[cA - Foundation -
ples & Practice of Accounting ~ Compiler] | Prof.Rahul Malkan
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economic and technological conditions which might take place, to ensure that the amount
provided for depreciation corresponds to that considered appropriate in the changed
circumstances. Proper records are maintained for running hours of the machine and depreciation
is computed accordingly. For example, the cost of a machine is Rs.10,00,000 and life of the machine
is estimated at 50,000 hours. The hourly depreciation will be calculated as follows:
Total cost of Machine
Estimated life of Machine
Rs.10,00,000,
50,000 hours
20 per hour
Hourly Depreciation
If the machine runs for say, 2,000 hours in a particular period, depreciation for the period will be
2,000 hours x Rs. 20 = Rs, 40,000.
ion of a new partner in a partnership firm, the profit/loss on revaluation account
is transferred to all partners in their new profit sharing ratio.
In the balance sheet of X Limited, preliminary expenses amounting to Rs, 5 lakhs and securities
premium account of Rs. 35 lakhs are appearing; The accountant can use the balance in securities
premium account to write off preliminary expenses
Insurance claim received on account of plant and machinery completely damaged by fire is a
capital receipt.
Purchase of office furniture & fixtures of Rs. 2,500 has been debited to General Expense Account,
Itisan error of omission.
A Limited is sending goods costing Rs. 50,000 to B Limited on consignment basis. The accountant
of A Limited is of the opinion that these goods should be sent under a sale invoice.
A concern proposes to discontinue its business from December 2020 and decides to dispose off all
its plants within a period of 3 months. The Balance Sheet as on 31st December, 2020 should
continue to indicate the plants at its historical costs as the assets will be disposed off after the
Balance Sheet date.
False; Incase of admission of new partner in a partnership firm, profit/loss on revaluation account
is transferred to old partners in their old profit-sharing ratio.
True; According to Section 52 of the Companies Act, 2013, Securities Premium Account may be
used by the company to write off preliminary expenses of the company. Thus, the accountant can
use the balance in securities premium account to write off the preliminary expenses amounting *
5 lakhs.
True; Insurance claim received on account of plant and machinery completely damaged by fire is
a capital receipt ast is not obtained in course of normal business activiti
False; When a transaction is recorded in contravention of accounting principles, like treating the
purchase of an asset as an expense, it is an error of principle. Purchase of office furniture and
fixtures is a capital expenditure, if debited to General Expenses account, is an error of principle
and not an error of omission
False; Goods sent on consignment basis should be sent under a proforma invoice nota sale invoice.
False; If the fundamental accounting assumption of going concer is not followed, then the assets
and liabilities should be stated at realizable value not historical cost,
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