Class 11 Accountancy - Chapter Theory Base of Accounting NCERT Solutions | When should revenue be recognised? Are t
When should revenue be recognised? Are there exceptions to the general rule?
Revenue should be recognised when sales take place either in cash or credit and/or right to receive income from any source is established. Similarly, rent for the month of March even if received in April month will be treated as revenue of the financial year ending 31st March.
There are two exceptions of this rule:
a) In case of sales on installment basis, only the amount collected in installments is treated as revenue.
b) In case of long term construction contracts, proportionate amount of revenue, based on part of the contract completed by the end of the financial year is treated as realised.
More Questions From Class 11 Accountancy - Chapter Theory Base of Accounting
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Complete the following work sheet:
(i) If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.
(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.
(iii) Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(iv) The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
(v) A firm may hold stock which is heavily in demand. Consequently, the market value of this stock may be increased. Normal accounting procedure is to ignore this because of the ___________.
(vi) If a firm receives an order for goods, it would not be included in the sales figure owing to the ___________.
(vii) The management of a firm is remarkably incompetent, but the firms accountants can not take this into account while preparing book of accounts because of ________ concept. - Q:-
Discuss the concept-based on the premise do not anticipate profits but provide for all losses.
- Q:-
Fill in the correct word:
1. Recognition of expenses in the same period as associated revenues is called _______________concept.
2. The accounting concept that refers to the tendency of accountants to resolve uncertainty and doubt in favour of understating assets and revenues and overstating liabilities and expenses is known as _______________.
3. Revenue is generally recognised at the point of sale denotes the concept of _______________.
4. The _______________concept requires that the same accounting method should be used from one accounting period to the next.
5. The_______________concept requires that accounting transactions should be free from the bias of accountants and others. - Q:-
The accounting concepts and accounting standards are generally referred to as the essence of financial accounting. Comment.
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Why is it necessary for accountants to assume that business entity will remain a going concern?
- Q:-
What is the money measurement concept? Which one factor can make it difficult to compare the monetary values of one year with the monetary values of another year?
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What is matching concept? Why should a business concern follow this concept? Discuss?
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Why is it important to adopt a consistent basis for the preparation of financial statements? Explain.
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What is the basic accounting equation?
- Q:-
The realisation concept determines when goods sent on credit to customers are to be included in the sales figure for the purpose of computing the profit or loss for the accounting period. Which of the following tends to be used in practice to determine when to include a transaction in the sales figure for the period. When the goods have been:
a. dispatched
b. invoiced
c. delivered
d. paid for Give reasons for your answer.
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