07-07-2020

EEE Accounting
Accounting?
Accounting is a financial information System that provides us
financial information of the companies.
What are the activities of accounting?
Basic activities of accounting:
(a) To identify the economic activities/events of the organization
(b) To record the economic activities in the accounting system
(c) To communicate the accounting data with the users
How accounting communicates?

Accounting communicates through accounting reports/

Financial Statements
 (i) Income Statement: Main purpose of Income Statement
is to assess the performance of the company.
Profit/Loss
(ii) Owner’s Equity/Capital statement: OE=Capital of
company
(iii) Balance Sheet: A statement of financial position of the
company. Total Assets, total liability. To show the total
assets and total liability of a company
(iv) Cash Flows Statement: It show the flows of cash in and
cash out of a company.

(A set of F/S):
Who are users of accounting? Everybody of the society are the
users of accounting data.
Human being, Business org, any other organization
Users of Accounting:
Internal Users of accounting: Insiders of a company ( Managers,
Accountant, Engineer, Security guard, Cleaners, CEO, Managing Directors,
HOD, Head of service, Head of Operation)
BEL=
External Users of Accounting: Outsiders of a company (Other
companies, Govt, Creditors, Customers, Suppliers, Tourism Board, Teacher,
Students).

GAAP (Generally Accepted Accounting Principles)

FASB= Financial Accounting Standard Board
SEC= Securities and Exchange Commission
US organizations
We have 4 accounting principles:
(a) Historical cost principle/ Cost Principle:
All the assets should be recorded in the accounting system at their
historical cost/ price
Historical cost: Past cost/ Purchase price of the asset
Cause: Historical cost is verifiable , reliable

(b) Revenue recognition principle:

Revenue should be recorded and recognized when the revenue is
earned/ the job is complete. No matter whether cash has been
received or not.

(c) Matching principle/ Expense recognition principle:

Expense should be recorded and recognized when the expense is
happened. No matter whether cash has been paid or not.
 (d) Full disclosure principle: All the important information should be
disclosed with the users of accounting data. No information should
be hidden. Information should be disclosed in the Financial
Statements.

Four Accounting Assumptions

Assumption= Predict/ Guess/ Assume
(a) Economic entity assumption:
All the companies are artificial individual. The activities of a
company should be kept separate from the activities of the owner
of the company. Company’s activities should be kept separate from
the activities of other companies.

Beximco Pharmaceuticals
Beximco Textile
(b) Monetary Unit Assumption:
The events/ activities that can be expressed in the
amount money should be recorded in the accounting
system. Only the economic events are recorded in
the accounting book. Economic events/ activities are
called transactions.

(c) Going Concern assumption:

The companies will continue for unlimited time. Or
the business will continue into the forceable future.
(d) Time-periodicity assumption:
The total life of the company should be divided into
small parts.
To assess the performance of the company

Jahid’s Kitchen’s activities = -2,00,000

Jahid’s Activities = 3,00,000
100,000

Equation:
A=C+7
A=19
C=19-7
F=ma
2-07-2020
The accounting equation
Basic Accounting Equation?

A=L+OE
A-L=OE

A-OE=L

In a company:
A: Assets= Assets are the resources owned by a company.
Assets will provide the future economic benefits.
With the assets we can do two things:
 (a) We can use it
(b) We can sell the assets
Mobile balance
Accounts receivable
Supplies
Prepaid Insurance/ Prepaid expense
Notes receivable
Liability: Liabilities are external claims against the assets.
Assets = Liability + OE
Cash 4,00,000 -60,000-50,000 = Capital 4,00,000
Machine 400,000 = A/payable 4,00,000+50,000+5000
Computer 60,000 =
Furniture 1,00,000 =
Raw material 5000
Accounts payable
Notes payable

Owner’s equity:
A=L+OE
OE=A-L
OE= Total assets – total liability
OE is also a liability for the company. OE is internal liability. OE
is ownership claim against the assets.

