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

Question 44

Question

MCQ▾

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:

Choices

Choice (4)

a.

$ 17180

b.

$ 3,500

c.

$ 5080

d.

$ 4,500

Answer

a.

Explanation

Trading and Profit & Loss A/c

Trading and Profit & Loss a/C
ParticularsAmountParticularsAmount
To Opening Stock8000
To purchases33800
Less: Return outwards1,60032200
700
17,180
To carriage inwards
To Gross Profit c/d

Question 45

Question

MCQ▾

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:

Choices

Choice (4)

a.

If the adoption of the new method is required by statute

b.

For compliance with an accounting standard

c.

If it is taken into consideration that the change in the method would lead to a more appropriate preparation of the financial statements of the business

d.

All a., b. and c. are correct

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.

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