RBSE Solutions Class 12 Accountancy Chapter 10 Analysis of Financial Statements

RBSE Class 12 Accountancy Chapter 10 Multiple Choice Questions

 

Question 1. Which tool of teaching is used for horizontal analysis?
(a) Balance sheet
(b) Comparative statement and trend analysis
(c) Common size profit and loss account
(d) Common size balance sheet
Answer: (b) Comparative statement and trend analysis
In simple words: Horizontal analysis checks how financial figures change over different time periods. Comparative statements and trend analysis are the best tools for this as they show changes and patterns.

🎯 Exam Tip: Remember that horizontal analysis specifically looks at data over several periods, making comparative and trend analysis the most suitable methods.

 

Question 2. In horizontal analysis financial statement of accounting periods are necessary.
(a) two or more

🎯 Exam Tip: For horizontal analysis to be effective, always ensure you have financial data from at least two accounting periods to compare changes over time.

 

Question 3. Intra firm comparison is also known as :
(a) Time Series
(b) Trend Analysis
(c) Cross Sectional Analysis
(d) All of the options
Answer: (c) Cross Sectional Analysis
In simple words: When a company compares its own performance with another company at the same time, it's called intra-firm comparison. This is also known as cross-sectional analysis.

🎯 Exam Tip: Distinguish between intra-firm (comparing different firms at one point) and inter-firm (comparing one firm over time) comparisons to avoid confusion.

 

Question 4. The most commonly tools used for financial analysis are :
(a) Ratio analysis
(b) Horizontal analysis
(c) Vertical analysis
(d) All of the options
Answer: (d) All of the options
In simple words: Financial analysis uses different tools like ratios, and both horizontal and vertical analysis, to get a full picture of a company's financial health. Each method gives a unique view, so they are all important.

🎯 Exam Tip: A comprehensive financial analysis often requires using a combination of these tools to get a complete understanding of a company's position and performance.

 

Question 5. In common size, income statement, various items are presents as a percentage of
(a) Revenue from operations
(b) Gross sales
(c) Net profit
(d) Gross profit
Answer: (a) Revenue from operations
In simple words: In a common size income statement, every item is shown as a percentage of the total revenue from operations. This helps to easily compare different companies or different periods for the same company.

🎯 Exam Tip: Remember that "Revenue from operations" is the base (100%) for common-size income statements, which simplifies comparisons across varying scales.

 

Question 6. Common size balance sheet is also called as:
(a) Percentage Balance Sheet
(b) Percentage Income Statement

🎯 Exam Tip: Understand that a common-size balance sheet expresses each item as a percentage of total assets or total liabilities plus equity, providing a standardized view for comparison.

 

Question 7. Cost of goods sold =
(a) Purchase + Direct expenses
(b) Opening stock of material + Purchase of material + Direct expenses - Closing stock of material
(c) Opening stock of material + Purchases of material - Closing stock of material
(d) None of the options
Answer: (b) Opening stock of material + Purchase of material + Direct expenses - Closing stock of material
In simple words: The cost of goods sold is calculated by taking the value of materials you started with, adding new purchases and direct costs to make goods, and then subtracting any leftover materials. This formula helps determine the direct cost of items sold during a period.

🎯 Exam Tip: Memorize the complete formula for Cost of Goods Sold, ensuring you include opening stock, purchases, direct expenses, and subtract closing stock.

 

Question 8. The comparative balance sheet presents......changes between the each item of balance sheet.
(a) relative
(b) absolute
(c) absolute and relative
(d) None of the options
Answer: (c) absolute and relative
In simple words: A comparative balance sheet shows changes in actual amounts (absolute) and also changes as a percentage (relative) for each item. This gives a clear picture of how each part of the business's finances has changed over time.

🎯 Exam Tip: When preparing comparative statements, always calculate both absolute (amount) and relative (percentage) changes to provide a complete picture.

