Financial Statements of a Company Test 21

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Financial Statements of a Company Test 21

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Weekly Quiz Competition

Question 1
1 / -0

Financial statements can be used by ___________.

A
Owners

B
Creditors

C
Investors

D
All of the above

Solution

The accounting information generated by the accounting process is communicated in the form of reports, statements, graphs and charts to the users who need it in different decision situations. There are two main user group viz. internal users, mainly management, who needs timely information on cost of sales, profitability, etc. for plaining, controlling and decision making and external users who have limited authority, ability and resources to obtain the necessary information and have to rely on financial statements (Balance sheet, profit and loss account)
Question 2
1 / -0

An audit of joint stock companies is conducted to ______________.

A
Increase profits

B
Raise goodwill

C
Cover up illegal transactions

D
Meet the statutory requirement
Question 3
1 / -0

A contingent asset is a possible asset that arises from__________ the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.

A
Past events

B
Future events

C
Probable events

D
None of the above
Question 4
1 / -0

Final accounts of companies are prepared according to ______of the Companies Act, 2013.

A
Schedule VI

B
Schedule V

C
Schedule II

D
Schedule III

Solution

Schedule III of the act complements section 129 which says that the financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III which is general instructions for preparation of balance of a company showing the profits and losses and on that basis final accounts are prepared.
Question 5
1 / -0

Which of the following is a limitation of financial statements?

A
Does not reflect current situation

B
Assets may not realise

C
Bias

D
All of the above

Solution

Financial Statements are the collective name given to Income Statement and Positional Statement of an enterprise which show the financial position of business concern in an organised manner.

Some of limitations of financial statements are as follows

Accounting information is sometimes based on estimates which may be unrealistic.

Window dressing may lead to faulty results. Window dressing means manipulation of accounts and Show easy picture of financial statements

Accounting ignores the effect of price level changes. Transactions recorded on historical cost. Examples, fixed assets recorded at historical cost.

Accounting information can be manipulated and thus cannot be considered as the true test of performance.

Accounting information may be Biased accounting information is not without personal influences or bias of accountant.
Question 6
1 / -0

____________ may develop standard ratios and design uniform system of accounts.

A
Owners association

B
Trade associations

C
Company association

D
Both a and b

Solution

A financial statement is a collection of data organized according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm.
One of the importance of financial statement is it aids trade associations in helping their members as Trade associations may analyse the financial statements for the purpose of providing service and protection to their members. They may develop standard ratios and design uniform system of accounts.
Question 7
1 / -0

Retained earnings will change over time because of several factors. Which of the following factors would explain an increase in retained earnings?

A
Net loss.

B
Net income.

C
Dividends.

D
Investments by stockholders.

Solution

Retained earnings are affected by any increases or decreases in net income and dividends paid to shareholders.
As a result, any items that drive net income higher or push it lower will ultimately affect retained earnings.
Question 8
1 / -0

Financial statements are prepared on the basis of _________ cost.

A
marlet

B
historical

C
material

D
net realizable

Solution

As per “Generally Accepted Accounting Principles (GAAP)” one of the important rule is to record all transactions on the basis of historical cost, which is verifiable from the documents such as cash receipt for the money paid. This brings in objectivity in the process of recording and makes the accounting statements more acceptable to various users.
Question 9
1 / -0

The investors include both ________ and _________ investors under basis for prospective investors.

A
Long-term, Short-term

B
Short-term, Medium-term

C
Medium-term, Long-term

D
None of the Above

Solution

The investors include both short-term and long-term investors. Their prime considerations in their investment decisions are security and liquidity of their investment with reasonable profitability. Financial statements help the investors to assess long-term and short-term solvency as well as the profitability of the concern.
Question 10
1 / -0

Trade associations may analyse the financial statements for the purpose of providing service and protection to the _________.

A
owners

B
shareholders

C
managers

D
members

Solution

A financial statement is a collection of data organised according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm.
One of the importance of financial statement is it aids trade associations in helping their members as Trade associations may analyse the financial statements for the purpose of providing service and protection to their members. They may develop standard ratios and design uniform system of accounts.

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Financial Statements of a Company Test 21

Result

Financial Statements of a Company Test 21

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Rank

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SHARING IS CARING

Question 1

Owners

Creditors

Investors

All of the above

Solution

Question 2

Increase profits

Raise goodwill

Cover up illegal transactions

Meet the statutory requirement

Question 3

Past events

Future events

Probable events

None of the above

Question 4

Schedule VI

Schedule V

Schedule II

Schedule III

Solution

Question 5

Does not reflect current situation

Assets may not realise

Bias

All of the above

Solution

Question 6

Owners association

Trade associations

Company association

Both a and b

Solution

Question 7

Net loss.

Net income.

Dividends.

Investments by stockholders.

Solution

Question 8

marlet

historical

material

net realizable

Solution

Question 9

Long-term, Short-term

Short-term, Medium-term

Medium-term, Long-term

None of the Above

Solution

Question 10

owners

shareholders

managers

members

Solution

User

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