THE INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF BANGLADESH

CMA DECEMBER, 2017 EXAMINATION

KNOWLEDGE LEVEL
SUBJECT: IE 01. PRINCIPLES OF ACCOUNTING.

Solution
Solution to the question. No. 1.

Trial Balance Adjustments Adjusted Trial Balance Income Statement Balance Sheet
Accounts Title
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
(Tk.) (Tk.) (Tk.) (Tk.) (Tk.) (Tk.) (Tk.) (Tk.) (Tk.) (Tk.)
Cash -
43,350 43,350 43,350
Notes Receivable
51,700 51,700 51,700
Supplies
2,800 650 2,150 2,150
Prepaid Insurance
8,950 1,850 7,100 7,100
Equipment
137,050 137,050 137,050
Accumulated Depreciation-
Equipment 7,400 2,300 9,700 9,700
Buildings
269,500 269,500 269,500
Accumulated Depreciation-
Buildings 172,800 12,500 185,300 185,300
Land
93,500 93,500 93,500
Accounts payable
73,650 73,650 73,650
Unearned Service Revenue
44,000 21,000 23,000 23,000
Notes payable
93,500 93,500 93,500
Omega’s Capital
171,450 171,450 171,450
Drawings
19,000 19,000 19,000
Service Revenue
84,850 21,000 105,850 105,850
Salaries expenses
10,850 2,000 12,850 12,850
Utilities expenses
5,650 5,650 5,650
Advertising expenses
5,300 400 5,700 5,700
Accounts Payable
900 900 900
Interest Revenue
900 900 900
Supplies Expense
650 650 650
Salaries Payable
2,000 2,000 2,000
Insurance Expense
1,850 1,850 1,850
Depreciation Expense
14,800 14,800 14,800
Interest Expense
1,200 1,200 1,200
Interest Payable
1,200 1,200 1,200
Accounts Payable
400 400 400
Net Income
64,050 64,050

Total
647,650 647,650 42,800 42,800 666,950 666,950 106,750 106,750 624,250 624,250

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Solution to the question No. 2
Req.: (i)
Journal Entries
For the month of July, 2016
Date Particulars Ref. Dr. (Tk.) Cr. (Tk.)
2016 Cash 2,50,000
July-1 Debu’s Capital 2,50,000
“ -5 Salaries expenses 6,000
Cash 6,000
“ -7 Accounts Receivable 18,000
Service Revenue 18,000
“ -8 Miscellaneous expenses 3,000
Cash 3,000
“ -15 Cash 15,000
A/R 15,000
“ -29 Office Equipment 50,000
Accounts Payable 50,000
“ -31 Drawings 10,000
Cash 10,000

Req. (ii)

Trial Balance
For the month of July, 2016
Sl. No. Account Titles Ref. Dr. (TK.) Cr. (TK.)
01. Cash 2,46,000
02. Capital 2,50,000
03. Salaries expenses 6,000
04. Accounts Receivable 3,000
05. Service Revenue 18,000
06. Miscellaneous expenses 3,000
07. Office equipment 50,000
08. Accounts Payable 50,000
09. Drawings 10,000
Total 3,18,000 3,18,000

Solution to the question No. 3.

The cost of goods available for sale is as follows:

Inventory: 200units @Tk.4.00 Tk.800

Purchases:
March 10 500 units @Tk.4.50 2,250
March 20 400 units @ Tk.4.75 1,900
March 30 300 units @ Tk.5.00 1,500
Total 1,400 units 6,450

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Under a periodic inventory system, the cost of goods sold and cost of inventory are as
follows:

Req.: (a) Under FIFO Method:

Cost of ending inventory:

Date Units Unit cost Total Cost (Tk.)

