary , accrual basis of accounting recognizes revenue when sales are made or services are
performed regardless of when cash is receiver. Cash is realizable (receivable). The accrual basis of
accounting also recognizes expenses when they incur regardless of when cash to paid. Cash is payable at any
future date.
Cash basis vs. accrual basis of accounting compared
Recognition Cash basis Accrual basis
Revenues are When cash is received When goods or
recognized services are delivered
and cash is realizable
at a future date
Expenses are When cash is paid When expenses are
recognized incurred and cash is
payable at a future date
Example:
Cash basis of accounting Accrual basis of accounting
1.purchase is made by paying cash 1.purchese is made on account for
tk. 2,000 tk. 2,000 to paid within next 30
2.cash received for sales made days.
tk.3,500 2.goods are sold to a customer for
tk. 3,500 to be received within nest
60 days.
Question: 3.Why does the accrual basis financial statement provide more useful information than that of
cash basis financial statement? 2004 or
Superiority of accrual basis of accounting over cash:
Most of the transactions today take place on the credit basis. That’s why, most business enterprises follow
accrual basis of accounting. There are certain advantages of accrual basis of accounting in comparison with
cash basis of accounting in comparison with cash basis of accounting as follows:
1. Cash basis of accounting is not in compliance with generally accepted accounting principles (GAAP) it is
not consistent with the revenue recognition principle, matching principle and accounting periodicity concept.
On the contrary, accrual basis follows GAAP.
2. The cash basis of accounting very often gives us a misleading picture of the financial results. As it fails to
record those revenues in the period for which cash is not received and those expenses for which cash is not
paid. The problem does not exist in case of accrual basis of accounting.
Question 4. Accrual Basis Accounting applies these principles:
Define the cash basis and the accrual basis of accounting:

Cash basis—an accounting method in which an expense is recorded when cash is paid and revenue is
recorded when cash is received. Cash-basis accounting is NOT in accordance with GAAP.
Accrual basis—an accounting method in which an expense is recorded when it is incurred and revenue is
recorded when it is earned. It is the basis of accounting in which transactions that change a company’s
financial statements are recorded in the periods in which the events occur.
Define the matching principle.
Matching principle—the accounting principle that states that revenue earned during an accounting period
should be offset by the expenses that were incurred in earning that revenue. The principle that efforts
(expenses) be matched with accomplishments (revenues).
How to apply the matching principle—at the end of the accounting period expenses and revenues must
be examined to find out what amounts belong to the period regardless of when the related cash payments
and receipts occur which means you will need to adjust both expenses and revenues in order to apply the
matching principle.
To determine Accrual Net Income:
All Recognized Revenues
All Matched Expenses
Recognized - Matched = Accurate net income for the period
Revenues Expenses
Question 5. Time period assumption:

An assumption that the economic life of a business can be divided into artificial time periods.
Owners and managers as well as other users need timely results of operations of a business:
Management usually wants monthly financial statements.
Internal Revenue Service (IRS) requires all businesses to file annual tax returns.
Fiscal and Calendar Years:
Accounting time periods are generally a month, a quarter, or a year. Monthly and quarterly time periods
are called interim periods—less than one year.
Fiscal year—an accounting period that is one year in length. A fiscal year usually begins on the first day of
a month and ends twelve months later on the last day of a month.
Calendar year—an accounting period that extends from January 1 to December 31.
Define the revenue recognition principle:
The principle that revenue be recognized in the accounting period in which it is earned.
In a service enterprise, revenue is considered to be earned at the time the service is performed.
Define accruals and deferrals.
Accruals—Expenses incurred and revenue earned in the current accounting period but not recorded as
of the end of the period. To accrue means to build up or to accumulate. Thus, an accrual is a buildup or
accumulation of revenue or an expense that has not been recorded by a routine journal entry.
Deferrals—Expenses and revenues that have been recorded in the current accounting period but are not
incurred or earned until a future period. To defer means to put off or to postpone. Thus a deferral is a
putting off or a postponement of revenue or an expense that has been recorded by a routine journal entry
but belongs to the future.
Define the Going Concern Concept—financial reports of a business are prepared with the expectation that
the business will remain in operation indefinitely. Since this concept assumes that a business will continue
indefinitely into the future, by accruing expenses and revenues, it is understood that the business has a
future.
The Basics of Adjusting Entries:
Adjusting entries are entries made at the end of an accounting period to ensure that the revenue recognition
and matching principles are followed.
Adjusting entries are required every time financial statements are prepared and are dated as of the balance
sheet date.
Question 6.Explain why Adjusting entries are needed ?
Adjusting entries are needed because:
Some events are not journalized daily because it is inexpedient to do so. Examples are the consumption of
supplies and the earning of wages by employees.
Some costs are not journalized during the accounting period because they expire with the passage of time
rather than through recurring daily transactions. Examples are equipment deterioration, and rent and
insurance expiring.
Some items may be unrecorded. An example of a utility bill that will not be received and/or paid until the
next accounting period.
Question 7. Describe the types of Adjusting Entries:
Prepayments:
Prepaid Expenses—expenses paid in cash and recorded as assets (or expenses as shown in the chapter
appendix—alternative treatment of prepaid expenses) before they are used or consumed. Depreciation of
plant assets falls into this category.
Unearned Revenues—cash received and recorded as liabilities (or revenues as shown in the chapter
appendix—alternative treatment of unearned revenues) before revenue is earned.
Accruals:
Accrued Revenues—revenues earned but not yet received in cash or recorded.
Accrued Expenses—expenses incurred but not yet paid in cash or recorded.
II. Accounting for Accrued Expenses—ADJUSTING ENTRIES FOR ACCRUALS. The accrual of
expenses creates liabilities. Expenses that have been incurred but not yet recorded at the end of an
accounting period require an adjusting entry to recognize both the proper amount of expense for the period
on the income statement and the proper amount of liabilities on the balance sheet. Accrued Expenses are
also called Accrued Liabilities because accrued expenses have not been paid as of the end of the period and
thus represent a liability of the firm. Helpful hint to remember what is done with Accruals: The “A” in
Accrual means add to expense or revenue as the adjusting entry will be adding to expenses or to revenues.
Explain ACCRUED SALARIES and the adjustment needed:

How accrued salaries occur—accrued salaries occur only when the last day of the payroll period and the
last day of the accounting period are different days.
Steps to accrue salaries:
Determine the days to accrue: BE CAREFUL determining the number of days to accrue salaries. Best way
to determine the number of days to accrue is to set up a calendar of the week and notate what day the year
ends. YOU ARE ACCRUING THE EXPENSE FOR THE CURRENT YEAR (2014) NOT THE
FOLLOWING YEAR (2015). If $20,000 is the weekly payroll, the daily amount for a five-day work week
would be $4,000:
2014 2015
Dec. 29 30 31 Jan. 1 2
Monday Tuesday Wednesday Thursday Friday Total
$4,000 $4,000 $4,000 $4,000 $4,000 $20,000
$12,000 is Accrued $8,000 is NOT Accrued
Determine the amount to accrue: $20,000 is total payroll ÷ 5 days = $4,000 per day x 3 days (Dec. 29 – Dec.
31) = $12,000.
Prepare the adjusting entry:
General Journal Page 1
Date Account Title P.R. Debit Credit
2014 Adjusting Entries
Dec. 31 Salaries Expense 12,000.00
Salaries Payable 12,000.00
An adjusting entry, such as one for an accrued expense, affects both the income statement and the balance
sheet) as it results in an increase (debit) to an expense account and an increase (credit) to a liability account.
In the case of an accrued expense such as accrued salaries, the income statement is affected because an
expense account (Salaries Expense) is debited; a balance sheet account is affected because a liability account
(Salaries Payable) is credited.
Affect if the adjusting entry for accrued expenses is OMITTED:

Expenses are understated as did not accrue the additional expense of Salaries Expense. Set up the
accounting equation with simple balances in the accounts if fail to do the adjustment: A = L + OE + R –
E or 200 = 100 + 50 +100 -50. Expenses are showing a balance of $50 but the balance SHOULD BE (S/B)
$60 as an additional expense of $10 should have been accrued. Therefore expenses are understated by $10
if the adjusting entry is omitted.
Liabilities are understated as did not accrue the additional liability owed of Salaries Payable. The first line
on the handout is showing the balances in the accounts if fail to do the adjustment. Liabilities are
showing a balance of $100 but the balance SHOULD BE (S/B) $110 as an additional liability of $10 should
have been accrued. Therefore liabilities are understated by $10 if the adjusting entry is omitted.
Net income is overstated as did not accrue the additional expense of Salaries Expense which would reduce
the amount of net income as expenses decrease income and owner’s equity. The accounting equation is
showing a net income of $50 ($100 Revenues - $50 Expenses) if fail to do the adjustment. When the
accrued expense is made the net income is $40 ($100 Revenues - $60 Expenses). Therefore net income is
overstated by $10 if the adjusting entry is omitted.
TYPICAL STUDENT MISCONCEPTION: Students often want to use the Cash account when making
an adjusting entry for an accrual. This point needs to be emphasized—Cash is NEVER involved in ANY
adjusting entry. The reason is that the Cash account should already be reconciled BEFORE adjusting
entries are made. If an adjusting entry is made to the Cash account, the account WILL NO LONGER
BE RECONCILED to the balance per the bank statement.
Explain accrued interest and the adjustment needed. Helpful hint to remember what is done with
Accruals: The “A” in Accrual means add to expense or revenue as the adjusting entry will be adding to
expenses or to revenues. Thus with accrued interest, additional interest will be added to the interest
expense account.
How to calculate the due date of a note:
Determine Due Dates of Notes

(a) 90 days from May 8:
Begin with last day of month that the note was dated May 31
Subtract the date of the note May -8
Days in the first month May 23

Add the total days in the following month June 30 84 days
Add the total days in the following month July 31
Days needed in the next month for a total of 90 days Aug 6 Due Date of Note
Total days of note 90
How to calculate interest: Interest (I): The cost of borrowing money that accumulates with the pages of time
or the charge for credit; calculated as principal (P) x rate (R) x time (T). Bankers’ interest uses a 360-day
year if the note is by days but if notes are by months, then the denominator will use 12 for months in a year.
Accrued interest arises when the accounting period ends BEFORE THE NOTE REACHES ITS MATURITY
DATE. The interest from day of note to the end of the accounting period is an expense and a liability and
must be recorded with an adjusting entry.
Steps to make an adjusting entry for accrued interest:
Determine the days from the date of the note to the end of the accounting period. Refer to the example:
Assume that on November 1, 20--, Bluff City Supply Company borrowed $12,000 on a 90-day, 14% note
(the day after the note is signed is the first day when counting days).
Begin with last day of month that the note was dated Nov. 30
Subtract the date of the note Nov. -1
Days in November Nov. 29

Add the total days in December Dec. 31
Total days from the date of the note to end of period 60
Calculate the interest from the date of the note to the end of the accounting period.
Principal x Rate x Time = Interest
$12,000 X 14% X 60/360 = $280
Make the adjusting entry:
20-- Adjusting Entries
Dec. 31 Interest Expense 280.00
Interest Payable 280.00
Post to the General Ledger:

Owner's
Assets = Liabilities + + Rev. - Expenses
Equity
Cash Interest Payable Interest Expense
Dec.31 Adj. Dec. 31 Adj.
280 280
5. Affect if the adjusting entry for accrued expenses is OMITTED:
Expenses are understated as did not accrue the additional expense of Interest Expense. Set up the
accounting equation with simple balances in the accounts if fail to do the adjustment: A = L + OE + R –
E or 200 = 100 + 50 +100 -50. Expenses are showing a balance of $50 but the balance SHOULD BE (S/B)
$60 as an additional expense of $10 should have been accrued. Therefore expenses are understated by $10
if the adjusting entry is omitted.
Liabilities are understated as did not accrue the additional liability owed of Interest Payable. Liabilities are
showing a balance of $100 but the balance SHOULD BE (S/B) $110 as an additional liability of $10 should
have been accrued. Therefore liabilities are understated by $10 if the adjusting entry is omitted.
Net income is overstated as did not accrue the additional expense of Interest Expense which would reduce
the amount of net income as expenses decrease income and owner’s equity. The accounting equation is
showing a net income of $50 ($100 Revenues - $50 Expenses) if fail to do the adjustment. When the
accrued expense is made the net income is $40 ($100 Revenues - $60 Expenses). Therefore net income is
Describe other types of accrued expenses—the adjusting entry always involves a debit to an expense and a
credit to a liability.
To accrue rent that is owed but unpaid at the end of the accounting period—debit Rent Expense and credit
Rent Payable.
To accrue taxes that are owed but unpaid at the end of the accounting period—debit Taxes Expense and
credit Taxes Payable.
To accrue utilities that are owed but unpaid at the end of the accounting period—debit Utilities Expense and
credit Utilities or Accounts Payable.
III. Accounting for Accrued Revenue . The accrual of revenue creates assets. Accrued revenue has been
earned in the current accounting period but the cash will NOT BE RECEIVED until the next period.
Accrued revenue is also called an Accrued Asset as the debit will be to a Receivable (an asset) account when
accrued revenue is credited). Helpful hint to remember what is done with Accruals: The “A” in Accrual
means add to expense or revenue as the adjusting entry will be adding to expenses or to revenues in this
case. Remember that the goal is to adhere to the revenue recognition principle—a business earns (realizes)
revenue when goods or services are sold to customers, even though cash may not be collected until
sometime in the future. Therefore, to make sure that the correct amount of revenue is shown that is earned
each fiscal year for the accrual basis of accounting, some revenue may need to be accrued that has been
earned but not yet recorded. Adjusting entries to accrue revenue will affect both an income statement (credit
to a revenue) and a balance sheet (debit to a receivable) account ALL adjusting entries effect one Income
Statement account and one Balance Sheet account.
Explain accrued rent revenue and the adjustment needed.

