CBSE Class 12 Accountancy Financial Analysis And Tools For Financial Analysis Worksheet Set 02

Q. 1. Is there any standard format of 'Balance Sheet' of a company?
Answer: Section 129 of the Companies Act, 2013 requires that the Balance Sheet of a company should be prepared in the prescribed form, given in Part I of Schedule III of the Companies Act, 2013.

Exam Tip: The Companies Act mandates a specific format for Balance Sheets — this ensures consistency and comparability across companies.

Q. 2. List the major heads under which the assets are presented in the Balance Sheet of a company as per Schedule III Part I of the Companies Act, 2013.
Answer: (i) Non-current Assets, (ii) Current Assets.

Exam Tip: This binary classification divides all assets based on their operational cycle and expected realization period — assets are separated into those held long-term and those expected to convert to cash within 12 months.

Q. 3. Give two examples each of Non-current Assets and Non-current Liabilities.
Answer:
(1) Non-current Assets: (i) Land and Building, (ii) Plant and Machinery.
(2) Non-current Liabilities: (i) Debentures, (ii) Public Deposits.

Exam Tip: Non-current items typically have a life or settlement period exceeding 12 months — think long-term when classifying these assets and liabilities.

Q. 4. What are contingent liabilities? How would you disclose 'Contingent Liabilities' in the Balance Sheet of a company?
Answer: Contingent liabilities are those liabilities that may or may not arise because they are dependent on a happening in future. They are disclosed in the Notes to Accounts for providing information to users about impending liabilities.

Exam Tip: Contingent liabilities are not shown on the Balance Sheet face itself — they must be detailed in Notes to Accounts with clear explanations of the conditions on which they depend.

Q. 5. Define 'Authorised Capital'.
Answer: As per Section 2(8) of the Companies Act, 2013, "Authorised Capital" or "Nominal Capital" means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company.

Exam Tip: Authorised Capital is a ceiling — it is the upper limit the company can raise through share issuance, not the amount actually raised.

Q. 6. Define 'Paid-up Share Capital'.
Answer: As per Section 2(64) of the Companies Act, 2013, "Paid-up Share Capital" or means aggregate of amount of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of a company, but does not include any other amount received in respect of such shares, by whatever name called.

Exam Tip: Paid-up Capital is the cash money actually received from shareholders — it is always less than or equal to Subscribed Capital.

Q. 7. What do you understand by 'Capital Redemption Reserve'?
Answer: When a company buys its own shares out of free reserves, capital redemption reserve is created. As per Section 69 of the Companies Act, 2013 a sum equal to the nominal value of shares so purchased shall be transferred to Capital Redemption Reserve.

Exam Tip: Capital Redemption Reserve is created as a legal reserve when companies repurchase their own shares — it restricts the distribution of profits as dividend.

Q. 8. Define 'Operating Cycle'.
Answer: As per Schedule III of the Companies Act, 2013, "Operating cycle is the time between the acquisition of an asset for processing and its realisation into cash and cash equivalents. If operating cycle cannot be identified, it is assumed to be of 12 months".

Exam Tip: The operating cycle concept determines whether assets and liabilities are current or non-current — a 12-month default is assumed when the exact cycle cannot be identified.

Q. 9. Name any four items of intangible assets.
Answer: (i) Goodwill
(ii) Trademarks
(iii) Computer Software
(iv) Mining Rights

Exam Tip: Intangible assets have no physical form but provide measurable economic value — they are shown separately from tangible fixed assets in the Balance Sheet.

Question 10. What are Appropriations of Profit? What is a reserve represented by investments termed as?
Answer: Appropriations of Profit are amounts set aside from profit for reserves, provision for proposed dividend, etc. Profit gets appropriated by adding the profit of the current year to the opening balance of Surplus, i.e., Balance in Statement of Profit and Loss and thereafter transferring, i.e., appropriating amounts to other reserves such as General Reserve, Capital Redemption Reserve, etc.
In simple words: Appropriations are portions of profit that a company reserves for different purposes like dividends or building reserves. A reserve created by investments is typically known as an Investment Reserve.

Exam Tip: Remember that appropriations happen after profit is calculated, and they reduce the distributable profit to shareholders.

Question 11. Give two examples of 'Contingent Liabilities'.
Answer: (i) Claims against the company not acknowledged as debt. (ii) Uncalled liability on partly paid shares.
In simple words: Contingent liabilities are possible obligations that may or may not become actual debts. They are shown as notes because they are not confirmed liabilities yet.

Exam Tip: Contingent liabilities appear in the notes to financial statements, not in the main Balance Sheet body.

Question 12. Hazel Ltd. has been established by the persons who were earlier working as partners. They decided to follow the same Balance Sheet format as they used in their partnership firm. Can they follow the same format of Balance Sheet?
Answer: Hazel Ltd. cannot follow the same Balance Sheet format as they used in their partnership firm. As per Section 129 of the Companies Act, 2013, a company is required to prepare its Balance Sheet every year in the format prescribed under Schedule III of the Companies Act, 2013.
In simple words: Companies must follow a standard format set by law for their Balance Sheets. They cannot use old partnership formats because company accounts have different legal requirements.

Exam Tip: Always remember that company Balance Sheets follow Schedule III of the Companies Act, 2013 - this is a strict legal requirement.

Question 13. Multiple Paper Solutions Ltd. received applications for 5,00,000 preference shares against an issue of 4,00,000 preference shares of Rs 10 each. Allotment has not been made against the applications yet. How will you show the amount in the Balance Sheet of company?
Answer: Rs 40,00,000 (4,00,000 × Rs 10) will be shown against 'Share Application Money Pending Allotment' and Rs 10,00,000 (1,00,000 × Rs 10) will be shown as 'Other Current Liabilities' under the head 'Current Liabilities'.
In simple words: The money received for the allotted shares goes to one place, while the extra money for shares not allotted goes to another place as a liability.

Exam Tip: Always separate the amount actually allotted from the excess application money received in the Balance Sheet.

Question 14. Anuj, the Accountant of Best Choice Furniture Ltd. has shown Building under 'Inventories' as the company has decided to sell one of its buildings next month. Is he correct in his approach?
Answer: Stock held for the purpose of trade in the normal course of business is shown under 'Inventories'. Building is shown under fixed tangible assets. 'Sale of building' is considered as sale of a fixed asset and not trading by the firm having a business of trading in furniture items.
In simple words: Buildings are always fixed assets, even if the company plans to sell them soon. They are not inventory because the company does not buy and sell buildings as part of its normal business.

Exam Tip: Classify assets based on their nature and the company's main business, not on immediate plans to sell them.

Question 15. Unimax Finance Ltd., a finance company had received interest of Rs 2,00,000 on the amount invested in Maxwell Sports Ltd. Is the interest received 'Revenue from Operations'?
Answer: Yes, the interest of Rs 2,00,000 received by Unimax Finance Ltd. is classified under 'Revenue from Operations' as the company is a 'Financing Company'.
In simple words: For a finance company, earning interest on investments is part of its main business, so it counts as revenue from operations.

Exam Tip: The classification of revenue depends on the nature of the business - what is "revenue from operations" for one company may not be for another.

Question 16. Cash and Cash Equivalents are always classified as current assets. Can they ever be shown as non-current assets? Give an example. [HOTS]
Answer: If a company has a bank balance outside the country and a situation arises when the foreign country restricts the transfer of amount outside the country, then such bank balance is shown as non-current assets in the Balance Sheet.
In simple words: Cash that cannot be moved out of a foreign country due to government restrictions becomes a non-current asset because it is not freely available for use.

Exam Tip: Current assets must be convertible to cash within one year - if there are legal restrictions preventing this, reclassify them as non-current.

