Mr ram has been doing the business of manufacturing toys since 2010 . During the year 2015, a likely loss of rs. 50000 on account of bad and doubtful debts was foreseen in the business . Alikely gain of rs.25000 on account of getting discount on creditors was expected to received .mr.ram ignored the loss due to the bad debts and considered gain due to the discount on creditors while preparing final accounts .Which accounting concrpt will it violate ?Explain the concept .
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Explanation:
Statement of Affairs
as on March …
Liabilities Amount (Rs) Assets Amount (Rs)
Sundry Creditors 80,000 Cash in Hand 15,000
Capital (Balancing Figure) 6,40,000 Cash at Bank 70,000
Sundry Debtors 1,20,000
Stock 2,40,000
Furniture 75,000
Machinery 2,00,000
7,20,000 7,20,000
Statement of Profit or Loss
for the year ended ….
Particulars Amount
(Rs)
Capital at the end of the year 6,40,000
Add: Drawings made during the year 90,000
Less: Additional capital introduced during the year 1,50,000
Adjusted capital at the end of the year 5,80,000
Less: Capital in the beginning of the year 5,00,000
Profit made during the year 80,000
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