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Read the following hypothetical Case Study and answer the given questions:
A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,
(i) Owner of the business is treated as creditor to the extent of his capital;
(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.
Financial statements are prepared on 31st March ever year.
A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost.’ Identify the concept violated in the above situation.
- a)Conservatism
- b)Business entity
- c)Accounting period
- d)Matching
Correct answer is option 'A'. Can you explain this answer?
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Read the following hypothetical Case Study and answer the given quest...
Goods purchase Rs 2,00,000
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so 75% goods are sold out
Remaining goods at cost = 2,00,000 × 25/100 = 50,000
remaining goods at cost Rs 50,000
Market value of goods is 48,000
Cost of the goods value is higher than market value
This is a Conservatism convention concept
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Read the following hypothetical Case Study and answer the given quest...
Concept Violated: Conservatism
Explanation:
The concept violated in the given situation is the Conservatism concept. Conservatism is an accounting principle that requires caution while recognizing uncertain events and transactions. Under this principle, potential losses are recognized immediately, but potential gains are only recognized when they are realized.
In the given situation, the accountant valued the closing stock at cost, which violates the Conservatism concept. The market value of the remaining goods was ₹43,000, but the accountant did not consider it while valuing the closing stock. This violates the Conservatism concept as the accountant did not recognize the potential loss of the business, which could have occurred if the market value of the remaining goods had decreased.
The accountant's approach of treating the owner of the business as a creditor to the extent of his capital also violates the Conservatism concept. This approach assumes that the business will be able to pay back the owner's capital, which is uncertain. This violates the Conservatism concept as it is not conservative to assume that the business will be able to pay back the capital.
Conclusion:
In conclusion, the accountant's approach of valuing the closing stock at cost and treating the owner of the business as a creditor violates the Conservatism concept. The accountant should have considered the market value of the remaining goods while valuing the closing stock and should have been more conservative while treating the owner of the business as a creditor.
Explanation:
The concept violated in the given situation is the Conservatism concept. Conservatism is an accounting principle that requires caution while recognizing uncertain events and transactions. Under this principle, potential losses are recognized immediately, but potential gains are only recognized when they are realized.
In the given situation, the accountant valued the closing stock at cost, which violates the Conservatism concept. The market value of the remaining goods was ₹43,000, but the accountant did not consider it while valuing the closing stock. This violates the Conservatism concept as the accountant did not recognize the potential loss of the business, which could have occurred if the market value of the remaining goods had decreased.
The accountant's approach of treating the owner of the business as a creditor to the extent of his capital also violates the Conservatism concept. This approach assumes that the business will be able to pay back the owner's capital, which is uncertain. This violates the Conservatism concept as it is not conservative to assume that the business will be able to pay back the capital.
Conclusion:
In conclusion, the accountant's approach of valuing the closing stock at cost and treating the owner of the business as a creditor violates the Conservatism concept. The accountant should have considered the market value of the remaining goods while valuing the closing stock and should have been more conservative while treating the owner of the business as a creditor.
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Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost.’ Identify the concept violated in the above situation.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'A'. Can you explain this answer?
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Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost.’ Identify the concept violated in the above situation.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost.’ Identify the concept violated in the above situation.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost.’ Identify the concept violated in the above situation.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'A'. Can you explain this answer?.
Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost.’ Identify the concept violated in the above situation.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'A'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost.’ Identify the concept violated in the above situation.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Read the following hypothetical Case Study and answer the given questions:A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost. According to him,(i) Owner of the business is treated as creditor to the extent of his capital;(ii) All expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income.Financial statements are prepared on 31st March ever year.A business purchased goods for ₹2,00,000 and sold 75% of such goods during accounting year ended 31st March, 2020. The market value of remaining goods was ₹43,000. Accountant valued closing stock at cost.’ Identify the concept violated in the above situation.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'A'. Can you explain this answer?.
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