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Financial position of the business is ascertained on the basis of
- a)Records prepared under book-keeping process.
- b)Trial balance.
- c)Accounting reports.
- d)None of the above.
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Financial position of the business is ascertained on the basis ofa)Rec...
Accounting reports are compilations of financial information that are derived from the accounting records of a business. These can be brief, custom-made reports that are intended for specific purposes, such as a detailed analysis of sales by region, or the profitability of a specific product line. More commonly, accounting reports are considered to be equivalent to the financial statements. These statements include the following reports:
1. Income statement. States the revenues earned during a period, less expenses, to arrive at a profit or loss. This is the most commonly used accounting report, since it is used to judge the performance of a business.
2. Balance sheet. Shows the ending asset, liability, and equity balances as of the balance sheet date. It is used to judge the liquidity and financial reserves of a business.
3. Statement of cash flows. Shows the sources and uses of cash related to operations, financing, and investments. Can be the most accurate source of information regarding the cash-generating ability of an entity.
A number of disclosures may accompany the financial statements, in the form of footnotes. This is more likely to be the case when the financial statements have been audited.
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Financial position of the business is ascertained on the basis ofa)Rec...
Financial position of a business refers to its ability to meet its financial obligations and the overall health of the business. This is determined by analyzing the financial statements and reports generated through the accounting process.
The correct answer to the question is option 'C', which states that the financial position of a business is ascertained on the basis of accounting reports. This is because accounting reports provide a comprehensive overview of the financial performance of a business and help in understanding its financial position.
Let us understand the different types of accounting reports that help in ascertaining the financial position of a business:
1. Balance Sheet: A balance sheet provides a snapshot of a company's financial position at a given point in time. It shows the company's assets, liabilities, and equity.
2. Income Statement: An income statement, also known as a profit and loss statement, shows a company's revenue, expenses, and net income over a specific period.
3. Cash Flow Statement: A cash flow statement shows the inflow and outflow of cash in a business over a specific period. It helps in analyzing the liquidity of a business.
4. Statement of Changes in Equity: This report shows the changes in a company's equity over a specific period. It includes information on dividends, stock issuances, and changes in retained earnings.
In conclusion, accounting reports are essential in determining the financial position of a business. They provide valuable insights into a company's financial health and help in making informed decisions.
The correct answer to the question is option 'C', which states that the financial position of a business is ascertained on the basis of accounting reports. This is because accounting reports provide a comprehensive overview of the financial performance of a business and help in understanding its financial position.
Let us understand the different types of accounting reports that help in ascertaining the financial position of a business:
1. Balance Sheet: A balance sheet provides a snapshot of a company's financial position at a given point in time. It shows the company's assets, liabilities, and equity.
2. Income Statement: An income statement, also known as a profit and loss statement, shows a company's revenue, expenses, and net income over a specific period.
3. Cash Flow Statement: A cash flow statement shows the inflow and outflow of cash in a business over a specific period. It helps in analyzing the liquidity of a business.
4. Statement of Changes in Equity: This report shows the changes in a company's equity over a specific period. It includes information on dividends, stock issuances, and changes in retained earnings.
In conclusion, accounting reports are essential in determining the financial position of a business. They provide valuable insights into a company's financial health and help in making informed decisions.
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Financial position of the business is ascertained on the basis ofa)Records prepared under book-keeping process.b)Trial balance.c)Accounting reports.d)None of the above.Correct answer is option 'C'. Can you explain this answer?
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