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प्रश्न
Short Answer Question
State the meaning of financial statements?
What are the financial statements?
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उत्तर १
Financial statements of a company present a true and fair picture of the results of a company's operations to the various users of an accounting information. Financial Statements are the end products of the accounting process. These are the annual formal statements that are prepared by various enterprises or organisations for a particular accounting period.
Quoting the words of the American Institute of Certified Public Accountants (AICPA), "Financial statements are prepared for the purpose of presenting a periodical review or report on progress made by the management and deal with the status of investment in the business and the results achieved during the period under review."
उत्तर २
Financial statements are the statements prepared by the business concerns at the end of the accounting period to ascertain the operating results and the financial position.
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संबंधित प्रश्न
What is meant by 'Financial Statements' of a company?
Financial Statements are prepared following the constituent accounting concepts principles procedures and also the legal environment in which the business organisation operate. These statements are the source of information on the basis of which conclusions are drawn about the profitability and financial position of a company so that their users can easily understand and use them in their economic decisions in a meaningful way.
From the above statements identify any two values that a company should observe while preparing its financial statements. Also, State under which major headings and sub-headings the following items will be presented in the Balance Sheet of a company as per Schedule III of the Companies Act 2013
(1) Capital Reserve
(2) Calls-in-Advance
(3) Loose Tools
(4) Bank overdraft
'Good Blankets Ltd.' are the manufacturers of woollen blankets. Blankets of the company are exported to many countries. The company decided to distribute blankets free of cost to five villages of Kashmir Valley destroyed by the recent floods. It also decided to employ 100 young persons from these villages in their newly established factory at Solan in Himachal Pradesh. To meet the requirements of funds for starting its new factory, the company issued 50,000 equity shares of Rs 10 each and 2,000 8% debentures of Rs 100 each to the vendors of machinery purchased for Rs 7,00,000. Pass necessary journal entries for the above transactions in the books of the company. Also, identify anyone value which the company wants to communicate to the society.
Financial statements are prepared following the consistent accounting concepts, principles, procedures and also the legal environment in which the business organizations operate. These statements are the sources of information on the basis of which conclusions are drawn about the profitability and financial position of a company so that their users can easily understand and use them in their economic decisions in a meaningful way.
From the above statement identify any two values that a company should observe while preparing its financial statements. Also state under which major headings and sub-headings the following items will be presented in the balance sheet of a company as per Schedule III of the Companies Act 2013.
General Reserves, short term loans and advances, Capital work in progress and desgin.
Briefly explain the significance of 'Analysis of financial statements' to (a) The Finance Manager, and (b) Trade Payables.
State the significance of analysis of financial statements to ‘Top Management’.
Name any two financial statements prepared by a not-for-profit organisation.
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 |
Prepare the balance sheet of Jyoti Ltd. as at March 31, 2017 from the following information:
Building Rs. 10,00,000; Investments in the shares of Metro Tyers Rs. 3,00,000; Stores & Spares Rs. 1,00,000; Discount on issue of 10% debentures Rs. 10,000; Statement of Profit and Loss (Dr.) Rs. 90,000; 5,00,000 Equity Shares of Rs. 20 each fully paid-up; Capital Redemption Reserve Rs. 1,00,000; 10% Debentures Rs. 3,00,000; Unpaid dividends Rs. 90,000; Share options outstanding account Rs. 10,000.
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.
Under which major head will the following be shown:
(i) Share Capital; and (ii) Money Received Against Share Warrants?
List any five items that are shown under Reserves and Surplus.
Name the itmes that are shown under Long-term Borrowings.
A company has an opening credit balance in Surplus, i.e., Balance in Statement of Profit and Loss of ₹ 1,00,000. During the year, it earned a profit of ₹ 75,000. It decided to transfer ₹ 15,000 to Debentures Redemption Reserve (DRR) and also proposed to pay dividend of ₹ 25,000.
