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Question
Briefly explain any three limitations of financial statements.
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Solution
- Lack of qualitative information: Qualitative information, that is non – monetary information is also important for business decisions.
For example- Efficiency of the employees and efficiency of the management. But this is ignored in financial statements. - Record of historical data:
Financial statement are prepared based on historical data. They may not reflect the current position. - Ignores price level changes:
Adjustments for price level changes are not made in the financial statements. Hence financial statements may not reveal the current position.
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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?
