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प्रश्न
What are the objectives of preparing financial statements?
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उत्तर
The following are the objectives of preparing financial statements:
1. To ascertain profit earned or loss incurred by a business during an accounting period.
This is estimated by preparing Trading and Profit and Loss Account.
2. To ascertain the true financial position of a business.
This is reflected by the Balance Sheet.
3. To enable comparison of current year’s performance with that of the previous year’s, i.e., intra-firm comparisons.
Also, to compare own performance with that of the other firms in the same industry, i.e., inter-firm comparisons.
4. To assess the solvency and credit worthiness of the business
5. To provide various provisions and reserves to meet unforeseen future conditions and to toughen the financial position of the business
6. To provide vital information to facilitate various users of accounting information in decision-making process.
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संबंधित प्रश्न
State the objectives of 'Analysis of Financial Statements'.
State any two limitations and any two objectives of 'Analysis of Financial Statement'.
State the significance of analysis of financial statements to ‘Top Management’.
Name any two financial statements prepared by a not-for-profit organisation.
Long Answer Question
Explain the process of preparing income statement and balance sheet.
Show the following items in the balance sheet as per the provisions of the Companies Act, 2013 in Schedule III:
| Particulars | Rs. | Particulars | Rs. |
| Preliminary Expenses | 2,40,000 | Good will | 30,000 |
| Discount on issue of shares | 20,000 | Loose tools | 12,000 |
| 10% Debentures | 2,00,000 | Motor Vehicles | 4,75,000 |
| Stock in Trade | 1,40,000 | Provision for tax | 16,000 |
| Cash at bank | 1,35,000 | ||
| Bills receivable | 1,20,000 |
From the following information, prepare the balance sheet of Jam Ltd.
Inventories Rs. 7,00,000; Equity Share Capital Rs. 16,00,000; Plant and Machinery Rs. 8,00,000; 8% Preference Share Capital Rs. 6,00,000; General Reserves Rs. 6,00,000; Bills payable Rs. 1,50,000; Provision for taxation Rs. 2,50,000; Land and Building Rs. 16,00,000; Noncurrent Investments Rs. 10,00,000; Cash at Bank Rs. 5,00,000;Creditors Rs. 2,00,000; 12% Debentures Rs. 12,00,000.
Brinda Ltd. has furnished the following information:
(a) 25,000, 10% debentures of Rs. 100 each;
(b) Bank Loan of Rs. 10,00,000 repayable after 5 years;
(c) Interest on debentures is yet to be paid.
Show the above items in the balance sheet of the company as at March 31, 2017.
What are the major heads in the Equity and Liabilities part of the Balance Sheet as per Schedule III?
Under which major head will the following be shown:
(i) Share Capital; and (ii) Money Received Against Share Warrants?
State giving reason whether Trade Receivables are classified as Current Assets or Non-current Assets in the Balance Sheet of a Company as per Schedule III of the Companies Act, 2013 in the following cases.
| Case | Operating cycle Period (months) | Expected realization period (months) |
| 1 | 10 | 11 |
| 2 | 10 | 12 |
| 3 | 10 | 13 |
| 4 | 14 | 13 |
| 5 | 15 | 16 |
Under which head and how are the following items shown in the Balance Sheet of a company under Schedule III:
(i) Calls-in-Arrears; (ii) Share Application Money Pending Allotment; (iii) Unpaid Dividend; and (iv) Dividend not paid on Cumulative Preference Shares?
Under which heads the following items are classified or shown on the Assets part of the Balance Sheet of a copany: (i) Loose Tools; (ii) Bills Receivable; (iii) Sundry Debtors: and (iv) Advances Recoverable in Cash?
From the following information of Best Marketing Ltd. for the year ended 31st March, 2019 prepare Note to Accounts on Depreciation and Amortisation Expenses:
Depreciation on: Building ₹ 15,500; Plant and Machinery ₹ 25,000; Computers ₹ 60,000; Goodwill written off ₹ 7,500; Patents written off ₹ 12,500.
Choose the appropriate alternative from the given options:
Which of the following is a limitation of financial analysis?
‘Financial statements are prepared based on past data’. Explain how this is a limitation.
Bank overdraft is shown in the balance sheet under the ______.
Which of the following statements are false?
- When all the comparative figures in a balance sheet are stated as percentage of the total, it is termed as horizontal analysis.
- When financial statements of several years are analysed, it is termed as vertical analysis.
- Vertical Analysis is also termed as time series analysis.
Financial statements includes which types of statements are required for external reporting and also for internal needs of the management?
The statement which shows the assets and liabilities of a company is known as ______.
Consider the following statements.
Statement 1 - "Facts and figures presented in financial statements are based on personal judgements"
Statement 2 - "Facts and figures presented in financial statements are not at all based on personal judgements"
What are the items shown under the heading 'Miscellaneous expenditure?'
Name the expenses that are incurred in connection with the formation of a company?
What are the items shown under the heading of "Current assets" in the balance sheet?
What are the components of income statement?
Find out Cost of goods sold Opening stock = 1002, Purchases = 50,000, Wages = 5000, Manufacturing expenses = 20,000.
The financial statements of a business enterprise include ______.
What are the limitations of financial statements?
As per Schedule III, Part I of the Companies Act, 2013 'calls-in-arrears' will be presented under which of the following head/sub-head, in the Balance Sheet of a company?
Carriage Inwards is shown in the Statement of Profit and Loss under ______.
Purchase of goods for reselling is shown in the Statement of Profit and Loss under ______.
Securities Premium is shown under which head in the Balance Sheet ?
| Nitya, Shreya and Ishita are partners in a firm. They share profits in the ratio of 5: 3 : 2. Their fixed capitals are ₹ 1,80,000; ₹ 1,60,000 and ₹ 2,00,000 respectively. For the year ending 31st March 2022, Nitya withdrew ₹ 7,500 at the end of every quarter. |
The average number of months for which interest on drawings will be calculated will be:
| Nitya, Shreya and Ishita are partners in a firm. They share profits in the ratio of 5 : 3 : 2. Their fixed capitals are ₹ 1,80,000; ₹ 1,60,000 and ₹ 2,00,000 respectively. For the year ending 31st March, 2022, Nitya withdrew ₹ 7,500 at the end of every quarter. |
The partnership deed provided that interest on capital will be allowed @10% p.a. The amount of interest on Ishita's capital will be:
|
Rudra, Dev and Shiv were partners in a firm sharing profits in the ratio of 5 : 3 : 2. Their fixed capitals were ₹ 6,00,000, ₹ 4,00,000 and ₹ 2,00,000 respectively. Besides his capital Shiv had given a loan of ₹ 75,000 to the firm. Their partnership deed provided for the following:
During the year Rudra withdrew ₹ 50,000 at the end of each quarter; Dev withdrew ₹ 50,000 in the beginning of each half year and Shiv withdrew ₹ 70,000 at the end of each half year. The profit of the firm for the year ended 31-3-2022 before allowing interest on Shiv's loan was ₹ 7,06,750. |
What will the amount of interest on drawings of the partners?
