06-28-2007, 11:25 PM
I have read in an accounts book wriiten by javed zuberi that
1.If any expenditure incurred in respect of a fixed asset and if this expense is improving the quality of that asset although not increasing the useful life then it should be added in the cost of that asset.
2.If any expenditure incurred in respect of a fixed asset and if this expense is increasing the useful life of an asset then it should be debited in accumulated depreciation account of that asset and not the cost.
Why are there 2 different treatments?Although the new book value which we would get would be same in both the cases.???
MY QUESTION NUMBER TWO IS
Fire occured in the premises of X Ltd on 10 th january,2000. All the stocks were destroyed except to the extent of RS 62,000.From the following figures,ascertain the loss suffered by the company
RS
Stock on 1st April ,1998 360000
Purchases less returns during 1998-99 1450000
Sales less returns during 1998-99 2000000
Stock on 31st March 1999 225000
Purchases less returns since 1st April, 99 up to date of fire 1460000
Sales less returns since April, 1999 up to date of fire 1890000
It was the practice of the firm to value stock at cost less 10%.Early in April 1999; prices were raised by 5%.
My questions are as follows
1. In this question whether sales price has increased or purchase?
2. If we want to find out the rate of Gross Profit of last year then shall we bring the stock to its original cost? If yes then why is this so?
Please write your explanation in detail.
I would be grateful to you.
1.If any expenditure incurred in respect of a fixed asset and if this expense is improving the quality of that asset although not increasing the useful life then it should be added in the cost of that asset.
2.If any expenditure incurred in respect of a fixed asset and if this expense is increasing the useful life of an asset then it should be debited in accumulated depreciation account of that asset and not the cost.
Why are there 2 different treatments?Although the new book value which we would get would be same in both the cases.???
MY QUESTION NUMBER TWO IS
Fire occured in the premises of X Ltd on 10 th january,2000. All the stocks were destroyed except to the extent of RS 62,000.From the following figures,ascertain the loss suffered by the company
RS
Stock on 1st April ,1998 360000
Purchases less returns during 1998-99 1450000
Sales less returns during 1998-99 2000000
Stock on 31st March 1999 225000
Purchases less returns since 1st April, 99 up to date of fire 1460000
Sales less returns since April, 1999 up to date of fire 1890000
It was the practice of the firm to value stock at cost less 10%.Early in April 1999; prices were raised by 5%.
My questions are as follows
1. In this question whether sales price has increased or purchase?
2. If we want to find out the rate of Gross Profit of last year then shall we bring the stock to its original cost? If yes then why is this so?
Please write your explanation in detail.
I would be grateful to you.
