(a) Distinguish between Acrual and Cash basis of Accounting.
() What is meant by accounting standards ? State briefly the merits of issuing accounting
standards. What is the legal status of accounting standards in India ?
(c) Distinguish between Capital expenditures, Revenue expenditures and Deferred Revenue
expenditure with suitable examples
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Answers
a. The main difference between accrual and cash basis accounting lies in the timing of when revenue and expenses are recognized. The cash method is a more immediate recognition of revenue and expenses, while the accrual method focuses on anticipated revenue and expenses.
b. Accounting Standards (AS) are basic policy documents. Their main aim is to ensure transparency, reliability, consistency, and comparability of the financial statements. In India, the Indian Accounting Standards are issued by the Institute of Chartered Accountants of India (ICAI). ...
c. Differences between Capital Expenditure and Deferred Revenue Expenditure. The CAPEX is written off using depreciation expense. ... On the other hand, the benefits from deferred revenue expenditure are reaped between 3 to 5 years of the business. Capital expenditure is incurred, which helps in the creation of the asset.
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