Assignment-principles of Acounting
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2222401056Assignment-principles of Acounting
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2222401056ASSIGNME
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FOR
EVEN ID
TOPIC-1: CANONS OF TAXATION.
TOPIC-2:INCOME
STATEMENT(PROFIT&LOSS)
ASSIGNMENT –PRINCIPLES OF ACCOUNTING
Course Code: IE2011
Prepared for:
MD. ADAM SHAFIULLA
Lecturer
Department of Fashion Design and Technology
Uttara University.
Dhaka.
Prepared by:
Md. Ariful Islam Sarker
BSC in FDT, Uttara University
ID#2222401056
Batch#30Th
APRIL 25, 2025
Department of Fashion Design and Technology
Uttara University.
TOPIC-1 :Canons of Taxation
Introduction
Taxation is a crucial tool for governments to generate revenue and fund
public services. However, for a tax system to be efficient and fair, certain
principles, known as the Canons of Taxation, should be followed. These
canons were first systematically laid out by Adam Smith in his book The
Wealth of Nations in 1776.
Adam Smith’s Four Canons of Taxation
1. Canon of Equity (Fairness)
o Taxes should be proportional to income—those who earn more
should pay more.
o The tax burden should be distributed fairly, taking into account the
taxpayer’s ability to pay.
2. Canon of Certainty
o The taxpayer should know how much tax is to be paid, when, and
how.
o Uncertainty leads to arbitrary practices and potential misuse by tax
authorities.
3. Canon of Convenience
o Tax collection should be convenient for the taxpayer.
o For example, deducting income tax at source is more convenient
than requiring a large lump-sum payment.
4. Canon of Economy
o The cost of collecting taxes should be kept as low as possible.
o If collection costs are high, it reduces the net revenue available to
the government.
Modern Canons of Taxation
In addition to Adam Smith’s original canons, modern economists have
suggested more canons to reflect the complexity of contemporary tax systems :
5. Canon of Productivity
o A tax should bring in sufficient revenue to the government.
6. Canon of Elasticity
o The tax system should be flexible enough to respond to changes in
income or economic conditions.
7. Canon of Diversity
o A good tax system should rely on multiple sources of revenue, not
just one or two taxes.
8. Canon of Simplicity
o The tax system should be easy to understand and administer.
Conclusion
The canons of taxation are essential for building a just, efficient, and
effective tax system. Adhering to these principles helps maintain public
trust, reduce evasion, and ensure that the tax system supports economic
stability and growth.
TOPIC-2: Income Statement
(Profit and Loss Statement)
✅ Definition:
An Income Statement, also called a Profit and Loss (P&L) Statement,
shows a company’s revenues and expenses over a specific period of time. It
provides insight into a company’s financial performance, specifically
whether it made a profit or loss.
📅 Typical Structure:
1. Revenue (Sales)
→ Total income from selling goods or services.
2. Cost of Goods Sold (COGS)
→ Direct costs of producing the goods or services sold.
3. Gross Profit
→ Revenue - COGS
4. Operating Expenses
Salaries and Wages
Rent
Utilities
Marketing
Depreciation
5. Operating Profit (EBIT)
→ Gross Profit - Operating Expenses
6. Other Income/Expenses
→ Interest, gains/losses from assets, etc.
7. Net Profit Before Tax
→ Operating Profit ± Other Income/Expenses
8. Income Tax Expense
9. Net Profit (or Loss)
→ Final profit after tax
📘 Example Income Statement:
ABC Company
Income Statement for the Year Ended December 31, 2024
Item Amount (USD)
Revenue (Sales) 500,000
Cost of Goods Sold (COGS) 200,000
Gross Profit 300,000
Operating Expenses:
- Salaries and Wages 80,000
- Rent 20,000
- Utilities 5,000
- Marketing 15,000
- Depreciation 10,000
Total Operating Expenses 130,000
Operating Profit (EBIT) 170,000
Other Income (Investment) 5,000
Net Profit Before Tax 175,000
Income Tax Expense (25%) 43,750
Net Profit 131,250
📝 Notes:
Income Statements are usually prepared monthly, quarterly, or annually.
It helps stakeholders assess profitability and make financial decisions.
