A-AS Level (CIE) Accounting Paper-2: Specimen Questions with Answers 3 - 4 of 6

Question 3

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Write in Short

Short Answer▾

Differentiate between tangible and intangible assets.

Explanation

Tangible assets are those assets which can be seen or touched. In other words, which have a physical existence such as land building, plant, furniture, stock, cash etc. Intangible assets are those assets which do not have a physical existence and which cannot be seen or felt. Examples of such assets are Goodwill, patents, trademarks, and prepaid expenses. Intangible assets are also valuable assets. For example, with the help of patents (know-how) businessman can produce goods and then this goodwill helps in attracting customers easily. Therefore, intangible assets help the firm in earning profits as much as tangible assets.

Hence both tangible and intangible assets are valuable assets. Valuable of intangible assets is based on the benefit and facility available to the business from such assets.

Question 4

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Describe in Detail

Essay▾

Explain why fixed assets appear on the assets side.

Explanation

Assets which are acquired for permanent use in the business and are not meant for resale are called fixed. Such assets are purchased once and last for many years such as goodwill, land, buildings, leaseholds, railway sidings, plant and machinery, furniture, development of property, patents, live-stock, vehicles etc.

  • In case of fixed assets, original cost of each asset, additions made during the year, cost of the asset sold during the year and the total depreciation provided on each asset up to the end of the year are to be stated separately.
  • If all such details cannot be conveniently included in the balance of sheet itself, a separate schedule containing all such details will be annexed to the balance of sheet and it will form a part of the balance sheet.

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