Accounting Question and Answer

8/13/2019 Accounting Question and Answer

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CHAPTER-1: INTRODUCTION TO ACCOUNTING

1. What is the objective of financial statements?

Ans: The objective of financial statements is to provide information the financial position, performance and change

financial position of an entity that is useful to a wide range of users in making economic decision.

2. Mention the users of financial statements.Ans:Theusers of financial statement as per BFR framework are as follows:

!. "nvestors

#. $mployees

%. &enders

'. uppliers and others creditors

(. )ustomers

*. +overnments and their agencies

. -ublic.

3. Why it is easier to get financial information for internal user and harder for external user?

Ans: "t is easier to get financial information for internal user because the internal users can just go along to

accounts department and ask the staff there to prepare whatever accounting statements he she needs.

But it is harder to get financial information for e/ternal users because they can not get the internal accou

related information smoothly.

. !oint out the information needs of follo"ing users?

a0 tewardship functioning

b0 1anagement performance analysis

c0 2bility to pay debt

d0 2ssessing ta/ liability and determine ta/ policy

e0 $fficient allocation of resources

f0 )ontribution to local economy, using local supplier, environmental effect

Ans: The information needs of following users are pointed out:

tewardship functioning Managers# directors

1anagement performance analysis $hareholders

2bility to pay debt $u%%liers2ssessing ta/ liability and determine ta/ policy &'(

$fficient allocation of resources )overnment agencies

)ontribution to local economy, using local supplier, environmental effect !ublic

*. Mention financial re%orting frame"or+ in 'angladesh.

Ans: The financial reporting frameworks in Bangladesh are as under:

&egislation3 2ccounting concept3

MOTIUR RAHMAN AHKC, CHARTERED ACCOUNTANTS


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2ccounting standard3 2ccounting practice3 True and fare view fair representation.

,. What -ualitative characteristic are a%%ro%riate for each of the belo" cases?

a0 undue delay in financial reporting

b0 incomplete information or redundant information in the financial statement

c0 error free, neutral information presented in the financial statement , prudence and economic substance used

d0 information provided in the financial statements on a consistence basis

Ans:

a0 Relevance3

b0 4nderstandability3

c0 Reliability3

d0 )omparability.

. )ive */ exam%les of 0A! and 2/ for (?

Ans: xam%les of 0A! 4ca%ital ex%enditure5 are given belo":

!. "nvoice price of machine purchase

#. Freight charge of machine purchase

%. -urchase of building by a real estate company

'. Fees for inspection of the machine by engineer

(. Repair and maintenance of the machine with an enhance capacity

*. pare parts with enhance capacity. "mport duty charged on imported machine

5. 2dd additional !#51B ram for office computer

6. -urchase of property

!7. olicitor fees in connection with the purchase of property

!!. )ost of new machine

!#. )ustom duty charged on machinery

!%. The carriage cost of transporting the new machinery from the suppliers factory to the premises of the

purchasing it

xam%les for ( 4(evenue ex%enditure5 are given belo":

!. 8epreciation of the machine

#. Royalty e/penses

%. Repair maintenance of the machine within an e/isting capacity



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'. 8ividend

(. 2ny administrative and selling 9 distribution e/penses

*. &oss on sale of fi/ed assets

. -urchase of new computer after replacing old machine within e/isting capacity

5. ages of the machinery operator

6. 7dentifying 0A! and (

a0 purchase of an application software for the company

b0 purchase a second hand machine with reduced price

c0 wages for operating the newly purchased machine

d0 advertisement bill given for ( years at time

e0 gain on sale of fi/ed assets

Ans:

a0 )2-$;

b0 )2-$;

c0 R$


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&on'A$ ;erm 'A$ ;erm

Fi/ed assets =on>current asset

tock "nventory

8ebtor Receivable

)reditor -ayable

-rofit 9 loss account "ncome statement

12. $u%%ose< list %rice in an invoice of sales "as t+. *// 4A; inclusive< at standard rate5< trade discount =1/

cash discount = *> 42#1/< n#3/5< customer %aid the amount on 21 st day. 9etermine the invoice val

9etermine )! ratio &! ratio and Administrative cost to sale if 0)$ "as t+. 3// and Admin cost "as t+. 6/

