THE WAY OF ASKING THEORY QUESTIONS
IN EXAMINATION POINT OF VIEW FOR PCC /IPCC
FUNDAMENTALS OF ACCOUNTING:
1. What are Fundamental Accounting Assumptions? Write short notes on them. Ans: The Fundamental Accounting Assumptions are
a. Going Concern: The enterprise is normally viewed as a going concern, that is as continuing in operation for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of liquidation or of curtailing materially the scale of operation.
b. Consistency: It is assumed that accounting policies are consistent from one period to another.
c. Accrual: Revenues and Costs are accrued, that is recognized as they are earned or incurred and recorded in the Financial Statements of the periods to which they relate.
AVERAGE DUE DATE:
1. What is ADD, areas where ADD is calculated?
Ans: Definition: Average Due Date (ADD) is an equated date of payment on which a single payment can be made in lieu of several payments due for payment on different dates, without loss of interest to either party. Thus, ADD is the Arithmetic Average of various payments.
Areas where ADD method is followed:
a. For calculation of ADD when various payments are due on different dates and single payment is to be made by debtor. (Including the settlement of various bills due on different dates).
b. For calculating Interest on drawings made by partners on different dates.
c. For settlement of Contra Accounts. E.g. X & Y sells goods to each other on different dates.
d. For calculation of ADD when amount is lent by the creditor in one installment and repayment of the amount lent is to be made in various installments.
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