IGCSE Accounting Paper-2: Specimen Questions with Answers 170 - 171 of 189

Question 170

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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 171

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Short Answer▾

Kipla Ltd. is a Pharmaceutical Company. Following is the situation of its stock of medicines as on 31 March 2020.

The situation of its stock of medicines as on 31 March 2020The situation of its stock of medicines as on 31 March 2020
$
(I) Medicines in stock15000
(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 20202000
(IV) Raw Material in Godown4000

What shall be the value of stock on 31 March 2020? (Marks 2)

Explanation

Computation of closing stock of Kipla Ltd. -

Computation of closing stock of Kipla Ltd. -Computation of closing stock of Kipla Ltd. -
$
Medicines in stock15000
Less: Expired Medicines1000
14000
Add: Medicines in process of Manufacturing as on 31 March 20202000
Raw Material in Godown40006000
Closing Stock20000

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