ACC 1101 Mid Merged

Faculty of Business Studies
Department of Business Administration

Program: BBA
Course Title: Principles of Accounting Credits:03

Course Code: ACC-1101 Exam Hours:04
Course Assessments
Attendance 10 Marks
CIE: Continuous Internal Evaluation Class Test/ Assignment/ Quizzes 10 Marks
Mid-term 30 Marks
SEE: Semester End Examination 50 Marks
Course Description
This course aims at providing basic knowledge on principles and concepts of accounting and
making them to understand the accounting cycle and their applications in different categories of
business entities. It will highlight the underlying theoretical concepts and basic accounting
practices.
Course Learning Outcomes

After completion of this course, the students will be able to: .
CL01 Understand the concept of Accounting and its principles.
CL02 Identify and analyze the transactions of any organization
CL03 Know how to record, classify and summarize the transactions.
CL04 Prepare financial statements to know the financial positions and assets and liabilities
with classification.
CL05 Calculate depreciation under different methods,
CL06 Understand the bank reconciliation statement and its procedures.
CL07 Know the merchandised inventory recording under perpetual and periodic system
CL08 Understand the Islamic accounting concept and its application.
Mapping of CLO to PLO Mapping

CLO/PLO PLO1 PLO2 PLO3 PLO4 PLO5 PLO6 PLO7
CLO1 2 1 1 - - - -
CLO2 1 2 2 - - - -
CLO3 2 1 2 - - - -
CLO4 1 3 1 1 - - -
CLO5 1 3 2 2 - - 2
CLO6 2 2 1 1 - 3 -
CLO7 1 1 1 2 - 2 3
CLO8 1 - - - - 3 2
3-High Correlation, 2- Medium Correlation, 1-Low Correlation
SL CONTENT OF COURSE (as Summary) Hrs. CLOs
01. Introduction: Defining accounting, Purpose and nature of accounting 06 CLO1
information, Historical background of accounting, users of accounting
information, accounting organizations, Branches of accounting, Types of
business organizations, accounting concepts and principles, accounting
equation, and Financial Statements.
02. Recording Business Transactions: T accounts, Meaning of assets, 06 CLO2
Liabilities, Owner’s equity, Expenses and revenues, Double entry
systems: transaction analysis, Books of original entry/ journal, ledger,
and trial Balance.
03. Adjusting Process: Capital and revenue expenditure and its distinction. 06 CLO3
Accrual basis vs cash basis accounting, Adjustment to the accounts,
Posting and adjusting entries, Closing and reversal entries, adjusted trial
balance, Preparation of financial statements from adjusted trial balance.
Preparation of worksheet.
04. Completing the Accounting Cycle: Overview of the accounting cycle, 06 CLO4
Adjusting and closing process of merchandising businesses, and
preparation financial statements, Format of financial statement.
05. Plant Assets-Acquisition, Use& Disposal: Definition of plant assets; 06 CLO5
Classification of plant assets; usage of plant assets; Acquisition &
treatment of tangible assets; Methods to calculate depreciation;
Treatment of depreciation..
06. Bank Reconciliation Statement: Definition, reasons for reconciliation, 06 CLO6
advantages of reconciliation, Methods of reconciliation, phases in the
reconciliation process, terms used in the bank reconciliation statement,
preparation of bank reconciliation statement
07. Accounting for Inventories: Definition of inventory; inventory 06 CLO7
classification; inventory accounting system; Recording entries under
periodic and perpetual inventory system.
08. An Introduction to Islamic Accounting: Definition of Islamic 03 CLO8
Accounting; Features and objectives of Islamic Accounting; Need for
development of Islamic Accounting; Accounting Concepts from Islamic
perspective; Islamic vs Conventional Accounting; Islamic Accounting
System and practices, such as Zakat Accounting.
Text Book
1. Weygandt, J. J., Kieso, D. E., Kimmel, P. D., &Kell, W. G. (2015). Accounting Principles.
Wiley. UK, 12th edition
Reference Books:
1. Harrission, W. T. (2016). Financial Accounting. 11th Edition, Pearson
2. Matz, A. & Usry, M. F. (1984). Cost Accounting Planning and Control. 8th Edition,
South- Western Publishing Co.
Course Assessment Pattern (Theory courses):
Bloom’s Category Evaluations out of 100 marks
CIE (50 marks) SEE (50marks)
Cognitive Affective Mid-term: Assignment/ Attendance Written Exam: (50)
learning Learning (30) Class Test: (10) Marks (:10)
Remember - 5 - - 5
Understand - - 5 - 10
Apply - 5 - - 05
Analyze - 5 - - 10
Evaluation - 10 5 - 15
Create - 5 - - 05
x Responding x x 10
Remarks Course teachers may change the magnitude of marks in Bloom’s category(Both for CIE and
SEE), but he/she will have to keep in mind that the % of higher order learning mode must be
about 60% or more and all the Bloom’s categories to be addressed during the semester.
Note: CIE = Continuous Internal Evaluation, SEE = Semester End Examination.
Delivery methods & activities: Lecture, White Board Writing, Questions and Answers, Discussions Power
point Presentation,
Assessment tools: Class Attendance, Class test, Quizzes/ Assignment. Mid-Term & Final Exam. Project
evaluation & Viva.
PRINCIPLES OF Accounting: ACC-1101
Chapter one
Accounting and Its Environment

Accounting has been called “the language of business”. Perhaps a better term is “the language of
financial decisions”. The better one can understand the language, the better you can manage the
financial aspects of living. Personal financial planning, education expenses, investments, loans,
income taxes, and many other aspects of daily life are based on accounting.
Definition of Accounting:
Accounting is the system that measures business activities, process that information into reports
and communicates these findings to decision makers.
--Hongreen and Harrison
“Accounting is the art of recording, classifying, and summarizing in a significant manner and in
terms of money, transactions, and events, which are in part at least of financial character and
interpreting the result there of.”- American Institute of Certified Public Accountants: Committee
and Terminology.
Accounting is an information systems that measures business activities, process data in to
reports, communicates result to people.
Book-Keeping:
Book-keeping usually involves only the recording of economic events. It is just one part of the
accounting process.
Events:
Any incidents affecting the human life are known as events.
Transactions:
The economic events of an enterprise that are recorded by accountant. An event that affects the
financial position of a particular entity and may be reliably recorded is known as transaction.
i. Transaction must be measurable, independent;
ii. Transaction must have two sides/parties;
iii. Transactions must change financial position;
iv. Transactions may be invisible.
Therefore, a transaction is an event or action resulting a change in the assets, the liabilities,
and/or the owner’s equity of a business.
Entity:
An entity is an organization for which the annual report and accounts are prepared.
Bba, Department of business administration, iiuc

Chapter one
Book-keeping vs. Accounting:

Book-keeping Accounting
Book-keeping usually involves only the Accounting involves the entire process of
recording of economic events. identifying, recording, and communicating
economic events.
Book-keeping is just one part of the Accounting includes all book-keeping
Accounting process. functions.
Accounting Process:
There are three steps in accounting process that are discussed below:
1. Identification: Accounting identifies economic events which involves selecting the
economic activities relevant to a particular organization. For example, Purchases, sale,
payment of wages.
2. Recording: Accounting records economic events by keeping a systematic chronological
diary of events, measured in monetary unit to provide a history of organization’s financial
activities. The examples of recording are Journalizing, posting to ledger books, etc.
3. Communication: Accounting communicates between organization and interested users
by providing financial information through accounting reports. The examples of financial
reports are Income Statement, Owner’s Equity Statement, Balance Sheet, Cash flow
statement, etc.
Accounting Cycle:
1. Recording: Recording the transaction in the journals or books of original entry.
2. Classifying: Transferring the entries from the journals to the ledger.
3. Summarizing: Preparing a Trial Balance from the debit and credit balances of ledger
accounts.
4. Preparing Financial Statements: Preparing the Income Statement, Balance Sheet, Cash
Flow Statements also taking into account all adjustments affecting the period concerned.
5. Interpreting and analyzing those statements: Giving requisite information to the
interested group by calculating accounting ratios and by interpreting the performance of
the company concerned.
The accounting cycle is a continuous process and its continuity is maintained by passing an
opening entry at the beginning of a year.
Users of Accounting Information:
Decision makers beg for information. The more important the decision, the greater the need
for relevant information. The users of accounting information are:

Chapter one
Internal Users:
Internal Users of accounting information are managers who plan, organize and run a
business. These include managers, production supervisors, finance directors, and company
officers, etc.
External Users:
1. Investors: Investors (owners) use accounting information to make decision to bye, hold,
or sell stock.
2. Creditors: They use accounting information to evaluate the risks of granting credit or
lending money.
3. Taxing Authorities: They use accounting information to levy taxes and to know whether
the company complies with the tax laws. (NBR)
4. Regulatory Agencies: They use accounting information to know whether the company is
operating within prescribed rules. (BSTI, SEC).
5. Customers: Customers are interested in whether a company will continue to honor
product warranties and support its product lines.
6. Labor Unions: Labor Unions want to know whether the owners can pay increased wages
and benefits.
7. Economic Planners: They use accounting information to forecast economic activity.
8. Student, teacher, Researcher, financial analyst.
Importance/Advantages of Accounting:
1. To determine profit/loss of the business/organization.
2. To determine the financial position of the business
3. To control cost
4. For comparative analysis
5. To avoid misunderstanding and remedy of conflict
6. Advantage as evidence
7. Remedy of theft and fraud
8. To determine tax
9. To determine sale price/cost
10. To help decision making of management.
Branches of Accounting:
1. General Accounting or Financial Accounting: It provides a record of business
transactions in financial terms and also the periodical preparation of financial statements
from these records. It furnishes accounting information for the owners, govt., creditors,
and other interested groups in any organization.
2. Cost Accounting: Cost Accounting emphasizes the determination of business costs,
especially unit cost of production and distribution. Cost accounting analyzes a business’s
cost to help managers control expenses. Good cost accounting guide managers in pricing
their products and services to achieve greater profits.

Chapter one
3. Managerial Accounting: Managerial Accounting is concerned with providing

information to managers –that is people inside the organization who direct and control its
operation. Management Accounting generates confidential information for internal
decision makers.
4. Auditing: It involves the verification of the records and the reports prepared by the
accountants of an enterprise, in order to check errors and frauds and to authenticate the
financial statements. Auditing is usually done by an independent accountant, who
examines records and reports and issues a statement of opinion regarding their accuracy
together with a report containing confidential advice to the management.
5. Tax Accounting: It refers to the determination of the correct liability for taxes, especially
income taxes, and social security taxes and preparation of necessary returns.
6. Budgetary Accounting: It refers to a systematic forecasting of business operations in
financial terms. It presents in an account from the transactions planned for the coming
period and summarizes these transactions in accounting statements.
7. Government and Municipal Accounting: It specializes in the transactions of political
units such as states and municipalities. It seeks to provide useful accounting information
with regard to the business aspects of public administration.
8. Environmental Accounting: A report by the directors of a company that attempts to
quantify the costs and benefits of that company’s operations in relation to the
environment.
9. Human Resource Accounting: According to American Accounting Association
(A.A.A)- Human Resource Accounting is the process of identifying, and measuring data
about human resources and communicating this information to interested parties.
10. Inflation Accounting: Inflation Accounting is a system of accounting which purports to
record as a built in mechanism all economic events in terms of current cost. The principal
methods of dealing with inflation have been Current Cost Accounting (CCA) and Current
Purchasing Power Accounting (CPPA).
11. Industrial Accounting: It refers to the integration of Financial Accounting, Cost
Accounting and Managerial Accounting for managerial planning and control of an
industry. It helps the management in-a) measuring the operating results; b) controlling
business expenditures so as to maximize profits; c) formulating business policies.
12. Social Accounting: Social Accounting deals with measurement of Social and National
Income and National wealth. It deals with macro model rather than micro model. Social
Accounting seeks to measures social income and disposal thereof in terms of social
consumption and social savings.
13. Responsibility Accounting: Responsibility Accounting is a system of accounting that
recognizes various responsibility centres throughout the organization and reflect the plans
and actions of each of these centres by allocating particular revenues and costs to those
having the pertinent responsibilities.
14. Mechanized Accounting: Mechanized Accounting has been developed as a result of the
technological development. Now-a-days accounts are maintained by using computers
which facilitates to store data and maintain accounts quickly, accurately ande reliably.