How will be the appropriations shown in the financial statements?
State giving reason whether Trade Payables are classified as Current Liabilities or Non-current Liabilities in the Calance Sheet of a Company as per Schedule III of the Companies Act, 2013 in the following cases:
| Case |
Operating Cycle Period (Months) |
Expected Payment Period (Months |
||
| 1 |
10 |
11 |
||
| 2 |
10 |
12 |
||
| 3 | 10 | 13 | ||
| 4 | 14 | 13 | ||
| 5 |
15 |
16 |
||
State any two items that are included in the following major heads under which liabilities of a company are shown:
(i) Reserves and Surplus;
(ii) Long-term Borrowings;
(iii) Short-term Borrowings;
(iv) Other Current Liabilities.
Classify the following items under major head and sub-head (if any) in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013:
(i) Capital Work-in-Progress:
(ii) Provision for Warranties;
(iii) Income received in Advance; and
(iv) Capital Advances
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?
Identify which of the following items will be shown in the Note to Accounts on Other Expenses?
(i) Salaries;
(ii) Postage Expenses;
(iii) Telephone and Internet Expenses;
(iv) Rent for warehouse;
(v) Carriage Inwards;
(vi) Depreciation on computers;
(vii) Computer Software amortised;
(viii) Computer Hiring Charges;
(ix) Audit fee;
(x) Bonus.
Which of the following statement is not true?
‘Financial statements are prepared based on past data’. Explain how this is a limitation.
Briefly explain any three limitations of financial statements.
What are the objectives of preparing financial statements?
The Goodwill is not a ________.
Bank overdraft is shown in the balance sheet under the ______.
A company prepares its Balance Sheet as per the format in ______.
Assertion (A): The focus of calculation of working capital revolves around managing the operating cycle of the business.
Reason (R): It is because the concept of operating cycle is required to ascertain the liquidity of assets and urgency of payments to liabilities.
In the context of the above two statements, which of the following is correct?
Financial statements includes which types of statements are required for external reporting and also for internal needs of the management?
Consider the following statements.
Statement 1 - "Financial statements are the end products of accounting process"
Statement 2 - "Financial statements are not the end products of accounting process"
For income measurement ______ basis of accounting is followed.
The statement which shows the assets and liabilities of a company is known as ______.
Profit and loss account is also called ______ statement.
Consider the following statements.
Statement 1 - "Financial statements are primarily directed towards the needs of owners"
Statement 2 - "Financial statements are primarily not directed towards the needs of owners"
What are the limitations of financial statements?
What are the components of income statement?
Which of the following is not a part of Finance Cost (in Statement of Profit and Loss)?
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?
Purchase of goods for reselling is shown in the Statement of Profit and Loss under ______.
______ are especially interested in the average payment period, since it provides them with a sense of the bill-paying patterns of the firm.
‘Freedom to Choose of method of depreciation’ refers to which limitation of financial statement analysis.
Richa and Anmol are partners sharing profits in the ratio of 3 : 2 with capitals of ₹ 2,50,000 and ₹ 1,50,000 respectively. Interest on capital is agreed @6% p.a. Anmol is to be allowed an annual salary of ₹ 12,500. During the year ended 31st March 2023, the profits of the year prior to calculation of interest on capital but after charging Anmol’s salary amounted to ₹ 62,000. A provision of 5% of this profit is to be made in respect of manager’s commission.
Following is their Profit & Loss Appropriation Account:
| Particulars | (₹) | Particulars | (₹) |
| To Interest on Capital | By Profit & loss account (After manager’s commission) | __(2)__ | |
| Richa | ______ | ||
| Anmol | ______ | ||
| To Anmol’s Salary a/c | 12,500 | ||
| To Profit transferred to: Richa’s Capital A/C (1) | __(1)__ | ||
| Anmol’s Capital A/c | ______ | ||
| ______ | ______ |
The amount to be reflected in blank (1) will be:
