ard ¢€ YHE INSTITUTE OF BANKERS, BANGLADESH Banking Dipicma Examination, November, 2011 JSAIBB ACCOUNTING FOR FINANCIAL SERVICES (AFS} Time—3 hours Total marks—100 Pass marks—50 [N.B.—tThe figures in the right margin indicate full marks. Answer any five questions including question No. 8.] Marks (2) Give a functional and operational definition of accounting. 6 () Distinguish between relevance and reliability of accounting 6 information. (¢) Why do external users use accounting information? 6 & @ Define the terms : Expense, Loss, Revenue and Gain. 6 4) Explain the monetary unit assumption and economic entity 6 < assumption. @ “Accounting is ingreined in our society and it is vital to our 6 economic system.” Do you agree? Explain. 3. fa) What are the limitations of trial balance? 6 (6) John Keat, a beginning accounting student, believes that debit 6 balances are favorable and credit balances are unfavorable. Is it correct? Discuss. (ce) “Adjusting entries are required by the matching principle of 6 accounting.” —Do you agree? Expiain. [Please turn over4 @ What are the reasons for adjusting entries? What is reve: 2 entry? How js it recorded? Explain with au example. © Nandan Park was starved on April i by M. Karnal. 1 selected events and wansactions ozcurred during Apr’ April 1 on 3 36 © following Kamal invested Tk. 200,000 cash. Purchased land costing Tk. 59,060 for cash. incurred advertising expenses of Tk. 2,080 on account. Paid salaries to employees Tk. 15,060, Hired 2 park manager at 2 salary of Tk. 45,600 p.m. effective May 1. Y Paid Tk, 26,000 cash for a one year insurance policy. Withdrew Tk. 10,000 cash for personai use. Received Tk. 6.000 for admission fees, Sold 106 coupon books for Tk. 250 cash. Each book contains }0 coupons that allow the holder io one admission to the park. Received Tk. $,900 in cash admission fees. Paid Tk. 900 to the advertising agency incurred on April 8. M. Kamal uses the following accounts :— » Cash prepaid Insurance, sal, Accounts Payable unearned Admission ee ee Revenue, M. Kamal, capital, M. Kamal, D: Advertising Expense and Salaries Expense. , in, ig Admission Revenue, Requirements :-~ fi) Journaiize the Apcil Transactions; (iii Post to the ledg (iii) Prepare a trial balance.Marks 5. (a) xplain sensitiviey analysis for determining Break-even point. 4 (bh) fa 208 janagers’ salary was Tk. » 200 O00; rent Tk. 86,000, 10 mat cost Tk. 5 per unit, lsbor Tk. 3 per unit other variable expenses Tk. 2 per unit, sales per unit Tk. 16. in 2016 managers’ salary end ander cost increased by 10% but material cost decreased by 12%. All other information remain the same > 2 fi) Calculate BEP for 2010; Gi) How many units 10 be soid tc make a profit of” tk 160,000 in year 2010? {c) Balance Sheet has to show the irue and fair view of financial 4 position a business, But long-term assets like iand, building and equipments are recorded at cost price though their value changes. Explain what is the rationale for recording long-term assets at cost price. 6. (a) Perpetual inventory is better than periodic inventory. Do you 4 agree? Explain. (6) Insurance Companies in Bangladesh under the insurance Act, 1938 4 do not have te prepare an income statement. Then how do they measure income or |: ions in the cash book :— 10 fi) Paid rent by cheque ‘fk. 600; (#) Took Tk. 3000 out of bank and placed in casiv sales Tk. 15,000 including VAT 15%; (iv) Received a cheque from a debtor Tk. 1300 in full settlement of his account of Tk. 1350; (v) A charge received but it is dishonoured FT’. 430 (c) Show the following transacti 7. Write short aotes (any six) > 3x6=18 fa) Sank Cost; (6) Limitations of CVP Analysis; Intemational Accouriting Standards (LAS); (& Debit Memorandum Vs Cresit Memorandum; @_ CAMELS rating; @ Matching Principles; @ Deferred Revenue and Expense; (hj) Cooking the Books of Accounts, @® Break-even point. [Please turn aver8. Marks The Trial Balance of Monty Zuma Wholesale Company contained 8+12+4 the following accounts at December 31, the end of company’s fiscal +4=28 year —— Monty Zuma Wholesale Company Triai Balance Decembers 31, 2010 Account Title Cash Accounts Receivable Merchandise Inventory Land Building Acc. Depreciation—Building Equipment Acc. Depreciation—Equipment Notes Payable Accounts Payable M. Zuma, Capital M. Zuma Drawing Sales Sales Discounts Cost of Goods sold Salaries Expense Utilities Expense Repair Expense Gas and Oil Expense Insurance Expense Adjustment data -— Debit Taka 23,400 37,600 90,000 92,000 1,97,000 83,500 10,000 4,600 7,09,900 69,800 19,400 5,900 7,200 3,500 13,53,800 Credit Taka 54,000 42,400 50,000 37,500 2,67,800 9,02, 1068 13,53,800 (i) Depreciation is Tk. 10,000 on building and Tk. 9,000 on equipment (Both are administrative expenses). (ii) Interest of Tk. 7,000 is due and unpaid on notes payable at December 31, 2010.w Marks Other data — Y Salaries are 80% selling and 20% administrative. (ii) Utilities Expense, repair expense and insurance expenses are 100% administrative. (iii) Tk. 15,000 of the notes payable are payable next year. (iv) Gas and Oil expense is selling expense. Requirements :— (a) Enter the Trial Balance on a worksheet and complete the worksheet. (6) Prepare :-— () a multiple step income statement; (ii) owners Equity statement; (iti) a classified balance sheet. (c) JSournalize the adjusting entries. (@ Journalize the closing entries.