CIE Accounting Paper-1: Specimen Questions with Answers 125 - 127 of 214

Passage

Mosses started a business on 1 December 2015 printing designs on Sarees and bought a printing machine for $32000.

He decided to depreciate the printing machine on the straight line basis over 10 years and expected the machine to have a scrap value of $7000 after that time.

Question number: 125 (4 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

Mosses bought the new machine at the end of 2017 and sold the existing machine for scrap for $4000.

Prepare the Disposal of non-current (fixed) assets account in Mosses’s ledger account.

Disposal of machinery account

Explanation

Disposal of machinery account

Disposal of machinery account at the end of 2017

Table of Disposal machinery account at the end of 2017

Date

Particulars

$

Date

Particular

$

October 12

32000

October 15

Depreciation

5000

Bank

4000

Profit/loss account

23000

On sale of fixed asset an’ asset disposal account’ may be opened in order to ascertain the profit and loss incurred during the sale of old fixed assets. It is usually opened with the cost value of assets.

Question number: 126 (5 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

Give one reason why depreciation on fixed assets are shown in an income and statement.

Explanation

The primary objectives are as follows:

  • To ascertain of true profit
  • Presentation of true financial position of the firm.
  • No distortion of divisible profits.

The value of an asset may get exhausted due to it over usage. The reduction in the asset should be provided from the income in order to calculate the true and real income of the business. Thus depreciation on fixed assets is shown in the profit and loss accounts.

Question number: 127

Short Answer Question▾

Write in Short

Give brief meaning of the following terms.

Trading account:

Explanation

Trading account is created for a particular period of time to know the trading activity and their results of the business. The transaction which is direct relation to the good dealt in by the business are recorded under the trading accounts.

Items which are appeared in the trading accounts

Items Which Are Appeared in the Trading Accounts

shows image of Items which are appeared in the trading accounts