Test: Financial Statements of a Company- Assertion & Reason Type Questions


4 Questions MCQ Test Accountancy Class 12 | Test: Financial Statements of a Company- Assertion & Reason Type Questions


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Attempt Test: Financial Statements of a Company- Assertion & Reason Type Questions | 4 questions in 8 minutes | Mock test for Commerce preparation | Free important questions MCQ to study Accountancy Class 12 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): All contingent liabilities are shown in the non-current liabilities section of the balance sheet.

Reason (R): A contingent liability refers to the claim which is uncertain to arise/which may or may not rise/which is dependent on a happening in future.

Solution: All contingent liabilities are shown as a footnote to the balance sheet.
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 balance sheet of the company needs to show the complete detail of the share capital of the company.

Reason (R): As per Schedule III of Companies Act, 2013, the Balance Sheet must disclose authorized capital, issued capital and subscribed capital for each class of share capital (i.e. for both Equity and Preference Shares) besides the called-up amount made by the company and paid-up amount made by the shareholders.

Solution: Share capital is reported by a company on its balance sheet in the shareholder's equity section. The information may be listed in separate line items depending on the source of the funds. These usually include a line for common stock, another for preferred stock, and a third for additional paid-in capital.
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 are the end products of the accounting process which reveal the financial results of a specified period and financial position as on a particular date.

Reason (R): The basic objective of these statements is to provide information required for decision making by the management as well as other outsiders who are interested in the affairs of the undertaking, as per Section 129 Schedule III to the Companies Act, 2013 every year.

Solution: Financial statements are the end products of the accounting process which reveal the financial results of a specified period and financial position as on a particular date, so that the financial position of the company can be ascertained and analysed.
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): Accounts Payables are recorded in the heading of Current Liabilities in the Balance Sheet of the company.

Reason (R): Accounts Payable is the money the company currently owes to its suppliers, partners, and employees.

Solution: Accounts payable is the money a company owes its vendors, while accounts receivable is the money that is owed to the company, typically by customers. When one company transacts with another on credit, one will record an entry to accounts payable on their books while the other records an entry to accounts receivable.
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