CAP-I Fundamentals of Accounting — Exam Q&A, Key Concepts, and Student Summary Pad
This one-page prep covers inventory valuation (LCNRV), sale-or-return, provisions on debtors, rectification entries, fire-loss & insurance, manager’s commission, and depreciation change (WDV→SLM). Important points are highlighted. Use the search filter to jump to a topic and write your own summary at the end.
Q1) How do you value closing stock at year-end (LCNRV)? (नेपाली: अन्त्यको स्टक कसरी मूल्यांकन गर्ने?)
Apply the Lower of Cost and Net Realizable Value rule: compare the historical cost with NRV and pick the lower figure for inventory. This protects against overstating assets and profit. If cost is Rs. 225,000 and NRV is Rs. 210,000, report Rs. 210,000 as closing stock. (नेपाली: लागत र शुद्ध प्राप्त मूल्य (NRV) मध्ये कम भएको राख्ने।)
Q2) What is the provision for doubtful debts and discount on debtors policy? (नेपाली: शंकास्पद देय र छुट प्रावधान)
For doubtful debts, firms may use aging rates (e.g., 20% on >1-year, 50% on >2-years) or a flat 5% on total debtors. After deducting bad-debt provision, you may also create a 2% provision on debtors for cash discounts. This ensures prudent receivables and more realistic profit. (नेपाली: उम्र अनुसार २०%/५०% वा समग्र ५% राख्ने; त्यसपछि २% छुट प्रावधान।)
Q3) Period-end treatment of goods sent on sale or return (approval basis)? (नेपाली: बिक्री वा फिर्ता)
If approval is pending at year-end, reverse the sale entry (reduce Sales/Debtors) and bring the goods back into inventory at cost. Only approved/accepted goods remain as sales. This avoids overstated revenue and understated stock. (नेपाली: स्वीकृति नभएसम्म बिक्री उल्ट्याएर लागतमा स्टक राख्ने।)
Q4) How to rectify a purchase return wrongly recorded in the Sales Return journal?
Pass a rectification using Suspense A/c if totals were mis-posted: Suspense Dr; To Purchase Return; To Sales Return (split the wrong total). This corrects the books without distorting revenue or purchases.
Q5) Fire destroyed inventory — how to record insurance claim and loss?
Recognize the loss of stock at cost and the claim receivable for the insured portion (e.g., 80%). Typical entry: Claim Receivable Dr, Loss of Stock Dr To Trading A/c. This keeps gross profit proper and shows recoverable amount as an asset.
Q6) Compute Manager’s Commission on net profit after charging commission
Use the shortcut: Commission = NP before commission × r / (100 + r). Example: If NP before commission is Rs. 59,500 and rate is 5%, commission = 59,500 × 5/105. (नेपाली: सूत्र प्रयोग गरी सजिलै निकाल्नुहोस्।)
Q7) Changing depreciation from WDV to SLM with retrospective effect — what to adjust?
Recompute accumulated depreciation under the new method up to the date of change. The difference vs earlier charge is adjusted through Profit & Loss (Adjustment). Then apply the new method for the current year.
Q8) Do we calculate provision for discount on debtors before or after doubtful-debt provision?
First deduct the bad-debt provision from gross debtors to get net debtors, then apply the discount provision (e.g., 2%) on that net figure. This two-step order avoids double-counting.
Q9) Year-end stock valuation adjustments: goods in transit, sold-not-delivered, returns, sale-or-return
Adjust the stock figure for items purchased but not recorded/received, sold but not delivered, returns inwards/outwards not posted, and sale-or-return goods pending approval. Prepare a clear reconciliation so the adjusted closing stock is correct and profit is not misstated.
✍️ Student Summary (Your own words)
Write a concise summary of today’s key ideas (LCNRV, sale-or-return, provisions, rectification, fire loss, commission, depreciation change). Highlight formulas & definitions.
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