AccountingQA Latest Questions

Radha
Radha
In: >

(a) Potential investors (b) The owners or managers of the concern (c) Creditors and Lenders (d) Government​

  2. Simerpreet Helpful CMA Inter qualified

    The correct option is (b) and (d) As the internal analysis is done for the internal assessment of the firm, only those persons can carry out the assessment who has access to the internal accounting records of a business firm. As the owners or managers are the members of the top-level management execRead more

    The correct option is (b) and (d)

    As the internal analysis is done for the internal assessment of the firm, only those persons can carry out the assessment who has access to the internal accounting records of a business firm. As the owners or managers are the members of the top-level management executives they can carry out the work of internal analysis. Also, the government agencies can carry out internal analysis as they have been given the statutory powers of doing such works.

    To make it clear, let me explain a little about internal analysis-

    To determine the profitability of various activities and operations or to know the performance of the business concern, the top-level executives along with the management accountant carry out an internal assessment of the financial statements within the concern, this process is known as internal analysis.

     

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Astha
AsthaLeader
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  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    Financial analysis of a company means analyzing the previous data of the company and giving recommendations based on that whether the company will improve in the future on not. It is the process of evaluating the financial performance and stability of the company. There are various types of financiaRead more

    Financial analysis of a company means analyzing the previous data of the company and giving recommendations based on that whether the company will improve in the future on not.

    It is the process of evaluating the financial performance and stability of the company.

    There are various types of financial analysis. They are leverage, growth, cash flow, liquidity, profitability, etc.

    The main objectives of Financial analysis are

    1.Reviewing the current position: In order to know if the company is doing well, past analysis of data is required to be carried out. Regular recording of the transactions helps to understand the financial position of the company.

    For example, A company wants to generate a revenue of 2000 crores in the next 5 years. The last four years’ data shows revenue as 1100, 1300,1600, 1800 crores respectively.

    So from the above, we can say that the company is performing well and looks like it will reach the desired target in the fifth year or may perform better than the target desired.

    However, if the revenue declines, it will cause concern for the team but the team will get time to gear up and work efficiently to achieve the desired target.

    2. Ease in decision making: For Future decision-making, quarterly financials play an important role. Subsidiary books and accounts like the sales book, purchase orders, manufacturing a/c, etc. help in giving more reliable information.

    For example, If sales are increasing inconsistently in a quarter, and in the next quarter the level of sales decrease due to any reason then the management can analyze and change the strategy.

    3. Performance Comparison: It helps in comparing the performance of the business every month, quarterly, half-yearly, and yearly. Analyzing the data can help the management to compare if the company is proceeding in the right direction.

    4. Assessing the profitability: Financial statements are used to assess the profitability of the firm. The analysis is made through the accounting ratios, trend line, etc. Accounting ratios calculated for a number of years shows the trend of change of position i.e. positive, negative or static. The assessing of the trend helps the management to analyze if the company is making profits or not.

    5. Measure the solvency of the firm: Financial analysis helps to measure the short-term and long-term efficiency of the firm for the benefit of the Stakeholders.

    6. Helps the end-users: The owners are the end-users for whom the financial statements are prepared. Financial statements are the summaries that are prepared for providing various disclosures to the owners which helps them understand the statements in a better way. If the end-users arrive at the right decision with the help of financial statements that means the objective is achieved.

    7. Other objectives:

    • It helps to settle disputes among the parties.
    • It helps in the expansion decision of the firm.
    • It helps in analyzing the amount of tax to be paid.
    • It reduces the chances of fraud.
    • It provides information about resources.
    • It provides a true and fair view of financial position.
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Karan
Karan
In: >

  2. prashant06 B.com, CMA pursuing
    This answer was edited.

    As per the Income-tax act, solar panels are categorized under the heading renewal energy devices. The rate of depreciation for these devices is mentioned below. As per the act, the rate of depreciation for solar panels is given as 40% as per the WDV method. Generally, these devices are treated as inRead more

    As per the Income-tax act, solar panels are categorized under the heading renewal energy devices. The rate of depreciation for these devices is mentioned below.

    As per the act, the rate of depreciation for solar panels is given as 40% as per the WDV method. Generally, these devices are treated as investments in fixed assets. Therefore they are treated accordingly like other fixed assets and are depreciated periodically in an organized and regular time period. The useful life of such solar devices is taken to be 5 years.

    Giving you a small example of the depreciation on solar panels.

    Solar panels were purchased by Agro Farm ltd. for installing them to be used for electricity generation. These panels were bought for Rs 2,00,000. Therefore depreciation to be charged as per income tax act over its useful life of 5 years is as follows:

    Depreciation as per WDV = (Cost of an asset – salvage value)* rate of depreciation

    Depreciation for 1st year = (2,00,000 – 0)* 40% = Rs 80,000

    WDV at the end of 1st year = (2,00,000 – 80,000) = Rs 1,20,000

    Depreciation for 2nd year = (1,20,000 – 0)* 40% = Rs 48,000

    the same process will continue till the useful life of an asset.

