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    Question

    A s per which concept, total Notional profit should not be transferred to Profit and Loss Accounts but the portion of it should be kept in reserve to meet any unforeseen future expenses or contingencies?

    A Matching Correct Answer Incorrect Answer
    B Prudence Correct Answer Incorrect Answer
    C Going Concern Correct Answer Incorrect Answer
    D Business Entity Correct Answer Incorrect Answer
    E Dual Aspect Correct Answer Incorrect Answer

    Solution

    Portion of Notional profits or Estimated Profits transferred to Profit and Loss Account: - depends on the stage of completion of the contract ie. Ratio of (Work Certified / Total Contract Work) Concept of Prudence requires that the total Notional profit should not be transferred to Profit and Loss Accounts but the portion of it should be kept in reserve to meet any unforeseen future expenses or contingencies.

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