Explain the main objection to double accounting system
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Some of the disadvantages of Double Account System are:
(a) Capital Account incorporates the value of an asset whose life is very short. Those assets appear in the account at their scrap value although these are shown at a higher value.
(b) Since all Assets are recorded at cost and not the written-down value, the Balance Sheet does not exhibit a real position.
(c) Capital account includes the items like preliminary expenses which are also considered in Single Account System.
(d) It is not always possible to understand the accounting statements and forms by the ordinary people.
(e) In order to replace an asset for improved means it may not always be possible to determine exactly the amount of revenue expenditure items which should be charged.
(f) Since repairs and renewal expenditures are charged to revenue account of the same year, profit of the undertaking, particularly on that year when no expenditures on repairs and renewals are incurred is affected. That is why, in order to overcome this difficulty, some undertakings may even open a separate account, viz., Repair and Renewal Reserve.
(g) Proper distinctions between revenue expenditure and capital expenditure is not possible under this system.
❣❣ PLEASE CHOOSE AS BRAIN LIST ❣❣
(a) Capital Account incorporates the value of an asset whose life is very short. Those assets appear in the account at their scrap value although these are shown at a higher value.
(b) Since all Assets are recorded at cost and not the written-down value, the Balance Sheet does not exhibit a real position.
(c) Capital account includes the items like preliminary expenses which are also considered in Single Account System.
(d) It is not always possible to understand the accounting statements and forms by the ordinary people.
(e) In order to replace an asset for improved means it may not always be possible to determine exactly the amount of revenue expenditure items which should be charged.
(f) Since repairs and renewal expenditures are charged to revenue account of the same year, profit of the undertaking, particularly on that year when no expenditures on repairs and renewals are incurred is affected. That is why, in order to overcome this difficulty, some undertakings may even open a separate account, viz., Repair and Renewal Reserve.
(g) Proper distinctions between revenue expenditure and capital expenditure is not possible under this system.
❣❣ PLEASE CHOOSE AS BRAIN LIST ❣❣
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