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Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000 and paid expenses amounting Rs. 2,70,000 during the year, 2009. He paid Rs. 5,000 for an electricity bill of Dec. 2008 and advance salaries amounting Rs. 15,000 was paid for the month of Jan. 2010. He counted net profit as Rs. 3,50,000.The net profit calculated by him is correct according to _________
- a)Entity concept
- b)Periodicity concept
- c)Matching concept
- d)Conservatism concept
Correct answer is option 'C'. Can you explain this answer?
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Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods am...
Concepts Involved: Entity Concept, Periodicity Concept, Matching Concept, Conservatism Concept.
Explanation:
The net profit calculated by Mohan is correct according to the Matching Concept. Let us understand each concept involved in this scenario:
1. Entity Concept: It states that the business and its owners are separate entities. Transactions and events related to the owner should not be mixed with those of the business. In the given scenario, Mohan paid an electricity bill of December 2008 and advance salaries for January 2010. These transactions are related to the owner and should not be included in the calculation of the net profit of the business.
2. Periodicity Concept: It states that the life of a business can be divided into smaller periods to measure the performance of the business. Usually, the period is one year. In the given scenario, it is not clear whether the net profit of Rs. 3,50,000 was earned during the financial year or some other period. Therefore, this concept is not applicable here.
3. Matching Concept: It states that expenses incurred in earning revenue should be matched with the revenue earned during the same period. In the given scenario, Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000. Therefore, the cost of goods sold is Rs. 12,00,000 (4/5th of Rs. 15,00,000). He paid expenses amounting Rs. 2,70,000 during the year. These expenses should be matched with the revenue earned during the same period. Hence, the net profit is correctly calculated as Rs. 3,50,000 (Revenue of Rs. 18,00,000 minus Cost of goods sold of Rs. 12,00,000 minus Expenses of Rs. 2,70,000).
4. Conservatism Concept: It states that while recognizing profits, uncertainties and risks should be taken into account. In the given scenario, there is no uncertainty or risk involved that needs to be accounted for. Therefore, this concept is not applicable here.
Hence, the correct answer is option (c) Matching Concept.
Explanation:
The net profit calculated by Mohan is correct according to the Matching Concept. Let us understand each concept involved in this scenario:
1. Entity Concept: It states that the business and its owners are separate entities. Transactions and events related to the owner should not be mixed with those of the business. In the given scenario, Mohan paid an electricity bill of December 2008 and advance salaries for January 2010. These transactions are related to the owner and should not be included in the calculation of the net profit of the business.
2. Periodicity Concept: It states that the life of a business can be divided into smaller periods to measure the performance of the business. Usually, the period is one year. In the given scenario, it is not clear whether the net profit of Rs. 3,50,000 was earned during the financial year or some other period. Therefore, this concept is not applicable here.
3. Matching Concept: It states that expenses incurred in earning revenue should be matched with the revenue earned during the same period. In the given scenario, Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000. Therefore, the cost of goods sold is Rs. 12,00,000 (4/5th of Rs. 15,00,000). He paid expenses amounting Rs. 2,70,000 during the year. These expenses should be matched with the revenue earned during the same period. Hence, the net profit is correctly calculated as Rs. 3,50,000 (Revenue of Rs. 18,00,000 minus Cost of goods sold of Rs. 12,00,000 minus Expenses of Rs. 2,70,000).
4. Conservatism Concept: It states that while recognizing profits, uncertainties and risks should be taken into account. In the given scenario, there is no uncertainty or risk involved that needs to be accounted for. Therefore, this concept is not applicable here.
Hence, the correct answer is option (c) Matching Concept.
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Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000 and paid expenses amounting Rs. 2,70,000 during the year, 2009. He paid Rs. 5,000 for an electricity bill of Dec. 2008 and advance salaries amounting Rs. 15,000 was paid for the month of Jan. 2010. He counted net profit as Rs. 3,50,000.The net profit calculated by him is correct according to _________a)Entity conceptb)Periodicity conceptc)Matching conceptd)Conservatism conceptCorrect answer is option 'C'. Can you explain this answer?
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Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000 and paid expenses amounting Rs. 2,70,000 during the year, 2009. He paid Rs. 5,000 for an electricity bill of Dec. 2008 and advance salaries amounting Rs. 15,000 was paid for the month of Jan. 2010. He counted net profit as Rs. 3,50,000.The net profit calculated by him is correct according to _________a)Entity conceptb)Periodicity conceptc)Matching conceptd)Conservatism conceptCorrect answer is option 'C'. 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 Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000 and paid expenses amounting Rs. 2,70,000 during the year, 2009. He paid Rs. 5,000 for an electricity bill of Dec. 2008 and advance salaries amounting Rs. 15,000 was paid for the month of Jan. 2010. He counted net profit as Rs. 3,50,000.The net profit calculated by him is correct according to _________a)Entity conceptb)Periodicity conceptc)Matching conceptd)Conservatism conceptCorrect answer is option 'C'. 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 Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000 and paid expenses amounting Rs. 2,70,000 during the year, 2009. He paid Rs. 5,000 for an electricity bill of Dec. 2008 and advance salaries amounting Rs. 15,000 was paid for the month of Jan. 2010. He counted net profit as Rs. 3,50,000.The net profit calculated by him is correct according to _________a)Entity conceptb)Periodicity conceptc)Matching conceptd)Conservatism conceptCorrect answer is option 'C'. Can you explain this answer?.
Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000 and paid expenses amounting Rs. 2,70,000 during the year, 2009. He paid Rs. 5,000 for an electricity bill of Dec. 2008 and advance salaries amounting Rs. 15,000 was paid for the month of Jan. 2010. He counted net profit as Rs. 3,50,000.The net profit calculated by him is correct according to _________a)Entity conceptb)Periodicity conceptc)Matching conceptd)Conservatism conceptCorrect answer is option 'C'. 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 Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000 and paid expenses amounting Rs. 2,70,000 during the year, 2009. He paid Rs. 5,000 for an electricity bill of Dec. 2008 and advance salaries amounting Rs. 15,000 was paid for the month of Jan. 2010. He counted net profit as Rs. 3,50,000.The net profit calculated by him is correct according to _________a)Entity conceptb)Periodicity conceptc)Matching conceptd)Conservatism conceptCorrect answer is option 'C'. 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 Mohan purchased goods for Rs. 15,00,000 and sold 4/5th of the goods amounting Rs. 18,00,000 and paid expenses amounting Rs. 2,70,000 during the year, 2009. He paid Rs. 5,000 for an electricity bill of Dec. 2008 and advance salaries amounting Rs. 15,000 was paid for the month of Jan. 2010. He counted net profit as Rs. 3,50,000.The net profit calculated by him is correct according to _________a)Entity conceptb)Periodicity conceptc)Matching conceptd)Conservatism conceptCorrect answer is option 'C'. Can you explain this answer?.
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