Accrued rent revenue—revenue earned but not yet received.
Steps to prepare the adjusting entry:
Calculate the amount of rent earned.
Prepare the adjusting entry—an adjusting entry for accrued revenues results in an increase (debit) to an asset
account and an increase (credit) to a revenue:
20-- Adjusting Entries
Dec. 31 Rent Receivable 1,200.00
Rent Income 1,200.00
Post to the General Ledger where the Rent Receivable will be shown under the current asset section on the
Balance Sheet and Rent Income account will be closed and its balance listed as nonoperating revenue on the
income statement:
Owner's
Assets = Liabilities + + Revenues - Expenses
Equity
Cash Rent Income
Dec.31 Adj.
1,200
Rent Receivable
Dec.31 Adj.
1,200
A good way to understand the concept of accrued revenue is the mirror image concept—accrued revenue is
the mirror image of accrued expenses. A rent accrual can be shown as follows:
From the Lessor perspective, the entry would be:
Debit—Rent Receivable 1,200
Credit—Rent Income 1,200
From the Lessee perspective, the entry would be:
Debit—Rent Expense 1,200
Credit—Rent Payable 1,200
Affect if the adjusting entry for accrued revenues is OMITTED:
Revenues are understated as did not accrue the additional revenue of Rent Income. Set up the accounting
equation with simple balances in the accounts if fail to do the adjustment: A = L + OE + R – E or 200 = 100
+ 50 +100 -50.. Revenues are showing a balance of $100 but the balance SHOULD BE (S/B) $110 as an
additional revenue of $10 should have been accrued. Therefore revenues are understated by $10 if the
adjusting entry is omitted.
Assets are understated as did not accrue the additional receivable owed to the company of Rent Receivable.
The accounting equation is showing the balances in the accounts if fail to do the adjustment. Assets are
showing a balance of $200 but the balance SHOULD BE (S/B) $210 as an additional receivable of $10
should have been accrued. Therefore assets are understated by $10 if the adjusting entry is omitted.
Net income is understated as did not accrue the additional revenue of Rent Income which would increase
the amount of net income as revenues increase income and owner’s equity. The net income shows $50
($100 Revenues - $50 Expenses) if fail to do the adjustment. When the accrued revenue is made the net
income is $60 ($110 Revenues - $50 Expenses). Therefore net income is understated by $10 if the
adjusting entry is omitted.
Describe other types of Accrued Revenue:
In Chapter 8 Notes Receivable are covered and should be considered as the mirror image of Notes
Payable. Calculations of due date and interest are identical for notes payable and notes receivable and where
one company’s interest expense is another company’s interest income. To accrue interest income:
Calculate interest earned from the date of the note until the end of the accounting period—P x R x T.
Record the adjusting entry:
Debit—Interest Receivable
Credit—Interest Income
Any unbilled revenues such as fees earned or sales made but where the cash has not yet been received needs
to be accrued to accounts receivable. Normally the name of the receivable account will match the name of
the revenue account as shown in the above examples (i.e. Rent Receivable/Rent Income; Interest
Receivable/Interest Income, etc.) unless the revenue is for the regular income for the business. The example
of fees earned, but not yet recorded example:
Debit—Accounts Receivable
Credit—Fees Earned
IV. Summary of Accruals:
Accruals ALWAYS Add—the “A” in accrual means Add. You always Add to expense or Add to revenue
(bringing in something not yet recorded into the present) and you ALWAYS Add to the Balance Sheet
(liabilities or assets and Add to the Income Statement (expenses or revenues).
The adjustment for accruals usually (unless you are accruing the service or sales revenue for the normal
operations of the business in which case accounts receivable is the account) ALWAYS creates a balance
sheet account.
Accruals can ALWAYS be reversed. This point is a key one before going on to deferrals, which can only
SOMETIMES BE REVERSED. The RULE TO MASTER: Whenever an adjusting entry creates a Balance
Sheet account (liability or asset) reversal is possible and desirable as well so that the adjusting entry into
the created account WILL NOT BE FORGOTTEN. When the salaries are paid the following period, the
debit to Salaries Payable must be made along with the amount for Salaries Expense. But the amount in
Salaries Payable is often FORGOTTEN and the entire amount of $4,000 in this example is debited to
Salaries Expense.
V. Accounting for Prepayments: Prepaid (Deferred) Expenses. Deferred expenses are also called prepaid
expenses or deferred charges. A key letter, “D” and a key word, “Deduct,” to remember with Deferrals as
amounts are deducted from deferrals during the adjusting process to record correct expenses incurred and
revenues earned. With deferred expenses and deferred revenues, not all adjusting entries can be reversed as
can be done with accrued expenses and accrued revenues.
Explain the entries needed when deferred expenses are first recorded as assets.
Define deferred expense—advance payment for goods or services that benefit more than one accounting
period. Deferred expenses are actually Prepaid expenses (supplies, prepaid insurance, prepaid rent,
prepaid advertising, etc.). Deferred expenses have already been paid, but will benefit future periods. To
match (Matching principle) revenue and expenses properly, a part of the deferred expense must be “put
off” into the future (part that has future benefit) and part must be recognized in the current period
(part that has been used or expired). Be Careful with the word, “Expense,” as many students get
confused thinking that the account must be an Expense account but the usual transaction is to record
the amounts paid for expenses paid in advance as an asset NOT AN EXPENSE. If the prepayment
will become an expense in one year or less, then the prepaid expense account is listed under the
“Current Asset” section of the Balance Sheet. If the prepayment will become an expense longer than
one year, it is shown in the “Other Asset” section (long-term section) of the Balance Sheet as a
Deferred charge.
To differentiate between Accruals and Deferrals, think of the phrase: “Show me the money!”.
With Deferrals, money has changed hands where the money has been paid in advance BEFORE an expense
has been incurred. With Revenues, money was received BEFORE a revenue has been earned.
With Accruals, money has NOT changed hands where the expense has not yet been paid by the end of the
accounting period but it HAS BEEN INCURRED. For Revenues: revenues HAVE BEEN EARNED but the
money has not yet been received at the end of the accounting period.
When deferred or prepaid expenses are initially recorded as assets, an adjusting entry is needed to transfer
the amount of the asset used or expired from the asset account to an expense account.
For the initial recording when the cash was paid example: On October 1, an entry for $3,600 for a one-year
insurance policy: debit to Prepaid Insurance and a credit to Cash.
The adjusting entry transfers the amount of expenditure (for insurance in the example) expired or used to an
expense account. To calculate the amount expired, divide the amount by 12 (months in a year) and then
multiply by the number of months that have expired as follows: $3,600 ÷ 12 = $300/month x 3 months =
$900 expired. Debit Insurance Expense and credit Prepaid Insurance.
The closing entry that closes the balance of the expense account to the income summary which then
becomes part of owner’s equity for the net income or net loss of the company.
Consider the concept of whether a reversing entry will be considered or not (Reversing entries are
introduced in the Appendix, chapter 4 of the textbook). NOTE that no reversing entry will be made. Recall
the RULE TO MASTER: Whenever an adjusting entry creates a Balance Sheet account (liability or asset)
reversal is possible. When a deferred or prepaid expense is initially recorded as an asset, the adjusting
process will create an expense account that is closed in the normal closing routine at the end of the fiscal
year. Since NO ASSET or LIABILITY account was created during the adjustment, there is no support for a
reversing entry.
Describe the adjustment for supplies used. The supplies account will contain the amount that was in the
account at the beginning of the period plus (+) any supplies purchased during the period Example:
purchased advertising supplies costing $2,500 on October 5. A debit (increase) was made to the asset
Advertising Supplies. This account shows a balance of $2,500 on the October 31 trial balance (T.B.). The
adjustment will be the amount of supplies that have been USED. At October 31st, an inventory of supplies is
taken and it is determined that $1,000 of supplies is still on hand. In order to determine the amount of
supplies used, you must SUBTRACT. THIS STEP IS OFTEN FORGOTTEN and should be done as follows:
Balance of account on T.B. 2,500.00
- Inventory count (amount on hand) - 1,000.00
= Amount USED (the adjustment) 1,500.00
Assets = Liabilities + Owner’s + Revenues - Expenses
Equity
Adver. Adver. Supplies
Supplies Exp.
2,50 1,500 USED 1,500
0
1,00
0
Note that after the adjusting entry, the balance of the Advertising Supplies account, $1,000 reflects the
amount shown in the inventory count or the amount of the supplies still on hand. Every adjusting entry
affects both the balance sheet and the income statement. For example, the adjustment for supplies used, the
debit is to Supplies Expense (an income statement account) and the credit is to supplies (a balance sheet
account). This will always hold true.
Illustrate the adjustment needed for depreciation of assets.
Define depreciation—an allocation process in which the cost of a long-term asset (except land as land is
considered permanent and is assumed to last forever, so depreciation is not allowed) is divided over the
periods in which the asset is used (useful life) in the production of the business’s revenue in a rational and
systematic manner. The objective of depreciation accounting is to spread the cost of a long-term asset over
the assets’ useful life, rather than treating the cost of an asset as an expense in the year of purchase.
TYPICAL STUDENT MISCONCEPTION: in accounting for depreciation, students often think of
depreciation in the economic sense. That is, they view it as a valuation process used to record the decline in
the value of an asset. In accounting, depreciation has nothing to do with value. It refers only to the
allocation of an asset’s cost over its estimated useful life. As time passes, the usefulness of assets will
decline, and eventually they will no longer serve their original purpose so the accounting system, must,
therefore, reflect the fact that the equipment and furniture will gradually wear out or become obsolete and
will have to be replaced.
Describe the straight-line method of computing depreciation—a popular method of calculating
depreciation that yields the same amount of depreciation for each full period an asset is used. When
calculating the amount of the adjustment for straight-line depreciation, you should always calculate a yearly
amount first, then a monthly amount. See example on page 99 of the textbook.
Describe the contra-account Accumulated Depreciation. The depreciation adjustment is not reflected directly
in the asset account. Accumulated Depreciation is a contra asset account—an account whose balance is
opposite (offset against) the asset to which it relates. Since asset accounts have debit balances, contra asset
accounts (the opposite of assets) have credit balances. Contra means opposite or against like in the words
contradiction, contraband, and contrary (similar to what drawing and expenses do to owner’s equity).
Depreciation is recorded in the Accumulated Depreciation account , rather than directly in the asset account,
so as to maintain both the asset account showing the original (or historical) cost of the asset and the
Accumulated Depreciation account showing how much the asset has depreciated (the total cost that has
expired to date). This is especially needed when the asset is sold to determine any gain or loss on the sale of
the asset. The questions that must be answered on the tax return are:
What was the original cost of the asset? (the amount is found in the asset account)
What is the total depreciation that has been taken on the asset? (the amount is found in the accumulated
depreciation account)
How much was the asset sold for?
What is the gain or loss on sale?
The use of a contra account provides disclosure of both the original cost of the equipment and the total cost
that has expired to date.
The following example illustrates the process of allocating expired (deferred) prepayments to expenses:
Assets = Liabilities + Owner’s Equity + Revenues - Expenses
Office Supplies Office Supplies Exp.
125 45 USED 45
150
275
230
Prepaid Insur. Insurance Expense
240 20 USED (EXPIRED) 20
220
Office Equip.
3,000
Acc.Dep-Off Eq USED (ALLOCATED) Depr.Exp.-Off. Eq.
50 50
Office Furn.
2,000
Acc.Dep-Off USED (ALLOCATED) Depr.Exp.-Off.Furn.
Furn
30 30
Every adjusting entry affects both the balance sheet and the income statement. For example, the adjustment
for depreciation, the debit is to Depreciation Expense (an income statement account) and the credit is to
accumulated depreciation (a balance sheet account).
Book Value of an asset. Refer to Illustration 3-8 on page 100 of the text showing the partial balance sheet.
Note how the balance sheet discloses the book value of each asset—the difference between an asset’s cost
and its accumulated depreciation. The book value of an asset and its market value are not the same. The
book value is just the value that is being shown “on the books,” also sometimes referred to as carrying value
or unexpired cost. Book value is cost minus (-) accumulated depreciation; market value is what the asset
would sell for. A question that often comes up is: Can a business continue to use an asset if it has been
fully depreciated (book value is equal to zero). The answer is, YES, because the purpose of depreciation
accounting is to spread the cost of an asset over its useful life. An asset may last longer than its “estimated”
useful life
Affect if the adjusting entry for deferred expenses, initially recorded as assets, is OMITTED:
Expenses are understated as did not accrue the additional expense of Insurance or Supplies Expense. Set up
the accounting equation with simple balances in the accounts if fail to do the adjustment: A = L + OE +
R – E or 200 = 100 + 50 +100 -50.. Expenses are showing a balance of $50 but the balance SHOULD BE
(S/B) $60 as an additional expense of $10 should have recorded. Therefore expenses are understated by
$10 if the adjusting entry is omitted.
Assets are overstated as did not adjust the asset for the portion used or expired. The accounting equation
shows the balances in the accounts if fail to do the adjustment. Assets are showing a balance of $200 but
the balance SHOULD BE (S/B) $190 as an asset should have been reduced by $10 for the portion used or
expired. Therefore assets are overstated by $10 if the adjusting entry is omitted.
Net income is overstated as did not record the additional expense of Insurance or Supplies Expense which
would reduce the amount of net income as expenses decrease income and owner’s equity. The accounting
equation shows a net income of $50 ($100 Revenues - $50 Expenses) if fail to do the adjustment. When
the additional expense is recorded the net income is $40 ($100 Revenues - $60 Expenses). Therefore net
income is overstated by $10 if the adjusting entry is omitted.
Explain the entries needed when deferred expenses are first recorded as expenses.
There are two ways to initially record deferred or prepaid expenses (1) as assets or (2) as expenses. Both
methods yield the identical results on the income statement and the balance sheet. A question usually arises
at this point as to WHY would this entry be initially recorded as an EXPENSE and believe it or not, from an
auditor’s perspective, this is the METHOD that I have observed is the MORE COMMON method done in
practice. Some of the reasons are:
The entry was made by an inexperienced or not properly educated bookkeeper who believes that any time an
expenditure is made; IT MUST BE AN EXPENSE because money has been spent and anytime money is
spent, it is an expense with that thinking.
There is actually a conceptual reason for recording this type of expenditure initially as an expense especially
dealing with the expenditure for supplies. If it is believed that all of the supplies would be used by the end
of the accounting period, then it would be wise to initially record the amount as an expense because then it
would not be necessary to make an adjusting entry at the end of the accounting period. This reasoning does
not make sense, though, when paying for an insurance policy because you would know at the time of the
payment if the policy would totally expire or not by the end of the accounting period. But if most of the
policy will be expired, then it could be initially recorded as an expense.
The adjusting entry that transfers the amount of the expenditure that is unexpired (insurance in the example)
to an asset account.
The closing entry that closes the balance of the expense account to the income summary which then
becomes part of owner’s equity for the net income or net loss of the company.
Consider the concept of whether a reversing entry will be considered or not. . Recall the RULE TO
MASTER: Whenever an adjusting entry creates a Balance Sheet account (liability or asset) reversal is
possible and desirable as well so that the adjusting entry into the created account WILL NOT BE
FORGOTTEN. Since an asset account had been created in the adjusting process (prepaid insurance in the
example), a reversing entry is needed to return the prepayment to an expense in the next accounting period.
VI. Accounting for Prepayments: Unearned (Deferred) Revenues. Deferred revenue can also be called
unearned revenue or deferred credits. End-of-the-year adjustments are different for the two methods. A key
letter, “D” and a key word, “Deduct,” to remember with Deferrals as amounts are deducted from deferrals
during the adjusting process to record correct expenses incurred and revenues earned. With deferred
expenses and deferred revenues, not all adjusting entries can be reversed as can be done with accrued
expenses and accrued revenues. Another liability called unearned (deferred) revenue that does not have the
word, "payable," with the name of the account but it is a liability (a debt owed by the company) as it
originates from receiving cash in advance before a revenue (income earned from carrying out the activities
of a firm) is performed. The reason that this account is a liability is that a service or sale must be made
requiring a performance in the future (a liability as a debt of performance is owed) or the money must be
refunded (a liability as a debt owed) if the job is not done.
Explain the entries needed when deferred revenue is first recorded as a liability:
The initial recording when the cash was received: Debit Cash and credit Unearned Subscriptions.
The adjusting entry that transfers the amount of money received (for subscriptions in the example) in
advance that has been earned to a revenue account: Debit Unearned Subscriptions and credit Subscriptions
or Subscription Income, etc.
The closing entry that closes the balance of the revenue account to the income summary which then
becomes part of owner’s equity for the net income or net loss of the company. (Closing entries are covered
in chapter 4 of the textbook).
Decide whether a reversing entry will be considered or not. NOTE that no reversing entry will be made.
Recall the RULE TO MASTER: Whenever an adjusting entry creates a Balance Sheet account (liability or
asset) reversal is possible. When deferred or unearned revenue is initially recorded as a liability, the
adjusting process will create or increase a revenue account that is closed in the normal closing routine at the
end of the fiscal year. Since NO ASSET or LIABILITY account was created during the adjustment, there is
no support for a reversing entry.
Affect if the adjusting entry for deferred expenses, initially recorded as assets, is OMITTED:
Revenues are understated as did not record the additional revenue earned. Set up the accounting equation
with simple balances in the accounts if fail to do the adjustment: A = L + OE + R – E or 200 = 100 + 50
+100 -50.. Revenues are showing a balance of $100 but the balance SHOULD BE (S/B) $110 as additional
revenue of $10 should have been recorded. Therefore revenues are understated by $10 if the adjusting
entry is omitted.
Liabilities are overstated as did not adjust the portion of the unearned revenue that has now been earned and
should be transferred to a revenue account. The accounting equation shows the balances in the accounts if
fail to do the adjustment. Liabilities are showing a balance of $100 but the balance SHOULD BE (S/B)
$90 as a liability should have been reduced by $10 for the portion earned. Therefore liabilities are
Net income is understated as did not record the additional revenue that had been earned where revenues
increase income and owner’s equity. A net income shows of $50 ($100 Revenues - $50 Expenses) if fail to
do the adjustment. When the additional revenue is recorded the net income is $60 ($110 Revenues - $50
Expenses). Therefore net income is understated by $10 if the adjusting entry in omitted.
Explain the entries needed when deferred revenue is first recorded as revenue.
The initial recording when the cash was received: Debit Cash and credit a revenue account. There are two
ways to initially record deferred or unearned revenues (1) as liabilities or (2) as revenues. Both methods
yield the identical results on the income statement and the balance sheet. A question usually arises at this
point as to WHY would this entry be initially recorded as an REVENUE and believe it or not, from an
auditor’s perspective, this is the METHOD that I have observed is the MORE COMMON method done in
practice. Some of the reasons are:
The entry was made by an inexperienced or not properly educated bookkeeper who believes that any time
cash is deposited; IT MUST BE REVENUE because money has been RECEIVED and anytime money is
RECEIVED, it is revenue with that thinking.
There is actually a conceptual reason for recording this type of expenditure initially as revenue. If it is
believed that all of the revenue will be earned by the end of the accounting period, then it would be wise to
initially record the amount as revenue because then it would not be necessary to make an adjusting entry at
the end of the accounting period. This reasoning does not make sense, though, when receiving cash for
subscriptions because you would know at the time when the cash is received whether all the subscriptions
will be sent or not by the end of the accounting period. But if most of the subscriptions will be sent, then it
could be initially recorded as revenue since the interim financial statements would be showing closer to
revenue that will be or has been earned.
The adjusting entry that transfers the revenues unearned (unearned subscriptions in the example) to a
liability account: Debit the revenue account and credit the Unearned Subscriptions.
The closing entry that closes the balance of the revenue account to the income summary which then
becomes part of owner’s equity for the net income or net loss of the company. (Closing entries are covered
in chapter 4 of the textbook).
Decide whether a reversing entry will be considered or not. Recall the RULE TO MASTER: Whenever an
adjusting entry creates a Balance Sheet account (liability or asset) reversal is possible and desirable as well
so that the adjusting entry into the created account WILL NOT BE FORGOTTEN. When a deferred or
unearned revenue is initially recorded as revenue, the adjusting process will create or increase a liability
account (some unearned revenue account—unearned subscriptions income in the example) and since a
liability account had been created or increased in the adjusting process, a reversing entry is needed to return
the prepayment to revenue in the next accounting period.
VII. Summary of Deferrals.
Deferrals always result in a DEDUCTION. You will always be reducing what already happened. The final
amount of expense or revenue that is shown in the expense or revenue account will always be less than the
dollar value that you started to work with.
There are always two methods to account for deferrals. However, though there are two ways of recording
deferrals, there is still just ONE CORRECT RESULT.
IX. Accounting Records Formats for Adjusting Entries.

General Journal showing adjusting entries:
The caption, “Adjusting Entries,” is entered on the first line opposite the year of the adjusting entries. This
caption helps to inform the readers of the general journal that the entries that are following are the adjusting
entries—entries made at the end of an accounting period to insure that the revenue recognition and the
matching principles are followed which bring the account balances up-to-date.
Explanations are OPTIONAL if you use the caption at the beginning of the adjusting entries, “Adjusting
Entries,” as this is all that is needed to inform the readers that the entries following are the adjusting entries
at the end of the accounting period.
General Ledger:
The words “Adjusting Entry” are entered into the Explanation column which again alerts the readers of the
general ledger that these entries were made at the end of the accounting period to bring the balances of the
accounts up-to-date.
The date transferred from the general journal shows that the entries were made the last day of the accounting
period.
Preparing the Adjusted Trial Balance:
It proves the equality of the total debit balances and the total credit balances in the ledger after all the
adjustments have been made.
The accounts in the adjusted trial balance contain all the data that are needed for the preparation of the
financial statements except for the capital account that may have additional investments in which case that
information would show in the general ledger account.
Preparing Financial Statements:

The income statement is the first prepared from the revenue and expense accounts where the numbers are
entered from the adjusted trial balance with the adjusted account balances.
The statement of retained earnings shows the net income (loss) from the income statement and dividends
that have been declared.
The balance sheet is then prepared from the asset and liability accounts and the ending retained earnings
from the statement of retained earbubgs.
Chapter Four
Completion of accounting cycle (Work sheet)
Define Work sheet 2004
Describe the Types of work sheet
What are the objective & Preparation of a work sheet?
Show Structure of work sheet
Define closing entries?
Define reversing entry with example
Define Post closing Trial Balance
Question 1. Define Work sheet. 2004

Answer. A Work sheet is a working tool of an accountant while preparing financial statements in a large
company. This is certainly a step of an accounting cycle, but is optional.
In other words, a work sheet is a multiple column form that may be used in the adjustment process and in
preparing financial statements.
Question 2. Describe the Types of work sheet.
Answer. Work sheet can be classified in three categories.
General Worksheet: The worksheet in which contains the ten or twelve columns, is the general worksheet.
Generally it is prepared with ten columns, like (i) Trial Balance, (ii) Adjustments, (iii) Adjusted Trial
Balance, (iv) Income Statement and (v) Balance Sheet.
Detailed Worksheet: The worksheet, in which the necessary columns can be added, is called the detailed
worksheet. In this worksheet additional schedule is added when needed. The additional schedule include (i)
Debtors and Creditors list, or Accounts Receivable and Accounts Payable list, (ii) Production Cost list, (iii)
Fixed Assets and Current Assets list, (iv) Current Liabilities list, (v) Insurance Policy list.
Audit Worksheet: The worksheet is similar to the detailed worksheet. The additional lists are added so
that, the audit can be made easily.
Question 3. What are the objective & Preparation of a work sheet?

