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CA Inter AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies — practice questions — page 2

Explore 55 free AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies questions in CA Inter Accounting. Open each question or exercise to read its content, reference answers and available explanation.

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AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies questions and exercises with answers

Showing questions 31–55 of 55.

Which reason allows a change in accounting policy under AS 5?Read the answer and worked solution →A change in policy is also allowed if it givesRead the answer and worked solution →Replacing ad hoc retirement payments with a formal gratuity scheme isRead the answer and worked solution →Adopting a policy for transactions that did not occur earlier isRead the answer and worked solution →The impact of a material policy change is shown in the statements ofRead the answer and worked solution →If the effect of a policy change is not ascertainable, the factRead the answer and worked solution →A policy change with no current material effect but a likely later one is disclosedRead the answer and worked solution →A policy change due to a new accounting standard followsRead the answer and worked solution →The use of reasonable estimates in financial statementsRead the answer and worked solution →Accounting estimates by their nature areRead the answer and worked solution →Why are the same accounting policies normally used every period?Read the answer and worked solution →Accounting policies are specific principles together with theRead the answer and worked solution →AS 5 aims to make the profit statement prepared onRead the answer and worked solution →An event may be extraordinary for one enterprise and not another sinceRead the answer and worked solution →An estimate may have to be revised ifRead the answer and worked solution →The part of an estimate change relating to later years is recognisedRead the answer and worked solution →Ordinary activities include business activities and thoseRead the answer and worked solution →Last year's depreciation of Rs 40,000 was missed by oversight and charged now. It isRead the answer and worked solution →A Rs 90,000 machine, nil scrap, had 9 years straight line. After 3 years, total life is 12. New yearly charge?Read the answer and worked solution →Profit from ordinary activities is Rs 5,00,000 and an extraordinary earthquake loss is Rs 80,000. Net profit?Read the answer and worked solution →Profit before a missed prior-year expense is Rs 3,00,000; the expense is Rs 30,000. Net profit after including it?Read the answer and worked solution →Last year's stock was overstated Rs 15,000 by a sum error; bad debt estimate rose Rs 10,000. Prior period item?Read the answer and worked solution →Profit Rs 8,00,000 before a Rs 20,000 prior period expense and Rs 1,50,000 extraordinary gain. Net profit?Read the answer and worked solution →Rent of Rs 25,000 for last year was omitted by error and received now. Other profit is Rs 2,00,000. Net profit?Read the answer and worked solution →Bad debt provision is raised from Rs 20,000 to Rs 32,000 on new information. Extra charge this period?Read the answer and worked solution →

Worked practice questions

Which reason allows a change in accounting policy under AS 5?

  1. To raise reported profit
  2. Requirement of statute
  3. Pressure from lenders
  4. Preference of auditors
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Correct answer: B. Requirement of statute

A policy may be changed when a statute requires it, an accounting standard demands it, or presentation becomes more appropriate.

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A change in policy is also allowed if it gives

  1. A higher tax saving
  2. A bigger dividend payout
  3. More appropriate display
  4. Lower auditing costs
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Correct answer: C. More appropriate display

AS 5 permits a change that results in a more appropriate presentation of the financial statements.

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Replacing ad hoc retirement payments with a formal gratuity scheme is

  1. A change in policy
  2. A prior period item
  3. An extraordinary item
  4. Not a policy change
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Correct answer: D. Not a policy change

The new scheme covers transactions that differ in substance from earlier ad hoc payments, so it is a new policy rather than a change.

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