Qp8 € THE INSTITUTE OF BANKERS, BANGLADESH (IBB) Banking Diploma Exarhination, May, 2016 JAIBB/DAIBB Accounting for Financial Services (AFS) Time—3 hours Full marks—100 Pass marks—S50 IN.B.—The figures in the right margin indicate full marks. Answer any five questions including question No. 9. Different parts of each question must be answered in the same place.] Marks 1. (@ “Accounting is ingrained in our society and it is vital 8 to our economic system”. Do your agree? Explain. (b) Who are internal users of accounting data? How does 10 accounting provide relevant data to these users? 2. (a) What js the basic accounting equation? What items 6 affect owner’s equity? (b) Are the following events recorded in the accounting 4 records? Explain your answer in each case :— (i) The owner of the company dics. (ii) Supplies of the company destroyed. (iii) An employee is fired. () The owner of the business withdraws cash from the business for personal use. (c) What is monetary unit assumption? What impact, does 8 inflation have on thé monetary unit assumption? [Please turn overat (a) ©The terms debit and credit mean increase and decrease respectively”. Do you agree? Explain. (b) Mr. Khan is a chartered accountant. During the first month of his practice, the following events and transactions occurred :-— May 1 Mr. Khan invested Tk. 1,00,000 in his firm. 2 Hired an executive at a salary of Tk. 8,000 per month, 3 Purchased Tk. 10,000 of supplies on account from Stationery Supply Co. 7 Paid office rent of Tk. 3,600 cash for the month. 11 Completed a tax assignment and billed client Tk. 8,400 for service provided. 12 Received Tk. 14,000 advance on a management consulting engagement. 17 Received cash of Tk. 4,800 for services completed for Armer Co. . 31 Paid executive Tk. 8.000 salary for the month. 31 Paid 40% of balance due Stationery Supply Co. Instructions : (i) Journalize the transactions; ii) Post to the ledger accounts; (iii) Prepare a Trial Balance as on May, 31. (a) Why do accrual basis financial statements provide more useful information than cash-basis statements? |. (b) “Adjusting entries are required by the cost principle of accounting.” Give reasons in support of your answer. (c) Why may a trial balance not contain up-to-date and complete financial information? Marks 35s 6. (@ (b) (a) (b) (© What do you mean by Perpetual Inventory System? How does it differ from continuous stock taking? From the records of an oil distributing company the following summarized information is available for the month of January 2016 : Sale.for the month Tk. 19,25,000 Opening stock as on 1-1-16 : 1,25,000 lires @ Tk. 6-50/litre Purchases (including freight and insurance) : January 5, 1,50,000 litres @ Tk. 7-10/litre January 27, 1,00,000 litres @ Tk. 7-00/itre Closing stock as on 31-01-16 : 1,30,000 litres. General administrative expenses for the month : Tk. 45,000. On the basis of the above information, work out the following using FIFO methods of inventory valuation, assuming pricing of issues is being done at the end of the month (afier all receipts during the month) : (i) Value of closing stock as on 31-1-16; (ii) Cost of goods sold during January ”16; (iii) Profit or loss for January *16. Explain the difference between depreciation expense and accumulated depreciation. 9 Why a business might choose an accelerated depreciation method? p On January 2, 2014 a new machine was acquired for Tk. 18,00,000. The machine has an estimated salvage value of Tk. 2,00,000 and an estimated useful life of 10 years. The machine is expected to produce a total of 10,00,000 units of product throughout its useful life. Compute depreciation for 2014 and 2015 using cach of, the following methods :— (i) Straight-line; ; (ii) Units of production (assume 60,000 and 1,20,000 units were produced in 2014 and 2015 respectively); (iii) Double-declining balance. Marks [Please turn over7. 