Tag: introduction to final accounts

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Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

Primary responsibility for the adequacy of financial statement disclosures rest with the____________.

  1. auditor

  2. management

  3. auditor's staff

  4. central Government
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The primary responsibility for the adequacy of disclosure in the financial statements of a company rests with the management. Management is the one who communicates with the outside world. It acts as a link between business and outside world. So primary responsibility lies with the management.  

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

Which is a part of financial statements?

  1. Balance sheet

  2. Book keeping

  3. Debit & Credit

  4. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders' equity. Balance sheets show what a company owns and what it owes at a fixed point in time.

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

Which of the following external influences will not affect the directors in the preparation of the financial statements?

  1. Legislation

  2. Regulatory requirements

  3. Political environment

  4. Accounting requirements
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is a duplicate of question 472167. Legislation, regulatory requirements, and accounting requirements directly affect financial statement preparation. The political environment (government changes, political climate) does not directly influence preparation methods, though it may affect business environment.

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

When a company's financial statements have been audited, an audit report will prepared. If this is unqualified the auditors will report that the financial statements__________________.

  1. Are certified correct

  2. Contain no material errors

  3. Comply with the Companies Act

  4. Present a true and fair view and comply with the Companies Act
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An unqualified audit report states that the financial statements present a true and fair view of the company's financial position and comply with the relevant legal requirements (e.g., Companies Act).

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

Which of the following best describes the reason why an independent auditor reports on financial statements?

  1. A management fraud may exist and is more likely to be detected by independent auditors

  2. Different interests may exists between the company preparing the statements and the persons using the statements

  3. A misstatement of account balances may exist and is generally corrected as the result of the independent auditor's work

  4. Poorly designed internal control may exist
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The primary reason for independent audits is the agency problem: the potential conflict of interest between those who prepare the statements (management) and those who rely on them (shareholders/creditors).

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

Procedure for preparation of 'Projected Financial Statements' should start from ______________.

  1. Projection of Fixed Assets

  2. Projection of Capital

  3. Projection of Sales

  4. Projection of Profit
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Projected financial statements take into account past financial trends, market conditions, possible changes and management expectations to arrive at a future financial picture.

It begins with Projection of Sales.

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

Which of the following best describes the reason why an independent auditor reports on financial statements?

  1. A management fraud may exist and is more likely to be detected by independent auditors

  2. Different interests may exist between the company preparing the statements arid the persons using the statements

  3. A misstatement of account balances may exist and [s generally corrected as the result of the independent auditor's work

  4. Poorly designed internal control may exist
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Independent auditors serve as an objective bridge between management who prepare financial statements and external stakeholders who use them. This conflict of interest necessitates an independent third party to provide credibility and assurance to financial information. Options A and C describe what auditors might detect, but not the fundamental reason for independence. Option D is a condition that auditors evaluate, not the rationale for independent reporting. Note: The question has typos (arid instead of are, bracket in option C).

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

Final accounts include preparation of ____________.

  1. Trading A/c

  2. Profit and Loss A/c

  3. Balance Sheet

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Final Account is the final process of accounting. Final Account is prepared to show the final results of the company in a specified period. Final Account is also known as Financial statement. Final accounts include the preparation of Trading account, Profit and Loss account and Balance Sheet. Trading Account and Profit and Loss account shows the profitability achieved during the year. Balance Sheet shows the financial position of the business at the end of accounting period. 

Multiple choice book keeping and accountancy accounting equation and business transactions introduction to final accounts meaning, objectives and importance of final accounts meaning, objectives, importance and preparation of final accounts

The statements prepared by the summarizing process is known as ______ which will show the profit or loss made by the business over a period of time and the total capital employed in the business. 

  1. Financial statements

  2. Budgeted statements

  3. Standard cost statements

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Financial statements are summary reports. Summary report shows how a firm has used the funds entrusted to it by its stakeholders and lenders and what is its current financial position. The three basic financial statements are 1. Balance Sheet  2. income statements 3. Cash Flow statement. 
Balance sheet shows firm's assets, liabilities and net worth on a stated date. 
Income Statement shows how the net income has arrived over a certain period. 
Cash flow statement shows the inflows and outflows of cash caused by the firm's activities over a stated period.