Special Class note for

CMA Professional Level –II

201-Advanced Financial Accounting-I

201-Advanced
Advanced Financial Accounting-I
Accounting

Teacher for Special Class:

Md.Monowar Hossain
Hossain, FCMA, FCPA, ACS, ACA
Audit Consultant (General Manager)
RUPALI BANK LTD.
Cell: +8801714410824
Email: md.monowar@yahoo.com
md.monowar@gmail.com

1
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

Subject Code 201-Advanced Financial Accounting-I

Professional Level –II
201. Advanced Financial Accounting-I (Marks-100)
201. Advanced Financial Accounting-I 100
Course Objective: This course provides the students with a detailed knowledge of accounting principles, concepts,
techniques and their application to develop an ability and skills in practical work situation. On completion of this course
the students will be able to:
a. appraise theoretical and regulatory national accounting frameworks of different concerns and international
accounting standards.
b. prepare financial statements for branches, joint ventures, financial institutions, govt. and non-govt.
organizations.
c. prepare financial reports for other organizational entities.

201.01 Financial statements from incomplete information

Single-Entry Systems; Records in Single-Entry Systems; Preparation of Financial Statements from Single-Entry Records;
Change from Single-Entry to Double-Entry; Use of Single-Entry System.

201.02 Accounting for leases (IAS-17)

Basics of leasing; accounting by lessee; accounting by lessor; special accounting problems; lease accounting; sale and
leaseback accounting.

201.03 Accounting for joint ventures, installment sales and consignments (IAS-31)
Joint ventures: forms of joint ventures; jointly controlled operations; jointly controlled assets; jointly controlled entities;
transactions between a venturer and joint venture; consolidated and separate financial statements of a venturer;
operators of joint ventures; disclosure in financial statements; installment sales: accounting for installment sales; profit in
period of sales; profit in relation to cash realized; trade-ins; defaults and repossessions; consignments: accounting for the
consignments; consignee’s books; consignor’s books; uncompleted consignments.

201.04 Accounting for income taxes (IAS-12)

Fundamentals of accounting for income taxes; accounting for net operating losses; financial statement presentation;
special issues; asset-liability methods; inter-period tax allocation; deferred income taxes.

201.05 Accounting for Banks and financial institutions (IAS-1)

Bank companies Act, 1991 & 2003; Non-bank Financial Institutions Act, 1993; Designing a system of accounting for a
Bank, full particulars of book debts, prescribed forms of profit and loss Account and Balance Sheet, statutory
requirements and limitations; preparation of financial statements of banks and non-bank financial institutions and
compliance of disclosure requirements.

201.06 Accounting for Insurance Companies (IAS–1, IFRS-4)

Insurance companies: Insurance Act, 1938 & 1973; financial statements of general insurance companies and life
assurance companies; statutory requirements and limitations; preparation of financial statements of insurance
companies; disclosure requirements.

201.07 Accounting for utility services (IAS-1)

Double account system; Capital Account and General Balance Sheet; construction of Capital Accounts; accounts of
Railway Companies; accounts of Electric Companies; accounts of Gas and Water supply Companies.
201.08 Branch accounting
Accounting systems for branches; preparation of branch and home office statements; preparation of combined
statements; adjustments for reciprocal accounts; special branch and home office relationships; inter branch transfer of
merchandise and cash; branch billing at arbitrary rate above cost or at retail sales price; combined financial statements.
2
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

201.09 Accounting for not-for-profit organizations (IAS-1)

Fund accounting; accrual basis of accounting; classification of revenue and expense; accounting for current funds;
contributions; accounting for plant funds; accounting for endowment funds; accounting for investments; accounting for
loan funds; accounting for custodial funds; accounting for annuity and life income fund; financial statements.

201.10 Government Accounting

Nature and scope of Government Accounting; Summary of differences to Commercial Accounting; The frame-work and
Structure of Government Accounting in Bangladesh; System of Accounts; Finance and Revenue accounts; Period
accounts; budgets and annual development programme.

201.11 Accounting changes and error analysis (IAS-8)

Accounting changes, types of accounting changes, changes in accounting principles, changes in accounting estimates,
reporting a change in entity, reporting a correction of an error, motivation for changes; error analysis, balance sheet
error, income statement error, balance sheet and income statement effects, preparation of financial statements with
error correction.

