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Financial Statements of a Company Test 22

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Financial Statements of a Company Test 22
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Weekly Quiz Competition
  • Question 1
    1 / -0
    ___________ of the companies are interested in knowing the status, safety and return on their investment.
    Solution

    The users of financial statements include management, investors, shareholders, creditors, government, bankers, employees and public at large.

    Shareholders of companies are interested in knowing the status, safety and return on their investment. They may also need information to take decision about continuation or discontinuation of their investment in the business. Financial statements provide information to the shareholders in taking such important decisions.
  • Question 2
    1 / -0
    Which is NOT a part of financial statements?
    Solution
    Financial statements consist of Profit & Loss Account and Balance Sheet. 

    Book Keeping is a process of recording of business transactions in chronological order. 
  • Question 3
    1 / -0
    Which of the following is not an use and importance of financial statements?
  • Question 4
    1 / -0
    All of them are long term borrowings except _____________.
    Solution

    Long-term borrowings generally refers to a company's loans and other liabilities that will not become due within one year of the balance sheet date. Public deposits and debenture comes within the ambit of long-term borrowings as they are taken for more than a financial period. A cash credit is a short-term cash loan to a company provided by banks on their current account.

  • Question 5
    1 / -0
    As financial statements do not show aggregate information, it may not help the ________ in decision-making much.
    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.

    Financial statements show aggregate information but not detailed information. Hence, they may not help the users in decision-making much. 

  • Question 6
    1 / -0
    Since the purchasing power of money is changing, the value of assets and liabilities shown in financial statement does not reflect ________ market situation.
    Solution

    As Financial statements are prepared on the basis of historical cost.

    It creates a demerit of financial statements. Since the purchasing power of money is changing, the values of assets and liabilities shown in financial statement do not reflect current market situation.
  • Question 7
    1 / -0
    Financial statements are the outcome of recorded facts, accounting concepts and conventions used and personal judgement made in different situations by the _________.
    Solution

    Financial statements are the outcome of recorded facts, accounting concepts and conventions used and personal judgements made in different situations by the accountants. Hence, bias may be observed in the results, and the financial position depicted in financial statements may not be realistic.

  • Question 8
    1 / -0
    The financial statements enable the ___________ to judge the financial position of different concerns and take decisions about the prices to be quoted.
    Solution
    Financial statements help the stock exchanges to understand the extent of transparency in reporting on financial performance and enables them to call for required information to protect the interest of investors. 
    The financial statements enable the Stock brokers to judge the financial position of different concerns and take decisions about the prices to be quoted.
  • Question 9
    1 / -0
    Financial statements provide information to _________ in taking important decision related to the value of investment.
    Solution

    Shareholders of companies are interested in knowing the status, safety and return on their investment. 

    They may also need information to take decision about continuation or discontinuation of their investment in the business. Financial statements provide information to the shareholders in taking such important decisions.

  • Question 10
    1 / -0
    Financial statements contain only _________ information but not ___________ information.
    Solution

    Financial statements are written records of a business's financial situation. They include standard reports like the balance sheet, income or profit and loss statements, and cash flow statement.

    Though utmost care is taken in the preparation of the financial statements and provide detailed information to the users. Shareholders of companies are interested in knowing the status, safety and return on their investment. They may also need information to take decision about continuation or discontinuation of their investment in the business.

    But financial statements contain only monetary information but not qualitative information like industrial relations, industrial climate, labour relations, quality of work, etc.
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