Question

started business with cash Rs 5,00,000. She paid rent of shop Rs 10,000.

Purchased furniture for Rs 2,00,000 and paid Rs 1,000 on its cartage. She paid

wages Rs 7,000 and advertising expenses Rs 5,000. Identify and calculate the

value of various kinds of expenditure and differentiate between them on the basis

of ‘Presentation’ in Financial Statements.​

Answer 1

Answer:

The total value furniture puchased is Rs 2,01,000 (The cartage on furniture is a part of expenditure on furniture).

Purchase of furniture is a Capital Expenditure and will be shown on the Asset side of the Balance Sheet.

Payment of wages of Rs 7,000 is a revenue expenditure (direct expense as wages are directly related to production of goods) and it will be shown on the Debit side of Trading A/c.

Advertisement expenses are deferred revenue expenditures. If the Advertisement expense is related to the current year, it will be shown on the Debit side of P&L A/c being an indirect revenue expenditure.

In absense of any information in the question, Debiting Advertisement expenditure in P&L A/c is absolutely correct.

If the Advertisement expenses are not related to current year, it is considered as Capital Expenditure and will be shown on the Assets side of the Balance Sheet.

If not specified in the question, such treatment must not be done.

I hope it helps.

I hope it helps.Don't forget to mark me as the brainliest.