March-30 300 Tk.5.00 1,500
March-20 200 Tk.4.75 950
Total cost of ending inventory Tk.2,450
So, Cost of Goods Sold= Cost of Goods Available for Sale- Cost of ending inventory
=Tk. 6,450-Tk. 2,450
=Tk. 4,000
Req.: (b) Under LIFO Method:

Cost of ending inventory:

Date Units Unit cost Total Cost (Tk.)

March-01 200 Tk.4.00 800
March-10 300 Tk.4.50 1,350
Total cost of ending inventory Tk.2,150
So, Cost of Goods Sold= Cost of Goods Available for Sale- Cost of ending inventory
=Tk. 6,450-Tk. 2,150
=Tk. 4,300
Req.: (c) Under Average Cost Method:

Average unit cost=Tk. 6,450/1,400 units=Tk.4.61

Cost of ending inventory= [email protected]=Tk.2,305
Cost of Goods Sold=Tk. 6,450-Tk. 2,305 =Tk.4.145

Solution to the question No.4.

Req. (a) Statement of Cost of Goods Manufactured

Direct Materials Used:

Beginning Raw Materials Tk.5,000
Add: Purchase of RM 70,000
RM available for use 75,000
Less: Ending RM 8,500 66,500
Direct Labour (balancing fig.) 13,300
Prime cost (given) 79,800
Mfg. Overhead:
Indirect materials 4,200
Royalty 2,500
Rent (6,000*60%) 3,600
Utility 4,500
Depreciation (4,000*80%) 3,200
Maintenance 8,750 26,750
Total manufacturing costs 1,06,550
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Add: Beginning WIP 600
Costs of goods in process 1,07,150
Less: Ending WIP 6,000
Costs of Goods Manufactured 1,01,150

Req. (b) Statement of Cost of Goods Sold

Beginning Finished goods inventory Tk.0

Add: Costs of Goods Manufactured 1,01,150
Goods available for sale 1,01,150
Ending finished goods inventory 7020
Cost of goods sold 94,130

Solution to the question No. 5.

(i) The following are the points of distinction between double entry system and single-entry
system:
Under double entry system, both debit and credit aspects of all the transactions are recorded.
Under single entry system, some transactions are not recorded at all while some transactions
are recorded in only one of their aspects – either debit aspect or credit aspect and there are
some transactions which are recorded in the same manner as they are recorded under double
entry system.
Under double entry system, various subsidiary books are maintained whereas under single
entry system no subsidiary book except cash book is maintained.
Under double entry system, the ledger contains personal, real as well as nominal accounts but
under single entry system the ledger contains some personal accounts only.
Under double entry system, arithmetic accuracy of records can be ascertained by preparing a
trial balance. Under single entry system, it is not possible.
Under double entry system, income statement and balance sheet are prepared in a scientific
manner but under single entry system, only a rough estimate can be made of profit earned or
loss incurred and only a statement of affairs can be prepared which does not present a
scientifically correct financial position.

(ii) Step 1. Analyze Transaction

Step 2. Record the Effect of Transactions in a Journal Entry
Step 3. Summarize the Effects of Transactions

Part 1. Post Journal Entries to the Ledger

Part 2. Prepare a Trial Balance

Step 4. Prepare Reports

Part 1. Make Adjusting Entries

Part 2. Prepare Financial Statements

Part 3. Close the Books

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(iii) Journal entries are used to record the effects of transactions in debit and credit language.
The use of a journal entry allows us to summarize the accounts affected by the transactions
and their respective amounts.

(iv) The prepaid insurance account is adjusted to reflect that portion of the asset that has been
used up during the year. An amount was received in advance during the year for consulting
revenue. The adjustment is to record the amount of consulting revenue that was actually
earned for the year.

(v) Although computers automate the accounting process, an accountant still needs to
understand debits, credits, journals, posting, T-accounts, and trial balances to be able to
understand what the computer is doing. By understanding the overall process, an accountant
will be able to analyze and interpret the data. In addition, business people are well advised to
understand the accounting process so that they can see how information flows in an
organization and so that they can understand the accounting jargon that is often used.

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