NMIMS BBA – B.Com Indian Accounting Standards Solved Answer Assignment
14
Oct
2024
Indian Accounting Standards
1. Every asset get depreciate in its useful life. This depreciation amount reduces the cost of that asset & also recorded to expense side & ultimately reduces net income. Different methods of depreciation show different amount & this impact on financial statement. Describe those methods. (10 Marks)
Ans:
Introduction:
Accounting is built on the idea of depreciation, which is an essential topic due to the large part it plays in calculating the actual value of an item over time. Every asset, whether material or intangible, has a certain amount of time that it may be used effectively. Depreciation calculates an asset’s declining worth due to normal wear and tear and the passage of time and use. The cost of an asset is spread out over the period during which it will yield a return on investment, a process known as depreciation.
Concept & Application:
Straight-Line Depreciation:
The straight-line depreciation technique is one of the most straightforward and widely used approaches. It spreads the expense of an asset out evenly throughout the period that it will be used.
The simple or straight-line depreciation calculation is as follows: (Cost of Asset less Salvage Value) / Useful Life.
This strategy results in a consistent and predictable annual depreciation expense, which is beneficial for purposes such as budgeting and financial planning.
Over time, the asset’s carrying value on the balance sheet and the business’s net income will experience a gradual but consistent decrease if straight-line depreciation is used.
Conclusion:
The notion of depreciation is fundamental to accounting because it enables companies to appropriately distribute the cost of their assets throughout the period during which those assets are used. This procedure represents the economic reality of asset use and impacts the various financial statements, particularly the income statement and the balance sheet.
2. Investment means growth of current savings by aiming with more return in future. In finance investment refers to allocation of surplus money, after all expenditures in some investment avenues. Elaborate different investment avenues. (10 Marks)
Ans:
Introduction:
Investing is one of the most fundamental aspects of finance, and it is essential to both the expansion of personal wealth and the effective administration of corporate and national budgets. Investing, in its most basic sense, is the process of putting aside money or other assets to make a profit and add to one’s wealth in the future. This extra money may have been saved, earned, or obtained from the proceeds of the sale of assets.
Concept & Application:
Types of Investment Avenues:
Stocks: Buying individual ownership shares in a firm means “investing in stocks.” If you hold equities in a firm, you have a financial interest in its gains and losses. Purchasing a company’s shares with the expectation that its value will rise might result in capital appreciation. They also have the potential to generate dividends, which are payments made to stockholders equal to a share of the company’s earnings. Stocks are a type of investment that carries a higher level of risk but also has the potential for substantial returns.
Conclusion:
In conclusion, the notion of investing is an essential one in the field of finance since it enables people, companies, and governments to increase their wealth and ensure a stable financial future for them. It entails putting extra money or resources into various investment opportunities, each with a risk and return profile. By conducting thorough research and weighing your options, you may amass wealth,
3. a. Seller transfer goods to the buyer to generate an income. But revenue from sale transaction is recognized when some basic conditions are fulfilled. Explain those basic conditions. (5 Marks)
Ans:
Introduction:
A crucial financial accounting component is recognizing revenue generated by a business transaction. In the company’s financial statements, this action officially recognizes the revenue produced as a result of the sale of goods or services. Nevertheless, the procedure of recognizing revenues is quite involved.
Concept & Application:
Persuasive Evidence of an Arrangement: The existence of compelling evidence of a transactional arrangement between the vendor and the purchaser is the primary fundamental condition for revenue recognition. In essence, there must be a legally binding agreement that describes the conditions of the sale for the transaction to take place.
Conclusion:
Recognizing revenue is a crucial feature of financial accounting that directly impacts the integrity and transparency of a company’s financial statements. In conclusion, recognizing revenue is an essential component of financial accounting. To ensure that payment is identified relatively and accurately, it is necessary to fulfill several vital prerequisites first.
ABC Ltd. purchased goods at the cost of Rs.50, 00,000. Till the end of the year 75% of the stocks were sold. The company wants to disclose closing stock. Expected sale value is Rs.13, 50,000 and the commission at 10% on sale is payable. Advice what is the correct closing stock to be disclosed at the end of the year? (5 Marks)
Ans:
Introduction:
A fundamental aspect of accounting for firms is the concept of “closing stock,” which is often referred to as “ending inventory” or “year-end inventory.” It indicates the value of commodities, merchandise, or raw materials that a company has on hand after its financial reporting period, such as a fiscal year or a quarter. For example, a fiscal year shows the value of a firm’s inventory at the end of the year.
Calculation of Closing Stock
The value of a company’s remaining stock of goods at the end of an accounting period is referred to as the closing stock and sometimes as the ending inventory. To determine the closing stock for ABC Ltd., you need to take into account the following factors:
Beginning Stock: If this is the first year the business has been active, the beginning stock will equal zero. In that case, you would take the value of the stock at the end of the preceding year as the value of the stock at the beginning of the current year.
Acquisitions: ABC Limited spent Rs. 50,000000 on acquiring various items during the year. This is the cost of the things that were purchased to be resold.
Summary:
You need to determine the remaining stock to compute the right closing stock that will be revealed at the end of the year for ABC Ltd. You can do this by deducting the cost of products sold and the commission on sales from the total purchases. This will give you the remaining stock.
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