Page 21 - DCOM409_CONTEMPORARY_ACCOUNTING

Contemporary Accounting

Notes the assets in the balance sheet in their recoverable amount, where it is lower than the
carrying amount. Hence, the standard follows a conservative approach in the sense that it
does not suggest carrying an asset at its recoverable amount when it is higher than the
carrying amount. Thus, AS-28 attempts to take some care of the criticism of historical cost
accounting.
29. AS-29 – Provisions, contingent liabilities and contingent assets: This is a mandatory
accounting standard effective from 1st April, 2004. The standard seeks to make a distinction
between provisions and contingencies and suggest recognition and disclosure requirements
for these items. At the outset, it should be made clear that provisions (e.g., provision for
tax) are different from outstanding liabilities (e.g., salary payable). In the case of the
former, the amount is based on estimation, whereas in case of the latter, the liability is
certain and hence no estimation is involved. Para 10 of AS-29 defines the term ‘provision’
as below:

“A provision is a liability which can be measured only by using a substantial degree of
estimation”.

Task Academy Ltd. purchased a computer for ` 1,50,000 to be paid in 2 installments of
` 1,00,000 and ` 50,000 payable on 1-12-2003 and 31-01-2004 respectively. The acquisition of
asset at ` 1,50,000 was duly recorded and the supplier was shown as a creditor for ` 50,000
in the balance sheet as on 31-12-2003. The account of the creditor, however, was settled by
paying ` 49,000 only on 31-01-04. The rebate of ` 1,000 has been considered as income of
the year 2004. Comment.
Hint: See AS-9 for Revenue Recognition

Self Assessment

Multiple Choice Questions:

11. Revenue reorganization is recorded under which Accounting Standard:
(a) AS 2 (b) AS 5

(c) AS 9 (d) AS 6
12. Earning per Share is recorded under which Accounting Standard:
(a) AS 2 (b) AS 20

(c) AS 6 (d) AS 9

13. Going concern is the part of which accounting principle under GAAP:
(a) Basic assumptions (b) Basic principles
(c) Modifying principles (d) None of the above

14. AS-20 prescribes that the profit available for equity shareholders should be divided
by……………number of shares.

(a) Weighted (b) Closing

(c) Total (d) Opening

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