There are four elements of OE:

(a) Capital
(b) Revenues
(c) Expenses
 (d) Drawing
ABC Company
OE
+Opening Capital = 1,00,000
+Revenue = 2,00,000
-Expense =-(50,000)
-Drawings = -(10,000)
Both sides of the equation are always same
A=L+OE
Purchased a computer equipment of 7000 On account/ On credit
Cash/ For cash
08-06-2020
L= Liability is to external
OE= Ownership Liability
 A/R, N/R, Supplies
A=L+OE
Assets = Liability +Owner’s equity
SL Cash Account Supplie Equip = Note Account +Capit +Reve - -
receivable s Drawin
Date ment payable Payable al nue Expense
g
Jan-1 100,000 50,000 = 150,000
Jan- 5 (20000) 200,000 = 180000
Jan 10 80000 20000 10000
0
(30000) 30000

16-07-2020
The following transactions are extracted from the books of accounts of Farhan’s Tour & Travelling
Company Limited for the month of June 2019:
June 01: The owner started the business with Tk. 5,00,000 cash and Tk.250, 000 Equipment.
June 02: Purchased office supplies of Tk. 7000 on account
June 03: Borrowed Tk. 200,000 from Dhaka Bank on a note payable
June 10: Performed services to Australian guests of Tk. 3,00,000. Received 2,00,000 now and
billed to the clients for the remaining balance on account.
June 15: Paid Tk. 75,000 for June office rent and Tk. 10,000 for utility expenses
June 22: Purchased a brand new Office Equipment of Tk. 80,000 from Akhter Limited payable
in 15 days
 June 25: Cash collected Tk. 50,000 from the client billed previously on account
June 28: Paid Tk. 25,000 for travelling expense and Tk. 30,000 for accounts payable due
June 28: Services offered to the clients for cash Tk. 40,000
June 30: Withdrawals by owner Tk. 20,000
Instruction: (a) Prepare a tabular summary of the transactions
(b) Prepare an Income Statement for the month of June 2019
(c) Prepare a Balance sheet at the end of month

(a) Farhan’s Tour & Travelling Company Limited

Tabular Summary of the Transactions
Assets = Liability + Owner’s Equity
Date Cash Account Supplies Equipment = Note Account + (-) (-)
Receivabl Payable Payable Capital Revenu Expense Drawing
e e
J-01 500000 250000 = 750000
02 7000 = 7000
03 200000 = 200000
10 200000 100000 = 300000
15 (75000) = (75000)
(10000) = (10000)
22 80000 = 80000
25 50000 (50000) =
28 (25000) = (25000)
(30000) = (30000)
28 40000 = 40000
30 (20000) = (20000)
830000 50000 7000 330000 = 200000 57000 750000 340000 (110000) (20000)
12,17,000 =
12,17,000

(b) Farhan’s Tour & Travelling Company Limited

Income Statement
For the month ended on June 30, 2019
Tk Tk
Revenues:
Service revenue 3,00,000
Service revenue 40,000
Total revenues 3,40,000

(-) Expenses:
Rent expense 75,000
Utility expense 10,000
Travelling expense 25,000
1,10,000
Net Income 2,30,000
 Opening capital 750,000
Owner’s equity statement
(+) Additional capital -
On June 30, 2019
Net Income 230000

(-) Owner’s drawing (20000)

Net loss -
Ending capital 9,60,000

(c) Farhan’s Tour & Travelling Company Limited

 Balance Sheet
June 30, 2019
Tk Tk
Assets

Cash 830000
Account Receivable 50000
Supplies 7000
Equipment 330000
Total Assets 12,17,000

Liability and Owner’s equity

Note payable 200000

Account payable 57000
Capital 960000
Total Liability and Owner’s 12,17,000
capital

Balance Sheet: It is a financial statement that shows the financial health/ condition of the
company. All the assets and liabilities are reported in the balance sheet.

17-07-2020
Recording Process
Basic activities:
To identify the economic events
To record the economic events in accounting system
To communicate the accounting data with the users

Recording?
Recording means to store/ preserve something for future use.
Why recording is needed?
It is needed to make it available in the future if needed

How recording is maintained?

Recording tools:
Primary recordings tool:
Journal: This is a primary recording tool where transactions are
recorded immediately after happening. In journal transactions are
recorded serially.
A journal entry has five spaces/ column:
Date Particulars Ref Debit Credit

Permanent recording tool:

Ledger: This a permanent recording tool. This is mandatory. Here
transactions are posted/ recorded permanently.
Ledger
Date Particulars Jp Debit Credit Balance

Debit/Credit procedure:
Account: This is simply a title or name of any accounting element

where transactions are recorded. Account looks like a T

 T
It has two sides, left side and right side. Left side of the account is
called debit and right side of the account is called credit

Debit credit procedure:

Assets Assets
Expense Increase Debit Expense Decrease Credit
Drawing Drawing
Revenue Revenue
Liability Increase Credi Liability Decrease Debit
Capital t Capital
Following transactions took place in Adeel Limited in June 2019

June 01: The owner started the business with Tk. 5,00,000 cash
June 02: Purchased office supplies of Tk. 7000 on account
June 03: Borrowed Tk. 200,000 from Dhaka Bank on a note payable
June 04: Paid Tk. 5,000 for office rent for the month
June 10: Performed services to Australian guests of Tk. 3,00,000. Received 2,00,000 now and
billed to the clients for the remaining balance on account.
June 15: Paid Tk. 75,000 for June salaryand Tk. 10,000 for utility expenses
June 22: Purchased a brand new Office Equipment of Tk. 80,000 from Akhter Limited payable
in 15 days
June 24: Services completed on account Tk. 10,000
June 26: Owner withdrew Tk. 15,000 for personal use
June 30: Collected Tk. 20,000 from the clients billed previously.

Required: Journalize the transactions in company’s books of account

Adeel Limited
Journal
Date Particulars Ref Debit Credit
June 01 Cash Dr 5,00,000
Capital Cr 5,00,000
(Invested cash by owner)
June 02 Supplies Dr 7,000
A/c Payable Cr 7,000
(Purchase of supplies)
 Cash Dr 2,00,000
June 03 Note payable Cr 2,00,000
(Borrowed from bank)
Rent expense Dr 5,000
June 04 Cash Cr 5,000
(Paid for office rent)
Cash Dr 2,00,000
June 10 A/c Receivable Dr 1,00,000
Service revenue Cr 3,00,000
(Services performed)
Salary expense Dr 75,000
June 15 Utility expense Dr 10,000
Cash Cr 1,00,000
(paid salary and utility)
Equipment Dr 80,000
June 22 A/c payable Cr 80,000
(Purchased equipment)
A/c receivable Dr
June 24 Service revenue Cr 10,000
(Services completed) 10,000
Drawings Dr
15,000
Cash Cr
June 26 15,000
(Drawings by owner)
Cash Dr 20,000
June 30 A/c receivable Cr
 (Collected from clients) 20,000
10,00,000

Cash increase
A/c receivable decrease

Journal entries are of two types:

Single/ simple entry: When a journal entry has only 1 debit and 1
credit this is called single or simple entry.
Complex/ Compound entry: When a journal entry has more than 2
debit/credit, it is called a compound/ complex entry
24-07-2020
J.F. Trading company started in June 2019 by Ms. Jeny. Following transactions
took place in June 2019:
June 01: Started business with Cash 75,000 and 2 laptops of 60,000.
June 05: Paid office rent 10,000
June 10: Purchased other equipment of 20,000; paid half now and half on account
June 20: Services performed 30,000; Received 20,000 cash and rest on account
June 22: Advertising expense occurred on account 5,000
June 25: Received 5,000 from accounts receivable dues
June 30: Paid 4,000 to accounts payable due
Required: Journal, Ledgers and Trial BalancJ.F. Trading companyJournal
Date Title and Explanation Re Debit Credit
f
June 01 Cash Dr 75,000
Equipment Dr 60,000
Capital Cr 1,35,000
(Started business with capital)
Rent expense Dr 10,000
05 Cash Cr 10,000
(Payment for office rent)
Equipment Dr 20,000
10 Cash Cr 10,000
A/c payable Cr 10,000
(Paid additional equipment)
Cash Dr 20,000
20 A/c receivable Dr 10,000
Service revenue Cr 30,000
(Revenues earned)
Advertising expense Dr 5,000
22 Advertising payable Cr 5,000
(Advertising expense)
Cash Dr 5,000
25
 A/c receivable Cr 5,000
(Received from receivable) 4,000
30 A/c payable Dr 4,000
Cash Cr
(Paid to A/c payable)

J.F. Trading company

Ledgers

Cash
Date Title Jp Debit Credit Balance
June 01 Capital 75,000 75,000
05 Rent expense 10,000 65,000
10 Equipment 10,000 55,000
20 Service revenue 20,000 75,000
25 A/c receivable 5,000 80,000
30 A/c payable 4,000 76,000

Equipment
 Date Title Jp Debit Credit Balance
June 01 Capital 60,000 60,000
10 Cash & A/c 20,000 80,000
payable

Capital
Date Title Jp Debit Credit Balance
June 01 Cash & 1,35,000 1,35,000
Equipment

Rent expense
Date Title Jp Debit Credit Balance
June 05 Cash 10,000 10,000

A/c payable
Date Title Jp Debit Credit Balance
June 10 Equipment 10,000 10,000
30 4,000 6,000

A/c receivable
Date Title Jp Debit Credit Balance
June 20 Service revenues 10,000 10,000
 25 Cash 5,000 5,000

Service revenues
Date Title Jp Debit Credit Balance
June 20 Cash & A/c 30,000 30,000
Receivable

Advertising expense
Date Title Jp Debit Credit Balance
June 22 Advertising 5,000 5,000
payable

Advertising Payable
Date Title Jp Debit Credit Balance
June 22 Advertising 5,000 5,000
expense
Trial Balance: It is a list of all the accounts of a company with their balances.
Trial balance is prepared at the end of accounting period

J.F. Trading Company

Trial Balance
 June 30, 2019
Serial Title Debit Credit
1Cash 76,000
2Equipment 80,000
3Capital 1,35,000
4Rent Expense 10,000
5A/c payable 6,000
6A/c Receivable 5,000
7Service revenue 5,000 30,000
8Advertising Expense
9Advertising payable 5,000
1,76,000 1,76,000
Assets, Expense, Drawing= Debit
Revenues, Capital, Liability= Credit
কোন আইটেম লেজার করার সময় প্রথম যে কলামে লিখা হয়েছে ট্রায়াল
ব্যালেন্স এ তাঁর ব্যালেন্স সেই কলামে লিখতে হবে।
25-07-2020
Chapter 03 (Text Book)
Adjusting the accounts
Adjusting Journal

Adjusting journal are the entries needed to solve problems in accounting.

Problems are related to overstatement or understatement in any
 accounting items. Basically adjusting are given to ensure that revenue
recognition and matching principle have been followed.

#Adjusting journal entries are given each time financial statements

are prepared.

Types of adjusting entries:

Broadly adjusting entries are of two types:

(1) Adjusting for prepayments
(a) Unearned revenues
(b) Prepaid Expense
(2) Adjusting for accruals
(a) Accrued expenses
(b) Accrued revenues
Another item: Depreciation expense
Why adjusting needed: Adjusting entries are needed to solve problems with
accounting records.
Adjusting entries are needed to ensure that revenue recognition and matching
principles have been followed.
When adjusting entries are needed: Adjusting entries are given each time
financial statements are prepared. Adjusting entries are needed at the end of
accounting period.

Mona Company started its business on June 1, 2014. Its trial balance before adjustment on June 30, 2014 is as
follows:
Mona Company, Trial Balance, June 30, 2014
Particulars Debit Credit (Tk.)
Cash 25,000
Supplies 4,800
Prepaid Insurance 7,200
Building 185,000
Unearned Revenue 17,000
Notes Payable 60,000
Capital 113,000
Drawing 5,000
Service Revenue 70,000
 Rent Expense 5,600
Salaries Expense 20,000
Utility Expense 7,400
Total 2,60,000 2,60,000
Other information:
(i) Prepaid insurance is a 2 year policy.
(ii) A physical count reveals Tk.2,800 of supplies on hand on June 30.
(iii) Unearned revenue amounted to Tk.3,000 at June 30.
(iv) Accrued salaries are Tk.2,000.
(v)The interest rate on notes payable is 15% per year.
(iii) Depreciation on Building is Tk.1,500 per month.

Instruction: Prepare necessary adjusting journal entries

Interest expense is understated by 750 taka, so it should be increased by 750 taka
Interest payable is understated by 750 taka, so it should be increased by 750 taka

Salary expense is understated by 2000 taka, so it should be increased by 2000 taka

Salary payable is understated by 2000, so it should be increased by 2000 taka

Supplies is overstated by 2000 taka, so supplies should be decreased by 2000 taka

Supplies expense is understated by 2000 taka, so supplies expense should be increased by 2000 taka

Prepaid insurance is overstated by 300 taka: So Prepaid insurance should be decreased by 300 taka
Insurance expense is understated by 300 taka: So insurance expense should be increased by 300 taka
 Mona Company
Adjusting journal entries
For the month ended on June 30, 2014
SL Account title and Explanation ref Debit Credit
1. Insurance expense Dr 300
Prepaid Insurance Cr 300
(To adjust insurance expense)
Supplies expense Dr 2000
2. Supplies Cr 2000
(To adjust supplies expense)
Unearned revenue Dr 14,000
3. Service revenue Cr 14,000
(To adjust unearned revenue)
Salary expense Dr 2000
4. Salary payable Cr 2000
(To adjust salary expense)
Interest expense Dr
5. Interest payable Cr 750
(To adjust interest expense) 750
Depreciation expense Dr
1500
Accumulated depreciation-
6.
Building ------------------ Cr
1500
(To adjust depreciation expense)

Assumption:
(1) The amount of the trial balance are beginning balance of the month
 (2) Other information are always true.
(3) Adjusting entries should start from other data

14-08-2020
Motiur Company started its business on June 1, 2019. Its trial balance before adjustment on June 30, 2019 is as
follows:
Motiur Company, Trial Balance, June 30, 2019
Particulars Debit Credit (Tk.)
Cash 25,000
Supplies 4,800
Prepaid Insurance 7,200
Building 125,000
Unearned Revenue 20,000
Capital 113,000
Drawing 5,000
Service Revenue 67,000
Rent Expense 5,600
Salaries Expense 20,000
 Utility Expense 7,400
Total 2,00,000 2,00,000
Other information:
i. One-third of the prepaid insurance is expired during the month.
ii. 2,000 of supplies were used during June 2019.
iii. Depreciation on Building is Tk.3,600 per year.
iv. Unearned revenue of Tk. 5,000 remains unearned at June 30.
v. Salaries were paid fully but administrative expenses of 6,000 remains accrued on June 30.
vi. Service provided to clients but not yet recorded Tk. 11,000
Instruction: Journalize the necessary adjusting entries
Service revenue is understated by 11000; so it should be increased by 11000
Account receivable is understated by 11000; so it should be increased by 11000

Administrative expense is understated by 6000; so it should be increased by 6000

Accounts payable is understated by 6000; so it should be increased by 6000

Unearned revenue is overstated by 15000; so it should be decreased by 15000

Service revenue is understated by 15000; so it should be increased by 15000

Supplies is overstated by 2000; so it should be decreased by 2000

Supplies expense is understated by 2000, so it should be increased by 2000

Prepaid insurance is overstated by 2400; so it should be decreased

Insurance expense is understated by 2400; so it should be increased
Motiur Company
Adjusting entries
For the month ended on 30th June 2019
Sl Account Title & Explanation Re Debit Credit
f
1 Insurance expense Dr 2400
Prepaid insurance Cr 2400
(To adjust insurance expense)
Supplies expense Dr 2000
2 Supplies Cr 2000
(To adjust supplies expense)
Depreciation expense Dr 300
3 Accumulated depreciation-
Building---------------------- Cr 300
(To adjust depreciation expense)
Unearned revenue Dr 15000
4 Service revenue Cr 15000
(To adjust unearned revenue)
Administrative expense Dr
Accounts payable Cr 6000
5 6000
 (To adjust administrative expense)
Account receivable Dr
6 Service revenue Cr 11000
(To adjust service revenue) 11000
12000 12000

CH-03: P3-2A
(Practice problem)

ACC 131 Financial and Managerial Accounting

Managerial accounting

Branches of accounting:
There are three basic types of accounting.

(1) Financial Accounting(FA)

FA is the branch of accounting which prepares accounting reports/ financial statements. FA
focus in the past activities

(2) Managerial Accounting(MA)

 MA is the branch of accounting that is used by the managers for decision making purpose.
MA focus on future

(3) Cost Accounting (CA)

Cost accounting is used to control or monitor the costs of the organization. CA focus on the
present