Question

1(a) State with reason whether the following statements are true or false

(i)Branch Account prepared under Debtors Method of Branch Accounting is a nominal account.

(ii)Fundamental Assumptions are always required to be disclosed in the financial statements.

(iii) Change in Accounting Estimate has to be given retrospective effect.

(iv) Economic life is 6 years, lease term is 2.5 years, but the asset is of a special nature, and has been procured only for use of

lessee.This is an operating lease.

(v) Change in Method of Depreciation is regarded as change in Accounting Policy of the entity.

(b) Distinguish between Finance Lease and Operating Lease. [3 Marks]

(c) Explain in brief the relevant accounting assumption or principle which is applied in Classification of Expenditure as Capital

Expenditure and Revenue Expenditure.​

Answer 1

Answer:

has been procured only for use of

lessee. This is an operating lease.

(v) Change in Method of Depreciation is regarded as change in Accounting Policy of the entity.

(b) Distinguish between Finance Lease and Operating Lease. [3 Marks]

(c) Explain in brief the relevant accounting assumption or principle which is applied in Classification of Expenditure as Capital

Expenditure and Revenue Expenditure. [3.25 Ma