Chapter one
Various types of accounting software have been developed for the purpose of efficient
and effective maintenance of accounts.
15. Mechanized Auditing: Mechanized Auditing has been developed due to the
development of mechanized accounting. Verification and examination of mechanized
accounting is done by mechanized auditing.
Generally Accepted Accounting Principles (GAAP):

Accounting practice rest on certain guidelines. The rules that govern how accountants
measures, process, and communicate financial information fall under the heading GAAP,
which stands for Generally Accepted Accounting Principles. Generally accepted accounting
principles include not only principles but also concepts and methods that identify the proper
way to produce accounting information. GAAP are very much like the law- a set of rules for
conducting behavior in a way acceptable by the majority of people. GAAP rests on a
conceptual framework written by the Financial Accounting Standards Board (FASB). Two
organizations are primarily responsible for establishing GAAP. The first one is the Financial
Accounting Standards Board and second one is the Securities and Exchange Commission
(SEC).
Accounting Concepts and Principles:
Generally accepted accounting principles include not only principles but also concepts and
methods that identify the proper way to produce accounting information. Some of the
concepts are:
1. The Entity Concept: The most basic concept in accounting is that of the entity. An
Accounting entity is an organization or a section of an organization that stands apart from
other organizations and individuals as a separate economic unit. Accounts are kept for
business entities, as distinguished from the persons who are associated with these entities.
For accounting purposes, the business is treated as a distinctive individualistic and
independent entity. In Summary, business transactions should not be confused with
personal transactions. Similarly the transactions of different entities should not be
accounted for together. Each entity should be evaluated separately.
2. The Reliability (Objectivity) Concept: Accounting records and statement are based on
the most reliable data available so that they will be as accurate and as useful as possible.
This is the Reliability Principle. Reliable data are verifiable. They may be confirmed by
an independent observer. Ideally, then, accounting records are based on information that
flows from activities that are documented by objective evidence. Without the reliability
principle also called the objectivity principle, accounting records would be based on
whims and opinions and would be subject to dispute.
3. The Cost Principle: The Cost Principle states that assets and services that are acquired
should be recorded at their actual cost (also called historical cost). Even though the
purchaser may believe the price paid is a bargain, the item is recorded at the price paid in
the transaction. The cost principle also holds that the accounting records should maintain

Chapter one
the historical cost of an asset as long as the business holds the asset. Because cost is a
reliable measure.
4. The Going-Concern Concept: Another reason for measuring asset at historical cost is
the going-concern concept, which holds that the entity will remain in operation for the
foreseeable future. Most assets, such as supplies, land, buildings, and equipment, are
acquired to use rather than to sell. Under the going-concern concept, accountants assume
that the business will remain in operation long enough to use existing assets for their
intended purpose.
5. The Accounting Period Concept: An accounting period is the span of time covered by a
set of financial statements. This period defines the time range over which business
transactions are accumulated into financial statements, and is needed by investors so that
they can compare the results of successive time periods. An accounting period is a period
of time such as the 12 months of January 1 through December 31, or the month of June,
or the three months of July 1 through September 30. It is the period for which financial
statements are prepared.
6. The Stable Monetary Unit Concept: Accountants assume that the dollar’s (Taka’s)
purchasing power is relatively stable. The stable-monetary unit concepts is the basis for
ignoring the effect of inflation in the accounting records. It allows accountants to add or
subtract dollar amounts as though each dollar has the same purchasing power.
7. Money Measurement Concept: In accounting, a record is made only of those facts that
can be expressed on monetary terms. The advantage of expressing facts in monetary
terms is that money provides a common denominator by means of which heterogeneous
facts about a business can be expressed in terms of numbers that can be added and
subtracted.
8. Dual Aspects Concept: Accounting systems are set up in such a way that a record is
made of two aspects of each event that affect these records, and in essence these aspects
are changes in assets and changes in equities (liabilities). Hence every transactions brings
it corresponding effect on the accounting equation, so this system of accounting is called
“double entry” system.
9. Conservatism Concept: The conservatism concept means that when the accountant has
reasonable choice, he usually will show the lower of asset amounts for a given item or
will record an event in such a way that owner’s equity is lower than it otherwise would
be. The concept is often stated as follows: “Anticipating for no profit, and provide for all
possible losses”.
10. The Accrual Concept: To measure net income for an accounting period, expenses must
be matched against revenue. More than 95% of business is conducted on a credit basis.
The way of matching revenue and expenses is known as the Accrual basis of accounting.
To measure income under the accrual method certain adjusting entries must be made. The
principal adjusting entries are for prepayments, accruals, deferrals, provisions and
depreciation.
11. The Realization Concept: A basic accounting concept is that revenue is considered as
being earned on the date at which it is realized, that is on the date when goods or services
are furnished to the customer in exchange for cash or some other valuable consideration.

Chapter one
12. The Full Disclosure Concept: Accountant are obliged to transmit all significant
financial data preferably in the body of the financial reports but also in explanatory
footnotes. The intension of full disclosure is to ensure that the financial statements leave
a correct impression.
13. The materiality Concept: The accountant does not attempt to record a great many
events, which are so insignificant that recording of them in books is not all justified by
the usefulness of the result. An example of such insignificant recording is the accounting
treatment of a pencil as an asset to a company, with its use it depreciates hence the
owner’s equity is decreased, such recording of depreciation is a cumbersome job and so
better should be avoided. He should rather consider the cost of entire pencil as an expense
when it is bought.
14. The Consistency Concept: The consistency concept requires that once a company has
decided on one of the methods, it will treat all subsequent events of same character in the
same fashion. There should be consistency in the use of accepted principles of accounting
from one year to another. To provide optimum comparability, transactions must be
analyzed and recorded in a consistent manner from one period to the other.
Types of Business Organizations:
1. Proprietorship: A business owned by one person is generally a proprietorship. The
owner is often the manager of the business. Usually only a relative small amount of
money (capital) is necessary to start in business as a proprietorship. The owner receives
any profits, suffers any losses and is personally liable for all debts of the business.
2. Partnership: A business owned by two or more persons associated as partners is a
partnership. Each partner generally has unlimited personal liability for the debts of the
partnership.
3. Corporation/Company: A business organized as a separate legal entity under state
corporation/company law and having ownership divided into transferable shares of stock
is a corporation. The holders of the shares enjoy limited liability and can transfer all or
part of their shares to other investors at any time.
Accounting Profession/Specialized Accounting Services:
Positions in the field of accounting profession may be divided into several areas. Three general
classifications are –i) Public Accounting ii) Private Accounting iii) Not for Profit Accounting
i) Public Accounting: In public accounting , expert services are offered to the general
public in the following ways:
1. Auditing: An audit is the independent examination that ensures the reliability of the
accounting reports that management prepares and submits to investors, creditors, and others
outside the business.
2. Taxation: The work performed by tax specialists includes tax advice and planning, preparing
tax returns, and representing clients before governmental agencies.

Chapter one
3. Management Consulting: It ranges from the installing of basic accounting systems to help
companies determine whether they should use the space shuttle for high-tech research and
development projects.
ii) Private Accounting: An accountant of a business enterprise would be involve in one of
the following activities:
1. General Accounting: Recording daily transactions and preparing financial statements
and related information.
2. Cost Accounting: Determining the cost of producing specific products.
3. Budgeting: Assisting management in quantifying goals concerning revenues, cost of
goods sold, and operating expenses.
4. Accounting Information Systems: Designing both manual and computerized data
processing systems.
5. Tax Accounting: Preparing tax returns and doing tax planning for the company.
6. Internal Auditing: Reviewing the company’s operations to see if they comply with
management policies and evaluating the efficiency of operations.
7. Management Accounting: It generates confidential information for internal decision
makers, such as, top executives, department heads, etc.
ii) Not-for-profit Accounting: Not-for-profit organizations also need sound financial
reporting and control. Donors to such organizations want information about how well
the organization has met its financial objectives and whether continued support is
justified. Hospitals, college, and universities must take decisions about allocating
funds.
Accounting Organizations:
1. Financial Accounting Standards Board (FASB): Established in 1973, the Financial
Accounting Standards Board (FASB) is the independent, private-sector, not-for-profit
organization based in Norwalk, Connecticut, that establishes financial accounting and
reporting standards for public and private companies and not-for-profit organizations
that follow Generally Accepted Accounting Principles (GAAP). The Financial Standards
Board formulates generally accepted accounting principles (GAAP). These principles are
the most important accounting guidelines. The FASB issues documents called financial
accounting standards. The FASB, composed of seven members, is governed by the
Financial Accounting Foundation, and is an independent organization.
2. Institute of Chartered Accountants of Bangladesh (ICAB): ICAB was formed as per
“Bangladesh Chartered Accountants Order” in 1973 to control the Accounting
Profession in Bangladesh. The enlisted members of the ICAB are of two types such as
A.C.A and F.C.A. The management of ICAB conducted by 18 members of whom 15 are
elected from the professional accountants and 3 are appointed by government from
Commerce, Finance and Industrial Ministry. The functions of ICAB include preparation
of code of conduct for professionals, take actions if any one violate the discipline of the
organization, maintain a list of the members, take examination from the students.

Chapter one
3. Institute of Cost and Management Accountants of Bangladesh (ICMAB): Institute of

Cost and Management Accountants of Bangladesh (ICMAB) was formed in 1977 based
on Cost and Management Accountants Ordinance of Bangladesh Government. There are
two types of members of ICMAB such as A.C.M.A and F.C.M.A. There is a council for
the management of organization. The council includes 16 members of whom 12 are
elected from the Fellows and 4 are appointed by the government.
4. International Federation of Accountants (IFAC): International Federation of
Accountants (IFAC) is the global organization for the accountancy profession. Founded
in 1977, IFAC has more than 175 members and associates in more than 130 countries
and jurisdictions, representing almost 3 million accountants employed in public practice,
industry and commerce, government, and academe. The organization supports the
development, adoption and implementation of international standards for accounting
education, ethics, and the public sector as well as audit and assurance. It supports four
independent standard-setting boards, which establish international standards
on ethics, auditing and assurance, accounting education, and public sector accounting. It
also issues guidance to encourage high quality performance by professional accountants
in business and small and medium accounting practices.
5. Confederation of Asia and Pacific Accountants (CAPA): Established in 1976 the
Confederation of Asian and Pacific Accountants (CAPA) represents national
professional accounting organizations in the Asia-Pacific region. Today, CAPA has a
membership of 32 accounting organizations in 23 jurisdictions. CAPA is by far the
largest regional accounting organization and its geographical area spans half the globe.
CAPA's mission is to provide leadership in the development, enhancement, and
coordination of the accountancy profession in the Asia-Pacific region to enable the
profession to provide services of consistently high quality in the public interest.
6. South Asian Federation of Accountants (SAFA): The South Asian Federation of
Accountants (SAFA) is a forum of professional accounting bodies in the South Asian
Association of Regional Cooperation (SAARC) region of eight nations. It works in the
public interest and towards broad economic development of the region in part through
promoting harmonization of accounting standards and practices. It was founded in 1984.
The strategy of the organization is not to create new standards, but rather to promote
harmonization by building common knowledge and adoption of International
Accounting Standards (IAS, which accommodates regional/national variations).
7. International Accounting Standards Committee (IASC): The International
Accounting Standards Committee (IASC) was founded in June 1973 in London and was
replaced by the International Accounting Standards Board on 1 April 2001. It was
responsible for developing the International Accounting Standards and promoting the
use and application of these standards.
International Accounting Standards (IAS):

International Accounting Standards are accounting standards issued by the International
Accounting Standards Board (IASB) and its predecessor, the International Accounting Standards

Chapter one
Committee (IASC).Listed companies, and sometimes unlisted companies, are required to use the
standards in their financial statements in those countries which have adopted them. IAS accepted
and applicable in Bangladesh are known as Bangladesh Accounting Standards (BAS).
International Accounting Standards (IAS) vs International Financial Reporting Standards

(IFRS)
The IAS was a set of standards that was developed by the International Accounting Standards
Committee (IASC). They were originally launched in 1973 but have since been replaced by the
IFRS.
International Financial Reporting Standards, commonly called IFRS, are accounting
standards issued by the IFRS Foundation and the International Accounting Standards
Board (IASB). They constitute a standardized way of describing the company's financial
performance and position so that company financial statements are understandable and
comparable across international boundaries.
The difference between IAS and IFRS
International Accounting Standard (IAS) and International Financial Reporting Standard (IFRS)
are the same. The difference between them is that IAS represents old accounting standard. The
IASC, the accounting standard-setting body, was replaced to IASB in 2001. IASC issued 41
accounting standards in the name of International accounting standards (IAS) between 1973 and
2001. On 1 April 2001, the IASB took over from the IASC the responsibility for setting
International Accounting Standards in the name of International Financial Reporting Standards

