Tag: accounting systems and reporting standards

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Questions Related to accounting systems and reporting standards

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

According to Accounting Standard-2, inventory is to be valued at __________.

  1. Actual cost or sales value, which ever is less.

  2. Historical cost.

  3. Net realizable value.

  4. Historical cost or net realizable value, which ever is less.
Reveal answer Fill a bubble to check yourself
D 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."

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

According to Accounting Standard-10, gross  book value of a fixed asset may be____________.

  1. Fair market value.

  2. Historical cost.

  3. Revaluation amount.

  4. Historical cost or revaluation amount.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

According to AS-10, the gross book value of a fixed asset is either its historical cost or a revalued amount. This provides flexibility in reporting the value of assets on the balance sheet.

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

Where depreciable assets are revalued, then according to Accounting Standard-6 depreciation amount should be based on____________.

  1. Historical cost and profit on revaluation should be transferred to P and L a/c

  2. Revalued amount

  3. Depreciated value of the asset

  4. Accounting Standard-6 does not specify anything in this regard
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

AS-6 deals with depreciation on fixed assets hence, depreciable assets are revalued, then depreciation amount should be based on revalued amount of the asset. 

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

Accounting Standard-6 relating to depreciation is not applicable on ____________.

  1. Building

  2. Plant and machinery

  3. Live stock

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

Accounting standard-6, relating to depreciation is not applicable to the following items to which special considerations apply:

1. Forest, plantation, and similar regenerative natural resources.
2. Wasting assets including expenditure on the exploration for and extraction of minerals, oil, natural gas, and similar non-regenerative resources. 
3. Expenditure or research and develepoment.
4. Goodwill.
5. Live stock.
The statement also does not apply to land unless it has a limited useful life for the enterprise.

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

According to Accounting Standard-6 which of the following is not required to be disclosed in the financial statement?

  1. Historical cost of the asset

  2. Depreciated value of the asset

  3. Accumulated depreciation

  4. Total depreciation for the period for each class of asset
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

AS-6 deals with depreciation of the tangible asset. Hence, only the historical cost, accumulated depreciation on the asset and total depreciation for the period for each class of asset will be recorded. Depreciable value of asset is not to be disclosed according to AS-6.

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

Inventory of consumable stores and maintenance supplies should ordinarily be valued at __________.

  1. Historical cost

  2. Net realizable value

  3. Gross sales value

  4. Historical cost or net realizable value, whichever is lower
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Net realisable value  is the estimated selling price in the ordinary course of business less the estimates 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". 

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

Accounting Standard-6 relating to depreciation is applicable to___________.

  1. Forests and plantations

  2. Mines

  3. Goodwill

  4. Land if it has a limited useful life for the enterprise
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting Standard-6 deals with depreciation accounting and applies to all depreciable assets, except the following items to which special considerations apply:—

(i) forests, plantations and similar regenerative natural resources; 
(ii) wasting assets including expenditure on the exploration for and extraction of minerals, oils, natural gas and similar non-regenerative resources; 
(iii) expenditure on research and development; 
(iv) goodwill and other intangible assets; 
(v) live stock. 
This standard also does not apply to land unless it has a limited useful life for the enterprise.

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

Accounting Standard-6 relating to depreciation is recommended for use companies___________________.

  1. Listed on a recognised stock exchange

  2. Engaged in manufacturing business

  3. Engaged in manufacturing or trading business

  4. All types of business undertakings
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Accounting Standards issued by the Institute of Chartered Accountancy of India are issued for better presentation of books of account and to ensure that they show a true and fair view. They are recommended for the used by company listed on a recognised stock exchange. 

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 information relating to fixed assets should be disclosed in the financial statements as per Accounting Standard-10 ?

  1. Gross book value of fixed asset at the beginning of the year

  2. Gross book value of fixed asset at the end of the year

  3. Net book value of fixed asset at the beginning and at the end of the year

  4. (A), (B), and (C)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The following information should be disclosed in the financial statements: 

(i) Gross and net book values of fixed assets at the beginning and end of an accounting period showing additions, disposals, acquisitions and other movements;
 (ii) Expenditure incurred on account of fixed assets in the course of construction or acquisition; and 
(iii) Revalued amounts substituted for historical costs of fixed assets, the method adopted to compute the revalued amounts, the nature of indices used, the year of any appraisal made, and whether an external valuer was involved, in case where fixed assets are stated at revalued amounts.

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

Accounting standard-10 does not deal with the following fixed assets________.

  1. Goodwill

  2. Patents

  3. Trade marks

  4. Live stock
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Accounting standard - 10 (Property, plant and equipment - updated) deals with all the fixed assets like goodwill, patent, trademarks, machinery etc. It does not deal with live stock as it is a (inventory) Current asset and not a fixed asset.