201.12 Accounting for insolvency

Contractual agreement; extension of payment period; composition agreements; formation of a creditors committee;
voluntary assignment of assets; bankruptcy; voluntary petition; involuntary petition; secured and unsecured creditors;
liquidation; duties of the trustees; accounting for reorganizations; troubled debt restructuring; the statement affairs;
trustee accounting and reporting; realization and liquidation accounts as per Insolvency Act, 1997.

201.13 Accounting for Construction Contracts (IAS-11)

Objectives; scope; definitions; combining and segmenting construction contracts; contract revenue; contract costs;
recognition of contract revenue and expenses; recognition of expected losses; changes in estimates; disclosure of
accounting policies; accounting for contract.

Text Books
1. Intermediate Accounting (13th ed.) - Smith & Skousen
rd
2. Advanced Accounting –Karrenbrock and Simons (South Western) (3 edition).
th
3. Advanced Accounting–Harried, Imdieke and Smith (Wiley) (6 edition).
4. International Accounting Standards, IASC, U. K.

Reference Books
th
1. Intermediate Accounting (11 ed.) - Kieso & Weygandt
th
2. Advanced Accounting – R.E. Baker, V.C. Lembke & T.E. King (6 edition).
th
3. Advanced Accounting- Pahler & Mori (6 edition).
th
4. Advanced Accounting–M.M. Khan (8 edition).
5. IASC Publications, U. K.

3
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

Subject Code 201-Advanced Financial Accounting-I

Class Plan
No. Class Course Contents
201.01 Financial Single-Entry Systems; Records in Single-Entry Systems; Preparation of Financial Statements from Single-Entry
statements from Records; Change from Single-Entry to Double-Entry; Use of Single-Entry System.
01 incomplete information Review of past question of CMA Exam.
201.02 Accounting for Basics of leasing; accounting by lessee; accounting by lessor; special accounting problems; lease accounting; sale
leases (IAS-17) and leaseback accounting.
Review of past question of CMA Exam.
201.03 Accounting for Joint ventures: forms of joint ventures; jointly controlled operations; jointly controlled assets; jointly controlled
joint ventures, entities; transactions between a venturer and joint venture; consolidated and separate financial statements of a
02 installment sales and venturer; operators of joint ventures; disclosure in financial statements; installment sales: accounting for
consignments installment sales; profit in period of sales; profit in relation to cash realized; trade-ins; defaults and repossessions;
(IAS-31) consignments: accounting for the consignments; consignee’s books; consignor’s books; uncompleted
consignments.
Review of past question of CMA Exam.
201.04 Accounting for Fundamentals of accounting for income taxes; accounting for net operating losses; financial statement
03 income taxes (IAS-12) presentation; special issues; asset-liability methods; inter-period tax allocation; deferred income taxes.
Review of past question of CMA Exam.
201.05 Accounting for Bank companies Act, 1991 & 2003; Non-bank Financial Institutions Act, 1993; Designing a system of accounting for
04 Banks and financial a Bank, full particulars of book debts, prescribed forms of profit and loss Account and Balance Sheet, statutory
institutions (IAS-1) requirements and limitations; preparation of financial statements of banks and non-bank financial institutions and
compliance of disclosure requirements.
Review of past question of CMA Exam.
201.06 Accounting for Insurance companies: Insurance Act, 1938 & 1973; financial statements of general insurance companies and life
05 Insurance Companies assurance companies; statutory requirements and limitations; preparation of financial statements of insurance
(IAS–1, IFRS-4) companies; disclosure requirements.
Review of past question of CMA Exam.
201.07 Accounting for Double account system; Capital Account and General Balance Sheet; construction of Capital Accounts; accounts of
utility services (IAS-1) Railway Companies; accounts of Electric Companies; accounts of Gas and Water supply Companies.
Review of past question of CMA Exam.
06 201.08 Branch Accounting systems for branches; preparation of branch and home office statements; preparation of combined
Accounting statements; adjustments for reciprocal accounts; special branch and home office relationships; inter branch
transfer of merchandise and cash; branch billing at arbitrary rate above cost or at retail sales price; combined
financial statements.
Review of past question of CMA Exam.
201.09 Accounting for Fund accounting; accrual basis of accounting; classification of revenue and expense; accounting for current funds;
not-for-profit contributions; accounting for plant funds; accounting for endowment funds; accounting for investments;
organizations accounting for loan funds; accounting for custodial funds; accounting for annuity and life income fund; financial
07 (IAS-1) statements.
Review of past question of CMA Exam.
201.10 Government Nature and scope of Government Accounting; Summary of differences to Commercial Accounting; The frame-work
Accounting and Structure of Government Accounting in Bangladesh; System of Accounts; Finance and Revenue accounts;
Period accounts; budgets and annual development programme.
Review of past question of CMA Exam.
201.11 Accounting Accounting changes, types of accounting changes, changes in accounting principles, changes in accounting
changes and error estimates, reporting a change in entity, reporting a correction of an error, motivation for changes; error analysis,
analysis (IAS-8) balance sheet error, income statement error, balance sheet and income statement effects, preparation of financial
statements with error correction.
08 Review of past question of CMA Exam.
201.12 Accounting for Contractual agreement; extension of payment period; composition agreements; formation of a creditors
insolvency committee; voluntary assignment of assets; bankruptcy; voluntary petition; involuntary petition; secured and
unsecured creditors; liquidation; duties of the trustees; accounting for reorganizations; troubled debt
restructuring; the statement affairs; trustee accounting and reporting; realization and liquidation accounts as per
Insolvency Act, 1997.
Review of past question of CMA Exam.
09 201.13 Accounting for Objectives; scope; definitions; combining and segmenting construction contracts; contract revenue; contract costs;
Construction Contracts recognition of contract revenue and expenses; recognition of expected losses; changes in estimates; disclosure of
(IAS-11) accounting policies; accounting for contract.
Review of past question of CMA Exam.
10 Class Test Class test through Model Question
4
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

