Accounting_Knowledge

Question Summary
Marks
Concept & Convension: (chapter 7)

1. What are the components to be included in a complete set of financial statements as per BAS 1? 6
(Dec_2010)

9. Explain the following terms as per BAS framework: 9 (Dec_2010)

a. Materiality and Aggregation

b. Offsetting
c. Neutrality and Completeness

1. (a) “A business should produce information about its activities because there are user
groups who want or need to know that information in order to make economic decisions,” - Discuss
in the light of BAS-1

(b) Summarize the Qualitative characteristics of useful accounting statement according to BAS
Framework. 5+ 5 (Dec_2011)

4. What is the meaning of following terms as per BAS Framework?

(i) Going concern

(ii) Substance over form 8(Dec_2011)

1. a. Write down the objectives of financial statements. 6

b. What are the components of a complete set of financial statements in line with
Bangladesh Accounting Standard-1? 4 (Dec_2012)

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3. State the Generally Accepted Accounting Principles with argument for recording the
following transactions in the books of XYZ company:

(1) Purchase a computer as on 30-10-2012 at Tk.120,000 with a fair value of Tk.115,000 on that date.

(2) Service rendered under annual maintenance contract for Tk.10,000 but no bill has been drawn on.

(3) Paid salary of Tk.1,000 for the month of October 2012 on 1.11.2012.

(4) Depreciation charged Tk.10,000.

(5) Purchased goods Tk.100,000 from ABC Company during October 2012.
5x2=10 (Dec_2012)

1. (a) What are the objectives of financial statements?

(b) What are the qualitative characteristics of financial information? 6 (June_2012)

5. Write short notes on following concepts: 4x3=12

(i) Going concern
(ii) Accrual basis of accounting
(iii) Materiality
(June_2012)
1. Write short notes on the followings: 10

i) Capital income, ii) Historical cost, iii) Cash discount, iv) Offsetting.

(June_2011)

8. a) Define Going concern as per BAS 1.

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b) A retailer commence business on 1 January and buys 20 washing machines, costing

Tk.10,000.
During the year he sells 18 machines at Tk.15,000 each. How should the remaining machines be
valued at 31 December in the following circumstances?
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i) He is forced to close down his business at the end of the year and the remaining machines will
realize only Tk.6,000 each in a forced sale.
ii) He intends to continue his business into the next year.
(June_2010)

5. What is the meaning of following terms as per BAS Framework?

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a. Prudence
b. Substance over form.
(June_2010)

2. According to BFRS framework who are the users of accounting information and
what are their needs? 5
(June_2010)

1. “Financial statements are required to give a true and fair view of the financial results of the
entity”‐ Explain in the light of BFRS. 5 (June_2010)

Non-Current Assets:

3. A Company has two non -current assets. Asset M was bought for Tk. 17,00,000 some years ago and is
now valued at Tk. 49,00,000. This asset is not depreciated. Asset N was bought for Tk. 10,00,000 five years
ago and has been depreciated at 10% on cost per annum. It is now valued at Tk. 16,00,000. There is no change to
its useful life.

Requirement:
Show the journal entries of the revaluations and extract balance sheet of the non current assets and
the revaluation reserve. Calculate the annual depreciation charge for assets N following the revaluation.
(Dec_2010) 8

4. Differentiate between Finance Lease and Operating Lease. 6(Dec_2010)

5. What is the difference between Accounting Depreciation and Tax Depreciation. 3+5(Dec_2010)

Calculate the year wise depreciation and written down value under two options
from the under noted information.
Cost of vehicle: Taka 100,000.00
Book rate of Depreciation: 20% on straight line basis
Tax rate of Depreciation: 20% on reducing
balance method Economic Life of the Asset:
5 years
Residual value after 5 years: Taka 40,000.00
Sale proceeds of vehicle: Taka 35,000.00
Selling expense: Taka 5,000.00

12. Define the following: 6(Dec_2010)

(a) Tangible and Intangible Asset
(b) Goodwill
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(c) Share Premium

6. What is impairment loss? A business purchased a building on 1 January 2005 at a cost of Tk.1,00,000. The
building had a 20 years life. On 31 December 2009, the business decides that since property prices have fallen
sharply and future trading prospect are poor, the building is now worth only Tk.60,000 and the value of
the asset should be reduced accordingly in the financial statements of the business for the year ended 31
December 2009.
The building was being depreciated over 20 years, at the rate of 5% per annum on cost.
Calculate the impairment loss, revised depreciation and annual charge against profit in 2009.
4+6 (Dec_2011)

9. PQR company has two non‐current assets. Asset M was bought for Tk.2,40,000 some year ago and is now
valued at Tk.5,000,000. This asset is not depreciated.
Asset N was bought for Tk.7,00,000 five years ago and has been depreciated at 10% on cost per annum. It
is now valued at Tk.12,00,000. There is no change to its useful life.
Show the journals to record the asset revaluations, and show the balance sheet extracts for the non‐ current
assets and the revaluation reserve. Calculate the annual depreciation charge for asset N
following the revaluation. 9 (June_2011)

8. On 1 January 2008 XYZ Co. buys a non‐current asset for Tk.12,00,000 with an estimated useful life of 20 years
and no residual value. The company depreciates its non‐current assets on a straight line basis. Its year end is 31
December. On 31 December 2010 the asset will be included in the balance sheet as follows:
Tk.
Non‐current asset at cost 12,00,000
Accumulated depreciation ( 180,000)

10,20,000
On 1 January 2011 the remaining useful life is revised to 15 years from that date. Calculate the revised
annual depreciation charge. 7 (June_2011)

11. Explain “Changes in Accounting Estimates” according to BAS‐8 with examples. 5 (June_2010)

12. Write a memorandum to the Board of Directors of a banking company justifying the rationale for re‐
estimating the useful lives of the fixed assets and changing the depreciation method from Reducing Balance Method
to Straight Line Method. 4 (June_2010)

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13. An assets had a cost of Tk.1,00,000, an estimated useful life of 10 years and a residual value of
Tk.18,000. At the start of year 3 a review shows its remaining useful life was unchanged but the residual
value was reduced to nil.
Calculate the depreciation charge for each year 1 to 3 on the straight line basis. 4
(June_2010)

14. PQR commenced trading on 1 January 2001. On that date he purchased a building for Tk.1,20,000 to be
depreciated over 30 years with residual value. After five years trading on 1 January 2006 PQR concludes his
building has a fair value of Tk.175,000. It still has a further 25 years of useful life remaining.
Give Journal entries for revaluation. 5 (June_2010)

Inventory

8. What is conversion cost and replacement cost? A business has valued its inventory at Tk.1000,
being the selling price of the items. What is the cost of closing inventory at cost assuring the business
operates? 3+4 (Dec_2010)
(i) On a margin of 25%
(ii) On a mark-up of 25%

6. A firm has the following transactions with respect to its product R.

Opening inventory: nil
Buys 15 units at Tk.300 and 17 units at Tk.250 per
unit Sells 13 units Tk.400 per unit
Buys 11 units at Tk.200 per unit
Sells 17 units at Tk.450 per unit
Using FIFO, calculate the following on an item by item basis:
(i) Closing inventory and (ii) Cost of sales 3x2=6 (June_2012)

9. How inventories are measured as per BAS 2? Explain the concept of Net Realizable value (NRV). 5 (June_2010)

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Recoverable Debts

6. What is trade and cash discount? Flora Ltd recently purchased 50 televisions at the cost of Tk. 20,000.00
each. A 11% discount was negotiated together with a 5.50% cash discount if payment was made within 16 days.

2+4 (Dec_2010)
Calculate the following:
a. total trade discount
b. total cash discount

7. What is the income statement? On 1 January 2010, X had doubtful debts allowances of Tk. 1000. During 2010 he
wrote off debts of Tk. 600 and was paid Tk. 80 by the liquidator of a company whose debts had been written off
completely in 2009. At the end of 2010 it was decided to adjust the doubtful debts allowance to Tk.900.

What is the net expense for irrecoverable debts in the income statement for 2010? 2+4 (Dec_2010)

2. Soft Supplier Co. recently purchased from Hard Imports Co. 10 printers originally priced at Tk.20000 each. A
10% trade discount was negotiated together with a 5% cash discount if payment was made within 14 days.
Calculate the following:
i) The total of the trade discount,
ii) The total of the cash discount. 6 (Dec_2011)

5. Mr. Shafayet realizes that his business will suffer an increase in customers not paying in the future
and so he decides to make an allowance against those who are at greater risk at each year end.
Balance on receivables a/c Balance at risk of
default
Tk. Tk.
Year end 31.12.07 15,200 304
Year end 31.12.08 17,100 342
Year end 31.12.09 21,400 214
Requirements:
For each of the three years:
(a) What are the closing trade receivables and allowances for receivables balance? 6
(b) What charge is made to the income statement? 3

(June_2011)

Cost of Sales

8. Explain cost of sales. Zabed had Tk.15,000 of inventory at January 2010. During the year
he purchased inventory for Tk.98,000, including carriage inwards of Tk.150. He made sales of
Tk.150,000, incurring delivery cost to his customers of Tk.2,400. At December 2010 he realized
that he had inventory costing only Tk.2000 left; goods costing Tk.18,000 had been stolen. The
insurance had agreed to pay his claim for 75% of the cost.

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You are required to prepare Zabed’s income statement.
4+6 (Dec_2011)
12. Horace Ltd. has the following transactions with respect to its product T:
Opening inventory: Nil
Buys 10 units at Tk.300 per unit Buys
12 units at Tk.250 per unit Sells 8
units at Tk.400 per unit Buys 6 units
at Tk.200 per unit Sells 12 units at
Tk.400 per unit
Using FIFO, calculate the following on an item by item basis: 10
i) Closing inventory, ii) Sales, iii) Cost of sales, iv) Gross profit

(June_2011)

Income Statement and Statement of Financial Position

4. An analysis of the transactions made by KLCC Ltd., a software manufacturing company for the month of
August 2012 is shown below:
Assets Liability + Owners Equity
Cash Accounts Office Office Accounts Owners Explanations
Receivable supplies equipments Payable equity
1 +15,000 +15,000 Investment
2 -2,000 +5,000 +3,000
3 - 750 + 750
4 +2,600 +3,700 +6,300
5 - 1,500 -1,500
6 -2,000 -2,000
7 - 650 - 650
8 + 450 - 450
9 - 3,900 - 3,900
10 + 500 - 500
Required:
(a) Describe each transaction that occurred for the month.
(b) Determine the increase in owner’s equity (O.E.) during the month.
(c) Compute the amount of net income for the month. 10+5+5=20
(Dec_2012)

3. The Unique shop has the following trial balance as at 30 September 2011.
Tk. Tk.
Sales 1,56,000
Purchase 65,000
Non-current assets 2,00,000
Inventory at 1.10.10 10,000
Cash at Bank 12,000
Trade Receivables 54,000
Trade Payables 40,000

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 Distribution costs 10,000
Cash in hand 2,000
Administrative Expenses 15,000
Finance Costs 5,000
Carriage Inward 1,000
Carriage outward 2,000
Capital account 1.10.10 1,80,000
3,76,000 3,76,000
The following additional information are available:
(a) Closing inventory at 30.9.11 is Tk.13,000, after writing off damaged goods of Tk.2,000.
(b) Included in administrative expenses is machinery rental of Tk.6,000 covering the year to 31 December
2011.
(c) A late invoice for Tk.12,000 covering rent for the year ended 30 June 2012 has not been
included in the trial balance.
Prepare the statement of comprehensive income and financial position for the year ended 30
September 2011
(June_2012)

7. (a) Disney Ltd, has 10,00,000 ordinary shares of Tk.10.00 each and 2,00,000 preference shares of
Tk.10.00 each. The company manufactures gas appliances. During the financial year to 31 December
2011 the company had to pay Tk.50,000 compensation from an uninsured claim for personal injuries
suffered by a customer while on the company premises. The profit for year ended December 2011 was
Tk.20,00,000. Disney Ltd. declared dividend on preference share @ 4%. Assuming an income tax rate of
45%, ascertain the profit from business and calculate earnings per share. 8 (June_2012)

(b) What are the accounting treatments related with dividend under the following circumstances: 3x3=9
(i) Payment of final dividend.
(ii) Declaration of interim dividend.
(iii) Declaration of final dividend.
(June_2012)

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Conversion & Acquisition

11. Rahmat, a sole trader, has agreed to sell his business to X Ltd for Tk. 1,17,000 in consideration to be
paid in Tk.0.50 shares valued at Tk. 0.90 each. The following information is available about
Rahmat’s business as at the sale date:
8 (Dec_2010)
Tk.
Cash 2,220
Fixed assets (net book value) 43,000
Creditors 3,250
Stock 2,100
Debtors 3,150
X Ltd values Rahmat’s fixed assets at Tk. 45,000 and stock Tk. 2,000; Rahmat is to retain
the cash and pay off the creditors.
Calculate:
(a) The gain/ loss on realization in Rahmat’s book.
(b) Goodwill and shares to be issued by X Ltd.

11. Kazi a sole trader, has agreed to sell his business to Lishari Ltd. for Tk.100,000, the consideration to be paid in 1
Taka share valued Tk.1.60 each. The following information is available about Kazi’s business as at sale date:

Taka
Fixed assets (net book value) 49,500
Stock 4,200
Debtors 5,740
Cash 1,850
Creditors 2,860
Lishari Ltd. values Kazi’s fixed assets at Tk.60,000 and stock at Tk.3,000. Anja is to
retain the cash and
pay off the creditors.
(i) What is the gain on realization in Kazi’s books? 5
(ii) With how many shares in Lishari Ltd. will Kazi be issued? 5
(Dec_2011)

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Share Issue, Right & Bonus:

14. The balance sheet of Quality Limited contains the following information. 9(Dec_2010)

Assets Tk’000
Non current assets 19,000
Current assets 3,600
Total assets 22,600
=====
Equity and liabilities
Ordinary shares of Tk.0.50 each 6,000
Share premium account 5,700
Retained earnings 7,000
Liabilities 3,900
Total equity and liabilities 22,600

The company decided to make a 1 for 4 rights issue for cash, fully paid, at a price
of Tk. 1.50 per share. Requirement:
What are the balance for (a) current assets (b) ordinary shares and (c) share premium after the rights issue?

7. (a) A company begins trading on 1 January 2010 and sales of Tk.1,50,000 during
the year to 31 December 2010. At 31 December there are receivables of
Tk.12,000. Of these it is uncertain whether Tk.5,000 will be paid. Exercise your
prudence to solve the matter.
5(Dec_2011)

(b) Fiza trades as a carpenter. He makes furniture for customer at an agreed price of Tk.25,000. At the end
Fiza’s accounting year the job is unfinished and the following data have been assembled.
Cost incurred for making the furniture to date Tk.15,500
Further estimated cost to complete the job Tk.12,200
Total cost Tk.27,700
What will be the net realizable value of WIP?
5 (Dec_2011)

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Partnership

9. On the 30th June 2008, X and Y who have been trading in partnership and sharing profits of 2/3 rd and
1/3rd, decide to dissolve and trade separately. Their Balance sheet on that date showed as follows:
Liabilities: Assets:
Creditors Tk.14,000 Cash at Bank Tk. 3,000
Reserve a/c Tk. 3,000 Sundry Debtors Tk.12,500
Current a/c X Tk. 1,500 Less Reserve for Bad debts Tk. 500
Y Tk. 1,500 Tk. 3,000 Tk 12,000
Investments Tk. 5,000

Capital a/c X Tk.20,000 Stock Tk.29,000

Y Tk.10,000 Tk.30,000 Furniture and Fixture Tk. 1,000
Tk.50,000 Tk.50,000

X agrees to discharge the liabilities and takes over the bank balance. He also takes over the Book debts at Tk.10,000.
Y takes over the stock at Tk.30,000, Fixture at Tk.900 and the investments at Tk.8,500. Y is allowed to carry on
the trade in the old firm’s name on his taking over the Goodwill at Tk.9,600.
Required:
i) Realization Account and ii) Current Account. 5+5 (Dec_2011)

11. L, N and M are in partnership and share of profits in the ratio 3:2:1. They also agree that:
(a) All three should be received interest at 12% on capital.
(b) M should receive a salary of Tk.6,000 per annum.
(c) Interest will be charged on drawings at the rate of 3% (charged on the total drawings in the year).
(d) The interest rate on the Tk.6,000 loan from L is 5%.
Their capital and current accounts as at 1 January 2010 are as follows:
Tk. Tk.
Capital account as at 1.1.2010
L 20,000
N 8,000
M 6,000 34,000
Current account as at 1.1.2010
L 9,500
N 3,300
M 8,800 21,600
Drawings made during the year to 31 December 2010 were:
L (6,000)
N (4,000)
M (7,000) (17,000)
38,600
The net profit for the year to 31 December 2010 was Tk.24,870 before deducting loan interest.
Prepare a profit and loss appropriation statement for the year to 31 December 2010, and the
partners capital accounts and current accounts at that date. 10 (June_2011)

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