A proprietor, Mr. A has reported a profit of Rs. 1,25,000 at the end of the financial year after taking into consideration the following amount:
(i) The cost of an asset of Rs. 25,000 has been taken as en expense.
(ii) Mr. A is anticipating a profit of Rs. 10,000 on the future sale of a car shown as an asset in his books.
(iii) Salary of Rs. 7,000 payable in the financial year has not been taken into account.
(iv) Mr. A purchased an asset for Rs.75,000 but its fair value on the date of purchase was Rs. 85,000. Mr. A recorded the value of asset in his books by Rs. 85,000.
On the basis of the above facts answer the following questions from the given choices:
(i) What is the correct amount of profit to be reported in the books?
(a) Rs. 1,25,000, (b) Rs.1,35,000, (c) Rs. 1,50,000,(d) Rs. 1,33,000,
(ii) Which measurement base should be followed in the statement (iv)?
(a) Historical cost,(b) Current cost (c) Replacement cost (d)Present value
(iii) Which concept should be followed in the statement (ii)?
(a) Conservatism, (b) Materiality, (c) Historical cost, (d)Accrual,
(iv) Which concept should be followed in the statement (iii)?
(a) Materiality, (b) Historical cost, (c) Current cost, (d)Accrual,