Chapter-01

Preparation of Company Accounts

Objective of IAS 1

The objective of IAS 1 (2007) is to prescribe the basis for presentation of general purpose
financial statements, to ensure comparability both with the entity's financial statements of
previous periods and with the financial statements of other entities. IAS 1 sets out the overall
requirements for the presentation of financial statements, guidelines for their structure and
minimum requirements for their content.

Objective of financial statements

The objective of general purpose financial statements is to provide information about the
financial position, financial performance, and cash flows of an entity that is useful to a wide
range of users in making economic decisions. To meet that objective, financial statements
provide information about an entity's:

 assets
 liabilities
 equity
 income and expenses, including gains and losses
 contributions by and distributions to owners (in their capacity as owners)
 cash flows.

That information, along with other information in the notes, assists users of financial statements
in predicting the entity's future cash flows and, in particular, their timing and certainty.

Components of financial statements

A complete set of financial statements includes: [IAS 1.10]

 a statement of financial position (balance sheet) at the end of the period

 a statement of profit or loss and other comprehensive income for the period (presented as
a single statement, or by presenting the profit or loss section in a separate statement of
profit or loss, immediately followed by a statement presenting comprehensive income
beginning with profit or loss)
 a statement of changes in equity for the period
 a statement of cash flows for the period
 notes, comprising a summary of significant accounting policies and other explanatory
notes
  comparative information prescribed by the standard.

Comparative information

IAS 1 requires that comparative information to be disclosed in respect of the previous period for
all amounts reported in the financial statements, both on the face of the financial statements and
in the notes, unless another Standard requires otherwise. Comparative information is provided
for narrative and descriptive where it is relevant to understanding the financial statements of the
current period.

Statement of financial position (balance sheet)

Current and non-current classification

An entity must normally present a classified statement of financial position, separating current
and non-current assets and liabilities, unless presentation based on liquidity provides information
that is reliable. In either case, if an asset (liability) category combines amounts that will be
received (settled) after 12 months with assets (liabilities) that will be received (settled) within 12
months, note disclosure is required that separates the longer-term amounts from the 12-month
amounts.

Current assets are assets that are:

 expected to be realised in the entity's normal operating cycle

 held primarily for the purpose of trading
 expected to be realised within 12 months after the reporting period
 cash and cash equivalents (unless restricted).

All other assets are non-current.

Current liabilities are those:

 expected to be settled within the entity's normal operating cycle

 held for purpose of trading
 due to be settled within 12 months
 for which the entity does not have an unconditional right to defer settlement beyond 12
months (settlement by the issue of equity instruments does not impact classification).

Other liabilities are non-current.

When a long-term debt is expected to be refinanced under an existing loan facility, and the entity
has the discretion to do so, the debt is classified as non-current, even if the liability would
otherwise be due within 12 months.

Minimum line items

The minimum line items to be included on the face of the statement of financial position are:

(a) property, plant and equipment

(b) investment property
(c) intangible assets
(d) financial assets (excluding amounts shown under (e), (h), and (i))
(e) investments accounted for using the equity method
(f) biological assets
(g) inventories
(h) trade and other receivables
(i) cash and cash equivalents
(j) assets held for sale
(k) trade and other payables
(l) provisions
(m) financial liabilities (excluding amounts shown under (k) and (l))
(n) current tax liabilities and current tax assets, as defined in IAS 12
(o) deferred tax liabilities and deferred tax assets, as defined in IAS 12
(p) liabilities included in disposal groups
(q) non-controlling interests, presented within equity
(r) issued capital and reserves attributable to owners of the parent.

Format of statement

IAS 1 does not prescribe the format of the statement of financial position. Assets can be
presented current then non-current, or vice versa, and liabilities and equity can be presented
current then non-current then equity, or vice versa. A net asset presentation (assets minus
liabilities) is allowed.

