A-AS Level (CIE) Accounting Paper-1: Specimen Questions with Answers 44 - 45 of 93

A՚s Trial Balance provides you the following information:

1. Opening stock $ 8,000

2. Purchases $ 33,800

3. Return outward $ 1600

4. Return Inward $ 2300

5. Closing Stock $ 4340

The amount to be recorded as Gross Profit will be:

Answer

a.

Explanation

Trading and Profit & Loss A/c

Trading and Profit & Loss a/C

Particulars		Amount	Particulars	Amount
To Opening Stock	8000
To purchases	33800
Less: Return outwards	1,600	32200
		700
		17,180
To carriage inwards
To Gross Profit c/d

The method of depreciation is applicable every year to facilitate comparability of the operational results of the enterprise from one period to another period. Change of method of depreciation from one method to another is made:

Answer

d.

Explanation

The depreciation method selected should be applied consistently from period to period. A change from one method of providing depreciation to another should be made only in the following cases when:

• The adoption of new method is required by Statute
• The new method is required for compliance with an accounting standard
• Change in the value result in a more appropriate preparation or presentation of the financial statements of the enterprise.

The change of method of depreciation should be treated as a change in accounting policy and its effect should be quantified and disclosed. The change in the method of depreciation should apply from the date of the asset coming into use. In other words, the accounting standard wants the change to be implemented retrospectively.