CIE Accounting Paper-1: Specimen Questions 119 - 120 of 214
Question number: 119
A trader recognizes that his machinery depreciate in value each year.
How does he record this in his final accounts?
The expenses incurred in relation to the fixed assets are shown in the profit and loss account in the debit side and the same amount is decreased from the fixed asset of the business. Hence the expenses will increase in profit and loss account and decrease the value of the assets.
Question number: 120
Stock in trades are to be recorded at cost or market price whichever is less.
Which accounting principle is being applied?
All prospective losses are taken into consideration in the prudence principle. But in this principle all prospective profits are left in calculation. Hence Stock in trades are to be recorded at cost or market price whichever is less.