P Limited is an Indian company which prepares its accounts as per the Accounting Standards notified by the Ministry of Corporate Affairs. While…

P Limited is an Indian company which prepares its accounts as per the Accounting Standards notified by the Ministry of Corporate Affairs. While finalizing its financial statements for the year ended 31 st March, 2025, the accountant of the company has sought your advice with regard to the following matters: P Limited had taken a loan of USD 1,00,000 on 1 st April, 2024 for a specific project at an interest rate of 5% per annum, payable annually. On 1 st April, 2024, the exchange rate between the currencies i.e. USD vs INR was 75 per USD. The exchange rate on the reporting date i.e. 31 st March, 2025 is 80 per USD. The corresponding amount could have been borrowed by P Limited in local currency at an interest rate of 10% per annum on 1 st April, 2024. P Limited holds 12% of the voting shares in G Limited. G Limited's board comprises of eight members and two of these members are appointed by P Limited casting significant influence. Each board member has one vote at the meeting. P Limited is engaged in the manufacturing of toys at its plant at Muzaffarnagar and incurs the following costs to manufacture each unit of toy: Particulars Cost per Unit (₹) Material Cost 200 Direct Labour 40 Direct Variable Production Overheads 20 The plant has the capacity to produce 1,00,000 units of toys per annum and the fixed production overheads for the year are - 15,00,000/-. During the year 2024-25, the actual production of toys was - 1,20,000 units. At the end of the year, 11,000 units of finished toys were lying unsold at the works of P Limited. P Limited also renders catering services at various events. At a wedding in 2024-25 in which it had given its catering service, ten people died possibly as a result of food poisoning. Legal proceedings were started by the client against P Limited seeking compensation of 10,00,000/-, but it disputes the liability. The legal counsel of P Limited has advised that the company is likely to lose the case, although the chances of paying the claim are not remote. The estimated potential liability estimated by counsel is (i) Legal cost to be incurred (irrespective of the outcome of the case) ₹ 75,000/- and (ii) Settlement if the claim is required to be paid - 10,00,000/-. On the basis of information provided above, you are required to choose the most appropriate answer to the below mentioned Questions 1 to 5 in line with the relevant Accounting Standards: