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Answer to FA Test Paper FA No 3 |
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Test On Accounting Concept & Regulatory Framework |
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IDENTIFICATION OF BASIC ACCOUNTING |
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(1) |
Business Entity |
Mr X, the sole proprietor of Company XY does not list his personal house on the balance sheet of Company XY |
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(2) |
Full Disclosure |
Company A included a disclosure note describing a lawsuit it is defending even though the suit has not yet been settled |
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(3) |
Realization or Revenue Recognition principle |
Company B records revenue when products are delivered and services being rendered, even though cash has not yet been received. |
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(4) |
Matching principle |
Company A amortizes the cost of a trade mark over the trade mark’s useful life. |
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(5) |
Historical Cost /original transaction value principle |
Company X depreciates the cost of its equipment rather than the replacement value of the equipment. |
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