Financial Statements and Analysis Test - 3

Balance Sheet of a company is prepared as per the Schedule III of the Indian Companies Act, 2013.

Non-operating income, in accounting and finance, is gains or losses from sources not related to the main activities of the business.

Non-operating income is the portion of an organisation's income that is derived from activities not related to its core operations. Non-operating income can include such items as dividend income, profits and losses from investments, gains or losses incurred due to foreign exchange, asset write-downs and other non-operating revenues and expenses

Securities premium reserve is shown under the heading Shareholders funds and sub heading Reserves and Surplus.

Titles and Mastheads are shown under the heading of Intangible assets.It does not have physical existence and gives benefit for more than one accounting period.

Internal analysis is done by the management to analyse financial position and performance. The analysis done by the shareholders, bankers and creditors is called external analysis.

Claim against the company not acknowledged as debt is shown as contingent liability after preparing the balance sheet. It is shown as a footnote to the balance sheet. Contingent liabilities are those which may or may not arise as they are dependent on happening in future.

Computer software is an intangible asset. It shown under the heading of Fixed Assets and sub heading Intangible Assets.It does not have physical existence and gives benefit for more than one accounting period.

Work in progress is shown under the heading of current assets and sub heading Inventories.Work in progress is semi finished stock of goods held for purpose of trade in moral course of business.So they are shown under inventories under current assets. But capital work in progress is shown under the fixed assets.

Analysis made by external users on the basis of published financial statements is called external analysis. Only an external user may have to use published statements; an internal user has access to all accounting records, he would not have to depend on and wait for the information to be published and they can do internal analysis throughout the year. 

Cross sectional analysis is the analysis of a financial ratio  of a company with the same ratio of different companies in the same industry. For example, one may conduct a cross-sectional ratio analysis of the debt ratios  of multiple companies in the telecommunications industry. Quite simply, one does this by taking the debt ratios of each company and comparing them to one another. An analyst does this in order to find the company with healthiest financial  status. This is helpful in making informed investment decisions.