CMA
Professional Level –II
201-Advanced Financial Accounting-I
- Single-Entry Systems;
201.01 Financial
- Records in Single-Entry Systems;
Special Class No. 1 statements from
- Preparation of Financial Statements from Single-Entry Records;
(Duration : 3 hours) incomplete information
- Change from Single-Entry to Double-Entry;
- Use of Single-Entry System.
th
Monday, 9 June, 2014 - Basics of leasing;
[6.00pm to 9.00pm] 201.02 Accounting for - accounting by lessee; - accounting by lessor;
leases (IAS-17) -special accounting problems; lease accounting;
- sale and leaseback accounting.

Single-Entry Systems:
 A one sided accounting entry to maintain financial information.
 A single-entry bookkeeping system or single-entry accounting system is a method of bookkeeping relying on a
one sided accounting entry to maintain financial information. This system does not chase the double entry
system and as such, does not record or give effect to the two aspects of each and every transaction.

Records in Single-Entry Systems:
Single-Entry Systems maintain following set of records Meaning of single entry and incomplete record
in order to prepare its financial statements: 1. Single entry: any system of accounting which
a) Cash Book does not use the two-fold aspect of it.
i. Cash Account 2. Incomplete record : any accounting system
ii. Bank Account which records only part of the business
Single entry system is b) Debtors (Accounts Receivables) transactions
generally found in Ledger
sole trading concerns Single Entry System may Consists on followings:
c) Creditors (Accounts Payables) o Transactions posted in a notebook,
or even in partnership Ledger
firms to some extent daybook, or journal.
d) Statement of Affairs (Opening) o It may include a complete set of journals
but never in case of e) Year-end adjustments
limited liability and a ledger providing accounts for all
i. Closing stock important items.
companies on ii. Depreciation of fixed assets
account of legal o A business checkbook, check
iii. Provision for doubtful debts disbursements journal or register,
requirements. iv. Accruals and prepayments daily/monthly summaries of cash receipts,
v. Disposal of Assets a depreciation schedule, employee wages
records, and ledgers showing debtor and
Above information provides sufficient data which is creditor balances.
required to prepare Income Statement and Balance
Sheet of the entity
Advantages of Single Entry System: Disadvantages of single Entry System:
- Simple.  Unavailability of ready data or information to
- Less Expensive. Management for quick decision making, planning
- Trained accountant is not required to thus resulting in poor administration.
maintain.  Unable to provide checks against clerical errors.
 Mathematical errors in the account totals.
Single entry system There are basically 3 types of  Lack of recording all the transactions as well as
ignores the concept of single entry systems: adjusting entries.
duality and therefore, 1. Pure Single Entry  Possibility of omitting important data or
transactions are not 2. Simple Single Entry information.
recorded in their two- 3. Quasi Single Entry  Difficult to detect theft, frauds and errors.
fold aspects.  Not self-balancing.