Answer. The preparation of work sheets serves the following basic objectives.
i)The work sheet is prepared as a preliminary steps in the preparation of financial statements.
ii)They help accountants organize their work and thus avoid omitting important data.
iii) They provide evidence of past work.
iv) It helps which accounts are to be closed at the end of the accounting period.
v)Interim financial reports can be prepared with the help of work sheet.
A work sheet preparation is a five step process. Each step consists of two columns (Dr & Cr.) That’s why
the general purpose work sheet is commonly known as ten-column work sheet. The following are the five
steps:
1.Trial balance
2. Adjustments
3. Adjusted Trail balance
4.Income statement &
5. Balance sheet.
Question 4.Show Structure of work sheet.
Answer. Structure of work sheet are as follows
1.Ten column work sheet

XY Company
Work shet
For the year ended -----
Trail balance Adjustments Adjusted Trial Income Balance sheet
balance Statement
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
2. Eight column work sheet

XY Company
Work shet
Trail balance Adjustments Income Balance
Statement sheet
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
3.Twelve column work sheet

XY Company
Work shet
Trail Adjustme Adjusted Income Retained Balance
balance nts Trial Statemen earning sheet
balance t statemen
t
Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Question 5. Define closing entries
The are many revenue, expense and dividends are called temporary accounts or nominal accounts. These
balance are not carried forward to the next year, such types of accounts are closed in the current accounting
period. These accounts are closed transferring them to income statement by journal entry which is called
closing entry.
The closing entries are stated below:
1) Income accounts are closed passed the following closing journal entries:
Debit Credit
Tk. Tk.
Sales ***
Interest Income ***
Discount Income ***
Purchase Return ***
Gain on sales of Assets ***
Dividend Income ***
Profit on Consignment ***
Commission Income ***
Income Summary *** ***
2) Expenditure accounts are closed passing the following closing journal entry:
Debit Credit
Tk. Tk.
Income Summary ***
Wages Expense *** ***
Sales Return ***
Purchase *** ***
Discount Expense *** ***
Salaries Expense *** ***
Advertising Expense *** ***
Rent Expense *** ***
Insurance Expense *** ***
Bad Debt Expense *** ***
3) The profit of income summary is closed by passing the following entry:

Debit Credit
Tk. Tk.
Income summary ***
Owner’s Equity
Or; Retained Earning Statement *** ***
4) The loss of income summary is closed by passing the following entry:
Debit Credit
Tk. Tk.
Owner’s Equity
Or; Retained Earning Statement ***
Income Summary ***
5) Withdrawal of owner of a sole tradership or partnership is closed by passing the following entry:
Debit Credit
Tk. Tk.
Capital ***
Drawings ***
6) The dividend of joint stock company paid is closed passing the following entry:
Debit Credit
Tk. Tk.
Retained Earning Statement ***
Dividend ***
Question 6. Define reversing entry with example.

Ans.:- Reversing entry:
Reversing entry is a last optional step of accounting cycle. Passing reversing entry not mandatory. At the
end of a particular accounting period an organization at beginning of the successive accounting period
passes entries for some certain adjusting entries. These entries are called reversing entries. Reversing entry
is not necessary for all kinds of adjusting entries. Reversing entries are needed only for outstanding income;
prepaid expanse, accrued, earned income & advance unearned income received.
Example: Say, Tk.3,000 remains unpaid on 31 December 2005, the accounting year end day. Pass adjusting
entry and reversing entry for this adjustment.
Adjusting entry:
Debit Credit
Tk. Tk.
31.12.2005 Salary expense 3,000
Salary payable 3,000
Reversing entry:
Debit Credit
Tk. Tk.
01.01.2006 Salary payable 3,000
Salary expense 3,000
Question 7. Define Post closing Trial Balance?

Answer: After the revenues and expenses accounts have been closed, it is desirable to prepare an after
closing trial balance, which o0f course will consist solely of Balance Sheet accounts. The post closing trial
balance gives assurance that the accounts are in balance and ready for the recording of the transactions of the
accounting period.
Chapter Five
Accounting for Merchandising operation
1.Differences between a service enterprise and a merchandiser 2004
2.Periodic versus perpetual inventory system
3.Explain the meaning of credit terms i)n/10,n/30, ii)2/10,n/30 iii)2/10,n/60 iv) 2/EOM,n/60. 2007,2009,
4. What is classified balance sheet? Discuss the different categories of assets according to classified balance
sheet. 2008, 2010
Question 1.Differences between a service enterprise and a merchandiser. 2004

Answer: Businesses are of two types –one is service enterprise and another is merchandise enterprise.
Though these are two business concerns, they have some differences in the following cases:
Service enterpriser Merchandiser
(1) Business pattern: it is a service oriented (1) Business pattern: it is a product oriented
business. business.
(2) Basic revenue: service revenue is the basic (2) Basic revenue: sales revenue of the basic
revenue of service enterprise. revenue of a merchandiser.
(3) Journal: it uses only periodic journal. (3) Journal: it uses both periodic and perpetual
journal.
(4) Scope: it has comparatively narrow scope (4) Scope: it has comparatively wide scope of
of businesses. businesses.
(5) Cost of goods sold: it does not deal with (5) Cost of goods sold: it deals with cost of
cost of goods sold. goods sold.
(6) Limitation: it provides limited services (6) Limitation: it has no limitation to sell
within a limited area. merchandises.
(7) Example: schools, colleges, universities, (7) Example: stores, stalls, shops, companies,
medical, clinic, repair workshop, chartered incorporations, industries, etc
accountants firm, law concern, transportation
concern, transportation concern etc
Question 2. Periodic versus perpetual inventory system.
Periodic versus perpetual inventory system are as follows

Periodic inventory system Perpetual inventory system
1. Actual physical court of goods Continuous physical count of
at a specific period of time. goods over the period of time.
2. Does not maintain the detailed Maintain the detail record of
record of physical inventory on physical inventory on hand during
hand during the period. the period.
3. Generally large organization Generally small organization
maintains this system. maintains this system.
4. Comparatively less expansible For continuous recording it is
and less affordable. more expansible and more
affordable.
5. Sometimes it hampers the Normal activities of the
normal activities of business. organization don’t hamper for it.
6. It doesn’t accelerate the overall It accelerated the overall
performance of the organization. performance of the organization.
Question 3.Explain the meaning of credit terms i)n/10,n/30, ii)2/10,n/30 iii)2/10,n/60 iv) 2/EOM,n/60.
2007,2009
Answer: ‘n/10’ or’ n/30’ (read as net 10 or net 30) meaning that the amount of the invoice is due ten days or
thirty days. ‘2/10, n/30’ or ‘2/10, n/60’ meaning that the debtor may take a 2 percent discount if the invoice
is paid within ten days, otherwise he must paid full amount of the invoice by thirty days or sixty days.
“2/EOM, n/60” (EOM means End of month) meaning that 2 percent discount may take if paid end of the
month.
Question 4. What is classified balance sheet? Discuss the different categories of assets according to
classified balance sheet.
Answer: A classified balance sheet presents assets and liabilities in defined subgroups to facilitate financial
analysis and management decision-making reader of the classified balance sheets can better judge the
adequacy of different assets used in the business. Also they can better estimate the probable availability of
funds to meet the various liabilities as they become due in a classified balance sheet.
Assets are classified into five subgroups.
(a) Current assets: current assets are those assets, which can be converted into cash in a accounting period
usually a year.
(b) Plant assets: plant assets are fixed assets used and retained in the business for a longer period.
(c) Investment: investment is the acquisition of shares, debentures, securities etc.
(d) Natural resources: it is resources supplied by the by the nature, such as ore deposits, mineral reserves
oil deposits etc.
(e) Intangible assets: intangible assets consist of non-current non-monetary non-physical assets of a
business.
Liabilities are classified into two subgroups:
(a) Current liabilities: current liabilities are those liabilities, which is to be paid off within an accounting
period.
(b) Long term liabilities: long-term liabilities are those liabilities, which are not usually paid off within an
accounting period.
Chapter Six
Inventories
1. What are the methods of issuing materials? 2009
2. Describe the Inventory valuation-Lower of cost or market.
3.Describe the steps in determining inventory quantities.
4.Explain the accounting for inventories and apply the inventory cost methods.
5.Explain the financial effects of the inventory cost flow assumptions.
Question 1. What are the Methods of issuing materials ? 2009

The methods of pricing of issues that are generally used are discussed below:
(1) FIFO method
(2) LIFO method
(3) Average price method
(4) Periodic average method
(5) Periodic Weighted average method
(6) Base stock method
(7) Fixed price method
(8) Standard price method
(9) Market price method
(10) Inflated price method.
Question: 2. Describe the Inventory valuation-Lower of cost or market.
Answer: We explained how costs are assigned to ending inventory and cost of goods sold using FIFO.LIFO
or average costing method. Yet the cost of inventory is not necessarily the amount always reported on the
balance sheet. Lower of cost or market (LCM) is such a case.
“Lower of cost of market” is basically an exception to the historical cost principle and employed when the
market value of inventory is lower then the historical cost to acquire inventory. It id an accounting inventory
valuation method used for financial reporting to the external users. This rule is set up to account for the loss
of inventory value due to change in price, deterioration, obsolescence (loss of being obsolete) etc, using this
method will assist in prudence principle. Conservatism principle suggests not overstating assets on the
balance sheet or income statement i.e. we would rather be conservative while presenting our financial
statements.
LCM states that inventory should be valued at lower of cost or market value. Here, the term’ cost’ refers to
the original cost of inventory. On the contrary, the term ‘market’ is defined as the replacement cost of
inventory. The replacement of the market cost must lie between a ceiling and floor. The ceiling is the net
realizable value or selling price less disposal cost (costs to be incurred to sell the inventory). The floor is net
realizable value less a normal profit margin.
Question :3. Describe the steps in determining inventory quantities.

Ans.:- The steps (1) take a physical inventory of goods on hand and (2) determine the ownership of goods in
transaction or consignment.
Question 4: Explain the accounting for inventories and apply the inventory cost methods.
Ans.:- The primary basis of accounting for inventories is cost. Cost of goods available for sale includes (a)
cost of beginning inventory and (b) cost of goods purchased. The inventory cost flow methods are: specific
identification and three assumed cost flow methods- FIFO, LIFO, and average-cost.
Question 5: Explain the financial effects of the inventory cost flow assumptions.
Ans.:- Companies may allocate the cost of goods available for sale to cost of goods sold and ending
inventory by specific identification or by a method based of an assumed cost flow. When prices are rising,
the first-in , first-out (FIFO) method results in lower cost of goods sold and higher net income than the other
methods. The reverse is true when prices are falling. In the balance sheet, FIFO result in an ending inventory
that is closest to current value; inventory under LIFO is the farthest from current value, LIFO results in the
lowest income taxes.
Chapter seven
Accounting Information System
Study Objectives- after studying the chapter, you should be able to:
Define accounting information 2008,2010
Define subsidiary ledger 2008,2010
Describe the features of subsidiary ledgers
Describe the advantages of subsidiary ledgers 2008,2010
Define Special journal
What are the Purposes of using special journals?
Question: 1.Define accounting information. 2008,2010

Answer: The accounting information systems id a specialized sub system of management information
systems (MIS) whose purpose is to collect, process and report information related to financial transaction. It
consists of a set of transactions leading to the recognition of major economic event in the financial
statements.
Accounting information systems is an organizational component which accumulates, classifies, processes,
analyzes and communicates relevant financial oriented decision making information to a company’s external
parties (such as investors, creditors) and internal parties (principally management).
Question: 2. Define subsidiary ledger. 2008,2010
Answer: A subsidiary ledger is a group of accounts that are used to keep track of individual balances of a
number of similar transactions. Accounting information systems employ a subsidiary ledger (a group of
subsidiary accounts) associated with particular general ledger. The subsidiary ledger can effectively identify
the change (increase or decrease) in a particular general ledger accounting.
Example: The use of the subsidiary ledger is generally found in case of accounts receivable, accounts
payable, plant & equipment investments and other accounts.
Question 3. Describe the features of subsidiary ledgers.
I. subsidiary ledger shows the individual balances of certain account.
II. It is used for a number of similar transactions.
III. A large business concern (a MNC) may need to prepare a lot of subsidiary ledger accounts.
IV. A subsidiary ledger may contain a group of accounts to facilitate the accounting system.
Question 4. Describe the advantages of subsidiary ledgers. 2008,2010

Answer: The use of a subsidiary ledger facilitates the accounting system in the following ways:
1. Subsidiary ledger accounts keep the general ledger trees the general ledger from detailed record of
transactions.
2. The use of subsidiary ledger facilitates control over transactions and systems. The accountant can easily
find out the accuracy of trace out the errors.
3. Facilitates the recording in an efficient and effecting way in a large concern.
4. Management can know the detailed information regarding individual balances of a certain account at any
time as and when required for control and decision-making purpose.
5. Make possible a division of labor in posting the ledgers.
Question 5. Define Special journal.
Answer: A special journal is used by the business entity where a number of transactions occur and which
uses modern accounting system (computerized system) usually. The special journal is used to record one
particular type of (similar) transactions quickly and efficiently.
Example: Sales on account, purchases on account, cash payments, cash receipts etc.
Question 6. What are the Purposes of using special journals?
Answer: The special journal is used to serve the following benefits:
I. Easy, efficient and speedy recording of transaction.
II. Saves time in recording and posting the transactions.
III. Eliminates detail from the general ledger.
IV. Computerized system may reduce the risk if errors.
V. provides management with information of specific type of
transactions for any relevant decision.
VI. Helps the accountants to handle a good number of transactions
systematically.
VII. Finally, the use of special journals aids in division of labor.
Chapter Eight
Internal Control & Cash
Study Objectives- after studying the chapter, you should be able to:
1.Define Internal Control
2.Identify the Principles of internal control. 2006
3. Describe the Features of Internal Control System.
4.Define Bank Reconciliation Statement. 2006
Question 1.Define Internal Control.
Internal control is the related methods and procedure adopted within an organization to safeguard its assets
and to enhance the accuracy and reliability of its accounting records.
Question 2.Identify the Principles of internal control. 2006
The principles of internal control are: establishment of responsibility; segregation of duties; documentation
procedures; physical, mechanical. and electronic controls; independent internal verification; and other
controls such as bonding and requiring employees to take vacations.
Question 3. Describe the features of Internal Control System.
An effective internal control system includes organizational planning of a business and adopts all work-
system and process to fulfill the following objects:
Safeguarding business assets from stealing and wastage.
Ensuring compliance with business policies and the law of the land.
Evaluating functions of each employee and officer to increase efficiency in operation.
Ensuring true and reliable operating data and financial statements.
It is to be kept in mind, a business organization, be its small or large, can enjoy the benefits adopting internal
control system. Prevention of stealing-plundering and wastage of assets are apart of internal control system.
Question 4. Define Bank Reconciliation Statement. 2006
A bank reconciliation statement is certain type of statement explaining any differences between the bank’s
record of cash and the Company’s record of cash periodically. In other word’s the bank reconciliation
statement is a process of accounting for the differences between the balances of cash as shown by the bank
statement (pass book).
Chart of Accounts
List of Assets List of Expenses List of Liabilities List of Revenue
Current Assets Purchases Current Liabilities Sales
Cash Sales return and Accounts Payable Purchases returns and
Temporary Investment allowance Notes Payable allowance
(Marketable Securities) Sales discount Accrued salaries Purchases discounts
Accounts Receivable Transportation in Accrued Rent Repair Revenue
Notes Receivable Selling expenses Other accrued expenses Service Revenue
Accrued Interest Sales salaries expenses Short term loan Accounting Fees earned
Receivable Delivery salaries Income tax payable Plumbing Revenue
Merchandise Inventory expenses Accumulated Commission earned
Office Supplies Rent expenses depreciation-office Rent Revenue
Store supplies Advertising expense equipment Interest earned
Prepaid Insurance Transaction out expense Accumulated Rent earned
Prepaid Rent Gas oil and sundry depreciation-office Bad debts recovered
Prepaid Advertising expense Building Dividend earned
Fixed Assets Store supplies expense Owner’s equity Gain on sales of assets
Land Repair supplies expense Capital Miscellaneous Revenue
Building Delivery expense Drawings Sales discounts not
Store Building Sales promotion expense Common stock taken
Office Building Heat, light & Preferred stock Others Revenues
Equipment Power expense
Machinery Insurance expense
Store Furniture & Fixtures Interest expense
Delivery equipment Loss on sales of assets
Trucks Tax expense
Office equipment Depreciation expense-
Intangible Assets Store Building
Patents Depreciation expense-
Trade Marks Store Furniture
Goodwill Depreciation expense-
Copyrights Delivery equipment
Franchises Depreciation expense-
Lease Rights Trucks
Depreciation expense-
Store equipment
Miscellaneous selling
expense
Payroll expense
Postage expense
Utilities expense
Telephone expense
Repair expense
Security expense
Cleaning expense
Bad debts expense
Bank service charge
expense
Collection fee expense
Amortization expense-
Goodwill
Amortization expense-
Patents
General Journal & Tabular Analysis
Exercise 1.
Mr. Tanjim started a Tanjim Travelling agency business on 1st January,2010. He invested Cash Tk.4,00,000
and equipment Tk. 1,00,000. During the first month his transactions were as follows:
January 2. Hired a building for office use for Tk. 1,000 per month and paid Tk. 2,000.
4. Purchase one steel cabinet for Tk. 60,000 on account.
10.Paid 15,000 cash for advertising bill.
11. Cash received from customers in advance Tk. 5,000 for future service.
13. Received Tk. 60,000 cash for service rendered.
16. Purchase office supplies Tk. 5,000 cash.
18. Withdraw Tk. 8,000 cash for personal use.
19. Service rendered and earned Tk. 10,000 but not yet received.
22. Borrow Tk. 50,000 from Exim Bank against notes payable.
24.Received cash Tk 5,000 from accounts receivable.
25. Paid cash : Salaries Tk. 2000, telephone bill Tk. 5,000 and electricity bill Tk. 1,000.
27. Recovered Tk. 3,000 from accounts receivable and the unrealized balance be
treated uncollectible.
27. Depreciation expense during the month Tk.2000.
28. During the month supplies worth Tk. 2,000 were use.
31, Treat on month’s rent expired out of advance payment of rent.
Req: a) Prepare Journal entries b) Tabular Analysis c)Income statement, Owner’s equity statement and
Balance Sheet from the above transactions.
Exercise 2.
Mr. Babu completed his civil engineering degree on 31 December 2008 and from 1st January 2008 set up
his engineering practice. During the first month of operation be completed the following transactions :
a. Began engineering practice by exchanging Tk. 2,00,000 for 1,00,000 shares of Tk.
2 par value common stock of the corporation.
b. Purchased engineering books for Tk. 80,000 cash.
c. Purchase office supplies for Tk. 20,000 on credit,
d. Accepted Tk. 4,000 in cash for completing a contract.
e. Billed clients Tk. 11,000 for service rendered during the month.
f. Paid Tk. 2,000 of the amount owed for office supplies.
g. Received Tk. 2,500 in cash from one client who had been billed previously for
services rendered.
h. Paid rent expense for the month in the amount of Tk. 10,000.
i. Declared arid paid a dividend of Tk. 2,000.
j. Paid insurance premium expense Tk. 2,000 for the month.
Required :
Show the effect of each of these transactions on the balance sheet equation by
completing a table. Identify each stockholders' equity transaction
Exercise 3.
On January 1, 2011, Bengal Travel Agency. The following transactions were completed during the month :
January 1. Invested cash to start the agency Tk. 3,00,000.
2. Paid cash for January office rent Tk. 10,000.
5. Purchased office equipment for cash Tk. 25,000.
10. Incurred advertising costs in the Daily Times, on account Tk. 10,000.
14. Purchased office supplies for cash Tk. 5,000,
18. Earned for services rendered Tk. 30,000 (Tk. 20,000 cash received from
customers and the balance Tk. 10,000 is billed to customers on account).
20. Withdrew cash for personal use Tk. 6,000.
23. Paid the Daily Times amount due on January 10.
25. Purchased additional office supplies on account Tk. 4,000.
31. Paid employees' salaries Tk. 5,000.
31. Received in cash from customers who have previously been billed on
January 18.
31. Received cash from a new customer for services rendered Tk. 10,000.
31. Paid telephone, gas and electricity bills Tk. 3,000.
Exercise 4.
Abid owns and operates Abid plumbing service, which has the following assets : Cash Tk. 10,000,
Plumbing supplies Tk. 2,000, tools Tk. 2,000 and truck Tk. 8,000. The business owes plumbing
supply company Tk. 1,000 for supplies previously purchased. During a short period, the Service Company
completed these transactions. 2002
Jan. 1. Paid the rent on the shop space for two months in advance Tk. 2,000.
2. Purchased tools for cash Tk. 2,000.
4. Purchased plumbing supplies on credit from plumbing supply company Tk.
2,500.
5. Completed repair work for a customer and immediately collected Tk. 3,000
cash for the work done.
6. Completed repair work for X Co. on credit Tk. 3,000.
1 5. Purchased plumbing supplies on credit from plumbing supply company Tk.
1,500.
20. Paid the electric bill for the month Tk. 1,500.
9. Abid withdrew Tk. 600 cash from the business to pay personal expenses.
1. Paid for the supplies purchased in transaction Jan. 4.
3 1. Treat one month's rent expired out of advance payment of rent.
Required :
Arrange the following assets, laibility and owner's equity titles on an equation
cash, accounts receivable, prepaid rent, supplies, tools, truck, accounts payable and
Abid - Capital.
Enter the beginning assets and liability under the proper titles of the equation.
Determine Abid beginning equity and enter it. Prepare also an Income Statement,
an Owner's Equity Statement and a Balance Sheet.
Exercise 5.
Hoque owns the Hoque Repair Centre. On 31st Dec. 2002 the centre had the following ledger balances :
Cash Tk. 5,000, Supplies Tk. 1,500, Accounts receivable Tk. 3,000, Tools Tk. 2,000 and Motor vehicles
Tk. 8,000 and Accounts payable Tk. 4,000. During the month January, 2003, the following
transactions were completed: 2003
January 1, Paid rent for the month January Tk. 1,000.
2. Paid cash on accounts payable Tk. 2,500.
4. Purchased supplies for cash Tk. 500.
6. Received cash Tk. 6,000 for service rendered.
10. Purchased tools for cash Tk. 1,000.
15. Billed for service rendered Tk. 3,000.
20. Purchased supplies on account Tk. 2,000.
25. Received payment against bill of January 15 for service rendered Tk.2,000.
27. Hoque withdrew Tk. 500 for his personal use.
28. Paid cash Tk. 500 for Hoque's residence.
29. Paid cash for Salaries Tk. 1,000, Electricity bill Tk, 350 and gas bill
Tk. 350 and water bill Tk. 500.
31. During the month supplies worth Tk. 3,500 were used.
Required :
Arrange the assets, liabilities and owner's equity in an equation using the
following account titles, 'cash, accounts receivable, supplies, tools, motor
vehicles, accounts payable and Hoque's capital.
Show the effects of the above transactions over the accounting equation in a
tabular summary.
Prepare four financial statements : Income statement, Owner's equity, Balance
Sheet and Cash flow statement.
Exercise 6.
On January 1, 2003, Abdullah established Bengal Travel Agency. The folloging transactions were completed
during the month : January 1, Invested cash to start the agency Tk. 3,00,000.
2. Paid cash for January office rent Tk. 10,000.
5 . Purchased office equipment for cash Tk. 25,000.
1 0. Incurred advertising costs in the Daily Times, on account Tk. 10,000.
14. Purchased office supplies for cash Tk. 5,000,
18. Earned for services rendered Tk. 30,000 (Tk. 20,000 cash received from customers and the balance Tk.
10,000 is billed to customers on account).
20. Withdrew cash for personal use Tk. 6,000.
23. Paid the Daily Times amount due on January 10.
2 5. Purchased additional office supplies on account Tk. 4,000.
31. Paid employees' salaries Tk. 5,000.
31. Received in cash from customers who have previously been billed on
January 18.
31. Received cash from a new customer for services rendered Tk. 10,000.
31. Paid telephone, gas and electricity bills Tk. 3,000.
Exercise 7.
On January 1, 2003, Khan started his merchandising business'in the name of Khan Traders by
investing cash Tk. 45,000 and equipment Tk. 10,000. During the 1st month he completed the
following
transactions : January
1. Hired a building for office use for Tk. 1,000 per month and paid Tk.2,000.
2. Merchandises Inventory purchased Tk. 30,000, paying Tk. 23,000 in cash and the
balance on account.
1 0. Borrowed Tk. 10,000 from the Janata Bank on a note payable.
1 4. Merchandise sales on account Tk. 50,0,00 (cost Tk.. 28,000).
1 5. Paid salaries expense Tk. 1,500 and advertising expense Tk. 1,300.
1 6. Purchased office supplies for cash Tk. 1,000.
18. Merchandise purchased on account Tk. 10,000.
20. Paid Tk. 6,500 in full settlement for merchandise purchased on
account on January 2.
25. Received a cash payment of Tk. 48,500 for sales made on account and
allowed Tk. 1,500 discount.
28. Paid electricity bill for the month of January, 2003 Tk. 1,000.
31. Paid salaries for the month of January, 2003 Tk. 1,500.
31. Cost of unused supplies Tk. 500.
Required :
a) Show the effects of the transactions on the elements of the accounting equation.
b) Prepare an Income Statement, an Owner's Equity Statement for the month of January, 2003 and a Balance
Sheet at January 31, 2003.
Exercise 8.
The Courier Corporation was founded by Hafiz, on 01 January, 2005 engaged in the following
transactions during the 1st month : 2005
January 1.Deposited 1,20,000 in cash in the name of Continental Courier Corporation, in exchange for
12,000 shares of Tk, 10 par value stock of the corporation.
5. Purchased a motorbike on credit Tk. 10,000.
1 0. Purchased delivery supplies for cash Tk. 1,000.
1 8. Received delivery fees in cash Tk. 15,000.
20. Made a payment on the motorbike Tk. 6,000.
21. Paid repair expense Tk. 3,000.
31 . Declared and paid dividends of Tk. 5,000.
31. Paid cash Tk. 5,000 for current month's salaries of staff.
31 . Delivery supplies were used fully.
31. Paid cash Tk. 16,000 for tax.
Required :
1. Arrange the following asset, liability and stockholders' equity accounts in the
equation showing : Cash, Accounts Receivable, Delivery Supplies, Motorbike,
Accounts Payable, Common Stock and Retained Earnings.
2. Show by addition and subtraction the effects of the transactions on the accounting
equation. Show new balances after each transaction and identify each
stockholders' equity transaction by type.
Exercise 9.
Show the effect on accounting equation of the following transactions of X Ltd. in a tabular form. 2005
January 1. Shareholders purchased 10,000 shares of Tk. 100 each paying cash
in full.
2. Paid Tk. 15,000 for preliminary expenses.
3. Purchased office supplies for tk. 1,000 on credit.
8. Purchased an office equipment for Tk. 40,000 and issued a note for
the same amount.
1 5. Received Tk. 50,000 cash for service rendered.
20. Paid Tk. 500 of the amount owed for office supplies.
22. Billed clients Tk. 20,000 for services rendered during the month.
25. Paid office salaries Tk. 10,000 for cash for the month.
28. Paid rent expense for the month in the amount of. Tk. 12,000.
31. Declared and paid a dividend of Tk. 20,000.
31. Office supplies used during the month worth Tk. 600.
Exercise 10.
Mr. Arfan passing Bachelor Degree in Medical Science started practice under firm's name "Arfan Medical
Service Centre" on January 1, 2003. During the first month, the following transactions occurred : 2003
January 1. Invested : Cash Tk. 15,000; Aimira, table costing Tk. 10,000.
. Paid rent for the month of January, 2003 Tk. 1,000.
. Purchased medical equipment for cash Tk. 5,000.-
4. Purchased medical supplies Tk. 1,000 on account
1 0. Service revenue received for cash Tk. 6,000
15. Billed patient Tk. 4,000 for treatment service rendered.
20. Cash Tk. 2,000 borrowed from a bank on a note payable.
25. Received Tk. 3,000 from the patient billed on January, 15.
Received a telephone bill for Tk. 500.
Paid salaries Tk. 1,000 and electricity bill Tk. 600.
31, Medical supplies on hand Tk. 200.
Required :
Prepare tabular summary of the transactions showing their effects on accounting equation!
Exercise 11.
Mr.Mahbub started Wonderland Park on 1st July 2008. The
following events and
transactions were occurred during the July.
July1. Invested cash Tk 6,00,000 in the business.

