College of Administration and Finance Sciences

Assignment (1)
Deadline: Saturday 16/10/2021 @ 23:59

Course Name: Principles of

Student’s Name:
Accounting
Course Code: ACCT101 Student’s ID Number:
Semester: 1st CRN:
Academic Year: 1443 H

For Instructor’s Use only

Instructor’s Name:
Students’ Grade: /5 Level of Marks: High/Middle/Low

Instructions – PLEASE READ THEM CAREFULLY

 The Assignment must be submitted on Blackboard (WORD format only) via
allocated folder.
 Assignments submitted through email will not be accepted.
 Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
page.
 Students must mention question number clearly in their answer.
 Late submission will NOT be accepted.
 Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No
exceptions.
 All answers must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism.
 Submissions without this cover page will NOT be accepted.
 College of Administration and Finance Sciences

Assignment Question(s): (Marks 5)

Q1. Discuss three of the accounting principles and assumptions with examples. (1 Mark)
Going concern
              Going concern means unless otherwise stated an entity is supposed to operate for longer term
and the operations will be carried out for a long term in the future. Going concern assumption is a
fundamental accounting assumption .Example the financial statement of Apple company is based on
going concern assumption as it is supposed to be continued for long term
Accrual
              Accrual basis accounting means that the accounting of the transaction will be done as and when
the transaction are incurred and not when the cash settlement is done .
For example., if the salary expense of current period is not paid till the end of current period ,it will still be
recorded as expenditure of current period as the expenditure has been incurred and the actual payment
is irrelevant
Conservatism / prudence
              While doing accounting the principle of conservatism is used . It means that we shall be
conservative towards recording of transaction . The expenses shall be provided and the provision shall
be made if they are probable but we shall not book income until the future income are virtually certain .
But we shall always make provision for expenses and losses . For example if loosing a legal suit is likely
then we shall make provision for compensation by making a reliable estimate

Q2. In chapter 3, slide 42, there is a summary of the accounting cycle. Describe each step. (2 Marks)
Accounting cycle includes :
Identifying the transaction
              The accounting transaction which shall be recorded has to be identified at the first place . It
helps us to determine what transactions are to be recorded
Analyzing the transaction
              In this step we analyze how the transaction affects the financial statements of the entity . Does it
affect the statement of profit and loss or does it affect the position of assets and liabilities and the effect it
has on cash flow of entity
Recording the transaction
              We then record the transaction to various books , like journal , ledger and then prepare trial
balance from it and finally financial statements

Q3. Explain the purpose and the importance of the income statement, and prepare the income
statement for ABC company based on the following information taken from the trial balance in 2020
(2 Marks)
 College of Administration and Finance Sciences

Consulting revenue SAR50,000

Rental revenue 20,000
Supplies expense 5,000
Rent expense 30,000
Wages expense 15,000

The income statement is being prepared in order to find out what is the end result of the company I.E.
whether the business in earning the profit or is suffering from the loss at the end of the financial year.

It helps the business to know that the year that the business was done, whether in that year the business
has earned anything or not.

Please comment if you need any clarifications.