5
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

Incomplete Record Technique

Incomplete Record Technique

Computation of profit Preparation of final accounts Computation of inventory value

 prepare a  establish opening balance  use accounting ratios
statement of sheet (e.g. mark-up and
affairs  prepare cash book margin )
 open ledger accounts
 make the year end adjustments
 prepare the trading and profit
and loss account
 prepare the balance sheet

1. from opening balance sheet to find opening capital balance

2. to update the cash book with the bank statement to identify any errors
3. to identify any missing figures e.g. missing drawings or missing sales >>> misappropriated cash
4. to open total debtors / creditors accounts >>> credit sales / credit purchases
5. to open ledger accounts e.g. expense account >>> expense incurred / paid during this period
6. to provide depreciation for fixed assets
7. to provide for any stock written off, bad debts, prepaid expense etc
8. to compute the net profit
9. to prepare balance sheet

Use of Single-Entry System

Mostly by small business concerns, where operations are especially simple and the volume of activity is low.
Difference between Single-entry and Double-entry in Bookkeeping
Single-entry system of bookkeeping requires inputting the entry only once in either the credit column or the debit column. Double-entry
system requires putting one entry twice, once in the credit column and once in the debit column of another account.
Single-entry Double-entry
Single-entry system of bookkeeping requires inputting
Double-entry system requires putting one entry twice, once in the
Definition the entry only once in either the credit column or the
credit column and once in the debit column of another account.
debit column.
Duality Is not based on the concept of duality. Is based on the concept of duality.
Maintains simple and personal accounts of debtors,
Accounts Maintains all personal, real and nominal accounts.
creditors and cashbook.
Cannot help in making the company’s profit or loss
Profit Or Loss Can help in making the company’s profit or loss statement.
statement.
Small businesses where transactions are small and Big businesses and corporations that deal with complex transactions
Suitability
simple. and huge inventories.
Trial Balance Cannot prepare trial balance Can prepare trial balance
Tax Purpose Is not acceptable for tax purposes. Is acceptable for tax purposes.
Financial Cannot ascertain the true financial position of the
Can ascertain financial position of the business.
Position business.
Complete data is available, provides an arithmetic check on
Simple, less-expensive, easier to manage, provides bookkeeping, helps track debits and credits, can help ascertain the
Advantages
general view of earnings and expenditure. financial position of the business, makes it easier to produce year-
end accounts.
Incomplete data, are not able to provide a check
against clerical error, does not record all transactions, Expensive, harder to understand, requires hiring external staff and
Disadvantages
does not provide a detailed record of assets, theft and time-consuming.
loss cannot be detected.
6
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

If you are appointed as accountant in any organization who does not maintain his record on the basis of double entry
system, it is your duty to prepare accounts on the basis of double entry system from incomplete record.

Its main steps are: What is the need of finding Opening Capital : It is useful for finding Closing Capital

1st Step : To Find Opening Capital

Closing Capital = Opening Capital + Additional Capital – Drawings + Profits

nd rd th
2 Step: To Make Cash Book 3 Step : To Find Credit 4 Step : To Find Credit
Purchase Sale
What is the need to make Cash Book :
What is the need to Find Credit What is the need to Find
It is useful for showing closing balance of cash book as Purchase : Credit Sale :
the current asset in the closing balance sheet. It is also
helpful for find credit purchase, credit sale and other To find credit purchase is useful To find credit sale is useful
outstanding expenses and outstanding incomes. We for finding the missing figure of for finding the missing
can also find missing cash payments and cash incomes sundry creditor. It will also be figure of sundry debtor. It
if there will difference between closing cash in our included in the cash purchase will also be included in the
pocket and as per cash book. After making adjusted for making trading account. cash sale for making trading
cash book, we can included all missing items. account.
When we buy goods on credit, When we buy goods on
Cash book is the book in which we record both cash we will get the invoices. All credit, we will get the
and bank transactions. In the debit side we will show these invoices will be useful for invoices. All these invoices
all cash and bank receipts. In the credit side, we will finding the figure of credit will be useful for finding the
show all cash and bank payments. purchase. figure of credit purchase.

th
5 Step : To Find Closing Stock

What is the need to Find

Closing Stock:

To find closing stock is useful

for making trading account. It
will also be included in the
current assets of balance
sheet.

