Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Four Frameworks of Accounting and Forms of Organization

Kapoor Electronics sold goods worth ₹90,000 on credit in March 2025, and the customer will pay in May 2025. Goods costing ₹55,000 were sold. Under the accrual basis and the realisation concept, what profit on this sale should be recognised for the year ended 31 March 2025?

The profit to be recognised is ₹35,000. Under the accrual basis, revenue is recorded when the sale is made, regardless of cash receipt, and the related cost is matched against it. Sales of ₹90,000 less cost of ₹55,000 gives ₹35,000.

  1. A₹35,000Correct
  2. B₹90,000
  3. CNil, as cash is not received
  4. D₹55,000

Explanation

Under accrual, revenue is recognised when the sale is made, not when cash is received. Profit = 90,000 - 55,000 = ₹35,000. Recognising nil ignores accrual; ₹90,000 ignores the cost of goods sold.

Did you get it right without looking?

One question tells you little. A timed set on Four Frameworks of Accounting and Forms of Organization shows your real accuracy, how long you take and where you lose marks.

Practise Four Frameworks of Accounting and Forms of OrganizationFree diagnostic mock

More Four Frameworks of Accounting and Forms of Organization questions