Question

Given below are two statements:
Statement I: Accounting income is the procedure whereby the present value of the future income is determined.
Statement II: The expression of farm plan in monetary terms by the estimation of receipts, expenses and net income is called budgeting.
In the light of the above statements, choose the most appropriate answer from the options below:

• A. Both Statement I and Statement II are correct
• B. Both Statement I and Statement II are incorrect
• C. Statement I is correct but Statement II is incorrect
• D. Statement I is incorrect but Statement II is correct

Hint:

Discounting or capitalization converts future values to present values. Budgeting always refers to forward-looking monetary estimations of a farm plan.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
Farm planning, accounting, and budgeting are core managerial procedures used to organize resources and evaluate the financial feasibility of agricultural operations.

Step 2: Detailed Explanation:
Let us analyze each statement:
- Statement I: The procedure where the present value of a future stream of income is determined is called Capitalization or Discounting. Accounting income, on the other hand, is the actual net income calculated as realized revenues minus historical explicit costs over a specific period. Thus, Statement I is incorrect.
- Statement II: Farm budgeting is defined as the physical and financial expression of a farm plan. It involves estimating the expected receipts, operating expenses, and projected net income of the farm. Thus, Statement II is correct.
Therefore, Statement I is incorrect, but Statement II is correct.

Step 3: Final Answer:
The correct option is (D), representing "Statement I is incorrect but Statement II is correct."