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cbse 12th Standard Accountancy Financial Statements of a Company Important Questions And Answers Study Material - QB365

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Questions:

Generic 3

17 x 3 = 51

Gyan Ud issued 10,000, 10% debentures of Rs 100 each on 1st October 2014 to be redeemed on 31st July 2015. How will it be shown in the balance sheet as at 31st March 2015?

Gateway Ltd sold its car at a profit of Rs 15,000. How will it be shown in the statement of profit and loss?

Durian Furniture Mart Pvt Ltd is a manufacturer of furniture.They sold waste from wood used for manufacturing furniture for Rs 2,00,000. Is the sale of waste revenue from operations?

While preparing the financial statements, it is advisable to follow the convention of conservation.Why?

Satish is interested in investing in Data Unlimited, a company providing 4G services.However, before investing, his financial advisor who undoubtedly is his wife, advises him to go through the financial statements of the company.Satish falls under which category of user?

From the following information of A Ltd. and B Ltd. for the financial year ending on March 31,2013,prepare a Common-size Balance sheet and comment on their financial position.

Particulars	A Ltd. Rs.	B ltd. Rs.
I. Equity and liabilities
Share Capital	6,00,000	8,00,000
Reserves and Surplus	3,00,000	2,50,000
Current Liabilities	1,00,000	1,50,000
Total	10,00,000	12,00,000
II. Assets
Fixed Assets	4,00,000	7,00,000
Current Assets	6,00,000	5,00,000
Total	10,00,000	12,00,000

With the help of the given information obtained from the books Raghu Ltd.,prepare a Comparative Statement of Profit and Loss for the year ended 31.03.2013:

Particulars	2012-13	2011-12
Revenue from Operations	Rs.20,00,000	Rs.17,00,000
Cost of Revenue from Operations	70% of Revenue from operations	60% of Revenue from Operations
Other Expenses	Rs.42,000	Rs.68,000
Other Incomes	Rs.20,000	Rs.14,000
Income Tax	50%	50%

Under which major heads the following items will appear in the statement of Profit and Loss of a company:
(i)Sale of Product
(ii)Interest income
(iii)Salaries and wages
(iv)Interest paid on Debentures
(v)Goodwill amortized
(vi)Selling and Distribution Expenses
(vii)Rent received
(viii)Profit on sale of investmen

List four items under the heading 'Other Income' in a Statement of Profit and Loss prepared as Schedule III, Part II of the Companies Act,2013.

10.

List four items under the heading 'Non-current Liabilities' in a balance sheet prepared as per Schedule III of the Companies Act., 2013

11.

Name the sub-heads under the head 'Non-Current assets' in the Balance Sheet under Schedule-III of the companies Act.,2013

12.

Name the sub-heads under the head 'Shareholders Funds' as per Schedule III part 1 of the Balance Sheet.

13.

List ant three examples of 'Contingent Liabilities'.

14.

State any six items which are shown under the heading 'Reserves and Surplus' in the Balance Sheet of a Company as per Schedule III, Part-I of the Companies Act,2013.

15.

List the items which are shown under the heading 'Current Liabilities' as per schedule III part-I of the Companies Act,2013.

16.

Under which major sub-headings the following items will be placed in the Balance Sheet of a company as per Schedule III Part I of the Companies Act 2013:
(i)Buildings
(ii)Raw Material
(iii)Term Loans from Bank
(iv)Goods-in-Transit
(v)Debenture Redemption Reserve
(vi)Income received in advance
(vii)Office equipment
(viii)Cash in hand

17.

Under which major sub-headings the following items will be placed in the Balance Sheet of a company as per Schedule III Part I of the Companies Act 2013:(i)Cheques in hand
(i)Cheques in hand
(ii)Stock of work-in-progress
(iii)Copyrights
(iv)Loan of Rs.1,00,000 payable after three years
(v)Short term deposits payable on demand
(vi)Negative balance shown by the statement of profit and Loss
(vii)Land
(viii)Cash at Bank

Fill up / 1 Marks

11 x 1 = 11

18.

State the satisfactory ratio of Current ratio and Liquid Ratio

19.

What is Vertical Analysis?

20.

How would you show the following two items in a company's Balance Sheet as at 31^st March, 2012 as per the requirement of Schedule VI:
General reserve(Since 31^st March, 2011) Rs. 3,00,000, Statement of Profit and Loss(Debit Balance) for 2011-12 Rs. 2,00,000

21.

What is Horizontal Analysis?

22.

State the interest of trade unions in the analysis of financial statements.

23.

How does 'subjectivity' become a limitation of Financial Statement Analysis ?

24.

State any one limitation of financial Statement Analysis.

25.

How the 'Earning capacity of a business' is assessed by "Financial Statement Analysis"?

26.

How is analysis of financial statements important to the shareholders of the company ?

27.

State why the creditors for goods are interested in analysing financial statements.

28.

Why is the government interested in analysing financial statements ?

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Answers Key:

Generic 3

17 x 3 = 51

They will be shown as 'short-term borrowings' in the balance sheet as at 31st March 2014 because they are repayable within 12 months of the date of issue of debentures.

The profit on sale of car will be shown as 'other income'.

Yes, it is revenue from operations because the wood sold as waste is from the manufacturing of furniture.

Convention of conservatism states that"anticipate all losses, but not profits", helsFollowing this convention helps to avoid overstatement of income.Therefore, it is advisable to follow this convention while preparing financial statements.

Satish is a potential investor for Data Unlimited.Therefore, he is an external user.

Co.	Share Capital	Reserve	Current Liabilities	Fixed Assets	Current Assets
A Ltd.	60%	30%	10%	40%	60%
B Ltd.	66.67%	20.83%	12.50%	58.33%	41.67%

Comment: On the basis of this analysis,one can conclude that both the companies are maintaining a comparable percentage of total assets in different consitituents of assets and liabilities.

Percentage change : Revenue from Operations 25%, Other income 50%, Cost of Revenue from Operations 37.25%; Other Expenses (38.24%),profit before and after Tax (7.67%) each

(i)Revenue from operations
(ii)Other Income
(iii)Employees Benefit Expenses
(iv)Finance Costs
(v)Depreciation and Amortization Expenses
(vi)Other Expenses
(vii)Other Income
(viii)Other income

(i)Interest Income
(ii)Dividend Income
(iii)Rental Income
(iv)Profit on Sale of investment

10.

(i)Long-term borrowings
(ii)Deferred tax liabilities(net)
(iii)Other long-term liabilities
(iv)Long-term provisions

11.

(i)Fixes Assets
(ii)Non-Current investments
(iii)Deferred tax assets(net)
(iv)Long-term loans and advances
(v)Other non-current assets

12.

(i)Share Capital
(ii)Reserves and Surplus
(iii)Money received against share warrents

13.

Examples of Contingent Liabilities: (i)Claims against the company not acknowledged as debts
(ii)Guarantees
(iii)Other money for which the company is contingently liable

14.

Reserves and Surplus: (i)Capital Reserve (ii)Capital Redemption Reserve (iii)Securities Premium(Reserve) (iv)Revaluation Reserve (v)Debenture Redemption Reserve (vi)Share Options Outstanding Account

15.

Current Liabilities:
(i)Short-term borrowings
(ii)Trade payables
(iii)Other current liabilities
(iv)Short-term provisions

16.

(i)Non-current Assets-Fixed Assets(Tangible)
(ii)Current Assets-Inventories
(iii)Non-current Liabilities-Long-term Borrowings
(iv)Current Assets-Inventories
(v)Shareholders' Fund-Reserves and Surplus
(vi)Current Liabilities-Other Current Liabilities
(vii)Non-Current Assets-Fixed Assets(Tangible)
(ix)Current Assets-Cash and Cash equivalents

17.

(i)Current Assets-Cash and Cash Equivalents
(ii)Current Assets-Inventories
(iii)Non-Current Assets-Fixed Assets(Intangible)
(iv)Non-Current Liabilities-Long-term Borrowings
(v)Current Liabilities-Short-term Borrowings
(vi)Shareholder's funds-Reserves and surplus
(vii)Non-Current Assets(Tangible)
(Viii)Current Assets-Cash and Cash Equivalents.

Fill up / 1 Marks

11 x 1 = 11

18.

()
The Standard Current ratio is 2:1 whereas Ideal Liquid ratio is 1:1

19.

()
11 The Analysis which is made to review the financial statements of one particular year only is called Vertical Analysis.

20.

()
Balance Sheet
As at 31³¹ march, 2012

Enquity and Liablities Note No. Rs

Shareholders' fund

reserve and Surplus 1 1,00,000

Notes to Accounts:
Reserve and Surplus
General Reserve (1^st April, 2011) 3,00,000
Less: Statement of Profit and Loss(Dr. Balance) 2,00,000
________
1,00,000

21.

()
The analysis which made to review and compare the financial statements of two or more then two Year is called Horizontal Analysis.

22.

()
Trade unions can judge the profitability of the business enterprises on the basis of analysis of financial statements because trade unions are interested in negotiating wages agreements.

23.

()
Conclusions obtained from the analysis are affected, to a great extent, by subjectivity (i.e., personal judgement in making a choice out of alternatives available). In such a case the financial statements are not free from bias.

24.

()
Limitations of financial statement analysis are
(i) Financial statement analysis ignore qualitative aspects like quality of management, labour foree and public relations.
(ii) The results obtained by analysis of financial statements may be misleading due to window dressing.

25.

()
Earning capacity of a business is assessed by applying solvency ratios, e.g., debt equity ratio,proprietary ratio, total assets to debt ratio and interest coverage ratio.

26.

()
Management of a firm is interested in analysis of the financial statements to know the solvency, profitability and the capital structure of the firm.

27.

()
Creditors are intersted to know the liquidlity of the business whether the business is able to pay their debts on maturity.

28.

()
On the basis of analysis of financial statements, government can judge which industry is progressing on the desired lines and which industry needs help.