State with reasons whether the following statements are True or False: i. Insurance claim received on account of plant and machinery completely…
CA Foundation · Accounting · MTP · April 2025
State with reasons whether the following statements are True or False: i. Insurance claim received on account of plant and machinery completely damaged by fire is a capital receipt . ii. Wages paid for erection of machinery are debited to Profit and Loss Account . iii. The financial statements must disclose all the relevant and reliable information in accordance with the Full Disclosure Principle. iv. The business of partnership must be carried on by all the partners . v. The debit notes issued are used to prepare Sales Return Book . vi. When shares are forfeited, the share capital account is debited with called up capital of shares forfeited and the share forfeiture account is credited with Calls in arrear of shares forfeited.
Suggested Answer and Working Notes:
(i) True: Insurance claim received on account of plant and machinery completely damaged by fire is a capital receipt as it is not obtained in course of normal business activities. (ii) False: Such wages being related to capital Asset should be debited to the machinery account. (iii) True: The financial statements must disclose all the relevant and reliable information in accordance with the Full Disclosure Principle. (iv) False: The business of the partnership firm can be carried on by all the partners or by any one of them acting for all. (v) False: The debit notes issued are used to prepare purchases return book. (vi) False: When shares are forfeited, the share capital account is debited with called up capital of shares forfeited and the share forfeiture account is credited with amount received on shares forfeited.
Topics: Partnership and LLP Accounts, Issue, Forfeiture and Re-issue of Shares
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