Q1. Delta Limited. manufactures textiles. The company accountant asks your suggestion regarding the given product lines:
Lime Green Tartan: Manufacturing cost Rs.9,000. Stock has been on a shelf since from the year 1995. The accountant believes that the one and only way of selling it would be to shred it and bundle it (at a cost of Rs. 500) and vend it as industrial cleaning wipes for an anticipated sale price of Rs.5,000.
Power Strangers: Initially printed to meet up a high demand for garments linked to a popular television serial, there is no additional demand for the textile in this country. Stocks cost Rs.16,000, and the only likely source of revenue would be to export the material at a cost of Rs.2750 for use as dusters in the Australia. Administration costs to handle the sale are estimated at Rs.2,650 and the sale price is estimated at Rs.4,000.
Describe, with reasons, how each of the above product lines must be accounted for in the annual accounts of the company for the year ended 31.03.2008.
Q2. Describe the main purpose and status of the ‘Framework for the preparation and presentation of the Financial Statements’ issued by Accounting Standard Board (ASB).
Q3. Illustrate the underlying suppositions considered in the ASB’s ‘Framework for the preparation and presentation of the Financial Statements’.