Question 17. Domes Ltd. has issued 2,500, 12% Debentures of Rs 100 each on 1st November, 2016 to be redeemed on 30th September, 2017. How will 12% Debentures be shown in the Balance Sheet as at 31st March, 2017?
Answer: 12% Debentures will be shown as short-term Borrowings under head 'Current Liabilities' in the Balance Sheet as at 31st March, 2017 as they are redeemable within 12 months from the date of Balance Sheet.
In simple words: Since the debentures will be repaid within one year from the Balance Sheet date, they are shown as current liabilities rather than long-term borrowings.

Exam Tip: Always check the redemption date against the Balance Sheet date - if redemption is within 12 months, classify as current liability.

Short Answer Questions [3, 4 marks]

Question 1. Under which major heads and sub-heads will the following items be presented in the Balance Sheet of the company as per Schedule III, Part I of the Companies Act, 2013?
(i) Bank Overdraft
(ii) Subsidy Reserve
(iii) Capital Redemption Reserve
(iv) Mining Rights
(v) Patents
(vi) Debit balance in Statement of Profit and Loss
(vii) Debenture Redemption Reserve
(viii) Provision for Taxation
Answer:

In simple words: Different items are classified into major heads like Current Liabilities, Shareholders' funds, and Non-current assets based on their nature and purpose in the company's financial structure.

Exam Tip: Memorize the major heads and sub-headings of Schedule III - they appear frequently in classification-type questions.

Question 2. Under which major headings and sub-headings will the following items be shown in the Balance Sheet of a company as per Schedule III Part I of the Companies Act, 2013:
(i) Net loss as shown by Statement of Profit and Loss
(ii) Capital redemption reserve
(iii) Bonds
(iv) Loans repayable on demand
(v) Unpaid dividend
(vi) Buildings
(vii) Trademarks
(viii) Raw materials.
Answer:

In simple words: Each asset and liability must be placed in its correct head and sub-heading based on whether it is current or non-current, tangible or intangible, and its specific nature.

Exam Tip: Remember: Current means convertible to cash within one year; Non-current means longer than one year. Tangible assets are physical; intangible assets have no physical form.

Question 3. Under which major headings and sub-headings will the following items be shown in the Balance Sheet of a company as per Schedule III Part I of the Companies Act, 2013:
(i) Balance of the Statement of Profit and Loss
(ii) Loan of Rs 1,00,000 payable after three years
(iii) Short-term deposits payable on demand
(iv) Loose tools
(v) Trademark
(vi) Land
(vii) Cash at bank
(viii) Trade payables
Answer:

In simple words: Assets and liabilities are divided based on how quickly they can be converted to cash or paid off - current items within one year, non-current items taking longer.

Exam Tip: Always determine the time frame - if payable/convertible within 12 months, it is current; otherwise it is non-current.

Question 4. Name the major heads under which the following items will be presented in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013:
(i) Provision for Employee Benefit
(ii) Unpaid Dividend
(iii) Interest on Calls-in-Advance
(iv) Patents
(v) Short-term Loans
(vi) Trade payables
(vii) Stores and Spare Parts
(viii) Goodwill
Answer:

In simple words: All items must be grouped into four main categories - Current Assets, Non-current Assets, Current Liabilities, and Non-current Liabilities based on their nature and time of conversion or payment.

Exam Tip: Create a mental checklist: Is it an asset or liability? Is it current or non-current? Use this two-step process to classify any Balance Sheet item correctly.

Question 5. Under which major sub-headings, the following items will be placed in the Balance Sheet of a company as per Schedule III, Part I of the Companies Act, 2013:
(i) Accrued Income
(ii) Loose Tools
(iii) Provision for Employees benefits
(iv) Unpaid dividend
(v) Short-term loans
(vi) Long-term loans
Answer:

In simple words: Sub-headings organize items into more specific categories within each major head, making the Balance Sheet clearer and easier to understand.

