(a) Mr.

Kalam owns and manages a Trading business, which had the following post closing trial balance on December 31,
2020. (Marks: 16)

Dr. Cr.
Cash Tk.30,800
Accounts Receivable 4,000
Supplies 1,000
Prepaid Rent 2,700
Furniture 7,000
Accumulated Dep.-Furniture 1,050
Allowance for doubtful accounts (AFDA) 500
Accounts Payable 2,500
Mr. Kalam’s, Capital 38,150
Closing Stock 4,500
Salary Payable 800
Total 43,000 43,000
During the year 2021 following summary transactions were completed:

1. Furniture purchased in cash Tk. 5,000 (on 01-01-2021);

2. Goods purchased in cash Tk. 12,000 and on credit Tk. 6,000;
3. Goods sold in cash Tk. 35,000 and on credit Tk. 7,000;
4. Cash collected from customers in payment of accounts receivable Tk.3,000.
5. Cash paid to creditors for accounts payable due Tk. 5,700;
6. Purchased supplies on account Tk. 4,000;
7. Salaries paid in cash, Tk. 6,000, of which Tk. 800 is for last year;
8. Mr. Kalam’s drawings during the year were Tk. 5,500;
9. Bad debts occurred Tk. 600.
Adjustment data consist of: (at the end of the year 2021)
(i) Prepaid salaries Tk. 400; (ii) Depreciation on Furniture at 15% (Straight line method);
(iii)Rent expired Tk. 1800 ( Tk.150 per month); (iv) Supplies on hand at December Tk. 1,200.
(v) Closing Stock Tk. 3,500; (vi) Create 10 % allowance for doubtful accounts on debtors.
Required: (1) Prepare ledger accounts (Use T account);
(2) Prepare unadjusted trial balance;
(3) Prepare adjusted trial balance;
(4) Prepare income statement, Owner’s equity statement and statement of financial position.
(5) Close temporary accounts and calculate closing balance for permanent accounts.
(b) What is economic entity assumption? (Marks: 02)
(c) “The terms debit and credit mean increase and decrease respectively.”Do you agree? Explain.
( Marks: 02)
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