CBSE Class 12 Accountancy Financial Statements Of a Company VBQs Set 02

Question. A company issued shares calling Application, Allotment and First and Final call. A holder of shares not paid allotment and first call. His shares are forfeied but not re-issued. As on balance sheet date, you are required to show these forfeited shares in the balance sheet of company under the head.
(a) Current Liability
(b) Shareholders’ Fund
(c) Current Assets
(d) None of the options
Answer: (b) Shareholders’ Fund
Amount received before forfeiture is kept by the company and therefore, it is a gain for the company. However, forfeiture reduces the share capital by amount of forfeited shares. Hence, it is shown on the liabilities side of balance sheet under ‘shareholder’s fund’ head.

Question. Preliminary expenses are those expenses which are paid before incorporation of a company. A company paid its preliminary expenses to its promoters. Accountant of company is in view that this is an expense, so it will be fully written-off in statement of profit and loss account. How this should have been shown?
(a) Statement of profit and loss account by full amount
(b) Current asset
(c) Deduct from reserve and surplus
(d) None of the above
Answer: (c) Deduct from reserve and surplus

Question. From following information, calculate other incomes.
Sales of product = Rs. 54,000
Sale of services = Rs. 60,000
Commission received = Rs. 1,20,000
Dividend from investment = Rs. 20,000
(a) Rs. 1,40,000
(b) Rs. 2,54,000
(c) Rs. (46,000) loss
(d) None of these
Answer: (a) Rs. 1,40,000
Other Incomes:
(i) Commission Received = 1,20,000
(ii) Dividend from Investment Received = 20,000
= 1,40,000
Sale of products and services are revenue from operation and excise duty is revenue from operation in negative nature.

Question. From the following information, you are required to compute profit after tax.
I. Revenue from operation = Rs. 80,00,000
II. Cost of material consumed = Rs. 10,00,000
III. Purchase of stock-in-trade = Rs. 30,00,000
IV. Employees salary = Rs. 4,00,000
V. Tax rate = 50%
(a) Rs. 20,00,000
(b) Rs. 24,00,000
(c) Rs. 15,00,000
(d) Rs. 18,00,000
Answer: (d) Rs. 18,00,000
Statement of Profit and Loss
Revenue from Operations: 8,00,000
(–) Expenses
Cost of Material Consumed: 10,00,000
Purchase of Stock-in trade: 30,00,000
Employees Benefit Expense: 4,00,000
Total Expenses: (44,00,000)
Profit before Tax: 36,00,000
(–) Tax @ 50%: 18,00,000
Profit after TAx: 18,00,000

Question. A company purchased a business of a firm. When accountant was tallying all assets and liabilities, he found that the company has paid more amount than the worth of it’s assets. You are required to find what this difference be called and where it will be shown?
(a) Capital reserve, reserve and surplus
(b) Goodwill, intangible assets
(c) Accountants totalling is wrong, assets and liabilities always tally without adjustment
(d) None of the above
Answer: (b) Goodwill, Intangible Assets
Hint: When net assets are less and payment for business purchase is more, then it is called goodwill and it is shown under intangible assets.

Question. Nominal accounts are related to:
(a) Expense + Income
(b) Liability
(c) Assets
(d) None of these
Answer: (a) Expense + Income

Question. Interest on loans received by a financial company is shown in the Statement of Profit and Loss as:
(a) Revenue from Operations
(b) Other Income
(c) Sundry Expenses
(d) None of these
Answer: (a) Revenue from Operations

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 these
Answer: (b) Other Income

Question. Which of the following is not the limitation of Financial Statements?
(a) Ignore qualitative aspects
(b) Personal bias
(c) Ignores price level change
(d) Provide information about the profitability of the business
Answer: (d) Provide information about the profitability of the business

Question. Assertion : Financial Statements are the end products of accounting process.
Reason : Financial Statements are the end products of accounting process. They provide information about the profitability and the financial position of a business.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer: (A) Both A and R true and R is the correct explanation of A.

Question. Assertion : Proposed dividend is a contingent liability.
Reason : As per AS-4 Revised, Proposed dividend is shown as the contingent liability because it is subject to approval by the shareholders, who may reduce the amount of dividend to be paid.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer: (A) Both A and R true and R is the correct explanation of A.