(IFRS). Currently, IASB operates under the oversight of the IFRS Foundation. Besides issuing
new IFRSs, IASB also replacing the old IAS in the name of IFRS.
International Accounting Standard (IAS)-1: Presentation of Financial Statements:

Issued in 1975, re-issued in 2007; followed by amendments. Effective Date: 01 January 2009.
IAS 1 is one of the most crucial of all the standards because it predecessors was issued in 1974,
in fact in 1975 under the different name and then it was redesign, redone and reformatted and
amended multiple times. It is still evolving. The main objective of IAS 1 is to prescribe how the
financial statements shall be presented so that they are comparable. IAS does that by setting the

Chapter one
basic definition. For example, it clearly defines materiality and clarifies material information,
then it also sets the general features of financial statements and also sets the basic structure of
financial statement including which part should be included in the complete set of financial
statements; then IAS 1 also prescribe minimum requirements for a content for an individual parts
of the financial statements.
Purpose: It is to provide information about financial position, financial performance and cash
flows of an entity that is useful to wide range of users in making economic decisions. In order to
follow the purpose IAS 1 lists what should be included in the complete set of financial statement.
1. Statement of Financial Position.
2. Statement of profit or Loss and Other Comprehensive Income.
3. Statement of Changes in Equity.
4. Statement of Cash Flows.
5. Notes to the Financial Statements (Reveals some information in addition to these numerical
statements).
General Features of Financial Statement:
These are the main characteristics that the IFRS compliance financial statement shall have.
1. Fair presentation and compliance of IFRS
2. Make a statement that financial statement complies with IFRS somewhere in the notes
3. Going Concern: the company is able to continue as a going concern for a foreseeable future (at
least 12 months)
4. Accrual Basis: Transaction must be recognized when they occur not when cash is received or
paid
5. Materiality and Aggregation: Each Material item should be presented separately, and material
amount should be aggregated with amounts of similar nature or functions and not presented
separately; otherwise, we’ll have a clutter of too much information in financial statement.
6. Off-setting: Assets and liabilities should not be offset except when offsetting is required or
permitted by another standard.
7. Frequency of Reporting: Complete set of financial statement shall be presented at least
annually.
8. Comparative Information: Comparative information from previous period should be disclosed
for all number in the financial statement and also in narrative and descriptive information when
relevant.
9. Consistency of Presentation: Financial statement must be presented in the same way as in the
previous period.

Chapter one
Financial Statements:
1: Statement of Financial Position:
Assets Liabilities and Equity
Property, Plant & Equipment Trade & Other payables
Investment Property Provisions
Intangible Assets Financial Liabilities
Investment by Equity Method Non-Controlling Interest Within Equity
Financial Assets Issued Capital and Reserves
Biological Assets
Inventories
Trade & Other Receivables
Cash & Cash Equivalents
2. Statement of Profit or Loss and Other Comprehensive Income:

Profit or Loss Other Comprehensive Income
Revenue Each Component of Other Comprehensive
Finance Cost Income by Nature
Share of the Profit or Loss of Associates or Share of Other Comprehensive Income by
Joint Ventures by Equity Method Associates or Joint Ventures by Equity method
Tax Expense
Total of Discontinued Operations
Profit or Loss
3. Statement of Changes in Equity:

Presents:
at least total comprehensive income that has come from previous statement separately
amounts attributable to the owners or the parent and to non-Controlling Interest for each
component of equity.
effect of retrospective application of restatement recognized according to IAS 8.
movement of Each Component of Equity separately reconciliation between the carrying
amount at the beginning and at the end of the reporting period. Need to disclose separately-
Changes resulting from profit or loss, other comprehensive income and transaction with
owners such as contributions from owners, distributions of dividends and similar.

Chapter one
4. Notes to Financial Statements:

Notes to Financial Statements shall presents information about basic of the preparation of
financial statement.
It Contains:
General information about the entity and the explicit statement of compliance with IFRS.
Accounting Policies applied and Judgements used.
Sources of estimation uncertainty.
Disclosures on Capital Management.
Disclosures on Puttable Financial Instruments classified as equity.
Dividend’s disclosures.
5. Statement of Cash Flows (IAS 7):
Issued in 1977, re-issued in 1992; followed by amendments. Effective Date: 01 January
1994.
The statement of cash flows is the only statement that ignores the accrual principle, because
all we need to report ins real cash in or out. It shows the ability of any entity to generate cash.
The statement should show how the company generated cash and where the cash was spent
over the period. In fact, it shows the movement of cash and cash equivalent.
Cash Flows from Operating Cash Flows from Investing Cash Flows from Financing
Activities: Activities: Activities:
Cash receipts from sales of Cash payments to acquire Cash payments to receipts from
goods or rendering services. property, plant & equipment, equity owners: Own shares/ equity
intangibles, or other long-term instruments.
Cash receipts from royalties, assets and also proceeds from
fees, commissions. sales of those items. Any source of cash receipts from
issuing dividends, debentures, taking
Cash payments to suppliers of Payments to acquire or receipts loans, notes, bonds, mortgages, and
goods and services or to and on from the sale of equity or debt other short- or long-term borrowing.
behalf of employees. instruments of the entities or joint
ventures. Payments to the reduction of the
Cash payment or refund of outstanding liability.
income taxes. Cash payments or receipts related
to derivative contract such as
futures, forwards, options, swaps.

Chapter one

Chapter two
Recording Business Transactions

Account: The basic summary device of accounting is the account. This is the detailed record of
the changes that have occurred in a particular asset, liability, or owner’s equity during a period of
time. Each account appears on its own page.
Types of Account:
Asset:
The resources owned by a business that has future economic benefits are called assets. Assets are
probable future economic benefits obtained or controlled by a particular entity as a result of past
transactions or events.
Cash: The cash account shows the cash effects of a business’s transactions. Cash means money
and any medium of exchange that a bank accepts at face value. Cash includes currency, coins,
money orders, certificates of deposit, and checks. The cash account included all cash items
whether they are kept on hand, in a safe, in a cash register, or in a bank.
Notes Receivable: A business sell its goods or services in exchange for a promissory note,
which is written pledge that the customer will pay the business a fixed amount of money by a
certain date. The Notes Receivable account is a record of the promissory notes that the business
expects to collect in cash.
Accounts Receivable: A business may sell its goods or services in exchange for an oral or
implied promise for future cash receipt. Such sale are made on credit (on account). The Accounts
Receivable account contains these amounts.
Prepaid Expenses: A business often pay certain expenses in advance. A prepaid expense is asset
because the business avoids having to pay cash in future for the specified expense. Prepaid rent
and prepaid insurance are prepaid expenses that occur often in business.
Land: The Land account is a record of the land that a business owns and uses in its operations.
Building: The cost of a business’s buildings- office, warehouse, garage, and the like appear in
the Building account.
Equipment, Furniture, and Fixtures: A business has a separate asset account for each type of
equipment- Office Equipment and Store Equipment, for example. The Furniture and Fixtures
account shows the cost of this asset.
Bba, Department of business administration, iiuc.

Chapter two
Liabilities:
The creditors claim on total assets of a business are called liabilities. A business generally has
fewer liability accounts than asset accounts because a business’s liabilities can be summarized
under few categories.
Notes Payable: This account is the opposite of Notes Receivable account. Notes Payable
represents the amounts that the business must pay because it signed a promissory note to
purchase goods or services.
Accounts Payable: The account is the opposite of the Accounts Receivable account. The oral or
implied promise to pay off debts arising from credit purchases of goods appears in the Accounts
Payable account. Such purchase is said to be made on account.
Accrued Liabilities: An Accrued Liability is a liability for an expense you have not yet paid.
Interest Payable and Salary Payable are accrued liability accounts for most companies. Income
Tax Payable is another accrued liability.
Stockholders’ (Owners’) Equity:
The owners’ claims to the assets of a corporation are called stockholders’ equity, shareholders’
equity, or simply owners’ equity. A corporation uses Common Stock, Retained Earnings, and
Dividends accounts to record changes in the company’s stockholders’ equity. In a proprietorship,
there is a single capital account. For a partnership, each partner has a separate owner equity
account.
Capital: This account shows the owner’s claim to the assets of the business. After total liabilities
are subtracted from total assets, the remainder is the owner’s capital. The owner’s investments in
the business are recorded directly in the Capital account. The balance of the capital account
equals the owner’s investments in the business plus its net income and minus net losses and
owner withdrawals.
Common Stock: A company’s common stock is its most basic element of equity. The Common
Stock account shows the owners’ investment in the corporation. A corporation receives cash and
issues common stock to its stockholders.
Dividends: After profitable operations, the board of directors of a company may (or may not)
declare and pay a cash dividend. Dividends are optional; they are decided by the board of
directors. The corporation may keep a separate account titled Dividends, which indicates a
decrease in Retained Earnings.
Revenue: Revenues are inflows or other enhancement of assets of an entity or settlement of
liabilities during a period.
Expenses: Expenses are outflows or other using up of assets or incurrence of liabilities during a
period.
Gains: Gains are increases in equity (net assets) from incidental transactions except those that
result from revenues or investment by owners.
Losses: Losses are decreases in equity (net assets) from incidental transactions of an entity
except those that result from expenses or distributions to owners.
Retained Earnings: Retained Earnings are the accumulated profits that have been kept in the
business.
Accounting Equation:
The most basic tool of the accountant is the accounting equation. This equation represents the
assets of the business and the claims to those assets. This relationship of assets, liabilities, and
owner’s equity can be expressed as an equation follows:

Chapter two
Assets = Liabilities + Owner’s Equity

Assets must equal to the sum of liabilities and owner’s equity. The accounting equation applies
to all economic entities regardless of size, nature of business, or form of business organization.
Increase in owner’s equity—by owner’s investments and revenue.
Decrease in owner’s equity—by owner’s withdrawals and expenses.
Analysis of Transaction:
Illustration I:
1) Lyon invested $50,000 cash in the business.
2) Paid $40,000 cash for Land.
3) Purchased $500 of Office Supplies on account.
4) Received $5,500 cash from clients for accounting service revenue earned.
5) Performed accounting service for a client on account, $3,000.
6) Paid cash expenses: rent, $1,100; Employee salary, $1,200; utilities, $400.
7) Paid $400 on the account payable created in transaction 3.
8) Remodeled his personal residence. (This is not a business transaction)
9) Received $1,000 on the account receivable created in transaction 5.
10) Sold land for cash equal to its cost of $22,000.
11) Withdraw $2,100 cash for personal living expenses.
Lyon
Transaction Analysis
For the Month Ended …., xxxx
Asset Liabilities Owners’ Equity Types of Owner’s Equity Transaction
Cash A/R Off. Supplies Land A/P Capital
1. +50,000 - - - - +50,000 Investment
Bal. 50,000 - - - - 50,000 -
2. -40,000 - - +40,000 - - -
Bal. 10,000 - - 40,000 - 50,000 -
3. - - +500 - +500 -
Bal. 10,000 - 500 40,000 500 50,000 -
4. +5,500 - - - - +5,500 S. Revenue
Bal. 15,500 - 500 40,000 500 55,500 -
5. - +3,000 - - - +3,000 S. Revenue
Bal. 15,500 3,000 500 40,000 500 58,500 -
6. -1,100 - - - - -1,100 Rent exp.
-1,200 -1,200 Salary exp.
- 400 -400 Utilities exp.
Bal. 12,800 3,000 500 40,000 500 55,800 -
7. -400 - - - -400 - -
Bal. 12,400 3,000 500 40,000 100 55,800 -
8. - Not a business transaction - - -
9. +1,000 -1000 - - - - -
Bal. 13,400 2,000 500 40,000 100 55,800 -
10. +22,000 - - -22,000 - - -
Bal. 35,400 2,000 500 18,000 100 55,800 -
11. -2,100 - - - - - 2,100 Owner Withdrawal
Bal. 33,300 2,000 500 18,000 100 53,700 -
$53,800 = $53,800

Chapter two
Lyon’s
Income Statement
For the Month Ended December 31, 2006
Amount ($)
Revenues:
Service Revenue ($5,500+3,000) 8,500
Expenses:
Salary Expense 1,200
Rent Expense 1,100
Utilities Expense 400 2,700
Net Income/Net Profit $5,800
Lyon’s
Balance Sheet
As on December 31, 2006
Assets Amount ($) Liabilities and Owner’s Equity Amount ($)
Cash 33,300 Liabilities:
Accounts Receivable 2,000 Accounts Payable 100
Office Supplies 500 Owner’s Equity:
Land 18,000 Lyon’s Capital 53,700
Total Assets 53,800 Total Liabilities and Owner’s Equity 53,800
Illustration II:
Shanta Reed owns and operates an interior design studio called “Shanta Interiors”. The
following amounts summarize the financial position of her business on March 31, 2007:
Assets Liabilities Owner’s Equity
Cash A/R Supplies Land A/P Capital
1,250 1,500 - 12,000 8,000 6,750
During April 2007, the following transactions occurred:
a) Shanta invested $ 15,000 in the business.
b) Performed services for a client and received cash of $800.
c) Paid off the beginning balance of Accounts Payable.
d) Purchased supplies on account, $500.
e) Collected cash from a client on account, $1,000.
f) Consulted on the interior design of a major office building and billed the client for the
service rendered, $2,500.
g) Recorded the following business expenses for the month:
i) Paid office rent ----$400.
ii) Paid advertising --- $300.
iii) Paid utilities ------$300.
h) Sold supplies to another business for $ 150 cash, which was the cost of the
supplies.
i) Purchased a Land for $8,000; cash paid $3,000 and the balance will be paid in the next
month.
j) Withdraw cash of $1,500 for personal use.
Analyze the effects of the above transactions on the accounting equation.

