CA Foundation Exam > CA Foundation Questions > ACE Traders purchased goods for Rs. 30,00,000...
Start Learning for Free
ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______
- a)Money measurement
- b)Periodicity
- c)Cost
- d)Conservatism
Correct answer is option 'D'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goo...
Estimated selling price less estimated cost of sales is known as Net Realizable Value. This is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs are unnecessary to make a sale.
View all questions of this test
Most Upvoted Answer
ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goo...
The correct option is D.
Conservatism Principle is a concept in accounting under GAAP which recognises and records expenses and liabilities-certain or uncertain in nature, as soon as possible but recognises revenues and assets when they are assured of being received. It gives clear guidance in recording cases of uncertainty and estimates. Since the value of the goods is decreased the company writes down this decrease.
Free Test
FREE
| Start Free Test |
Community Answer
ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goo...
The correct answer is option D, Conservatism.
Explanation:
The concept of conservatism in accounting requires that when there are multiple acceptable alternatives, the option that is least likely to overstate assets and income should be chosen. It is a principle that encourages caution and prudence in financial reporting.
In this case, ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of these goods during the accounting year. The market value of the remaining goods was Rs. 6,00,000. However, ACE Traders valued the closing stock at Rs. 6,00,000 and not at Rs. 9,00,000.
This valuation decision is based on the principle of conservatism. By valuing the closing stock at Rs. 6,00,000, ACE Traders is taking a more cautious approach and not overestimating the value of their inventory. This is because the market value of the remaining goods is uncertain and may not be realized in the future.
Valuing the closing stock at Rs. 9,00,000 would have resulted in a higher valuation of assets and potentially higher income. However, the concept of conservatism suggests that it is better to err on the side of caution and choose the lower valuation to avoid overstating the financial position of the company.
In conclusion, ACE Traders valued the closing stock at Rs. 6,00,000 and not at Rs. 9,00,000 due to the concept of conservatism, which requires a more cautious approach in financial reporting by choosing the least favorable alternative when there is uncertainty.
Explanation:
The concept of conservatism in accounting requires that when there are multiple acceptable alternatives, the option that is least likely to overstate assets and income should be chosen. It is a principle that encourages caution and prudence in financial reporting.
In this case, ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of these goods during the accounting year. The market value of the remaining goods was Rs. 6,00,000. However, ACE Traders valued the closing stock at Rs. 6,00,000 and not at Rs. 9,00,000.
This valuation decision is based on the principle of conservatism. By valuing the closing stock at Rs. 6,00,000, ACE Traders is taking a more cautious approach and not overestimating the value of their inventory. This is because the market value of the remaining goods is uncertain and may not be realized in the future.
Valuing the closing stock at Rs. 9,00,000 would have resulted in a higher valuation of assets and potentially higher income. However, the concept of conservatism suggests that it is better to err on the side of caution and choose the lower valuation to avoid overstating the financial position of the company.
In conclusion, ACE Traders valued the closing stock at Rs. 6,00,000 and not at Rs. 9,00,000 due to the concept of conservatism, which requires a more cautious approach in financial reporting by choosing the least favorable alternative when there is uncertainty.
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
ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. Can you explain this answer?
Question Description
ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. 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 ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. 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 ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. Can you explain this answer?.
ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. 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 ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. 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 ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. Can you explain this answer?.
Solutions for ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. 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 ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. Can you explain this answer?, a detailed solution for ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. Can you explain this answer? has been provided alongside types of ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice ACE Traders purchased goods for Rs. 30,00,000 and sold 70% of such goods during the accounting year ended 31stMarch, 2012. The market value of the remaining goods was Rs. 6, 00,000. ACE Traders valued the closing stock at Rs. 6, 00,000 and not at Rs. 9, 00,000 due to concept of ______a)Money measurementb)Periodicityc)Costd)ConservatismCorrect answer is option 'D'. 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!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup