BUS505.

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Course Name: Accounting Principles
Semester: Fall 2021
1st Midterm or Group Assignment – 1
Group Name – The Inception

Group Members Name & NSU IDs

Name of the Group Member NSU IDs
Tasmia Tabassum Arony 2135042660
Md. Samiur Rahman 2135091060
Khan Tofael Faridi 2135226660
Chowdhury Nafis Nusrat Asha 2135471660
Sunjida Ansari 2125182660
Sadia Afrin 2135075660

Submitted To
Dr. Samina Rahman
Assistant Professor & Faculty Member
Department of Accounting & Finance
North South University, Dhaka - 1229

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 Part - A
Question 1: In the current role of Accountants, “there is more focus on ‘communicating’ and
‘decision making’ rather than ‘identifying’ and ‘recording’ of accounting information” – do
you agree? Why or why not? Justify with an example.
Answer: I totally agree with the statement that Accountants focus more on ‘communicating’ and
‘decision making’ rather than ‘identifying’ and ‘recording’ of accounting information.
According to “The American Accounting Association”, Accounting is the process of identifying,
measuring, and communicating economic information to permit informed judgements and
decisions by users of the information. (Financial Statement, n.d.)
In general, we think the major role of an accountant is to bookkeep or recording, which is
absolutely a myth. An Accountant can be a bookkeeper, but a bookkeeper cannot be an
accountant since an accountant do a lot more than bookkeeping such as preparing tax returns,
evaluating financial operations, offering guidance on cost reduction, revenue enhancement, and
profit maximization, conducting forecasting and risk analysis assessments etc. and collaborate
with other departments of the company.
Accountants prepare and ensure the accuracy of financial documents (Income Statement, Cash
Flow Statement, and Balance Sheet) as well as their compliance with relevant laws and
regulations. After that, they maintain those financial documents and analyze those. They
determine and identify financial strengths, weaknesses and relationships that exist in the
company. In addition, by analyzing those documents, the organization become capable of taking
proper decision about their future goals and mission. Communication is a mandatory job for
accountants. Accountants has to maintain good communication with other departments such
finance, marketing, and management department of the company for conveying such analyzed
data. Even they have to keep good relationship with external group (creditors/investors) through
communication. If accountants do not make proper communication with other departments,
then company won’t be able to run its operations properly.
Here is an example which justify my answer more:
Suppose XYZ is a manufacturing company. It has four different departments: Accounts & Finance,
Marketing, Management and HRM. After one year of operation accounts department makes
Annual financial statements and analyze those. They have identified that their net profit margin
is 2%, Liquidity Ratio (current) is 0.60. This financial analysis is made by the accountant, he
explains that, in this year company earns $2 in every $100. In addition, with that the company
found that liquidity ratio is 0.60 which is nearly. It states that company has less assets (current)
to pay its liabilities. In this situation it won’t be wise to buy new equipment’s or need to find a
finance source. Here, after analyzing the financial statement, they need to communicate
immediately with finance and management department. Here the accountant is not only
accountable for bookkeeping but also for communication. Because other departments can only
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start their work after getting the information from accounts department. This is how accountants
focus more on ‘communicating’ and ‘decision making’.
Question 2: Why it is important to be ‘Ethical’ while preparing Financial Statements?
Answer: Ethics is an integral aspect of finance and accounting. It would not be an exaggeration if
we say that the entire foundation of accounting is strongly based on healthy ethical practices.
Financial statements are prepared usually for different time-frames – monthly, quarterly, and
annually. A company’s accountability largely depends on its financial reports. If there is any
mismanagement in the financial report of an institution, then the institutional reputation will
downfall as well as the institution will eventually lose its customers.
There are three major categories of a financial statement. These are the balance sheet, the
income statement, and the cash-flow statement. They incorporate the financial operability of an
institution in light of its profit or loss, assets, liabilities, and owners’ equity. If any
maladministration is found in any of the financial statements on a later point in time, then it may
lead the institution to a critical state from which there might have a minimal scope of opportunity
to get rid of.
We will now try to explore the reasons that require a healthy ethical structure in order to prepare
the financial statements. The reasons are briefly described below:
1. If any intentional manipulations have been found in the financial statement (considering
the annual financial statement), then the financial statement need to be reformed or
adjusted in no time before getting started with a new fiscal year. It causes a backlog in
the company’s financial services resulting in a serious drawback for the company.
2. If any employee deliberately makes any changes to any sections of the financial
statement, then it will somehow reflect in the financial statement at some point in time
which would certainly bring up serious consequences to that employee. In Most of the
cases, the accused employee is found to be guilty, and as part of the process, necessary
legal actions are issued against the employee.
3. If any unintentional mistake takes place in the financial statement, it will also invite similar
discomforts for the institute causing not more than the employee dissatisfactions who is
responsible for the inadvertent mistake. No legal actions will be applicable in this context.
4. If there are misleading entries in both the debit and credit parts (overemphasizing the
revenue, falsifying on assets, liabilities, and not recording expenses) of the financial
statement at a particular period of time, then the company would owe more or less at
the end of the period though in reality it is not. The company’s liability might eventually
increase due to the wrong entry. The entire financial process would be disrupted resulting
in an internal dispute in the company.
5. Being a stable financial institution, professionalism is a must. A professional accountant
will follow the rules of GAAP (Generally Accepted Accounting Principles) or IFRS
(International Financial Reporting Standards) which automatically enable the implied