 

Question 9. In common size balance sheet, total of equity and liabilities are assumed to be equal to :
(a) 1
(b) 100
(c) 10
(d) 1000
Answer: (b) 100
In simple words: In a common size balance sheet, the total amount of equity and liabilities is set to 100. Then, every other item is shown as a percentage of this 100. This makes it easy to compare balance sheets of different sizes.

🎯 Exam Tip: Always set the total of the base figure (e.g., total assets/liabilities) to 100% in common-size statements, as this is the standard for relative comparison.

 

Question 10. Vertical analysis is known as:
(a) Structural Analysis
(b) Static Analysis
(c) Dynamic Analysis
Answer: Vertical analysis is also known as:
(i) Structural Analysis: This is because it shows the composition of different items within a single financial statement, highlighting the relative importance of each item. It helps in understanding the structure of the business's finances.
(ii) Static Analysis: This is another name for vertical analysis because it studies financial statements for a single accounting period. It provides a snapshot of the financial position at one specific point in time, without comparing changes over multiple periods.

🎯 Exam Tip: When explaining terms like 'vertical analysis', clearly state its alternative names and briefly explain why each name is fitting (e.g., 'structural' due to component breakdown, 'static' due to single-period focus).

 

RBSE Class 12 Accountancy Chapter 10 Very Short Answer Questions

 

Question 1. Explain the meaning of financial statement.
Answer: Financial statements are the final reports prepared at the end of an accounting period. These reports include the balance sheet, profit and loss account, and notes to accounts. They provide a summary of a company's financial activities and position. These statements are crucial for decision-making by various stakeholders. They help in understanding the economic health of an organization.

🎯 Exam Tip: Define financial statements clearly by listing their main components (balance sheet, profit & loss, notes) and mentioning their purpose of summarizing financial health at period-end.

 

Question 2. As per Companies Act, 2013, what are included in a full set of financial statements, write only names
Answer: As per the Companies Act, 2013, a full set of financial statements includes:
• Balance Sheet
• Profit & Loss Account
• Notes to Account and Explanatory Notes
• Cash Flow Statement. These documents together provide a comprehensive view of a company's financial performance and position.

🎯 Exam Tip: List all four key components (Balance Sheet, P&L, Notes, Cash Flow) when asked about the full set of financial statements as per the Companies Act, 2013.

 

Question 3. Write any two nature of financial statements.
Answer: Two natures of financial statements are:
• Financial Statements are affected by personal decisions. For example, the method chosen for valuing stock can change the profit reported. This shows that human judgment plays a role in their preparation.
• Financial statements are prepared by following specific accounting concepts. For instance, the going concern concept assumes the business will continue to operate, influencing how assets and liabilities are reported. This ensures consistency and comparability.

🎯 Exam Tip: When asked for the nature of financial statements, highlight how personal judgments can influence them and how they are built upon established accounting concepts.

 

Question 4. Write any two characteristics of financial statements.
Answer: Two characteristics of financial statements are:
• Summary: Financial statements present a summary of all financial transactions over a period, rather than showing every single transaction. They condense a lot of information into a readable format.
• Show in currency: All items in financial statements are shown in monetary terms (currency), making them quantifiable and comparable. This allows for clear measurement of economic value. They provide a standardized unit of measurement.

🎯 Exam Tip: Focus on 'summary' and 'monetary terms' as key characteristics; these explain how statements condense information and provide a quantifiable measure.

 

Question 5. Write any two essentials of financial statements.
Answer: Two essential aspects of financial statements are:
• Financial statements are affected by personal judgment, such as the method used for stock valuation. A manager's personal decision in choosing an accounting method can influence the final figures presented in the statements. This highlights the subjective element involved in accounting.
• Financial statements provide key information about a business's assets, liabilities, equity, revenues, and expenses. These core components are crucial for stakeholders to assess the company's financial health. They form the foundation for further analysis. A manager's personal decision in choosing an accounting method can influence the final figures presented in the statements.

🎯 Exam Tip: Emphasize how personal judgment impacts statements and that they provide crucial financial data, as these are core to their essential nature.

