Question 1

Accepted Answer

| S. No. | Items | Major Head | Sub-head (if any) | |---|---|---|---| | 1. | Goodwill | Assets | Non-Current Assets (Fixed Assets - Intangible Assets) | | 2. | Forfeited shares | Equity and Liabilities | Shareholders' Funds (Subscribed Capital - Add: Forfeited Shares Account) | | 3. | Acceptances |...

Question 2

Q1: Explain the nature of the financial statements.

Accepted Answer

The nature of financial statements is complex as they are a combination of recorded facts, accounting principles, and personal judgements. The American Institute of Certified Public Accountants states that they are prepared to present a periodical review of progress by management. The following poin...

Question 3

Q2: Explain in detail about the significance of the financial statements.

Accepted Answer

Financial statements are of immense significance as they provide crucial information to a wide range of users for making economic decisions. Their importance can be detailed as follows: 1.  Report on Stewardship Function: For shareholders and owners, financial statements are a report card on the man...

Question 4

Q3: Explain the limitations of financial statements.

Accepted Answer

While financial statements provide valuable information, they suffer from several inherent limitations that users must be aware of: 1.  Do not reflect current situation: Financial statements are prepared using the historical cost principle. Assets and liabilities are shown at their original cost, wh...

Question 5

Q4: Prepare the format of statement of profit and loss and explain its items upto the as certainment of profit before tax.

Accepted Answer

The format of the Statement of Profit and Loss as per Part II of Schedule III of the Companies Act, 2013 is as follows: Statement of Profit and Loss for the year ended ... | Particulars | Note No. | Figures for the Current Reporting Period (Rs.) | Figures for the Previous Reporting Period (Rs.) | |-...

Question 6

Q5: Prepare the format of balance sheet and explain the various elements of balance sheet.

Accepted Answer

The format of the Balance Sheet as per Part I of Schedule III of the Companies Act, 2013 is a vertical format.  Balance Sheet as at ... | Particulars | Note No. | Figures as at the end of Current Reporting Period (Rs.) | Figures as at the end of Previous Reporting Period (Rs.) | |---|---|---|---| |...

Question 7

Q6: Explain how financial statements are useful to the various parties who are interested in the affairs of an undertaking?

Accepted Answer

Financial statements provide essential information to various stakeholders who are interested in the affairs of an undertaking, helping them in their decision-making processes. Their usefulness to different parties is as follows:    Management: For internal use, management needs financial statements...

Question 8

Q7: 'Financial statements reflect a combination of recorded facts, accounting conventions and personal judgements'. Discuss.

Accepted Answer

This statement by the American Institute of Certified Public Accountants accurately describes the nature of financial statements. They are not merely a collection of absolute facts but are a product of a structured process involving facts, established rules, and professional estimations. The discuss...

Question 9

Q8: Explain the process of preparing income statement and balance sheet.

Accepted Answer

The preparation of the Income Statement (Statement of Profit and Loss) and the Balance Sheet is the final step in the accounting cycle. They are the end products of the accounting process, summarizing the financial activities of a company for a period and its financial position at the end of that pe...

Question 10

Q1: Show the following items in the balance sheet as per the provisions of the companies Act, 2013 in Schedule III: | Particulars | (Rs.) | Particulars |...

Accepted Answer

Balance Sheet (Extract) as at ... | Particulars | Note No. | Amount (Rs.) | |---|---|---| | I. EQUITY AND LIABILITIES | | | | Non-Current Liabilities | | | | Long-term borrowings | 1 | 2,00,000 | | Current Liabilities | | | | Short-term provisions | 2 | 16,000 | | II. ASSETS | | | | Non-Current Asse...

Question 11

Q2: On April 1, 2017, Jumbo Ltd., issued 10,000; 12% debentures of Rs. 100 each a discount of 20%, redeemable after 5 years. The company decided to write-...

Accepted Answer

Balance Sheet of Jumbo Ltd. (Extract) as at April 1, 2017 | Particulars | Note No. | Amount (Rs.) | |---|---|---| | I. EQUITY AND LIABILITIES | | | | Shareholders' Funds | | | | Reserves and Surplus | 1 | (2,00,000) | | Non-Current Liabilities | | | | Long-term borrowings | 2 | 10,00,000 | | Total |...

Question 12

Q3: From the following information prepare the balance sheet of Gitanjali Ltd. Inventories Rs. 14,00,000; Equity Share Capital Rs. 20,00,000; Plant and Ma...