Chapter two
Shanta Reed
For the Month Ended April 30, 2007
Assets Liabilities Owner’s Equity
Cash A/R Supplies Land A/P Capital
Bal. 1,250 1,500 - 12,000 8,000 6,750
a) + 15,000 - - - - +15,000 Investment
Bal. 16,250 1,500 - 12,000 8,000 21,750
b) +800 - - - - +800 Service
Revenue
Bal. 17,050 1,500 - 12,000 8,000 22,550
c) -8,000 - - - -8,000 -
Bal. 9,050 1,500 - 12,000 - 22,550
d) - - +500 - +500 -
Bal. 9,050 1,500 500 12,000 500 22,550
e) +1,000 -1,000 - - - -
Bal. 10,050 500 500 12,000 500 22,550
f) - +2,500 - - - +2,500
Bal. 10,050 3,000 500 12,000 500 25,050
g) -1,000 - - - - -400 Rent Exp.
-300 Advert. Exp.
-300 Utilities Exp.
Bal. 9,050 3,000 500 12,000 500 24,050
h) +150 - -150 - - -
Bal. 9,200 3,000 350 12,000 500 24,050
i) -3,000 - - +8,000 +5,000 -
Bal. 6,200 3,000 350 20,000 5,500 24,050
j) -1,500 - - - - -1,500 Withdrawals
Bal. 4,700 3,000 350 20,000 5,500 22,550
28,050 = 28,050
Illustration III:
Ron Salem started his own delivery service, Salem Deliveries, on January 1, 2015. The following
transactions occurred during the month of June:
June – 1. Ron invested $10,000 cash in the business.
,, 2. Purchased a used Van for deliveries for $10,000. Ron paid $2,000 cash and signed a note
payable for the balance.
,, 3. Paid $500 for office rent for the month.
,, 5. Performed $1,400 of service on account.
,, 9. Withdrew $200 cash for personal use.
,, 12. Purchased supplies for $150 on account.
,, 15. Received a cash payment of $750 for services provided on June 5.
,, 17. Purchased gasoline for $100 on account.
,, 20. Received a cash payment of $1,500 for services provided.
,, 23. Made a cash payment of $500 on the note payable.
,, 26. Paid $250 for utilities.
,, 29. Paid for the gasoline purchased on account on June 17.
,, 30. Paid $500 for the employee salaries.

Chapter two
Instructions:
a) Show the effects of the previous transactions on accounting equation using the following
format.
Assets = Liabilities + O/E
Cash + A/R+ Supplies + Delivery Van = N/P+ A/P + Capital
Include explanations for any changes in the R. Salem, Capital Account in your analysis.
(b) Prepare an Income Statement for the month of June.
c) Prepare a Balance Sheet at June 30, 2015.
Ron Salem
For the Month Ended June 30, 2015
Date Cash A/R Supplies D. Van N/P A/P Capital Explanation
Bal. - - - - - - - -
June-1 +10,000 - - - - - +10,000
Bal. 10,000 - - - - - 10,000
June-2 -2,000 - - +10,000 +8,000 - -
Bal. 8,000 - - 10,000 8,000 - 10,000
June-3 -500 - - - - - -500 Off. Rent
expense
Bal. 7,500 - - 10,000 8,000 - 9,500
June-5 - +1,400 - - - - +1,400 Service Revenue
Bal. 7,500 1,400 - 10,000 8,000 - 10,900
June-9 -200 - - - - - -200 Owner’s
withdrawal
Bal. 7,300 1,400 - 10,000 8,000 - 10,700
June- - - +150 - - +150 -
12
Bal. 7,300 1,400 150 10,000 8,000 150 10,700
June- +750 -750 - - - - -
15
Bal. 8,050 650 150 10,000 8,000 150 10,700
June- - - - - - +100 -100 Gasoline
17 expense
Bal. 8,050 650 150 10,000 8,000 250 10,600
June- +1,500 - - - - - +1,500 Service Revenue
20
Bal. 9,550 650 150 10,000 8,000 250 12,100
June- -500 - - - -500 - -
23
Bal. 9,050 650 150 10,000 7,500 250 12,100
June- -250 - - - - - -250 Utilities expense
26
Bal. 8,800 650 150 10,000 7,500 250 11,850
June- -100 - - - - -100 -
29
Bal. 8,700 650 150 10,000 7,500 150 11,850
June- -500 - - - - - -500 Salaries expense
30
Bal. 8,200 650 150 10,000 7,500 150 11,350
$19,000 = $19,000

Chapter two
Ron Salem
Income Statement
For the Month Ended June 30, 2015
Amount ($)
Revenues:
Service Revenue ($1,400+$1500) 2,900
Expenses:
Office Rent 500
Gasoline 100
Utilities Expense 250
Salaries Expenses 500 1,350
Net Income/Net Profit $1,550
Ron Salem
Balance Sheet
As on June 30, 2015
Assets: Amount ($)
Current Assets:
Cash ………………….. 8,200
A/R ………………….. 650
Supplies…………………150
Total Current Assets…………………………………………………………… 9,000
Fixed Assets:
Delivery Van…………………………………………………………………… 10,000
Total Assets…………………………………………………………………… $19,000
Liabilities and Owner’s Equity:
Current Liabilities:
N/P……………………. 7,500
A/P…………………….. 150
Total Current Liabilities: ………………………………………………………... 7,650
Owner’s Equity:
Ron Salem Capital………………………10,000
+ Net Income …………………………….. 1,550
11,550
- Drawings ……………………………… 200 11,350
Total Liabilities and Owner’s Equity $19,000
Illustration IV:
Mr. Kamal owns and operates a firm called “Kamal Traders”. The following amounts summarizes
the financial position of his business on December 31, 2016
Assets = Liabilities + O/E
Cash + A/R + Supplies + Land = A/P + Capital
Bal. 5,750 3,000 - 16,000 = 6,000 18,750
During January 2017, the following transactions occurred:
a) Kamal invested additional $5,000 in the business during the month.
b) Sold goods on account of $1,500.
c) Paid off the $4000 of Accounts Payable and received $ 500 discount.
d) Purchased supplies using business credit card, $700.
e) Settled A/R of $ 1,000 from a customer and he was allowed 5% discount.
f) Office salaries due $4,000 but not paid.
g) Purchased a delivery van for $ 5000, paid cash $ 500 as down payment and signed a note
payable for the balance.

Chapter two
h) Recorded the following business expenses for the month:

i) Paid office rent ----$900.,
iii) Insurance expense ------$200.
i) Sold a portion of the land to another business for $ 10,000 cash; cost of which was $ 8,500.
j) Accounts Receivable of $ 350 was determined to be uncollectible/doubtful.
k) Paid cash of $ 400 to the son of Mr. Kamal.
Kamal Traders
For the month ended January 31, 2017
Date Cash A/R Supplies Land Delivery = A/P N/P Kamal’s Explanation
Van Capital
Bal. 5,750 3,000 - 16,000 6,000 - 18,750 -
a. +5,000 - - - - - +5,000
Bal. 10,750 3,000 - 16,000 6,000 - 23,750
b - +1,500 - - - +1,500
Bal. 10,750 4,500 16,000 6,000 - 25,250
c -3,500 - - - -4,000 - +500
Bal. 7,250 4,500 - 16,000 2,000 - 25,750
d - - +700 - - +700 - - -
Bal. 7,250 4,500 700 16,000 - 2,700 - 25,750
e +950 -1000 - - - - - -50
Bal. 8,200 3,500 700 16,000 - 2,700 - 25,700
f - - - - +4,000 - -4,000
Bal. 8,200 3,500 700 16,000 - 6,700 21,700
g -500 - - - +5000 - +4500 -
Bal. 7,700 3,500 700 16,000 5,000 6,700 4500 21,700
h -900 - - - - - - -1,200
-100
-200
Bal. 6,500 3,500 700 16,000 5,000 6,700 4,500 20,500
i +10,000 - - -8,500 - +1,500
Bal. 16,500 3,500 700 7,500 - 6,700 22,000
j - -350 - - - - -350
Bal. 16,500 3,150 700 7,500 5,000 6,700 21,650
k -400 -400
Bal. 16,100 3,150 700 7,500 5,000 6,700 4,500 21,250
=32,450 =32,450
Illustration V:
Mr. Jinnah owns and operates an interior design studio called “Jinnah Interiors”
The following amounts summarizes the financial position of his business on March 31, 2012:
Cash + A/R + Supplies + Land = A/P + Capital
Bal. 5,250 + 4,500 + 100 + 17,000 = 5,100 + 21,750
a) Jinnah invested $22,500 in the business.
b) Performed services for a client and received cash of $8,000.
c) Paid off the beginning balance of Accounts Payable as final settlement at $ 5,000.
d) Purchased supplies on account, $400.

Chapter two
e) Collected cash from a client on account, $3,000 and allowed $200 as discount.
f) Consulted on the interior design of a major office building and billed the client for the service
rendered, $2,500.
g) Recorded the following business expenses for the month:
i) Paid office rent ----$900.
iii) Paid utilities ------$800.
h) Sold supplies to another business for $ 200 cash, which was $180.
i) Uncollectible expenses $100 on Accounts Receivable.
j) Purchased a Land for $5,000; cash paid $2,000 and the balance being paid using credit card.
k) Salary expense due but not paid $300.
l) Withdraw cash of $1,000 for personal use.
Jinnah Interiors
For the month ended March 31, 2012
Date Cash A/R Supplies Land A/P Jinnah’s Explanation
Capital
Bal. 5,250 4,500 100 17,000 5,100 21,750 -
a +22,500 - - - - +22,500
Bal. 27,750 4,500 100 17,000 5,100 44,250
b +8,000 - - - - +8,000
Bal. 35,750 4,500 100 17,000 5,100 52,250
c -5,000 - - - -5,100 +100
Bal. 30,750 4,500 100 17,000 - 52,350
d - - +400 - +400 -
Bal. 30,750 4,500 500 17,000 400 52,350
e +2800 -3,000 - - - -200
Bal. 33,550 1,500 500 17,000 400 52,150
f - +2,500 - - - +2500
Bal. 33,550 4,000 500 17,000 400 54,650
g -900 - - - - -2,100
-400
-800
Bal. 31,450 4,000 500 17,000 400 52,550
h +200 - -180 - - +20
Bal. 31,450 4,000 320 17,000 400 52,570
i - -100 - - - -100
Bal. 31,450 3,900 320 17,000 400 52,470
j -2,000 - - +5,000 +3,000 -
Bal. 29,450 3,900 320 22,000 3,400 52,470
k - - - +300 -300
Bal. 29,450 3,900 320 22,000 3,700 52,170
l -1,000 -1,000
Bal. 28,450 3,900 320 22,000 3,700 51,170
54,870 = 54,870

Chapter two
Double Entry System of Accounting:

The double system of accounting is a system in which two-fold aspect of each and every
mercantile transaction in money or money’s worth is recorded. This system recognizes the
fundamental fact that a transaction is a double-sided affair. In fact, every debit must have its
corresponding credit under double entry system.
“Double-entry book-keeping is a method of recording the transactions of a business in a set of
accounts, such that every transaction has a dual aspect and therefore needs to be recorded in at
least two accounts.”-----Oxford dictionary of Business.
Advantages of double-entry system:
a) A complete record of transactions.
b) Ensures the arithmetical accuracy of accounts.
c) Help to determine profit or loss of the business.
d) Help to determine financial position of the business.
e) Advantages of payment of debtors and creditors.
f) Provide most complete and reliable information.
g) Help in comparison analysis.
h) Easy application.
i) Well-accepted scientific method.
j) Eliminates the possibilities of frauds and discovers irregularities.
Rules for determining Debit and Credit:

A) Golden Rules/Traditional Rules:
1. Personal Account:
Receiver A/C………….Dr.
Giver A/C…………………..Cr.
2. Assets Account:
Coming Assets…………..Dr.
Going Assets…………….Cr.
3. Income (Revenue) and Expenditure A/C:
Expenditure or loss…Dr.
Income A/C……………..Cr.
B) Modern Rules:
Assets A/C = Increase…Debit, Decrease…..Credit.
Expense A/C = ,, …... ,, , ,, ……… ,,
Liabilities A/C = ,, ……Credit, ,, ……..Debit.
Capital A/C = ,, …… ,, , ,, ……… ,,
Income A/C = ,, …… ,, , ,, ……… ,,

Chapter two
Debit: An amount entered on the left-hand side of T-account.

