Reference no: EM132610236

Question -

(a) Padma Fashion Ltd. prepares financial reports at the end of each month. On June 25, it sold goods for Tk. 80,000 and received Tk. 50,000. The rest of the amount will be received on July 8. Now, is it justifiable, if this organization records Tk. 50,000 as its sales revenue on June 25? Why or why not?

(b) The following situations involve accounting principles and assumptions.

i. Sakib Textile Ltd. owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Grossman reports the buildings at market value in its accounting reports.

ii. Sanzana Fashion Ltd. includes in its accounting records only transaction data that can be expressed in terms of money.

iii. Arifur Rahman, owner of Arif Associates, records his personal living costs as expenses of the Arif Associates.

Instructions - For each of the three situations, say if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated.