A-AS Level (CIE) Accounting Paper-2: Specimen Questions with Answers 19 - 20 of 53

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Question 19

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Distinguish between book keeping and Accountancy.

Explanation

Distinguish between Book Keeping and Accountancy
S. noBook keepingAccountancy
1.Book keeping is considered as endAccountancy is considered as beginning
2.The primary stage of accounting function is called book-keepingThe overall accounting functions are guided by accountancy
3.Accountancy can complete its function with the help of book keepingAccountancy depends on book keeping for its complete function
4.The necessary data about financial performance and financial position are taken from book keepingAccountancy can take its own decisions. Prepare reports and statements from the data taken from book keeping.
5.Financial transactions are recorded based on accounting principles concepts and conventionsAccountancy does not take any principles, concepts, and conventions from book keeping.

Question 20

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Short Answer▾

Explain the causes of depreciation.

Explanation

Depreciation is a term applicable in case of plant, building, equipment, machinery, furniture, fixture, vehicles, tools etc. These long term or fixed assets have a limited useful life i.e.. , they will provide service to the entity over a limited number of accounting periods. Depreciation implies gradual decrease in the value of an asset due to normal wear and tea, obsolescence etc.

Causes of Depreciations are:

  • Wear and tear of fixed assets like plant and machinery, furniture, motor vehicle etc. they suffer from loss of utility due to vibration, chemical reaction, negligent handling etc.
  • Innovation of better substitutes change in market demand; imposition of legal restrictions may result into discarding an asset.
  • Changes in scale of production or volume of activities may lead to discarding an asset.

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