CA Foundation Exam > CA Foundation Questions > Mr. A purchased a machinery costing Rs. 1,00,...
Start Learning for Free
Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.
Q. Which of the following concepts was violated by A?
- a)Cost concept
- b)Matching concept
- c)Realisation concept
- d)Periodicity concept.
Correct answer is option 'A'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Most Upvoted Answer
Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009....
Understanding the Cost Concept Violation
Mr. A's decision to value the machinery at Rs. 1,20,000 in his books violates the cost concept of accounting. Here's a detailed breakdown:
What is the Cost Concept?
- The cost concept states that assets should be recorded at their actual cost incurred to acquire them.
- This includes the purchase price and any additional costs necessary to prepare the asset for use, such as transportation, installation, and dismantling of old machines.
Calculation of Actual Cost
- Purchase Price: Rs. 1,00,000
- Transportation Charges: Rs. 10,000
- Installation Charges: Rs. 4,000
- Dismantling Charges: Rs. 10,000
- Total Cost of Machinery:
Rs. 1,00,000 + Rs. 10,000 + Rs. 4,000 + Rs. 10,000 = Rs. 1,24,000
Violation of the Cost Concept
- Mr. A valued the machinery at its market value (Rs. 1,20,000) instead of its actual cost (Rs. 1,24,000).
- This approach misrepresents the value of the asset in the financial statements and does not adhere to the cost principle.
Consequences of This Violation
- Leads to inaccurate financial reporting, impacting decision-making for stakeholders.
- Can result in financial statement manipulation, which may mislead investors and creditors.
In summary, Mr. A's action is a clear violation of the cost concept by valuing the asset at market value rather than its actual cost incurred. Adhering to this principle ensures transparency and reliability in financial reporting.
Mr. A's decision to value the machinery at Rs. 1,20,000 in his books violates the cost concept of accounting. Here's a detailed breakdown:
What is the Cost Concept?
- The cost concept states that assets should be recorded at their actual cost incurred to acquire them.
- This includes the purchase price and any additional costs necessary to prepare the asset for use, such as transportation, installation, and dismantling of old machines.
Calculation of Actual Cost
- Purchase Price: Rs. 1,00,000
- Transportation Charges: Rs. 10,000
- Installation Charges: Rs. 4,000
- Dismantling Charges: Rs. 10,000
- Total Cost of Machinery:
Rs. 1,00,000 + Rs. 10,000 + Rs. 4,000 + Rs. 10,000 = Rs. 1,24,000
Violation of the Cost Concept
- Mr. A valued the machinery at its market value (Rs. 1,20,000) instead of its actual cost (Rs. 1,24,000).
- This approach misrepresents the value of the asset in the financial statements and does not adhere to the cost principle.
Consequences of This Violation
- Leads to inaccurate financial reporting, impacting decision-making for stakeholders.
- Can result in financial statement manipulation, which may mislead investors and creditors.
In summary, Mr. A's action is a clear violation of the cost concept by valuing the asset at market value rather than its actual cost incurred. Adhering to this principle ensures transparency and reliability in financial reporting.
Free Test
FREE
| Start Free Test |
Community Answer
Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009....
Because, cost concept is valid
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
Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct answer is option 'A'. Can you explain this answer?
Question Description
Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct 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 Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct 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 Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct answer is option 'A'. Can you explain this answer?.
Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct 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 Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct 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 Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct answer is option 'A'. Can you explain this answer?.
Solutions for Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct 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 Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct answer is option 'A'. Can you explain this answer?, a detailed solution for Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct answer is option 'A'. Can you explain this answer? has been provided alongside types of Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Mr. A purchased a machinery costing Rs. 1,00,000 on 1st October, 2009. Transportation and installation charges were incurred amounting Rs. 10,000 and Rs. 4,000 respectively.Dismantling charges of the old machine in place of which new machine was purchased amounted Rs. 10,000. Market value of the machine was estimated at Rs. 1,20,000 on 31st March 2010. While finalising the annual accounts, A values the machinery at Rs. 1,20,000 in his books.Q. Which of the following concepts was violated by A?a)Cost conceptb)Matching conceptc)Realisation conceptd)Periodicity concept.Correct 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
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup