26. Adjusting Entries
1. On August 4, BhaiBhai Trading Co. paid
Tk.72,000 for a one-year car insurance policy.
Coverage began on August 1. BhaiBhai
recorded the payment by increasing (debiting)
Prepaid Insurance. This account shows a
balance of Tk.72,000 in the August 31 trial
balance. Insurance of Tk.6000 (Tk.72,000 /
12) expires each month.
27. :
Aug 31 Insurance expense 6000
Prepaid insurance 6000
( to record insurance expired)
After the adjusting entry is posted, the accounts show:
Prepaid Insurance Insurance Expense
08/4 72000 08/31Adj. 6000 08/31 Adj. 6000
08/31 Bal. 66000
28. Adjusting Entries
2. BhaiBhai Trading Co. estimates depreciation
on the office equipment to be Tk.30,000 a
year, or Tk.2500 per month. Thus, BhaiBhai
Trading Co. make the following adjusting entry
to record depreciation for July.
29. :
July 31 Depreciation expense 2500
Accumulated depreciation 2500
(To record monthly depreciation)
After the adjusting entry is posted, the accounts show:
Depreciation Expense Accumulated Depreciation
07/31 Adj. 2500
07/31Adj. 2500
31. CORRECTING ENTRIES
1. On July 14, BhaiBhai Trading Co. journalized
and posted a Tk.66,220 cash collection for
supplies from Bangsal Co. as a debit to Cash
Tk.66,220 and a credit to Sales Revenue
Tk.66,220. The company discovered the error
on July 25, when Bangsal paid the remaining
balance in full.
32. Incorrect entry
July 14 Cash 66220
Sales revenue 66220
Correct entry
July 14 Cash 66220
Supplies 66220
33. On July 25, correcting entry will be:
July 25 Sales Revenue 66,220
Supplies
(To correct entry of July 14) 66,220
34. CORRECTING ENTRIES
2. On July 14, BhaiBhai Trading Co. journalized
and posted a Tk.112,080 cash collection on
account from Sadorghat as a debit to Cash
Tk.112,080 and a credit to Sales Revenue
Tk.112,080. The company discovered the error
on July 25, when Sadorghat paid the
remaining balance in full.
35. Incorrect entry
July 14 Cash 112,080
Sales revenue 112,080
Correct entry
July 14 Cash 112,080
Accounts receivable 112,080
36. On July 25, correcting entry will be:
July Sales Revenue
25 Accounts Receivable 112,08
(To correct entry of 0 112,080
July 14)
38. BHAIBHAI TRADING CORPORATION
INCOME STATEMENT
FOR THE MONTH ENDED DECEMBER 31, 2011
Revenues:
Sales Revenue 1,100,000
Expenses:
Salary Expense 50,000
Rent Expense 50,000
Miscellaneous 50,000
Total Expenses 150,000
Net Income 950,000
39. BHAIBHAI TRADING CORPORATION
OWNER’S EQUITY STATEMENT
FOR THE MONTH ENDED DECEMBER 31, 2011
BhaiBhai Trading Co., Capital Dec. 01 50,000,000
Add: Investment -
Net income 950,000
50,950,000
Less: Drawings 350,000
BhaiBhai Trading Co., Capital Dec. 31 50,600,000
40. BHAIBHAI TRADING CORPORATION
BALANCE SHEET
DECEMBER 31, 2011
Assets
Cash 10,000,000
Accounts Receivable 10,000,000
Equipment 50,000,000
Total Assets 70,000,000
Liabilities
Accounts Payable 19,400,000
Owner’s Equity
BhaiBhai Trading Co., Capital 50,600,000
Total liabilities and Owner’s Equity 70,000,000
42. From the liquidity ratios,
Current Ratio = Current Asset/Current Liability
= 20,000,000/19,400,000
= 1.03 : 1
The ratio of 1.03 : 1 means that for every taka of
current liabilities, Quality has tk 1.03 of
current assets.
43. From the profitability ratios,
Profit Margin = Net Income/Net Sales
= 950,000/1,100,000
= 0.86 : 1
It measures the percentage of each taka of sales
that results in net income.
44. From the solvency ratios,
Debt to Asset Ratio = Total Debt/Total Asset
= 19,400,000/70,000,000
= 0.28 : 1
It measures the percentage of the total assets
that creditors provide.
50. ‘’……Higare on bebshatton out koron jai
kemne heda kon. Higa maal er daam jemne
komaitese, amra to bebsha e koirtam hattam
no. Higare bostat bori fidon dorkar. Daam loi
amra erum ida idi koirle daam jaibo hori.
Maijkhan di dokan dar gor shubida……’’
Implicit Contracts in Oligopoly Market
51. Real life use of business knowledge is entertaining.
52. Take Away
1. Looking into Bhai Bhai Trading Corporation
2. Its business plan
3. Its accounting system
4. Our group work and experience