    The depreciation amount will be written off from the book value as shown below:

    Useful life Value at the beginning of the year Depreciation amount Value at the end of the period
    1 2,00,000 80,000 1,20,000
    2 1,20,000 48,000 72,000
    3 72,000 28,800 43,200
    4 43,200 17,280 25,920
    5 25,920 10,368 15,552

     

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prashant06
prashant06
In: >

  2. Manvi Pursuing ACCA
    This answer was edited.

    Return inwards are the goods returned by the customer to the seller. The goods are returned for reasons like defects, excess delivery, and low quality. Return inwards are also known as Sales Returns. Sales returns are a contra account to sales revenue. The amount of sales returns is deducted from thRead more

    Return inwards are the goods returned by the customer to the seller. The goods are returned for reasons like defects, excess delivery, and low quality. Return inwards are also known as Sales Returns.

    Sales returns are a contra account to sales revenue. The amount of sales returns is deducted from the total sales in the Trading section of the Trading and Profit & Loss Account.

    In subsidiary books, return inwards are recorded only for those goods which are sold on credit to the customer.

    For example, On 1 August E Electronics sold 50 units of television to Hill Hotels on credit for Rs.25,000 each. Out of which 5 units were found to be defective and were returned back to E Electronics. In that accounting period, E Electronics made a total sales of Rs.20,00,000 (including the item sold to Hill Hotels).

    E Electronics in its Trading section of Trading and P&L A/c will account for a sales return of Rs.1,25,000 (Rs.25,000*5) and this amount will be deducted from the total sales. The same will be recorded in the subsidiary books as it accounts for sales made on credit.

    Extract of Profit & Loss Account:

    For a business, sales returns will either have a decrease in the sales revenue or it will increase the sales returns and allowances which is a contra account to sales revenue. An increase in sales returns will decrease gross profit.

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Aadil
AadilCurious
In: >

A. Trading Account B. Profit & Loss Statement C. Balance Sheet D. Cash Book

  2. Vijay Curious M.Com
    This answer was edited.

    The correct answer is C. Balance Sheet. A Balance Sheet is a financial statement prepared to know the financial position of a company at any particular point in time. Hence, the answer to your question is the balance sheet. It is also known as Position Statement (as it shows financial position) or SRead more

    The correct answer is C. Balance Sheet.

    A Balance Sheet is a financial statement prepared to know the financial position of a company at any particular point in time. Hence, the answer to your question is the balance sheet.

    It is also known as Position Statement (as it shows financial position) or Statement of Affairs (when it is prepared under the Single Entry System of accounting).

    The balance sheet shows the assets and liabilities of a firm at any specific point in time. It is a summary of the assets held by a firm and the liabilities owed to outsiders.

    As the name suggests, a balance sheet must always be balanced i.e, the total of assets should always be equal to the total of liabilities on any single day. To put it simply,

    Assets = Liabilities + Capital

    In the case of a sole proprietorship or partnership, capital means the amount invested by the proprietor/partners in the business. In the case of a company, capital means the funds contributed by the shareholders in the form of shares.

    Here is a link for the official balance sheet format as per the Companies Act 2013 (page 260 of the pdf),

    https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf

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Vijay
VijayCurious
In: >

  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    The Furniture and Fixture is depreciated @10% according to the income tax act and as per the companies act, 2013 @9.50% under Straight line method and @25.89% under written down value method. Furniture and fixture form a major part to furnish an office. For Example, the chair, table, bookshelves, etRead more

    The Furniture and Fixture is depreciated @10% according to the income tax act and as per the companies act, 2013 @9.50% under Straight line method and @25.89% under written down value method.

    Furniture and fixture form a major part to furnish an office. For Example, the chair, table, bookshelves, etc. all comes under Furniture and Fixture. The useful life of Furniture and Fixtures is estimated as 5-10 years depending upon the kind of furniture.

    Rate of depreciation in reference to days

    • If Furniture is bought and put to use for more than 180 days, then the full rate of depreciation will be charged.
    • If the furniture is bought and put to use for less than 180 days, then half the rate of depreciation will be charged.
    • If the furniture is bought but is not put to use, then no depreciation will be charged.
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Naina@123
Naina@123
In: >

  2. Radha M.Com, NET
    This answer was edited.

    The rate of depreciation on a car as per the Income Tax Act depends upon the purpose for which it has been purchased and the year on which it was acquired. As per the Income Tax Act, cars come under the Plant and Machinery block of assets. The Act classifies cars into two categories, Group 1 - MotorRead more

    The rate of depreciation on a car as per the Income Tax Act depends upon the purpose for which it has been purchased and the year on which it was acquired.

    As per the Income Tax Act, cars come under the Plant and Machinery block of assets.

    The Act classifies cars into two categories,

    • Group 1 – Motor cars other than those used in the business of running them on hire.
    • Group 2 – Motor taxis used in the business of running them on hire.

     

    Group 1:

    1. If the motor car is acquired and put to use on or after 23rd August 2019 but before 1st April 2020, then the rate applicable is 30%.
    2. If the motor car is acquired and put to use on or after 1st April 1990, then the rate applicable is 15%. (All the cars which are not covered under the category (1) comes under this category.)