Accepted Answer

Balance Sheet of Gitanjali Ltd. as at ... | Particulars | Note No. | Amount (Rs.) | |---|---|---| | I. EQUITY AND LIABILITIES | | | | 1. Shareholders' Funds | | | | (a) Share Capital | 1 | 32,00,000 | | (b) Reserves and Surplus | 2 | 6,00,000 | | 2. Non-Current Liabilities | | | | (a) Long-term borr...

Question 13

Q4: 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...

Accepted Answer

Balance Sheet of Jam Ltd. as at ... | Particulars | Note No. | Amount (Rs.) | |---|---|---| | I. EQUITY AND LIABILITIES | | | | 1. Shareholders' Funds | | | | (a) Share Capital | 1 | 22,00,000 | | (b) Reserves and Surplus | 2 | 6,00,000 | | 2. Non-Current Liabilities | | | | (a) Long-term borrowings...

Question 14

Q5: 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 Met...

Accepted Answer

Balance Sheet of Jyoti Ltd. as at March 31, 2017 | Particulars | Note No. | Amount (Rs.) | |---|---|---| | I. EQUITY AND LIABILITIES | | | | 1. Shareholders' Funds | | | | (a) Share Capital | 1 | 1,00,00,000 | | (b) Reserves and Surplus | 2 | 20,000 | | 2. Non-Current Liabilities | | | | (a) Long-te...

Question 15

Q6: 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 yea...

Accepted Answer

Balance Sheet of Brinda Ltd. (Extract) as at March 31, 2017 | Particulars | Note No. | Amount (Rs.) | |---|---|---| | I. EQUITY AND LIABILITIES | | | | Non-Current Liabilities | | | | Long-term borrowings | 1 | 35,00,000 | | Current Liabilities | | | | Other current liabilities | 2 | 2,50,000 | Note...

Question 16

Q7: Prepare a balance sheet of Black Swan Ltd., as at March 31, 2017 from the following information: | | | Rs. | |---|---|---| | General Reserve | : | 3,0...

Accepted Answer

Balance Sheet of Black Swan Ltd. as at March 31, 2017 | Particulars | Note No. | Amount (Rs.) | |---|---|---| | I. EQUITY AND LIABILITIES | | | | 1. Shareholders' Funds | | | | (a) Share Capital | 1 | 5,000 | | (b) Reserves and Surplus | 2 | 3,900 | | 2. Non-Current Liabilities | | | | (a) Long-term...

Question 17

Q1: State the meaning of financial statements?

Accepted Answer

Financial statements are the basic and formal annual reports that are the end products of the accounting process. They communicate financial information from the corporate management to its owners and other external parties. They reveal the financial results for a specified period (Statement of Prof...

Question 18

Q2: What are limitations of financial statements?

Accepted Answer

The limitations of financial statements are as follows: 1.  Do not reflect current situation: They are based on historical cost, not current market values, which can be misleading as the purchasing power of money changes. 2.  Assets may not realise: The values shown for assets are unamortised costs...

Question 19

Q3: List any three objectives of financial statements?

Accepted Answer

The three main objectives of financial statements are: 1.  To provide information about economic resources and obligations of a business: They offer adequate and reliable information about a firm's assets and liabilities to investors and other external parties. 2.  To provide information about the e...

Question 20

Q4: State the importance of financial statements to : (i) shareholders (ii) creditors (iii) government (iv) investors

Accepted Answer

The importance of financial statements to various parties is as follows: (i) Shareholders: Financial statements report on the performance of the management (stewardship function) and help shareholders assess the status, safety, and return on their investment. This information aids them in making dec...

S. No.	Items	Major Head	Sub-head (if any)
1.	Goodwill
2.	Forfeited shares
3.	Acceptances
4.	Preliminary expenses
5.	Capital reserve
6.	Loans from banks
7.	Investment in shares and debentures
8.	Interest accrued and due on debentures
9.	Interest accrued but not due on Secured Loans
10.	Interest accrued but not due on Unsecured Loans
11.	Interest accrued on Investments

Particulars	(Rs.)	Particulars	(Rs.)
Preliminary Expenses	2,40,000	Goodwill	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

		Rs.
General Reserve	:	3,000
10% Debentures	:	3,000
Balance in Statement of Profit and Loss	:	1,200
Depreciation on fixed assets	:	700
Gross Block	:	9,000
Current Liabilities	:	2,500
Preliminary Expenses	:	300
6% Preference Share Capital	:	5,000
Cash & Cash Equivalents	:	6,100

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