SHANTO-MARIAM UNIVERSITY OF

CREATIVE TECHNOLOGY

Department of Business Administration

Module Name: Principles of Accounting

 Module Code: ACT 1301

Module Leader: M. M. Ahsan

Assistant Professor

Department of Business Administration

Updated on: 13.10.2019

Module Specifications

Module Title : Principles of Accounting

Module Code : ACT 1301

Pre-requisite : N/A

Year of study :

Contact hours : Lecture 1.50 Hours/Week

Total Hours : 18

No. of Lectures : 12

Assessment method : Continuous Assessment, Mid Term and Final

Exam
Credit : 1.5

1
General Aim of the Study:

This module will give the basic concept of accounting arenas in the
organization. From this module, students will able to understand
the Accounting aspects of today’s world so that they can utilize
this in future endeavor.

Objectives of the Study:

After the completion of this module, students will have the

knowledge.
-How could be a successful Accounts Manager?
-They will be groomed and develop their professionalism.

2
 Syllabus Outline and Teaching Plan
Lecture Lecture Topic
No.

1 Accounting : The Language of Business: This

lecture will cover

 History of accounting

 Definition of Accounting

 Features/ Characteristics of Accounting

2 Conceptual Framework of Accounting : This

lecture will cover

 Need for conceptual framework

 Accounting Principles depend

 Basic Objective of Financial Reporting

 Qualitative characteristics of accounting

information

3 The Accounting Process-Double Entry system:

This lecture will cover
 Definition of Double entry system
 Background of Double entry system

4 The Accounting Process- Accounting Equation:

3
 This lecture will cover rules of solving accounting
equation problem

5 The Accounting Cycle-Rules for Debit & Credit:

This class will cover

 Accounting Cycle

 Rules for Debit & Credit

6 The Accounting Cycle-Journal: This lecture will

cover the various problems of journal and its
solution.
The Accounting Cycle-Journal: This lecture will
cover the various problems of journal and its
solution.

7 The Accounting Cycle-Journal to Ledger to Trial

Balance: This lecture will cover various problems
of journal and journal to ledger and trail balance.

4
8 Adjusting Entries: This lecture will cover

different problems related to adjusting entries.

9 Preparation of Trial Balance: This lecture will

cover different problems related to Trial Balance

10 Closing Entries: This lecture will cover different

problems related to closing entries.

11 Preparation of Income Statement: this lecture will cover

the basics of income statement.
12 Preparation of Balance Sheet: This class will cover the
whole idea about preparing Balance Sheet.

Preparation of Balance Sheet: This lecture will cover

various problems and solutions related to Balance sheet.

5
Text Book:
1. Accounting Principles – Waygandt, Kieso & kimmel (Latest Edition)
2. Fundamentals of Accounting Principles – Pyle & Larson

Website:
book, select “Publications” at http://www.authenticityconsulting.com
“Publications” at http://www.authenticityconsulting.com

Students are strongly requested to follow class notes, books recommended above,
on the aforesaid subject in addition to basic text to keep themselves updated on
recent developments.

6
Assessment Procedure:
Marks Distribution
Class Attendance: 10
Class Test 10
Assignment & Presentation 20
Midterm 20 (Exam would be conducted on 40
and then converted to 20)

60
Final 40(Exam would be conducted on 60
and then converted to 40)

Total 100

7
 MODULE CONTIOUS ASSESSMENT TIME TABLE

Program : Common core

Year & Semester :
Unit/Module code : ACT 1301
Unit/Module Title : Principles of Accounting
Assessment Mode : 40% class assessment + 60% written exam

Assessment
Mid Final
Description: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Term Exam
weeks
Assignment
on
Transaction 5%
Analysis

Assignment
on: Adjusting
Entries and
Worksheet 10%
20% 40%
written written
Exam Exam

Group power
point
presentation:
on Financial 15%
Statement

Attendance: 5% 5%

All the above assignments/class tests must be carried out in class unless
otherwise stated on the written assignment brief.

Module Leader: M. M. Ahsan

N.B: In the total marks 5% is before midterm attendance and 5% is in the after midterm attendance

8
 Week-01

Course Title: Principles of Accounting

Course Code – ACT 1301

Lecture – 01

Accounting: The Language of Business

Lecture Highlights:

• History of accounting

• Definition of Accounting

9
Origin and Gradual Evaluation of Accountancy:

 Early Stage: Pre 1500

 Expansion of Double Entry Book Keeping - 1500

 Financial Accounting - 1800

 Auditing & Tax Accounting - 1840

 Cost Accounting - 1900

 Government Accounting - 1925

 Social Accounting - 1940

 Management Accounting - 1950

 Inflation Accounting - 1970

 Human Resource Accounting – 1975

Development Period (Before 1494)

 Stone Age

 Exchange Age

 Money Age-Single Entry System

10
2nd Stage or Pre Analytical Age (1400-1800)

In 1494 Luca Pacioli discuss Double Entry System in the chapter named “De Computis

et-Scripteris” of his book “Summa de Arithmatica, Geomatrica,

ProportionietProportionilita”

3rd Stage or Analytical Age: (1800-1950)

Between 1750 - 1850 in England, Industrial Revolution happened. For that techniques &

presentation of Accounting also improved very fast. For faster improvement larger

production process, Joint Business & competition occurs. To solve many kind of hazard

accounting research & thoughts occurs. And this time entity concept, owner concept,

depreciation concept, money Concept, Dissolution & matching Concepts are introduced.

Current or Modern Concept:

In 1973 International Accounting Slandered Committee (IASC) Formed.

11
Definition of Accounting:

 Accounting may be define as the collection, compilation and systematic recording of

business transactions in terms of money, the preparation of financial reports,

the analysis and interpretation of this reports and the used of this reports for the

information and guidance of management. - A. W. Johnson

 Accounting is the art of recording, classifying and summarizing in significant manner

and in terms of money, transections and events which are in a part at least of a

financial character and interpreting the results there off.

- AICPA (AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS)

 Accounting refers to the process of identifying measuring and communicating

economic information to the permit informed judgment decisions by user of the

information.

- AAA (ASSOCIATION OF AMERICAN ACCOUNTANT)

 Accounting is the process used to measures and report to various users’ relevant

financial information regarding the economic activities of a unit or organization.

- FASB (FINANCIAL ACCOUNTING STANDARD BOARD)

12
Features/ Characteristics of Accounting:

1) Accountancy is a Social Science

2) Accountancy is an art

3) Accountancy is a Science

4) It is a Science or Art

5) It is a Best Media of Information

6) Measuring the Result

7) Accounting is a Practical Knowledge & Method

13
 Objective of Accounting:
As per AICPA,
American Institute Certify Public Accounting is a service activity is function is to provide
quantitative information primarily financial nature, about Economic entries that is
intended to be useful in making alternative courses of action.

i) Information supplied to the ultimate ii) Control the fraud

users
iii) Record of transection iv) Creating value and accounting
ability
v) Determining of results vi) Justify arithmetic accuracy
vii) Ascertainment of financial affairs viii) Legal binding
ix) Cost control x) Advantages of taking loan
xi) Keeping accounts of each xii) Determining VAT and TAX
xiii) Use as documents xiv) Comparative Analysis

Advantage or usefulness of Accounting:

i) Permanent accounting keeping of vii) Use as document
the
Transection viii) Cost control
ii) Know the information when need ix) Advantages of taking loan
iii) Ascertainment of profit or loss x) Determining VAT and TAX
iv) Exhibition of error and fraud xi) Analysis of particular items with
previous

14
 Scope of Accounting:
i) Accounting in personal ii) Accounting in non-trading
organization
iii) Accounting in Business organization iv) Accounting for Government office
v) Accounting for professional

Function of Accounting

Historical / Stewardship Function Managerial Function

Recording Transaction Formulation of Policy and

Preparation of Plan
Classification and Transfer of
Transaction Formulation of Policy and
Preparation of Budget
Finding the Result
Cost Control
Exhibition of Financial Affairs
Prevention of Error and Fraud
Communicating the Financial
Information

Analysis of Financial Statement

15
Roll of Accounting:
i) Finding out profit or loss
ii) Exhibition of financial position
iii) Comparative analysis
iv) Protect the owners interest
v) Cost control
vi) Operating of Business
vii) Use of document
viii) Finding income TAX
ix) Aid to management

Limitation of Accounting
i) Money management
ii) Lacking of Uniform Accounting
System
iii) Alternation of general acceptance
iv) Process of error
v) Comparison of position is
different organization
vi) Income TAX policy
vii) Disclose of secrecy
viii) Dis honesty
ix) Lack of compressive

16
What is Accounting Information?

1. Income Statement
2. Retain Earnings Statement
3. Capital Statement
4. Balance Sheet
5. Cash Flow Statement.

17
 Week-02

Course Title: Principles of Accounting

Course Code – ACT 1301

Lecture – 02

Conceptual Framework of Accounting

Lecture Highlights

 Need for conceptual framework

 Accounting Principles depend

 Basic Objective of Financial Reporting

 Qualitative characteristics of accounting

information 18
Conceptual Framework:

A conceptual framework is like a constitution. It is “a coherent system of

interrelated objectives and fundamentals that can lead to consistent
standard and that prescribes the nature, function, and limits of financial
accounting and financial statements.”
To ease the definition of conceptual framework, we can state that conceptual
framework is like a boundary. The prepares and users of accounting information are
permitted to work within this boundaries and they are not allowed to encroach this
rules and regulations.