     

    Group 2:

    1. If the motor taxi is acquired and put to use on or after 23rd August 2019 but before 1st April 2020, then the rate applicable is 45%.
    2. The rate applicable for motor taxis not covered under category (1) is 30%.

     

    Here is a summarised version of the rates applicable to cars,

     

    The rates can also be found on the Income Tax India website.

     

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Simerpreet
SimerpreetHelpful
In: >

  2. Karan B.com and Pursuing ACCA
    This answer was edited.

    Software is not depreciated but amortized, as it is an intangible asset. As per companies act the useful life of software is 3 years. The treatment of depreciation is the same as computers. Following are the software depreciation rates as per the companies act: As of 2021 Nature of Asset Useful LifeRead more

    Software is not depreciated but amortized, as it is an intangible asset. As per companies act the useful life of software is 3 years. The treatment of depreciation is the same as computers. Following are the software depreciation rates as per the companies act:

    As of 2021

    Nature of Asset Useful Life Depreciation
    WDV SLM
    Servers and networks 6 years 39.30% 15.83%
    End-user devices such as desktops, laptops, etc. 3 years 63.16% 31.67%

    For example, XYZ Ltd purchased a new accounting software on 1 October for Rs.50,000. As per the Companies Act, the useful life of software is 3 years. Hence, the software will be amortized for 3 years and the company amortizes on the straight-line method.

    Amortization amount = 50,000*31.67%

    For full year = Rs.15,835

    As the software was purchased on 1 October hence it will be amortized for 6 months.

    For 6 months = 15,835*6/12

    = Rs.7,917.50

    Amortization is the same as depreciation. Hence, treatment will also be the same. The amortization amount will be transferred to the Profit & Loss A/c on the debit side as a non-cash expense.

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Simerpreet
SimerpreetHelpful
In: >

  2. Naina@123 (B.COM and CMA-Final)
    This answer was edited.

    As per the companies act 2013, the rate of depreciation for cars/vehicles and their useful life is mentioned below  They are categorized by the companies act as follows: when these car/ motor vehicles are owned with no intention to sell within the accounting period and are generally used to generateRead more

    As per the companies act 2013, the rate of depreciation for cars/vehicles and their useful life is mentioned below

     They are categorized by the companies act as follows:

    1. when these car/ motor vehicles are owned with no intention to sell within the accounting period and are generally used to generate revenue. For example, giving cars/motor vehicles on lease or hire purpose.
    2. cars/motor vehicles when used for purposes other than the business of hire. For example, a car is owned for official use.

    Car/motor vehicles are considered as fixed tangible assets. Treatment of these cars/ motor vehicles is similar to those of other fixed assets. The depreciation will be shown as an expense in the profit and loss account and also the value of these assets will be adjusted in the balance sheet.

    Explaining with a simple example:  Mars.Ltd purchased a car for Rs 10,00,000, and use it for its official purpose. Its useful life as per act is taken as 6 years and the rate of depreciation as 31.23% as per the WDV method.

    Therefore depreciation as per WDV is calculated as follows

    Cost of car = Rs 10,00,000

    Residual value = NIL

    Rate of depreciation = 31.23%

    depreciation for first-year = Rs (10,00,000 – NIL)*31.23%

    = Rs 3,12,300

    Calculated depreciation on this car will be shown in the profit and loss account as an expense and the same will be treated under the balance sheet every year. Here is the extract of profit and loss and the balance sheet for the above example.

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Jasmeet_Sethi
Jasmeet_SethiCurious
In: >

  2. prashant06 B.com, CMA pursuing
    This answer was edited.

    Let me brief you about the nature of computers, their parts, laptops according to the companies act 2013. Basically, these are treated as non-current tangible fixed assets. This is because these types of equipment are used in business to generate revenue over its useful life for more than a year. AsRead more

    Let me brief you about the nature of computers, their parts, laptops according to the companies act 2013. Basically, these are treated as non-current tangible fixed assets. This is because these types of equipment are used in business to generate revenue over its useful life for more than a year. As per the companies act 2013, the following extract of the depreciation rate chart is given for computers.

    Giving you a short example, suppose M/s spy Ltd purchased 20 computers worth Rs 30000 each. As per the companies act 2013, the computer’s useful life is taken to be 3 years, and the rate of depreciation rate is 63.16%. Applying the WDV method we can calculate depreciation as follows:

     Depreciation as per WDV = (Cost of an asset – salvage value)* Depreciation rate

    So for the first year, the depreciation amount will be

    Cost of computers = Rs 6,00,000 (20*30000)

    Salvage value = NIL

    Rate of depreciation as per the Act = 63.16%

    Therefore depreciation = (6,00,000 – NIL)* 63.16%

    = Rs 3,78,960

    this amount of depreciation will be shown in the profit & loss account as depreciation charged to computers and the same will be adjusted in the balance sheet. The extract of Profit & Loss and corresponding year Balance sheet is shown below.

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