Credit: An amount entered on the right-hand side of T-account.
Debit balance: The balance of an account in which the total amount of debits exceeds the total
amount of credits.
Credit balance: The balance of an account in which the total amount of credits exceeds the total
amount of debits.
Financial Statements:
After transactions are identified, recorded, and summarized, four financial statements are
prepared from the summarized accounting data:
1) An income statement presents the revenues and expenses and resulting net income or net
loss for a specified period of time.
2) An owner’s equity statement summarizes the changes in owner’s equity for a specified
period of time.
3) A balance sheet reports the assets, liabilities, and owner’s equity at a specified date.
4) A statement of cash flows summarizes information about the cash inflows (receipts) and
outflows (payments) for a specified period of time.
Each statement provides management, owners, and other interested parties with relevant
financial data.
Meaning of Journal
A journal is a chronological record of the entity’s transactions. The word Journal came from the
French word ‘Jour’ meaning day. Thus, journal is the very first process of accounting which
records the business transactions chronologically (according to date), by analyzing debit and
credit, with interpretation as soon as they take place in the books of original entry.
Features of Journal
The features of Journals can be summarized as follows:
❖ Journal is the first step of accounting.
❖ It follows Double Entry Principle.
❖ It records transaction in chronological order by date.
❖ It provides explanations of each transaction.
❖ It analyzes the dual aspects of transactions.
Meaning of Journal Entry: The process of recording journals in the books of account is known
as journal entry. Thus, the method of journalizing can be expressed as journal entry.
Types of Journals:
Journal can be classified as simple and compound on the basis of structure. It can also be
classified as Special Journal and General Journal in a on the basis of practice.

Chapter two
Simple Journal: The journal in which there only two parties in which one is party is debited
exactly with the same amount for which another party is credited is known as simple journal. For
example, if X Company provides service to Y company on account for Tk 2,00,000, the journal
in the books of X Company will be,
Y Company A/C………………Dr. Tk. 200, 000
Service Revenue…………………..Cr. Tk. 200,000
Compound Journal: When three or more accounts are required in one journal, then it is referred
to as a compound journal. For example: Purchase of equipment of Tk. 5,000 part of which (Tk.
3,000) is paid in cash and the remainder is on account. The Journal follows:
Equipment………………………..Dr . Tk. 5,000
Cash………………………………………..Cr. Tk. 3,000
Accounts Payable…………………………..Cr. Tk. 2,000
Special Journal: The journal entries prepared to record the same sort of transactions in an
individual book named as special journal. In British Accounting it is known as “Daily Book” and
there are Seven (7) such books.
i) Purchase Book: This book has the following features
a) Purchase on account is recorded in this book
b) Cash Purchase and return are not recorded in this book.
c) The sum of the amount of purchase book is transferred to the debit side of Purchase A/C
ii) Sales Book: This book has the following features
a) Sales on account are recorded in this book
b) Cash Sales and return are not recorded in this book.
c) The sum of the amount of sales book is transferred to the credit side of Sales A/C
iii) Purchase Return Book: This book has the following features
a) Purchase return from credit purchase is recorded in this book
b) This book is known as outward return book
c) The sum of the amount of purchase return book is transferred to the credit side of Purchase
Return A/C
iv) Sales Return Book: This book has the following features
a) Sales return from credit sales is recorded in this book
b) This book is known as inward return book
c) The sum of the amount of sales return book is transferred to the debit side of Sales Return A/C

Chapter two
v) Bills Receivable Book: The receivables acknowledged by the debtors are recorded in this
book.
vi) Bills Payable Book: The payable acknowledged to the creditors are recorded in this book.
vii) General Journal: The transactions which do not take place on a regular basis and cannot be
posted in the subsidiary books of special journal need to be recorded through general journals.
Different types of general journal are discussed below.
i) Opening Journal: If we classify the different elements of transactions under five categories of
assets, liabilities, owners’ equity, income and expenses, it will be observed that the presence of
income and expenses do not exist at the end of the accounting period while a balance remain in
existence for assets, liabilities and owners’ equity. The journal required to transfer the balances
of such accounts to the new accounting period is known as opening journal entry.
ii) Closing Entries: Closing the accounts consists of journalizing and posting the closing entries.
Closing sets the balances of the revenue and expense accounts back to zero in order to measure
the net income of the next period. Journal entries are also necessary to close all nominal accounts
in the ledger by transferring them into the Income Statement and to close income statement by
transferring the net profit or net loss to the Owner’s Equity. These entries are known as closing
entries.
As revenue and expense accounts balances relate to a particular accounting period and are
therefore closed at the end of the period. The revenue and expense accounts are called temporary
(nominal) accounts. The owner’s withdrawal is a temporary account showing withdrawals of the
owner for a specific period. The closing process applies only to temporary accounts.
iii) Adjusting Entries: Adjusting entries assign revenues to the period in which they are earned
and expenses to the period in which they are incurred. They are needed (a) to measure properly
the period’s income and (b) to bring related asset and liability accounts to correct balances for
the financial statements. The journal entries that are required to adjust the various accounts for
the purpose of making provision for depreciation, allowance for doubtful debts and discounts,
adjusting the payments in advance and bring the outstanding liabilities in account, etc., are
known as adjusting entries.
Adjusting entries are generally related to the following transactions:
a) Prepaid expenses
b) Depreciation
c) Accrued expenses
d) Accrued revenues
e) Unearned revenues
iv) Correcting Entries: when entries are passed to correct the wrong posting already made, the
journals are called correcting journal.
v) Reversing Entries: Reversing entries are special types of entries that ease the burden of
accounting after adjusting and closing entries have been made at the end of a period. Reversing
entries are used most often in conjunction with accrual-type adjustments. GAAP does not require
reversing entries. They are used only for convenience and to save time.

Chapter two
A reversing entry is the exact opposite of an adjusting entry. The reversing entry is dated the first
day of the period following the adjusting entry. Reversing entries are not necessary, but they
make it possible to record the expense payments or revenue receipts in the new period in the
usual manner. If the reversing entries were not made, for example, for accrued expenses, the
expense payments would have to be analyzed as to (1) the amount representing payment of the
accrued liability, and (2) the amount representing the expense of the current period.
Meaning of Ledger:
The entire group of accounts maintained by a company, including all the asset, liability and
owner’s equity accounts is referred to collectively as the ledger. The ledger keeps all the
information about changes in specific account balances in one place. After recording transactions
in journal these are transferred to a principal book, which is called ledger.
“Ledger is the destination of all entries made in the subsidiary books or journals.”—Wiiliam
Pickles.
Form of Ledger:
Two forms of ledgers are generally seen in practice called i) T-form (traditional Method) and ii)
Standard form (Running Balance Method)
Trial Balance: A trail balance is a list of accounts and their balances at a given time. It is
prepared at the end of the accounting period to prove that the debits equal the credits after
posting.
“A Trial Balance may be defined as a statement of debit and credit balances extracted from the
ledger with a view to test the arithmetical accuracy of the Books”.--- J. R. Batliboi.
Limitations of Trial Balance:

A Trial Balance is not a conclusive proof of the arithmetical accuracy of the postings. Because
the trial may agree in both side and yet there may be some errors in the books remaining
undisclosed. The errors may be:
a) Clerical Errors:
1. Errors of omission: A transaction is not journalized or journalized but not posted in ledger.
2. Errors of commission: A wrong entry in the original book entered Tk. 500 instead of Tk.
5,000).
3. Errors of mis posting: If a transaction has been transferred to Rahman’s A/C instead of
Rahim’s A/C.
4. Compensating error: Some errors arise from the over-debits or under-debits of account being
neutralized by the over-credits or under-credits to the same extent of some other account.
b) Errors of Principle: Journalizing revenue expenses/income as capital expenses/ income or
vice-versa.

Chapter two
Journal
1. Sumana Delivery Services began operations during January 2012. In the month of February
the entity engaged in the following transactions:
Feb:1 Kamal Uddin, the owner, invested Tk. 45,000 entitled Sumana Delivery Service and a
delivery truck valued at Tk. 50,000.
,, 2: Purchased Tk. 40 fuel for the delivery truck, using a business credit card.
,, 5: Paid Tk. 1,000 cash for supplies.
,, 8: Completed a delivery job and received cash Tk. 7,000.
,, 10: Purchased advertising leaflets for cash, Tk. 200.
,, 12: Completed a delivery job and received the customer’s promise to pay the amount due Tk.
500 within ten days.
,, 15: Paid office utility bills, Tk. 120.
,, 17: Received cash from customer on account, Tk. 5,000.
,, 22: Paid on account, Tk. 40.
,, 25: Paid Tk. 250 for repairs to the delivery truck.
,, 28: Paid office manager’s salary, Tk. 800 and office rent, Tk.200.
,, 28: Withdrew Tk. 2,000 for personal use.
Required:
a) Journalize the transactions with explanation.
b) Prepare a ledger for ‘Cash’ and ‘Service Revenue.’
Sumona Delivery
Journal Entries
Date Accounts and Explanations Ref. Debit (Taka) Credit (Taka)
Feb-1, 2012 Cash A/C………………. Dr. 45,000
Truck A/C ……..……… Dr. 50,000
Capital A/C …………………..Cr. 95,000
(Initial Investment by Owner)
Feb-2, 2012 Fuel Expense A/C ………Dr. 40
Accounts Payable A/C ………. Cr. 40
(Purchased Fuel on Account)
Feb-5, 2012 Supplies A/C ……………. Dr. 1,000
Cash A/C ……………………. Cr. 1,000
(Purchased Supplies)
Feb-8, 2012 Cash A/C …………………Dr. 7,000
Service Revenue A/C ………. Cr. 7,000
(Service Revenue Received in Cash)
Feb-10, 2012 Advertising Expense A/C …Dr. 200
Cash A/C.………………….….Cr. 200
(Purchased Advertising Leaflets)
Feb-12, 2012 Accounts Receivable A/C…….Dr. 500
Service Revenue A/C ….………..Cr. 500
(Performed Service on Account)
Feb-15, 2012 Utility A/C ……………………...Dr. 120
Cash A/C …………………………...Cr. 120
(Paid Cash for Utility Expense)

Chapter two
Feb-17, 2012 Cash A/C ………...……. Dr. 5,000

Accounts Receivable A/C………Cr. 5,000
(Received Cash on Account)
Feb-22,2012 Accounts Payable A/C …….Dr. 40
Cash A/C ………………………Cr. 40
(Paid Cash on Account)
Feb-25,2012 Repair Expense A/C ………Dr. 250
Cash A/C ………………………Cr. 250
(Paid Cash for Repair Expense)
Feb-28,2012 Salary Expense A/C …….Dr. 800
Rent expense A/C ……….Dr. 200
Cash A/C …………………….Cr. 1,000
(Paid Cash Expense)
Feb-28,2012 Drawing A/C …………….Dr. 2,000
Cash A/C ……………………..Cr. 2,000
(Withdrew for Personal Use)
Total 112,150 112,150
Sumona Delivery Services

Ledgers
Cash Account
Balance (Tk)
Date Items Journal Debit (Tk) Credit (Tk) Debit Credit
Ref.
Feb-1, 2012 Capital 45,000 - 45,000 -
Feb-5, 2012 Supplies - 1,000 44,000 -
Feb-8, 2012 Service Revenue 7,000 - 51,000 -
Feb-10, 2012 Advertising Expense - 200 50,800 -
Feb-15, 2012 Utility - 120 50,680 -
Feb-17, 2012 Accounts Receivable 5,000 - 55,680 -
Feb-22, 2012 Accounts Payable - 40 55,640 -
Feb-25, 2012 Repair Expense - 250 55,390 -
Feb-28, 2012 Salary Expense - 800 54,590 -
Feb-28, 2012 Rent Expense - 200 54,390 -
Feb-28, 2012 Withdrawal - 2,000 52,390 -
Service Revenue
Balance (Tk)
Ref.
Feb-8, 2012 Cash - 7,000 - 7,000
Feb-12, 2012 Accounts Receivable - 500 - 7,500
2. Mr. Rahman has the following transactions in his business during May, 2013
1. Mr. Rahman invested Tk. 100,000 in his business.
2. He paid Tk. 50,000 for purchasing an office building.
3. Purchase Tk. 500 office supplies on account.
4. Received cash Tk. 25,000 for service rendered.

Chapter two
5. Paid cash expenses Tk.1,500 for advertising, Tk. 200 for utilities, and Tk. 5,000 for salaries.
6. Rendered services on account Tk. 2,000.
7. Paid Tk. 475 for full settlement of transaction 3.
8. Receive Tk. 1,950 for full settlement of transaction 6.
9. Service rendered on account Tk. 1, 000.
10. Sold supplies for Tk. 150 cash, cost of which was Tk. 120.
Required:
i) Prepare the journal entries to record these transactions.
ii) Post the entries to the ledger.
Mr. Rahman
Journal Entries
May-1, 2013 Cash A/C……………………Dr. 100,000
Capital A/C…………………………Cr. 100,000
May-2, 2013 Office Building A/C …………Dr. 50,000
Cash A/C …………………………..Cr. 50,000
(Paid Cash for Office Building)
May-3, 2013 Supplies A/C ………………….Dr. 500
Accounts Payable A/C………………..Cr. 500
(Purchased Supplies on Account)
May-4, 2013 Cash A/C ………………….Dr. 25,000
Service Revenue A/C ……….….Cr. 25,000
(Performed Service on Cash)
May-5, 2013 Advertising Expense A/C ………… Dr. 1,500
Utilities Expense A/C……………….Dr. 200
Salaries Expense A/C….………...... Dr. 5,000
Cash A/C ..………….……………………….Cr. 6,700
(Paid Cash Expenses)
May-6, 2013 Accounts Receivable A/C …..………….Dr. 2,000
Service Revenue A/C ………………..….….Cr. 2,000
May-7, 2013 Accounts Payable A/C…………..….Dr. 500
Discount Received/Purchase Discount A/C……Cr. 25
Cash A/C………………………………………..Cr. 475
(Paid Cash on Account and Received Discounts)
May-8, 2013 Cash A/C ………...………...Dr. 1,950
Discount Allowed A/C …….Dr. 50
Accounts Receivable A/C ………………Cr. 2,000
May-9,2013 Accounts Receivable A/C……..….Dr. 1,000
Service Revenue A/C ………………….Cr. 1,000
May-10, 2013 Cash A/C……………………….Dr. 150
Supplies A/C…………………………...Cr. 120
Gain on Sale of Supplies A/C…….……Cr. 30
(Sale of Supplies on Cash and Gain on Sale of Supplies)
Total 187,850 187,850

Chapter two
Ledger Accounts
Cash A/C
Balance (Tk)
Ref.
May-1, 2013 Capital 100,000 - 100,000 -
May-2, 2013 Office Building - 50,000 50,000 -
May-4, 2013 Service Revenue 25,000 - 75,000 -
May-5, 2013 Advertising - 1,500 73,500 -
May-5, 2013 Utility - 200 73,300 -
May-5, 2013 Salary - 5,000 68,300 -
May-7, 2013 Accounts Payable - 475 67,825 -
May-8, 2013 Accounts Receivable 1,950 - 69,775 -
May-10, 2013 Supplies 120 - 69,895 -
May-10, 2013 Gain on Sale of Supplies 30 - 69,925
Capital A/C
Balance (Tk)
Ref.
May-1, 2013 Cash 100,000 100,000
Office Building
Balance (Tk)
Ref.
May-2, 2013 Cash 50,000 50,000
Supplies
Balance (Tk)
Ref.
May-3, 2013 Accounts Payable 500 - 500 -
May-10, 2013 Cash 120 380 -
Accounts Payable
Balance (Tk)
Ref.
May-3, 2013 Supplies - 500 - 500
May 7, 2013 Cash 475 - 475 25
May 7, 2013 Discount Received 25 - - -
Service Revenue
Balance (Tk)
Ref.
May-4, 2013 Cash - 25,000 - 25,000
May-6, 2013 Accounts Receivable - 2,000 - 27,000
May-9,2013 Accounts Receivable - 1,000 - 28,000

Chapter two
Advertising
Balance (Tk)
Ref.
May-5, 2013 Cash 1,500 - 1,500 -
Utility
Balance (Tk)
Ref.
May-5, 2013 Cash 200 200
Salary
Balance (Tk)
Ref.
May-5, 2013 Cash 5,000 - 5,000 -
Accounts Receivable
Balance (Tk)
Ref.
May-6, 2013 Service Revenue 2,000 - 2,000 -
May-8,2013 Cash - 1,950 50 -
May-8,2013 Discount Allowed - 50 - -
May-9,2013 Service Revenue 1,000 - 1,000 -
Discount Allowed
Balance (Tk)
Ref.
May-8, 2013 Accounts Receivable 50 - 50 -
Discount Received
Balance (Tk)
Ref.
May-7, 2013 Accounts Payable - 25 - 25
Gain on Sale of Supplies
Balance (Tk)
Ref.
May-10, 2013 Cash - 30 - 30

Chapter two
Mr. Rahman
Trial Balance
As on May 31, 2013
Serial No. Particulars Ref. Debit (Taka) Credit (Taka)
1 Cash 69,925 -
2 Rahman’s Capital - 100,000
3 Office Building 50,000 -
4 Supplies 380 -
5 Accounts Payable -
6 Accounts Receivable 1,000 -
7 Service Revenue - 28,000
8 Advertising 1,500 -
9 Utilities 200 -
10 Salary 5,000
11 Discount 50 25
12 Gain on Sale of Supplies - 30
Total 128,055 128,055
3. Mr. Anis has just started his software business called Anis Soft Express. During the first month of his
operation the following transactions have been observed:
June-1, 2012: He invested Tk. 500,000 cash and brought five computers having a total value of Tk.
250,000 to start his new business.
June-4, 2012: He paid rent in advance Tk. 20, 000 for 10 months.
June-7, 2012: Provided service for cash Tk. 30,000.
June-9, 2012: Purchased a new model scanning machine for Tk. 5,000 on account.
June-19, 2012: Provided service on account Tk. 60,000.
June-24, 2012: Paid salary Tk. 15,000.
June-30, 2012: Received cash Tk. 59,000 in full settlement of accounts receivable created on June-19,
2012.
June-30, 2012: Rent for June expired.
Required:
iii) Prepare a Trial Balance
Anis Soft Express

Journal Entries
Date Particulars Ref. Debit (Taka) Credit (Taka)
June-1, 2012 Cash……………………Dr. 500,000
Computer………………Dr. 250,000
Anis’s Capital……………….Cr. 750,000
June-4, 2012 Prepaid Rent……………Dr. 20,000
Cash…………………….…..Cr. 20,000
(Office Rent Paid in Advance)
June-7, 2012 Cash……………………Dr. 30,000
Service Revenue…….…….Cr. 30,000

Chapter two
June-9, 2012 Office Equipment……………Dr. 5,000

Accounts Payable……..…………Cr. 5,000
(Purchased Scanning Machine on Account)
June-19, 2012 Accounts Receivable.…….Dr. 60,000
Service Revenue ………….…..Cr. 60,000
June-24, 2012 Salary Expenses…………Dr. 15,000
Cash…………………………..Cr. 15,000
(Paid Cash for Salary)
June-30, 2012 Cash………………………….Dr. 59,000
Discount Allowed……………Dr. 1,000
Accounts Receivable……………….Cr. 60,000
(Received Cash on Account and Discount
Allowed)
June-30, 2012 Rent Expenses………….Dr. 2,000
Prepaid Rent…………………Cr. 2,000
(Prepaid Rent Expired for June)
Total 9,40,000 9,40,000
Anis Soft Express

Ledgers
Cash A/C
Balance (Tk)
Ref.
June-1, 2012 Anis’s Capital 500,000 - 500,000 -
June-4, 2012 Prepaid Rent - 20,000 480,000 -
June-7, 2012 Service Revenue 30,000 - 510,000 -
June-24, 2012 Salary Expense - 15,000 495,000 -
June-30, 2012 Accounts Receivable 59,000 - 554,000 -
Computer A/C
Balance (Tk)
Ref.
June-1, 2012 Anis’s Capital 250,000 - 250,000 -
Anis’s Capital
Balance (Tk)
Ref.
June-1, 2012 Cash - 500,000 - 500,000
June-1, 2012 Computer - 250,000 - 750,000
Prepaid Rent A/C

Balance (Tk)
Date Name of account Journal Debit (Tk) Credit (Tk) Debit Credit
Ref.
June-4,2012 Cash 20,000 - 20,000 -
June-30,2012 Rent Expense - 2,000 18,000 -

Chapter two
Service Revenue A/C

Balance (Tk)
Ref.
June-7,2012 Cash 30,000 - 30,000
June-19,2012 Accounts Receivable 60,000 - 90,000
Office Equipment A/C

Balance (Tk)
Ref.
June-9,2012 Accounts Payable 5,000 - 5,000 -
Accounts Payable
Balance (Tk)
Ref.
June-9,2012 Office Equipment 5,000 - 5,000
Accounts Receivable
Balance (Tk)
Ref.
June-19,2012 Service Revenue 60,000 - 60,000 -
June-30,2012 Cash - 59,000 1,000 -
June-30,2012 Discount Allowed - 1,000 - -
Salary Expenses A/C

Balance (Tk)
Ref.
June-24,2012 Cash 15,000 - 15,000 -
Discount Allowed A/C

Balance (Tk)
Ref.
June-30,2012 Accounts Receivable 1,000 - 1,000 -
Rent Expenses A/C

Balance (Tk)
Ref.
June-30,2012 Prepaid Rent 2,000 - 2,000 -

Chapter two
Anis Soft Express

Trial Balance
As on 30th June 2012
Serial Particulars Ref. Debit (Taka) Credit (Taka)
No.
1 Cash 554,000 -
2 Computer 250,000 -
3 Anis’s Capital - 750,000
4 Prepaid Rent 18,000 -
6 Office Equipment 5,000 -
7 Accounts Payable - 5,000
8 Accounts Receivable - -
9 Salaries 15,000 -
10 Discount Allowed 1,000 -
11 Rent Expense 2,000 -
Total 845,000 845,000
4. Mostafa Jobbar owns and operates an interior design studio called ‘Jobbar Interiors’. The
following amounts summarize the financial position of his business on May 31, 2012:
Assets Liabilities + O/E

Cash + A/R + Supplies + Land A/P + Capital
12,500 15,000 120,000 80,000 67,500
During June 2012, the following transactions occurred: -

1) Jobbar inherited Tk. 500,000 and brought it in the business.
3) Performed services for a client and received cash of Tk. 7,000.
6) Paid off the beginning balance of accounts payable.
8) Purchased supplies on account, Tk. 5,000.
14) Collected cash from a customer on account, Tk.10,000.
19) Consulted on the interior design of a major office building and billed the client for
service rendered, Tk. 24,000.
24) Jobbar withdrew cash of Tk. 1,800 for personal use.
30) Recorded the following business expenses for the month:
(a) Paid office rent………. Tk. 9,000.
(b) Paid advertising………. Tk. 1,000.
Required:
iii) Prepare a Trial Balance.

