CA Foundation · Accounting · Theoretical Framework
Pooja Stores buys a waste paper bin for ₹150 which will last several years, and charges it fully to expenses in the year of purchase instead of capitalising it. Which concept or convention best explains this treatment?
The treatment is explained by materiality. A ₹150 bin is too insignificant to affect decisions of users of the financial statements, so it is expensed immediately rather than capitalised and depreciated over its useful life.
- AMaterialityCorrect
- BConsistency
- CRevenue recognition
- DAccrual
Explanation
Materiality says that insignificant items need not be accounted for strictly; the effort of capitalising and depreciating a ₹150 item exceeds any benefit. Consistency concerns using the same policies across periods, and revenue recognition and accrual deal with timing of income and expense.
Did you get it right without looking?
One question tells you little. A timed set on Theoretical Framework shows your real accuracy, how long you take and where you lose marks.
More Theoretical Framework questions
- Which of the following is correctly described as a revenue receipt of a trading business?
- Which of the following is a key objective of issuing Accounting Standards?
- A firm records the transactions of a business separately from the personal transactions of its owner, even though the owner has invested his…
- Mira Ltd. recognized revenue of ₹50,000 from a service contract in the current year, although cash was received only for ₹40,000. The remain…
- Under the cash basis of accounting, when is a credit sale of goods recorded?
- Which of the following is an example of a transaction that is NOT recorded in the books of a business, because of the money measurement conc…