 Need for conceptual framework:

 As an aid in developing more useful, consistent standards.

 As an aid in solving practical problems by reference to an existing
framework of basic theory.
 In combination with good judgment, a sound body of theory will help
accountants focus on logical and consistent solutions to accounting
problems as they arise.

 Accounting Principles depend on:

 General acceptance.
 Relevance & reliability.
 Usefulness.
 Cost/benefit constraints.

19
 Basic Objective of Financial Reporting / Accounting is to provide
information that is:

 Useful to those making investment and credit decisions.

 Directed at persons with a reasonable level of understanding of business
and economic activities.
 Helpful to present and future investors, creditors in assessing future cash
flows.
 About economic resources, the claims on those resources and changes in
them.

 Qualitative characteristics of accounting information are those that

help distinguish better (more useful) information from inferior (less
useful) information.

 The understandability of accounting information:

 There must be a connection between users of information and the

decisions they make.
 Users must be knowledgeable and information presented in a form, which
users will understand and be able to employ appropriately.

20
 Qualitative Characteristics of Accounting Information:

Primary Qualities Relevant Reliability

Verifiability
Predictive value

Representational faithfulness

Feedback value

Neutrality
Timeliness

Comparability/Consistency
Secondary Qualities

Materiality

Primary Characteristics of Accounting Information:

 Primary Characteristics: Relevance and Reliability

 Relevance: It states that the information should be-

 Capable of making a difference in a decision.
 Helpful in making predictions about ultimate outcomes of past, present and
future events: ‘Predictive value’.
 Helps users to confirm or correct prior expectations: ‘feedback value’.
 Contains the element of ‘timeliness’. The information is available in time to


21
  influence a decision.

 Reliability: It states that -

 Information can be relied on to represent the true, underlying situation to
those who do not have the time or ability to verify it.
 ‘Verifiability’ is the ability to arrive at the same conclusion, given the same
information, by independent evaluators or users.
 ‘Representational faithfulness’ is an important element of reliability in that it
means the information represents what really existed or happened.
 ‘Neutrality’ is the characteristic that the information presented is free from
bias. The information presented does not favor one party’s interests over
another.

Secondary Characteristics of Accounting Information:

 Secondary Characteristics are: Comparability and Consistency

 Comparability: It states that-

 Information is more useful if it lends itself to comparison with similar
information about another enterprise.
 Information is measured and reported in a similar manner for different
enterprises.
 This characteristic allows users to identify real differences between
enterprises, not those due to non-comparable accounting methods.
 Allows for the allocation of resources to the areas of greatest benefit.

22
  Consistency: It states that-

 This is achieved when an enterprise applies the same accounting principles in

a similar manner from one period to the next.
 Accounting principles may be changed when it can be demonstrated the
result would be preferable.

If principles are changed this must be disclosed as well as the justification for,
nature and effect of the change.

23
Basic Assumptions in Accounting:

 Economic Entity Assumption: It states that-

 The economic entity can be identified with a particular unit of

accountability.
 The business is separate and distinct from its owners. No commingling of
assets and other financial elements.
 Departments or divisions of an entity may be considered separate entities.

Accounting assumption not necessarily a legal one.

 Going Concern Assumption: It states that-

 That the business will be in business tomorrow.

 Implies accrual, historical accounting should be followed.
 Liquidation accounting is not followed unless indicated.

 Monetary Unit: It states that-

 Money is the common unit of measure of economic transactions.

 Use of a monetary unit is more relevant, simple, available, understandable
and useful.
 The dollar is assumed to remain relatively stable in value.

 Periodicity (Time Period) Assumption: It states that-

 Economic activity of an entity must be artificially divided into time periods

for reporting purposes.
 Adjusting entries must be done to bring books up to date at the end of
the time period.

24
  Shorter time periods more subject to revision but more timely

Basic Principles in Accounting:

 Historical Cost Principle: It states that-

 Once a transaction is recorded at its acquisition price it is subsequently

not changed. This is deemed to be more reliable than other valuation
methods.
 Applies to assets and liabilities.
 Prepares and users find current fair value information to be useful as well.

 Revenue Recognition Principle: It states that-

 Revenue is recognized when it is realized (or realizable) and earned.

 Revenue normally recognized at time of sale, with exceptions.
 During production (for example, long-term construction).
 End of production, before sale takes place. This might occur when
there is an active market such as mining.
 Receipt of cash (for example, installment sales)

 Matching Principle: It states that-

 “Let expenses follow revenues”

 Match (record) expenses to the revenues, which they helped generate.
 Match revenues and expenses to the time period benefited.

 Full Disclosure Principle: It states that-

 To report what a reasonable person would need to know to make an

informed decision.

25
  Disclosure may be achieved within the body of the financial statements,
the notes to those statements, or as supplementary information.
 Disclosure is not a substitute for proper accounting.

Constraints or Limitations in Accounting:

 Cost-Benefit Relationship: It states that-

 The cost of information should not outweigh the benefit derived.

 Costs and benefits are not always derivable, obvious or quantifiable.
 Sound judgment must be used.

 Materiality: It states that-

 Relates to an item’s importance to a firm’s overall financial operations.

 An item must make a difference to be material and be disclosed.
 Materiality has both quantitative and qualitative characteristics.
 Quantitative--Amount must be significant to be separately disclosed.
 Qualitative--Transaction has selected characteristics that require close
attention, disclosure. (For example, a forged check of a minimal
amount has cleared the company’s account. This would indicate
internal control problems!)

 Industry Practices: It states that-

 Peculiar nature of some industries and business concerns sometimes

requires departure from basic theory.
 The financial statements shall not mislead a reader. If following “pure”
accounting theory results in statements that are not comparable or
consistent, not relevant or reliable then theory should be adjusted.

26
  Conservatism: It states that-

 If there is a range of equally acceptable values, select the alternative that

will be least likely to overstate assets or understate liabilities.

In brief the Fundamental Concepts of Accounting are:

Assumptions of Accounting:
 Economic (Separate) entity
 Going concern (Continuity)
 Monetary unit (Unit of measure)
 Periodicity (Time period)

Principles of Accounting:
 Historical cost
 Revenue recognition
 Matching (Expense recognition)
 Full disclosure

Constraints of Accounting:
 Cost-benefit
 Materiality (Materiality threshold)
 Industry practice (Peculiarity)
 Conservatism

Fundamental Concepts of Accounting are discussed briefly below:

Assumptions of Accounting:

27
1.Economic (Separate) entity: Revenues, expenses, assets, liabilities, business
equity & transactions of business to be kept separate from those of the owners.

2.Going concern (Continuity): Business has an unlimited life unless it is known to be

otherwise.

3.Monetary unit (Unit of measure): Events must be primarily financial in nature

(expressed in tk.) before recording & reporting; disregarded any effects of inflation or
deflation.

4.Periodicity (Time period): The life of a business can be arbitrarily broken into
monthly, quarterly, and yearly time intervals without material distortion of reported
amounts.

Principles of Accounting:

1.Historical cost: All events to be recorded at original cost.

2.Revenue recognition: Record and report expenses when earned.

3.Matching (Expense recognition): Record & report expenses when incurred.

4.Full disclosure: Add additional information when necessary to provide an adequate

understanding.

Constraints of Accounting:

28
1.Cost-benefit: The cost of providing the information should not exceed the benefits
derived from using the information.

2.Mateiality (Materiality threshold): Insignificant amounts need not be recorded &

reported according to GAAP.

3.Industry practice (Peculiarity): Specialized types business will have their own
way of recording & reporting certain items i.e. a separate set of GAAP for some
business types.

4.Conservatism: When in doubt how to record or report, don’t overstate assets or

revenues

Week-03

Course Title: Principles of Accounting

Course Code – ACT 1301

Lecture – 03

The Accounting Process-Double Entry system

29
 Lecture Highlights

 Definition of Double entry system

 Background of Double entry system

Double Entry System and Accounting Equation:

Double entry bookkeeping is a generally accepted system. This system was first
described by Luca Pacioli in 1494. The system of double entry may be well compared to
a scale, which must have equal weight on both sides in order that the scale is balanced.
Thus, if the weight on one side of the scale is increased or decreased the same weight
must be correspondingly added to, or removed from, the other side. A more common
expression of double entry book keeping is the accounting equation.

The total assets of a firm are always equal to the total equities. This reflects
the fundamental accounting equation of:
A=E
Where A denotes ‘Assets’ and E denotes ‘Equities’

‘Assets’ are the goods and property, which the firm owns as well as claims
against outsiders that the firm has not yet collected.
‘Equities’ are the claims against the assets and indicate the sources of the assets.
The sources may be the owners themselves or outsiders. Due to the difference in the
nature of these claims, equities are divided into the claims of the creditors and claims of
the owners. Hence the fundamental equation can be explained as follows:
A=L + P
Where

30
 A = Assets
L = Liabilities (Loan from outsiders i.e. Creditors)
P = Proprietorship or Capital or Owners Equity (Owners claims in the
organization)

So the Accounting Equation is: A=L+P

Balance Sheet of an organization shows the financial position of an organization

at a certain period of time. Accounting equation equates the financial position i.e. all
the assets of an organization equals to the internal liabilities (Capital or Owners equity)
and external liabilities (Creditors) of an organization.

Now we will explain what assets, liabilities are and owner’s equity
means:

Assets: Assets can generate income for an organization and the physical objects or
services that have financial worth.

Types of assets:
1. Physical /tangible assets: Land, building, cash, motorcar etc. that we can
see and have the physical existence.
2. Right for receiving payment: Accounts Receivable, Sundry Debtors, Notes
Receivable, advances to employees.
3. Right for receiving services: Prepaid insurances, unexpired rates etc.
4. Intangible assets: Goodwill, patents etc that has no physical existence.

In another sense assets can be classified into two groups:

1. Long-term assets: Those assets that will give benefit more than one-year .For
example: Land, Equipment etc.

2. Short term assets /Current assets: Those assets that will be matured within
one year. For example: Cash, bank balance, Accounts receivable etc.

Liabilities:
-Claims in the assets by outsiders or creditors
-Obligation to pay for purchases

Liabilities can be classified into two groups:

31
1. Short term /current liabilities: Those liabilities that will have to pay with in
one year. For example: Notes payable, accounts payable, salaries payable etc.
2. Long team liabilities: Those liabilities that we can avail for more than one
year. For example: Debenture, Bond Payable, Mortgage payable etc.

Owner’s Equity (O.E):

- The claims of owners from to organizations assets
- It can be said ‘Residual Claim’ since at the time of termination of the
organization the creditors are firstly paid and the remaining amount paid to the
owners.

Week-04

Course Title: Principles of Accounting

Course Code – ACT 1301

Lecture – 04

The Accounting Process- Accounting Equation

32
 Lecture Highlights

Rules of solving accounting equation problem

The following Four types of transactions that changes the Capital or

Owner’s Equity (O.E):

0 Capital or
O.E.
1. Owners contribution (Any assets invested by the owners) +
2.Owner’s withdrawals (Any thing taken by owner’s from the -
organization)
3.Revenues/Income +
4.Cost/ Expenses -

Examples of Accounting Equation:

Transactions Assets =Liabilities Owner’s

Cash + Motor + Equity
Car
Investment by owner tk. (+) 10,00,000 (+)
10,00,000 10,00,000
2.Purchase a car of tk. (-) 5,00,000
5,00,000 (+) 5,00,000

33
 3.Purchase another car on (+) (+) 400,000
account tk. 400,000 400,000
4.Interest earned tk. 15,000 (+) 15,000 (+) 15,000

5. Staff salary paid tk. (-) 20,000 (-) 20,000

20,000
Total 4,95,000 + 9,00,000 =4,00,000 9,95,000
+

=Tk. 13, 95,000 =Tk. 13, 95,000

Now we will explain the above transactions:

Transaction no. 1: Investment by the owner will increase cash taka for the
organization. As a result cash increase (+) and since the owners give the fund to the
organization, it will increase the capital or Owner’s equity (+).

Transaction no.2: The organization purchases a car. As a result cash will

reduce (-) and on the other hand the organization will have a motorcar of the same
amount. So in the asset column a new asset named ‘Motor Car’ will be added. Now the
organization will have two assets –One is cash and another is Motorcar.

Transaction no 3: Purchase another car on account or on credit of tk. 4,

00,000. The organization will have a new asset (Motor car) and will be added with the
Motorcar column in the asset side. Since the organization did not paid cash for
purchasing the car, the organization will be liable to pay the amount to at a future date.
As a result this will increase the organizations liability and will be added with the liability
column. So the liability will increase (+).

Transaction no 4: Interest earned in cash taka. It will increase the cash of the
organization. So it will be added with cash (+) and on the other hand as it is revenue
for the organization it will increase the capital or Owner’s equity of the organization. So
added with the Owner’s equity (+)

34
 Transaction no 5: Salary paid to the organizations staffs. As a result cash will
be reduced (-) .On the other hand since it is an expense for the organization, it will
reduce the capital of the organization. So owner’s equity reduction.

Practical Problem: 1

The list below contains the transactions for the Joan Miller advertising
agency during the month of January, 2018:
January 1: Joan Miller invested $10,000 in her own advertising agency
January 2: Rented an office, paying two months’ rent in advance $800
January 3: Hired a secretary and agreed to pay $600 every two weeks. The secretary
agreed to work extra hours to make up the time for the first two days of January.
January 4: Purchased art equipment for $4200
January 5: Purchased office equipment from Morgan Equipment for $3000. Paying
$1500 in cash and agreeing to pay the rest next month.
January 6: Purchased on credit art supplies for $1800 and office supplies for $800
from Taylor Supply co.
January 8: Paid $480 for one-year insurance policy with coverage effective, January 1.
January 9: Paid Taylor Supply Co. $1000 of the amount owed.
January 10: Performed a service by placing advertisements for an automobile dealer
in the Newspaper and collected a fee of $1400
January 12: Paid the secretary two weeks salary, $600
January 15: Accepted $1000 as an advance fee for artwork to be done for another
agency, Ziko Co.
January 19: Performed a service by placing several major advertisements for ward
department stores. The earned fees of $2800 will be collected next month.
January 25: Joan Miller withdrew $1400 from the business for personal living
expenses.
January 26: Received (but did not pay) a telephone bill, $70.

You are requested to prepare a tabular analysis for Joan Miller advertising
agency for the month of January ‘2003.

35
Solution:
Joan Miller advertising agency
January ‘2003
(All figures are in Tk.)
Da Assets = Liabilities
te (+)

Accounts Payable O.E*

Ja Cash Prep Art Offic Prep A/ Mor Tayl Ziko Ac
n. aid equi e aid R* gan or Co. cru
rent p equi insu Co. Co. ed
men pme ranc T.B
t nt e .
1 (+) (+)
1000 10000
0
2 (-) (+)
800 800
3 - - - - - - - - - - -
4 (-) (+)
4200 4200
5 (-) (+) (+)
1500 3000 1500
6 (+) (+) (+)
1800 800 2600
8 (-) (+)
480 480
9 (-) (-)
1000 1000
10 (+) (+)
1400 1400
12 (-) (-)
600 600
15 (+) (+)
1000 1000

36
 19 (+) (+)
2800 2800
25 (-) (-)
1400 1400
26 (+) (-) 70
70
Tot 242 800 600 380 480 280 150 160 100 70 1213
al 0 0 0 0 0 0 0 0
16,300 16,300

Relative discussion: Now we will explain the above problem-

Jan. 1: The owner starts his own business .It will increase the cash for the business and
on the other hand will increase the capital for the business.
2: Rented an office for the business; paid in advance by the business. This will reduce
the cash for the business. On the other hand rent paid in advance (any ‘advance
expense’ treated as an ‘asset’ in accounting) will increase asset of the business in the
name ‘Prepaid rent’.
3:Hire a secretary is not any financial transaction for the organization. It will not be
recorded in the books of accounts.
4:Purchased-art equipment will increase an asset for the organization and also decrease
cash position for the organization.
5.Purchase-office equipment will increase asset for the organization .It will be recorded
in the asset side in the column ‘office equipment’. To purchase this 1500 cash is paid
will reduce the cash position of the organization. Remaining 1500 will be given later
on .So it will increase liability for the organization and will be recorded as Accounts
payable (Morgan co.) in the liability side.
6:Purchase art supplies will increase asset of the organization. This purchase is done on
credit .It will increase the liability.
8: Insurance is paid to cover the future risk. It is an advance payment. It is an asset for
the business. This will be recorded as ‘Prepaid insurance’ in the asset side. On the other
hand it will reduce the cash for the organization.
9: Payment is made to accounts payable (liability) will reduce the liability. On the other
hand will reduce the cash.
10: The business provides service to its clients. It is an income for the business and will
increase the owner’s equity. On the other hand it will also increase e the cash position
of the organization.

37
12:Payment is made in cash. It will reduce the cash position of the organization. Since
it is an expense it will reduce the owners equity.
15:The firm accept an advance payment from a client although it did not provide any
service to its clients. This will increase cash position as cash is increased. On the other
hand this will increase liability for the business as any advance receipt is treated as a
liability in accounting.
19:The business provides services to its clients. It is an income for the organization and
will increase the owner’s equity. On the other hand the payment will be collected in the
next month. This will be recorded as an asset in the name ‘Accounts Receivable’ in the
asset side.
25:The owner taken money from the business (Anything taken by the owner from the
business is considered as ‘Withdrawals or Drawings’ and is treated an expense for the
business). This will decrease the owner’s equity. On the other hand, cash will be
decreased as the owner takes cash.
26:It is an expense for the business and will reduce the owner’s equity. On the other
hand cash is not paid and it will increase the liability of the organization in the name of
‘Accrued Telephone Bill’

Practical Problem: 2
On the basis of the above problem, now try to solve the following
problem.

Michelle Pfeiffer opened a law office, Michelle Pfeiffer, attorney at law, on July

Purchased additional office equipment for $1000,paying$ 400 in cash and the
balance on account.
1. Paid salaries $2500; Rent for August $900 and advertise expenses $350
2. Withdrew $550 in cash for personal use.
3. Received $2000 from Standard Federal Bank-money borrowed on a note payable.
4. Incurred utility expenses for month on account $250.

Prepare a tabular analysis of the August transactions beginning with July 31

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38
 Week-05

Course Title: Principles of Accounting

39
Course Code – ACT 1301
 Lecture Highlights

 Accounting Cycle

 Rules for Debit & Credit

Accounting Cycle: In the accounting process, the accounting activities rotate in a similar way or
follows the same procedure in each year .The sequence or process is maintained by the
accounting activities can be entailed as ‘ accounting cycle’.

