0Chapter 3 & 4
Analysis of Financial Statements
Qus:1. How will you show the following items in the Balance sheet of a company.
(i) Calls in Arrears (ii) Calls in Advance.
Qus:2. Under what heads the following items on the Liabilities side of the Balance sheet Of a company will be presented?
- Proposed Dividend.
- Unclaimed Dividend.
Qus:3. State any two items which are shown under the head ‘Investment’ in a company balance sheet.
Qus:4. Give the format of the Balance sheet of a company(main headings only) as per the requirement of Schedule VI of the companies Act.1956.
Qus:5. Give the heading under which the following items will be shown in a company’s Balance sheet:
- Preliminary Expenses
- Loose Tools
- Capital Redemption Resave.
- Live Stock.
Qus:6. The following balance have been from the book of Sahara Ltd. Share capital Rs.10,00,000, securities Premium Rs. 1,00,000, 9% Debentures Rs. 500,000, Creditors Rs. 200,000., Proposed Dividend Rs. 50,000. , Freehold property RS. 9,00,000, share of Reliance Industries Rs. 4,00,000, Work-in- Progress Rs. 4,00,000, Discount on Issue of Debentures Rs. 1,00,000. Prepare the balance sheet of the company as per schedule VI part 1 of the companies Act.1956.
Qus:7. List any three items that can be shown as contingent Liabilities in a company’s Balance sheet.
Qus:8. Give two example each of Non-Current Assets and Non- Current Liabilities.
Qus:9. What is Horizontal Analysis?
Qus:10. Give the example of Horizontal Analysis.
Qus:11. What is Vertical Analysis?
Qus:12. Give the example of Vertical Analysis.
Qus:13. How is a Company’s balance sheet different from that of a Partnership firm? Give Two point only.
Qus:14. List any two information required to be given in the balance sheet of a company or by way of foot Notes.
Qus:15. State whether the Balance sheet of a Company is prepared ’as on a particular date‘ or ‘as at a Particular date‘?
Qus:16. Which part of Schedule VI to the Companies Act.1956 prescribes the forms of the balance sheet?
Qus:17. How is analysis of Financial statements suffered from the limitation of window dressing?
Qus:18. What is the interest of Shareholders in the analysis of Financial statements?
Qus:19. Name two tools of Financial Analysis.
Qus:20. Which item is assumed to be 100 in the case of common size Income statement?
Qus:21. Prepare Comparative income statement from the following information for the years ended march 31,2003 and 2004.
| Particulars | 2003(Rs.) | 2004(Rs.) |
| 1.Net Sales 2.Cost of Goods Sold 3.Indirect Expenses 4.Income Tax rate | 8,00,000 60% of sales 10% of Gross profit 50% | 10,00,000 60% of sales 10% of Gross Profit 60% |
Chapter 3 & 4
Analysis of Financial Statements
Ans:1 (i) Calls in Arrears: It is deducted from the subscribed capital.
- Calls in Advance: It is shown separately under the subscribed capital.
Ans:2 Items Heading Sub-Heading
Proposed dividend Current Liabilities Provision
& Provision
Unclaimed dividend Current Liabilities Current Liabilities
& Provision
Ans:3. (i) Government Securities.
(ii) Sinking Fund Investment.
Ans:4 Balance sheet as on______
Liabilities Rs. Assets Rs.
Share capital Fixed Assets
Reserve & surplus Investment
Secured Loans Current Assets,
Unsecured Loans Loan and Advances
(a) Current Assets
(b) Loans & Advance
Current Liabilities & Provision Miscellaneous Expenditures
- Current Liabilities Profit & Loss amount (Dr.Balance)
- Provision
Ans:5 (i) Fixed Assets.
(ii) Miscellaneous Expenditures
(iii) Current Assets Loans & Advance under Current Assets.
(iv) Reserve and Surplus.
(v) Fixed Assets.
Ans:6. Total of Balance Sheet Rs.18,50,000.
Ans:7. (i) Claims against the Company not acknowledged as debts .
(ii) Uncalled Liability on partly paid shares.
(iii) Arrears of Dividend on Cumulative preference shares.
Ans:8. Non-Current Assets – Building, Machinery.
Non-Current Liabilities – Share Capital, Debentures.
Ans:9. The analysis which is made to review and compare the financial statements of two or more then two Years is called Horizontal Analysis.
Ans:10. Comparative Financial Statement.
Ans:11. The Analysis which is made to review the financial statements of one particular year only is called Vertical Analysis.
Ans:12. Ratio Analysis.
Ans:13. (i) For company’s Balance Sheet there are two standard forms prescribed under the companies Act.1956. Whereas there is no standard form prescribed under the Indian partnership Act,1932 for a partnership Firms balance sheet.
(ii) In case of a company’s Balance sheet previous years figures are required to be given whereas it is not so in the case of a partnership firms balance sheet.
Ans:14. (i) Uncalled Liability on share partly paid up .
(ii) Arrears of fixed Cumulative Dividend.
Ans:15. Balance of a Company is prepared ‘ as at a particular date ‘ .
Ans:16. Part I of Schedule VI to the Companies Act.1956.
Ans:17. Analysis of financial statements is affected from the limitation of window dressing as companies hide. Some vital information or show items at incorrect value to portray better profitability and financial Position of the business, for example the company may overvalue closing stock to show higher profits.
Ans:18. (i) They want to judge the present and future earning capacity of the business.
(ii) They want to judge the safety of their investment.
Ans:19. (i) Comparative Financial Statements.
(ii) Ratio Analysis etc.
Ans:20. Sales.
Ans:21. Percentage Change:
- Net sale 25%
- Cost of Goods sold 25%
- Gross profit 25%
- Indirect Expenses 87.50%
- Net profit before Tax 18.05%
- Income Tax 41.67%
- Net Profit after Tax 5.56%
Analysis of financial statements
Financial statements of a company
1 mark question
Q1. What is meant by Financial Statements?
Ans. Financial statements are those statements of a company that depict the financial position & result of business activities at the end of the accounting period.
3 mark questions
Q2. List the major heads under which ‘Equity & Liabilities’ are presented in the Balance sheet of a Company as per Schedule VI(Revised), Part I to the Companies Act ,1956.
Ans.
| Particulars | Note No. | 31-03-2013(Rs) | 31-03-2012(Rs) |
| I. Equity & Liabilities (i) Shareholder’s Funds (ii) Share Application Money pending allotment (iii) Non Current Liabilities (iv) Current Liabilities Total |
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Q3. List the major heads on the assets side of the Balance sheet of a Company as per Schedule VI (Revised), Part I to the Companies Act ,1956.
Ans: The major heads o the assets side are:
II ASSETS
- Non Current Assets
- Current Assets.
Q4. List the items which are shown under the headings ‘Current liabilities’ as per Schedule Vi of Companies Act,1956.
Ans. The major items under Current Liabilities:
- Short term borrowings
- Trade Payables
- Other Current Liabilities
- Short term provisions.
Q5. List the items under head ‘Reserves & Surplus’ in the Balance sheet of a Company as per Schedule VI(Revised), Part I to the Companies Act ,1956.
Ans. The major items under Reserves & Surplus:
- Capital reserve.
- Capital redemption Reserve.
- Securities Premium Account.
- Debenture Redemption Reserve.
- Profit & Loss(Cr) balance.
Q6. List the major items under the head ‘ Current assets’ in the Balance sheet of a Company as per Schedule VI(Revised), Part I to the Companies Act ,1956.
Ans. The items under the head ‘Current Assets’:
- Current investments.
- Trade receivables.
- Cash & Cash Equivalents.
- Short term Loans &am
