Question

During the year 2015, Rohan purchased goods of Rs. 25,00,000, of which he sold 80% of the goods for Rs.30,00,000 and spent expenses amounting to Rs.3,00,000. The net profit earned by him is Rs. applying Concept of (a) 5,00,000, Going Concern (b) 2,00,000 Realization (c) 7,00,000, Matching (d) None of these There IR ...11 how​

Answer 1

Answer:

Conservatism convention- This convention ensures that uncertainties and risks inherent in business transactions should be given a proper consideration. as per this convention the accountants follow the rule ' anticipate no profit but provide for all possible losses'.

Purchase ==Rs. 25,00,00025,00,000; 80%80% of the goods have been sold.

So, cost of goods sold ==Rs. 20,00,00020,00,000

Stock remains at cost of Rs. 5,00,0005,00,000.

Since, market value of the stock left is Rs. 7,50,0007,50,000 which is higher than the cost of stock. So, stock is valued at Rs. 5,00,0005,00,000.

Explanation:

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