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ADW 610: SEM II (2014/2015

Answer all questions.
1. Discuss the importance of financial statements to a company and its
investors and creditors and why management may take steps to improve
the appearance of the company in its financial statements.
[5 marks]
2. Give an example of business transactions that would cause one asset to
increase and another asset to decrease, with no effect on either liabilities or
owners’ equity.

[5 marks]
3. If services have been rendered to customers during the current
accounting period but no revenue has been recorded and no bill has been
sent to the customers, why is an adjusting entry needed? What types of
accounts should be debited and credited by this entry?
[5 marks]

Alan Tan
While attending Graduate School of Business, USM, Alan Tan, developed a
deep interest in the material covered in his first-year MBA finance and
accounting course. This growing interest led him to approach his accounting
lecturer, in understanding how and why the accounting concepts and rules
discussed in class might be applied in practice-particularly. “I’ve read the
textbook and listened to you attentively, but every once in a while I run
across something that doesn’t seem to fit the rules”, said Alan to his
accounting lecturer.
“Not all accounting complications can-or should-be covered in a firstyear MBA course”, the lecturer replied. “As in the training of other
professions, many matters are dealt with in advanced classes and others,
while discussed routinely at some point in the program, are not settled in any
beginning or advanced class. Nevertheless, some problems that are not
specifically covered in assigned reading can be solved satisfactorily by

[10 marks] 2. he became aware that several managers report sales that are scheduled for shipment in early January as if they were shipped in late December. buildings. He has just returned from the company’s annual sales managers’ conference in Kuala Lumpur. Alan raised a number of accounting questions. If you will write down some of the matters about which you are now uncomfortable. in casual conversation with some of the regional managers.000. Indicate what Shoppers’ should do with this RM265. using specific examples. At the conference. RM40.000 a site on which it planned to build a new store.relating them to the basic accounting principles you have already learned. and explain your reasoning. Answer the questions raised by Alan in each of the four issues on his list below: 1. The company has a state-of-the-art computerized accounting system.000 cost in its financial statements. a producer of fine home furnishings.000. What do you think that he should do? [10 marks] 3. A sales manager for IDEA Berhad. County property tax records showed the following appraised values for this property: land. RM160. [10 marks] 2 . I’d be glad to discuss them with you-that is. Toys-4-You operates a national chain of 86 retail toy stores. All sales transactions are recorded on electronic point-of-sale terminals. Shoppers’ Market purchased for RM265. At subsequent accounting classes. What would you expect the business to use. has responsibility for the northern region of the country. a periodic inventory system or a perpetual inventory system? Explain the reasons for your answer. after you have given some thought as to the most reasonable solution”. These terminals are tied into a central computer system that provides the national headquarters with information about the profitability of each store on a weekly basis. The site consisted of three acre land and included an old house and two barns.