015 are normally included in the determination of net profit or loss for the current period. An alternative approach is to show such items in the statement of profit and loss after determination of current net profit or loss. In either case, the objective is to indicate the effect of such items on the current profit or loss. It may be mentioned that it is an expense arising from the ordinary course of business. Although abnormal in amount or infrequent in occurrence, such an expense does not qualify an extraordinary item as per Para 10 of AS 5 (Revised). For better understanding, the fact that power bill is accounted for at provisional rates billed by the state electricity board and final adjustment thereof is made as and when final bill is received may be mentioned as an accounting policy. In preparing the financial statements of R Ltd. for the year ended 31st March, 2013, you come across the following information. State with reasons, how you would deal with this in the financial statements: The company invested 100 lakhs in April, 2013 in the acquisition of another company doing similar business, the negotiations for which had started during the financial year. As it is stated in the question that financial statements for the year ended 31st March, 2013 are under preparation, the views have been given on the basis that the financial statements are yet to be completed and approved by the Board of Directors. Para 3.2 of AS 4 (Revised) defines "Events occurring after the balance sheet date" as those significant events, both favourable and unfavourable, that occur between the balance sheet date and the date on which the financial statements are approved by the Board of Directors in the case of a company. Accordingly, the acquisition of another company is an event occurring after the balance sheet date. However no adjustment to assets and liabilities is required as the event does not affect the determination and the condition of the amounts stated in the financial statements for the year ended 31st March, 2013. Applying para 15 which clearly states that/disclosure should be made in the report of the approving authority of those events occurring after the balance sheet date that represent material changes and commitments affecting the financial position of the enterprise, the investment of 100 lakhs in April, 2013 in the acquisition of another company should be disclosed in the report of the Board of Directors to enable users of financial statements to make proper evaluations and decisions. 38 A Limited Company closed its accounting year on 30.6.13 and the accounts for that period were considered and approved by the board of directors on 20th August, 2013. The company was engaged in laying pipe line for an oil company deep beneath the earth. While doing the boring work on 1.9.2013 it had met a rocky surface for which it was estimated that there would be an extra cost to the tune of 80 lakhs. You are required to state with reasons, how the