Purchase Land costing Tk 60,000 cash.
11. Incurred advertising exp. of Tk 4,000 on account.
13. Hired park manager at a salary of Tk 5,000 per month effective
from 1st August.
15. Borrowed Tk 30,000 from Islami Bank on a Notes payable.
17. Paid Tk 6,700 in cash for one year insurance policy.
24. Sold 200 coupon books for Tk 25 each. Each book contains 10
coupons that entitle the
holder to one admission to the park.
2 8. Paid 50% of the advertising bill that incurred on 11th July.
Required : (a)Journalize the July transactions (b)Post to the ledger
account (c) Prepare a Trail Balance.
Exercise 12.
Mustari started her own consulting firm- Mustari consulting, on May,
2009.
The following transactions occurred during the month of May.
May 1.Mustari invested Tk. 40,000 cash in the business.

2. Paid Tk. 2,500 for office rent for the month.
3. Purchased Tk. 1,500 supplies on account.
5. Paid Tk. 500 to advertise in the Daily Star.
9. Received Tk. 10,000 cash for service provided.
12.Withdrew Tk. 2,700 for personal use.
15. Performed Tk. 5,000 of service on account.
17. Paid Tk. 3,000 for employees salaries.
20. Paid for supplies purchased on May 3.
23. Received cash payment of Tk. 4,000 for service provided on account
on May 15.
26. Borrowed Tk. 10,000 from AB Bank.
29. Purchased office equipment for Tk. 12,000 on account.
30. Paid Tk. 500 for utilities.
Required:
(i)Prepare a Tabular analysis (ii) Compute net income or loss and (iii)
Balance Sheet.
Exercise 13.
An analysis of the transactions made by Tanjim and co. a certied public
accounting firm, for the month of august 2010, is shown below. Each
increase and decrease in owner’s equity is explained.
Cash + Accounts +Supplies +Office Equipment

=Accounts payable +Owner’s Equity
receivable
1. +15,000
+15,000 investment
2. -2,000 +5,000
+3,000
3. -750 +750
4. +2,600 +2,400
+5,000 Service revenue
5. -2,000 -
2,000
6. -3,000
-3,000 Drawings
7. -1,000
-1,000 Rent expense
8. +2,000 -2,000
9. -3000
-3,000 Salaries expense
10. +800
-800 Utilities expense
Req:i)Describe each transaction that occurred for the month.

ii) Determine the amount of net income for the month.
Exercise 14.
Financial statement information about two different companies is as
follows:
Azad company Rahim company
January 1,2010
Assets (a) 1,50,000
Liabilities 75,000 (d)
Owner’s equity 54,000 1,00,000
December 31,2010
Assets 1,80,000 (e)
Liabilities (b) 80,000
Owner’s equity 1,00,000 1,40,000
Owner’s equity changes in year
Additional investment 10,000 15,000
Drawings 12,000 10,000
Total revenues (c) 5,00,000
Total expenses 3,60,000 (f)
Instructions:
a)Determine the missing amounts.
Exercise 15.
Mr.Mahbub started Wonderland Park on 1st July 2005. The following
events and transactions were occurred during the
July.
1. Invested cash tk 6,00,000 in the Business.
Purchase Land costing tk 60,000 cash.
Incurred advertising exp. Of tk 4,000 on account.
13. Hired park manager at a salary of tk 5,000 per month effective from
1st August.
15. Borrowed tk 30,000 from Islami Bank on a Notes payable.
17. Paid tk 6,700 in cash for one year insurance policy.
24. Sold 200 coupon books for Tk 25 each. Each book contains 10
coupons that entitle the
holder to one admission to the park.
2 8. Paid 50% of the advertising bill that incurred on 7th July.
Required : Journalize the July transaction
Exercise 16.
Mr. Zafar opened The Lion care company on 1st April 2004. The
following selected transactions were completed during the month of
April.
1. Invested tk 25,000 to the business.
3.Purchased used delivery van for tk 22,500. Paid cash Tk 11,500 and
signed a notes payable for the remaining balance.
5. Paid tk 1.250 for office rent for the month..
9.Performed service for Tk 14,500 on account.
11.Purchase supplies Tk 625 in cash.
12. Depreciation on Delivery van Tk 2,000.
14. Cash received from customers for future service in advance Tk
1,000.
17. Paid Gas and oil exp. 375.
18. Received the cash payment of the services provided on 9th April.
21.Made cash payment of Tk 8,500 of the notes payable.
30. Salaries exp. are due for that month Tk 875
Required: Show the effect of the above transaction on the accounting
equation.
Work Sheet & Financial Statement
Question 1: The trial balance of Mukta Telecom Corp. at May 31,

2012, follows:
MUKTA TELECOM CORPORATION
Trial Balance
May 31, 2012
Account Titles Tk. Tk.
Cash 8670
Notes receivable 10340
Interest receivable
Supplies 560
Furniture 27410
Accumulated depreciation- Furniture 1480
Building 53900
Accumulated depreciation- Building 34560
Land 18700
Interest payable
Salaries payable
Unearned service revenue 8800
Notes payable, long-term 18700
Capital 34290
Withdrawals 3800
Service revenue 16970
Interest revenue
Depreciation expense- Furniture
Depreciation expense- Building
Salary expense 2170
Interest expense
Supplies expense
Total 1,29,530 1,29,530
Additional data at May 31, 2012

Depreciation furniture, Tk. 480; building, Tk. 460.
Accrued salary expense, Tk. 600.
Supplies on hand, Tk. 410.
Prepaid insurance expired during May, Tk. 390.
Accrued interest expense, Tk. 220.
Unearned service revenue earned during May, Tk. 4400.
Accrued advertising expense, Tk. 60 (credit Accounts Payable).
Accrued interest revenue, Tk. 170.
Required:
Complete work sheet for May adjusting entries by letter.
Prepare financial statements; journalize the adjusting and closing
entries.
Question 2: The trial balance of Naher Top Company at July 31, 2012
follows.
NAHER TOP COMPANY
Trial Balance
July 31, 2012
Account Titles Tk. Tk.
Cash 21200
Accounts receivable 37820
Supplies 17660
Equipment 32690
Accumulated depreciation- Equipment 26240
Building 42890
Accumulated depreciation- Building 10500
Land 28300
Interest payable
Wages payable
Unearned service revenue 10560
Notes payable, long-term 22400.
Capital 79130
Withdrawals 4200
Service revenue 20190
Depreciation expense- Equipment
Depreciation expense- Building
Wages expense 3200
Insurance
Interest expense
Supplies expense
Total 1,91,710 1,91,710
Additional data at July 31, 2012

