Financial Statements of a Company Test 29

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Financial Statements of a Company Test 29

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Weekly Quiz Competition

Question 1
1 / -0

Dividend may be declared out of ________.

A
Current Profit

B
Past Reserves

C
Money Provided By Government

D
All of the Above

Solution

All the companies which have issued share capital and are making the profits are bound by the law to declare the dividend

Dividend may be declared by the company:
a) Out of the profits of the company for the current year after providing the depreciation.
b) Out of the profits of the previous years or from past reserves.
c) Out of the money provided by the government for the payment of dividend by the company.
Question 2
1 / -0

Match the items of the following two lists:
List-I List-II
(i) Statement of changes in Working Capital (a) Cash Flow Statement
(ii) Deferred Tax (b) Fixed Assets
(iii) Three activities (c) Funds Flow Statement
(iv) Impairment Loss (d) Balance Sheet

A
(i) - (a), (ii) - (b), (iii) - (c), (iv) - (d)

B
(i) - (c), (ii) - (d), (iii) - (b), (iv) - (a)

C
(i) - (c), (ii) - (d), (iii) - (a), (iv) - (b)

D
(i) - (d), (ii) - (c), (iii) - (a), (iv) - (b)

Solution

1) Statement of changes in working capital: The change in working capital may also be verified by calculating working capital separately. While preparing a funds flow "Statement of changes in working capital" is prepared.
2) Deferred tax: An asset on a company's balance sheet that may be used to reduce any subsequent period's income tax expenses.
3) Three Activities: Cash flow statement consist of three activities Operating, Investing, Financing.
4) Impairment loss: It is the decrease in an asset's net carrying value that exceeds the future undisclosed cash flow it should generate. Net carrying value is an asset's acquisition cost minus depreciation.
Question 3
1 / -0

The term "Financial Statement" covers _____________.

A
Profit and loss statement

B
Balance sheet and Profit and loss appropriation account

C
Trading, Profit and loss account and Balance sheet

D
None of the above

Solution

Financial statements are summarized financial reports which provide the operating results and financial position of companies and the detailed information contained therein is useful for assessing the operational efficiency and financial soundness of a company. Financial statement covers trading, profit and loss account and balance sheet of the organisation.
Question 4
1 / -0

Which of the following are the postulates used while preparing financial statements?
a. Going concern postulates.
b. Money measurement postulates.
c. Realization postulates.
d. Depreciation postulates.

A
A, B, C

B
B, C, D

C
A, C, D

D
A, B, C, D

Solution

Following are the accounting postulates used while preparing financial statements:
1. Entity postulates
2. Going concern postulates
3. Money measurement postulates
4. Time period postulates
5. Realization postulates
Question 5
1 / -0

Which of the following are the objective of financial statements?
A. To provide information about economic resources and obligations of a business.
B. To provide information about the earning capacity of the business.
C. To not judge effectiveness of management.
D. Disclosing accounting policies.

A
A, B, C

B
A, B, D

C
A, C, D

D
B, C, D

Solution

Financial statement summarized reports of recorded facts and are prepared following the accounting concepts, convention and requirements of law. Objective of financial statements are as follows:
1. To provide information about economic resources and obligations of a business.
2. To provide information about the earning capacity of the business.
3. To provide information about cash flows.
4. To judge effectiveness of management.
5. Information about activities of business affecting the society.
6. Disclosing accounting policies.
Question 6
1 / -0

The paid-up capital of Mukund Ltd. is Rs $$18,00,000$$. The company decided to propose a dividend of Rs $$2,16,000$$ out of current profit. How much of current profit is to be transferred to reserve?

A
At least $$2.5$$ $$\%$$

B
At least $$5$$ $$\%$$

C
At least $$10$$ $$\%$$

D
None of the above
Solution
As per the provision of sub section (2) of section 205 of the companies act, no dividend can be declared or paid by the company to its shareholders out of the profits of the company for the financial year after providing depreciation until a specified percentage of profit of the financial year is transferred to reserves.
Rules are as under:
If proposed dividend exceeds 10% but less than 12.5% of the paid up capital, an amount of 2.5% of the current profit need to be transferred to reserve.
If proposed dividend exceeds 12.5% but less than 15% of the paid up capital, an amount of 5% of the current profit need to be transferred to reserve.
If proposed dividend exceeds 15% but less than 20% of the paid up capital, an amount of 7.5% of the current profit need to be transferred to reserve.
If proposed dividend exceeds 20% of the paid up capital, an amount of 10% of the current profit need to be transferred to reserve.

In present case dividend percentage is 12% (216000/1800000), falls under first rule, hence 2.5% need to be transferred to reserves from current year's profit.
Question 7
1 / -0

Faina Electronics Pvt. Ltd. provides following information regarding an item
Normal usages:50 per week
Maximum usages : 75 per week
Minimum usages : 25 per week
Re-order quantity : 300
Re-order period : 4 to 6 weeks
What will be the Re-order-Level of the company ?