 

Question 7. Write any four names of external users of financial statements.
Answer: Here are four external users of financial statements:
1. Banks and Financial Organizations: They review statements to decide whether to lend money and on what terms. They check the company's ability to repay loans.
2. Creditors: These are people or companies who are owed money. They use financial statements to assess if the business can pay its debts on time.
3. Government and Other Departments: Government bodies use financial statements for taxation, policy-making, and regulatory compliance. They ensure the company follows rules.
4. Debenture Holders and Other Future Investors: Debenture holders are interested in the company's ability to pay interest and repay the principal. Future investors look for profit potential and financial stability before investing. They all seek financial strength indicators.

🎯 Exam Tip: When listing external users, remember to briefly explain *why* each group uses financial statements to show a complete understanding.

 

Question 8. Write any four limitations of financial statements.
Answer: Here are four limitations of financial statements:
1. Historical Facts: Financial statements are based on past data and historical costs. They do not reflect current market values or future projections. This means they might not show the real value of assets today.
2. Depend on Guess: Many items in financial statements involve estimates and judgments, such as depreciation methods or bad debt provisions. These estimates can introduce subjectivity. Different assumptions can lead to different results.
3. To Hide Real Position: Sometimes, companies might try "window dressing" to make their financial position look better than it actually is. This can mislead users. They might not always show the complete and true picture.
4. No Attention on Qualitative Facts: Financial statements mainly focus on monetary (quantitative) information. They do not report on important qualitative factors like management quality, employee morale, or customer satisfaction. These non-financial aspects are very important for a business. These factors, while crucial, are hard to measure in money.

🎯 Exam Tip: When discussing limitations, ensure you explain how historical data, estimations, potential manipulation, and the exclusion of qualitative factors can affect the true representation of financial health.

 

Question 9. Explain the meaning of financial analysis.
Answer: Financial analysis means looking closely at the relationships between different numbers in a company's financial statements. It helps to understand how the company is performing and its financial health. This process involves evaluating financial data to assess a company's performance, stability, and growth potential. It helps identify trends and make future predictions.

🎯 Exam Tip: Define financial analysis as studying the relationships between financial figures to understand a company's performance and financial health.

 

Question 10. Write the names of types of financial analysis.
Answer: The main types of financial analysis include:
(i) Horizontal Analysis (or Dynamic Analysis): This type of analysis looks at financial statements over several periods (e.g., multiple years) to see how individual items are changing. It is useful for long-term trend analysis and planning. Comparative statements are a good example of this.
(ii) Vertical Analysis (or Static Analysis): This analysis reviews and analyzes financial statements for only one year. It shows each item as a percentage of a base figure within that same statement (e.g., sales for income statement, total assets for balance sheet). Ratio analysis is a common example, and it helps compare different companies or different divisions within one company at a specific time.

🎯 Exam Tip: Clearly name and briefly define both horizontal (dynamic, multi-period) and vertical (static, single-period) analysis as the primary types, highlighting their key characteristics.

 

Question 11. Explain four differences between horizontal and vertical analysis.
Answer: Here are four differences between Horizontal Analysis and Vertical Analysis:

Both methods are vital for understanding a company's financial health, but they offer different perspectives. Horizontal analysis helps spot growth or decline, while vertical analysis reveals the internal structure and composition of financial figures.

🎯 Exam Tip: When differentiating between horizontal and vertical analysis, ensure your points clearly contrast their scope (single vs. multiple periods) and the type of insights they provide (structure vs. trends).

 

Question 12. What is meant by comparative balance sheet ?
Answer: A comparative balance sheet is a financial analysis tool where a company's financial figures for two or more years are listed side-by-side. This arrangement makes it easy to compare the changes in assets, liabilities, and equity over time. This technique helps to identify trends and analyze the financial position. It provides a quick way to spot growth or decline in various financial components.

🎯 Exam Tip: Define a comparative balance sheet by emphasizing its side-by-side presentation of data from multiple periods to facilitate comparison and trend identification.

 

Question 13. What is meant by comparative income statement?
Answer: A comparative income statement is a report that shows the revenues and expenses of a company for two or more accounting periods next to each other. This format makes it easy to compare changes in sales, costs, and profits over time. It helps businesses see if they are earning more profit or if their expenses are increasing. This comparison can reveal important trends in profitability and operational efficiency.

