CBSE Class 12 Accountancy Financial Statements Of a Company VBQs Set 01

Financial Statements of a Company

Question. Choose the correct answer from the options given below:
The type of Analysis which used by the investor to identify whether the firm is fulfilling his expectations with regard to dividends, capital appreciation, etc. is known as .
(a) Security Analysis
(b) Dividend Decision
(c) Debt Analysis
(d) Credit Analysis
Answer: (a) Security Analysis

Question. Which of the following item appears as Short-term Provision in the Financial Statements of a Company?
(a) Interest Accrued but not due
(b) Current Maturities of Long-term Debt
(c) Provision for Employee Benefits
(d) All of the options
Answer: (c) Provision for Employee Benefits

Question. The detailed and accurate type of analysis done by the management of the enterprise to determine the financial position and operational efficiency of the organization is known as _________ .
(a) External Analysis
(b) Static Analysis
(c) Internal Analysis
(d) Horizontal Analysis
Answer: (c) Internal Analysis
Internal Analysis is a detailed and accurate type of analysis done by the management of the enterprise to determine the financial position and operational efficiency of the organisation. Since, management has access of complete information, they perform an extensive type of analysis which is more detailed and accurate.

Question. Which of the following is not a part of Finance Cost (in statement of profit and loss)?
(a) Bank Charges
(b) Interest Paid on Debentures
(c) Interest Paid on Public Deposits
(d) Loss on Issue of Debentures
Answer: (a) Bank Charges

Question. Which of the following is not a limitation of Financial Statements Analysis?
(a) It is affected by personal bias
(b) Inter-firm comparative study possible
(c) Lack of qualitative analysis
(d) Ignores price level changes
Answer: (b) Inter-firm comparative study possible

Question. Analysis of any Financial Statement comprises:
(a) Balance sheet
(b) P&L Account
(c) Trading account
(d) All of the options
Answer: (d) All of the options

Question. Which of the following is not presented under ‘Current Liabilities’ in the Balance Sheet of a company?
(a) Short-term Borrowings
(b) Debentures
(c) Short-term Provisions
(d) Trade Payables
Answer: (b) Debentures.

Question. ‘Shares Forfeiture Account’ appears in the Balance Sheet of the company under the subhead:
(a) Reserves and Surplus
(b) Long-term Provisions
(c) Share Capital
(d) Other Current Liabilities
Answer: (c) Share Capital

Question. Expenses allowed on issue of shares appears in a Company’s Balance Sheet under:
(a) Share Capital
(b) Current Liability
(c) Unamortised Expenditure
(d) Contingent Liability
Answer: (c) Unamortised Expenditure

Question. Which one of the following is Commitment?
(a) Proposed Dividend
(b) Interim Dividend
(c) Unpaid/Unclaimed Dividend
(d) Dividend Arrears on Cumulative Preference Shares
Answer: (d) Dividend Arrears on Cumulative Preference Shares

Question. Balance sheet of a company is required to be prepared in the format given in ………………………
(a) Schedule III Part II
(b) Schedule III Part I
(c) Schedule III Part III
(d) Table A
Answer: (b) Schedule III Part I

Question. Where will you show the Securities Premium Reserve in companies Balance Sheet.
(a) Current Liabilities
(b) Reserves and Surplus
(c) Share Capital
(d) None of the options
Answer: (b) Reserves and surplus

Question. Liability which may become payable depending on an event happening in future:
(a) Current Liabilities
(b) Long Term Borrowings
(c) Debentures
(d) Contingent Liabilities
Answer: (d) Contingent Liabilities

Question. Which of the following items is shown under the head ‘Non-Current Assets’ while preparing the Balance Sheet of a company?
(a) Underwriting Commission
(b) Current Investment
(c) Inventory
(d) Patents
Answer: (d) Patents

Question. Gain on sale of fixed assets by a financial company is shown in the Statement of Profit and Loss as:
(a) Revenue from operations
(b) Other Income
(c) Both (a) and (b)
(d) None of the options
Answer: (b) Other Income.

Question. Goodwill appears in a Company’s Balance Sheet under the Sub-head …………………. .
(a) Intangible assets
(b) Fictitious assets
(c) Tangible assets
(d) Current assets
Answer: (a) Intangible Assets

Question. Trade Investments appear in a Company’s Balance Sheet under the Sub-head:
(a) Current Investments
(b) Non-Current Investments
(c) Intangible Assets
(d) Short-term Loans and Advances
Answer: (b) Non-current Investments

Question. Under Financial Statement Analysis, this analysis is made to review and analyse the financial statements of one year only. Name of this analysis is:
(a) External Analysis
(b) Internal Analysis
(c) Horizontal Analysis
(d) Vertical Analysis
Answer: (d) Vertical Analysis

Question. Calls in advance appear in a Company’s Balance Sheet under:
(a) Share Capital
(b) Current Liability
(c) Long-term Borrowings
(d) Reserve and Surplus
Answer: (b) Current Liability

Question. The basic Financial Statements include:
(a) Statement of Cash Flows
(b) Statement of Retained Earnings
(c) Balance Sheet and Income Statement
(d) None of the options
Answer: (c) Balance Sheet & Income Statement

Question. Which of the following item is not included to the current assets while calculating current ratio?
(a) Cash and Cash Equivalents
(b) Only Loose Tools
(c) Only Stores and Spares
(d) Both Loose Tools and Stores and Spares
Answer: (d) Both Loose Tools and Stores and Spares

Question. Which of the following is not part of Short-term Provisions while preparing Balance Sheet of a Company?
(a) Provision for Tax
(b) Provision for doubtful debts
(c) Provision for Expenses
(d) Provision for Gratuity
Answer: (d) Provision for Gratuity

Question. Accrued incomes are shown in a Company’s Balance Sheet under:
(a) Inventories
(b) Other Current Assets
(c) Trade Receivables
(d) Other Non-Current Assets
Answer: (b) Other Current Assets.

Question. While preparing Company’s Balance Sheet, Self-Generated Goodwill is shown under:
(a) Fixed Tangible Assets
(b) Fixed Intangible Assets
(c) Current Assets
(d) None of the options
Answer: (d) None of the options

Question. Proposed Dividend comes under which heading:
(a) Short term Provisions
(b) Long term Provisions
(c) Share Capital
(d) Contingent Liability
Answer: (d) Contingent Liability

Question. Creditors comes under which heading:
(a) Trade Receivable
(b) Short term Provisions
(c) Reserves and Surplus
(d) Current Liabilities
Answer: (d) Current Liabilities

Question. Bills Payables comes under:
(a) Short term Provision
(b) Short term Borrowings
(c) Other Current Liabilities
(d) Trade Payables
Answer: (d) Trade Payables

Question. Short-term Provisions are shown under:
(a) Provision for Tax
(b) Provision for Doubtful Debts
(c) Other Current Liabilities
(d) Current Liabilities
Answer: (d) Current Liabilities

Question. Which of the following statement is not correct in case of Financial Statement Analysis?
(a) Horizontal Analysis is a part of comparison
(b) Vertical analysis is a step towards comparison
(c) Shareholders are the internal users
(d) Ratio analysis helps in understanding Cash inflows and Cash outflows
Answer: (d) Ratio analysis helps in understanding Cash inflows and Cash outflows

Question. Which of the following is not part of Reserves and Surplus in a Company’s Balance Sheet?
(a) General Reserve
(b) Revaluation Reserve
(c) Capital Reserve
(d) Reserve Capital
Answer: (d) Reserve Capital

Question. Which of the following is correct example of Capital work in progress?
(a) Purchase of current assets
(b) Conversion of raw material into final goods
(c) Office building under construction
(d) Increase in patents
Answer: (c) Office Building under construction

Question. Which of the following are not users of Financial Statement Analysis?
(a) Shareholders
(b) Debentureholders
(c) Investors
(d) Stock Exchanges
Answer: (d) Stock Exchanges

Question. Which of the following items is not part of Inventories?
(a) Loose Tools
(b) Stores and Spares
(c) Work in progress
(d) Capital work in progress
Answer: (d) Capital work in progress

Question. Accrued Commission of Rs. 60,000 will come under which heading while preparing Balance Sheet of a company:
(a) Inventories
(b) Trade Receivables
(c) Other Non-current Assets
(d) Other Current Assets
Answer: (d) Other Current Assets

Question. Prepaid rent is a :
(a) current asset
(b) fixed asset
(c) current liability
(d) None of the options
Answer: (a) current asset
Prepaid rent means advance payment of rent. Since rent is paid in advance, so it will not be repaid when it will due. So, it is a current asset.

Question. Staff welfare expenses are included in:
(a) cost of material consumed
(b) revenue from operation
(c) employees benefit expense
(d) None of the options
Answer: (c) employees benefit expense
Staff welfare expenses means employees expenses which are paid for their benefit. These are shown in statement of profit and loss.

Question. You are required to find heading and sub-heading under which sundry debtors can be shown?
(a) Fixed assets, trade receivables
(b) Current assets, trade receivables
(c) Fixed assets, trade payables
(d) Current assets, trade payables
Answer: (b) Current assets, trade receivables
Debtors are to be received within 12 months. So, these can be calssified as current assets and these are included in trade receivables with bills receivables.

Question. Directors of a company proposed dividend to its shareholders. You are required to show this proposed dividend in balance sheet of the company under:
(a) long-term liability
(b) current assets
(c) short-term provision
(d) foot notes
Answer: (d) foot notes
As per Accounting Standard-4 Proposed dividened is shown in foot notes below the Balance Sheet.

Question. A company got its mining right recently. You are required to show this right in Financial Statements of the Company as:
(a) expense
(b) tangible asset
(c) current asset
(d) intangible asset
Answer: (d) intangible asset
Mining right is an assets which is generally for long-term. So, it will be treated as fixed asset. Since, this right cannot be seen, so it is an intangible asset.

Question. A company issued capital. A shareholder paid all money on allotment while first call is not called by company. So, you are required to show this advance in balance sheet of company as:
(a) current liability
(b) long-term liability
(c) current assets
(d) None of the options
Answer: (a) current liability
Answer: Call-in-advance is always treated as current liability because it is reversed when call money is called-up by company.