JAIIB Paper 3 Module A Quiz 6

A subsequent expenditure that increases future economic benefits, such as capacity or useful life, may be capitalised if the applicable recognition criteria are met. Routine maintenance is generally expensed.

Routine production wages are operating costs incurred in the current period and are normally revenue expenditure. The other examples generally create or enhance long-term assets and may be capital expenditure.

A production machine provides benefits over multiple periods and is generally capitalised as property, plant and equipment, then depreciated over its useful life.

Sales revenue earned in the ordinary course of trading is a revenue receipt. Share issues, borrowings and owner contributions are financing/capital receipts rather than operating revenue.

Acceptance signifies the drawee’s assent to the order to pay. The drawee is then referred to as the acceptor and is primarily liable according to the instrument’s terms.

The payee is the person named to receive payment; after valid negotiation, a lawful holder may be entitled to receive payment under the applicable law.

Dishonour occurs when a bill is not accepted when required or is not paid at maturity. The legal consequences and notice requirements depend on the instrument and applicable law.

Endorsement is a method of negotiating certain instruments by signing and delivering them. The endorsee may acquire rights under the instrument, subject to statutory conditions and defences.

An accommodation bill is not supported by a genuine trade sale in the ordinary way. Its repayment depends on the financial arrangements and creditworthiness of the parties, so the bank must assess the underlying purpose and risks.

On receipt of payment, cash or bank is debited and Bills Receivable is credited to remove the asset that has been settled. Exact entries depend on whose books are being considered.

Concurrent audit provides timely review of transactions and controls so exceptions can be corrected early. It complements, rather than replaces, other audit and assurance functions.

Internal audit provides independent, objective assurance and advisory work designed to add value and improve operations by evaluating governance, risk management and control processes.

Preventive controls aim to stop errors or unauthorised activity before they occur. Maker-checker controls and segregation of duties are common examples; detective controls identify problems after or during processing.

Audit planning should respond to significant changes in business, systems, products, risk exposures, control failures and regulatory requirements. A purely calendar-driven plan may miss emerging risks.

Audits are designed to obtain reasonable assurance that the subject matter is free from material misstatement, not absolute assurance. Management remains responsible for the financial statements and internal controls.

Follow-up verifies that corrective actions have been completed and that the underlying risk or control weakness has been addressed. Unresolved findings should be escalated according to their severity and ageing.

Indian Accounting Standards are based substantially on IFRS, with Indian-specific carve-outs and carve-ins where required. Applicability depends on the legal and regulatory framework for the relevant class of entity.

The Institute of Chartered Accountants of India plays a major professional role in formulating and recommending accounting standards through its standard-setting processes. The notified standards obtain legal force through the applicable government framework.

Harmonisation can improve cross-border comparability and help investors analyse entities in different jurisdictions. It does not remove local law or guarantee identical accounting outcomes in all circumstances.