40
Step in account cycle:
The following steps are followed in the accounting cycle:
1. Source document collection and recording in Journal.
2. Classified posting into ‘general ledger’
3. Proving periodic arithmetical accuracy into ‘ trial balance’.
4. Adjusting ‘general ledger and preparation of work sheet.
5. Preparation of Final Financial Statement.

In every transaction the above-mentioned steps are followed. First the transactions are
recorded in Journal book and classified them and posting into the ledger account. The third step
is to provide the arithmetical accuracy through Trial Balance. In the fourth stage, adjusting
entries are incorporated with the Trial Balance accounts and worksheet is prepared. And finally,
various financial statements are prepared i.e. Income Statement, Cash Flow Statement, Retained
Earnings Statements, and Balance Sheet etc. This entire process is called as the ‘Accounting
cycle’.

Step 1: Identification and recording of transaction and other events- Journal.

The first step in the Accounting cycle is to record the transactions in the books of
accounts. This process is called ‘to record’ into the journal books. The books are also called
‘Book of original Entry’ as transactions occur they are recorded first in the journal.

Simply Journal can be defined as recordings of transactions in a set of books in a

systematic way according to days

Before starting to record the transactions into the journal book, we will discuss about the
‘Accounts.’

Accounts: An account is simply a place where similar transactions and events, which occur
during a particular period, are summarized and accumulated.

Classification of Accounts:
1. Personal account: Any person or organizations. Example: Mr. X’s a/c, Beximco co. ltd.
a/c.
2. Real a/c: any assets i.e. cash, bank, machinery, motorcar etc.
3. Nominal a/c: Nominal accounts are of two types:
(a) Expense a/c: Any expenses i.e. salary paid, commission paid etc.
(b) Income a/c: Any earnings or revenues i.e. interest earned, commission earned etc.

Debit & Credit:

41
 The term ‘Debit’ & ‘Credit’ gives an accounting explanation of the mathematical changes
in the individual accounts. There must be always equal increases and decreases so that equality
of the two sides of the accounting equation is maintained.

Journal rules:

1.In personal a/c: Receiver-------Dr

Donor------------Cr
Example: Mr. Hasan gives tk.100 to Mr. Jaman
Here Mr. Hasan and Mr. Jaman both are personal a/c and Jaman is the receiver. So
Jaman’s a/c will be debited. On the other hand Hasan is the donor and his a/c will be credited.
Journal entry: Mr. Jaman’s A/C Dr 100
Mr. Hasan’s A/c Cr 100

2.Real a/c: Asset increases------Dr

Asset decreases-------Cr

Example: Equipment purchased at a cost of tk. 1,00,000.

Equipment is an asset for the organization. So it will be debited. On the other hand cash
is also an asset for the organization. It will be decreased and will be credited.
Journal entry: Equipment A/c Dr 1,00,000
Cash A/c Cr 1,00,000
3.Nominal a/c:
(a) Expense a/c: Expenses increases----Dr
Expenses decreases ------Cr

(b) Income or revenue a/c: Income decreases-----Dr

Income increases-------Cr
Example 1: salaries paid tk. 10,000.
Salaries are an expense for the organization and it will be debited. On the other
hand salary is been paid in cash. Cash is an asset and it decreases so will be credited.
Journal would be: Salaries a/c Dr. 10,000
Cash a/c Cr. 10,000

Example 2: Interest income tk. 5000

Interest is an income for the organization and will be credited. On the other hand income
is earned in cash. So it will be debited.
Journal entry: Cash a/c Dr. 5000
Interest income Cr. 5000

4.Capital, reserve, and liabilities a/c: Any decreases -----Dr

Any increase -----Cr
Example: Mr. Hasan invested tk.100, 000 in the business. Here cash is increased and on the
other hand Capital is increased (Anything given by the owner’s to the business is the
considered as the Capital of the business). So it will be credited.

42
Journal entry: Cash a/c Dr.100, 000
Capital a/c Cr.100, 000

43
 Week-06

Course Title: Principles of Accounting

Course Code – ACT 1301

Lecture – 6

The Accounting Cycle-Journal

Lecture Highlights

 Problems of journal and its solution.

44
The specimen form of a General Journal is giver below:

General Journal
Folio No.............................
Date Particulars Ledger Debit Tk. Credit
Folio Tk.

Journal problem: 1
Ann Evans, CPA, completed the following transactions during August of this
current year:

Aug. 1: Begin a public accounting practice by investing $1500 in cash and office
equipment having a $ 1200 fair value.
Aug. 1: Purchased office supplies $75 and office equipment $250, from Sierra Company
on credit.
Aug. 1: Paid three months rent in advance on suitable office space, $900.
Aug. 5: Completed accounting work for a client and collected $ 60 cash there for.
Aug. 11:Paid Sierra Co. $ 125 of the amount owed for the items purchased on August
1.
Aug. 12: Paid the premium on insurance policy, $375.
Aug. 15: Completed accounting work for Nevada Co. on credit, $ 350.
Aug. 20: Ann Evans withdrew $100 from the Accounting practice for personal expenses.
Aug. 23: Completed Accounting work for Donner co. on credit, $200.
Aug. 25: Received $ 350 from Nevada co. for the work completed on August 15.
Aug. 31: Paid the utility bills, $ 3

Required:

45
1.Prepare journal entries for the transactions

Solution:
Ann Evans, CPA
Journal Entries
Date Particulars LF Dr (Tk) Cr (Tk)
2003 Cash A/C Dr 1500
Aug 1 Office equipment A/C Dr 1200
Capital A/C Cr 2700
Aug 1 Office Supplies A/C Dr 75
Office equipment A/C Dr 250
Accounts payable (Sierra Co) Cr 325
Aug 1 Prepaid Rent A/C Dr 900
Cash A/C Cr 900
Aug 5 Cash A/C Dr 60
Accounting Revenue Cr 60
Aug Accounts payable (Sierra Co) Dr 125
11 Cash A/C Cr 125
Aug Prepaid Insurance Dr 375
12 Cash A/C Cr 375
Aug Accounts Receivable (Neveda Co) Dr 350
15 Accounting Revenue Cr 350
Aug Withdrawals A/C Dr 100
20 Cash A/C Cr 100
Aug Accounts Receivable (Donner Co) Dr 200
23 Accounting Revenue Cr 200
Aug Cash A/C Dr
25 Accounts Receivable (Neveda Co) Cr 350
Aug Utility Expense Dr 350
31 Cash A/C Cr 35
35
5,520 5,520

46
 Questions: Students are requested to solve the following problems.
Problem no 1:
Dr. Wali Asahraf completed the following transactions in the practice of his
profession during May of the current year:

May 1. Paid office rent for May tk. 1400

2. Purchased X –ray film and other supplies on account tk. 680
4. Received cash on account from patient’s tk.8476
6. Purchased equipment on account tk.5100
6. Paid cash to creditors on account tk. 4810
8. Sold X-ray film to another doctor at cost, as an accommodation, receiving cash
tk. 120
10. Paid invoice for laboratory analysis tk.280
11. Paid cash for renewal of property insurance policy tk. 560
20. Out of the items of equipment purchased on May 6 one was defective. It was
returned with the permission of the supplier who agreed to reduce the account
for the amount charged for the item tk. 800
26. Paid cash from business bank account for personal and family expenses tk. 3500
31. Recorded the cash received in payment of services (on a cash basis) to patients
during May tk.8350
31. Recorded fees charged to patients on account for May tk. 10,000

Requirement:
1.Pass journal entries for the above transactions.

Problem no 2:
Journalize the following entries:
1.Mr. Hasan starts his business. He invests TK 10,00,000; a motorcar of Tk 5,00,000; a
machinery of Tk 1,00,000 and Tk 2,00,000 in the Standard Chartered Bank to operate
the business.
2. Purchase goods at a cost of Tk 30,000
3. Purchase office equipment of Tk 50,000
4. Purchase goods from Beximco ltd. co on account at Tk 15,000

47
5. Sold goods for cash Tk 1,00,000
6. Sold goods on credit to Mr. Rafiq at Tk 50,.000
7. Goods returned to Beximco ltd. co Tk 1000
8. Goods returned from Rafiq at Tk 2000
9. Deposited cash into the Bank Tk 2,00,000p
10. Paid carriage on sales of goods Tk 500
11. Salary paid by cheque Tk 20,000
12. Insurance prepaid Tk 2500
13.Wages outstanding Tk 2000

Week-7

48
 Course Title: Principles of Accounting

Course Code – ACT 1301

Lecture – 7

The Accounting Cycle-Journal to ledger

Lecture Highlights

 problems and its solution of journal

 Procedure to prepare Ledger

Ledger: The individual accounts are normally maintained in a book referred to as

“Ledger”. It is the most important book of accounts, because it includes all the
summaries of transactions. Therefore, it is called the ‘principal book’ of the books of
accounts. It provides a permanent record of the financial transactions of a firm.

49
Inventory A/C dr 5000
Account Payable Cr 5000

Account Payable A/c Dr 5000

Cash A/C Cr 5000

The specimen form of a General Ledger is giver below:

Account Payable Accounts name

Dr. Cr.
Date Particulars Jour Amou Date Particulars Jour Amou
nal nt nal nt
Folio (Tk) Folio (Tk)
Cash 5000 Inventory AC/ 5000

This form is named as “T Account” or “Two column ledger”.

Practical problem: 2
Based on the above-mentioned journals in the problem no.1, now we
will open the following accounts.

Open the following accounts:

(1) Cash;
(2) Accounts Receivable,
(3) Prepaid rent;
(4) Prepaid insurance;
(5) Office supplies;
(6) Office Equipment,
(7) Accounts payable;

50
(8)Ann Evans Capital;
(9) Withdrawals;
(10) Accounting Revenue; and
(11) Utilities expenses.

Cash Acc Dr 1500

Office accont Dr 1200
Capital account Cr 2700

Solution:
Ann Evans, CPA
Ledger
Cash Account
Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003 Prepaid Rent
Aug 1 Capital A/C 1500 Aug 1 A/C 900

Aug 5 Revenue A/C 60 Aug Accounts 125

11 payable
Accounts 350 (Sierra Co)
Aug Receivable Insurance 375
25 (Neveda Co) Aug Expense
12 Withdrawals 100
A/C
Aug Utility Expense 35
20
Balance C/D
Aug 375
1,910 31 1,910

Aug
31

51
 Accounts Receivable Account
Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003
Aug Accounting 350 Aug Cash A/C 350
15 Revenue A/C 25

Accounting
Aug Revenue A/C 200 Aug Balance C/D 200
23 550 31 550

Office Equipment Account

Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003
Aug 1 Capital A/C 1200
Aug
Aug 1 Accounts payable 250 31 Balance C/D 1450
(Sierra Co)

1,450 1,450

52
 \
Accounts Payable Account
Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003
Aug Cash A/C 125 Aug 1 Supplies A/C 75
11
Aug 1 Office 250
Aug Balance C/D 200 Equipment A/C
31 325 325

Accounting Revenue Account

Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003
Aug 5 Cash A/C 60

Aug Balance C/D 610 Aug Accounts 350

31 15 Receivable
(Neveda Co)
200
Aug Accounts
23 Receivable
610 (Donner Co) 610

53
 Ann Evans Capital Account
Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003
Aug 1 Cash A/C 1500

Aug Balance C/D 2700 Aug 1 Office 1200

31 Equipment A/C
2700 2700

Prepaid Rent Account

Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003
Aug 1 Cash A/C 900
Aug Balance C/D 900
31
900 900

Prepaid Insurance Account

54
Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003
Aug Cash A/C 375 Aug Balance C/D 375
12 375 31 375

Office Supplies Account

Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003
Aug 1 Accounts payable 75 Aug Balance C/D 75
(Sierra Co) 75 31 75

Withdrawals Account
Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003
Aug Cash A/C 100
20 Aug Balance C/D 100
100 31 100

Utilities Expense Account

Dr Cr
Date Particulars JF Tk Date Particulars JF Tk
2003 2003
Aug Cash A/C 35 Aug Balance C/D 35
31 35 31 35

55
Questions: The Students are requested to solve the following problems.

Problem no 1:
Based on the journals in the problems of Dr. Wali Asahraf in the lecture no. 6
Prepare ‘T’ from ledger accounts and make posting of all the transactions.

Problem no 2:
Based on the journals in the problems of Mr. Hasan in the lecture no. 6 post
to the appropriate ledger accounts:

56
 Week-8

Course Title: Principles of Accounting

Course Code – ACT 1301

Lecture 8

Adjusting Entries

Lecture Highlights

 problems and its solution of Adjusting journal

57
Adjusting ‘General Ledger’ and Preparation of Work Sheet:

Problems: Adjusting Entries

Problem 1: Selected accounts of City Real Estate firm, are shown below as of
January 31,2003,of the current year before any adjusting entries has been
made:

Particulars Dr Cr.
Prepaid Insurance 2,700
Supplies on hand 750
Office Equipment 8,400
Unearned rental fees 3,000
Salaries expenses 2,100
Renal fees earned 12,000

Based on the following information, record in a general journal the necessary

adjusting entries on January 31:
(a) Prepaid insurance represents premiums for 3 years paid on January 1
(b) Supplies of Tk. 450 were on hand January 31
(c) Office equipment is expected to last 10 years
(d) The firm collected 6 months rent in advance on January 1 from a tenant renting
space for Tk 500 per month
(e) Accrued salaries not recorded as of January 31 are Tk. 360

Solution:

Date Particulars L.F. Dr Cr

(Tk) (Tk)
2003 (a) Insurance Expense Dr 75
Jan Prepaid Insurance Cr 75
31 (Three yeas i.e. 36 months insurance
premium =Tk 2,700
One months premium (2,700*1/36)=Tk 75)
(b) Supplies Expense Dr 300
Supplies on hand Cr 300
” (Supplies Expense=750-450=Tk 300)

58
 (c) Depreciation Expense –Equipment Dr
Accumulated Depreciation –Equipment
Cr
(Annual Depreciation=8,400/10=Tk 840
Monthly Depreciation=840/12=Tk 70)
70
(d) Unearned Rental Fees Dr
70
Rental Income Cr
”
(e) Salaries Expense Dr
Salaries Payable Cr
500

Problem 2:
Cox’s Bazar Beach Motel adjusts and closes its accounts once a year on December
31.Most guests of the motel pay at the time they check out and the amounts collected
are credited to ‘rental revenue’. A few guests pay in advance for rooms and these
amounts are credited to ‘unearned rental revenue’ at the time of receipt. The following
information is available as a source for preparing adjusting entries a December 31.

(a) A one year bank loan in the amount of Tk. 80,000 ha been obtained on November
1.No interest has been paid and no and no interest expense has been recorded. The
interest accrued at December 31 is Tk. 1,600
(b) On December 16 a suite of rooms was rented to a corporation for 6 months at a
monthly rental of Tk. 3200. The entire6 months rent of Tk. 19,200 was collected in
advance and credited to unearned rental revenue. At December 31 the amount of
tk.1600 representing one-half months rent was considered to be earned and the
remainder of Tk. 17,600 was considered to be unearned.
(c) As of December 31, the motel has earned Tk. 18,090 rental revenue from current
guests who will not be billed until they are ready to check out.
(d) Salaries earned by employees at December 31,but not yet paid to Tk. 11,640
(e) Depreciation on the motel for the year was Tk. 51,250
(f) Depreciation on the station wagon owned by the motel was based on a 4-year life.
The station wagon was purchased on September 1 of this current year at a cost of
12,600.Depreciation for four months should be recorded at December 31.
(g) On December 31, Cox’s Bazar beach motel entered into an agreement to host the
national shooter society’s convention in June of next year. The motel expects to
earn rental revenue of at least tk.30, 000 from the convention.

59
Instructions:
For each of the numbered paragraphs, draft separate adjusting entries, if
required. One or more of the above paragraphs may not require any adjusting entry.

Solution: Cox’s Bazar Beach Motel

Adjusting journal entries
Date Particulars LF Dr Cr
(Tk) (Tk)
Dec (a) Interest Expense Dr 1600
31 Interest payable Cr 1600
(b) Unearned Rental Revenue Dr 1600
Rental Income Cr 1600
(c) Rent Receivable Dr 18,09
Rent Income Cr 0 18,09
(d) Salary Expense Dr 0
Salary payable Cr 11,64
(e) Deprecation Expense-Motel Dr 0 11,64
Accumulated Depreciation –Motel Cr 0
(f) Deprecation Expense-Station Wagon Dr 51,25
0 51,25
Accumulated Depreciation – Station Wagon 0
Cr 1050
(12,600/4=3150/1/3=Tk 1,050) 1050
(g) Agreement for rental did not constitute a
transaction
- -

Problem no.3:
The information presented below was obtained from a review of the ledger (before
adjustments) and other records of Golden Heart Co. Ltd. at the end of the current
fiscal year ended December 31:
(a) As Office Supplies have been purchased during the year they have been debited to
Office Supplies Expense, Which has a balance of tk. 995, at December 31. The
inventory of supplies at that date totals tk. 280.

60
(b) On December 31 Rent Expense has a debit balance of tk. 26,000, which includes
rent of tk. 2000 for January of the following year paid on December 31 of the
preceding year.
(c) Sales commissions are uniformly 1% of net sales and are paid the tenth of the
month following the sales. Net sales for the month ended December 31 were tk.
90,500. Only commissions paid have been recorded during the year.
(d) Prepaid Advertising has a debit balance of tk. 7,800 at December 31, which
represents the advance payment on March 1 of a yearly contract for a uniform
amount of space in 52 consecutive issues of a weekly publication. As of December
31 advertisements had appeared in 44 issues.
(e) Unearned Rent has a credit balance of tk. 14,700 composed of the following:
(1) January 1 balance of tk. 2700 representing rent prepaid for three months
January through March and
(2) a credit of tk. 12,000 representing advance payment of rent for twelve
months at tk. 1000 a month beginning with April.
(f) Management Fees Earned has a credit balance of tk. 1,30,750 at December 31. The
unbilled fees at December 31 total tk. 7,150.

Journalize the adjusting entries as of December 31 of the current fiscal year.

61
Solution:
Adjusting entries on December 31
Date Particulars L.F. Dr Cr
Dec.
31 Supplies Dr 280
(a) Office Supplies Expense Cr 280

Prepaid Rent Dr 2000

(b) Rent expense Cr 2000

Commission Expense Dr 905

(c) Commission Payable Cr 905

Advertising Expense Dr 6600

(d) Prepaid advertisement Cr 6600

Unearned Rent Dr 11,700

(e) Rent Income Cr 11,700

Management Fees Receivable Dr 7150

(f) Management Fees Income Cr 7150

Calculation:
(c)Commission expense (for December )= (tk.90,500 1%)= tk. 905
(d)Advertisement expense = (7800 44/52)= Tk.6600
(f) (1) Rental Income tk. 2700
(2) Rental income =(tk.12,000 9/12)= tk.9,000( April to Dec.)

