CA Foundation Exam > CA Foundation Questions > A proprietor, Mr. A has reported a profit of ...
Start Learning for Free
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.
Q. Which measurement base should be followed in the statement (iv)?
(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.
Q. Which measurement base should be followed in the statement (iv)?
- a)Historical Cost
- b)Current Cost
- c)Replacement Cost
- d)Present value
Correct answer is option 'A'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end o...
The correct option is A
A historical cost is a measure of value used in accounting in which the value of an asset on the balance sheet is recorded at its original cost when acquired by the company. The historical cost method is used for fixed assets under generally accepted accounting principles (GAAP). Since the asset is to be recorded at the previous price ,so historical concept should be followed.
Most Upvoted Answer
A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end o...
Measurement Basis in Financial Statements
In financial accounting, the measurement basis refers to the method used to determine the value of assets, liabilities, revenues, and expenses in the financial statements. Different measurement bases can be used, such as historical cost, current cost, replacement cost, and present value. Each measurement basis has its own advantages and disadvantages, and the choice of measurement basis depends on the circumstances and objectives of the financial reporting.
The given scenario involves the purchase of an asset by Mr. A and the recording of its value in his books. Let's analyze each measurement basis and determine which one should be followed in this case.
1. Historical Cost
Historical cost is a measurement basis that records assets at their original purchase price, regardless of any changes in their value over time. This basis is widely used in financial reporting as it is objective and verifiable. In the given scenario, Mr. A recorded the value of the asset in his books based on the purchase price of Rs. 85,000. Therefore, the measurement basis followed in this case is historical cost.
2. Current Cost
Current cost is a measurement basis that records assets at their current market value. This basis provides more relevant information about the value of assets at a specific point in time. However, it may require frequent revaluation and can be subjective. In the given scenario, Mr. A did not record the asset at its current market value but at its original purchase price. Therefore, current cost is not applicable in this case.
3. Replacement Cost
Replacement cost is a measurement basis that records assets at the cost of replacing them with similar assets. This basis is useful when the market value of assets is not readily available. However, it may not reflect the true economic value of assets. In the given scenario, there is no indication that the asset was recorded at its replacement cost. Therefore, replacement cost is not applicable in this case.
4. Present Value
Present value is a measurement basis that discounts future cash flows to their present value. This basis is commonly used for liabilities and financial instruments. In the given scenario, there is no mention of any future cash flows or liabilities that need to be discounted. Therefore, present value is not applicable in this case.
Conclusion
Based on the given information, the measurement basis followed in statement (iv) is historical cost. Mr. A recorded the value of the asset in his books based on its purchase price of Rs. 85,000. This measurement basis is objective and consistent with the general principles of financial accounting.
In financial accounting, the measurement basis refers to the method used to determine the value of assets, liabilities, revenues, and expenses in the financial statements. Different measurement bases can be used, such as historical cost, current cost, replacement cost, and present value. Each measurement basis has its own advantages and disadvantages, and the choice of measurement basis depends on the circumstances and objectives of the financial reporting.
The given scenario involves the purchase of an asset by Mr. A and the recording of its value in his books. Let's analyze each measurement basis and determine which one should be followed in this case.
1. Historical Cost
Historical cost is a measurement basis that records assets at their original purchase price, regardless of any changes in their value over time. This basis is widely used in financial reporting as it is objective and verifiable. In the given scenario, Mr. A recorded the value of the asset in his books based on the purchase price of Rs. 85,000. Therefore, the measurement basis followed in this case is historical cost.
2. Current Cost
Current cost is a measurement basis that records assets at their current market value. This basis provides more relevant information about the value of assets at a specific point in time. However, it may require frequent revaluation and can be subjective. In the given scenario, Mr. A did not record the asset at its current market value but at its original purchase price. Therefore, current cost is not applicable in this case.
3. Replacement Cost
Replacement cost is a measurement basis that records assets at the cost of replacing them with similar assets. This basis is useful when the market value of assets is not readily available. However, it may not reflect the true economic value of assets. In the given scenario, there is no indication that the asset was recorded at its replacement cost. Therefore, replacement cost is not applicable in this case.
4. Present Value
Present value is a measurement basis that discounts future cash flows to their present value. This basis is commonly used for liabilities and financial instruments. In the given scenario, there is no mention of any future cash flows or liabilities that need to be discounted. Therefore, present value is not applicable in this case.
Conclusion
Based on the given information, the measurement basis followed in statement (iv) is historical cost. Mr. A recorded the value of the asset in his books based on its purchase price of Rs. 85,000. This measurement basis is objective and consistent with the general principles of financial accounting.
Attention CA Foundation Students!
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect answer is option 'A'. Can you explain this answer?
Question Description
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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect 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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect 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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect 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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect 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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect 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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect answer is option 'A'. Can you explain this answer?.
Solutions 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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect 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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect 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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect 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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect 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.Q. Which measurement base should be followed in the statement (iv)?a)Historical Costb)Current Costc)Replacement Costd)Present valueCorrect answer is option 'A'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up
within 7 days!
within 7 days!
Takes less than 10 seconds to signup