Tag: accounting standards: concept and objectives

Questions Related to accounting standards: concept and objectives

As per AS-1 significant accounting policies may not be ________.

book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

  1. Disclosed at all

  2. Omitted from financial disclosure

  3. Selected on random basis

  4. Changed from time to time

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Correct Option: B
Explanation:

Financial statement must be prepared with a true and fair view. All the relevant information which is of the interest of the owner, investors, creditors should be fully disclosed. All the significant policies should also be disclosed.  

Inappropriate selection of the accounting policy decision may lead to _________.

book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

  1. Overstating the financial position performance

  2. Over/understating the performance of financial position

  3. Overstatement of losses

  4. Understatement of profit

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Correct Option: B
Explanation:
Financial statements are prepared by selecting certain policies. A proper balance has to done while selecting an appropriate policies which are useful for better presentation of financial statement. Improper selection of accounting policy may lead to ambiguity in performance of financial position.

As per AS-2, cost of inventory is determined by applying___________.

book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

  1. FIFO

  2. LIFO

  3. highest in first out

  4. next in first out

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Correct Option: A

According to AS-2 inventories means tangible property held_________.

book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

  1. For sale in the ordinary course of business

  2. In the process of production of such goods or

  3. In the production of goods or services for sale including maintenance supplies and consumables other than machinery spares

  4. All of the above

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Correct Option: D
Explanation:

According to AS 2 inventory means tangible property held for sale in the ordinary course of business or in the process of production of such goods or in the production of goods or services for sale including maintenance supplies and consumables other than machinery spares.

AS-2 is not applicable to________.

book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

  1. Financial instruments held as stock in trade

  2. Live-stock,agricultural and forest products, mineral oils, ores and gases

  3. Work in progress arising under construction contracts.

  4. All the three

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Correct Option: D
Explanation:

As per AS-2, Valuation of inventories prescribed the accounting treatment for inventories and sets the guidance to determine the value at which the inventories are carried in the financial statement. 

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs. 

The cost of inventories should comprise all costs of purchase, Costs of conversion and other costs incurred in bringing  the inventories to their present location and condition. 

Hence, it does not include any of the items given in the options.

AS-2 requires that the financial statements should disclose________.

book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

  1. The accounting policies adopted in measuring inventories, including the cost formula

  2. The total carrying amount of inventories and classification appropriate to the enterprise

  3. Both (a) & (b)

  4. Either (a) or (b)

Show answer
Correct Option: C
Explanation:

According to AS - 2 financial statements should disclose the accounting policies adopted in measuring inventories, including the cost formula and the total carrying amount of inventories and classification appropriate to the enterprise.

Which of these AS deals with inventory valuation?

book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

  1. AS-13

  2. AS-12

  3. AS-2

  4. AS-5

Show answer
Correct Option: C
Explanation:

As per AS-2, Valuation of inventories prescribed the accounting treatment for inventories and sets the guidance to determine the value at which the inventories are carried in the financial statement. 

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs. 

The cost of inventories should comprise all costs of purchase, Costs of conversion and other costs incurred in bringing  the inventories to their present location and condition. 

As per AS-2, "Inventories should be valued at the lower of cost and net realisable value."

As per AS-2, inventories are valued at lower of cost or_______.

book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

  1. Realisable value

  2. Replacement value

  3. Net realisable value

  4. Market value

Show answer
Correct Option: C
Explanation:

As per AS-2, Valuation of inventories prescribed the accounting treatment for inventories and sets the guidance to determine the value at which the inventories are carried in the financial statement. 

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs. 

The cost of inventories should comprise all costs of purchase, Costs of conversion and other costs incurred in bringing  the inventories to their present location and condition. 

As per AS-2, "Inventories should be valued at the lower of cost and net realisable value."

As per AS-2, inventory means goods_______.

book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

  1. Spare parts held for break down of machinery

  2. Held for sale in the ordinary course of business

  3. Fixed assets purchased for sale

  4. Shares purchased for sale

Show answer
Correct Option: B
Explanation:

As per AS-2, Valuation of inventories prescribed the accounting treatment for inventories and sets the guidance to determine the value at which the inventories are carried in the financial statement. 

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs. 

The cost of inventories should comprise all costs of purchase, Costs of conversion and other costs incurred in bringing  the inventories to their present location and condition. 

When we say that inventory is to be valued at cost or market price whichever is less. The Term "market" means________.

book keeping and accountancy accounting standards: concept and objectives accounting standards accounting standards (as) and ifrs accounting systems and reporting standards

  1. Current replacement cost

  2. Discounted price

  3. Net realizable value

  4. Historical cost

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Correct Option: C
Explanation:

When we say that inventory is to be valued at cost or market price whichever is less. The Term "market" means Net realizable value. By net realizable value we mean the realizable amount of the asset that will be realized when the asset is sold.