Ans:

@ist %rice *//

@ess: A; =1/ >4 *//1*#11*5 ,*

3*

@ess: trade discount =1/ >

&et sales 381

@ess: 0)$ 3//

)ross %rofit 81

@ess: admin cost 6/

&et %rofit 11

)! ratio)!# &et sales 81#381 23.2>

&! ratio&!# &et sales11#381 2.61>

CHAPTER-3: RECORDING FINANCIAL TRANSATIONS

13. Mention the name of all source documents.

Ans: purchase invoice, sales invoice, credit notes, pay slips, debit notes, credit notes and cash vouchers.

1. What are the main boo+s of original entries

Ans: sales day book, purchase day book, cash book, petty cash book, the payroll and the journal.

1*. $tate system note for credit sales %rocess indicating basic documents re-uired in each stage

Ans:


(eceive sales order

from customer

(eceive sales order

from customer

$ales order

@Received from

customer0


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1,. $tate system note for credit %urchase %rocess indicating basic documents re-uired in each stage

1. $tate system note for %urchase of fixed assets in credit indicating basic documents re-uired in each stage

Ans: ystem note for purchase of fi/ed assets in credit indicating basic documents re?uired in each stage are give

below:MOTIUR RAHMAN AHKC, CHARTERED ACCOUNTANTS

Prepare goods and delivery

Note: deliver to customer

Prepare goods and delivery

Note: deliver to customer

Prepare sales invoice

And send to customer

SOURCE DOCUMENT

OR ACCOUNT!N" S#STEM

Prepare sales invoice

And send to customer

SOURCE DOCUMENT

OR ACCOUNT!N" S#STEM

Sales

invoice

Delivery

notes

Send purc$ase order tosupplier

Purchase

order

Receive goods %it$supplier&s delivery note:prepare goods received

note '"RN)

Goods

received

note

Receive purc$ase invoice (rom

supplier) and matc$ to "RN

SOURCE DOCUMENT OR

ACCOUNT!N" S#STEM

Purchase invoice

(Received from

customer)


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16. What are basis inclusion of )oods (eceived &otes 4)(&5

Ans:

i. -urchase order no

ii. uppliers vendors name

iii. upplierAs challan delivery note no

iv. 8ate of receipt

v. 8escription of goods

vi. "tem code

vii. uantity received.

18. What information are needed to draft invoice< credit notes< delivery challan and )(&

Ans:

7n case of invoice:

"nvoice number=ame and address of seller and purchaser

ale date -roduct service description uantity and unit price of what has been sold 8etails of trade or bulk discount, if any Total invoice amount including


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The date by which payment is due and other term of sales Tear off remittance advice for the customer to send to the business along with payment.

7n case of credit notes:

)redit note number=ame and address of seller and purchaser

ale date -roduct service description uantity and unit price of what has been sold 8etails of trade or bulk discount, if any Total invoice amount including


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#7!7

1arch #'

!#(7 Rajan 9 )o !7'.5! !(.*! (7 %6.#7

!#(! 1otiur 9 )o 5*.'5 !#.55 %.*7 >+= 77% "mam 9 )o @%!.'60 @'.*60 > @#*.570

!#(# 12 9 )o !#*'. !55.% 577.%7 #*.!7

12.* 212.1 823.8/ 266.*/

!urchase day boo+

!urchase 9ay 'oo+

9ate

7nvoice

#credit note

no.

su%%liers ;otal 4;+.5 A; 4;+.5!urchase

4;+.5

x%ens

4;+.5

#7!7

1arch #7

!'!6# )ook %!'.67 '*.67 #*5 >

)= 7'5 Butler @#6.*!0 @'.'!0 @#(.#70 >

!'!6% Telcom !!*.(* !.%* > 66.#7!'!6' how !77.!! !'.6! 5(.#7 >

*/1.8, ., 326 88.2/

!etty cash 'oo+:

!etty cash 'oo+

(ecei%ts

4;+.59ate &arrative

!ayments

4;+.5

A;

4;+.5

Mil+

4;+.5

!ostage

4;+.5

;ravel

4;+.5

the

4;+.