🎯 Exam Tip: When defining a comparative income statement, highlight that it presents revenue and expense data from multiple periods in a comparative format, enabling trend analysis of profitability.

 

Question 14. Prepare the format of comparative profit and loss account showing main headings.
Answer: A comparative profit and loss account shows how a company's financial performance has changed over different periods by listing income and expenses side-by-side. This helps in spotting trends and understanding growth. It is an important tool for financial analysis, allowing managers and investors to see patterns over time.

In simple words: This format helps you compare a company's income and costs over different years to see if it is making more or less money.

🎯 Exam Tip: When preparing formats, always include all key headings and sub-headings, even if you are not filling in the numbers. This shows a complete understanding of the statement structure.

 

Question 16. Prepare Common Size Balance Sheet from the following balance sheet:
Answer: A Common Size Balance Sheet shows each item as a percentage of the total assets or liabilities, making it easy to compare financial structures over time or between different companies. This helps in understanding the relative importance of each asset and liability component.

Common Size Balance Sheet
(As on 31 March 2017)

In simple words: This sheet converts all balance sheet numbers into percentages of the total, making it simple to compare how the company's financial structure has changed or how it compares to others.

🎯 Exam Tip: Remember that in a common size balance sheet, the total of assets and the total of equity and liabilities are both always 100%. All other items are shown as a percentage of this total.

 

Question 17. Prepare Comparative Balance Sheet from the following information as at 31st March 2016-2017 :
Answer: A comparative balance sheet helps to see changes in financial items over two accounting periods, making it easy to identify trends and analyze performance. By presenting data side-by-side, it highlights increases or decreases in assets, liabilities, and equity, offering insights into a company's financial health.

In simple words: This sheet compares different balance sheet items from one year to the next, showing you which items have grown or shrunk, and by how much.

🎯 Exam Tip: Remember to calculate both the absolute change (the difference in value) and the percentage change for each item. This gives a complete picture of the movement.

 

Question 18. Prepare Comparative Balance Sheet as on 31st March, 2017 from the following informations :
Answer: A comparative balance sheet lays out financial data for multiple periods side-by-side, helping stakeholders quickly identify changes and trends in a company's financial position. This makes it easier to analyze growth, stability, and areas that need attention.

In simple words: This balance sheet compares the financial numbers of a company over two years to highlight how different items like assets and debts have changed.

🎯 Exam Tip: Pay close attention to negative changes (decreases) and large percentage shifts, as these often indicate important financial movements for the business.

 

RBSE Class 12 Accountancy Chapter 10 Essay Type Questions

 

Question 1. Explain parties interested in financial statements and their utility.
Answer: Many different people and groups are interested in a trading company's financial statements because these statements show how the business is doing. These users are typically split into two groups: internal users and external users. Knowing how the business performs helps with various decisions.

Internal Users:

1. Shareholders: These are the people who invest money in the company. They want to know if the company is profitable, how strong its finances are, and how much cash it has. All this information helps them decide if their investment is safe and growing.
2. Management: The managers and controllers of the business are responsible for protecting the company's investments and using its resources in the best way possible. Financial statements help them measure how efficient the business is and how well it is earning profits.

External Users:

• Banks and Financial Institutions: These groups want to know if the company can repay loans and earn enough profit before they offer credit or financial help.
• Debenture Holders and Future Investors: Debenture holders need to know if the company can pay their interest on time. Future investors look for information about profits, dividends, and market conditions to decide if they should invest. Both groups need to understand the company's financial strength.
• Creditors: People or companies that are owed money by the business want to know about its ability to pay back debts (liquidity) and overall financial health.
• Government and Other Departments: They need financial statements to ensure that the company is following ethical practices, laws, and government rules.
• Researchers and Analysts: These people use financial statements to achieve specific goals, like preparing summaries of an organization's financial health for the public and government.
• Trading Council: Organizations like chambers of commerce or industry associations study financial statements to ensure the safety and growth of their members. They also compare business performance.
• Stock Market and Indian Securities and Exchange Board: These bodies establish rules and regulations to protect investors. They use financial statements to check if companies are following these rules and to ensure transparency.

In simple words: Many people care about a company's financial reports. Owners want to know if they are making money, and managers use them to run the business well. Banks and others need to know if the company can pay back money, and the government checks if rules are being followed.

🎯 Exam Tip: When listing parties, always categorize them as internal or external users, as this shows a structured understanding of who interacts with financial data.

 

Question 2. Write down limitations of financial statements.
Answer: Financial statement analysis helps us find the strengths and weaknesses of a business. However, it also has some limitations that we must remember when looking at financial statements.

1. Historical Analysis: Financial statements mostly show what has already happened. They look at past data and do not necessarily predict the future. Investors, for example, are often more interested in what the future holds for the company.
2. Ignores Qualitative Aspects: Financial statements only deal with numbers. They do not consider important non-financial factors like the quality of management, staff skills, or good public relations, which can greatly affect a business.
3. Suffers from the Limitations of Financial Statements: The analysis relies on the information given in the financial statements themselves. If the original financial statements have problems or are unreliable, then any analysis based on them will also be unreliable.
4. Not Free from Bias: Accountants often have to make choices, such as how to value inventory or how to calculate depreciation. These choices involve personal judgment, which means financial statements might not always be completely free from bias.
5. Variation in Accounting Practices: Different companies might use different accounting methods. This can make it hard to compare financial statements between different firms accurately, as their numbers might not be based on the same rules.
6. Window Dressing: Sometimes, companies try to make their financial position look better than it actually is by changing their accounting records. This "window dressing" can mislead users and make financial analysis inaccurate.
7. Identifies Symptoms: Financial analysis can show that there are problems in a business, like low profits. However, it only points out the symptoms, not the actual reasons or solutions for those problems. Management then needs to investigate further to find the cause and fix it.

In simple words: Financial reports help see how a business is doing, but they have limits. They mainly show past numbers and may not tell us exactly what will happen in the future. They also ignore things like good management, can be biased, and sometimes companies try to make numbers look better than they are.

🎯 Exam Tip: When discussing limitations, focus on how subjective judgments and historical data can affect the reliability and completeness of financial analysis.

 

Question 3. Explain objectives of financial analysis.
Answer: Financial analysis has several important goals that help people understand a company's financial health.

1. Knowing Business Profitability: One main goal is to find out if the business is making enough profit and if its profits are increasing or decreasing compared to previous years. This helps management make timely decisions to improve performance.
2. Knowing Business Solvency: Financial statements help assess if a business can pay its short-term and long-term debts. This is crucial for understanding the company's ability to meet its financial obligations.
3. Judging Financial Strength: Financial statements help a company understand its overall financial stability and strength. This helps answer various questions about its financial standing.
4. Making Comparisons and Choosing Policies: By comparing its profitability with other similar businesses, management can choose the right business policies. This includes doing internal comparisons (intra-firm comparison) to see how different parts of the company are performing.
5. Forecasting and Preparing Budgets: Financial statements show where a business is weak, so management can take steps to fix these problems. They also help in making future predictions and creating budgets for upcoming periods.
6. Communicating with Different Parties: Financial statements are created to share information about the company's financial situation with various groups, like investors, creditors, and government bodies. Understanding these basic statements is essential for managing any business successfully.

In simple words: Financial analysis helps us know if a business is making money and if it can pay its debts. It also helps managers make good decisions, plan for the future, and share information with others.

🎯 Exam Tip: Focus on the two primary objectives: profitability (earning money) and solvency (ability to pay debts), as these are fundamental aspects of financial health.

 

Question 4. Explain procedure of financial analysis.
Answer: The process of doing financial analysis involves several steps to get useful insights from financial information.

1. Determine Objective and Limits: First, you need to decide why you are doing the analysis and what its boundaries are. For example, if you want to study business growth, you would focus on the profit and loss account. If you want to check financial health, you would analyze the balance sheet. Your goal will guide which analysis method you choose.
2. Detailed Study of Financial Statement: Next, you will thoroughly examine the financial statements to evaluate all the information provided. This involves looking closely at all the figures and details.
3. Collection of Useful Information: Along with the financial statements, analysts will gather other relevant information to help with their analysis. This could include industry data or economic trends.
4. Re-classification of Information and Rounding Figures: Financial figures should be grouped and rounded to easier numbers. This helps in making calculations and comparisons simpler and more meaningful.
5. Explanation and Presentation: Analysis is not useful without proper explanation. Therefore, the last step of financial analysis is to clearly explain and present the findings. Business records, classification, and summaries are essential parts of this process.

In simple words: To analyze finances, first, decide what you want to learn. Then, study the financial reports carefully and collect other useful information. Finally, organize and round the numbers to make them easier to understand and then explain your findings clearly.

🎯 Exam Tip: Emphasize that the first step, defining the objective, is critical as it dictates the entire direction and scope of the financial analysis.

 

Question 5. Give the format of common size balance sheet and common size profit and loss account.
Answer: Here are the standard formats for a common size balance sheet and a common size profit and loss account. These formats show each item as a percentage of a base figure, which helps in comparing financial structures over time or with other companies.

Common Size Balance Sheet Format:

Common Size Profit and Loss Account Format:

In simple words: These formats show how a company's financial items look as percentages of a total, which makes it easier to compare its financial structure and performance over time or with other businesses.

🎯 Exam Tip: Remember that for a common size balance sheet, the total of assets/liabilities is 100%, and for a common size profit and loss account, Revenue from Operations is 100%.

 

RBSE Class 12 Accountancy Chapter 10 Numerical Questions

 

Question 1. From the following balance sheets, prepare comparative balance sheet
Answer: A comparative balance sheet helps to clearly show how a company's assets, liabilities, and equity have changed over two or more accounting periods. This side-by-side comparison makes it easy to spot trends, growth, or potential issues in financial health over time.

Comparative Balance Sheet
(As at 31 March, 2016-2017)

In simple words: This financial statement compares a company's assets and debts over two different years, showing how much each item has changed in value and by what percentage.

🎯 Exam Tip: When preparing comparative statements, ensure each item is matched correctly across periods and that both absolute and percentage changes are calculated precisely.

 

Question 2.
Answer: A comparative balance sheet shows how much an item on the balance sheet has changed in both absolute numbers and percentages between different periods. This helps in understanding the exact increase or decrease, along with its relative significance. For example, knowing that 'Trade Payables' increased by Rs 1,00,000 (an absolute change) is helpful, but also knowing it increased by 50% (a relative change) adds more context to the business's financial health.
In simple words: A comparative balance sheet tells you two things: the exact amount an item has changed (absolute change) and how big that change is compared to its original value (relative change or percentage). This helps to see the real impact of the changes.

🎯 Exam Tip: Remember to express absolute changes in monetary terms (e.g., Rs) and relative changes as percentages. Ensure you apply the same logic to all items for consistent comparison.

 

Question 3. Prepare Comparative Balance Sheet from the following information :

Answer:

In simple words: This table shows a comparison of the balance sheet for two different years. It lists how much each item changed in actual money and as a percentage, helping to quickly see financial trends.

🎯 Exam Tip: When preparing comparative statements, calculate both the absolute (rupee amount) and percentage changes for each line item. Ensure that the total changes for liabilities and assets match.

 

Question 2.

Answer:

In simple words: This table compares financial details over two years, showing the exact increase or decrease in money and the percentage change for each item. This gives a clear picture of how different parts of the company's finances have grown or shrunk.

🎯 Exam Tip: Always double-check your calculations, especially for negative changes and percentage changes, to ensure accuracy and internal consistency. Totals for assets must always match totals for equity and liabilities.

 

Question 3. From the following balance sheet, prepare Comparative Balance Sheet:

Answer:

In simple words: This table compares the company's financial position at two different times, showing how each part of the balance sheet has changed in actual money and as a percentage. It helps us see where the company has grown or shrunk over the year.

