ACCOUNTING

Time allowed – 2 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 manner 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) Users use accounting information as a helping tool to make economic decisions. Briefly 4
discuss the qualitative characteristics that accounting information should possess to be useful
to the reasonable users.
(b) When departure from the BAS is allowed? What are the disclosure requirements for such an 3
event?
(c) Define ‘Going Concern’ assumption. If there is significant doubt about the entitity’s going 3
concern, how would you report the assets?
(d) What are the reasons for which the control account may not agree with the sum of the 3
individual customers’ or suppliers’ balances?

2 (a) The following transactions were extracted from the daily book of entries of M/s. Rahim &
Co.

(i) Mr. Rahim started business with Tk. 100,000 cash and provided inventory valued at
Tk. 10,000.
(ii) Mr. Rahim took a 10%, 5 years loan of Tk. 50,000 from bank for business.
(iii) Mr. Rahim purchased office furniture for Tk. 12,000. The useful life of the furniture
is five years.
(iv) Goods costing Tk. 20,000 (including VAT @15%) is purchased for resale during the
month.
(v) Total sales (including VAT @15%) amounted to Tk. 50,000 for the month. Out of
the invoiced amount, 60% is received in cash.
(vi) Salary of Tk. 5,000 is paid to the staff from the personal bank account of Mr. Rahim.
(vii) VAT is deposited to the govt. treasury.
(viii) Utility bills for the month Tk 10,000 is received.

Required: Prepare journal entries to record the above transactions. 7

(b) Luna runs a bookshop. The trial balance items related to accounts receivable and sales as at
31 December 2014 are:
 Net credit sales Tk. 45,000,
 Accounts Receivable Tk. 13,000
 Bad debt expense Tk. 700 and
 Allowance for doubtful debt Tk. 900.
She needs to take account of the following matters for adjustment:

(i) As at 31.12.2014 accounts receivable Tk. 695 from a customer to be written off for
which no provision was made earlier. Luna is also concerned that Tk. 250 may be
difficult to recover from the same customer.
(ii) During the year 2014, Tk. 200 was banked in respect of a receivable which had been
written off in the year ended 31 December 2013. The only entry in this respect was made
in the cash at bank account.
(iii) The accounting policy is to maintain allowance for doubtful debt @ 3% of net credit
sales.
Required: Prepare the adjusting journal entries to record the above adjustments. 5

(c) Khan Ceramics sells ceramic products including dinner set and others. It sent out a sales
invoice to a customer for 10 dinner sets, but the employee creating the invoice accidentally
typed in a total of Tk. 50,000 instead of Tk. 5,000. The customer has been overcharged by Tk.
45,000.

Required: What is Khan Ceramics to do in the above circumstance? Explain. 5

3 (a) Kiron Ltd. had the following record of transactions for the year 2014:

Beginning inventories: 15,000 units for Tk. 30,000. Purchases and sales details were as
follows:
Purchase details Sales details
Date Units Unit cost Total Date Units Price
(Tk) cost (Tk) Sold (Tk)
per unit
01/01/14 60,000 2.4 144,000 15/01/14 60,000 3.0
02/02/14 50,000 2.5 125,000 17/05/14 50,000 3.2
30/06/14 50,000 2.6 130,000 30/10/14 60,000 3.1
24/12/14 70,000 2.8 196,000
Total 230,000 595,000 170,000

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 Required:
10
(i) Calculate ‘cost of goods sold’ and value of ‘closing inventory’ under FIFO and
average cost (AVCO) method. Which method is more justified in the context of 5
pharmaceuticals Industry?
(ii) Calculate the gross profit of the Kiron Ltd.

(b) At the end of 30 June 2015, Gouri’s cash book showed that she had an overdraft of Tk. 300
on her current account at the bank. A bank statement as at 30 June 2015 showed that she has
an overdraft of Tk. 150. On checking the cash book and bank statement you found the
following:
(i) Cheques issued to a supplier amounting to Tk. 485, had been entered in the cash
book, but not yet been presented by the supplier.
(ii) Cheques received and deposited amounting to Tk. 400 had been entered in the
cash book, but had not yet been credited by the bank.
(iii) Bank charges Tk. 35 debited by the bank but it was not credited in the cash
book.
(iv) A customer has deposited Tk. 200 directly into the bank which has not been
recorded in the cash book.
(v) A cheque for Tk. 50 from Banani was recorded and banked on 24 June. This
was returned unpaid on 30 June. No entry has been made in the cash book.
(vi) An insurance premium paid of Tk. 50 is transferred by the bank as per previous
instruction, but was recorded by the bank on 5 July 2014. This amount was duly
credited in the cash book.
(vii) A cheque Tk 20.000 has been deposited in the bank on 26 June 2015 but
necessary entry was not made in the General ledger. However, the said cheque
was not honored due to invisible issuer signature.
Required:
.
(i) Prepare a statement of corrected cash book as on 31 December 2014 5
(ii) Prepare a bank reconciliation statement as per corrected cash book’s customer wise. 5
(iii) Prepare adjusted net profit for the year ended on 31 December 2014. Assume that,
the company assessed Gross profit Tk. 100,000 before adjusting the above entries. 5

