State with reasons whether the following statements are True or False: i. Depreciation cannot be provided in case of loss, in a financial year. ii.…

CA Foundation · Accounting · MTP · January 2025
State with reasons whether the following statements are True or False: i. Depreciation cannot be provided in case of loss, in a financial year. ii. At the end of the accounting year, all the nominal accounts of the ledger book are balanced. iii. Any amount spent for replacement of worn out part of a machine is capital expenditure. iv. In case of admission of a new partner in a partnership firm, the profit/loss on revaluation account is transferred to all partners in their new profit sharing ratio. v. The debit notes issued are used to prepare Sales Return Book. vi. Debentures Suspense Account appears on the liability side of the Balance Sheet of a Company.

Suggested Answer and Working Notes:

(i) False: Depreciation is a charge against profit and not an appropriation of profit. Therefore, depreciation has to be provided for, even in case of loss in a financial year. (ii) False: At the end of the accounting year, all the nominal accounts of the ledger book are totalled and transferred to Profit & Loss A/c. (iii) False: Amount spent for replacement of any worn-out part of a machine is revenue expense since it is part of its maintenance cost. (iv) False: In case of admission of new partner in a partnership firm, profit/loss on revaluation account is transferred to old partners in their old profit-sharing ratio. (v) False: The debit notes issued are used to prepare purchases return book. (vi) False: Debentures Suspense Account appears on asset side of Balance Sheet under Non-Current Asset.

Topics: Depreciation and Amortisation, Partnership and LLP Accounts

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