TEST YOUR UNDERSTANDING I
• State whether the following statements are true or false.
• Fill in the blanks with appropriate word(s)
TEST YOUR UNDERSTANDING II
Question 1. What are the items shown under heading ‘Reserve and Surplus’?
Question 2. What are the items shown under heading ‘Miscellaneous Expenditure?
SHORT ANSWER TYPE QUESTIONS
Question 1. State the nature of financial statements.
Question 2. Briefly explain the importance of preparing financial statements.
Question 3. What are the limitations of financial statements?
Question 4. Prepare the format of income statement and discuss its elements.
Question 5. Prepare the format of balance sheet and discuss its elements.
Elements of Balance Sheet: A brief description of various element of balance sheet is given below
(ii) Reserve and Surplus: As per the Schedule VI, it consists of the following items
(iii) Secured Loans:
(iv) Unsecured Loans:
(v) Current Liabilities: Current Liabilities are those liabilities which are liable to pay with in an operating cycle generally one year; e.g., bank overdraft creditors, bills payable, outstanding wages, short term loans, etc are called current liabilities.
Description of Elements at the Liabilities Sfde of Balance Sheet
LONG ANSWER TYPE QUESTIONS
Question 1. Explain how financial statements are useful to the various parties who are interested in the affairs of an undertaking?
The following are the various external parties.
Question 2. Financial statements reflect a combination of recorded facts, accounting conventions and personal judgements. Discuss.
Question 3. Explain the process of preparing income statement and balance sheet.
The process of preparing Balance Sheet is given below
Question 1. The following is the trial balance on June 30, 2011 of the Modern Manufacturing Company Ltd.
Question 2. The following is the trial balance of Alfa Ltd, for the year ended June 30, 2011
3. The following balances appeared in the books of Parasuram Flour Mills Ltd., as on December 31, 2005 :
Note :Pension fund is assumed to be created out of profits. Dividend ? 9,000 is considered as declared and paid in same year.
4. An unexperienced accountant prepared the following trial balance of Bang Vikas Ltd., for the year ending 31.12.2005. The cash in hand on 31.12.2005 was Rs. 750.
Adjustments: (i) Stock on 31.12.2005 Rs. 95,000 and (ii) Write-off preliminary
Note: Rectified trial balance need not be prepared
Note: When the trial balance does not tally, it should be balanced by writing the difference amount on either side as required and then show it in balance sheet
5. The Silver Ore Co. Ltd. was formed on April 1, 2005 with an authorised capital of Rs.6,00,000 in shares of Rs. 10 each. Of these 52,000 shares had been issued and subscribed but there were calls in arrear on 100 shares @ Rs. 2.50. From the following trial balance as on March 31, 2006 prepare the trading and profit and loss account and the balance sheet: