🧮 Accountant & Finance Viva

The Accounting Equation:
Assets = Liabilities + Owner's Equity

This is the foundation of double-entry bookkeeping. Every transaction affects at least two accounts and keeps the equation balanced.

Components:

• Assets: Resources owned — cash, inventory, equipment, accounts receivable, land
• Liabilities: Obligations owed — accounts payable, loans, accrued expenses
• Owner's Equity: Residual interest — capital, retained earnings, drawings (negative)

Examples:

• Owner invests BDT 500,000: Cash (Asset) ↑ 500,000 = Capital (Equity) ↑ 500,000
• Buy equipment for BDT 100,000 on credit: Equipment (Asset) ↑ 100,000 = A/P (Liability) ↑ 100,000
• Pay rent BDT 20,000: Cash (Asset) ↓ 20,000 = Retained Earnings (Equity) ↓ 20,000 (expense reduces equity)

Extended Equation: Assets = Liabilities + Capital + Revenue − Expenses − Drawings

Three Golden Rules (Traditional Approach):

• Personal Account: Debit the Receiver, Credit the Giver
  Example: Paid salary to Rahim BDT 30,000 → Dr. Salary A/C, Cr. Cash A/C
• Real Account: Debit What Comes In, Credit What Goes Out
  Example: Purchased furniture BDT 50,000 → Dr. Furniture A/C, Cr. Cash A/C
• Nominal Account: Debit All Expenses/Losses, Credit All Incomes/Gains
  Example: Received commission BDT 10,000 → Dr. Cash A/C, Cr. Commission Received A/C

Modern Approach (more widely used):

• Assets: Increase = Debit, Decrease = Credit
• Liabilities: Increase = Credit, Decrease = Debit
• Equity: Increase = Credit, Decrease = Debit
• Revenue: Increase = Credit, Decrease = Debit
• Expenses: Increase = Debit, Decrease = Credit

Example Journal Entry — Sold goods on credit BDT 80,000:
Dr. Accounts Receivable (Asset ↑) — 80,000
Cr. Sales Revenue (Revenue ↑) — 80,000

Three Core Financial Statements:

• 1. Income Statement (Profit & Loss): Shows revenue, expenses, and profit/loss for a period
  Revenue − COGS = Gross Profit
  Gross Profit − Operating Expenses = Operating Profit
  Operating Profit − Interest − Tax = Net Profit
• 2. Balance Sheet (Statement of Financial Position): Shows assets, liabilities, and equity at a point in time
  Assets = Liabilities + Equity
• 3. Cash Flow Statement: Shows cash inflows and outflows during a period
  Operating Activities + Investing Activities + Financing Activities = Net Change in Cash

How They Connect:

• Net Profit from Income Statement flows into Retained Earnings on the Balance Sheet
• Retained Earnings = Opening Balance + Net Profit − Dividends
• Cash Flow Statement explains the change in Cash (an asset) on the Balance Sheet
• Net Profit is the starting point for Cash Flow from Operations (indirect method)

Additional Statements: Statement of Changes in Equity, Notes to Financial Statements — together form a Complete Set of Financial Statements (IAS 1).

Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life.

Why Depreciate: Matching principle — spread the cost of the asset over the periods it generates revenue.

Common Methods:

• Straight-Line Method (SLM): Equal depreciation each year
  Formula: (Cost − Salvage Value) ÷ Useful Life
  Example: Machine cost BDT 500,000, salvage BDT 50,000, life 5 years
  Annual Depreciation = (500,000 − 50,000) ÷ 5 = BDT 90,000/year
• Reducing/Declining Balance Method: Higher depreciation in early years
  Formula: Book Value × Depreciation Rate
  Year 1: 500,000 × 20% = 100,000
  Year 2: 400,000 × 20% = 80,000
  More realistic for assets like vehicles, computers that lose value faster initially
• Units of Production: Based on actual usage
  Formula: (Cost − Salvage) ÷ Total Units × Units Produced
  Best for manufacturing equipment

IAS 16 — Property, Plant & Equipment: Entity should choose the method that best reflects the pattern of consumption of economic benefits. Review useful life and method annually.

Key Financial Ratios by Category:

Liquidity Ratios:

• Current Ratio: Current Assets ÷ Current Liabilities (ideal: 1.5–2.0)
• Quick Ratio: (Current Assets − Inventory) ÷ Current Liabilities (ideal: >1.0)

Profitability Ratios:

• Gross Profit Margin: (Revenue − COGS) ÷ Revenue × 100
• Net Profit Margin: Net Profit ÷ Revenue × 100
• ROE (Return on Equity): Net Profit ÷ Shareholder's Equity × 100
• ROA (Return on Assets): Net Profit ÷ Total Assets × 100

Efficiency Ratios:

• Inventory Turnover: COGS ÷ Average Inventory (higher = better)
• Receivable Days: (Accounts Receivable ÷ Revenue) × 365
• Payable Days: (Accounts Payable ÷ COGS) × 365

Leverage Ratios:

• Debt-to-Equity: Total Debt ÷ Total Equity (lower = less risky)
• Interest Coverage: EBIT ÷ Interest Expense (higher = safer)

Analysis Framework: Compare against industry benchmarks, trend analysis (3-5 years), and competitor comparison.

Bangladesh Income Tax System:

• Governed by the Income Tax Ordinance 1984 (being replaced by new Direct Tax Act)
• Income Year: July 1 – June 30
• Assessment Year: Following the income year (when tax return is filed)
• Filing deadline: November 30 (individual), September 15 (company)

Tax Heads (7 Sources of Income):

• 1. Salary
• 2. Interest on securities
• 3. House property income
• 4. Agricultural income
• 5. Business or professional income
• 6. Capital gains
• 7. Income from other sources

Individual Tax Slabs (FY 2025-26):

• First BDT 350,000 — Nil (tax-free threshold)
• Next BDT 100,000 — 5%
• Next BDT 400,000 — 10%
• Next BDT 500,000 — 15%
• Next BDT 500,000 — 20%
• Remaining — 25%

Company Tax Rate: 27.5% (listed), 30% (non-listed), 37.5% (tobacco, mobile), 40% (bank/financial institution).
TDS (Tax Deducted at Source): Employer deducts tax from salary monthly and deposits to government.

VAT (Value Added Tax) is an indirect tax on consumption — collected at each stage of the supply chain on the value added.

Bangladesh VAT & SD Act 2012 (effective 2019):

• Standard Rate: 15% on most goods and services
• Reduced Rates: 5%, 7.5%, 10% for specified goods/services
• Exempt: Basic food items, education, healthcare, agriculture inputs
• Turnover Tax: 4% for businesses with annual turnover BDT 50 lakh to 3 crore

VAT Mechanism (Input-Output):

• Manufacturer pays VAT on raw materials (Input VAT)
• Charges VAT on finished goods sold (Output VAT)
• Deposits the difference to government: Output VAT − Input VAT = Net VAT Payable
• This avoids cascading tax effect — tax is only on value added at each stage

Compliance Requirements:

• VAT Registration (BIN — Business Identification Number) for annual turnover > BDT 50 lakh
• Monthly VAT Return filing (Mushak 9.1) by 15th of following month
• Maintain purchase and sales records with VAT challans
• Issue Tax Invoice/Mushak 6.3 for every sale

Auditing is the independent examination of financial statements to express an opinion on whether they present a true and fair view in accordance with applicable financial reporting standards.

Types of Audit:

• External/Statutory Audit: Required by law (Companies Act 1994). Conducted by independent CA firm. Mandatory for companies
• Internal Audit: Conducted by company's own audit department. Focuses on internal controls, risk management, compliance
• Tax Audit: Verification of tax returns and compliance with tax laws
• Forensic Audit: Investigation of fraud, financial irregularities
• Management Audit: Evaluating efficiency of management practices
• Compliance Audit: Checking adherence to laws, regulations, and policies

Audit Opinion Types (ISA 700/705):

• Unqualified (Clean): Financial statements are fairly presented ✅
• Qualified: Fair except for specific matters ⚠️
• Adverse: Financial statements are materially misstated ❌
• Disclaimer: Auditor cannot form an opinion (scope limitation) ⛔

Key Concepts: Materiality, audit risk (inherent, control, detection), audit evidence, substantive testing, test of controls.

Internal Controls are processes and procedures designed to ensure the reliability of financial reporting, compliance with laws, and effectiveness of operations.

COSO Framework Components:

• 1. Control Environment: Tone at the top — management's attitude toward integrity, ethics, and competence
• 2. Risk Assessment: Identifying and analyzing risks that could prevent achieving objectives
• 3. Control Activities: Policies and procedures — approvals, reconciliations, segregation of duties
• 4. Information & Communication: Relevant information flows in a timely manner
• 5. Monitoring: Ongoing evaluation of internal control effectiveness

Key Control Activities:

• Segregation of Duties: No single person handles authorization, recording, and custody (e.g., person who approves payments ≠ person who makes payments)
• Authorization: All transactions require proper approval (purchase orders, expense claims)
• Reconciliation: Bank reconciliation, ledger reconciliation, inventory counts
• Physical Controls: Safeguarding assets — locks, access restrictions, security cameras
• Documentation: Proper record-keeping, audit trail, policy manuals

Budget is a financial plan that estimates revenue and expenditure for a specific period, used for planning, coordination, and control.

