A-AS Level (CIE) Accounting Paper-2: Specimen Questions with Answers 45 - 46 of 53

Question 45

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Explain the accounting standard:

(a) IAS (6)

(b) IAS (10)

(c) IAS (14)

Explanation

(a) IFRS (6) : It is limited to the accounting for and reporting of costs associated only with the exploration of costs associated only with the exploration and evaluation of mineral resources. These activities are defined as the search for mineral after the entity has obtained legal rights to explore in a specific area.

(b) IFRS (10) : It establishes principles for presentation and preparation of consolidated statements when an entity controls one or more entities.

(c) IFRS (14) : To establish principles for reporting financial information by line of business and by geographical area. It applies to enterprises whose equity or debt securities are publicly traded and to enterprise in the process of issuing securities to the public.

Question 46

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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.

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