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‘A Limited’ purchased goods of Rs.10,00,000, and sold 90% of goods and remaining goods market value is Rs.90,000, and closing stock is 10%, but he recorded Rs.90,000 and not Rs.1,00,000. Which concept does he follows:-
- a)Materiality concept
- b)Cost concept
- c)Entity concept
- d)Conservatism concept
Correct answer is option 'D'. Can you explain this answer?
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A Limited purchased goods of Rs.10,00,000, and sold 90% of goods and r...
Explanation:
The correct answer is option D, i.e., Conservatism concept.
Conservatism Concept: The conservatism concept is also known as the principle of prudence. It implies that while preparing financial statements, the accountant should be cautious and careful in recognizing the assets' value and the revenues' amount. The conservatism concept states that while recording transactions, the accountant should be careful and not overestimate the assets' value or the revenues' amount.
In the given scenario, the Limited Company has recorded the market value of the remaining goods as Rs. 90,000 and not Rs. 1,00,000, which means that the company has reduced the closing stock value by Rs. 10,000. By doing so, the company is following the conservatism principle.
The company has reduced the value of closing stock by Rs. 10,000, which means that the company has not overestimated the value of the closing stock. The company has been cautious while preparing the financial statements and has not recorded an amount higher than what it is worth.
Conclusion: In conclusion, the company is following the conservatism concept while recording the value of the closing stock. The company has been careful and cautious while recording the value of the assets and revenues, and it has not overestimated their value.
The correct answer is option D, i.e., Conservatism concept.
Conservatism Concept: The conservatism concept is also known as the principle of prudence. It implies that while preparing financial statements, the accountant should be cautious and careful in recognizing the assets' value and the revenues' amount. The conservatism concept states that while recording transactions, the accountant should be careful and not overestimate the assets' value or the revenues' amount.
In the given scenario, the Limited Company has recorded the market value of the remaining goods as Rs. 90,000 and not Rs. 1,00,000, which means that the company has reduced the closing stock value by Rs. 10,000. By doing so, the company is following the conservatism principle.
The company has reduced the value of closing stock by Rs. 10,000, which means that the company has not overestimated the value of the closing stock. The company has been cautious while preparing the financial statements and has not recorded an amount higher than what it is worth.
Conclusion: In conclusion, the company is following the conservatism concept while recording the value of the closing stock. The company has been careful and cautious while recording the value of the assets and revenues, and it has not overestimated their value.
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A Limited purchased goods of Rs.10,00,000, and sold 90% of goods and r...
BECAUSE ACCORDING TO CONSERVATISM/PRUDENCE CONCEPT CLOSING STOCK IS VALUED ON MARKET PRICE OR COST PRICE WHICH EVER IS LESS. SO IN THIS CASE MARKET VALUE(90000) WAS LESS THAN COST(100000).SO THATS WHY MARKET VALUE IS TAKEN.
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A Limited purchased goods of Rs.10,00,000, and sold 90% of goods and remaining goods market value is Rs.90,000, and closing stock is 10%, but he recorded Rs.90,000 and not Rs.1,00,000. Which concept does he follows:-a)Materiality conceptb)Cost conceptc)Entity conceptd)Conservatism conceptCorrect answer is option 'D'. Can you explain this answer?
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A Limited purchased goods of Rs.10,00,000, and sold 90% of goods and remaining goods market value is Rs.90,000, and closing stock is 10%, but he recorded Rs.90,000 and not Rs.1,00,000. Which concept does he follows:-a)Materiality conceptb)Cost conceptc)Entity conceptd)Conservatism conceptCorrect answer is option 'D'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about A Limited purchased goods of Rs.10,00,000, and sold 90% of goods and remaining goods market value is Rs.90,000, and closing stock is 10%, but he recorded Rs.90,000 and not Rs.1,00,000. Which concept does he follows:-a)Materiality conceptb)Cost conceptc)Entity conceptd)Conservatism conceptCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A Limited purchased goods of Rs.10,00,000, and sold 90% of goods and remaining goods market value is Rs.90,000, and closing stock is 10%, but he recorded Rs.90,000 and not Rs.1,00,000. Which concept does he follows:-a)Materiality conceptb)Cost conceptc)Entity conceptd)Conservatism conceptCorrect answer is option 'D'. Can you explain this answer?.
A Limited purchased goods of Rs.10,00,000, and sold 90% of goods and remaining goods market value is Rs.90,000, and closing stock is 10%, but he recorded Rs.90,000 and not Rs.1,00,000. Which concept does he follows:-a)Materiality conceptb)Cost conceptc)Entity conceptd)Conservatism conceptCorrect answer is option 'D'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about A Limited purchased goods of Rs.10,00,000, and sold 90% of goods and remaining goods market value is Rs.90,000, and closing stock is 10%, but he recorded Rs.90,000 and not Rs.1,00,000. Which concept does he follows:-a)Materiality conceptb)Cost conceptc)Entity conceptd)Conservatism conceptCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A Limited purchased goods of Rs.10,00,000, and sold 90% of goods and remaining goods market value is Rs.90,000, and closing stock is 10%, but he recorded Rs.90,000 and not Rs.1,00,000. Which concept does he follows:-a)Materiality conceptb)Cost conceptc)Entity conceptd)Conservatism conceptCorrect answer is option 'D'. Can you explain this answer?.
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