State with reasons whether the following statements are True or False: i. Subsidy received from the government for working capital by a…
CA Foundation · Accounting · MTP · June 2024
State with reasons whether the following statements are True or False: i. Subsidy received from the government for working capital by a manufacturing concern is a revenue receipt. ii. If the effect of errors committed cancel out, the errors will be called compensating errors and the trial balance will disagree. iii. The financial statements must disclose all the relevant and reliable information in accordance with the Full Disclosure Principle. iv. Limited Liability Partnership (LLP) is governed by Indian Partnership Act, 1932. v. Nominal Accounts are kept under Single Entry System. vi. A person holding preference shares of a company cannot hold equity shares of the same company.
Suggested Answer and Working Notes:
(i) True: Subsidy received from the government for working capital by a manufacturing concern is a revenue receipt because it has no effect on improvement of future capability of business in revenue generation. (ii) False: If the effect of errors committed cancel out, the errors will be called compensating errors and the trial balance will agree. (iii) True: The financial statements must disclose all the relevant and reliable information in accordance with the Full Disclosure Principle. (iv) False: The provisions of the Indian Partnership Act, 1932 shall not apply to a limited liability partnership. Limited Liability (LLPs) Act, 2008 is applicable for Limited Liability Partnerships. (v) False: Under the single entry system of bookkeeping, generally cash book and personal accounts of creditors and debtors are maintained, and no other ledger is maintained. (vi) False: Preference share holder can hold both Equity shares and Preference shares of the company. Any person can hold both kinds of shares.
Topics: Partnership and LLP Accounts, Issue, Forfeiture and Re-issue of Shares
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