Test: Analysis of Financial Statements- Assertion & Reason Type Questions


4 Questions MCQ Test Accountancy Practice Tests: CUET Preparation | Test: Analysis of Financial Statements- Assertion & Reason Type Questions


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Attempt Test: Analysis of Financial Statements- Assertion & Reason Type Questions | 4 questions in 8 minutes | Mock test for Commerce preparation | Free important questions MCQ to study Accountancy Practice Tests: CUET Preparation for Commerce Exam | Download free PDF with solutions
QUESTION: 1

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): Comparative Balance Sheet provides information regarding progress of the business firm.

Reason (R): The Comparative Balance Sheet shows increase and decrease in absolute terms as well as in percentage in various assets, liabilities and capital.

Solution: Comparative statements compare financial data of two points of time and help in deriving meaningful conclusions regarding the changes in financial position and operating results.
QUESTION: 2

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): The analysis of financial statements does not disclose the current worth of the business.

Reason (R): Financial statements are prepared on cost principles.

Solution: As the financial statements are prepared on the cost principle, its analysis does not disclose the current financial position of the company.
QUESTION: 3

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): Financial statements help in drawing out meaningful conclusions.

Reason (R): Financial Statements Analysis presents financial data in a simplified and understandable form.

Solution:
  • Financial analysis determines a company's health and stability, providing an understanding of how the company conducts its business. But it is important to know that financial statement analysis has its limitations as well.

  • Financial statement analysis is the process of analyzing a company's financial statements for decision-making purposes. External stakeholders use it to understand the overall health of an organization as well as to evaluate financial performance and business value.

QUESTION: 4

Directions : In the following questions, a statement of Assertion (A) is followed by a statement of Reason (R). Mark the correct choice as:

Assertion (A): Comparative statements help in deriving meaningful conclusions regarding the changes in financial position and operating results.

Reason (R): Comparative statements compare financial data of two points of time.

Solution: Statements showing financial data for two or more years, placed side by side to facilitate comparison are called Comparative Financial Statements.
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