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 ethics required for the financial statement. Thus, professionalism promotes ethical
standards that would act combinedly as a pre-requisite for preparing the financial
statement.
6. A financial institution’s reputation and market value largely depends on its financial
statement – how much value the institution possess contemporarily can be understood
by investigating its financial statement. In order to retain the customers and maintain the
stability, any financial institution must emphasize formulating an accurate and legitimate
financial statement.
Financial statement is an integral part of a financial institution which should be prepared with
utmost care and accuracy. Financial statement reflects a company’s standing in the market, its
reputation, business prospects, and financial ratings. If the financial statement is falsified, then
the company would find it really difficult to stay afloat. The financial stability of a company largely
depends on an accurate and appropriate financial statement. So, it is really important to maintain
the ethical standard throughout the preparation of the financial statement.

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Question 3: Do you believe Accounting/BUS 505 knowledge help you in real life? Explain with
five examples.
Answer: Yes, I do believe that Accounting/BUS 505 knowledge helps one in real life.
To justify my opinion, here’s five examples on ‘How it may help one real life’ based on my
understanding.
Example 1: To understand what work is being performed and the reason behind it.
A person not from business background will gather the basic understanding of accounting which
will help him/her to understand the business that he/she is working for. It also helps to
understand what procedures are being performed and for what reason.
Example 2: To interpret the underlying meaning of the numbers.
The accumulated data received over the time throughout a Fiscal year needs to be interpreted
to understand where to put more focus on. Without accounting knowledge, it is close to
impossible to understand what the numbers presenting. For example, if one has clear idea about
Income statement and it results in Net loss in the end of the fiscal year, then a person with
accounting knowledge is able to figure out if it’s due to insufficient sales or increased cost.
Example 3: To formulate strategy
With the knowledge of Basic accounting, one can easily formulate concrete strategy as the
strategy will be backed up with number gotten from various accounting analysis. Whether or not
the strategy will work can also be proven to a certain degree by forecasting. This helps to make
effective decision.
Example 4: To maintain ethics.
Without accounting knowledge it’s close to impossible for a businessperson to understand if the
business is ethically conducted; if investments are properly made or being used in other purpose
if the generated profit are distributed or reinvested properly or not.
Example 5: To manage finances more effectively.
Starting a business may seem tough. But maintaining the business tougher and keep it growing
is the toughest. For maintaining and growing the business, the managing finances is more crucial
than anything else. For which accounting knowledge is very important especially to people who
own their business.

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 Part - B
Answer to the question no – a

General Journal
Date Account Titles and Explanation Ref Debit Credit
May-1 Cash 40,000
Owners Capital 40,000
May-3 Prepaid Rent Expense 24,000
Cash 24,000
May-4 Furniture and Equipment 30,000
Cash 10,000
Accounts Payable 20,000

May-5 Prepaid Insurance 1800

Cash 1800
May-6 Supplies 420
Cash 420
May-7 Supplies 1500
Accounts Payable 1500
May-8 Cash 8,000
Accounts Receivable 12,000
Service Revenue 20,000
May-9 Accounts Payable 400
Cash 400

May-10 Cash 3000

Accounts Receivable 3000

May-11 Utility Expense 380

Accounts Payable 380

May-12 Salaries and Wages expense 6100

Cash 6100

Please Note: There will be no entry in May-2 since we do not consider hire, order, contact, promise etc.
to be any financial transactions.

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 Answer to the Question no - b
The journal entries that we have discussed in the question no - a have been posted
to the T accounts below.
Cash
Debit Credit
May-1 40,000 May-3 24,000
May-8 8000 May-4 10,000
May-10 3000 May-5 1800
May-6 420
May-9 400
May-12 6100

May-31 8280

Owner’s Capital
Debit Credit
May-1 40,000

May-31 40,000

Prepaid Rent Expense

Debit Credit
May-3 24,000

May-31 24,000

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 Furniture and Equipment
Debit Credit
May-4 30,000

May-31 30,000

Accounts Payable
Debit Credit
May-9 400 May-4 20,000
May-7 1500
May-11 380

May-31 21,480

Prepaid Insurance
Debit Credit
May-5 1800

May-31 1800

Supplies
Debit Credit
May-6 420
May-7 1500

May-31 1920

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 Accounts Receivable
Debit Credit
May-8 12,000 May-10 3000

May-31 9000

Service Revenue
Debit Credit
May-8 20,000

May-31 20,000

Utility Expense
Debit Credit
May-11 380

May-31 380

Salaries and Wages Expense

Debit Credit
May-12 6100

May-31 6100

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 Answer to the question no - c
XYZ Services
Trial Balance
May-31, 2021

Debit Credit
Cash $8280
Prepaid Rent Expense 24,000
Furniture and Equipment 30,000
Prepaid Insurance 1800
Supplies 1920
Accounts Receivable 9000
Accounts Payable $21480
Owner’s Capital 40,000
Service Revenue 20,000
Utility Expense 380
Salaries and Wages Expense 6100

$81,480 $81,480

The End – Thank You!

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