4 (a) A business purchased two machines on 1 January 2010 at a cost of Tk. 25,000 each. Each had
an estimated life of 6 years and a zero residual value. The straight line method of depreciation
is used. Owing to an unforeseen slump in market demand, the business decided to reduce its
output, and switch to making other products instead.

On 31 March 2012, one machine was sold (on credit) for Tk. 15,000. Later in the year,
however, it was decided to abandon production altogether, and the second machine was sold
on 1 December 2012 for Tk. 6,500 (cash).

Required:

Prepare the Machinery account and disposal account. 5

(b) At the year end 30 June 2015, the Trial Balance of M/s. Zaman & Co. contained a credit
balance in suspense account of Tk. 1,040. Other trial balance items related to revenue and
expenses are as follows.

Account Name Taka

Purchase 19,500
Discount received 150
Unearned service revenue 5,600
Sales revenue 33,000
Selling expense 1,500
Depreciation expense – Plant 750
Interest expense 500
Distribution expense 6,750
Administrative expense 14,000
Office rent expense 2,040
Bad debt expense 1,000
Closing inventory 2,000

The following facts revealed afterwards:

(a) A sale of goods on credit for Tk. 1,000 had been omitted from the sales account.
(b) A payment to supplier of Tk. 240 has been recorded as revenue expenditure in
the distribution expenses.
(c) Cash discount of Tk. 150 had been taken into account on paying a supplier,
BMW, even though the payment was made outside the time limit. BMW is
insisting that Tk. 150 is still payable.
(d) A raw material purchase of Tk. 350 had been recorded in the purchase account
as Tk. 850, but the accounts payable account was correctly written-up.
(e) The purchases day book included a credit note for Tk. 230 as an invoice in the
total column. The correct entry was made in the purchases account.

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 Required to:

(i) Correct the above facts through proper journal entries, and 8
(ii) Prepare Income statement year end 30 June 2015. 7

5 The Trial balance for Chowdhury Ltd. as of June 30, 2015 follows:

Chowdhury Ltd.
Trial Balance
As at 30 June 2015
Accounts title Tk. Tk.
Cash 160,000
Inventory (1 July 2014) 3,900,000
Trade receivables 3,640,000
Land 4,240,000
Machinery and office equipment 4,000,000
Prepaid Insurance (1 July 2014) 600,000
Trade payables 3,732,000
Borrowings from Bank 2,000,000
Accumulated depreciation- Machinery 1,800,000
Allowance for irrecoverable debts 200,000
Ordinary shares (Tk. 10 par value) 2,000,000
Retained earnings 2,200,000
Sales 19,000,000
Interest expense 60,000
Selling and distribution expense 1,432,000
General and administrative expenses 2,050,000
Salaries (Factory) 600,000
Purchases 10,150,000
Purchase return 100,000
Transportation in 200,000
31,032,000 31,032,000

Additional information to be taken into consideration:

(i) Annual depreciation on the machinery and office equipment is Tk. 800,000 (70%
relates to factory, 20% relates to distribution and 10% relates to administrative)
(ii) The cost of expired insurance is Tk. 400,000
(iii) Interest expense amounting Tk. 60,000 is to be accrued at the year end.
(iv) Value of inventory after physical verification stood at Tk. 4,040,000
(v) Allowance for doubtful debt should be increased by Tk. 200,000
(vi) Income Tax for the year is estimated at Tk. 1,500,000
(vii) Provision for electricity bill for the month of June was not provided in the accounts.
Electricity bill for the month of May was Tk. 10,000 (75% relates to factory and
25% relates to administrative)

Required:

(i) Prepare Statement of profit or loss and other comprehensive income for the year 10
ended 30 June 2015 as per guideline of BAS 1.
10
(ii) Prepare Statement of Financial position as on 30 June 2015 as per guideline of BAS 1.

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