Tag: accountancy

Questions Related to accountancy

Which of the following are the steps followed for preparation of comparative statements?
a. List out absolute figures in rupees related to two points of time.
b. Find out changes in absolute figures by subtracting the first year from second year and indicating the change as increase or decrease.
c. Then calculate percentage for decrease amount.
d. Then calculate the percentage change.  

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. a, b, and c

  2. a, b, and d

  3. b, c, and d

  4. a, b, c, d

Show answer
Correct Option: B
Explanation:

Comparative statement refers to the profit and loss account and balance sheet prepared by providing columns for the figures for both the current year as well as for the previous year. The following steps may be followed to prepare the comparative statements:

1. List out absolute figures in rupees related to two points of time.
2. Find out change in absolute figures by subtracting the first year from the second year and indicate  the change as increase (+) or decrease (-).
3. Calculate the percentage change as follows:
 (Second year absolute fig./ First year absolute fig.) x 100 

____________ statements refer to the Profit and Loss Account and Balance Sheet prepared by providing columns for the figures for both the current year as well as for the previous year and for the changes during the year.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. Common size

  2. Comparative

  3. Income

  4. Both A and C

Show answer
Correct Option: B
Explanation:

Comparative statements refers to the profit and loss account and balance sheet prepared by providing columns for the figures for both current year as well as for the previous year for the changes during the year. Comparative statements are prepared basically to understand the trend of the company. Hence, its also known as trend analysis. 

Trendz Spa is a company listed on the Bombay Stock Exchange. Its Financial statements for the year ended 31 March 2015 Showed earning per share of Rs.136. 
On 1 October 2015, Trendz spa made a 3 for 1 bonus issue. According to IAS 33 - 'Earning per share', what figure for the 2015 EPS will be shown as comparative information in the financial statements for the year ended 31 March 2016?

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. Rs.34

  2. Rs.45.36

  3. Rs.408

  4. Rs.544

Show answer
Correct Option: A
Explanation:
Earning per share = Earning for equity shareholders 
                                 ----------------------------------------------
                                             No. of shares. 
                                =    Rs-136
                                    -------------
                                       3 + 1 
                                = Rs-34 per share. 

Observing changes in the financial variables across the years___________.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. Vertical analysis

  2. Horizontal analysis

  3. Inter firm comparison

  4. None of these

Show answer
Correct Option: B
Explanation:

Observing changes in the financial variables across the years is done through horizontal analysis. Horizontal analysis is a trend analysis where the firm compares ratios, statements etc over a period of time. 

Most common approach for analysing the capital structure of a firm is_______.

accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

  1. Ration Analysis

  2. Cash Flow Analysis

  3. Comparative Analysis

  4. Leverage Analysis

Show answer
Correct Option: C
Explanation:

The most common approach for analyzing the capital structure of a firm is Comparative analysis. Comparative analysis is comparison of various ratios, balances, statements of different years of the company. 

It is basically done to understand the trend off the company. Hence, its also known as trend analysis.  

ABC Corp. wants to increase its current ratio from the present level of 1.5 when it closes the books next week. The action of ____________ will have the desired effect.

accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

  1. payment of current payables from cash

  2. sales of current marketable securities for cash

  3. write down of impaired assets

  4. delay of next payroll

Show answer
Correct Option: A
Explanation:
Payment of current payables from cash will reduce current liabilities and also reduce current assets. 
Suppose if at the current position current assets are 1,50,000 and current liabilities 1,00,000 and if current payable repaid are 50,000. The new position will be 
    = 1,50,000 - 50,000
       --------------------------
        1,00,000 - 50,000
   = 1,00,000
    ----------------
       50,000
  2 : 1

Operating cost includes ___________.

accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

  1. Cost of direct materials

  2. Cost of direct labour

  3. Overhead costs

  4. All of the above

Show answer
Correct Option: D
Explanation:

Operating cost is the cost that is associated with the administration and maintenance of the business on day-to-day basis. It includes various costs such as cost of direct materials, direct labour, overhead costs.etc.

Sale of investments indicate __________.

accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

  1. Source of funds

  2. Applications of funds

  3. Change in current assets

  4. None of the above

Show answer
Correct Option: A
Explanation:

Source of funds results in the generation of cash for the company. Sale of investments results in the generation of cash which is regarded as source of funds. 

Investment by owner results in ___________________.

accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

  1. Increase in capital and decrease in libility

  2. Increase in capital and increase in liability

  3. Increase in capital and decrease in asset

  4. Increase in capital and increase in asset

Show answer
Correct Option: D
Explanation:

Owner investment, also called owner's investment or contributed capital, is the amount of assets that the owner puts into the company. 


In other words, this is the amount of money or other assets that the owner contributes to the business either to start it or to keep it running.

Which one of the following concepts is used as fund in the preparation of Funds Flow Statements?

accountancy statement of changes in financial position preparation of cash flow statement cash flow statement finance

  1. Current Assets

  2. Working Capital

  3. Cash

  4. All Financial Resources

Show answer
Correct Option: B
Explanation:

According to working capital concept, the term 'funds' refers to net working capital (current assets-current liabilities). In the funds statement, inflow and outflow of net working capital is displayed.