A: Internal control is a process designed to provide reasonable assurance regarding the achievement of objectives. R: Internal control can guarantee the prevention of all frauds. Choose the correct option.
A.Both A and R are true and R is the correct explanation of A
B.Both A and R are true but R is NOT the correct explanation of A
Explanation:
Internal control provides *reasonable* assurance, not absolute assurance, regarding operational efficiency, reliable reporting, and compliance. It cannot guarantee the prevention of all frauds due to inherent limitations like collusion or management override. A is true, R is false.
A government department incurs an expenditure of ₹5,00,000 on the repair of a building. Under the General Financial Rules (GFR), this expenditure should be classified as:
A.Revenue expenditure, as it maintains the existing condition
B.Capital expenditure, as it improves the building
C.Contingent expenditure
D.Deferred revenue expenditure, to be written off over 5 years
Explanation:
Under standard accounting and GFR principles, routine repairs and maintenance that do not increase the capacity or useful life of an asset are classified as revenue expenditure, not capital.
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