IGCSE Accounting Paper-2: Specimen Questions with Answers 171 - 172 of 189
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Question 171
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Write in Brief
One Liner▾Name the accounting principle explained in the below statement
‘In a given situation, an accountant should choose that accounting alternative that will report lesser profits, less asset amount or a greater liability amount.’ (Marks 1)
Explanation
Principle of Prudence
- Principle of Prudence is a policy of playing safe. Principle of Prudence says that an accountant should not overestimate the amount of revenues or underestimate the amount of expenses.
- Further, assets too shouldn՚t be overstated and the liabilities should not be underestimated.
Question 172
Write in Short
Short Answer▾Kipla Ltd. is a Pharmaceutical Company. Following is the situation of its stock of medicines as on 31 March 2020.
| $ | |
| (I) Medicines in stock | 15000 |
| (II) Medicines whose expiry date is on 31 March 2020 is included in the above value of $ 15000 is of $ 1000 | |
| (III) Medicines in process of Manufacturing as on 31 March 2020 | 2000 |
| (IV) Raw Material in Godown | 4000 |
What shall be the value of stock on 31 March 2020? (Marks 2)
Explanation
Computation of Closing Stock of Kipla Ltd
| $ | ||
| Medicines in stock | 15000 | |
| Less: Expired Medicines | 1000 | |
| 14000 | ||
| Add: Medicines in process of Manufacturing as on 31 March 2020 | 2000 | |
| Raw Material in Godown | 4000 | 6000 |
| Closing Stock | 20000 |