7
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

th
6 Step : To Find the Closing
Balance of Sundry Creditors
What is the need to Find Closing
Stock: Closing balance of sundry
creditors is used as current
liability in our closing balance
sheet.
Prepare Sundry Creditors
Account : Just show the opening
balance of sundry creditors in
the credit side. Calculated credit
purchase will be gone its credit
side. Cash payment to creditors
will be shown in the debit side
of creditor account. We show
the purchase return out of credit
purchase in the debit side of
creditors account. Balance will
be the closing balance of
creditors.
th
7 Step: To Find the Closing
Balance of Sundry Debtors
What is the need to Find Closing
balance of sundry debtors:
Closing balance of sundry debtors
is used as current assets in our
closing balance sheet.
Prepare Sundry Debtors Account
: Just show the opening balance
of sundry debtors in the debit
side. Calculated credit sales will
be gone its debit side. Cash
received from debtors will be
shown in the credit side of sundry
debtors account. We show the
sale return out of credit sale in
the credit side of sundry debtors
account. Balance will be the
closing balance of creditors.
Make Trading and Profit Account of Current Year
Now, we are able to prepare profit and loss
account on basis of double entry system. In trading
account, we will show the opening stock, net
purchase and direct expenses in its debit side. In
credit side, we will show net sales and closing stock
which we calculated. Difference of debit and credit
side will be gross profit which will be transferred to
profit and loss account.
Now, we prepare profit and loss account. In the
debit side, we will show all expenses. In the credit
side, we show all incomes. Collect all the bills, you
will find the information of your expenses and
incomes. You can also take the help from your
bank statements. We only show the revenue
expenditures in the profit and loss account.
Difference between income and expenses will
either our net profit or net loss. It will be
transferred to balance sheet.

Make Closing Balance Sheet

Balance sheet is the list of all

assets and liabilities. Take all the
fixed assets from opening
balance sheet. Deduct
depreciation from respective
fixed asset. Now, show the
balance of fixed asset in closing
balance sheet's asset side. Show
also current assets in the asset
side. Some missing figures like
closing balance of cash book,
closing balance of inventory,
closing balance of debtors will
be included in current assets. In
the liability side, we will show
calculated sundry creditors's
closing balance and other
liabilities. We also show the net
closing capital by calculating
following formula.

Closing Capital
= Opening Capital + Net profit -
Drawing

8
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

Problem No. 1:

MUTTAKEEN runs a small business from home (MUTTAKEEN Traders), and does not keep proper accounting records. She
needs to calculate her profit/loss for income tax purposes and requests your assistance. You establish the following:
Balances at 31 December: 2013 2012
Motor vehicle at cost (bought on 31 December 2012) TK.50 000 TK.50 000
Tools and equipments at cost (bought on 31 December 2012) 93 000 93 000
Trading inventory 19 600 20 400
Bank A/C (favourable) - 4 960
Bank overdraft 13 000 -
Long-term borrowings 28 000 18 400
Accounts payable 10 400 12 240
Income received in advance 7 600 10 000
Accrued expenses 3 200 2 600

Additional information:
a. MUTTAKEEN drew TK.200 000 during the year for her own use.
b. The accounting policy of the business is to depreciate vehicles as well as tools and equipment at 20% on cost
price.

Required:
1. Calculate the estimated profit/loss for the year ended 31 December 2013.
2. Prepare the statement of financial position as at 31 December 2013.
3. Prepare the note on property, plant and equipment as at 31 December 2013.

Solution of problem no. 1:

Ans. 1(1):
Capital at beginning of the year (1/1/2013)
Equity = Assets – Liabilities
= TK.162,600 – TK.62,200
= TK.100,400

Capital at the end of the year (31/12/2013)

Equity = Assets – Liabilities
= TK.168,360 – TK.43,240
= TK.125,120
Estimated profit/loss:

Before profit After profit

adjustment adjustment
Capital at the beginning of the year TK. 100,400 TK. 100,400
+ Net profit 224,720 196,120
- Drawings (200,000) (200,000)
Capital at the end of the year 125,120 96,520

Therefore:
Adjusting net profit Tk.224,720
- Depreciation (28,600)
Net profit for the year 196,120

