Tag: accounting standards: concept and objectives

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Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

The main objective of Accounting Standards is to ___________.

  1. Prepare the accounting reports which is easily understood by common man

  2. Comply with the legal formalities

  3. Harmonise the diversified accounting practices

  4. Comply with the requirements of the International Accounting Standards (IAS)
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The primary objective of accounting standards are:

1. To provide a standard for the diverse accounting policies and principles.
2. To put an end to the non-comparability of financial statements.
3. To provide standards which are transparent for users.
4. To provide a suitable starting point for accounting. etc.
 The primary objective of accounting standards is to harmonize  the different accounting policies. The policies are used in the preparation of financial reports.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Accounting Standards Board of India was established in the year ______.

  1. $1970$
  2. $1972$
  3. $1973$
  4. $1977$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Indian accounting standards is the accounting standard adopted by companies in India and issued under the supervision of accounting standard board (ASB) which was constituted as a body in the year 1977. 

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

When a fixed asset is acquired in exchange for another asset, its cost is usually determined by reference to the_________________.

  1. Net book value of the asset given up

  2. Gross book value of the asset given up

  3. Net book value of the asset acquired

  4. Gross book of the asset acquired
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a fixed asset is acquired in exchange for another asset, its cost is usually determined by reference to the net book value. Net book value of the asset given up is the cost less depreciation. 

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Revenue from service transactions, is usually recognized by a method known as__________.

  1. Accrued method.

  2. Proportionate completion method.

  3. Consistency method.

  4. Matching principle.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Revenues from service transactions, is usually recognised by a method known as proportionate completion method. Proportionate completion method is a method where the revenues or costs of service are recorded as a percentage of work completed. 

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Revenue arising from the use by others of enterprise resources yielding interest should be recognized on_____________.

  1. Time proportion basis.

  2. Accrual basis.

  3. Actual receipt basis.

  4. When right to receive payment is established.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Interest revenue is recognized on a time proportion basis, reflecting the passage of time during which the resource is used by others.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

An expenditure incurred relating to fixed asset resulting in increase in capacity of the asset should be_____________.

  1. Charges to P&L a/c.

  2. Added to gross book value of asset.

  3. Added to net book value of asset.

  4. Treated as deferred revenue expenditure.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An expenditure incurred relating to fixed asset resulting in increase in capacity of the asset should be added to the gross book value of asset. They are not charged to P & L because they are expected to provide value and can be consumed over a period of time. 

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

In case of service transactions, when performance consists of the execution of a single act, revenue recognition takes place by____________.

  1. Accrued method.

  2. Proportionate completion method.

  3. Completed service contract method.

  4. Consistency method.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When a service transaction consists of a single act, revenue is recognized only when that act is completed, known as the completed service contract method.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

The term 'Inventory' includes any tangible item held_________.

  1. For sale.

  2. For consumption in production of goods/ services for sale.

  3. Either (A) or (B).

  4. All of these.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The term 'Inventory' includes any tangible item held for sale and for consumption in production of goods/services for sale. 

The inventory for sale is the finished goods inventory, whereas the goods for consumption in production of goods/services for sale, is known as raw materials.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Which of the following is an example of 'REVENUE' for the purpose of AS-9?

  1. Appreciation in the value of a fixed asset.

  2. Gain resulting from changes in foreign exchange rates.

  3. Royalties receivable.

  4. Realized gain resulting from the discharge of an obligation at less than its carrying amount.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

AS-9 deals with the bases for recognition of revenue in the statement of profit and loss of an enterprise. The Standard is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from: 

–the sale of goods, 
–the rendering of services, and 
–the use by others of enterprise resources yielding interest, royalties and dividends. 
Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends.

Multiple choice book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

Valuation of inventory is dealt with in ___________.

  1. Accounting Standard-2

  2. Accounting Standard-5

  3. Accounting Standard-6

  4. Accounting Standard-9
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As per AS-2, Valuation of inventories prescribed the accounting treatment for inventories and sets the guidance to determine the value at which the inventories are carried in the financial statement. 

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs. 
The cost of inventories should comprise all costs of purchase, Costs of conversion and other costs incurred in bringing  the inventories to their present location and condition. 
As per AS-2, "Inventories should be valued at the lower of cost and net realisable value."