Which of the following statement is incorrect?

Q: Which of the following statement is incorrect ?

Which of the following statement is incorrect ?

Question

Accepted Answer

The correct option is 4:
The statement that Fixed assets are stated in the Balance Sheet at their market value is **incorrect**, which is why it is the correct answer to the question. According to the foundational accounting convention, the **Historical Cost Principle**, fixed assets (Property, Plant, and Equipment - PP\&E) must be recorded on the Balance Sheet at their original acquisition cost, minus the accumulated depreciation. Market value is generally ignored for day-to-day reporting because it is often subjective, fluctuating, and violates the principle of objectivity. An asset's value is only reviewed for significant decreases below the book value via an impairment test, but the default reporting standard is cost-less-depreciation, not market value.

The incorrect option is 1:
The statement "Depreciation is an amortised expenditure" is considered a correct conceptual statement, though technically the term *amortisation* is strictly reserved for expensing intangible assets, while *depreciation* is for tangible assets. However, in a broader sense, both are systematic processes for spreading a capital expenditure—the initial cost of an asset—over its useful life. The cost is not fully expensed in the year of purchase but is "amortized" across the accounting periods that benefit from its use.

The incorrect option is 2:
This statement accurately reflects the rule for preparing final accounts. If the Closing Stock (Stock at the end) is listed within the Trial Balance itself, it signifies that the necessary adjusting entry for stock (debiting Closing Stock and crediting the Trading Account) has already been passed. In such a scenario, the closing stock figure is no longer needed in the Trading Account, and it is appropriately and **only** presented on the Assets side of the Balance Sheet as a Current Asset.

The incorrect option is 3:
This is a standard and correct definition from Cost Accounting. Fixed costs, such as rent, insurance, or the salary of permanent staff, are costs that remain constant in their total amount over a defined time period, regardless of the fluctuations in the volume of production or sales. This characteristic defines them as "period costs" and is fundamental to analysis like Break-Even Point calculations.