Unit-II
Statutory requirements for preparation of financial statements
Exercises
1. Objective Type Questions.
A. State whether the following statements are true or false :
1.Financial Statements are the end products of accounting process. (True)
2. Financial statements are primarily directed towards the needs of owner. (True)
3.Facts and figures presented in financial statements are free from personal judgements. (False)
4. Recorded facts are based on market price. (False)
5.Financial statements provide all information about the business- both quantitative and qualitative. (False)
5.Financial Statements provide aggregate information about the business. (True)
6.Financial statements are prepared on certain assumptions and conventions. (True)
8.Financial statements are interim reports. (True)
9.Position statement shows financisl position of a company. (True)
10.Cash Flow statement is an essential part of financial statements. (True)
B. Fill in the blanks:
1) Financial statements are basic _____ of information to interested parties. (sources)
2) The shareholders of a company are______ called basis.(members)
3) Preparation of Income statement is based on ______ basis.
(accrual)
4) The statement which shows assets and liabiities of a company is known as ______ .
(Balance Sheet)
5)Profit and Loss Statement is also known as _____ statement. (Income)
6)Financial statements reflect a combination of recorded facts, accounting principles
personal _______ (Judgements).
7) Financial Statements include ______ , ________ and _______ .(Statement of Profit or Loss, Balance Sheet, Cash Flow Statement)
8) Published Accounts are prepared as per the prescribed form given in _______of Sec 2011 of the companies Act. (Schedule VI)
9) Proper Books of Accounts are mantained under Sec____- (2009)
10) Every Balance Sheet of a company shall given a true and fair view of the state of affair
the company at the end of the year under Sec______ (2011)
11) The Board of Directors has to prepare a Director's Report under Sec_____ (217)
12) The Auditor must gives his opinion regarding the truthfulness and fairness of the affai
the company under Sec______ (227)
C. Choose the correct alternative:
(1) Statement of Profit and Loss shows:
(a) results of operation.
(b) liquidity position.
(c) total financial posion
(d) all of them.
(2) Balancesheet shows:
(a) Performance of the business.
(b) Financial position of the business.
(c) Operating Expenses only.
(d) all of them.
Ans.(b)
(3) Financial facts are recoreded at
(a) Cost price
(b) Market price
(c) Replacement cost.
(d) Any one of the them
Ans.(a)
(4) Financial statements are
(a) Interim reports of the business.
(b) Final reports of the business.
(c) Any one of a(a) and (b)
(d) None of the above two.
Ans.(a)
(5) Accounting conventions followed in preparation and presentation of financial statements make financial statements:
(a) Comparable
(b) Non comparable.
(c) In consistent
(d) None of the above
(6) Financial statements are
(a) Summarised reports of recorded facts.
(b) Detailed reports of recorded facts.
(c) Reports of estimates only.
(d) None of the above two.
Ans.(a)
(7) An independent auditor is to express his opinion regarding
(a) Truthfulness of the affacts of the company only
(b) Fairness of the affairs of the company only
(c) Both truthfulness and fairness of the affairs of the company
(d) None of the above.
Ans. (c)
(8) Financial Reports of a Company contain
(a) Balance Sheet only.
(b) Statement of Profit and Loss
(c) Balance Sheet, Profit and Loss statement, Cash Flow Statement,
(d) None of the above.
Ans. (c)
I. Very Short Answer type Quastions:
1. What are financial statements of a company?
2. What is a Balance Sheet?
3. What are basic financial statements?
4. What is Segment Report?
5. What is Directors' Report?
6. What are quarterly financial statements.
III. Short Answer type quastions
1. What are financial statements? Mention two objectives of preparing financial statement
2. What is the significance of financial statements?
3. What are the limitations of financial statements?
4. What is the nature of financial statements?
5. What is meant by retained earnings?
6.Name some assumptions on which financial statements are based.
7. Name two items that can be shown under Reserves and Surplus,
8. What is Directors Responsibility Statement?
9. What are the objectives of Income Statement?
10. What are the objectives of preparing Balance Sheet?
11. What is included in auditor's reports?
12. What a are included in Directors' Report?
13. What are the main features of Financial Statements?
IV. Long Answer type quastios:
1. Explain the nature of financial statements.
2. Who are the users of financial statements? Explain the information they require from financial statements.
3. Explain the limitationss of financial statements.
4. What are the objectives of financial statements?
5. Discuiss the uses and importane of financial statements?
6. What are contingent liabilities? Mention any two of them.
7. What are the contents of "Directors' Responsibility Statement"?
8.What matter is disclosed in the Report on Corporate Governance?
9. What are the statements included in annual report of a company? Explain briefly theri contents
10.What are financial statements? Explain the special features of each of them.
11. What are the elements of financial statements? Explain the characterstics of each of them
12. What are the features of an ideal financial statements? Explain.
13. Discuss the statutory requriemens for the preparation of financial statements in India.
14. Financial Statements portray the financial effects of transactions and other events by grouping them into broad classes according to their characteristics."
15. Discuss the four principal qualitative characteristics of accounting information.
16. "Financial Accounting usally emphasises the economic substance of events even thought the legal form may differ and suggest different treatments. Do you agree?
Type - pinku moni bora.