Exam Tip: Study the Schedule III structure carefully - sub-headings are more specific than major heads and help you classify items precisely.

Question 6. Under which sub-headings, will the following items be placed in the Balance Sheet of a company as per Schedule III Part I of the Companies Act, 2013:
(i) Capital Reserve
(ii) Bonds
(iii) Loans repayable on demand
(iv) Vehicles
(v) Goodwill
(vi) Loose tools
Answer:

In simple words: Reserves belong to equity, borrowings are split between long-term and short-term based on repayment timing, assets are divided into tangible and intangible.

Exam Tip: Remember the distinction - Fixed Assets last longer than a year; Inventory is normally sold within a year; Borrowings are classified by when they must be repaid.

Question 7. State under which major headings and sub-headings the following items will be presented in the Balance Sheet of a company as per Schedule III of the Companies Act, 2013: General Reserves, Discount on Issue of Debentures, Capital Work in Progress and Design.
Answer:

In simple words: Reserves add to shareholder equity, discount on debentures reduces the premium reserve, capital work under construction is an asset still being built, and design is an intangible asset.

Exam Tip: Capital Work-in-Progress is shown separately under Fixed Assets because it is not yet ready for use - once completed, it moves to a specific asset account.

Question 8. Under which heads and sub-heads the following items will appear in the Balance Sheet of a company as per Schedule III Part I of the Companies Act, 2013:
(i) Premium on Redemption of Debentures
(ii) Patents
(iii) Security against Telephone
(iv) Tax Reserve
Answer:

In simple words: Premiums on debenture redemptions are liabilities, patents are intangible fixed assets, security deposits are long-term advances, and tax reserves are part of equity reserves.

Exam Tip: Security deposits and similar items are classified as "Long-term Loans and Advances" when they are not expected to be recovered within one year.

Question 9. State the major headings under which the following items will be put as per Schedule III, Part I of the Companies Act, 2013:
(i) Long-term investments
(ii) Bills of Exchange
(iii) Motor Car
(iv) Loss on Issue of Debentures
(v) Securities Premium and
(vi) Unclaimed Dividend
(vii) Security Deposits for Electricity
Answer:

In simple words: Long-term items held beyond one year are non-current, current items convertible within one year are current, losses reduce reserves, and unclaimed payments are liabilities.

Exam Tip: The time horizon is key - if held or expected to mature beyond 12 months, classify as non-current; within 12 months, classify as current.

Question 10. Under what headings and sub-headings of the Balance Sheet of a company, following will be presented:
(i) Proposed Dividend
(ii) Calls-in-Arrears
(iii) Patents and Trade Marks
(iv) Prepaid insurance
(v) Outstanding Salary
(vi) Shares in D.C.R. Limited
Answer:

In simple words: Dividends and salaries owed are current liabilities, intangible assets like patents go under fixed assets, prepaid expenses are current assets, and share investments are long-term assets.

Exam Tip: Look for time indicators - "Outstanding" and "Proposed" usually mean current year items, while long-term investments and fixed assets have longer useful lives.

Question 11. Under which headings and sub-headings, would you disclose the following items in the Balance Sheet of a limited company?
(i) Forfeited share Account (ii) Capital Advances (iii) Factory Building under construction (iv) Premium on Redemption of Debentures (v) Shares in Infotech Ltd. (vi) Interest Accrued and due on Unsecured Loan (vii) Interest Accrued and due on Secured Loan (viii) Interest Accrued but not due on Loan.
Answer:

In simple words: Different items get shown in different parts of the Balance Sheet based on whether they are assets or liabilities, and whether they are short-term or long-term. The table shows where each item belongs and under which section heading.

Exam Tip: Remember that items are classified first by type (Assets, Liabilities, or Equity), then by time frame (current or non-current), and finally placed under the appropriate sub-heading. This structured approach ensures the Balance Sheet is presented correctly.