Depreciation equipment, Tk. 630; building, Tk. 370.
Accrued wage expense, Tk. 240.
Supplies on hand, Tk. 14740.
Prepaid insurance expired during July, Tk. 500.
Accrued interest expense, Tk. 180.
Unearned service revenue earned during, July, Tk. 4970.
Accrued advertising expense, Tk. 100 (credit Accounts payable).
Accrued service revenue, Tk. 1100.
Required :
Complete work sheet for July, Key adjusting entries by letter.
Prepare Financial Statements.
Show adjusting and closing entries.
Question 3: The Savikun Ltd. prepared a trial balance on the following

partially completed worksheet for the year ended December 31, 2012:
Savikun Ltd.
Trial balance
December 31, 2012
Account Titles Dr. Cr.
Cash 2500
Allowance for doubtful
Accounts 300
Inventory, 1/1/2012 6800
Prepaid rent 3600
Equipment 30000
Accumulated depreciation 12000
Notes payable, due 7/1/2013 5000
Retained earnings 10200
Capital Stock (1000 shares) 8900
Dividends distributed 1000
Sales revenues 45000
Purchases 22400
Salaries expense 7100
Total 85,100 85,100
Additional information:
The equipment is being depreciated on a straight-line basis over a 10-
year life, no residual value.
Salaries accrued but not recorded total Tk. 300.
On January 1, 2012 the company had paid 2 year’s rent in advance at
Tk. 150 per month.
Bad debts are expected to be 1% of total sales.
Interest Tk. 250 has accrued on the note payable.
The December 31, 2012, inventory is Tk. 8200.
The income tax rate is 40% on current income and will be paid in the
first quarter of 2013.
Required :
Complete the worksheet.
Prepare financial statements for 2012.
Prepare closing entries in the general journal.
Question 4: Following is the Trial Balance and other pertinent

information of Houck Ltd.
HOUCK LIMITED
Trial balance
December 31, 2012
Cash 42384
Merchandise Inventory 171120
Sales Supplies on Hand 3216
Prepaid Fire Insurance 2880
Prepaid Rent 34560
Store Equipment 52800
Accumulated Depreciation- Store Equipment 10560
Capital 251784
Sales 673416
Sales Returns and Allowance 3096
Purchases 300504
Purchase Return and Allowance 2424
Transportation-In 4704
Sales Salaries Expense 83040
Advertising Expense 46800
General Office Expense 5928
Office salaries Expense 144480
Legal and Auditing Expense 6000
Telephone Expense 2880
Interest Revenue
Interest Expense 360
10,00,464 10,00,464
Additional data as of December 31, 2012:

Prepaid fire insurance expired Tk. 2040.
Sales supplies consumed Tk. 2196.
Prepaid rent expired during the year Tk. 30360.
Depreciation expenses on store equipment Tk. 5280.
Accrued sales salaries Tk. 2400.
Accrued office salaries Tk. 1800.
Merchandise Inventory on hand Tk. 210000
Required :
An eight column work sheet for the year ended December 31, 2012.
A classified Income Statement.
A classified Balance Sheet.
Question 5: Following is the trial balance of Doom Ltd. December 31,

2012.
Account Titles Tk. Account Titles Tk.

Accounts receivable 12600 Accounts payable 3100
Capital stock 15000 Cash 9800
Interest expense 500 Interest income 350
Misc. general expense 12600 Notes payable 6000
Notes receivable 2000 Purchases 82000
Purchase discount 2300 Purchase return 1650
Sales salaries 8000 Store furniture’s 3700
Supplies 600 Taxes 600
Sales 85000
Additional data:
Inventories: Merchandise Tk. 24100; Store supplies Tk. 280.
Depreciation of store furniture 10% p.a. Additions to store furniture
were made on march 1, 2012 closing Tk. 900.
Accrued advertising Tk. 95.
Taxes paid in advance Tk. 200.
Accrued taxes Tk. 215.
Accrued interest on notes payable Tk. 75.
Accrued interest on notes receivable Tk. 105.
5% of the accounts receivable are expected to be uncollectible.
Required :
An eight column work sheet
An Income statement
Adjusting entries.
Question 6: The following is the Trial Balance of M/S HRC & CO. as
on June 30, 2012.
Account Titles Tk.
Advertisements 40000
Accumulated Depreciation- Building 165000
Allowance or Doubtful Accounts 11500
Buildings 600000
Capital Stock, Tk. 100 par 1500000
Cash 200000
Dividends Paid 120000
Insurance Expense 12000
Freight in 30000
Interest Income 5500
Inventory June 30, 2012 540000
Land 580000
Long-term Investments 105000
Mortgage Payable 400000
Notes Payable 125000
Office Expense 134000
Purchases 1154000
Purchase Discount 9500
Retained Earnings, June 30, 2012 117000
Sales 2050000
Sales Discount 45000
Sales Returns 28000
Selling Expense 412000
Supplies Expense 35000
Taxes-payroll & others 66500
Adjustments on June 30 are required as follows:

The inventory on hand is Tk. 756000.
The allowance for doubtful accounts is to be increased to be increased to
balance of Tk. 25000.
Buildings are depreciated at the rate of 3% per year.
Accrued selling’s expenses are Tk. 32000.
There are supplies 6500 on hand.
Prepaid Insurance relating to 2012-13 and 2013-14 totals Tk. 6000.
Accrued interest on long-term investment is Tk. 2000.
Accrued Payroll and other taxes are Tk. 7500.
Accrued interest on the mortgage is Tk. 4000.
Income taxes are to be estimated @ 30%.
Required :
i. Prepare an eight column Work Sheet.
ii. Prepare Multiple-step Income Statement.
iii. Prepare Balance Sheet in Report From.
iv. Give Adjusting Entries.
Question 7: From the following Trial balance of Nokia Company,
prepare income statement for the year ended 31st December 2012 and a
Balance Sheet as on that date:

Purchases 16000
Sales 20000
Capital 10650
6% loan (1-1-2012) 9000
Inventory (1-1-2012) 5000
Wages and Salaries 3700
Goods returned 2000 1500
Insurance 320
Carriage 280
Land and Buildings 8600
Furniture and Fittings 4300
Trade Expense 800
Allowance for Bad debts 400
Cash in hand 1600
Income Tax 100
50,500 50,500
Additional information :
Closing inventory Tk. 8500.
Of the accounts receivable Tk. 200 are to be written off as bad debt and
a allowance for doubtful debt @ 5% is to be created on accounts
receivable.
A fire occurred in the godown on the 20th December, 2012 and goods
valuing Tk. 3000 were damaged. The Insurance Company admitted the
claim for Tk. 2000.
Insurance unexpired Tk. 50.
Depreciation is to be at 5% on furniture and fittings.
Furniture and fitting costing Tk. 400 were purchase on 1st July but not
recorded in the Books of Accounts.
Question 8: From the following Trial Balance of Samsung Company
Ltd. prepare an income statement for the year ended on 31st December,
2012 and the Balance Sheet as at that date.
Trial Balance
Buildings 700000
Furniture and fittings 115000
Purchases and Sales 500000 1234000
Inventory (1-1-2012) 200000
Allowance for Bad debt 10000
10% Loan Account (Taken on 1-7-2012) 40000
Accounts receivable 324000 471000
Accounts payable
Salaries 102000
Advertisement 19500
Carriage Outward 6000
Wages 210000
General Expense 105000
Rent 10000
Insurance 4000
Investment (10% bond) 50000
Capital Account 650000
Bank Balance 48500
Drawing Account 31000
24,15,000 24,15,000
Adjustment :
Closing Inventory was valued at Tk. 225000, which includes goods
worth Tk. 15000 sold but not yet delivered to the purchaser;
Credit Sales of Tk. 2000 has not been recorded in the books;
Mr. Kalam has drawn out goods worth Tk. 3000 for his personal
consumption of which there is no record in the books.
Write off Tk. 6000 as bad debt and a allowance for bad debt at 5% on
remaining accounts receivable;
Rent not yet received amounted to Tk. 12000.
Accrued interest on investment on 31-12-2012 amounts to Tk. 2500.
Furniture and Fittings to be depreciation @ 10%.
Question 9: The accounts balances are taken from the ledger of
Kingstar Company Ltd. on December, 31, 2012:
Account Titles Tk.
Merchandise Inventory (1-1-2012) 50000
Purchase 770000
Purchase return 16500
Purchase discount 23000
Sales salaries 80000
Drawings 26000
General expense 100000
Supplies 6000
Cash 98000
Taxes 6000
Interest expense 5000
Furniture 37000
Notes Receivable 20000
Sales 852000
Sales return 2000
Capital 150000
Notes payable (long-term) 60000
The data for year end adjustment on December 31, 2012 are as follows:
Merchandise Inventories in hand Tk. 220000 office supplies in hand
2500.
Outstanding Advertisement Tk. 10000.
Accrued taxes Tk. 2000.
Accrued interest on notes payable Tk. 7000.
Accrued interest on notes receivable Tk. 8000.
6% of the accounts receivable are expected to be uncollectible.
Depreciation of office furniture @ 10% p.a. Additions to office furniture
were made on April 2012 costing Tk. 5000.
5% interest to be charged on capital.
Required :
An Income statement;
Statement of owners equity;
Balance sheet as at December 31, 2012.
Question 10: The following is the unadjusted trial balance of
Symphony Ltd. as on 30th June, 2012.
Account Title Debit (Tk.) Credit (Tk.)
Purchases 1650000
Purchase return 25000
Sales 1830000
Sales return 6000
Office equipment 46000
Notes payable 30000
Cash in hand 150000
Insurance 8000
Office supplies 14000
Rental expense 6000
Office salaries 32000
Drawings 9000
Freight in 22000
Delivery expenses 35000
Capital stock (1-7-2011) 405000
24,70,000 24,70,000
Adjustments on 30th, June 2012 are required as follows:

Merchandise Inventory on 30-6-2012 Tk. 285000.
Office supplies consumed were Tk. 1000.
Un-expired insurance was Tk. 2000.
5% of the accounts receivable are expected to be uncollectible
Expenses outstanding on 30-6-2012:
Rent 400
Freight in 4000
Advertising 3000
Office salaries 8000
Depreciation on office equipment for the year Tk. 6000.
Required :
Income statement for 30-6-2012 in classified from.
Balance sheet as at 30-6-2012.
Question 11: The accounts balance are taken from the ledger of Doom
Trading Enterprise on December 31, 2012.
Account Title Tk.
Capital (1-1-2012) 1500000
Inventory (1-1-2012) 540000
Office Equipment 350000
Furniture 200000
Office Expense 134000
Building 600000
Cash in hand and Bank Balance 200000
Freight in 30000
Purchases (Merchandise) 1154000
Allowance for Depreciation on Building 100000
Allowance for depreciation on office equipment 65000
Allowance for doubtful accounts 11500
Sales 2000000
General Reserve 150000
Purchase discount 21500
Mortgage Payable 400000
Investment 100000
Rates & Taxes 66500
Supplies expenses 35000
Sales returns 73000
Selling expenses 412000
The following adjustments are available for action:

Merchandise Inventory in hand is Tk. 700000.
There are supplies of Tk. 6200 in hand.
Accrued interest on mortgage is Tk. 3500.
Goods costing Tk. 2500 were taken by the proprietor for personal use no
record of it was maintained in the books of accounts.
The allowances for doubtful accounts is to be increased to a balance of
Tk. 15000.
1
Building and office equipment are depreciated @ 5% & 2 %
2
respectively.
Required :
a) An income statement
b) Balance sheet as on Deember, 31, 2012.
Question 12: From the following Ledger Balances of Mr. Sajib as on

31st December, 2012. Prepare Income statement for the year ended 31st
December , 2012 and a balance sheet as on sheet as on that date.
Account Title Tk.

