Accounting Principles and Practice

In case of motor insurance, the sum insured is the insured's declared value [IDV]. It is the value of the vehicle, which is found by adjusting the current manufacturer's listed selling price of the vehicle with depreciation percentage as prescribed in the IRDA regulations. Manufacturer's listed selling price will include local duties / taxes, excluding registration and insurance.

Section 13 of IRDA, 1999 deals with TRANSFER OF ASSETS, LIABILITIES, ETC., OF INTERIM INSURANCE REGULATORY AUTHORITY.

A rebate is a deduction from the quoted price that is returned to the customer after the purchase is complete. Unlike a discount (applied at purchase), a rebate involves the buyer paying full price first, then receiving a partial refund later. This differs from general offers or bonanzas which are promotional tactics.

Current Ratio = Current Assets / Current Liabilities. This liquidity ratio measures a company's ability to pay short-term obligations. A ratio above 2:1 is generally considered healthy, below 1:1 indicates potential liquidity problems. Option A inverts the calculation, B uses long-term liabilities, and C incorrectly uses capital assets (fixed assets).

 In this system, continuous  record of receipt and issue of materials is maintained by the stores department and the information about the stock material is always available. 

 Imputed cost is the cost which are considered only for the purpose of decision making and performance evaluation. In interest on capital no actual cash payment is made, but the concept is that had the funds been invested elsewhere they would have earned interest.

Liability is the value which need to discharge in the required time, i.e. TDS is a liability to submit into the account of government.

AS-26 is associated with Intangible Assets.

The formula for calculation of depreciation is (Cost - Scrap Value) / Life of Asset. The scrap value recovered after use of asset, so we need to deduct the net value to find the value of depreciation.

 As per the Matching concept, Revenue - expenses = Profit

All of the above are PV methods.

The Diminishing Value (or Declining Balance) method calculates depreciation as a percentage of the remaining book value each year. Since depreciation is always a percentage of a diminishing balance, the asset value approaches but never reaches zero - the depreciation amount gets progressively smaller each year.

The Depletion Method is specifically used for natural resources like mines, oil wells, and quarries. Unlike calendar year methods that allocate depreciation evenly over time, depletion is based on actual extraction or usage of the resource, making it usage-based rather than time-based.

Live stock (animals like cattle, horses) requires periodic revaluation because their value changes due to growth, breeding potential, health, and market conditions. The Revaluation Method assesses actual value at each period-end rather than applying fixed depreciation. This accurately reflects the changing worth of living assets.

Explanation: The profits of a business is transferred to the owner/partner's capital account. According to the business entity concept, the owner is different from the business he owns for purposes of accounting. So the profits the business earns, the business firm is liable to pay to the owner. Hence, profits is a liability. However, the profits/part of the profits may be retained in the business for developmental activities or for reserves subject to the rules from time to time.