#(7 #7!7

1arch

#(

Balance

bd

1ilk bill #( #(-ostage

stamp

( (

Ta/i fare !7 !7Flowers !( !(



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Balance

cd

!6(

2*/ ;otal 2*/ / 2* * 1/ 1*

0ash 'oo+

0ash 'oo+ 4(ecei%ts5

9ate &arrative

;otal

recei%ts

4;+.5

A; 4;+.5

(eceiv

ables

4;+.5

0ash sales

4;+.5

thers

4;+.5

#7!7

1arch #'

Balance bd 677

)ash sales 6' !' 57Receivable : ;CD %57 %57

Receivable : - '#7 '#7

Receivables : 12 !'7 !'7

&oan : "mam !577 !,577

)ash sales !'! #! !#7

ale of non>current asset #77 #77

#,*550 1,6

3*

!ayroll boo+

!ayroll 'oo+



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!articularsWithholding

tax 4;+.5

!ension

4;+.5

&et %ay

4;+.5

)ross %ay

4;+.5

m%loyer

%ension 4;+.5

;otal %ayroll

cost 4;+.5

12 ((7 !(7 #,%77 %,777 #77 %,#77

$" (77 !%( #,!!( #,(7 !57 #,6%7

11R '*7 !#( !,6!( #,(77 !*( #,**(

;otal 1


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2. fill in the blan+s:

Source document Books of original entry

ales invoice ales day book

-urchase invoice -urchase day book

8ebit note Purchase da1 boo"

)redit note ales day book)he?ue remittance advice )ash book

-ay slip )ash book

-etty cash voucher -etty cash

2*. !re%aring cash boo+:

2s on ! Ganuary #7!7, 2B) )ompany had Tk. 677 in the bank as overdraft. 8uring the year #7!7 the company had

following receipts and payments. -repare an analyHed cash book from the above transactions.

Transactions during #7!7:

a. )ash sale: receipt of Tk. 6' @including


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Ganuary !7-ayable @f0 !#7Telephone bill @g0 %*-etty cash @h0 !77Furniture purchase @i0

Total payment

Balance )8

@'(!(>#76*0

!,(77

#,76*

#,'!6

;otal


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b. ales day book

c. -etty cash book

d. -urchase day book

e. )ash book

f. ales day book

g. -urchase day book

h. )ash book

3/. 9raft a dummy %ayroll sheet#boo+ of your com%any

Ans: 2 draft payroll sheet book of my company are as under:

0ode

no&ame 9esignation

)ross

salary

'asic

*/>

Addition .*> on 'asic Attendance

9eduction!ayment

$igna0o.!

F

"n

!.F. ).$.G!.F.;otal

!.f.Advance Amount (evenue Attend

&et

salary

/1Md.

$amiullah

Manager 13621 ,811 *16 *16 1338 1/3 1/// 1/// * 3/ 12286

31. 2B) &td. Eas !7 employees who had gross pay of tk. !'7,777 per annum among them in #776. "n that year the

company made net pay payments to employees of tk. !#6,#77 and paid tk. #7,677 to eLthe pension trustees. "ts to

payroll cost was tk. !7,'77. Eow much did the company pay to +overnment treasury in respect of withholding ta/

32. What transactions are recorded via journal as a boo+ of original entry?

A&$: =on>current asset purchases are usually recorded via the journal as a book of original entry.

CHAPTER-4: LEDGER ACCOUNTING & DOUBLE ENTRY

33. 9istinguish nominal ledger and subsidiary ledger

Ans: 8istinguish between nominal ledger and subsidiary ledger is mentioned in the following table:

&ominal ledger $ubsidiary ledger

!. 2n accounting record which analyses the

financial records of a business.

!. "t is actually maintained for the backup of

nominal ledger.

#. =ominal ledger represents the total

balance of a respective 2c head after net

off.

#. ubsidiary ledger represents any individuals

or a specific events balance.

%. 2mounts of nominal ledger came from

subsidiary ledger.

%. ubsidiary ledgers maintained for the

breakup record of each transaction.

3. 9efine duality conce%t "ith exam%le

Ans: $very transaction is recorded twice in the ledger accounts. 8ouble entry book keeping is the method used to

transfer totals from the Books of original entry into the nominal ledger. )entral to this process is the idea that



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every transaction has two effects, which is the 8uality concept. uch as3 purchase a car for Tk. !,777 cash.

This event would be affected in two ways:

wn a car worth Tk. !,777

)ash reduced by Tk. !,777

3*. $tate the general rule of double entry boo++ee%ing.

Ans: The basic rule, which must always be observed, is that every financial transaction gives rise to two accountingentries, one a debit and the other a credit.

A 9ebit entry "ill: A 0redit entry "ill:

"ncrease an asset

"ncrease an e/pense

8ecrease a &iability

8ecrease )apital

8ecrease "ncome

8ecrease an asset

8ecrease an e/pense

"ncrease a &iability

"ncrease )apital

"ncrease "ncome

3,. 7dentify the debit and credit entries in the follo"ing transactions 4ignore A;5

a5 bought a machine on credit from A< cost t+. 6>>>>>>>>>dr. 5,777

N2A ac>>>>>>>>>>cr. 5,777

b5 bought goods on credit from '< cost t+. *//:

-urchase ac>>>>>>>>>>dr. (77

NBA ac>>>>>>>>>>cr. (77

c5 sale goods on credit to 0< value t+. 1>>>>>>>>>>>>>>>dr. !,#77

ales ac>>>>>>>>>cr. !,#77

d5 %aid 9 4a credit su%%lier5 t+. 3//:

N8A ac>>>>>>>>>>>>>>dr. %77

)ash ac>>>>>>>cr. %77

e5 collected t+. 16/ from < a credit customer:

)ash ac>>>>>>>>>>>>>>>>>>>dr. !57

N$A ac>>>>>>>>>>>>>>>>>cr. !57

f5 %aid net %ay t+.


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=et pay ac>>>>>>>>>>dr. ',777

)ash ac>>>>>>>>>cr. ',777

g5 received rent bill of t+. // from landlord )

i. &o entry needed.

h5 %aid rent insurance %remium t+. 8/

"nsurance premium ac>>>>>>>>dr. 67

)ash 2c>>>>>>>>>>>>>>>cr. 67

3. ummit -ower operates an imprest petty cash system. The imprest amount is Tk. (777. at the end of the period th

totals of the four analysis columns in the petty cash book were as follows:

)olumn >! tk. #%.!#

)olumn ># tk. *.'

)olumn >% tk. !#.67

)olumn >' tk. #5.(7

Eow much cash is re?uired to restore the imprest amountM

Ans: Tk.!.#*, This is the total amount of cash that has been used.

36. )ive t"o exam%le of subsidiary ledger.

Ans: Two e/amples of subsidiary ledger are given below:

Receivables ledger, -ayables ledger.

38. oft upplies )o. recently purchase from Eard "mports )o. !7 printers originally priced at tk. #77 each. 2 !7J trad

discount was negotiated together with a (J cash discount if payment was made within !' days. )alculate the

following.

a0 The total of the trade discount

b0 The total of the cash discount

Ans:

a0 The total of the trade discount O @!7/#770 /!7JO Tk.#77

b0 The total of the cash discount O P@!7/#770 >#77Q / (JO Tk. 67

/. 9efine trade discount and cash discount "ith t"o exam%les



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;rade discount:2 reduction in the cost of goods, owing to the nature of the trading transaction. "t is deducted from

the list price of goods sold, to arrive at a final sales figure.

xam%le:2 customer is ?uoted a price of tk. ! per unit for a particular item, but lower price of 6(p per unit if the it

is bought in ?uantities of !77 units of more at a time.

0ash discount:2 reduction in the amount payable in return for immediate payment in cash, or for payment within

agreed period.

xam%le:2 supplier charges tk. !,777 for goods, but offers a discount of (J if the goods are paid for immediate in

cash.

1. 9efine the term 2#1/< n#3/

Ans: The term can be defined as to the purchaser must be paid the purchased amount of the goods within %7 da

but if he paid the amount within !7 days he will get #J discount in respect of which he purchased.

