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Page 1 Q-23 On 31st March, 2020, Om Ltd. provides to you the following ledger balances after preparing its Profit and Loss Account for the year ended 31st March, 2020: Credit Balances ` Equity shares capital (fully paid shares of ` 10 each) 1,05,00,000 General Reserve 21,84,000 Loan from State Finance Corporation 15,75,000 (Secured by hypothecation of Plant & Machinery - Repayable within one year ` 3,00,000) Loans: Unsecured (Long term) 12,70,500 Sundry Creditors for goods & expenses (Payable within 6 months) 21,00,000 Profit & Loss Account 10,50,000 Provision for Taxation 12,25,350 199,04,850 Debit Balances : ` Calls in arrear 10,500 Land 21,00,000 Buildings 30,75,000 Plant and Machinery 55,12,500 Furniture & Fixture 5,25,000 Inventories : Finished goods 21,00,000 Raw Materials 5,25,000 Trade Receivables 21,00,000 Advances: Short-term 4,48,350 Cash in hand 3,15,000 Balances with banks 25,93,500 Patents & Trade marks 6,00,000 199,04,850 The following additional information is also provided in respect of the above balances: (i) 6,30,000 fully paid equity shares were allotted as consideration for land & buildings. (ii) Cost of Building ` 42,00,000 Cost of Plant & Machinery ` 73,50,000 Cost of Furniture & Fixture ` 6,56,250 (iii) Trade receivables for ` 5,70,000 are due for more than 6 months. (iv) The amount of Balances with Bank includes ` 27,000 with a bank which is not a scheduled Bank and the deposits of ` 7,50,000 are for a period of 9 months. (v) Unsecured loan includes ` 3,00,000 from a Bank and ` 1,50,000 from related parties. You are not required to give previous year figures. You are required to prepare the Balance Sheet of the Company as on 31st March, 2020 as required under Schedule III of the Companies Act, 2013. Join Us on Telegram http://t.me/canotes_ipcc Page 2 Q-23 On 31st March, 2020, Om Ltd. provides to you the following ledger balances after preparing its Profit and Loss Account for the year ended 31st March, 2020: Credit Balances ` Equity shares capital (fully paid shares of ` 10 each) 1,05,00,000 General Reserve 21,84,000 Loan from State Finance Corporation 15,75,000 (Secured by hypothecation of Plant & Machinery - Repayable within one year ` 3,00,000) Loans: Unsecured (Long term) 12,70,500 Sundry Creditors for goods & expenses (Payable within 6 months) 21,00,000 Profit & Loss Account 10,50,000 Provision for Taxation 12,25,350 199,04,850 Debit Balances : ` Calls in arrear 10,500 Land 21,00,000 Buildings 30,75,000 Plant and Machinery 55,12,500 Furniture & Fixture 5,25,000 Inventories : Finished goods 21,00,000 Raw Materials 5,25,000 Trade Receivables 21,00,000 Advances: Short-term 4,48,350 Cash in hand 3,15,000 Balances with banks 25,93,500 Patents & Trade marks 6,00,000 199,04,850 The following additional information is also provided in respect of the above balances: (i) 6,30,000 fully paid equity shares were allotted as consideration for land & buildings. (ii) Cost of Building ` 42,00,000 Cost of Plant & Machinery ` 73,50,000 Cost of Furniture & Fixture ` 6,56,250 (iii) Trade receivables for ` 5,70,000 are due for more than 6 months. (iv) The amount of Balances with Bank includes ` 27,000 with a bank which is not a scheduled Bank and the deposits of ` 7,50,000 are for a period of 9 months. (v) Unsecured loan includes ` 3,00,000 from a Bank and ` 1,50,000 from related parties. You are not required to give previous year figures. You are required to prepare the Balance Sheet of the Company as on 31st March, 2020 as required under Schedule III of the Companies Act, 2013. Join Us on Telegram http://t.me/canotes_ipcc Ans. Om Ltd. Balance Sheet as on 31st March, 2020 Particulars Notes Figures at the end of current reporting period (`) Equity and Liabilities 1 Shareholders’ funds a Share capital 1 1,04,89,500 b Reserves and Surplus 2 32,34,000 2 Non-current liabilities a Long-term borrowings 3 25,45,500 3 Current liabilities a Trade Payables 21,00,000 b Other current liabilities 4 3,00,000 c Short-term provisions 5 12,25,350 Total 1,98,94,350 Assets 1 Non-current assets a