🎯 Exam Tip: Ensure that the 'Total' for Equity and Liabilities exactly matches the 'Total' for Assets in both the previous and current years, as well as for the absolute and percentage changes. This is a fundamental check for balance sheets.

 

Question 4. Prepare Comparative Statement of Profit and Loss from the following informations :

Answer:

In simple words: This statement compares a company's profit and loss figures over two years. It shows the exact change in income, expenses, and profit, along with their percentage changes, which helps in seeing how performance has changed.

🎯 Exam Tip: Always calculate 'Profit Before Tax' by subtracting 'Total Expenses' from 'Total Revenue'. Then apply the tax rate to get 'Income Tax' and subtract that to find 'Profit After Tax'.

 

Question 5. Complete the Comparative Balance Sheet from the following information :

Answer:

In simple words: This table compares the company's financial results over two years, showing the growth or decline in income and expenses. It highlights both the exact rupee amount change and the percentage change for each item.

🎯 Exam Tip: When filling in missing values in a comparative statement, always ensure that all columns (Previous Year, Current Year, Absolute Change, Percentage Change) are internally consistent with each other. Calculate one missing value based on the other two known, reliable values.

 

Question 6. Prepare Common Size Balance Sheet from the following information's :

The information for preparing the Common Size Balance Sheet is given below:

Answer:

In simple words: This table shows a common size balance sheet, where each item is shown as a percentage of the total assets or liabilities. This makes it easy to compare the structure of the company's finances across different years, regardless of the overall size.

🎯 Exam Tip: In a common size balance sheet, the total of all assets (and liabilities plus equity) should always add up to 100%. This is the primary check for accuracy.

 

Question 7. Complete the Common Size Balance Sheet.

Answer:

In simple words: This table shows a balance sheet where each amount is expressed as a percentage of the total assets/liabilities for a given year. This format helps to understand the proportion of each item, making comparisons easier even if the company's total size changes.

🎯 Exam Tip: When completing a common size balance sheet, remember that each item's percentage is calculated by dividing its value by the total of assets/liabilities for that specific year and multiplying by 100.

 

Question 9. From the following informations calculate Trend Ratio of various items of profit and loss account, taking as base 2012-13.

Answer:

In simple words: This table shows how different financial figures have changed over several years compared to a starting year (2012-13). Each number is shown as a percentage of its value in the base year, which helps to easily spot trends in income, expenses, and profit.

🎯 Exam Tip: When calculating trend percentages, always use the *base year* figure in the denominator for all calculations, not the previous year's figure. Ensure all calculations are correctly rounded.

 

Question 10. Calculate Trend Percentage from the following informations, taking base 2012-13 :

Answer:

In simple words: This table tracks the changes in total revenue and total expenses over several years, using 2012-13 as the starting point. Each year's figures are expressed as a percentage of the base year, showing how much they have grown or shrunk.

🎯 Exam Tip: Trend percentages are excellent for visualizing long-term growth or decline. Ensure to consistently use the base year's value as the reference for all percentage calculations.

 

Question 11. Calculate Trend Ratio from the following figures taking the year ending 31, March, 2012 as base.

Answer: (The detailed Trend Ratio calculations and table for this question are not available in the provided source material within the specified page range. Please refer to external solutions or complete the calculation using the base year 2012 as 100% for each item.)
In simple words: This question asks us to calculate how much net sales, total expenses, and profit before tax have changed each year, compared to the starting year of March 31, 2012. We do this by turning each year's amount into a percentage, with the 2012 amount being 100%.

🎯 Exam Tip: When the solution table for a trend analysis is not provided, ensure you clearly state the base year and the formula used for calculation: \( \frac{\text{Current Year's Value}}{\text{Base Year's Value}} \times 100 \). Calculate at least the first two years to demonstrate understanding.

The provided pages (43-46) contain only navigation links, website metadata, footer information, and elements related to commenting, not educational questions or answers. Therefore, there is no content to convert according to the specified content processing rules.