Types of Budgets:

• Master Budget: Comprehensive financial plan — combines all departmental budgets. Includes operating budget + financial budget
• Sales Budget: Forecast of expected sales revenue by product/region/period — starting point for all budgets
• Production Budget: Units to produce = Sales forecast + Desired ending inventory − Beginning inventory
• Cash Budget: Projects cash inflows and outflows — identifies surplus or deficit periods. Critical for liquidity management
• Capital Budget: Plans for long-term asset purchases — equipment, building, technology. Uses NPV, IRR, payback period for evaluation
• Zero-Based Budget (ZBB): Every expense must be justified from zero each period — no automatic carryforward from previous year
• Flexible Budget: Adjusts to actual activity levels — allows meaningful variance analysis

Budget Process:

• 1. Set objectives → 2. Forecast revenue → 3. Estimate expenses → 4. Review & approve → 5. Monitor actual vs budget → 6. Variance analysis → 7. Corrective action

This tests your ethical standards and professional integrity.

Step-by-Step Approach:

• 1. Verify: Don't jump to conclusions. Double-check the data — could it be an error? Review the supporting documents and verify the discrepancy is intentional
• 2. Document: Gather evidence — copies of records, dates, amounts, nature of manipulation. Keep records secure
• 3. Report Internally: Report to the appropriate authority — internal audit department, audit committee, or senior management (skip the manager in question). Follow the company's whistleblower policy if available
• 4. Escalate if Necessary: If internal channels are unresponsive, escalate to external authorities — BSEC (for listed companies), regulatory bodies, or law enforcement if fraud is involved
• 5. Protect Yourself: Maintain copies of evidence, document all communications, know your rights under whistleblower protection

Professional Ethics: As an accountant, you have a professional duty (ICAB Code of Ethics / IFAC Code) to maintain integrity, objectivity, and professional competence. Turning a blind eye makes you complicit.

What NOT to Do: Don't confront the manager alone, don't spread rumors, don't participate in the manipulation, don't destroy evidence.

Common Accounting Software in Bangladesh:

• Tally ERP 9 / Tally Prime: Most widely used in Bangladesh SMEs. Handles accounting, inventory, GST/VAT, payroll. Know: voucher entry, ledger creation, trial balance, financial reports
• SAP (FICO Module): Enterprise-level. Used by large corporations, banks, MNCs. Know: posting documents, cost center accounting, financial reporting
• QuickBooks: Popular for small businesses. Cloud-based, invoice management, bank reconciliation, financial reports
• Oracle Financials: Enterprise ERP — general ledger, accounts payable/receivable, fixed assets, cash management
• Microsoft Excel: Still essential — pivot tables, VLOOKUP/XLOOKUP, IF statements, financial modeling, data validation, charts

Key Skills to Highlight:

• Chart of accounts setup and maintenance
• Bank reconciliation process
• Month-end and year-end closing procedures
• Financial report generation and customization
• Data backup and security practices

Modern Trends: Cloud accounting (Xero, Zoho Books), AI-powered expense categorization, automated bank feeds, digital invoice processing.

IAS/IFRS — International Accounting Standards / International Financial Reporting Standards, issued by the IASB (International Accounting Standards Board).

In Bangladesh, ICAB has adopted these as BAS (Bangladesh Accounting Standards) and BFRS (Bangladesh Financial Reporting Standards).

Important Standards to Know:

• IAS 1 — Presentation of Financial Statements: Format, components, fair presentation
• IAS 2 — Inventories: Valuation at lower of cost and NRV. Methods: FIFO, Weighted Average (LIFO not allowed)
• IAS 16 — Property, Plant & Equipment: Recognition, depreciation, revaluation
• IAS 18/IFRS 15 — Revenue Recognition: Five-step model for revenue recognition
• IAS 36 — Impairment of Assets: Test assets for impairment when carrying amount exceeds recoverable amount
• IAS 37 — Provisions, Contingent Liabilities: When to recognize provisions vs disclose contingencies
• IAS 38 — Intangible Assets: Recognition criteria, amortization, goodwill
• IFRS 9 — Financial Instruments: Classification, measurement, impairment of financial assets
• IFRS 16 — Leases: Right-of-use asset model — most leases on balance sheet