Share capital and reserves

Regarding issued share capital and reserves, the following disclosures are required:

 numbers of shares authorized, issued and fully paid, and issued but not fully paid
 par value (or that shares do not have a par value)
 a reconciliation of the number of shares outstanding at the beginning and the end of the
period
 description of rights, preferences, and restrictions
 treasury shares, including shares held by subsidiaries and associates
 shares reserved for issuance under options and contracts
 a description of the nature and purpose of each reserve within equity.

Additional disclosures are required in respect of entities without share capital and where an
entity has reclassified puttable financial instruments. 
Statement of profit or loss and other comprehensive income

Concepts of profit or loss and comprehensive income

Profit or loss is defined as "the total of income less expenses, excluding the components of other
comprehensive income". Other comprehensive income is defined as comprising "items of
income and expense (including reclassification adjustments) that are not recognised in profit or
loss as required or permitted by other IFRSs".  Total comprehensive income is defined as "the
change in equity during a period resulting from transactions and other events, other than those
changes resulting from transactions with owners in their capacity as owners".

Comprehensive income Profit Other

 =   + 
for the period or loss comprehensive income

All items of income and expense recognised in a period must be included in profit or loss unless
a Standard or an Interpretation requires otherwise. Some IFRSs require or permit that some
components to be excluded from profit or loss and instead to be included in other comprehensive
income.

Examples of items recognized outside of profit or loss

 Changes in revaluation surplus where the revaluation method is used under IAS 16
Property, Plant and Equipment and IAS 38 Intangible Assets
 Remeasurements of a net defined benefit liability or asset recognised in accordance with
IAS 19 Employee Benefits (2011)
 Exchange differences from translating functional currencies into presentation currency in
accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates
 Gains and losses on remeasuring available-for-sale financial assets in accordance with
IAS 39 Financial Instruments: Recognition and Measurement
 The effective portion of gains and losses on hedging instruments in a cash flow hedge
under IAS 39 or IFRS 9 Financial Instruments
 Gains and losses on remeasuring an investment in equity instruments where the entity has
elected to present them in other comprehensive income in accordance with IFRS 9
 The effects of changes in the credit risk of a financial liability designated as at fair value
through profit and loss under IFRS 9.

In addition, IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires
the correction of errors and the effect of changes in accounting policies to be recognised outside
profit or loss for the current period.

Choice in presentation and basic requirements

An entity has a choice of presenting:

  a single statement of profit or loss and other comprehensive income, with profit or loss
and other comprehensive income presented in two sections, or
 two statements:
o a separate statement of profit or loss
o a statement of comprehensive income, immediately following the statement of
profit or loss and beginning with profit or loss.

The statement(s) must present:

 profit or loss
 total other comprehensive income
 comprehensive income for the period
 an allocation of profit or loss and comprehensive income for the period between non-
controlling interests and owners of the parent.

Profit or loss section or statement

The following minimum line items must be presented in the profit or loss section (or separate
statement of profit or loss, if presented): [IAS 1.82-82A]

 revenue
 gains and losses from the derecognition of financial assets measured at amortised cost
 finance costs
 share of the profit or loss of associates and joint ventures accounted for using the equity
method
 certain gains or losses associated with the reclassification of financial assets
 tax expense
 a single amount for the total of discontinued items

Expenses recognised in profit or loss should be analysed either by nature (raw materials, staffing
costs, depreciation, etc.) or by function (cost of sales, selling, administrative, etc). [IAS 1.99] If
an entity categorises by function, then additional information on the nature of expenses – at a
minimum depreciation, amortisation and employee benefits expense – must be disclosed. [IAS
1.104]

Other comprehensive income section

The other comprehensive income section is required to present line items which are classified by
their nature, and grouped between those items that will or will not be reclassified to profit and
loss in subsequent periods. [IAS 1.82A]

Other requirements

Additional line items may be needed to fairly present the entity's results of operations. [IAS 1.85]
Items cannot be presented as 'extraordinary items' in the financial statements or in the notes.
[IAS 1.87]

Certain items must be disclosed separately either in the statement of comprehensive income or in
the notes, if material, including: [IAS 1.98]

 write-downs of inventories to net realisable value or of property, plant and equipment to

recoverable amount, as well as reversals of such write-downs
 restructurings of the activities of an entity and reversals of any provisions for the costs of
restructuring
 disposals of items of property, plant and equipment
 disposals of investments
 discontinuing operations
 litigation settlements
 other reversals of provisions

Statement of cash flows

Rather than setting out separate requirements for presentation of the statement of cash flows, IAS
1.111 refers to IAS 7 Statement of Cash Flows.

Statement of changes in equity

IAS 1 requires an entity to present a separate statement of changes in equity. The statement must
show: [IAS 1.106]

 total comprehensive income for the period, showing separately amounts attributable to
owners of the parent and to non-controlling interests
 the effects of any retrospective application of accounting policies or restatements made in
accordance with IAS 8, separately for each component of other comprehensive income
 reconciliations between the carrying amounts at the beginning and the end of the period
for each component of equity, separately disclosing:
o profit or loss
o other comprehensive income*
o transactions with owners, showing separately contributions by and distributions to
owners and changes in ownership interests in subsidiaries that do not result in a
loss of control

* An analysis of other comprehensive income by item is required to be presented either in the

statement or in the notes. [IAS 1.106A]

The following amounts may also be presented on the face of the statement of changes in equity,
or they may be presented in the notes: [IAS 1.107]

 amount of dividends recognised as distributions

  the related amount per share.

Notes to the financial statements

The notes must: [IAS 1.112]

 present information about the basis of preparation of the financial statements and the
specific accounting policies used
 disclose any information required by IFRSs that is not presented elsewhere in the
financial statements and
 provide additional information that is not presented elsewhere in the financial statements
but is relevant to an understanding of any of them

Notes are presented in a systematic manner and cross-referenced from the face of the financial
statements to the relevant note. [IAS 1.113]

IAS 1.114 suggests that the notes should normally be presented in the following order:

 a statement of compliance with IFRSs

 a summary of significant accounting policies applied, including: [IAS 1.117]
o the measurement basis (or bases) used in preparing the financial statements
o the other accounting policies used that are relevant to an understanding of the
financial statements
 supporting information for items presented on the face of the statement of financial
position (balance sheet), statement(s) of profit or loss and other comprehensive income,
statement of changes in equity and statement of cash flows, in the order in which each
statement and each line item is presented
 other disclosures, including:
o contingent liabilities (see IAS 37) and unrecognised contractual commitments
o non-financial disclosures, such as the entity's financial risk management
objectives and policies (see IFRS 7 Financial Instruments: Disclosures)

Other disclosures

Judgements and key assumptions

An entity must disclose, in the summary of significant accounting policies or other notes, the
judgements, apart from those involving estimations, that management has made in the process of
applying the entity's accounting policies that have the most significant effect on the amounts
recognised in the financial statements. [IAS 1.122]

Dividends

In addition to the distributions information in the statement of changes in equity (see above), the
following must be disclosed in the notes: [IAS 1.137]
  the amount of dividends proposed or declared before the financial statements were
authorised for issue but which were not recognised as a distribution to owners during the
period, and the related amount per share
 the amount of any cumulative preference dividends not recognised.

Capital disclosures

An entity discloses information about its objectives, policies and processes for managing capital.
[IAS 1.134] To comply with this, the disclosures include: [IAS 1.135]

 qualitative information about the entity's objectives, policies and processes for managing
capital, including>
o description of capital it manages
o nature of external capital requirements, if any
o how it is meeting its objectives
 quantitative data about what the entity regards as capital
 changes from one period to another
 whether the entity has complied with any external capital requirements and
 if it has not complied, the consequences of such non-compliance.

Puttable financial instruments

IAS 1.136A requires the following additional disclosures if an entity has a puttable instrument
that is classified as an equity instrument:

 summary quantitative data about the amount classified as equity

 the entity's objectives, policies and processes for managing its obligation to repurchase or
redeem the instruments when required to do so by the instrument holders, including any
changes from the previous period
 the expected cash outflow on redemption or repurchase of that class of financial
instruments and
 information about how the expected cash outflow on redemption or repurchase was
determined.

Other information

The following other note disclosures are required by IAS 1 if not disclosed elsewhere in
information published with the financial statements: [IAS 1.138]

 domicile and legal form of the entity

 country of incorporation
 address of registered office or principal place of business
 description of the entity's operations and principal activities
 if it is part of a group, the name of its parent and the ultimate parent of the group
 if it is a limited life entity, information regarding the length of the life
Terminology

The 2007 comprehensive revision to IAS 1 introduced some new terminology. Consequential
amendments were made at that time to all of the other existing IFRSs, and the new terminology
has been used in subsequent IFRSs including amendments. IAS 1.8 states: "Although this
Standard uses the terms 'other comprehensive income', 'profit or loss' and 'total comprehensive
income', an entity may use other terms to describe the totals as long as the meaning is clear. For
example, an entity may use the term 'net income' to describe profit or loss." Also, IAS 1.57(b)
states: "The descriptions used and the ordering of items or aggregation of similar items may be
amended according to the nature of the entity and its transactions, to provide information that is
relevant to an understanding of the entity's financial position."

Term before 2007 revision of IAS 1 Term as amended by IAS 1 (2007)

balance sheet statement of financial position
cash flow statement statement of cash flows
statement of comprehensive income (income statement
income statement
is retained in case of a two-statement approach)
recognised in the income statement recognised in profit or loss
recognised [directly] in equity (only for
recognised in other comprehensive income
OCI components)
recognised [directly] in equity (for recognised outside profit or loss (either in OCI or
recognition both in OCI and equity) equity)
removed from equity and recognised in reclassified from equity to profit or loss as a
profit or loss ('recycling') reclassification adjustment
Standard or/and Interpretation IFRSs
on the face of in
equity holders owners (exception for 'ordinary equity holders')
balance sheet date end of the reporting period
reporting date end of the reporting period
after the balance sheet date after the reporting period

Exercise No. 1
Agrani Limited, a company with an authorized capital of Tk. 8, 00,000 divided in shares of Tk.
20 each, showed the following balances as on December 31, 2014

Particulars Taka Taka

Share capital 4,00,000
Buildings 1,70,000
Rates and taxes 5,400
Purchases 14,53,980
Sales 18,94,200
Accounts receivable 1,74,480
Purchase returns 5,520
Accounts payable 1,22,400
Salaries 1,00,000
Bad debts 7,300
Allowance for doubtful accounts 9,300
Interim dividend paid 20,000
Insurance premium 2,920
Office expenses 75,340
Furniture 14,000
Accumulated Depreciation-Furniture 7,000
General Reserve 70,000
Inventory 2,01,980
Cash at bank 1,00,240
Wages 1,17,840
Motor vehicles 1,50,000
Accumulated depreciation-Motor vehicles 50,000
Discounts 5,820 800
Income statements 40,080
15,00,000 15,00,000

Additional information:

i. Closing inventory valued at Tk. 2, 40,000, which does not include goods amount Tk.
24,000 destroyed by the fire. Insurance company admitted the claim to the extent to Tk.
22,500.
ii. Rates and taxes cover 15 months to 31st March 2015 and the insurance was accrued Tk.
920.
iii. General reserve to be raised by Tk. 30,000.
iv. Depreciation on all types of tangible fixed assets @ 10% per annum.
v. Total dividend for this year 20% on paid up capital.
You are required to prepare:

a. Income Statement for the year ended 31 December, 2014;

b. Statement of Financial Position as at 31 December, 2014;

Exercise No. 2
The following is the Trial Balance of Salman Ltd. As of December 31, 2014

Particulars Taka Taka

Share capital (Tk. 10 par share) 1,00,000
Paid-in capital in excess of par 5,000
General reserve 25,000
Debenture, 8% issued on July 1, 2014 50,000
Buildings and accumulated depreciation 1,10,000 30,000
Plant and Machinery and accumulated depreciation 70,000 20,000
Investment 14,000
Preliminary expenses 8,000
Cash in hand and at bank 23,000
Inventory 64,000
Accounts receivable and accounts payable 35,000 15,000
Advance income tax 4,000
Purchase and sales 1,25,000 2,04,000
Returns 2,000 3,000
Bad debts and allowance for bad debts 2,300 800
Salaries 6,000
Printing and stationery 700
Interest expense on debenture 1,700
Insurance expense 1,200
Audit fees 1,400
Interest received 1,000
Income statement 14,500
4,68,300 4,68,300

Additional information:

i. Closing inventory valued at Tk. 55,000, which includes goods amount Tk. 4,000
destroyed by the fire. Insurance company admitted the claim to the extent to Tk. 2,500.
ii. General reserve to be raised by Tk. 30,000.
iii. Accrued salaries were Tk. 1,000.
iv. Insurance was paid for twelve months on March31, 2014.
v. Depreciation on Building and Machinery @ 12% per annum.
vi. 25% preliminary expenses should amortize this year.
vii. Dividend was declared 25% on paid up capital.

You are required to prepare:

a. Income Statement for the year ended 31 December, 2014;

b. Statement of Financial Position as at 31 December, 2014;

Exercise No. 3
Ajita ltd. was registered with 30,000 shares of Tk. 10 each. Following is the Trial Balance as on
31st December 2014.

Accounts Title Taka Taka

Land and Buildings 70,000
12% investment 10,000
Plant and Machinery 80,000
Furniture and Fixtures 20,000
Inventory 40,000
Purchase 1,00,000
Wages 20,000
Salary 10,000
Advertisement 3,000
Discounts on Dentures 1,000
Accounts Receivable 25,000
Rates and Taxes 1,500
Bad debts 2,000
Repairs of plants 1,000
Preliminary expenses 5,000
Goodwill 30,000
Cash at Bank 75,000
Cash in Hand 1,000
Accounts Payable 20,000
Sales 2,20,000
Paid up capital (16,400 shares) 1,64,000
10% Debentures 50,000
Reserve fund 20,000
Transfer fees 500
Retained Earnings 20,000
4,94500 4,94,500
Other Information:

i. Closing inventory Tk. 50,000.

ii. Write off Goodwill by 10% and Preliminary expenses by 20%.
iii. Depreciate Plant and Machinery by 10%, Land and Building by 2% and Furniture and
Fixture by 15%.
iv. The directors proposed 5% dividend.
v. Increase the Reserve fund to Tk. 30,000.
vi. Provide a Allowance of 5% for bad debts and doubtful debts.

You are required to prepare:

a. Income Statement for the year ended 31 December, 2014;

b. Statement of Financial Position as at 31 December, 2014.
Exercise- 04:
You are given below the Trial Balance and other information for adjustment from the books of
Cosmopolitan Trading Company Ltd.:

Particulars Taka Taka

Land and Buildings (Cost Tk. 5,00,000) 4,10,000 -----
Plant and machinery (Cost Tk. 4,50,000) 3,40,000 -----
Preliminary expenses 15,000 -----
Stock (01.07.2011) 65,000 -----
Purchases 3,30,000 -----
Salaries 50,000 -----
General expenses 12,500 -----
Directors fees 6,000 -----
Auditors fees 1,500 -----
Wages 55,000 -----
Manufacturing expenses 25,000 -----
Carriage inwards 5,000 -----
Advertising 20,000 -----
Sundry debtors 60,000 -----
Goodwill 50,000 -----
Bank Balance 55,000 -----
Share capital (Fully paid) ----- 5,00,000
Share premium ----- 50,000
General Reserve ----- 1,00,000
Income Statement ----- 75,000
Bank loan @ 6%, taken on 01.06.2012 ----- 1,00,000
Sundry creditors ----- 55,000
Sales ----- 6,20,000
15,00,000 15,00,000
Adjustments:

ii. The closing stock on 30th June, 2012 was Tk. 75,000;
iii. The managing director is entitled to a commission of 5% on net profit before charging his
commission;
iv. General expense include prepaid rates totaling Tk. 300;
v. A provision for income tax to the extent of Tk. 25,000 is to be kept and the directors
recommended a dividend @ 5%;
vi. Depreciation should be written off Plant and Machinery and Land and Buildings @ 10%
and 2% on cost respectively;
vii. Create a 5% provisions for bad debts on sundry debtors.
You are required to prepare:

a. Income Statement for the year ended 30th June 2012;

b. Statement of Financial Position as at 30th June 2012;
Answer: Gross Profit Tk. 1, 70,000; Net Profit Tk. 38,460; Un appropriated Profit Tk.
88,460; Balance Sheet Total Tk. 8, 38,460.

Exercise - 05:
You are given below the Trial Balance and other information for adjustment from the books of
Gigabyte Company Ltd.:

Particulars Taka Taka

10,000 shares of Tk. 10 each, Tk. 5 paid-up … 50,000
Calls in advance … 500
Stock (01.01.2010) 15,500 …
Plant and Machinery 25,000 …
Building (Lease for 10 years) 10,000 …
Furniture and fixture 1,200 …
Purchase and Returns 40,000 1,200
Bills Receivable 2,000 …
Wages 60,000 …
Sales and Returns 500 80,000
Sundry Creditors 20,500
Preliminary Expenses 5,000 …
Investments 8,000 …
Bank overdraft … 13,000
Goodwill 10,000 …
Drawing Office Supplies 3,000 …
Salaries 23,600 …
5% Debentures … 50,000
Interest on Debenture 1,400 …
Compensation for late delivery of goods 700 …
Rates and Insurance 2,400 …
Advertisement 5,600 …
Cash Balance 11,300 …
Sundry Debtors 5,500 ...
Profit and Loss Account … 15,500
2,30,700 2,30,700

Others Information:

i. The value of closing stock as per stock book was Tk. 99,000; but actually the stock
amounting Tk. 4,000 was lost by fire.
ii. Depreciate machinery @ 10%. Machinery includes a new machine costing Tk. 5,000
installed on July 1, 2010.
iii. Write off advertisement 50%, Goodwill 10% and Preliminary expenses 5%.
iv. Provide for bad debts Tk. 500.
v. Proposed dividends @ 10%.
vi. Office supplies on hand Tk. 500.
You are required to prepare Income Statement 31 st December 2010 and a Balance sheet as at that
date.

Answer: Gross Profit Tk. 64,200; Net Profit Tk. 20,700; Un appropriated Profit Tk. 31,200;
Balance Sheet Total Tk. 1, 44,700.
Exercise - 06:

The allied company Ltd. has an authorized and subscribed capital of Tk. 10, 00,000 in Tk. 100
per share. From the following balances with appear in the books of the company as on 31 st
December, 2011 prepare (a) Income Statement, (b) Retained Earnings Statement, and (c)
Statement of Financial Position.

Share capital (paid Tk. 80 per Interim dividend 18,000

share) 8,00,00
0
Land and Building 3,60,00 Repairs 3,440
0
Plant and Machinery 6,62,40 Sundry Creditors 1,22,400
0
Loose Tools 37,600 Reserve Fund 60,000
Preliminary Expenses 19,600 General Expenses 17,200
Furniture 14,400 Purchases 9,60,000
Calls-in-arrear 6,000 Returns Inward 20,000
Cash in hand 2,000 Sales 12,31,200
5% Govt. Bonds (Face value Sales Returns 28,000
Tk. 40,000) 39,520
Bills Receivable 54,400 Advertisement 10,160
Goodwill 64,000 Audit Fees 4,000
Motor Vehicle 12,000 Carriage 14,800
Sundry Debtors 83,200 6% Debentures 4,00,000
Wages 92,800 Bank Overdraft 53,120
Stock (1.1.2011) 1,90,40 Debenture interest
0 (Less Tax @ 30%) 8,400
Profit & Loss A/C (1.1.2011) 35,200

You are required to consider the following adjustments:

i) Stock as on 31.12.2011 Tk. 1,76,800; ii) Create Reserve for bad debts at 5% on sundry
debtors; iii) Provide depreciation: Plant and machinery @ 5%; Furniture @ 7.5%; Loose Tools
@ 15%; Motor Vehicles @ 20% p.a.; iv) Prepaid insurance Tk. 1,600; v) Reserve fund to be
increased by Tk. 1,00,000; vi) Directors declared on 15.08.2011 an interim dividend for six
months ending on 30th June 2011 @ 3%; vii) Wages outstanding Tk. 2,400; viii) Interest on
debenture for 6 months is still due.

Answer: Gross Profit Tk. 1, 00,840; Net Profit Tk. 38,000; Un appropriated Profit Tk.
49,380; Balance Sheet Total Tk. 15, 02,720.
Exercise - 07:

The allied company Ltd. has the following balances with appear in the books as on 30the June,
2011. You are required to prepare (a) Income Statement, (b) Retained Earnings Statement, and
(c) Statement of Financial Position.

Preliminary Expenses 25,000 Goodwill 90,000

Machinery (cost Tk. Bank Balance 25,000
4,50,000) 3,40,00
0
Land & Building (cost Tk. Share capital (Fully paid 4,000
4,00,000) 3,10,00 shares of Tk. 100 each) 4,00,000
0
Stock (1.7.2010) 65,000 Share premium 60,000
Purchases 3,30,00 General Reserve 80,000
0
Salaries 50,000 Profit & Loss A/C 45,000
General Expenses 15,000 Bank Loan (Taken on 1.1.2010 @
6%) 2,00,000
Directors Fees 13,000 Sundry creditors 35,000
Auditors Fees 12,000 Sales 6,40,000
Wages 60,000 Advertising 20,000
Factory Overhead 20,000 Sundry Assets 60,000
Carriage Inward 25,000

The closing stock on 30th June, 2011 was Tk. 60,000. The Managing director is entitled to a
commission of 5% on net income after charging his commission. Sundry assets include sundry
debtors of Tk. 10,000 on which a provision of 5% is to be made for bad debts. A provision for
income tax to the extent of Tk. 12,000 is desired and directors recommended a dividend of 5%.
Depreciation is to be charged for machinery @ 10% and Land and Building @ 2% on the
original cost. 50% of the advertisement is to be capitalized.

Answer: Gross Profit Tk. 1, 55,000; Net Profit Tk. 32,857; Un appropriated Profit Tk.
45,857; Balance Sheet Total Tk. 7, 85,857.
Exercise - 08:

The following is the Trial Balance of Susex Ltd. as on 31.03.2010:

Particulars Debit (Taka) Credit (Taka)

Equity share Capital (shares of Tk. 10 each) 1,50,000
10% Debentures 1,00,000
General Reserve 65,000
Profit and Loss Account 36,000
Securities Premium 20,000
Sales 3,50,000
Creditors 26,000
Provisions for Depreciation 86,000
Suspense Account 2,000
Land at Cost 1,10,000
Plant and Machinery at Cost 3,85,000
Debtors 48,000
Stock (31.03.2010) 43,000
Cash at Bank 10,000
Adjusted Purchases 1,60,000
Factory Expenses 30,000
Administrative Expenses 15,000
Selling Expenses 15,000
Debenture Interest 10,000
Interim Dividend Paid 9,000
8,35,000 8,35,000

Additional Information:

a) On 31.03.2010 the company issued bonus shares to the share holders on 1:3 basis. No
entry relating to this has yet been made.
b) The authorized share capital of the company is 25,000 equity shares of Tk. 10 each.
c) The company on the advice of an independent valuer wishes to revalue the land at Tk. 1,
80,000.
d) Proposed final dividend 10% (in addition to interim dividend).
e) Suspense account of Tk. 2,000 represents cash received for the sale of some of the
machinery on 01.04.2001. The cost of the machinery was Tk. 5,000 and the accumulated
depreciation thereon being Tk. 4,000.
f) Depreciation is to provided on plat and machinery at 10% on cost.
g) Transfer amount Tk. 6,225 to General Reserve.
You are required to prepare Income Statement, Retained Earnings Statement and a Balance Sheet
as at 31.03.2010.