9
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

Ans. 1(2):

MUTTAKEEN Traders
Statement of financial position as at 31 December 2013

ASSETS TK.
Non-current assets
Property, plant and equipment 114,400

Current assets
Inventory 20,400
Cash and cash equivalents 4,960
TOTAL ASSETS 139,760

EQUITY AND LIABILITIES

Equity
Capital (100,400 + 196,120 – 200,000) 96,520

Non-current liabilities
Long-term loan 18,400

Current liabilities
Trade and other payables (12,240 + 10,000 + 2,600) 24,840
TOTAL EQUITY AND LIABILITIES 139,760

Ans. 1(3):
Property plant and equipment
Tools and
Vehicles Total
equipment
Carrying value at beginning of year 50,000 93,000 143,000
Cost 50,000 93,000 143,000
Accumulated depreciation - - -

Additions/replacement - - -
Depreciation (10,000) (18,600) (28,600)

Carrying value at end of year 40,000 74,400 114,400

Cost 50,000 93,000 143,000
Accumulated depreciation (10,000) (18,600) (28,600)

Problem No. 2 {CMA Examination, December – 2011 [Q. No. 4.]}: Marks : (5+15) = 20
(a) What are the draw backs of single entry system?
Ans. The following are the draw backs of single entry system:
1. Unscientific and Unsystematic system
2. Incomplete System
3. Lack of arithmetical accuracy
For getting full marks,
4. Does not reflect True Profit or Loss
5. Does not reflect True Financial Position required narrative answer
6. Frauds and Errors may be possible
7. Unacceptable for Tax Purpose, etc.

10
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

(b) Mr. X, a retail merchant, keeps only a memorandum record of his transactions. By going through his notes and
records you are able to ascertain the following:

(1) Summary of Bank Account (01.01.2009 to 31.12.2009):

Dr. Cr.
Tk. Tk.
Balance b/d 2,500 Accounts payable 2,20,000
Cash deposit 2,30,000 Rent expenses 12,000
Balance c/d 13,100 Office charges 3,600
_______ Drawings 10,000
2,,45,,600 2,,45,,600

(2) Other cash transactions:

Cash purchases Tk. 20,000
Other expenses paid 20,500
Cash balance on 01.01.2009 500
Cash balance on 31.12.2009 1,000
(3) Other information:
(i) Stock-in-trade:
as on 01.01.2009 Tk. 50,000
as on 31.12.2009 75,000
(ii) A deposit of Tk. 3,000 paid as rent expense to the landlord remains as permanent advance.
(iii) Furniture with a written-down-value of Tk.30,000 on 01.01.2009 is subject to depreciation @10%.
(iv) Electricity bill to be paid on 31.12.2008 and 31.12.2009 were Tk.400 and Tk.600 respectively.
(v) Amounts due to the accounts payable on 31.12.2008 and 31.12.2009 were Tk.10,600 and Tk.21,000
respectively.
(vi) An amount of Tk.2,000 being irrecoverable from a customer is to be written off as bad debts.
(vii) Accounts receivable on 31.12.2008 and 31.12.2009 were Tk.20,000 and Tk.17,000
respectively (excluding Tk.2,000 as bad debt).
Required:
(1) Income statement for the year ended on 31.12.2009; and
(2) Balance sheet as on 31.12.2009.

Solution of problem No. 2 {CMA Examination, December – 2011 [Q. No. 4.]}:

Note-1
Opening cash balance, closing cash balance and other cash transactions are given in the question. Under this
circumstances cash book is to be prepared to check whether cash book agrees or not.

Cash Book
Dr. Cr.
Amount (Tk.) Amount (Tk.)
Balance b/d 500 Cash purchases 20,000
Cash received from Accounts Office expenses 20,500
Receivable (Balancing figure) 271,000 Deposit into Bank 230,000
Balance c/d 1,000
271,500 271,500

But the cash book does not agree. The difference in the cash book is to be treated as cash received from accounts
receivable which is not given in the question.

