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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.
Financial Statements of an entity are prepared at regular intervals in accordance to which accounting concept.
- a)Conservatism
- b)Business entity
- c)Accounting period
- d)Matching
Correct answer is option 'C'. Can you explain this answer?
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Read the following hypothetical Case Study and answer the given quest...
Accounting Period Concept: Every organization, according to its needs, chooses a specific period of time to complete an accounting cycle.
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Read the following hypothetical Case Study and answer the given quest...
Accounting Period Concept
The accounting period concept refers to the idea that financial statements of an entity are prepared at regular intervals. This concept helps in determining the financial performance and position of the business over a specific period of time. In this case study, the financial statements are prepared on 31st March every year.
Explanation of the Given Case Study
In the given case study, a business purchased goods for ₹2,00,000 and sold 75% of such goods during the accounting year ended on 31st March, 2020. The market value of the remaining goods was ₹43,000. The accountant valued the closing stock at cost.
Owner as a Creditor
According to the accountant, the owner of the business is treated as a creditor to the extent of his capital. This means that the owner's capital investment in the business is treated as a liability to the business. The owner's capital is considered a debt owed by the business to the owner. Therefore, it is shown as a liability in the financial statements of the business.
Matching Principle
The accountant also follows the matching principle, which states that all expenses incurred to earn revenue of a particular period should be charged against that revenue to determine the net income. This means that the expenses related to the goods sold during the accounting year should be matched with the revenue generated from the sale of those goods.
Valuation of Closing Stock
In this case, the accountant valued the closing stock at cost. This means that the remaining goods, which were not sold during the accounting year, are valued at their original cost. The market value of the remaining goods is not considered for valuing the closing stock. This is in line with the conservatism principle, which states that assets and income should not be overstated. By valuing the closing stock at cost, the accountant is being conservative and ensuring that the financial statements do not overstate the assets and income of the business.
Conclusion
In conclusion, the financial statements of an entity are prepared at regular intervals in accordance with the accounting period concept. The accountant in this case study treats the owner as a creditor to the extent of his capital and follows the matching principle to determine the net income. The closing stock is valued at cost, adhering to the conservatism principle.
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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.Financial Statements of an entity are prepared at regular intervals in accordance to which accounting concept.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'C'. 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.Financial Statements of an entity are prepared at regular intervals in accordance to which accounting concept.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'C'. 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.Financial Statements of an entity are prepared at regular intervals in accordance to which accounting concept.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'C'. 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.Financial Statements of an entity are prepared at regular intervals in accordance to which accounting concept.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'C'. 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.Financial Statements of an entity are prepared at regular intervals in accordance to which accounting concept.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'C'. 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.Financial Statements of an entity are prepared at regular intervals in accordance to which accounting concept.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'C'. 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.Financial Statements of an entity are prepared at regular intervals in accordance to which accounting concept.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'C'. Can you explain this answer?.
Solutions 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.Financial Statements of an entity are prepared at regular intervals in accordance to which accounting concept.a)Conservatismb)Business entityc)Accounting periodd)MatchingCorrect answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
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