Theoritical Question

Question-01
Are the Allowance for receivable and Allowance for doutful debt both same?
Answer: Yes allowances for receivable and allowances for doubtful debbts both are same. Both the term means the estimated amount of
the accounts receivable that will not be collected.
Question-02
What will be the effect in net profit if allowance for receivable is decrease?
Answer: The amount of the decrease in allowance is credited to irrecoverable debt expense in the income statement resulting increase the
profit for the period in which the reduction in allowance is made.
Question-03
Why Opening inventory is expense?
Answer: This is the application of the Matching Concept which requires expenses to be recognized against periods from which associated
revenue from the expense is expected to be earned. Therefore, as closing inventory is not consumed at any given accounting period end, it
must not be part of expense which is why it is deducted from the cost of sale. Similarly, as opening inventory is consumed in the current
accounting period, it must therefore be added to the cost of goods sold.
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Mathmetical Question
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Question-04 May-June 2010
At first April 2008 a business had total outstanding debts of taka 12,500.During the yearto 31 March 2009 the following transactions took place
59.9K
a) Credit Sales Tk 46,000
13b) payment from Customer tk.48,000
c) Two debts for 280 and Tk480, were decleared irrecoverable and the customers are no longer purchasing goods from the company. Thease are to be
more
at:
http://accounting-simplified.com/financial-accounting/accounting-for-inventory/accountingwitten
off See
treatment.html#sthash.73E3DkJL.dpuf
My
quection is what will be the journal entry for adjustment (b).
Solution
Cash/Bank

Debit

Accounts receivable Credit

48,000
48,000

Question-05 May-June 2015

Receivable 01 January 2014
Collection from receivable
Receivable 31 December2014
Cost of Sales
Discount allowed
Discount Received
Irrecoverable debt exp
Debt paid in 2014 which were previously witten off as irrecoverable in 2013
Other Expenses
Solution
Sales (118,000+9,000-7,000)
Cost of Sales
Gross Profit
Add:Discount Received

7,000
118,000
9,000
70,000
1,000
6,000
8,000
1,500
29,500

120,000
70,000
50,000
6,000
56,000
1,000
55,000

Less:Discount allowed
Less:Expenses
Irrecoverable debt (8,000-1,500)
Other Expenses
Net Profit

6,500
29,500
19,000

Question-06 May-June 2015

On Janurary 01,2014, XYZ Company limited acquired production equipment on credit by the amount of taka 2,50,000. The following further costs were
incurred in cash
Delivary Van
36,000
Installation
40,000
General Administrative Cost
6,000
Consultant fee
5,000
Interest Charge
12,000
Operating Losses
7,000
The installatioon and settingup period was 3 months and a further amount of tk 42,000 was spent on cost directy related to bringing the asset to its working
condition.The equipment was redy for use on 01 April 2014.But actually used from 01 May 2014 in commercial production.

The equipment has an estimated useful life of 14 years and residual value of tk.36,000.Estimated dismalting cost amount of taka 25,000 whichwill be paid at
the time of dismalting
Give the journal entry for recoding the asset in 2014 and show the presentation in statement of financial position as on 31 Decmber 2014 and in statement of
comprehensive income for the year

Solution :
Value or cost of Asset
Purchase amount
Delivary
Installation Cost
Consultancy fee
Dismantelling cost

250,000
36,000
40,000
5,000
25,000
356,000

Journal entry
Non Current asset Dr.
1-Jan-14

356,000

Payable for Non -Current Assets Cr

Provision for dismantelling cost Cr
Cash/Bank
Cr.

250,000
25,000
81,000

April 1,2014 Non Current asset Dr.

Cash
Cr.

December31,2014

42,000
42,000

Depreciation expense
Dr.
Accumulated Depreciation
Cr.
(3,56,000+42,000-36,000)/14 = 25857/12*9

19,393
19,393

XYZ Company Limited

Statement of Financial Position
as on 31.12.2014
Non-Current Asset
PPE

398,000

Liability
Payable for Non -Current Assets Cr
Provision for dismantelling cost Cr
Accumulated Depreciation
Equity

250,000
25,000
19,393
-

XYZ Company Limited

Statement of Comprehensive Income
For the year ended 31.12.2014
Sales
Cost of sale
Gross Profit
Less: Expenses
Depreciation

Net loss

19,393
(19,393)

Question-07
XYZ company limited on 01January 2001. On that date purchase a machine for tk.1,20,000 to be depreciated over 30 years with no residual value.

After five years of trading on 01 January 2006 XYZ company concludes this machine has a fair value of 1,75,000.It still has a further 25 years of useful life
remaining.
Show the journal entry for revaluation of asset and effect in statement of finacial position
Solution
Non-Current asset
Dr
Accumulated Depreciation
Dr
Revaluation Reserve
Cr

55,000
20,000
75,000

XYZ Company Limited

Statement of Financial Position
Non-Current Asset
PPE
Liability
Revaluation Reserve

175,000
75,000
75,000