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Which of the following events after the balance sheet date would normally qualify as adjusting events according to AS-4 (Events after balance sheet date)? (A) The insolvency of a customer on the balance sheet date (B) A decline in the market value of investments (C) The declaration of an ordinary dividend (D) The determination of the cost of assets purchased before the balance sheet date Choose the most appropriate answer from the options given below:

Which of the following events after the balance sheet date would normally qualify as adjusting events according to AS-4 (Events after balance sheet date)? (A) The insolvency of a customer on the balance sheet date (B) A decline in the market value of investments (C) The declaration of an ordinary dividend (D) The determination of the cost of assets purchased before the balance sheet date Choose the most appropriate answer from the options given below: Correct Answer (A) and (D) only

The correct answer is (A) and (D) only

Key PointsAccounting Standard - 4 

Accounting Standard 4 (AS 4) pertains to the treatment of the following items in the financial statements:

  • Contingencies
  • Events occurring after the balance sheet date

Important Points Events Occurring after the Balance Sheet Date:

  1. Events which occur between the balance sheet date and the date on which the financial statements are approved, may indicate the need for adjustments to assets and liabilities as at the balance sheet date or may require disclosure
  2. Adjustments to assets and liabilities are required for events occurring after the balance sheet date that provide additional information materially affecting the determination of the amounts relating to conditions existing at the balance sheet date.
    For Example: For example, an adjustment may be made for a loss
    on a trade receivable account which is confirmed by the insolvency of a
    customer which occurs after the balance sheet date
  3. Adjustments to assets and liabilities are not appropriate for events occurring after the balance sheet date, if such events do not relate to conditions existing at the balance sheet date.

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