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InterviewSolution
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Sadhana decides to start a business of selling air – conditioners. She buys different brands of air – conditioners. She also buys a delivery van, some furniture and some tools to fix air- conditioners.She buys some stationery items and cleaning liquid. She spends some amount on advertising her shop. She records the entire amount spent in the trading account. Now, discuss on the following points:(i) Is it correct to record the entire amount spent in the first year of trading in the trading account? What impact will it have on the profit for the year?(ii) What are her fixed assets?(iii) Does she apply accounting concepts? If not which is the concept she does not apply? |
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Answer» (i) It is not correct to record the entire amount spent in the first year of trading in the trading account. It will be shown as a capital expenditure. For example: furniture and delivery van. (ii) 1. A delivery van. 2. Some furniture. 3. Some tools (iii) No, she does not apply accounting concepts. She does not apply business entity concepts. |
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