62
 Week-9

Course Title: Principles of Accounting

Course Code – ACT 1301

Lecture – 9

TRIAL BALANCE

Trial balance:
Under double entry system, for every debit entry there is a corresponding credit
entry of the same amount. Consequently, the total amount of all the debit entries
should be equal to the total of all credit entries. In order to verify, whether the two
totals are equal, a statement is prepared periodically showing the debit items in one
column and the credit items in another. This statement is called the “Trial Balance”.

There are two methods of preparing a trial balance- (1) Trial Balance prepared
with the gross totals of the debit and credit sides of each ledger account, and (2) Trial
Balance prepared with the balance of each account. When both gross amounts and
balances of the accounts are shown in the trial balance it becomes a third method and
it is called a mixed Trial Balance. In actual practice, the first and the third methods are
used very rarely while the second method is used generally.
Different classes of errors that may exist in spite of the agreement of the Trial
Balance are discussed below:

63
 (a) Errors of omission: Such an error arises when any transaction is either
wholly or partially unrecorded in the in the books. In the former case, the trial
balance will not be affected, and thus the error will be more difficult to detect.
Where only one aspect of a transaction is recorded, the omission will throw the
Trial Balance out of agreement.

(b) Errors of commission: Errors of commission arise when transactions are

incorrectly recorded, either wholly or partially. In the former case the Trial
Balance will not the trial balance out of agreement to that extent.

(c)Clerical errors: A clerical error is a form of error of commission. It may consist

of an incorrect posting, or a mistake in casting, or the transposition of figures, or
posting to the wrong account. Unless the error affects the debit and credit
equally, the incorrect posting and mistakes in casting will cause the trial balance
to be out of the agreement. Posting to the wrong account but on correct side,
however, will not affect the agreement of the Trial Balance.

(d) Errors of Principle: An error of principle arises by reason of a

transaction being recorded in a fundamentally incorrect manner. Certain errors of
principle may not affect the ultimate profit, but it may cause a revenue item
being posted to wrong revenue account. Major errors of principle directly affect
profit. They may be caused by treating a revenue item as an asset or liability, or
vice versa. These errors will not throw the trial balance out of agreement.

(e) Compensating errors: A compensating error is one, which is counter

balanced by another error or errors of the same amount either in the same
account or other accounts. Such error will not cause the Trial Balance to
disagree.

From the above discussion it is clear that, a Trial Balance may agree in spite of the
presence of many errors mentioned above. Hence an agreed Trial Balance cannot be
regarded as a conclusive evidence of the correctness of the books of accounts, rather it
may be regarded as a prima facie proof that the posting are arithmetically correct.
Rules regarding the Trial Balance:
The following rules are followed in solving a Trial Balance-
1.All assets are recorded in the Debit side
2. .All the expenses are recorded in the Debit side
3.All revenues are recorded in the Credit side

64
4.Capital, liabilities and Reserves are recorded in the Credit side

Examples:

From the following balances of accounts prepare a Trial Balance as at 31 st December

1991:

Particulars Tk Particulars Tk
Opening Stock 41,000 Bad Debts 600
Purchases 1,10,000 Sales 1,80,000
Drawings 18,000 Sundry Debtors 14,000
Sales Return 6,000 Fixed Assets 35,000
Wages 5,400 Creditors 62,500
Salaries 9,000 Cash 8,200
Travelling 950 General Expenses 1,200
Rent, Rates and Advertisements 900
Taxes 2,400 Capital 8,750
Purchase Returns 1,500 Investments 3,500
Interest Paid 1,200 Bank Overdraft 5,000
Discount Allowed 800 Commission Received 1,000
Insurance Charges 600

On 31st December 1991 losing Stock was valued at Tk 16,000.

65
Solution:
Trial Balance
as at 31 December, 1991
Accounts L.F. Debit (Tk) Credit (Tk)
Opening Stock 41,000
Purchases 1,10,000
Drawings 18,000
Sales Returns 6,000
Wages 5,400
Salaries 9,000
Traveling 950
Rent, Rates and Taxes 2,400 1,500
Purchase Returns
Interest Paid 1,200
Discount Allowed 800
Insurance Charges 600
Bad Debts 600 1,80,000
Sales
Sundry Debtors 14,000
Fixed Assets 35,000 62,500
Creditors
Cash 8,200
General Expenses 1,200
Advertisements 900 8,750
Capital
Investments 3,500 5,000
Bank Overdraft 1,000
Commission Received
Total 2,58,750 2,58,750

Note: Closing Stocks are not included in the Trial Balance

66
Problems 1: Now students are requested to solve the following problem.
From the following balances of accounts prepare a Trial Balance as at 31 st July2000:

Accounts Tk
Capital 8,900
Drawings 1,000
Stock (1.7.1999) 3,700
Purchases 23,125
Sales 39,400
Motor Vehicles 1,450
Cash in hand 135
Sundry Creditors 4,976
Sundry Debtors 13,970
Bank Overdraft 900
Wages and Salaries 6,200
Lighting and Heating 315
Equipment 3,500
Carriage Outward 231
Return Inwards 205
Provision for Bad Debts 425
Returns Outward 316
Discount Allowed 280
Discount Received 315
Rent, Rates and Insurance 1,121

Answer: Total of the Debit and Credit are Tk 55,232.

Notes:
1. Stock (1.7.1999) is the Opening Stock
2. ‘Provision for Bad Debts’ is a liability
3.Discount Allowed is an expense
4.Discount Received is a revenue

67
Problem no.: 2
The accounts in the ledger of Asbury Park Inc. as of August 31 of the current year
are listed in alphabetical order as follows. All accounts have normal balances. The
balance of the cash account has been intentionally omitted.

Accounts Payable Tk 18,750

Accounts Receivable Tk 20,500
Capital Stock Tk 50,000
Cash ?
Dividends Tk 20,000
Fees earned Tk 3,15,000
Insurance Expense Tk 5,000
Land Tk 1,25,000
Miscellaneous Expense Tk 9,900
Notes Payable Tk 35,000
Prepaid Insurance Tk 3150
Rent Expense Tk 58,000
Retained Earnings Tk 60,290
Supplies Tk 4,100
Supplies Expense Tk 5,900
Unearned Rent Tk 6,000
Utilities Expense Tk 41,500
Wages Expense Tk1, 75,000

Prepare a Trial balance, listing the accounts in their proper order and
inserting the missing figure for cash.

68
 Week-10

Course Title: Principles of Accounting

Course Code – ACT 122

Lecture – 10

Closing entries

Lecture Highlights

 Rules of preparing closing entries

69
 Closing Entry

Closing entry: Closing entries are required to close all the nominal accounts at the
end of a certain accounting period or at the end of a fiscal year.
The following closing entries are needed to close the nominal accounts:

1.To close the revenue:

Sales a/c Dr
Interest income a/c Dr
Dividend income a/c Dr
Gain on sale of asset a/c Dr
Income Summary Account Cr

2.To close the expenses:

Income Summary Dr
Purchase a/c Cr
Wages a/c Cr
Salaries a/c Cr
Depreciation a/c Cr
Interest expense a/c Cr

3. To record the profit:

Income Summary Dr
Capital or retained earnings Cr

4.To record the loss:

Capital or Retained earnings Dr
Income summary Cr
5.To transfer the dividends declared:
Retained earnings Dr
Dividends Cr

70
 Week-11

Course Title: Principles of Accounting

Course Code – ACT 122

Lecture – 11

Preparation of Income Statement in

worksheet

Lecture Highlights

Various Problems related to worksheet.

71
Illustrative Problem:
Three years ago T. Roderick organized harbor Reality Inc. At July 31,
2000, the end of the current fiscal year, the trial balance of Harbor Reality is as follows:

Harbor Realty Inc.

Trial balance
July 31, 2000
Accounts name Dr Cr
Cash 3,42,500
Accounts receivable 7,00,000
Supplies 1,27,000
Prepaid Insurance 62,000
Office equipment 51,65,000
Accumulated Depr. 9,70,000
Accounts payable 92,500
Unearned fees 1,25,000
Capital Stock 5,00,000
Retained earnings 24,00,000
Dividends 5,20,000
Fees earned 59,12,500
Wages expense 22,41,500
Rent expense 4,20,000
Utilities expense 2,71,500
Miscellaneous expense 1,50,500

1,00,00,000 1,00,00,000

The data needed to determine year-end adjustments are as follows:

a. Supplies on hand at July 31,2000 are tk.38, 000
b. Insurance premiums expired during the year are Tk. 31,500
c. Depreciation of equipment during the year is Tk. 4,95,000
d. Wages accrued but not paid ay July 31,2000 are Tk. 44,000
e. Accrued fees earned but not recorded at July 31,2000 are TK. 1,00,000

72
f. Unearned fees on July 31,2000 are Tk. 75,000

Requirements:
1. Enter trial balance on a ten –column worksheet and complete the worksheet
2. Prepare an income statement, a retained earnings statement, and a Balance
sheet

73
Solution: (1)
Harbor Realty Inc.
Work Sheet
For the year ended on July 31,2000
(All figures are in ’00 TK)
Trial balance Adjustments Adjusted Income Balance
Trial balance Statement Sheet
Accounts Title Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr

74
Cash 3,42 3,42 3,42
5 (e) 5 5
Accounts 1000 (a)
Receivable 7,00 890 8,00 8,00
0 0 0
Supplies 380 380
127 (b)
Prepaid 0 315 305
Insurance 305
620 14,6 51,6 14,6
Office 9,70 51,6 50 50 50
Equipment 51,6 0 (c) 50
50 4950 925 925
Accum. 925
Depreciation (f) 750 60,6 750
1,25 500 25
Accounts 0 5,00 5,00
Payable 0 0
5,00
Unearned Rent 0 24,0 24,0
00 00
Capital stock 24,0
00
Retained (e) 5,20 60,6 22,8 5,20
earnings 5,20 1000 0 25 55 0
0 (d) (f)
Dividends 59,1 440 500 4,20
25 22,8 0
Fees Earned 55
22,4 2,71
Wages 15 4,20 5
expenses 0
4,20
Rent Expenses 0 2,71 1,50
5 5 60,6
Utilities 2,71 25
Expense 5 (a)
890 1,50 890

75
Miscellaneous 1,50 (b) 5 315
Expense 5 315 4,95
(c) 440 0 60,6 440
4,95 (d) 890 25
Supplies 0 440 315
Expense 4,95 1,06 45,7
Insurance 0 ,390 68,9 65
expense 8,09 37,4 60
Depreciation 8,09 5 30
expense 5 23,1
Wages payable 95
1,06 23,1
,390 95 68, 68,9
960 60
60,6
25

Net Profit

Class problem 1:
Balances taken from the ledger of Mr. S. Dewan as on 31st December, 2002 are
given below after first year of business:

Accounts name Tk
Cash 30,000
Capital 100,000
Sales 150,000
Accounts receivable 60,000
Purchases 70,000
Interest income 3000
Allowances for doubtful
accounts 2000
Merchandise inventory(1-1- 45,000
2002)
Accounts payable 10,000
Gain on sale of fixed assets 3000

76
 Rent expenses 14,000
Salary expense 20,000
Office equipment 10,000
Stores equipment 13,500
Supplies 3000
Freight in 2500

Adjustments are to be made:

(a) Merchandise inventory on 31st December,2002, Tk. 35,000
(b) Prepaid rent tk.2000
(c) Accrued salaries tk.4000
(d) Doubtful accounts to be written of against allowances Tk. 1000
(e) Maintain an allowances for doubtful accounts equal to 7% of accounts receivable
(f) Office equipment includes an item purchased on 1 st July 2002 at Tk. 2000.
Depreciation to be charged @ 10% per annum
(g) Stores equipment was charged with an amount of tk.1500, which was spent for
repairing the trolley of the stores. Depreciation to be charged @ 10% per annum
(h) Goods valuing Tk. 1000 taken by the proprietor for personal use debited to purchase
(i) Supplies in hand Tk 500

Required:
(a) Prepare a 10 column work sheet
(b) Adjusting entries, show computation where necessary.
(c) Prepare the Income statement and The Balance Sheet

Answer: Net Income Tk 29,270.

Total of the Balance Sheet (asset and Liability side) are Tk 1,49,500

77
Class problem 2:
Mr. Abu Hasan started a business named ‘Southern Express Communication
Ltd. co.’ The Trial Balance of the company at the end of the current fiscal year on 31 st
December, 2002 are as follows:

Southern Express Communication Ltd. co

Trial Balance
December 31,2002

Accounts Name Dr. Cr.

Bank balance 100,000
Cash in hand 50,000
Accounts Receivable 20,000
Supplies on hand 1000
Prepaid Insurance 25,000
Building 500,000
Accumulated Depreciation 200,000

78
 Accounts Payable 30,000
Unearned Fees 50,000
Capital 400,000
Fees Earned 32,000
Rent Expense 11,000
Utilities Expense 5000
Total 712,000 712,000

But at the last date of this calendar year Mr. Hasan found that the following
entries are need to be adjusted to determine exact position of the organization:

1.Prepaid Insurance represents premiums for 5 years paid on January 1,2002

2.Supplies of tk.300 were expensed and the exact amount were on hand Tk. 700
in December 31
3.It is estimated that the building can be used for 100 years
4.The firm collected 5 months fees in advance on December 1 of this year from a

client as unearned fees to provide services @ Tk. 10,000 per month

5. Accrued rent expenses Tk 1000 for one month

As a probationary officer of this organization you are requested to prepare a ten-

column worksheet and to complete the worksheet as on December31, 2002.

Answer: Net Income Tk 14,700

Total of the Balance Sheet (asset and Liability side) are Tk 6,90,700

Example 3: Worksheet with amounts extended to Income Statement and

balance Sheet columns
(All figures are in
’00 TK)
Trial balance Adjustments Adjusted Trial Income Balance
balance Statement Sheet
Accounts Title Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr

79
Cash 2,06 2,06 2,06
5 5 5
Accounts (e)
Receivable 2,22 500 (a) 2,72 2,72
0 1240 0 0
Supplies
2,00 (b) 760 760
Prepaid Insurance 0 100
2,30
Land 2,40 0 230
0 900 900 0
Office Equipment 10,0
10,0 360 00 240
Accounts Payable 00 10,0
15,0 1,80 15,00 00 900
Unearned Rent 1,80 00 (c) 0 0
0 120 180
Capital stock 0 240

Dividends 16,3 16,84

40 0 15,0
Fees Earned (e) 00
500
Wages expenses (d) 4,00
4,00 250 0 4,5
Rent Expenses 0 25 16,8
40
Utilities Expense 1,6
4,52 00 400
Supplies Expense 4,27 5 0
5 (a) 985
Miscellaneous 1240 1,60
Expense 1,60 0
0 2,0
985 40
Insurance Expense 985 120
(b) 2,04
Rent Revenue 800 100 0 250 455
(c)
Wages payable 455 120 455
80
 32,6 32,6 100
Depreciation 00 00 (d)
Expense 250 100 50
(f)
Accumulated 50
Depreciation 33,40 120
(f) 50 0
250
50
2,26 2,260 50
0

33,4 50
00

81
Example 4: Completed Worksheet with Net Income Shown
(All figures are in
’00 TK)
Trial balance Adjustments Adjusted Trial Income Balance
balance Statement Sheet
Accounts Title Dr Cr Dr Cr Dr Cr Dr Cr Dr Cr

82
Cash 2,06 2,06 2,06
5 5 5
Accounts (e)
Receivable 2,22 500 (a) 2,72 2,72
0 1240 0 0
Supplies
2,00 (b) 760 760
Prepaid Insurance 0 100
2,30
Land 2,40 0 230
0 900 900 0
Office Equipment 10,0
10,0 360 00 240
Accounts Payable 00 10,0
15,0 1,80 15,00 00 900
Unearned Rent 1,80 00 (c) 0 0
0 120 180
Capital stock 0 240

Dividends 16,3 16,84

40 0 15,0
Fees Earned (e) 00
500
Wages expenses (d) 4,00
4,00 250 0 4,52
Rent Expenses 0 5 16,8
40
Utilities Expense 1,60
4,52 0 400
Supplies Expense 4,27 5 0
5 (a) 985
Miscellaneous 1240 1,60
Expense 1,60 0
0 2,04
985 0
Insurance Expense 985 120
(b) 2,04
Rent Revenue 800 100 0 250 455

83
 (c)
Wages payable 455 120 455
100
Depreciation (d)
Expense 250 100 50
(f)
Accumulated 50
Depreciation 33,40 120
(f) 50 0
250
50
Net Income 2,26 2,260 50
0

33,4 50
00 9,75
5
16,9 16,4
7,2 60 40
05
7,2
16, 05
960 16,9 23,6
60 45 23,
645

23,6
45

Week-12

84
Course Title: Principles of Accounting
 Lecture Highlights

Basics of Balance Sheet.

85
Basic Elements of Financial Statements:

 Assets: Probable future economic events obtained or controlled by a particular

entity as a result of past transactions or events.

 Liabilities: Probable future sacrifices of economic benefits arising from present

obligations of a particular entity to transfer assets or provide services to other
entities in the future as a result of past transactions or events.

 Owner’s Equity: Residual interest in the assets of an entity that remains after
deducting its liabilities.

 Revenues: Inflows or other enhancements of assets of an entity or settlement

of its liabilities during a period from delivering or producing goods, rendering
services, or other activities that constitute an entity’s major, ongoing operations.

 Expenses: Outflows or other using up of assets or incurrence of liabilities during

a period from delivering or producing goods, rendering services, or carrying out
other activities that constitute the entity’s ongoing, major or central operations.

 Gains: Increases in net equity from peripheral or incidental transactions of an

entity and from all other transactions and other events and circumstances
affecting the entity during a period except those that result from revenues or
investments by owners.

 Losses: Decreases in equity from peripheral or incidental transactions of an

entity and from all other transactions and other events and circumstances
affecting the entity during a period except those that result from expenses or
distributions to owners.

86
Elements of Financial Statements

Income Statement
 Revenues
 Expenses
 Gains
 Loss

Balance Sheet
 Assets
 Liabilities
 Owner’s Equity

Balance Sheet:
The Balance Sheet in example 5 was explained by adding subsections for
current assets, property, plant, and equipment, and current liabilities. Such a Balance
Sheet is a classified Balance Sheet. In the following paragraphs, we describe some of
the sections and subsections that may be used in a Balance Sheet.