11
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

Note-2 : Credit Sales determination

Accounts Receivable
Dr. Cr.
Amount (Tk.) Amount (Tk.)
Balance b/d 20,000 Cash received 271,000
Credit Sales (Balancing figure) 270,000 Bad Debts expense written off 2,000
Balance c/d 17,000
290,000 290,000

Note-3 : Credit Purchases determination

Accounts Payable
Dr. Cr.
Amount (Tk.) Amount (Tk.)
Cash paid 220,000 Balance b/d 10,600
Balance c/d 21,000 Credit purchase(Balancing figure) 230,400
241,000 241,000

Note-4 : Opening Capital determination

Balance Sheet
st
As at 1 January, 2009
Assts Amount (Tk.) Liabilities Amount (Tk.)
Furniture 30,000 Accounts Payable 10,600
Stock 50,000 Outstanding Electric Bill 400
Accounts Receivable 20,000 Capital (Balancing figure) 95,000
Advanced Rent Expenses 3,000
Cash at Bank 2,500
Cash in hand 500
106,000 106,000
Ans. 2(1)
Mr. X
Income Statement
st
For the year ended 31 December, 2009
Income Amount (Tk.) Amount (Tk.)
Sales 270,000
Cost of Goods sold:
Purchas (20,000 + 230,400) 250,400
Add: Opening Stock 50,000
300,400
Less: Closing Stock 75,000 225,400
Gross Profit 44,600
Operating Expenses:
Rent Expenses 12,000
Office Charges 3,600
Add: Due 600
4,200
Less: Last year’s due 400
Office expenses 3,800
Bad debt expenses 20,500
Depreciation – Furniture (Tk. 30,000 x @10%) 2,000
Net Profit 3,000 41,300
3,300
12
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

Ans. 2(2)
Mr. X
Balance Sheet
st
As at 31 December, 2009
Amount (Tk.) Amount (Tk.)
Assets
Current Assets:
Cash in hand ……………………………………………………………………………. 1,000
Rent in advanced …………………………………………………………………….. 3,000
Accounts Receivable ………………………………………………………………… 17,000
Stock –in-trade ………………………………………………………………………… 75,000 96,000
Fixed Assets:
Furniture ….……………………………………………………………………………. 30,000
Less: Depreciation …………………………………………………………………. 3,000 27,000
Total Assets 123,000
Liabilities & Capital
Current Liabilities:
Accounts Payable ……………………………………………………………………… 21,000
Bank Over Draft…………………………………………………………………………. 13,100
Outstanding Bill ………………………………………………………………………… 600
Total Liabilities 34,700
Capital:
Opening Capital ……………………………………………………………………… 95,000
Add: Net profit …………………………………………………………………….. 3,300
98,300
Less: Drawings ………………………………………………………………………... 10,000
Net Capital 88.300
Total Liabilities & Capital 123,000

Problem No. 3
FARHANA Washing House did not keep his book of accounts under double entry system. You are a partly qualified CMA
and recently joined FARHANA Washing House. The manager has provided you the following information
available from his records:
31.3.2013 31.3.2014
Tk. Tk. .
Accounts Receivable ………………………………………. 9,000 12,000
Accounts Payable …………………………………………… 14,400 6,800
Stock of Materials ………………………………………….. 10,000 16,000
Washing Equipment ………………………………………. 40,000 40,000
Furniture ……………………………………………………….. 3,000 3,000
Discount allowed during the year …………………. - 1,400
Discount Received during the year ……………….. - 1,700
Depreciating the washing equipment @ 10%.
Receipts Tk. Payments Tk.
Balance b/f (Opening Balance) 8,000 Cash Purchases 14,000
Cash Sales 40,000 Paid to Creditors 20,000
Received from Accounts Receivables 30,000 Sundry Expenses 6,000
Cartage 2,000
Drawings 8,000
Balance c/f (Closing Balance) 28,000
78,000 78,000
Required: 13
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
1. Prepare Profit and Loss account for the year ending 31-3-2014 and
Audit Consultant (General Manager),
Rupali Bank Ltd.
2. Balance sheet as on that date.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

Solution of problem No. 3

Note-1

Note-2

Note-3

14
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.
 Special Class note for
CMA Professional Level –II
201-Advanced Financial Accounting-I

Ans. 3(1): FARHANA Washing House

Ans. 3(2): FARHANA Washing House

31-3-2014

Home work:
1. CMA Examination August – 2010 : Question no. 2

15
Md.Monowar Hossain FCMA,FCPA,ACS,ACA Sunday, June 08, 2014
Audit Consultant (General Manager),
Rupali Bank Ltd.