CBSE Class 12 Accountancy HOTs Financial Statements of a Company

Question. Match the items given in Column I with the headings/subheadings (Balance sheet) as defined in Schedule III of Companies Act 2013.
Column I                                                      Column II
(I) Computer software                         (a) Reserves and Surplus
(II) Calls-in-advance                            (b) Fixed Assets-Intangible Assets
(III) Interest accrued on Investment     (c) Other current Assets
(IV) Securities Premium Reserve           (d) Other Current Liabilities
Choose the correct option:
A. (I)-(a), (II)-(b), (III)- (d), (IV)- (c)
B. (I)-(b), (II)- (a), (III)-(d), (IV)- (c)
C. (I)-(d), (II)- (a), (III)-(b), (IV)-(e)
D. (I)- (b), (II)- (d), (III)- (c), (IV)-(a)
Answer. D

Question. Which of the following are not the tools of Vertical Analysis?
(i) Ratio Analysis.
(ii) Comparative Statements.
(iii) Common Size Statements.
(iv) Trend Analysis
(A) Only (iii)
(B) Both (ii) and (iv)
(C) Both (ii) and (iii)
(D) Only (iv)
Answer. B

Question. Which of the following is true?
An item is classified as current:
(i) if it is involved in entity’s operating cycle
(ii) is expected to be realised/settled within twelve months
(iii) if it is held primarily for trading
(A) Only (ii)
(B) Both (ii) and (iii)
(C) Both (i) and (ii)
(D) All (i), (ii) and (iii)
Answer. D

Question. Proposed dividend is a liability.
(A) Current
(B) Non-Current
(C) Contingent
(D) Both (A) and (B)
Answer. C

Question. Which of the following statements is False?
(A) Bank Charges are included in the Finance cost in the Statement of Profit Loss.
(B) Interest income is Revenue from Operations in the case of a Finance Company.
(C) Trade receivables realised beyond twelve months classified as “Other non-current assets”
(D) Current maturities to long-term loan include amount repayable within twelve months/operating cycle under other current liabilities
Answer. A

Question. An investment normally qualifies as cash-equivalent only when from the date of acquisition it has a short maturity period of:
(A) One month or less
(B) Three months or less
(C) Three months or more
(D) One year or less
Answer. B

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) Ignore price level changes.
Answer. B

Question. Under which of the following head/subhead is ‘Share Options Outstanding Account’ presented in the Balance Sheet of a company?
(A) Reserves and Surplus
(B) Share Capital
(C) Other Long-term Liabilities
(D) Other Current Liabilities
Answer. A

Question. Employee benefit expenses include .
(A) Leave Encashment
(B) Depreciation
(c) Bonus
(D) Both (A) and (C)
Answer. D

Question. ‘Interest accrued but not due on loans’ is shown in the companies’ Balance Sheet under the sub head .
(A) Reserves and Surplus
(B) Short term provisions
(C) Other Long-term Liabilities
(D) Other Current Liabilities
Answer. D

Question. Dividend Income for a Non-Financing Company is-
(A) Revenue from Operations
(B) Other Income
(C) Operating Income
(D) All of the above
Answer. A

Question. Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R):
Assertion(A): Analysis and Interpretation are complementary to each other.
Reason(R): Analysis is useless without interpretation, and interpretation without analysis is difficult or even impossible.
In the context of the above two statements, which of the following is correct?
(A) Both (A) and (R) are correct and (R) is the correct reason for (A).
(B) Both (A) and (R) are correct but (R) is not the correct reason for (A).
(C) Only (R) is correct.
(D) Both (A) and (R) are wrong.
Answer. A

Question. The financial statements of a business enterprise include:
(A) Balance sheet
(B) Statement of Profit and loss account
(C) Cash flow statement
(D) All the above
Answer. D

Question. Comparative statements are also known as:
(A) Dynamic analysis
(B) Horizontal analysis
(C) Vertical analysis
(D) External analysis
Answer. B

Question. Statement I: Unclaimed Dividend is a Contingent Liability. Statement II: Proposed Dividend is a Current Liability.
Choose the Correct Option:
(A) Only (i) is correct
(B) Only (ii) is correct
(C) Both (i) and (ii) are correct
(D) Both (i) and (ii) are incorrect
Answer. D

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

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 Above
Answer. C

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

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

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

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

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

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

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

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

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

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 these
Answer. B

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

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

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

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

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

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

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

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 these
Answer. C

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

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

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

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 these
Answer. D

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

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

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

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

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

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

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

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

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

Question. Accrued Commission of ` 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

Question. Prepaid rent is a :
(a) current asset
(b) fixed asset
(c) current liability
(d) None of these
Answer. A

Question. Staff welfare expenses are included in:
(a) cost of material consumed
(b) revenue from operation
(c) employees benefit expense
(d) None of these
Answer. C

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

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

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

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 these
Answer. A

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 these
Answer. B

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

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 = ` 20,000
(a) Rs 1,40,000
(b) Rs 2,54,000
(c) Rs (46,000) loss
(d) None of these
Answer. A

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

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

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

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

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

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

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

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

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

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

Question. Assertion : Contingent Liabilities are not shown in the Balance Sheet.
Reason : Contingent Liability is recorded in the Notes to Accounts.
(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

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

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

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

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

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

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 these
Answer. A

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 these
Answer. B

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

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 these
Answer. A

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 these
Answer. C

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

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 these
Answer. D

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