Question 12. Show the following items in the Balance Sheet of ABC Ltd. as at 31st March, 2019 as per the requirements of Schedule III of the Companies Act, 2013: General Reserve (31st March, 2018) Rs.4,00,000, Surplus i.e., Balance in Statement of Profit and Loss (Debit Balance) for 2018-19 Rs.7,50,000.
Answer: Balance Sheet of ABC Ltd. as at 31st March, 2019

Notes to Accounts:

In simple words: The Balance Sheet shows the company's financial state. Reserves and Surplus are part of Shareholders' Funds. The General Reserve adds Rs.4,00,000, but the debit balance (loss) subtracts Rs.7,50,000, giving a net result of Rs.(3,50,000).

Exam Tip: When showing Reserves and Surplus, ensure that debit balances (losses) are shown in brackets with a minus sign. The net balance must equal the total shown in the main Balance Sheet.

Question 13. Calculate total revenue from operations for the year ended 31st March, 2019 of MNO Finance Ltd. (a financing company) from the following information: Commission Received Rs.10,000, Interest on Loans Rs.60,00,000, Dividend Received Rs.2,00,000, Profit on sale of Land Rs.30,00,000.
Answer: Statement of Profit and Loss of MNO Finance Ltd. for the year ended 31st March, 2019

Notes to Accounts:

In simple words: Revenue from operations includes income earned from the main business activities like commissions, interest, and dividends. Other income comes from non-core activities like selling land. Together, they form the total revenue.

Exam Tip: For a financing company, distinguish between revenue from core operations (interest, commission, dividend) and other income (gains from asset sales). Only core business income goes into Revenue from Operations.

Question 14. From the following information of Ratna Ltd., prepare a Statement of Profit and Loss for the year ended 31st March, 2017: Revenue from operations Rs.1,15,000, Commission Received Rs.35,000, Cost of Material Consumed Rs.12,500, Purchases of stock-in-trade Rs.5,000, Changes in Inventories Rs.22,500, Employees Benefit Expenses Rs.10,000, Finance Cost Rs.6,000, Depreciation Rs.2,500, Advertising Expenses Rs.8,500.
Answer: Statement of Profit and Loss for the year ended 31st March, 2017

Notes to Accounts:

In simple words: The Statement of Profit and Loss shows all the money earned and all the money spent during the year. Subtract total expenses from total revenue to find the profit earned.

Exam Tip: Ensure all revenue items are listed first (operations and other income), followed by all expenses. The final profit is computed by subtracting total expenses from total revenue.

Question 15. Calculate Cost of Material Consumed from the following information: Opening Inventory: Material Rs.2,75,000, Finished Goods Rs.1,25,000, Material purchased Rs.11,25,000, Closing Inventory: Material Rs.2,25,000, Finished Goods Rs.75,000.
Answer: Cost of Material Consumed = Opening inventory of material + Purchase of material - Closing inventory of material

= Rs.2,75,000 + Rs.11,25,000 - Rs.2,25,000

= Rs.11,75,000

In simple words: Start with the material you had at the beginning. Add what you bought during the year. Subtract what you still have at the end. The result is how much material you used in production.

Exam Tip: Remember that only raw material inventory is used in the formula for Cost of Material Consumed. Finished goods inventory is not included in this calculation.

Question 16. Calculate the amount of change in inventories of finished goods, work-in-progress and stock-in-trade, that will be shown in the Notes to Accounts from the following information:

Answer: Notes to Accounts

In simple words: For each inventory category, subtract the closing amount from the opening amount. If the result is negative, inventory increased; if positive, inventory decreased. Add all three changes together to get the net change shown in the Profit and Loss statement.

Exam Tip: A negative value shows that inventory has increased during the period (closing more than opening), while a positive value shows inventory has decreased. The net figure combines changes in all three inventory categories.