Question. Assertion : Debentures are shown under the head Other Long-term Liabilities in the Balance Sheet.
Reason : Debentures are not shown under Other Long-term Liabilities, they are shown under sub head Long term Borrowings.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer: (D) A is false and R is true
Answer: Debentures are not shown under Other Long-term Liabilities, they are shown under Main Head Non-Current Liabilities and sub head Long term Borrowings which are to be paid in more than 12 months or after the period of Operating Cycle.

Question. Assertion : Reserve Capital is part of Share Capital that a company resolves not to call at any time it desires.
Reason : Reserve capital is a part of the Subscribed Capital that a company resolves, by a Special Resolution, not to call except in the event of Winding up of the Company.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer: (D) A is false and R is true

Question. Assertion : Contingent Liabilities are not shown in the Balance Sheet.
Reason : Contingent Liability is recorded in the Notes to Accounts for the information of the users.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer: (B) Both A and R are true but R is not the correct explanation of A
Answer: Contingent Liability is not recorded in the books of account but is disclosed in the Notes to Accounts for the information of the users.

Question. Assertion : Interest Accrued on Investments will not be presented in the Balance Sheet of a Company.
Reason : Interest Accrued on Investments will be presented in the Balance Sheet of a Company under the sub-head Other Current Asset.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer: (D) A is false and R is true

Question. Assertion : Prepaid Insurance appears on the assets side of the Balance Sheet.
Reason : Prepaid Insurance appears in the Balance Sheet of a company under the sub-head Other Current Assets..
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer: (A) Both A and R true and R is the correct explanation of A.

Question. Assertion : Trade Payables, unless agreed to be settled otherwise, will not be shown in the Balance Sheet.
Reason : Trade Payables, unless agreed to be settled otherwise, will be shown in the Balance Sheet as Current Liabilities.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer: (D) A is false and R is true

Question. Assertion : Security Premium Reserve is shown under the head Share-holders Fund.
Reason : Security Premium Reserve is the part of reserves hence it should be shown under the head Reserves and Surplus.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer: (B) Both A and R are true but R is not the correct explanation of A
As Reserve and Surplus is the Sub head of Shareholders fund so it has no difference if we use the Main head Shareholders fund or sub head Reserves and Surplus

Question. Assertion : A Balance Sheet is prepared for a particular period and not on a particular date.
Reason : A Balance Sheet is prepared for a particular period which is 1st April to 31st March on the specified date that is 31st March of every year.
(A) Both A and R true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A
(C) A is true and R is false
(D) A is false and R is true
Answer: (D) A is false and R is true

Under which major sub-headings the following itmes will be placed in the Balance Sheet of a company as per Schedule-III, Part-I of the Companies Act, 2015:
1. Accrued Incomes
2. Loose tools
3. Provision for employees benefits
4. Unpaid dividend

Question. What will be the major sub-heading of Item no. 1 ?
(a) Other current assets
(b) Shareholders’s fund
(c) Non-current Assets
(d) None of the options
Answer: (a) Other current assets

Question. What will be the major sub heading of Item no. 2 ?
(a) Long-term provisions
(b) Inventories
(c) Long-term borrowings
(d) None of the options
Answer: (b) Inventories

Question. What will be the major sub heading of Item no.3 ?
(a) Long-term borrowings
(b) Reserves and Surplus
(c) Other current liabilities
(d) Long term provisions
Answer: (d) Long term provisions

Question. What will be the major sub heading of Item no.4 ?
(a) Other current liabilities
(b) Long-term loans and advances
(c) Short-term borrowings
(d) None of the options
Answer: (a) Other current liabilities

Under what heading will you show the following items in the Balance Sheet of a company:
1. Goodwill
2. Unclaimed dividends
3. Provision for tax
4. Securities Premium Reserve

Question. What will be the major heading of Item no.1 ?
(a) Current Assets
(b) Current Liabilities
(c) Non-current Assets
(d) None of the options
Answer: (c) Non-current Assets

Question. What will be the major heading of Item no.2 ?
(a) Current Liabilities
(b) Non-current Liabilities
(c) Current Assets
(d) None of the options
Answer: (a) Current Liabilities

Question. What will be the major heading of Item no.3 ?
(a) Shareholder’s Fund
(b) Current Assets
(c) Non-current Assets
(d) None of the options
Answer: (b) Current Assets

Question. What will be the major heading of Item no.4 ?
(a) Shareholders’ Fund
(b) Current Assets
(c) Non-current Assets
(d) Current Assets
Answer: (a) Shareholders’ Fund