Assets:
Assets are commonly divided into classes for presentation on the Balance Sheet.
Two of the classes are (1) current assets and (2) fixed or long-term assets i.e. property,
plant, and equipment.

Current assets:
Cash and other assets that are expected to be converted to cash or sold or used
up usually within one year or less, through the normal operations of the business, are
called Current Assets. In addition to cash, the current assets usually owned by a service

87
business are notes receivable, accounts receivable, supplies, and other prepaid
expenses.
Notes receivable are amounts customers owe. They are written promises to pay
the amount of the note and possibly interest at an agreed rate. Accounts receivable are
also amounts customers owe, but they are less formal than notes and do not provide
for interest. Accounts receivable normally result from providing services or selling
merchandise on account. Notes receivable and accounts receivable are current assets
because they usually are converted to cash within one year or less.

Property, plant, and equipment:

The property, plant, and equipment section may also be described as ‘ Fixed
asset’ or ‘Plant assets’. Theses assets include equipment, machinery, building, and land.

Liabilities:
Liabilities are the amounts the business owes to creditors. The two most
common classes of liabilities are (1) Current liabilities and (2) long term liabilities.

Current liabilities:
Liabilities that will be due within a short time (usually one year or less) and that
are to be paid out of current assets are called current liabilities. The most common
liabilities in this group are notes payable and accounts payable. Other current liability
accounts commonly found in the ledger are Wages payable, Interest payable, tax
payable and unearned fees.

Long-term liabilities:
Liabilities that will be due for a long time (usually more than one year) are called
long term liabilities. If Computer King had long-term liabilities, they would be reported
below the current liabilities. As long-term liabilities come due and are to be paid within
one year, they are classified as current liabilities. If they are to be renewed rather than
paid, they would continue to be classified as long term. When an asset is pledged as
security for a liability, the obligation may be called a mortgage note payable or a
mortgage payable.

Stockholders equity:
The owners right to the assets of the business are presented on the Balance
Sheet below the liabilities section. The Stockholders Equity is added to the total
liabilities, and this total must be equal to the total assets.

Various Forms of Balance Sheet are depicted below:

88
(a) Balance Sheet for a profit concern organization:

XYZ co. ltd.

Balance Sheet
as on December 31,20xx
Assets Tk Tk Liabilities and Tk Tk
Stockholders equity
Current assets: Current Liabilities:
Cash (in hand and in bank) Notes payable
Marketable securities Accounts payable
Notes Receivable Dividends payable
Accounts Receivable Advances from
Less: Allowances for doubtful customers
accounts Income taxes payable
Interest on Notes Receivable Salaries and wages
Claim for Income Tax refund payable
Creditors account with debit Taxes payable
balance Total Current liabilities
Advance of employees
Inventories (at lower of cost Long term liabilities:
or market) Mortgage payable
Supplies Bond payable
Prepaid Insurance Deferred Revenue:
Total current assets Unearned lease income
Deferred income taxes
Fixed assets/Long term payable
assets/Plant Total Liabilities
assets/Property, Plant
and equipment: Stockholders Equity:
Investments: Share Capital:
Investment in land and Authorized Capital
unused facilities Issued Capital
Cash surrender value of life Subscribed Capital
insurance Called up Capital
Land, Building & Equipment:
Land Share premium
Furniture Reserve fund
Less: Accumulated Retained earnings
Depreciation
Buildings
Less: Accumulated
Depreciation
Equipment

89
 Less: Accumulated
Depreciation
Intangible assets:
Preliminary expenses’
Goodwill
Other long term assets:
Advances to officers
Customers deposits
Total assets Total Liabilities &
Stockholders Equity

(b) Balance Sheet for a manufacturer:

Mr. Hasan’s
Balance Sheet
as on December 31,20xx
Assets Tk Tk Capital & Liabilities Tk Tk
Current assets: Current Liabilities:
Cash (in hand and in bank) Notes payable
Notes Receivable Accounts payable
Accounts Receivable Salaries and wages
Less: Allowances for doubtful payable
accounts Taxes payable
Interest on Notes Receivable Total Current liabilities
Supplies Long term liabilities:
Prepaid Insurance Mortgage payable
4% Govt. Promissory Notes
Stock-in Trade: Total Liabilities
Raw Materials
Work-in Process Capital Account:
Finished Goods Opening Capital
Total current assets (+) Introduction of
fresh
Fixed assets/Long term Capital
assets/Plant (+) Net Profit
assets/Property, Plant (-) Drawings
and equipment:
Factory Buildings

90
Less: Depreciation

Plant & Machinery

Less: Depreciation

Furniture & Fixture

Less: Depreciation

Patents
Less: Depreciation

Total assets Total Liabilities &

Capital

(c)Balance Sheet for a non-trading organization:

Dhaka Golf Club’s

Balance Sheet
as on December 31,20xx
Liabilities Tk Tk Assets Tk Tk
General fund: Furniture and
Opening Balance Equipment
Add: Excess of Income over Less: Depreciation
expenditure
Restaurant Stock
Loans Stock of Prizes
Subscriptions in Advance Prepaid Rent

91
 Creditors for restaurant Subscription in arrears
supplies Fixed deposit with
Outstanding Expenses banks
Cash in hand and at
bank
Total Liabilities Total assets

Note: It may be noted that in the in the first two Balance Sheet (Balance Sheet for
profit motive organizations and for the Manufacturers) the ‘Assets’ are recorded in the
left side and ‘Liabilities’ are in the right side. On the other hand the ‘Assets’ are
recorded in the right side and ‘Liabilities’ are recorded in the left side in the last Balance
Sheet. This is because ‘Assets’ are recorded in the left side under the American method
and ‘Assets’ are recorded in the right side under the British method. Both recording
systems are valid. The students may follow any system to record transactions in the
Balance Sheet.

92
 Three years ago T. Roderick organized harbor Reality Inc. At July 31, 2000, the
end of the current fiscal year, the trial balance of Harbor Reality is as follows:

Harbor Realty Inc.

Trial balance
July 31, 2000
Accounts name Dr Cr
Cash 3,42,500
Accounts receivable 7,00,000
Supplies 1,27,000
Prepaid Insurance 62,000
Office equipment 51,65,000
Accumulated Depreciation 9,70,000
Accounts payable 92,500
Unearned fees 1,25,000
Capital Stock 5,00,000
Retained earnings 24,00,000
Dividends 5,20,000
Fees earned 59,12,500
Wages expense 22,41,500
Rent expense 4,20,000
Utilities expense 2,71,500
Miscellaneous expense 1,50,500

1,00,00,000 1,00,00,00
0

The data needed to determine year-end adjustments are as follows:

g. Supplies on hand at July 31,2000 are tk.38, 000
h. Insurance premiums expired during the year are Tk. 31,500
i. Depreciation of equipment during the year is Tk. 4,95,000
j. Wages accrued but not paid ay July 31,2000 are Tk. 44,000
k. Accrued fees earned but not recorded at July 31,2000 are TK. 1,00,000
l. Unearned fees on July 31,2000 are Tk. 75,000

Requirements:
3. Enter trial balance on a ten –column worksheet and complete the worksheet
4. Prepare an income statement, a retained earnings statement, and a Balance
sheet

93
 Harbor Realty Inc.
Income Statement
For the year Ended July 31,2000
Particulars Tk Tk
Fees earned 60,62,500
Operating Expenses:
Wages Expense 22,85,500
Depreciation expense 4,95,000
Rent expense 4,20,000
Utilities expense 2,71,500
Supplies expense 89,000
Insurance expense 31,500
Miscellaneous expense 1,50,500
Total operating 37,43,000
expense
Net income 23,19,500

Harbor Realty Inc.

Retained Earnings Statement
For the year Ended July 31,2000
Particulars Tk Tk
Retained earnings, August 1,1999 24,00,000
Net income for the year 23,19,500
Less: Dividends 5,20,000
Increase in retained earnings 17,99,500
Retained earnings, July 31,2000 41,99,500

Harbor Realty Inc.

94
 Balance Sheet
July 31,2000
Assets Tk Tk Liabilities Tk Tk
Current assets: Current
Cash 3,42,500 liabilities: 92,500
Accounts 8,00,000 Accounts payable 75,000
receivable 38,000 Unearned fees 44,000
Supplies 30,500 Wages payable 2,11,500
Prepaid insurance 12,11, Total liabilities
Total current 000
assets
Property, plant 51,65,000 Stockholder’s 5,00,000
and Equipment: equity 41,99,50
Office equipment 14,65,000 Capital stock 0 46,99,500
Less: Retained earnings
Accumulated 37,00,
deprecia 000
tion

Total assets 49,11, Total liabilities 49,11,000

000 and
stockholder’s
equity

95
(3)
Journal
Date Description L.F Dr (Tk) Cr (Tk)
2000 Closing entries
July Fees Earned Dr 60,62,50
31 Income Summary Cr 0 60,62,50
0
Income Summary Dr
July Wages expense Cr 37,43,00
31 Rent expense Cr 0 22,85,50
Utilities expense Cr 0
Miscellaneous expense Cr 4,20,000
Supplies expense Cr 2,71,500
Insurance expense Cr 1,50,500
Depreciation expense Cr 89,000
31,500
4,95,000
Income Summary Dr
Retained earnings Cr
July 23,19,50
31 Retained Earnings Dr 0 23,19,50
Dividends Cr 0

July 52,000
31 52,000

96