Question

QUIZ PartArtimin e 1. What Capital expenditure? 3. In which financial statement des capital expenditure appear 4. In which financial statement des revenue expenditure appear 5. Expenses incurred for incorporation of a company are called 6. These expenses are categorized capital expenditure revenue expenditure 7. What is the counting treatment for these expenses -- - ------- - Give examples of these types of expenses -- 9. What is the journal entry when these expenses are cred.--- P B Consolidated Financial Statements 10. Company Xcontrols Company Y by means of holding majority shares in that company. Co Xis called - and Co. Y is called ... 11. How does FASB define consolidated financial statements? -- 12. If a company doesn't choose to use consolidated subsidiary financial statement reporting it may account for its subsidiary ownership using the following 2 methods: ------- -- 13. Give two purposes as to why consolidated financial statements are used: ---

Answer 1

1. Capital Expenditure:-  Expenses are made for a particular asset but they do not get completely consumed in the specific time. Capital expenditures are long-term expenditures. Example: Purchase of machiney and IT Items etc.

2. Revenue Expenditure:- These are the routine expenditures that takes place in the normal business. In other words, this kind of expenditure maintains fixed assets. Example: Electricity, water, fuel, salary etc.

3. Capital Expenditure are appear in Balance Sheet of a company.

4. Revenue  Expenditure are appear in Profit & Loss (Income Statement) of a company.

5. Expenditure incurred for incorporation of company are called preliminary expense and shown in Balance sheet..

6. Preliminary expense are also called capital expenditure expenses.

7. Preliminary Expenses are shown on the asset side of the balance sheet and are preferably amortized within the same year.

8. Example of Preliminary Expenses:-

A) Amount paid for CPA for formation of Business.

B) Expense for printing of Memorandom and Artical of a company.

9. Journal Entry

A) At the time of Payment

Preliminary Expense Dr

Cash Cr

B) At the time of Written off

Preliminary Expense Written off Dr

Preliminary Expense Cr

C) Closing Entry

Profit and Loss Dr

Preliminary Expenses Cr

10. Company X control Company Y by mean of holdiing majority shares in that company. Company X is called Holding Company and Company Y is called Subsidiary Company.

11. FASB concluded that a noncontrolling interest in an entity meets the definition of equity (or net assets) as, the residual interest in the assets of an entity that remains after deducting its liabilities.

12. If a company doesn’t choose to use consolidated subsidiary financial statement reporting it may account for its subsidiary ownership using the cost method or the equity method.

13. A) Consolidated financial statement are prepared for the benefit of the shareholders and creditors of the parent company, the results of operations and the financial position of a parent company and its subsidiaries.

B) Consolidation Eliminated all transaction that occur between subsidiaries and the parent company and gives a simplified view of business performance.