Which of the following is not an example of a fictitious asset?
Answer Details
Raw materials stock is not an example of a fictitious asset.
A fictitious asset is an asset that is shown on a company's balance sheet but has no tangible value or does not exist in reality. It is important to note that fictitious assets are not real assets that can be used to generate revenue or profits for the company. They are usually created artificially to conceal losses or inflate the value of the company.
Examples of fictitious assets include debit balances in a profit and loss account, preliminary expenses of a limited company, and expenditure on incorporation carried forward. These items do not represent any tangible assets or value and are only created for accounting purposes.
In contrast, raw materials stock is a real asset that has tangible value and can be used in the production process to generate revenue for the company. Raw materials are an essential component of a manufacturing business, and their value is reflected in the company's inventory account.
Overall, it's important for companies to avoid creating fictitious assets as they can misrepresent the company's financial position and mislead investors and other stakeholders.