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

Financial statements only consider _________________.

  1. Assets expressed in monetary terms

  2. Liabilities expressed in monetary terms.

  3. Assets expressed in non-monetary terms.

  4. Assets and liabilities expressed in monetary terms
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

'Financial Statements' comprises of Statement of Profit/Loss, Balance Sheet (including Notes to Accounts), Cash flow statement and statement of changes in Equity. 

Financial statements is a record of all the monetary items which includes assets and liabilities. In addition to the assets and liabilities, capital, profits and losses of the entity will also form a part of the financial statements.

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

What is the correct sequence of the following in the preparation of periodical financial statements?
I. Preparation of Balance sheet
II. Preparation of Funds flow statement
III. Preparation of Trial balance
IV. Preparation of Profit/Loss statement
Select the correct answer from the codes given and mark your answer sheet accordingly.

  1. IV, II, I, III

  2. III, IV, I, II

  3. II, IV, III, I

  4. I, III, II, IV
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Once all the transactions are recorded in the books of account then only process of preparing the financial statements starts. The sequence of preparation of financial statement is as under:


III - Preparation of Trial Balance
IV- Preparation of Profit & Loss Account
I - Preparation of Balance Sheet
II - Preparation of Funds Flow Statement

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 shares are forfeited, the share capital account is debited by ________________.

  1. Paid-up amount

  2. Called-up amount

  3. Nominal value of the shares

  4. Market value of the shares
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When shares are forfeited, the share capital account must be debited by the amount that was actually called up on those shares, regardless of whether it was paid or unpaid.

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

Financial Statements usually consists of _____________.

  1. Trading Account

  2. Profit & loss Account

  3. Balance Sheet

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

Financial statements are prepared at the end of the financial year to know the overall financial performance and financial position of the business. 


Following are the financial statements:
Trading Account is prepared to know the gross profit earned by the business. 
Profit & Loss Account is prepared to find out the net profit after deducting the indirect expenses from the gross profit. 
Balance sheet is prepared to know the financial position of the  business on a particular date including the position of assets and liabilities.  

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 are the basic objectives of preparing Financial Statements?

  1. To view financial performance.

  2. To view financial Position.

  3. Both (A) & (B).

  4. None of the above.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

To know the financial position of the business, financial statements are prepared. Normally the financial statements are prepared at the end of the financial year. 


Financial statements includes the following:

Trading, Profit & Loss A/c - To know the profitability of the business.
Balance Sheet- To know the position of assets and liabilities of the firm.
Fund Flow Analysis- To know the movement of fund during the year.

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 statement is not correct?

  1. Financial statements do adjust themselves for price level changes

  2. Only business transactions are within the ambit of financial records

  3. Financial statements have evidential value in the court of law

  4. Accounting principles have no universal acceptability
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Financial statements are generally prepared on a historical cost basis and do not automatically adjust for price level changes (inflation). The other statements correctly describe the nature and limitations of accounting.