Chapter two
Jobbar Interior
Journal Entries
June-1, 2012 Cash…………………Dr. 500,000
Jobbar’s Capital…………..Cr. 500,000
June-3, 2012 Cash…………………Dr. 7,000
Service Revenue………….Cr. 7,000
June-6, 2012 Accounts Payable……..Dr. 80,000
Cash……………………..Cr. 80,000
(Paid Cash on Account)
June-8, 2012 Supplies……………….Dr. 5,000
Accounts Payable …….….Cr. 5,000
(Purchased Supplies on Account)
June-14, 2012 Cash…….……………Dr. 10,000
Accounts Receivable...…..Cr. 10,000
June-19, 2012 Accounts Receivable…….Dr. 24,000
Service Revenue …………….Cr. 24,000
June-24, 2012 Drawings………...Dr. 1,800
Cash………………...Cr. 1,800
(Withdrew for Personal Use)
June-30, 2012 Rent Expenses.………..Dr. 9,000
Advertising Expenses…Dr. 1,000
Cash……………………....Cr. 10,000
(Paid Cash Expenses)
Total 637,800 637,800
Jobbar Interior
Ledger Accounts
Cash A/C
Balance (Tk)
Ref.
June-1, 2012 Beginning Balance 12,500 - 12,500 -
June-1, 2012 Jobbar’s Capital 500,000 - 512,500 -
June-6, 2012 Accounts Payable - 80,000 439,500 -
June-14, 2012 Accounts Receivable 10,000 - 449,500 -
June-24, 2012 Drawings - 1,800 447,700 -
June-30, 2012 Rent Expense 9,000 438,700 -
June-30, 2012 Advertising Expense 1,000 437,700

Chapter two
Jobbar’s Capital A/C

Balance (Tk)
Ref.
June-1, 2012 Beginning Balance - 67,500 - 67,500
June-1, 2012 Cash - 500,000 - 567,500
Service Revenue A/C
Balance (Tk)
Ref.
June-3, 2012 Cash - 7,000 - 7,000
June-19, 2012 Accounts Receivable - 24,000 - 31,000
Accounts Payable A/C

Balance (Tk)
Ref.
June-1, 2012 Beginning Balance - 80,000 - 80,000
June-6, 2012 Cash 80,000 - 80,000 -
June-8, 2012 Supplies - 5,000 - 5,000
Accounts Receivable A/C

Balance (Tk)
Ref.
June-8, 2012 Cash - 10,000 5,000 -
Land A/C
Balance (Tk)
Ref.
Supplies A/C
Balance (Tk)
Ref.
June-8, 2012 Accounts Payable 5,000 - 5,000 -
Drawings A/C
Balance (Tk)
Ref.
June-24, 2012 Cash 1,800 - 1,800 -

Chapter two
Rent Expense A/C

Balance (Tk)
Ref.
June-30, 2012 Cash 9,000 - 9,000 -
Advertising A/C
Balance (Tk)
Ref.
June-30, 2012 Cash 1,000 - 1,000 -
Jobbar Interior
Trial Balance
As on 30th June 2012
Serial No. Particulars Ref. Debit (Taka) Credit (Taka)
1 Cash 437,700 -
2 Jobbar’s Capital - 567,500
4 Land 120,000 -
5 Accounts Payable - 5,000
6 Accounts Receivable 29,000 -
7 Supplies 5,000 -
8 Drawings 1,800 -
9 Salaries 9,000 -
10 Rent Expense 1,000
Total 603,500 603,500

Principles of Accounting: ACC-1101
Chapter four
Completing the Accounting Cycle: Worksheet

Worksheet:
Worksheet is a columnar document that is designed to help move data from the trial balance to
the finished financial statements. The worksheet is not part of the ledger or the journal, nor is it a
financial statement. Therefore, it is not part of the formal accounting system. Instead, it is a
summary device that exists for the accountant’s convenience.
Benefits of Worksheet:
1) Provide an orderly way to compute net income and arrange the data for the financial
statements.
2) It helps the accountant identify the accounts needing adjustment.
3) It brings together in one place the effects of all the transactions of a particular period.
4) It aids the closing process by listing the adjusted balances of all the accounts.
5) It also helps the accountant discover potential errors.
Steps to Prepare a Worksheet:
1) Write the account titles and their unadjusted ending balances in the Trial Balance columns of
the worksheet and total the amounts.
2) Enter the adjustments in the Adjustment columns and total the amounts.
3) Compute each account’s adjusted balance by combining the trial balance and adjusted figures.
Enter the adjusted amounts in the Adjusted Trial Balance columns.
4) Extend the revenue and expense amounts from the Adjusted Trial Balance to the Income
Statement Columns. Extend the asset, liability, and owner’s equity amounts to the Balance Sheet
columns. Total the Statement columns.
5) Compute net income or net loss as the difference between total revenues and total expense on
the income statement. Enter net income or net loss as a balancing amount on the income
statement and on the balance sheet and compute the adjusted columns totals. After completion,
total debits equal total credits in the income statement columns and in the balance sheet columns.
Problem-1:
The Trial Balance of Smart Airlines on March 31 of the current year and the data needed for the
month-end adjustments follow:
Information for adjustments:
a) Accrued service revenue Tk. 650
b) Supplies on hand Tk. 500
c) Prepaid rent expired Tk. 2,000
d) Depreciation on furniture Tk. 300
e) Accrued salary expense Tk. 1,200
f) Amount of unearned service revenue that has been earned Tk. 350

Chapter four
Smart Airlines
Unadjusted Trial Balance
March 31, 2010
Cash ……………………… Tk. 24,800 -
Accounts Receivable ………. 2,250 -
Supplies ……………………. 700 -
Prepaid Rent……………….. 3,000 -
Furniture…………………… 26,500 -
Accumulated - Tk. 10,000
Depreciation…. - 13,100
Accounts Payable………….. - 450
Unearned Service Revenue… - 31,250
Capital……………………… 3,200 -
Withdrawal…………………. - 7,000
Service 950 -
Revenue……………. 400 -
Salary Expense…………….. Tk.61,800 Tk. 61,800
Utilities Expense……………
Total……………………
Required:
a) Prepare a worksheet.
b) Give the adjusting entries.
Smart Airlines
Work Sheet
For the month ended March 31, 2010
Accounts Title Unadjusted Adjustment Adjusted Trial Income Balance
Trial Balance Balance Statement Sheet
Dr. Cr. Dr. Cr. Dr. Cr Dr. Cr. Dr. Cr
Cash 24,800 - - - 24,800 - - - 24,800 -
Accounts Receivable 2,250 - 650 - 2,900 - - - 2,900
Supplies 700 - - 200 500 - - - 500 -
Prepaid Rent 3,000 - - 2,000 1,000 - - - 1,000 -
Furniture 26,500 - - - 26,500 - - - 26,500 -
Accumulated Depreciation - 10,000 - 300 - 10,300 - - - 10,300
Account Payable - 13,100 - - - 13,100 - - - 13,100
Unearned Service Revenue - 450 350 - - 100 - - - 100
Capital - 31,250 - - - 31,250 - - - 31,250
Withdrawal 3,200 - - - 3,200 - - - 3,200
Service Revenue - 7,000 - 1,000 - 8,000 - 8,000 - -
(a+f)
Salary Expense 950 - 1,200 - 2,150 - 2,150 - - -
Utilities expense 400 - - - 400 - 400 - - -
Supplies Expense - - 200 - 200 - 200 - - -
Depreciation Expense - - 300 - 300 - 300 - - -
Salary Payable - - - 1,200 - 1,200 - - - 1,200
Rent expense - - 2,000 - 2,000 - 2,000 - - -
Net Income - - - - - - 2,950 - - 2,950

Chapter four
Total 61,800 61,800 4,700 4,700 63,950 63,950 8,000 8,000 58,900 58,900
Adjustment Entries:
a) Accounts Receivable A/C……..Dr. 650
Service Revenue A/C……………….Cr. 650
(To Record Accrue Service Revenue)
b) Supplies Expense A/C……..Dr. 200
Supplies A/C………………………Cr. 200
(To Record Supplies Used)
c) Rent Expense A/C………….Dr. 2,000
Prepaid Rent A/C…………………Cr. 2,000
(To Record Rent Expense)
d) Depreciation Expense A/C….Dr. 300
Accumulated Depreciation A/C……Cr. 300
(To Record Depreciation)
e) Salary Expense A/C………Dr. 1,200
Salary Payable A/C…………Cr. 1,200
(To Record Accrued Salary Expense)
f) Unearned Service Revenue A/C……Dr. 350
Service Revenue A/C…………………Cr. 350
(To Record Unearned Service Revenue That Has Been Earned)
Closing Entries
a) Service Revenue A/C………Dr. 1,000
Income Summary A/C………….Cr. 1,000
(To Close Revenue Accounts)
b) Income Summary A/C……..Dr. 3,700
Supplies Expense A/C…………..Cr. 200
Rent Expense A/C………………Cr. 2,000
Depreciation Expense A/C……...Cr. 300
Salary Expense A/C…………….Cr. 1,200
(To Close All Expense Accounts)
c) Income Summary A/C………Dr. 2,950
Capital A/C……………………….Cr. 2,950
(To Transfer Net Income to Capital Account)
d) Capital A/C………………..Dr. 3,200
Owner’s Drawing A/C………….Cr. 3,200
(To Transfer Drawing Accounts to Capital Account)

Chapter four
Problem 2: The Trial Balance of Global Insurance Agency at October 31, 2015 and data needed
for the month-end adjustments are as follows:
Adjustment data:
a. Supplies on hand at the month ended, Tk. 340.
b. Prepaid rent still in force at October 31, Tk. 1,800.
c. Depreciation on Furniture and fixtures for the month Tk. 500.
d. Depreciation on Building for the month Tk. 800.
e. Accrued salary expense at October 31, Tk. 1,200.
f. Unearned service revenue still unearned at October 31, Tk. 4,300.
g. Accrued service revenue at October 31, Tk. 1,500.
Global Insurance Company

Trial Balance
As at October 31, 2015
Sl. Name of Accounts Ref. Debit Credit
No.
Cash Tk. 10,400 -
Accounts Receivable 12,310 -
Supplies 1,840 -
Prepaid Rent 2,700 -
Furniture 26,840 -
Accumulated Depreciation-Furniture - Tk. 3,400
Building 68,300 -
Accumulated Depreciation-Building - 9,100
Accounts Payable - 7,290
Salary Payable - -
Unearned Service Revenue - 5,300
Capital - 85,500
Withdrawal 4,900 -
Service Revenue - 19,560
Salary Expense 1,840 -
Rent Expense - -
Utilities Expense 530 -
Depreciation Expense-Furniture - -
Depreciation Expense-Building - -
Supplies Expense - -
Advertisement Expense 490 -
Total Tk. 130,150 Tk. 130,150
Required: Prepare a worksheet of the Global Insurance Agency.