Property, Plant and Equipment 6 1,12,12,500 b Intangible assets (Patents & Trade Marks) 6,00,000 2 Current assets a Inventories 7 26,25,000 b Trade receivables 8 21,00,000 c Cash and cash equivalents 9 29,08,500 d Short-term loans and advances 4,48,350 Total 1,98,94,350 Notes to accounts ` 1 Share Capital Equity share capital Issued, subscribed and called up 10,50,000 Equity Shares of ` 10 each (Out of the above 6,30,000 shares have been issued for consideration other than cash) 1,05,00,000 Less: Calls in arrears (10,500) 1,04,89,500 Total 1,04,89,500 2 Reserves and Surplus General Reserve 21,84,000 Surplus (Profit & Loss A/c) 10,50,000 Total 32,34,000 Join Us on Telegram http://t.me/canotes_ipcc Page 3 Q-23 On 31st March, 2020, Om Ltd. provides to you the following ledger balances after preparing its Profit and Loss Account for the year ended 31st March, 2020: Credit Balances ` Equity shares capital (fully paid shares of ` 10 each) 1,05,00,000 General Reserve 21,84,000 Loan from State Finance Corporation 15,75,000 (Secured by hypothecation of Plant & Machinery - Repayable within one year ` 3,00,000) Loans: Unsecured (Long term) 12,70,500 Sundry Creditors for goods & expenses (Payable within 6 months) 21,00,000 Profit & Loss Account 10,50,000 Provision for Taxation 12,25,350 199,04,850 Debit Balances : ` Calls in arrear 10,500 Land 21,00,000 Buildings 30,75,000 Plant and Machinery 55,12,500 Furniture & Fixture 5,25,000 Inventories : Finished goods 21,00,000 Raw Materials 5,25,000 Trade Receivables 21,00,000 Advances: Short-term 4,48,350 Cash in hand 3,15,000 Balances with banks 25,93,500 Patents & Trade marks 6,00,000 199,04,850 The following additional information is also provided in respect of the above balances: (i) 6,30,000 fully paid equity shares were allotted as consideration for land & buildings. (ii) Cost of Building ` 42,00,000 Cost of Plant & Machinery ` 73,50,000 Cost of Furniture & Fixture ` 6,56,250 (iii) Trade receivables for ` 5,70,000 are due for more than 6 months. (iv) The amount of Balances with Bank includes ` 27,000 with a bank which is not a scheduled Bank and the deposits of ` 7,50,000 are for a period of 9 months. (v) Unsecured loan includes ` 3,00,000 from a Bank and ` 1,50,000 from related parties. You are not required to give previous year figures. You are required to prepare the Balance Sheet of the Company as on 31st March, 2020 as required under Schedule III of the Companies Act, 2013. Join Us on Telegram http://t.me/canotes_ipcc Ans. Om Ltd. Balance Sheet as on 31st March, 2020 Particulars Notes Figures at the end of current reporting period (`) Equity and Liabilities 1 Shareholders’ funds a Share capital 1 1,04,89,500 b Reserves and Surplus 2 32,34,000 2 Non-current liabilities a Long-term borrowings 3 25,45,500 3 Current liabilities a Trade Payables 21,00,000 b Other current liabilities 4 3,00,000 c Short-term provisions 5 12,25,350 Total 1,98,94,350 Assets 1 Non-current assets a Property, Plant and Equipment 6 1,12,12,500 b Intangible assets (Patents & Trade Marks) 6,00,000 2 Current assets a Inventories 7 26,25,000 b Trade receivables 8 21,00,000 c Cash and cash equivalents 9 29,08,500 d Short-term loans and advances 4,48,350 Total 1,98,94,350 Notes to accounts ` 1 Share Capital Equity share capital Issued, subscribed and called up 10,50,000 Equity Shares of ` 10 each (Out of the above 6,30,000 shares have been issued for consideration other than cash) 1,05,00,000 Less: Calls in arrears (10,500) 1,04,89,500 Total 1,04,89,500 2 Reserves and Surplus General Reserve 21,84,000 Surplus (Profit & Loss A/c) 10,50,000 Total 32,34,000 Join Us on Telegram http://t.me/canotes_ipcc 3 Long-term borrowings Secured Term Loans Loan from State Finance Corporation (` 15,75,000 less ` 3,00,000) (Secured by hypothecation of Plant and Machinery) 12,75,000 Unsecured Bank Loan 3,00,000 Loan from related parties 1,50,000 Others 8,20,500 12,70,500 Total 25,45,500 4 Other current liabilities Loan Instalment repayable within one year 3,00,000 5 Short-term provisions Provision for taxation 12,25,350 6 Property, Plant and Equipment Land 