Purchases 700000
Freight in 25000
Sales 1500000
Capital, Mr. Sajib 1000000
Cash 300000
Allowances for doubtful debts 20000
Supplies 30000
Rent expenses 140000
Salary expenses 200000
Office equipment 100000
Gain on sale of fixed assets 30000
Stores equipment 135000
Adjusting data :
Merchandise inventory on December, 31, 2012 Tk. 350000
Prepaid rent Tk. 20000.
Doubtful accounts to be written off against allowance Tk. 10000.
Maintain an allowance for doubtful accounts equal to 10% of accounts
receivable.
Accrued salaries Tk. 40000.
Supplies in hand 15000.
Goods worth Tk. 5000 taken by the proprietor for personal use was
debited to purchases.
Stores equipment was charged with an amount of Tk. 10000 which was
spent for repairing the delivery van of the stores. Depreciation is to be
changed @ 10% per annum.
Office equipment includes an item purchased on 1-7-2012 at Tk. 20000.
depreciation is to be charged @ 5% per annum.
Question 13: The trial balance of Motorola Trading Corporation is as
follows:
Trial Balance
Capital 450000
Sales 809000
Rent Income 10000
Purchase Returns 13000
Commission Income 2000
Allowances for bad debts 1500
Drawing 36000
Purchases 553000
Sales Returns 19000
Carriage Inward 10000
Office Salaries Expenses 60000
Merchandise Inventory 120000
Rent & Taxes expenses 12000
Accumulated Depreciation- Furniture 2000
Accumulated Depreciation- Buildings 5000
Notes Payable 30000
Loan on Mortgage (Payable on 30th June, 2014) 100000
Sales Salaries expenses 22000
Carriage on sales 14000
Insurance expenses 18000
Sundry office expenses 2000
Furniture 65000
Cash in hand 9000
Building 200000
Cash at Bank 140000
15,47,000 15,47,000
Adjusting Entries are :
Merchandise Inventory on 31st December, 2012 Tk. 180000.
Office salaries accrued but not paid Tk. 6000.
Rent received but not earned Tk. 2000.
Carry forward for prepaid insurance Tk. 4500.
Interest on Mortgage loan accrued Tk. 5000.
Commission accrued but not received Tk. 1000.
Depreciation to be provided:-
Furniture Tk. 2000 and Building Tk. 5000.
Increase allowance for bad debts to Tk. 1190 on accounts receivable.
Goods taken by the proprietor for private use Tk. 1000.
Required :
An income statement in multiple step form.
A balance sheet as on December 31, 2012.
Question 14: The followings are the ledger balances of Beximco

Pharmaceutics Ltd. as on 30th June 2012.
Account Titles Tk.
Advertising 40000
Allowance for depreciation on Building 165000
Allowance for doubtful Accounts 11500
Buildings 600000
Capital Stock 1500000
Cash 200000
Dividends 120000
Freight in 30000
Insurance 12000
Interest Expenses 22000
Inventory, 30th June. 2011 540000
Land 560000
Long Term Investment 105000
Mortgage payable 400000
Notes Payable 125000
Office Expenses 134000
Purchase 1154000
Purchase Discount 9500
Retained Earnings, 30.06.2012 122000
Sales 2050000
Sales Returns 28000
Sales Discounts 45000
Selling Expenses 412000
Supplies Expenses 35000
Taxes-Payroll etc. 66500
Adjustments on 30th June, 2012 are required as follows :
The Inventory on hand Tk. 728500.
The allowance for doubtful Accounts is to be increased to a balance of
Tk. 25000.
Buildings are depreciated @ Tk. 3%
Accrued selling expenses are Tk. 22000.
There are supplies of Tk. 6500 on hand.
Unexpired insurance for the next two years total Tk. 3500.
Accrued Payroll Taxes is Tk. 4000.
Income tax is estimated at 30% of the net income before tax.
Required :
An income statement in multiple step form.
A balance sheet as on 30th June, 2012.
Question 15: From the following Trial Balance of Mr. Mukta Textile
Ltd. prepare an Income statement for the year ended 31st December, an
statement of owner’s equity and a Balance Sheet as on that date:

Capital 96000
Drawings 10000
Notes Receivable 9700
Plant and Equipment 28800
6% Loan (1-4-2012) 24000
Wages 40900
Inventory (1-1-2012) 5000
Uncollectible account 3500
Carriage on Purchases 1000
Sales 92000
Carriage on Sales 1100
Purchases 46000
Cash at Bank 6500
Notes Payable 1500
2,13,500 2,13,500
Adjustments :
(a) Inventory on 31st December, 2012 was Tk. 25580. included in
inventory goods valued at Tk. 1200 which are destroyed by fire, against
which an insurance claim to the extended of Tk. 800 is admitted.
A note for Tk. 1500 discounted with the Bank was dishonored on
maturity but entry was made elsewhere in the books of accounts.
Goods worth of Tk. 500 was taken by the proprietor for his personal
use.
Wages include Tk. 500 incurred for creation of a computer purchased
and installed on 1st July, 2012, Purchase price of the computer was Tk.
8800.
1
Depreciation plant and equipment @ 12 %
2
Allowances 5% provision for bad and doubtful debts on Accounts
receivable.
Question 16: From the following Trial Balance of Mss. Savikun

prepare an Income Statement, an statement of owner’s equity for the
year ended 31st December, 2012 and a Balance Sheet as on that date.
Account Titles Debit Credit
Inventory (1-1-2012) 58000
Plant and equipment 45000
Sales 291200
Purchases 236100
Returns 9500 7500
Freight and duty 1600
Carriage inward 14300
Salary and wages 9890
Capital 129000
Discount 1320 800
Bad debts/Uncollectible accounts 1000
Loan @ 7% (1-1-2012) 25000
Interest on loan 1200
Printing and advertising 4910
Furniture 9500
Investment 6000
Income from Investment 300
General expenses 1400
Insurance premium 1200
Traveling expenses 2560
Postage and telegram 420
Electricity 600
Rent & taxes 2400
Notes receivable 9500
Drawings 6000
Cash in hand 1500
Cash at bank 20000
4,78,700 4,78,700
Adjustments :
A cheque for Tk. 500 received from a debtor was returned by the Bank
being dishonored on presentation. The Bank charged Tk. 2 as expenses
incurred on it. No record was made in the Cash Book. It is further
known that the debtor is not in a position to pay more then Tk. 250
against the amount due from him.
1
Create an allowances for bad debts @ 2 % on Accounts receivable.
2
Depreciate Plant and Equipment @ 10% and Furniture @ 20%.
Accounts receivable include Tk. 6000 due from Mr. Raju whereas
Accounts payable include Tk. 3000 due to him.
The proprietor took goods worth Tk. 1200 for personal use.
On the way to deposit money in the Bank, the miscreant snatched away
Tk. 8000 from the cashier on 31-12-2012.
Closing Inventory was valued at Tk. 77500 including stock of stationary
Tk. 500.
17. Following is the trial balance of Bostorn and Co. as on 31st

December,2001.
Bostron and Co.
Trial Balance
December31, 2005
Accounts Titles Debit Credit
Tk. Tk.
Capital 1,35,000
Merchandise sale 1,50,000
Merchandise Purchase 90,000
Sales return and allowance 5,000
Purchase return and allowance 3,200
Investments 30,000
Cash on hand 35,000
Merchandise inventory(1.1.2005) 18,000
Wages 8,000
Land 2,000
Plant-Equipment 40,000
Accumulated depreciation-Equipment 50,000
Patents rights 10,000
8% Loan on Mortgage 10,000
Merchandise sent on consignment 30,000
Drawings-Bostron 2,000
Freight expenses 5,000
Interest expenses 3,000
10,000
3,60,200 3,60,200
The following adjustments are to be made on December 31,2001.
The Merchandise inventory Tk. 3,500.
Goods worth Tk. 300 had been destroyed by.
Goods worth Tk. 300 were taken by the owner and no record of it was
maintained in the books of accounts.
Interest on capital is to be provided for at 10% per annum.
Accrual expenses for salaries Tk. 500 and advertising Tk. 700
Required:
Prepared 10 column work Sheet
Income statement & work sheet
Journalize the adjusting entries.
18. The following trial balance and adjustments for the year ending 31st
December ,2002 have been extracted from the book of Rahim and Co.
Rahim and Co.
Trial Balance
December 31,2002
Accounts titles Debit Credit
Tk. Tk.
Cash 20,000
Inventory(1.1.2002) 1,000
Office supplies expense 4,100
Store Equipment 100
Accumulated dp.-(Store Equipment) 6,000
Accumulated dep.-(Office Equipment)
Capital-Rahim 6,000
Sales 4,500
Accounts payable 1,08,500
Merchandise purchase 60,000 1,00,000
Sales discount 2,000 30,000
Purchase discount
Sales return and allowance 5,000 1,000
Sales salaries 8,000 3,000
Rent expense 2,000
Freight in 1,000
Office salaries expense 3,000
Miscellaneous expense 500
Interest expense 400
land 50,000
2,53,000 2,53,000
Adjustments:
The inventory on hand 31st December,2002 Tk. 50,000.
Office supplies on hand Tk. 500 & store supplied on hand Tk. 400.
Insurance expenses Tk. 500 and accrued sales salaries Tk. 300.
Accrued office salaries Tk. 200.
Charge depreciation 10% on office equipment & stores equipment.
Provide 10% provision for Bad and doubtful debts on accounts
receivable.
19.
M/s Robin Son Co.
Trial Balance
30th June,2002
Accounts titles Debit Credit
Tk. Tk.
Capital 40,500
Sales 1,83,000
Purchase 1,65000
Sales return 600
Purchase return 2,500
Notes payable 3,000
Cash in hand 15,000
Merchandise inventory(1.7.2001) 7,000
Insurance 800
Rental expenses 600
Office salaries 3,200
Drawing 900
Advertising expenses 2,200
Delivery expenses 3,500
Freight in 2,200
Total 2,47,000 2,47,000
The following additional data available for action:
expense outstanding on 30.6.2002
Office salaries Tk. 800
Advertising 300
Freight in 400
Rent 40
Office supplies consumed were Tk. 1,000
Un-expired insurance was Tk. 200
Depreciation on office Equipment for the year Tk. 600
Merchandise inventory on 30.6.2002, Tk. 28,500
Requirement:
A ten column work Sheet.
Income statement for 2001-02 in classified reprrt from.
Balance sheet as at 30th June 2002.

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For Professional BBA Students ( Principles of Finance) of

all universities and Colleges.

1102 PRINCIPLES OF ACCOUNTING

1. Introduction: What is accounting? Building Blocks of Accounting -

adjusted trial balance prepared? 2.5

4.What are the two main qualitative characteristics of useful

financial information? Explain. 5

Particulars Debit Credit

Condition-1 Condition-2 Condition-3

(b) Information relating to Samsu and Co. is presented

Required:—Prepare Journal Entries to record the transactions on the

Particulars Debit Credit Taka

Required: - Prepare a ten column work sheet

(d)The company issued a check for Tk.685 to Timberland Ltd.

Ans. to the quest No: 8 (a)

Ronzu Wholesale Company

Liabilities and O.E 1,44,300

Ans. to the que. No. 10

Dep. exp.- Equipment 12,00 12,000

Tower Holdings Ltd.

B.B.A PART-I (FIRST SEMESTER) EXAMINATION,2005

The deposit for cash sales of October 6 was incorrectly recorded in

8. Following is the trial balance of Mr. Chowdhury Enterprise as at

Write short notes (any five) :-

5,000 9,200 1,000 12,000 4,000 4,700 18,500

Ans: Adjusted Trial Balance Total 42,200

[N.B.-Assume work sheet prepare as one month]

Ans. to the question No. 8

Mr. Chowdhury Enterprise

Non operating exp: 1,200

Non operating income: (500) 20,000

Mr. Chowdhury Enterprise

Mr. Chowdhury Enterprise

B.B.A PART-I (FIRST SEMESTER) EXAMINATION, 2006

6. (a) What is Bank Reconciliation Statement?

7. (a) Describe the advantages and disadvantages of FIFO and

You are required to prepare a tabular analysis of the transactions using

9. (a) What is purchase discount lost? Show the difference between

10. The following is the trial balance of Hanif Enterprise as on

Account titles Debit Credit

The following adjustments are to be accounted for:

Accrued salaries expense Tk. 1,500

Depreciation on furniture and equipment is to be

Make an allowance for bad debts at the rate of 6% on accounts

March 1 Beginning inventories 24 units Tk. 10 per unit.

Office equipment 80,000

13. Write short notes:

Classified balance sheet.

81,50 2,000 10,000 2,000 6,000 3,000 2,000 1,02,5

Cost of goods sold 5,000

Ans. to the question No.10

Net income 25,000

Service provided by a public account included----

Accrued revenue is-----

Which of the following is not part of the recording process?

3. (a) what is meaning of GAAA?

4. (a) What are the major types of adjusting entries?

January 1,2006 Taka

5 (a.) what is a trial balance and what is its primary purpose?

6. (a) Define the terms assets, liabilities and owner’s equity.

7. (a). Explain the meaning of the credit terms 2\10 .n\30

April 1 Invested TK.10, 00,000 cash to start the business.

9. Mr. Firoj is a licensed architect. During the first month of the