Chapter four
Global Insurance Agency

Work Sheet
For the month ended October 31, 2015
Dr. Cr. Dr. Cr. Dr. Cr Dr. Cr. Dr. Cr.
Cash 10,400 - - - 10,400 - - - 10,400 -
Accounts Receivable 12,310 - 1,500 - 13,810 - - - 13,810 -
Supplies 1,840 - - 1,500 340 - - - 340 -
Prepaid Rent 2,700 - - 900 1,800 - - - 1,800 -
Furniture 26,840 - - - 26,840 - - - 26,840 -
Accumulated Depreciation- - 3,400 - 500 - 3,900 - - - 3,900
Furniture
Building 68,300 - - - 68,300 - - - 68,300 -
Building
Accounts Payable - 7,290 - - - 7,290 - - - 7,290
Salary Payable - - - 1,200 - 1,200 - - - 1,200
Unearned Service Revenue - 5,300 1,000 - - 4,300 - - - 4,300
Capital - 85,500 - - - 85,500 - - - 85,500
Withdrawal 4,900 - - - 4,900 - - - 4,900 -
Service Revenue - 19,560 - 2,500 - 22,060 - 22,060 - -
Salary Expense 1,840 - 1,200 - 3,040 - 3,040 - - -
Rent Expense - - 900 - 900 - 900 - - -
Utilities Expense 530 - - - 530 - 530 - - -
Depreciation Expense-Furniture - - 500 - 500 - 500 - - -
Depreciation Expense-Building - - 800 - 800 - 800 - - -
Supplies Expense - - 1,500 - 1,500 - 1,500 - - -
Advertisement Expense 490 - - - 490 - 490 - - -
Net Income - - - - - - 14,300 - - 14,300
Total 130,150 130,150 7,400 7,400 134,150 134,150 22,060 22,060 126,390 126,390
Adjustment Entries:
a) Supplies Expense A/C………Dr. 1,500
Supplies A/C………………….Cr. 1,500
b) Rent Expense A/C……………Dr. 900
Prepaid Rent A/C………………Cr. 900
c) Depreciation Expense A/C………Dr. 1,300
Accumulated Depreciation A/C……Cr. 1,300
(To Record Depreciation)
d) Salary Expense A/C………Dr. 1,200
(To Accrue Salary Expense)
e) Unearned Service Revenue A/C……Dr. 1,000
Service Revenue A/C…………………Cr. 1,000
(To Record Unearned Service Revenue that has been Earned)
f) Accounts Receivable A/C…….Dr. 1,500
Service Revenue A/C…………….Cr. 1,500

Chapter four
(To Record Accrued Service Revenue)
Closing Entries
a) Service Revenue A/C…………Dr. 2,500
Income Summary A/C…………….Cr. 2,500
(To Close Revenue Accounts)
b) Income Summary A/C……Dr. 4,900
Supplies Expense A/C……………Cr. 1,500
Rent Expense A/C………………..Cr. 900
Depreciation Expense A/C……….Cr. 1,300
Salary Expense A/C……………...Cr. 1,200
(To Close All Expenses Accounts)
c) Income Summary A/C……….Dr. 14,300
Capital A/C…………………………Cr. 14,300
d) Capital A/C……………….Dr. 4,900
Owner’s Drawing A/C……………Cr. 4,900
Problem-3: The Trial Balance of Agape Counselling Centre at May 31, 2016, follows:
Agape Counselling Centre
Trial Balance
As at May 31, 2016
Sl. No. Name of Accounts Ref. Debit Credit
Cash Tk. 1,670 -
Notes Receivable 10,340 -
Interest Receivable - -
Supplies 560 -
Prepaid Insurance 1,790 -
Furniture 27,410 -
Building 55,900 -
Land 13,700
Interest Payable - -
Salary Payable - -
Unearned Service Revenue - 6,800
Notes Payable-Long Term - 18,700
Capital - 34,290
Withdrawal 3,800 -
Service Revenue - 9,970
Interest Revenue - -
Depreciation Expense-Furniture - -
Depreciation Expense-Building - -
Salary Expense 2,170 -
Interest Expense - -
Utilities Expense 490 -
Property Tax Expense 640
Advertisement Expense 1,060 -
Supplies Expense - -
Total Tk. 119,530 Tk. 119,530

Chapter four
a. Accrued salary expense 600.

b. Supplies in hand 410.
c. Prepaid insurance expired during May, 390.
d. Accrued interest expense, 220.
e. Unearned service revenue earned during May, 4400.
f. Accrued advertising expense, 60 (Credit Accounts Payable).
g. Accrued interest revenue, 170.
h. Depreciation: furniture, 380; building, 160.
Required: Complete Agape’s worksheet for May.
Agape Counselling Centre

Work Sheet
For the month ended May 31, 2016
Cash 1,670 - - - 1,670 - - - 1,670 -
Notes Receivable 10,340 - - - 10,340 - - - 10,340 -
Supplies 560 - - 150 410 - - - 410 -
Prepaid Insurance 1,790 - - 390 1,400 - - - 1,400 -
Furniture 27,410 - - - 27,410 - - - 27,410 -
Furniture
Building 55,900 - - - 55,900 - - - 55,900 -
Building
Land 13,700 13,700 13,700
Accounts Payable - 14,730 - 60 - 14,790 - - - 14,790
N/P-Long Term 18,700 - - 18,700 18,700
Capital - 34,290 - - - 34,290 - - - 34,290
Withdrawal 3,800 - - - 3,800 - - - 3,800 -
Service Revenue - 9,970 - 4,400 - 14,370 - 14,370 - -
Salary Expense 2,170 - 600 - 2,770 - 2,770 - - -
Property Tax Expense 640 - - - 640 - 640 - - -
Advertisement Expense 1,060 - 60 - 1,120 - 1,120
Salary Payable - - - 600 - 600 - - - 600
Supplies Expense - - 150 - 150 - 150 - - -
Insurance Expense - - 390 - 390 - 390 - - -
Interest Expense - - 220 - 220 - 220 - - -
Interest Payable - - - 220 - 220 - - - 220
Interest Receivable - - 170 - 170 - - - 170 -
Interest Revenue - - - 170 - 170 - 170 - -
Depreciation Expense- - - 380 - 380 - 380 - - -
Furniture
Building
Net Income - - - - - - 8,220 - - 8,220
Total 119,530 119,530 6,530 6,530 121,120 121,120 14,540 14,540 114,800 114,800

Chapter four
Problem-4: The Trial Balance of Picaso Limited at December 31, 2020 and data needed for the month-
end adjustments are as follows:
a. Supplies on hand at the month ended, Tk. 340.
b. Prepaid rent still in force at December 31, Tk. 1,800.
c. Depreciation on Furniture and fixtures for the month Tk. 500.
d. Depreciation on Building for the month Tk. 800.
e. Insurance Premium is paid for 15 months.
f. Accrued salary expense at December 31, Tk. 1,200.
g. Unearned service revenue still unearned at December 31, Tk. 4,300.
h. Accrued service revenue at December 31, Tk. 1,500.
i. Investment is made on May 31.
j. Ending Inventory Tk. 25,000.
Picaso Limited
Trial Balance
As at December 31, 2020
Sl. No. Name of Accounts Ref. Debit Credit
Cash Tk. 10,400 -
Accounts Receivable 12,310 -
Supplies 1,840 -
Inventory 20,000
Prepaid Rent 2,700 -
Insurance Premium 3,000
Furniture 26,840 -
Building 68,300 -
6% Investment 20,000
Unearned service revenue - 5,300
Capital - 85,500
Withdrawal 4,900 -
Service revenue - 19,560
Salary expense 1,840 -
5% Mortgage Loan - 40,000
Utilities expense 530 -
Advertisement expense 490 -
Total Tk. 173,150 Tk. 173,150
Required: Prepare a worksheet of the Picaso Limited.

Chapter four
Picaso Limited
Work Sheet
For the month ended December 31, 2020
Cash 10,400 - - - 10,400 - - - 10,400 -
Accounts Receivable 12,310 - 1,500 - 13,810 - - - 13,810 -
Supplies 1,840 - - 1,500 340 - - - 340 -
Inventory 20,000 - 5,000 - 25,000 - - - 25,000 -
Prepaid Rent 2,700 - - 900 1,800 - - - 1,800 -
Insurance Premium 3,000 - - 600 2,400 - 2,400 - - -
Furniture 26,840 - - - 26,840 - - - 26,840 -
Furniture
Building 68,300 - - - 68,300 - - - 68,300 -
Building
Accounts Payable - 7,290 - 5,000 - 12,290 - - - 12,290
6% Investment 20,000 - - - 20,000 - - - 20,000 -
Capital - 85,500 - - - 85,500 - - - 85,500
Withdrawal 4,900 - - - 4,900 - - - 4,900 -
Service Revenue - 19,560 - 2,500 - 22,060 - 22,060 - -
Salary Expense 1,840 - 1,200 - 3,040 - 3,040 - - -
5% Mortgage Loan - 40,000 - - - 40,000 - - - 40,000
Advertisement Expense 490 - - - 490 - 490 - - -
Supplies Expense - - 1,500 - 1,500 - 1,500 - - -
Rent Expense - - 900 - 900 - 900 - - -
Furniture
Building
Prepaid Insurance - - 600 - 600 - - - 600 -
Salary Payable - - - 1,200 - 1,200 - - - 1,200
Interest Receivable - - 700 - 700 - - - 700
Interest Revenue - - - 700 - 700 - 700 - -
Interest Expense - - 2,000 - 2,000 - 2,000 - - -
Interest Payable - - - 2,000 - 2,000 - - - 2,000
Net Income - - - - - - 10,600 - - 10,600
Total 173,150 173,150 15,700 15,700 184,850 184,850 22,760 22,760 172,690 172,690

Chapter four
Adjusting Entries:
a) Supplies Expense A/C………Dr. 1,500
Supplies A/C………………….Cr. 1,500
b) Rent Expense A/C……………Dr. 900
Prepaid Rent A/C………………Cr. 900
c) Depreciation Expense-Furniture & Fixture A/C………Dr. 500
Accumulated Depreciation-Furniture & Fixture A/C……Cr. 800
(To Record Depreciation on Furniture & Fixture)
d) Depreciation Expense-Building A/C………Dr. 800
Accumulated Depreciation-Building A/C……Cr. 800
(To Record Depreciation on Building)
e) Prepaid Insurance A/C………………Dr. 600
Insurance Premium A/C…………………….Cr. 600
(To Record Prepaid Insurance)
f) Salary Expense A/C………Dr. 1,200
(To Accrue Salary Expense)
g) Unearned Service Revenue A/C……Dr. 1,000
Service Revenue A/C…………………Cr. 1,000
(To Record Unearned Service Revenue that has been Earned)
h) Accounts Receivable A/C…….Dr. 1,500
Service Revenue A/C…………….Cr. 1,500
(To Record Accrued Service Revenue)
i) Interest Receivable A/C…………Dr. 700
Interest Revenue A/C………………….Cr. 700
(To Record Interest Revenue on Investment)
i) Interest Expense A/C…….Dr. 2,000
Interest Payable A/C……………..Cr. 2,000
(To Record Interest on Mortgage Loan)
j) Inventory A/C……………Dr. 5,000
Accounts Payable A/C…………….Cr. 5,000
(To Record Adjustment in Inventory)
Closing Entries:
a) Income Summary A/C ………………..Dr. 6,900
Supplies Expense A/C………………………Cr. 1,500
Rent Expense A/C…………………………..Cr. 900
Depreciation Expense A/C………………….Cr. 1,300
Salary Expense A/C…………………………Cr. 1,200
Interest Expense A/C………………………..Cr. 2,000
(To Close all Expenses to Income Summary)
b) Service Revenue A/C…………………..Dr. 2,500
Interest Revenue A/C…………………..Dr. 700
Income Summary A/C………………………..Cr. 3,200
To Close all Revenues to Income Summary)
c) Income Summary A/C……….Dr. 10,600
Capital A/C…………………………Cr. 10,600
d) Capital A/C……………….Dr. 4,900
Owner’s Drawing A/C……………Cr. 4,900

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Faculty of Business Studies

Department of Business Administration

Course Title: Principles of Accounting Credits:03

Course Learning Outcomes

Mapping of CLO to PLO Mapping

Accounting and Its Environment

Bba, Department of business administration, iiuc

Book-keeping vs. Accounting:

Bba, Department of business administration, iiuc

Bba, Department of business administration, iiuc

3. Managerial Accounting: Managerial Accounting is concerned with providing

Bba, Department of business administration, iiuc

Generally Accepted Accounting Principles (GAAP):

Bba, Department of business administration, iiuc

Bba, Department of business administration, iiuc

Bba, Department of business administration, iiuc

Bba, Department of business administration, iiuc

3. Institute of Cost and Management Accountants of Bangladesh (ICMAB): Institute of

International Accounting Standards (IAS):

Bba, Department of business administration, iiuc

International Accounting Standards (IAS) vs International Financial Reporting Standards

International Financial Reporting Standards, commonly called IFRS, are accounting

comparable across international boundaries.

The difference between IAS and IFRS

International Accounting Standards in the name of International Financial Reporting Standards

International Accounting Standard (IAS)-1: Presentation of Financial Statements:

Bba, Department of business administration, iiuc

Bba, Department of business administration, iiuc

2. Statement of Profit or Loss and Other Comprehensive Income:

3. Statement of Changes in Equity:

Bba, Department of business administration, iiuc

4. Notes to Financial Statements:

Bba, Department of business administration, iiuc

Bba, Department of business administration, iiuc

Recording Business Transactions

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Assets = Liabilities + Owner’s Equity

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

h) Recorded the following business expenses for the month:

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Double Entry System of Accounting:

Rules for determining Debit and Credit:

Bba, Department of business administration, iiuc.

Debit: An amount entered on the left-hand side of T-account.

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Limitations of Trial Balance:

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Feb-17, 2012 Cash A/C ………...……. Dr. 5,000

Sumona Delivery Services

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Bba, Department of business administration, iiuc.

Anis Soft Express

Bba, Department of business administration, iiuc.