Here we are providing Class 12 Accountancy Important Extra Questions and Answers Chapter 9 Analysis of Financial Statements. Accountancy Class 12 Important Questions and Answers are the best resource for students which helps in class 12 board exams.
Class 12 Accountancy Chapter 9 Important Extra Questions Analysis of Financial Statements
Analysis of Financial Statements Important Extra Questions Very Short Answer Type
Question 1.
State any one limitation of Financial Statement Analysis. (CBSE Compartment Delhi 2014, 2015)
Answer:
Historical Analysis of financial Statement.
Question 2.
State any one objective of analysis of financial statements. (CBSE Compartment Delhi 2014)
Answer:
To measure earning capacity of business.
Question 3.
State the type of Financial Statement Analysis in which figures of the same items of various years are compared.
Answer:
Horizontal analysis.
Question 4.
Which type of financial statement analysis helps a company to establish the relationship between different items financial statement of a same year?
Answer:
Vertical analysis.
Question 5.
“One of the objectives of Financial Statement Analysis is to assess solvency of business”. What does the term ‘solvency’ mean here ?
Answer:
Solvency means ability to pay the debts.
Analysis of Financial Statements Important Extra Questions Short Answer Type
Question 1.
From the following information extracted from the Statement of Profit and Loss for the years ended 31st March, 2017 and 2018, prepare a Comparative Statement of Profit & Loss. (CBSE Delhi 2019)
Answer:
Comparatwe statement of profit & loss for the year ended 31st March 17 & 18.
Question 2.
Prepare a comparative statement of Profit and Loss from the information extracted from the statement of Profit and Loss for the year ended 31st March, 2017 and 2018.
Answer:
Question 3.
Explain the importance of financial analysis for
(i) labour unions, and
(ii) creditors. (CBSE Outside Delhi 2019) ‘
Answer:
(i) Importance for Labour Unions: Labour unions analyse the financial statements to assess whether it can presently afford a wage increase and whether it can absorb a wage increase through increased productivity or by raising the prices.
(ii) Importance for Creditors: Creditors through an analysis of Financial Statements appraises not only the ‘ ability of the company to meet its short term obligations but also judges the probability of its continued ability to meet its financial obligations in future.
Question 4.
Prepare a comparative statement of Profit and Loss from the following information extracted from the statement of Profit and Loss for the year ended 31st March, 2017 and 2018.
Answer:
Question 5.
Following information is extracted from the Statement of Profit and Loss of Crypto Finance Ltd. For the year ended 31st March 2017 and 31st March 2018. Fill in the missing figures. (CBSE SP 2019-20)
Answer:
Question 6.
Prepare a Common-size Statement of Profit and Loss of ‘Hari Darshan Ltd.’ from the following information:
Answer:
Question 7.
Following information is extracted from the Statement of Profit and Loss of Delko Ltd. for the year ended 31st March, 2019:
Answer:
Question 8.
What is meant by ‘Analysis of Financial Statements’? State any two objectives of such analysis. (CBSE Outside Delhi 2017, Modified)
Answer:
Meaning of analysis of financial statements: Analysis of Financial Statements is the process of critical evaluation of the financial information contained in the financial statements.
Question 9.
State the objectives of ‘Analysis of Financial Statements’. (Delhi 2017)
Answer:
Objectives of‘Financial Statements Analysis’:
- Assessing the earning capacity or profitability of the firm as a whole as well as its different departments so as to judge the financial health of the firm.
- Assessing the managerial efficiency by using financial ratios to identify favourable and unfavourable variations in managerial performance.
Question 10.
State any four limitations of analysis of financial statements. [Delhi 2017]
Answer:
Limitations of ‘Financial Statements Analysis’:
(a) Different Accounting Principles and Practices. Financial analysis is subject to limitations inherent in the financial statements like following different accounting principles or practices regarding depreciation methods, inventory valuation and pricing, etc.
(b) Ignores the Quality Elements. Financial statements contain only financial data and exclude from the preview of qualitative information, which cannot be expressed in money terms. Thus, analysis of such financial statements will also lack quality element.
(c) Ignores Price Level Changes. Transactions, in financial statements, are recorded on historical cost basis and generally no adjustment is made for price level changes. Thus, the analysis of financial statement will not yield comparable results due to lack of adjustments for the price level changes.
(d) Affected by Window Dressing. Some firms may resort to window dressing (showing better picture) to cover-up bad financial position. For example, closing stock may be overstated. In such case, the results of analysis will also be misleading.
Question 11.
From the Balance Sheets for the year ended March 31, 2013 and 2014. prepare the Comparative Balance Sheet of Omega Chemicals Ltd.:
Answer:
Question 12.
Prepare the Common Size Balance Sheet of KJ Ltd. from the following information.
Answer:
Question 13.
From the following Balance Sheet of R Ltd., Prepare a Common Size Statement
Answer:
Question 14.
From the following Statement of Profit and Loss of the Sakhi Ltd. for the year ended 31st March 2018, prepare Comparative Statement of Profit & Loss.
Answer:
