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Reported profit = rs 125000 rn+ capital expenditure wrongly shown as revenue expenditure = rs 25000 rn- unrealized gain (as it against conservatism concept) = Rs 10000 rn- salary payable though unpaid (accrual concept) = rs 7000 rnRectified profit = Rs 133,000 rn rnworking notes rn1. depreciation is to be charged on rs 25000, say @15% for P&M, 10% for building. Since nothing was mentioned, it has been ignored. rn2. As per conservatism concept, ignore all future gains & provide for anticipated losses. rn3. As per accrual concept, we need to provide for all expenses incurred during the particular accounting period, whether paid or not. rn4. typo error. market value is Rs 85,000 ( I guess) . rnAs per historical cost concept, we should record assets at its purchase price & not at its market/fair value. so revised value of asset should be Rs 75000. If depreciation. has been charged on Rs 85000, the same shall be reduced by proportionate amount to be charged (i.e., depreciate rate) on Rs 10000. rnsince rates are not mentioned, depreciation has been ignored again & profit will remain not change because of adjustment no. 4.
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Reported profit = rs 125000
rn+ capital expenditure wrongly shown as revenue expenditure = rs 25000
rn- unrealized gain (as it against conservatism concept) = Rs 10000
rn- salary payable though unpaid (accrual concept) = rs 7000
rnRectified profit = Rs 133,000
rn
rnworking notes
rn1. depreciation is to be charged on rs 25000, say @15% for P&M, 10% for building. Since nothing was mentioned, it has been ignored.
rn2. As per conservatism concept, ignore all future gains & provide for anticipated losses.
rn3. As per accrual concept, we need to provide for all expenses incurred during the particular accounting period, whether paid or not.
rn4. typo error. market value is Rs 85,000 ( I guess) .
rnAs per historical cost concept, we should record assets at its purchase price & not at its market/fair value. so revised value of asset should be Rs 75000. If depreciation. has been charged on Rs 85000, the same shall be reduced by proportionate amount to be charged (i.e., depreciate rate) on Rs 10000.
rnsince rates are not mentioned, depreciation has been ignored again & profit will remain not change because of adjustment no. 4.