8. (a) When are entries made to the Petty Cash Account? (b) The cash in bank account for Sun Company on December 31, 2015 indicated balance of k. 7,200 after both the cash receipts ‘and cheque register for December had been posted. The bank statement indicated a balance of ‘Tk. 80,000 on December 31, 2015. Comparison of the bank statement and_ the accompanying cancelled cheques and memorandums with the records revealed the following reconciling items : (i) A cheque issued for Tk. 42,000 had been recorded in the cheque register of Sun Co, as Tk. 24,000; (ii) Total cheque outstanding Tk. 50,000; (iii) A cheque for Tk. 40,000 drawn by Sony Company had been erroneously charged by the bank to Sun Company’s Account; (iv) The bank had collected for Sun Company. Tk. . 1,01,000 on a note lefi for collection. The face value of the note was Tk. 1,00,000; (vy) A deposit of Tk. 20,000 representing receipts of December; 31 had been made too late to appear on the bank statement; (vi) Bank service charges for December to Tk. 200. Required : (a) Prepare a Bank Reconciliation Statement. (b) JSournalize the necessary transaction. (a) A, B and C are equal partners in a firm. After adjustment of interest on capital, share of profit, drawings and.B’s salary, their capital balance of 31% December, 2015 stood Tk. 64,000, Tk. 67,000 and Tk.47,000. Net profit distributed among the partners Tk. 30,000. Partners drawings Tk. 6,000, Tk. 5,000 and Tk. 3,000 respectively, B’s salary for the year was Tk. 12,000. Noted that 10% interest on capital, 5% interest on stawings has been omitted to determine distributed profit. Prepare ' Profit and Loss Adjustment Account and Partners Capital Adjustment Account.9. Marks (b) From the following particulars relating to ABC Co. 12 prepare as details as possible the income statement of the company for the year ending 31-12-2015 and its Balance sheet as on that date : Fixed Assets/Turnover Ratio 1:2 Debt collection period 2 months Gross Profit 25% Net Profit 15% Consumption of Raw Materials 40% of cost Inventory of Raw Materials 4 months consumption Finished Goods 20% of the cost xed assets to Current assets 1:1 Curent Ratio 2:1 Long Term Loan to Current Liability 1:3 Capital to-Reserve and Surplus Value of Fixed Asscts The following is the T' at December 31, 2015 - 5:2 ‘Tk. 10,50,000 rial Balance of M/s Sonia Traders as Accounts Title Credit Taka Buildings Furniture & Fittings Purchases and Sales 12,19,000 Inventory (1-1-15) Allowances for Bad Debts 10,000 10% Loan (1-7-15) 40,000 Accounts Receivable 3,00,000 Accounts Payable 4,47,000 Salaries enses 1,00,000 Advertising Expense 21,000 Carriage Outwards 6,000 Store Expense 2,00,000 General Expense 65,000 Rent Income 10,000 Insurance Expense 4,000 10% Investment 50,000 Sonia Capital 6,00,000 Sonia Drawings 30,000 Bank Balance 50,000 23,26,000 23,26,000 [Please turn overAdjustments : @ (ii) (iii) (iv) @) oi) (vii) Ending inventory was valued at Tk. 2,25,000 which includes goods worth ‘Tk. 25,000 sold but not yet delivered to the purchaser; Credit sales of Tk. 2,000 has not been recorded in the books; Sonia has withdrawn goods worth Tk. 3,000 for her personal consumption of which there is no record in the books; Write off Tk. 6,000 as bad debts and make an allowance for bad debts at 5% on remaining accounts receivable; Rent not yet received amounted to Tk. 12,000; Accrued interest on investment amounts to Tk. 2,500; Furniture and Fittings to be depreciated @ 5%. Required : (@) (b) © @d) @ o Adjusting Entries Multiple Step Income Statement Owner’s Equity Statement Classified Balance Sheet Closing Entries Reversing Entries. 10. Write short notes (any six) -— BAS and BFRS; Revenue Recognition Principle; CAMEL Rating; Contingent Liability; Adjusting Entries; Window Dressing; Cash Flow Statement; Zero Interest Bearing Note; Current Ratio. Marks 3x6= nanan a