2. !re%are an income statement from the follo"ing items:

Taka

a0 purchase at gross cost !#7,777

b0 trade discount allowed ',777

c0 cash discount received !,(77

d0 cash sales %',777

e0 credit sale at invoice price !(7,777

f0 cash discount allowed 5,777

g0 distributaries cost %#,777

h0 administrative cost '7,777

i0 drawings by proprietor ##,777

Ans:

7ncome statement

!articulars ;a+a ;a+aRevenue :)ash sales %',777)redit sales !(7,777Total sales !5',777&ess: cost of sales !# 7,777+ross profit *',777ther income :discount received !,(77



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$/pense: )ash discount allowed 5,777 )redit discount allowed ',777

8istributaries cost %#,777 2dministrative cost '7,777

@5',7770&et %rofit # 4@oss5 416


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6. A'0 0om%any usually sell goods at t+. 13/ each< it gives CK ;rade discount of t+. 1/ so he sells goods to

CK for t+. 12/. A'0 is registered for A;. Do" much out%ut A; should A'0 com%any include on CKLs

invoice?

Ans:

!articulars ;a+a

ales value !%7

&ess : Trade discount !7+oods value !#7 4gross amount5< calculate the A; amount?

Ans:

&et, gross amount is Tk. !77

o,


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6


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**. What are the errors do not ma+e a trial balance imbalance?

Ans: The error do not make a trial balance imbalance are as under:

mission errors3

)ommission errors3

)ompensating errors3

$rrors of principle.

*,. 8istinguish between errors that cause trial balance imbalance and those that do not.

Ans:

Transportation error

$rrors of omission

$rrors of principles

$rrors of commission

)ompensating errors

CHAPTER 6: CONTROL ACCOUNT, ERRORS AND OMISSION

*. ;he total of the balance in a com%anyLs receivables ledger is t+. 6// more than the debit balance on its

receivables control account. Which one of the follo"ing errors could by itself account for the discre%ancy?

a0 The sales day book total column has been under cast by tk.577

b0 )ash discounts totallling tk. 577 have been omitted form the nominal ledger

c0 ne receivables ledger account with a credit balance of tk. 577 has been treated as a debit balance in the

of balances

d0 The cash receipts book has been under cast by tk. 577

*6. S'an+ statement is the mirror image of the cash boo+Jex%lain

2ns: )ash is an asset @a debit balance0 in the business ledger accounts. 2s far as the bank concerned it owes the

business money. Thus every item recorded as a debit in the business book>a positive bank balance and any receip

of cash>will be shown as a credit on the bank statement.

hen cash is a liability @a credit balance0 in the business book, as far as the bank is concerned it is owed money.

Thus every credit entry in the business books>a negative bank balance and any payment of cash>will be shown as

debit on the bank statement.

*8. Mention the * common ex%lanations for differences bet"een cash boo+ and ban+ statement

2ns: There are five common e/planations for differences between ash book and bank statement. hich are

given below:MOTIUR RAHMAN AHKC, CHARTERED ACCOUNTANTS


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!. $rror

#. Bank charges or bank interest

%. 2utomated payments and Receipts

'. 8ishonor che?ue

(. Timing differences

,/. x%lain< in brief< the adjusted cash boo+

4ns% Pa1ment made into or from the ban" account b1 :a1 of standing order direct debit or onlinetransfer :hich have not 1et been entered in the cash boo"2

o Aan" interest and ban" charges not 1et entered in the cash boo"2

o !ishonored cheque not 1et entered in the cash boo"2

,1. "dentity types of error from following transactions

Ans:

Error Type

2 credit sales of tk. *,5'% has been incorrectly debited in the receivable ledger as tk.

*,'5%Transposition errors

2 business receives an invoice from a supplier for tk. #(7 and the transaction is missed

from the books$rrors of omission

2n error is to treat revenue e/penditure incorrectly as capital e/penditure $rrors of principal

-utting a debit entry or a credit entry in the wrong account $rrors of commission

)asting error $rrors of commission

2dmin e/penses of tk. #,5## are entered as tk. #,#5# in the administrative e/penses

ledger account. 2t the same time, income of tk. 5,6%! is shown in te sales account as

tk. 5,%6!.

$rrors of compensating

CHAPTER : ACCOUNTING CONCEPT AND CON!ENTIONS:

,2. identifying concepts and conventions:



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Accounting Question and Answer