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Published on: 31/07/2018
In this question paper, some of the important one mark, three mark and eight marks questions are from the chapter Financial Statement Analysis are covered.
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Questions + Answers key
Take MCQ Accountancy Test
1.
State how financial statement analysis is considered historical in nature.
2.
State the interest of investors in the analysis of financial statements.
3.
State why shareholders are interested in Financial Statement Analysis
4.
How the solvency of business is assessed by ' Financial Statement Analysis' ?
5.
Why is the government interested in analysing financial statements ?
6.
Identify the values involved in comparative analysis and common size statement.
7.
What is the main objective of preparing comparative balance sheet?
8.
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 |
9.
From the following information, prepare a Comparative Balance Sheet of Deep Ltd.
| Particulars | Note No. |
31.03.2013 Rs. |
31.03.2012 Rs. |
|---|---|---|---|
|
I. Equity and liabilities |
|
||
|
Share Capital |
25,00,000 |
25,00,000 | |
| Reserves and Surplus |
6,00,000 |
5,00,000 |
|
|
Long-term Loans |
15,00,000 |
15,00,000 |
|
| Trade Payables | 5,50,000 |
5,00,000 |
|
| Total | 51,50,000 |
50,00,000 |
|
|
II. Assets |
|||
| Fixed Assets |
36,00,000 |
30,00,000 |
|
| Current Assets |
10,50,000 |
15,00,000 |
|
| Non-current Investments |
5,00,000 |
5,00,000 |
|
| Total | 51,50,000 | 50,00,000 |
10.
From the information given below, prepare a Comparative Statement of profit and loss:
| Particulars | Note No | 2012-13 | 2011-12 |
|---|---|---|---|
|
Revenue from Operations |
|
Rs.3,50,000 |
Rs.2,00,000 |
|
Purchases of stock-in-Trade |
|
Rs.2,00,000 |
Rs.1,00,000 |
|
Cost of Revenue from Operations |
|
70% of Revenue from operations |
60% of Revenue from Operations |
|
Employee Benefit Expenses |
|
Rs.7,350 |
Rs.4,000 |
| Income Tax | 45% | 45% |
11.
Prepare a comparative Statement of Profit and Loss from the following information:
| Particulars | Note No. | 2011-12 | 2010-11 |
|---|---|---|---|
|
Revenue from Operations |
50,000 |
40,000 |
|
|
Cost of Material Consumed |
35,000 |
30,000 |
|
|
Other Expenses |
3,000 |
2,500 |
|
|
Other Income |
2,000 |
3,000 |
|
| Income Tax | 7,500 | 4,750 |
12.
State how does financial statement analysis ignore price level changes.
13.
Prepare common size income statement from the following Staement of profit and loss.
| Particulars | 31st March,2014 Amt(Rs) | 31st march,2015 Amt(Rs) |
|---|---|---|
| I.Income | ||
| Revenue from Operations(Net Sales) | 5,00,000 | 5,00,000 |
| Other Income | 5,000 | 5,500 |
| Total | 5,05,000 | 5,05,000 |
| II.Expenses | ||
| Purchase of Stock-in-trade | 3,25,000 | 3,50,000 |
| Changes in Inventories of Stock-in-trade | 25,000 | 24,000 |
| Employees Benefit Expenses | 40,000 | 49,000 |
| Other Expenses | 58,750 | 45,000 |
| III.Profit(I-II) | 56250 | 37500 |
| Total | 4,48,750 | 4,68,000 |
14.
Rearrange the following in the form of a comparative income statement or statement of profit and loss.
| Particulars | 31st March, 2014 Amt(Rs) | 31st March,2015 Amt(Rs) |
|---|---|---|
| Revenue from Operations (Net Sales) | 16,00,000 | 19,20,000 |
| Purchase of Stock-in-trade | 9,00,000 | 11,00,000 |
| Changes in Inventories of stock-in-trade | 1,00,000 | 60,000 |
| Other Expenses | ||
| Office and And Administration | 2,80,000 | 3,80,000 |
| Selling and Distribution | 1,80,000 | 1,40,000 |
| General Expenses | 20,000 | 10,000 |
15.
From the following statement of profit and loss of Fenox Ltd for the year ended 31st march,2015, prepare a comparative statement of profit and loss.
| Particulars | Note No | 2014-15(Rs) | 2013-14(Rs) |
|---|---|---|---|
| Revenue from Operations | 8.00,000 | 6,00,000 | |
| Other Incomes | 1,00,000 | 50,000 | |
| Expenses | 5,00,000 | 4,00,000 |
Rate of income tax was 40%
1.
( )
Financial statements analysis is considered as historical in nature because the analysis is made on data which is of past and not of furture.
2.
( )
Inverters are intrested in the safty of their capital as well as apprteciation of their capital through financial analysis.
3.
( )
Shareholders are inerested in the profitability, dividents, market value of their holding and long-term solvency of bthe business concern.
4.
( )
Solvency of business is assessed by applying solvency ratios, e.g., debt equity ratio, proprietary ratio, total assets to debt ratio and interest coverage ratio.
5.
( )
On the basis of analysis of financial statements, government can judge which industry is progressing on the desired lines and which industry needs help.
6.
Values Involved in comparative and common size statement are:
(i) Comparative financial information for interested parties
(ii) Decision-making
(iii) Transparency
(iv) Scientific temperament
(v) Critical analysis
7.
The main objective of preparing comparative balance sheet is to analyse the changing in the financial position of an enterprise
8.
| 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.
9.
Percentage change :Fixed Assets 20% , Investment-Nill, Current Assets (30%),Current Liabilities 10%, Long-term Loans-Nill,Shareholders' Funds 3.33% , Equity share Capital-Nill, Reserves and Surplus 20%.
[Hint : % Increase / decrease = Absolute Figure of Increase/decrease \(\div\) Absolute Figure of previous year \(\times\)100]
10.
Percentage change : Revenue from Operations 75%, Cost of Revenue from Operations 104.17%, Employee Benefit Expenses 83.75%, Others each 28.49%.
[Hints: Purchase of stock-in-trade is a part of cost Revenue from Operations.]
11.
Percentage change : Revenue from Operations 25%, Other income 50% , Cost of Material Consumed 16.67% , Other Expenses 20% , Others 57.89% each
12.
The recording in financial statements is on the basis of actual cost, whereas the value of money goes on changing.As such, the comparison of previous year figures with current year figures may lead to misleading conclusions. For example, sale of fixed assets in 2012 would be much higher than in 2008 due to rising prices because fixed assets are still being expressed on the basis of cost incurred in a number of years ago while sales (revenue from operations) are being expressed at their current prices. As such, sufficient adjustment must be made for changes in price level while making the analysis.
13.
Common size Income Statement
for the years ended 31st March,2014 and 2015
| particulars | Absolute Amount | Percentage of Revenue from Operations (Net Sales) | ||
|---|---|---|---|---|
| 2014 (Rs) | 2015 (Rs) | 2014 (%) | 2015 (%) | |
| I.Revenue from Operations(Net Sales) | 5,00,000 | 5,00,000 | 100.00 | 100.00 |
| II.Other Income | 5,000 | 5,500 | 1.00 | 1.10 |
| III.Total Revenue(I+III) | 5,05,000 | 5,05,500 | 101.00 | 101.10 |
| IV.Expenses | ||||
| (a) Purchase of Stock-in-trade | 3,25,000 | 3,50,000 | 65.00 | 70.00 |
| (b) Changes in Inventories of Stock-in-trade | 25,000 | 24,000 | 5.00 | 4.80 |
| (c) Employees Benefit Expenses | 40,000 | 49,000 | 8.00 | 9.80 |
| (d) other Expenses | 2,500 | 7,500 | 0.50 | 1.50 |
| Total Expenses | 3,92,5000 | 4,30,500 | 78.50 | 86.10 |
| V.Profit before Tax(III-IV) | 1,12,500 | 75,000 | 22.50 | 15.00 |
| (-) Provision for Tax | 56,250 | 37,500 | 11.25 | 7.50 |
| VI.Profit after Tax | 56,250 | 37,500 | 11.25 | 7.50 |
14.
Comparative Statement of Profit and Loss
for the years ended 31st march, 2014 and 2015
| Particulars | 31st March 2014 Amt(Rs) | 31st March 2015 Amt(Rs) | Absolute change (Increase or Decrease) (Rs) |
Percentage Change (Increase or Decrease) (Rs) |
|---|---|---|---|---|
| I. Revenue from Operations(Net Sales) | 16,00,000 | 19,20,000 | 3,20,000 | 20.00 |
| II. Expenses | ||||
| (a) Purchase of Stock-in-trade | 9,00,000 | 11,00,000 | 2,00,000 | 22.22 |
| (b) Changes in Inventories of Stock-in-trade | 1,00,000 | 60,000 | (40,000) | (40.00) |
| (c) Other Expenses | 4,80,000 | 5,30,000 | 50,000 | 10.42 |
| Total Expenses | 14,80,000 | 16,90,000 | 2,10,000 | 14.19 |
| III. Profit before and after Tax(1-III) | 1,20,000 | 2,30,000 | 1,10,000 | 91.67 |
15.
Comparative Statements of profit and Losses
for the years ended 31st March, 2014 and 2015
| Particulars | Absolute Value | Change | ||
|---|---|---|---|---|
| 2013-14(Rs) | 2014-15(Rs) | Absolute Change (Increse or Decrease)(Rs) | Percentage Change (Incresae or Decrease)(%) | |
| I.Revenue from Operations | 6,00,000 | 8,00,000 | 2,00,000 | 33.33 |
| II.Other Income | 50,000 | 1,00,00 | 50,000 | 100 |
| III.Total Revenue(I+II) | 6,50,000 | 9,00,000 | 2,50,000 | 38.46 |
| IV.Expenses | 4,00,000 | 5,00,000 | 1,00,000 | 25 |
| V.Profit before Tax(III-Iv) | 2,50,000 | 4,00,000 | 1,50,000 | 60 |
| (-) Income Tax @ 40% | 1,00,000 | 1,60,000 | 60,000 | 60 |
| VI.Profit after Tax | 1,50,000 | 2,40,000 | 90,000 | 60 |
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