What is meant by the Ficititious Assets?
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Answer Posted / h.r. sreepada bhagi
A fictitious asset is an asset accounted and presented in
the Balance Sheet, but has no tangible existence or
realisable value, but represents actual expenditure
incurred. A fictitious asset is created to account the
expenses incurred but could not be charged off to the Profit
& Loss A/c of the year in which they are incurred.
Fictitious Assets can be amortized as soon as possible as
per the GAAP applicable to the country.
In other words, fictitious assets are not real assets which
can be felt & seen. An example of fictitious asset is
Preliminary Expenditure.
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From the following information you are to prepare a Cash Budget for the period from July to December 2008. (i) The estimated sales and expenses are as follows: June July Aug. Sep. Oct. Nov. Dec. Sales 35,000 40,000 40,000 50,000 50,000 60,000 65,000 Purchases 14,000 16,000 17,000 20,000 20,000 25,000 28,000 Wages & Salaries 12,000 14,000 14,000 18,000 18,000 20,000 22,000 Expenses 5,000 6,000 6,000 6,000 7,000 7,000 7,000 Interest Received 2,000 - - 2,000 - - 2,000 Sale of Fixed Assets - - 20,000 - - - - (ii) Sales are 20% in cash and balance on credit. 50% of the debtors are collected in the month of sales and the remaining in the next month. (iii) The time lag in payment of purchases and expenses is 1 month. However, wages and salaries are paid fortnightly with a time lag of 15 days. (iv) The company maintains a minimum cash balance of Rs. 5,000. The cash balance in excess of Rs. 7,000 is invested in government securities in multiples of Rs. 1,000. Short falls in cash balance are made good by borrowing from banks. The interest received as well as paid is to be ignored.
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