A-AS Level (CIE) Accounting Paper-2: Specimen Questions with Answers 19 - 20 of 53
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Question 19
Explanation
| S. no | Book keeping | Accountancy |
| 1. | Book keeping is considered as end | Accountancy is considered as beginning |
| 2. | The primary stage of accounting function is called book-keeping | The overall accounting functions are guided by accountancy |
| 3. | Accountancy can complete its function with the help of book keeping | Accountancy depends on book keeping for its complete function |
| 4. | The necessary data about financial performance and financial position are taken from book keeping | Accountancy 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 conventions | Accountancy does not take any principles, concepts, and conventions from book keeping. |
Question 20
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.