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A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:
(i). The cost of an assets Rs. 25,000 has been taken as en expense.
(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.
(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.
(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.
Which concept should be followed in the statement (ii)?
(i). The cost of an assets Rs. 25,000 has been taken as en expense.
(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.
(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.
(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.
Which concept should be followed in the statement (ii)?
- a)Conservatism
- b)Materiality
- c)Historical cost
- d)Accrual
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end o...
The concept that should be followed in statement (ii) is conservatism.
Explanation:
The concept of conservatism in accounting suggests that when there are uncertainties or risks involved in financial transactions, the accountant should always choose the option that is more conservative or cautious. This means that the accountant should err on the side of understating profits and assets, and overstating liabilities and expenses.
In the given statement (ii), Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books. However, the concept of conservatism requires the accountant to be cautious and not recognize potential profits until they are realized or certain. Therefore, Mr. A should not include the anticipated profit of Rs. 10,000 in his financial statement as it has not been realized yet. By not recognizing this anticipated profit, Mr. A is following the concept of conservatism.
Other options explained:
- Materiality: Materiality concept states that financial information should be disclosed if it is significant enough to influence the decisions of users. In this case, the anticipated profit of Rs. 10,000 may not be considered significant enough to influence the decisions of users, so materiality concept does not apply here.
- Historical cost: Historical cost concept states that assets should be recorded at their original cost. In this case, the car asset has already been recorded at its historical cost, so the concept of historical cost does not apply to the anticipated profit.
- Accrual: Accrual concept states that revenues should be recognized when earned and expenses should be recognized when incurred, regardless of when cash is received or paid. In this case, the anticipated profit has not been earned yet, so the concept of accrual does not apply here.
Explanation:
The concept of conservatism in accounting suggests that when there are uncertainties or risks involved in financial transactions, the accountant should always choose the option that is more conservative or cautious. This means that the accountant should err on the side of understating profits and assets, and overstating liabilities and expenses.
In the given statement (ii), Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books. However, the concept of conservatism requires the accountant to be cautious and not recognize potential profits until they are realized or certain. Therefore, Mr. A should not include the anticipated profit of Rs. 10,000 in his financial statement as it has not been realized yet. By not recognizing this anticipated profit, Mr. A is following the concept of conservatism.
Other options explained:
- Materiality: Materiality concept states that financial information should be disclosed if it is significant enough to influence the decisions of users. In this case, the anticipated profit of Rs. 10,000 may not be considered significant enough to influence the decisions of users, so materiality concept does not apply here.
- Historical cost: Historical cost concept states that assets should be recorded at their original cost. In this case, the car asset has already been recorded at its historical cost, so the concept of historical cost does not apply to the anticipated profit.
- Accrual: Accrual concept states that revenues should be recognized when earned and expenses should be recognized when incurred, regardless of when cash is received or paid. In this case, the anticipated profit has not been earned yet, so the concept of accrual does not apply here.
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A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer?
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A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer?.
A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer?.
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Here you can find the meaning of A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:(i). The cost of an assets Rs. 25,000 has been taken as en expense.(ii). Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.(iii). Salary of Rs. 7,000 payable in the financial year has not been taken into account.(iv). Mr. A purchased an asset for Rs. 75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.Which concept should be followed in the statement (ii)?a)Conservatismb)Materialityc)Historical costd)AccrualCorrect answer is option 'A'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
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