ACCOUNTING

Time allowed – 2:15 Hours

Total marks – 100
[N.B. – The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take account of
the quality of language and of the manager in which the answers are presented. Different parts, if any, of the same
question must be answered in one place in order of sequence.]
Marks

1. (a) There are four factors or causes that contribute to depreciation of a Fixed Asset. List these factors or causes. 3
(b) List five accounting errors that do not affect the agreement of the trial balance. 3
(c) List five accounting errors that affect the agreement of the trial balance. 3
(d) Identify the different methods of valuation of inventory. Which method do you think is suitable for
the oil refinery companies in line with IAS 2? 3
2. Khan Hospital, a privately owned hospital keeps accounting records on a cash basis. In the year 2018,
the hospital received Tk. 24,000,000 from the patients and paid Tk. 13,600,000 for operating expenses.
The accounting records reveal the following balances:
January 1, 2018 December 31, 2018
Accounts receivable Tk. 960,000 Tk. 720,000
Unearned service revenue - Tk. 320,000
Accrued liabilities Tk. 160,000 Tk. 440,000
Prepaid expenses Tk. 144,000 Tk. 216,000
The management wants to convert the cash basis accounting records into accrual basis accounting for
presentation to the investors and creditors.
Requirements:
(a) Compute accrual basis Service Revenue of the hospital during 2018. 5
(b) Compute accrual basis operating expenses of the hospital during 2018. 5
3. State with reasons whether the following are Capital or Revenue Expenditure: 5
i) Expenses incurred in connection with obtaining a license for starting the factory were Tk. 10,000.
ii) Rings and Pistons of an engine were changed at a cost of Tk. 5,000 to get full efficiency.
iii) Tk. 2,000 spent as lawyer’s fee to defend a suit claiming that the firm’s factory site belonged to the
Plaintiff. The suit was not successful.
iv) Tk. 20,000 custom duties are paid on import of machinery for modernization of the factory production
during the current year and Tk. 6,000 is paid on import duty for purchase of raw material.
v) Tk. 18,000 interests had accrued during the year on term loan obtained and utilized for the
construction of factory building; however, the production has not been commenced till the last date
of the accounting year.
4. The trial balance of Better Enterprise as at 30 June 2019 was balanced by the inclusion of the debit
balance difference of Tk.15,000. Further investigations revealed the following errors:
i) The total sales day book for June 2019 had been overstated by Tk. 13,500.
ii) Discount received of Tk. 7,500 in January 2019 had been posted to the debit of the discount allowed account.
iii) Payment by cheque to a creditor for Tk. 9,450 had been entered in the cash book as Tk. 4,050.
iv) Wages of Tk. 12,600 paid in the month of June had not been posted from the cash book.
v) In June 2019, purchases of new equipment amounting to Tk. 30,000 had been debited to the purchases account.
vi) A remittance of Tk. 8,100 received from a credit customer in June 2019, had been credited to the sales account.
vii) The proprietor of Better Enterprise withdrew a cheque of Tk. 4,200 for his personal use. The bank account
and the drawings account were both credited.
Requirements: Pass necessary journal entries to correct each of the above errors discovered. 7

Page 1 of 3
5. The Trial Balance before and after adjustment for South Bengal Ltd. at the end of its financial year 2018
are presented below:
Before Adjustment (Tk.) After Adjustment (Tk.)
Debit Credit Debit Credit
Cash and Bank Balance 8,32,000 8,32,000
Accounts receivable 7,04,000 8,00,000
Stationeries 1,84,000 56,000
Prepaid Insurance 3,20,000 2,00,000
Office Equipment 11,20,000 11,20,000
Accumulated Depreciation- Off. Equipment 2,88,000 3,92,000
Salaries and Wages Payable - 88,000
Unearned Rent Revenue 1,20,000 64,000
Share Capital 14,24,000 14,24,000
Retained Earnings 2,88,000 2,88,000
Sales Revenue 27,20,000 28,16,000
Rent Revenue 8,80,000 9,36,000
Salaries and Wages Expense 13,60,000 14,48,000
Stationeries expense 1,28,000
Rent expense 12,00,000 12,00,000
Depreciation expense 1,04,000
Insurance expense 1,20,000
57,20,000 57,20,000 60,08,000 60,08,000
Requirements:
(a) Prepare adjusting entries that were made. 10
(b) Prepare closing entries at the year end. 8

6. Sikder Ltd. holds an account with XYZ Bank. On June 30, 2019, the bank statement of Sikder Ltd.
showed credit balance of Tk. 3,20,000 while the company closed its cash book with a debit balance of
Tk. 1,52,000. After scrutiny, the following issues were identified:
i) Cheque of Tk. 80,000 and Tk. 40,000 issued as on 30th March 2019, but not yet cleared.
ii) An insurance premium paid by bank Tk. 16,000. It is not yet recorded in Cash Book.
iii) An outgoing cheque of Tk. 160,000 recorded twice in the Cash Book.
iv) Payment of a cheque of Tk. 32,000 recorded twice in Bank statement.
v) Dividends received Tk. 40,000 recorded only in the bank statements and not in Cash Book.
vi) Cheque of Tk. 56,000 deposited on 29th May 2019. But, it is not yet collected.
vii) Bank charges of Tk. 2,200 for printing new cheque books ordered by company and Tk. 5,000 for operating
the bank account debited only in Bank Statement.
viii) The bank statement rejected a deposit of Tk. 40,000 due to not having sufficient funds, and charged the
company a fee of Tk. 800 associated with the rejection.

Requirements:
(a) Calculate correct cash book balance as at 30 June 2019 8
(b) Prepare a bank reconciliation statement as at 30 June 2019. 5

7. Tulip Pvt. Ltd. commenced business on 1st January, 2015. On 1st January, 2015 a Machinery was
purchased for Tk.7,00,000. The company has been following the policy mentioned below:
i) Charging depreciation at 15% per annum on diminishing balance basis; and
ii) Charging full year’s depreciation on additions during the year irrespective of the date of purchase. The
company added following machines:
On 1.8.2016 Tk. 1,50,000
On 30.9.2019 Tk. 2,00,000

Page 2 of 3
 On 1.1.2019, the company decided to change the method of depreciation and rate of depreciation to 10%
on straight line basis with retrospective effect from 1.1.2015, the adjustment will be made in the
accounts for the year ending 31.12.2019.
Requirements:
Calculate the depreciation to be adjusted in Machinery account on 1.1.2019 and show the Ledger
Account of Machinery for the year 2019. 10
8. The Trial Balance of Rohan Ltd., a renowned publicly listed manufacturing company is given below:
Rohan Ltd.
Trial Balance
As at 30 June 2019
Tk.' 000 Tk.' 000
Cash 4,000
Trade receivables 91,000
Short term investment 65,000
Inventory (1 July, 2018) 97,500
Land 106,000
Equipment 100,000
Accumulated depreciation – Equipment 45,000
Trade payables 143,300
Allowance for doubtful debts 5,000
Long term borrowings 50,000
Share capital- Common shares 40,000
15% irredeemable preference shares 10,000
Retained earnings 55,000
Sales 475,000
Investment income 10,000
Purchases 256,250
Transportation 5,000
General & administrative expenses 43,750
Selling & Distribution expenses 34,550
Salaries - Factory 15,000
Salaries - Administration 13,750
Interest - Long term borrowing 1,500
833,300 833,300
The following information are yet to be adjusted:
i) Provision for tax amounting to Tk. 37,500,000 on the income of the year ended 30 June 2019 is required to
be provided.
ii) Equipment are depreciated at 20% on straight line basis.
iii) After physical counting of inventory, the value of closing inventory has been determined at Tk.
101,000,000
iv) Interest on long term borrowing is payable semi-annually. Interest rate on the loan is 6%.
v) Trade receivables of Tk. 750,000 should be written off as per Board decision. A further allowance of Tk.
5,000,000 is to be provided for irrecoverable debt.
vi) Company allocates depreciation expense between cost of sales, distribution costs and administrative
expenses at 50%, 25% and 25% respectively.
vii) At 30 June 2019, impairment test on Equipment revealed that an impairment loss has to be recognized.
The fair value less costs to sell the asset at 30 June 2019 was 32,500,000 and value in use has been
estimated by the company at Tk. 33,500,000.
Requirements:
(a) Prepare the Statement of comprehensive income for the year ended on 30 June 2019. 15
(b) Prepare the Statement of financial position as at 30 June 2019. 10

--- The End ---

Page 3 of 3