A
300 units

B
375 units

C
450 units

D
525 units

Solution

Re Order level is that level of inventory where organization has to take a call to give the order for inventory to have the smooth operation.
There are two major components for deciding the re order level i.e. Average usage and lead time.

Re order Level= Average usage * Maximum Lead Time
= 75 * 6
= 450 Units
Question 8
1 / -0

Which among these is true?

A
The Debenture Redemption Reserve Account is shown on the liabilities side of the Balance Sheet under the head 'Reserve and Surplus'

B
Under the sec. 80(5A) of companies (Amendment) Act, 1988, a company limited by shares shall issue irredeemable preference shares

C
Insurance fund is not an example of divisible profits

D
The Capital Redemption Reserve Account may not be applied by the company in issuing fully paid bonus shares to the members of the company

Solution

Debenture redemption reserve is created is created out of the divisible profits for redemption of debentures. As per the provisions of companies act 2013 creation of debenture redemption reserve is compulsory. Hence, they will be shown on the liabilities side of balance sheet under the head Reserves and surplus.

Question 9

1 / -0

Match List-I with List-II and select the correct answer using the codes given below the lists:

List-I (Item of balance sheet of company)	List-II (Heading of balance sheet)
a. Preliminary expenses	1. Current liabilities
b. Other liabilities	2. Current asset
c. Loose Tools	3. Misc.Expenditure
d. Bill of Exchange	4. Loan & Advances

(a)-1, (b)-2, (c)-4, (d)-3

(a)-3, (b)-2, (c)-1, (d)-4

(a)-3, (b)-1, (c)-2, (d)-4

(a)-3, (b)-1, (c)-4, (d)-2

Solution

Item of Balance Sheet	Heading of Balance Sheet
Preliminary Expenses	Misc. Expenditure
Other Liabilities	Current Liabilities
Loose Tools	Current Assets
Bill of Exchange	Loans & Advances

Question 10
1 / -0

Redeemable preference shares of $$Rs. 2,00,000$$ are redeemed at par for which purpose fresh equity capital of $$Rs. 80,000$$ is issued at par. What amount should be transferred to Capital Redemption Reserve account?

A
Nil

B
$$Rs. 80,000$$

C
$$Rs. 1,20,000$$

D
$$Rs. 2,00,000$$

Solution

Redeemable preference shares : $$Rs.200000$$
Fresh Equity Shares $$Rs.80000$$
-------------------
Balance Amount $$Rs.120000$$
--------------------

An amount of $$Rs.120000$$ need to be transferred to Capital Redemption Reserve Account.

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Re-Attempt Weekly Quiz Competition

List-I	List-II
(i) Statement of changes in Working Capital	(a) Cash Flow Statement
(ii) Deferred Tax	(b) Fixed Assets
(iii) Three activities	(c) Funds Flow Statement
(iv) Impairment Loss	(d) Balance Sheet

Financial Statements of a Company Test 29

Result

Financial Statements of a Company Test 29

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Rank

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SHARING IS CARING

Question 1

Current Profit

Past Reserves

Money Provided By Government

All of the Above

Solution

Question 2

(i) - (a), (ii) - (b), (iii) - (c), (iv) - (d)

(i) - (c), (ii) - (d), (iii) - (b), (iv) - (a)

(i) - (c), (ii) - (d), (iii) - (a), (iv) - (b)

(i) - (d), (ii) - (c), (iii) - (a), (iv) - (b)

Solution

Question 3

Profit and loss statement

Balance sheet and Profit and loss appropriation account

Trading, Profit and loss account and Balance sheet

None of the above

Solution

Question 4

A, B, C

B, C, D

A, C, D

A, B, C, D

Solution

Question 5

A, B, C

A, B, D

A, C, D

B, C, D

Solution

Question 6

At least $$2.5$$ $$\%$$

At least $$5$$ $$\%$$

At least $$10$$ $$\%$$

None of the above

Solution

Question 7

300 units

375 units

450 units

525 units

Solution

Question 8

The Debenture Redemption Reserve Account is shown on the liabilities side of the Balance Sheet under the head 'Reserve and Surplus'

Under the sec. 80(5A) of companies (Amendment) Act, 1988, a company limited by shares shall issue irredeemable preference shares

Insurance fund is not an example of divisible profits

The Capital Redemption Reserve Account may not be applied by the company in issuing fully paid bonus shares to the members of the company

Solution

Question 9

(a)-1, (b)-2, (c)-4, (d)-3

(a)-3, (b)-2, (c)-1, (d)-4

(a)-3, (b)-1, (c)-2, (d)-4

(a)-3, (b)-1, (c)-4, (d)-2

Solution

Question 10

Nil

$$Rs. 80,000$$

$$Rs. 1,20,000$$

$$Rs. 2,00,000$$

Solution

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