Question 1 (a)
True or false, with reasons
12 marks
- Time to write
- About 24 minutes
- Notes
- Crux notes
Question
Question 1 (a) · 12 marksState, giving reasons, whether the statements below are true or false (any six).
Accounting has only one function, i.e., the maintenance of systematic accounting records.
Expenses that are incurred to keep the machine in a working condition are capital expenditure.
Expenditure that is intended to benefit the current period is revenue expenditure.
Every enterprise is required to apply Ind AS.
Any outstanding expense account is a nominal account.
The fundamental accounting assumptions are going concern, Consistency, and accrual.
Under the consistency principle, once accounting policies are adopted for similar items, they should be followed consistently from one year to the next and should never be changed in any circumstances.
Accrual means that revenue is recognised as it is earned and costs as they are paid. (6×2=12)
Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- any sixAnswer any 6 of the 8, 2 marks each. Only 6 are marked: a further earns nothing.
- true or…A verdict for each (True or False), then the reason that decides it.
Write it in this order
- Read each statement; find the word that decides it 2 min
- 1 Six statements, each with a verdict and a reason 2 marks each 12 marks 20 min
- Check: a verdict and a reason for every statement 2 min
Easy marks
- Choose the ones you know best: each carries the same marks.
Try it first. About 24 minutes for 12 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Six statements are answered: (i), (ii), (iii), (v), (vi) and (viii).
(i)False Keeping systematic records is only the first function of accounting. It also protects the business's properties, communicates the results to the parties interested in them, and meets legal requirements.
(ii)False Expenses that only keep a machine in working condition, such as repairs and maintenance, add nothing to its capacity or life; their benefit is used up in the year. Expenditure whose benefit is available only for the present is revenue expenditure.
(iii)True That is the meaning of revenue expenditure: expenditure whose benefit is available only for the present period, such as salaries and rent.
(v)False An outstanding expense account shows an amount owed to the persons to whom the expense is payable, so it is a personal account (a representative personal account) and appears as a liability. The expense account itself is the nominal account.
(vi)True AS 1 names going concern, consistency and accrual as the fundamental accounting assumptions. If they are followed, no specific disclosure is required; if one is not followed, that fact is disclosed.
(viii)False Under accrual, revenue is recognised when earned, but costs are recognised when incurred, not when paid: all expenses relating to the period are charged even if they are still unpaid, as with the last month's unpaid rent.
Alternative: if you chose (vii) instead of (i)
(vii)False Consistency means that policies are not changed from year to year without good reason, not that they can never change. AS 1 requires any change in accounting policies that has a material effect to be disclosed, with the amount of the effect where it can be ascertained; a change is therefore permitted, but it must be disclosed.
Where the 12 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Six statements, each with a verdict and a reason (2 marks each) | 12 |
| Total | 12 |
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