IGCSE Accounting Paper-1: Specimen Questions with Answers 291 - 293 of 338
Passage
Anand depreciates his furniture using the straight line method of depreciation. He provides a full year depreciation in the year of purchase and none in the year of disposal. He provided the following information:
| Furniture | ||
Cost $ | Accumulated Depreciation $ | |
At 31 Dec 2,016 | 55,000 | 11,000 |
At 31 Dec 2,017 | 55,000 | 16,500 |
There were no new purchase or disposal during the year ended 31 Dec 2,017.
Question 291 (5 of 5 Based on Passage)
Write in Brief
One Liner▾Give the journal entry for eliminating the accumulated depreciation on the furniture sold on 15 June 2,019. (Marks 2)
Explanation
| Date | Dr $ | Cr $ | |
2,019 June 15 | Provision for depreciation on Furniture A/c | 1,800 | |
Disposal A/c | 1,800 |
Question 292
Question
MCQ▾ABC Ltd. bought a building at a cost of $ 2, 00,000 in 2,010, the fair market value of which stands at $ 4, 50,000 on 31 December 2,019. ABC Ltd. shows the building at $ 4, 50,000 in his balance sheet on 31 December 2,019. Which accounting principle is violated here?
Choices
| Choice (4) | |
|---|---|
a. | Going Concern Principle |
b. | Conservatism Principle |
c. | Cost Principle |
d. | Realization Principle |
Answer
c.Explanation
- Cost Principle says that the fixed assets of a business should always be recorded at their original cost regardless of their current market price. The original cost is the amount actually paid for its acquisition.
The building in this case should be shown at the price paid by ABC Ltd. to acquire it i. e. at $ 2, 00,000.
Question 293
Question
MCQ▾X writes a cheque to his supplier of goods and his supplier sends this into his bank for collection. Which of the following is correct implication of this in X’s books of accounts?
Choices
| Choice (4) | |
|---|---|
a. | Banks- Decrease, Creditors- Decrease, |
b. | Banks- Unchanged, Creditors- Decrease, |
c. | Banks- Decrease, Creditors- Increase, |
d. | Banks- Decrease, Creditors- Unchanged, |
Answer
a.Explanation
- When X writes a cheque in favour of his supplier of goods, his bank balance will get reduced by the amount of cheque.
As the same time, the supplier is a creditor for X, so when X pays him, the amount standing to the credit of creditors” account will also get reduced as the supplier is no longer a creditor for X.