Online Exam: Conceptual Framework, IAS 2, Inventory Valuation, Capital vs Revenue Expenditure, Depreciation Methods

ONLINE EXAM

Table of Contents
MAIN BODY..................................................................................................................................2
Question 1 Conceptual framework..............................................................................................2
a. Define the term IAS 2 define “inventories” and “net realisable value”............................3
b. Explain how cost should be measured according to IAS 2................................................3
Question 2 Sean Morris Plc........................................................................................................4
Question 3: Danke Linited..........................................................................................................4
Question- Joy plc........................................................................................................................5
d) Three method of depreciation are as following......................................................................6
MAIN BODY
Question 1 Conceptual framework
(a) The Conceptual Framework is a body of objectives and fundamentals, its purpose determines
the goals and objective of financial reporting (Scudder and Colson, 2019).
(b) The main objective of conceptual framework is to aid the IASB in the growth of future IFRSs
and in reviewing the existing IFRSs. It also helps in preparation of financial statements in
modification and developing accounting policies for the situation nor covered by existing
standards
(c)
 Shareholders- Use the financial statements for finding out the profitability of their
investment, these statements are useful taking the selling, holding and more buying
decision.
 Mangers- financial reports are used for finding out the current position of the
organisation, any fraud or error that are going on in the business entity can be determined
by it. Hence it is very useful for the same also these are used for making budget for the
upcoming year and strategic planning.

 Creditor and debtors- To seek the potential and efficiency of the business entity, it helps
in determining whether to continue the business or not.
 Staff- The employees seek stability and security in a job, these reports help them to know
about details of the company.
 Other parties are financial advisor, analyst, authorities and government they use financial
records of the organisation for their needs and requirements.
(d) key assumption used in preparation of financial statement is:
Accrual assumption- The financial records are prepared using the accrual basis of
accounting
Conservatism assumption- Revenue should be recorded once earned, but expenses
should be recognised in the year incurred.
Consistency assumption- The method used of recording and preparation must be
followed consistently.
Economic entity assumption- The organisation and the owner are to be treated as
separate legal entity.
Going concern assumption- Business shall continue its operation in the future, there is
no aim of discontinuation.
Reliability assumption- Transaction should be recorded supported by an evidence.
Time period assumption- Accounting should be done for specific period; this time period
must be followed without modification.
a. Define the term IAS 2 define “inventories” and “net realisable value”
Inventory is assets held for ordinary core operation of business includes work in progress,
semi-finished and finished good.
Net realisable value is the evaluated selling price subtracting cost incurred in completion
and selling of the good.
b. Explain how cost should be measured according to IAS 2
Expense related to the inventory’s purchasing, conversion, installation, cost incurred in bringing
the inventory to location. Items such as abnormal waste, storage costs, administrative expenses
not related manufacturing