21,00,000 Buildings 42,00,000 Less: Depreciation (11,25,000) 30,75,000 Plant & Machinery 73,50,000 Less: Depreciation (18,37,500) 55,12,500 Furniture & Fittings 6,56,250 Less: Depreciation (1,31,250) 5,25,000 Total 1,12,12,500 7 Inventories Raw Material 5,25,000 Finished goods 21,00,000 26,25,000 8 Trade receivables Debts outstanding for a period exceeding six months 5,70,000 Other Debts 15,30,000 Total 21,00,000 9 Cash and cash equivalents Cash at bank with Scheduled Banks including Bank deposits for period of 9 months amounting ` 7,50,000 25,66,500 with others 27,000 25,93,500 Cash in hand 3,15,000 Total 29,08,500 Join Us on Telegram http://t.me/canotes_ipcc Page 4 Q-23 On 31st March, 2020, Om Ltd. provides to you the following ledger balances after preparing its Profit and Loss Account for the year ended 31st March, 2020: Credit Balances ` Equity shares capital (fully paid shares of ` 10 each) 1,05,00,000 General Reserve 21,84,000 Loan from State Finance Corporation 15,75,000 (Secured by hypothecation of Plant & Machinery - Repayable within one year ` 3,00,000) Loans: Unsecured (Long term) 12,70,500 Sundry Creditors for goods & expenses (Payable within 6 months) 21,00,000 Profit & Loss Account 10,50,000 Provision for Taxation 12,25,350 199,04,850 Debit Balances : ` Calls in arrear 10,500 Land 21,00,000 Buildings 30,75,000 Plant and Machinery 55,12,500 Furniture & Fixture 5,25,000 Inventories : Finished goods 21,00,000 Raw Materials 5,25,000 Trade Receivables 21,00,000 Advances: Short-term 4,48,350 Cash in hand 3,15,000 Balances with banks 25,93,500 Patents & Trade marks 6,00,000 199,04,850 The following additional information is also provided in respect of the above balances: (i) 6,30,000 fully paid equity shares were allotted as consideration for land & buildings. (ii) Cost of Building ` 42,00,000 Cost of Plant & Machinery ` 73,50,000 Cost of Furniture & Fixture ` 6,56,250 (iii) Trade receivables for ` 5,70,000 are due for more than 6 months. (iv) The amount of Balances with Bank includes ` 27,000 with a bank which is not a scheduled Bank and the deposits of ` 7,50,000 are for a period of 9 months. (v) Unsecured loan includes ` 3,00,000 from a Bank and ` 1,50,000 from related parties. You are not required to give previous year figures. You are required to prepare the Balance Sheet of the Company as on 31st March, 2020 as required under Schedule III of the Companies Act, 2013. Join Us on Telegram http://t.me/canotes_ipcc Ans. Om Ltd. Balance Sheet as on 31st March, 2020 Particulars Notes Figures at the end of current reporting period (`) Equity and Liabilities 1 Shareholders’ funds a Share capital 1 1,04,89,500 b Reserves and Surplus 2 32,34,000 2 Non-current liabilities a Long-term borrowings 3 25,45,500 3 Current liabilities a Trade Payables 21,00,000 b Other current liabilities 4 3,00,000 c Short-term provisions 5 12,25,350 Total 1,98,94,350 Assets 1 Non-current assets a Property, Plant and Equipment 6 1,12,12,500 b Intangible assets (Patents & Trade Marks) 6,00,000 2 Current assets a Inventories 7 26,25,000 b Trade receivables 8 21,00,000 c Cash and cash equivalents 9 29,08,500 d Short-term loans and advances 4,48,350 Total 1,98,94,350 Notes to accounts ` 1 Share Capital Equity share capital Issued, subscribed and called up 10,50,000 Equity Shares of ` 10 each (Out of the above 6,30,000 shares have been issued for consideration other than cash) 1,05,00,000 Less: Calls in arrears (10,500) 1,04,89,500 Total 1,04,89,500 2 Reserves and Surplus General Reserve 21,84,000 Surplus (Profit & Loss A/c) 10,50,000 Total 32,34,000 Join Us on Telegram http://t.me/canotes_ipcc 3 Long-term borrowings Secured Term Loans Loan from State Finance Corporation (` 15,75,000 less ` 3,00,000) (Secured by hypothecation of Plant and Machinery) 12,75,000 Unsecured Bank Loan 3,00,000 Loan from related parties 1,50,000 Others 8,20,500 12,70,500 Total 25,45,500 4 Other current liabilities Loan Instalment repayable within one year 3,00,000 5 Short-term provisions Provision for taxation 12,25,350 6 Property, Plant and Equipment Land 21,00,000 Buildings 42,00,000 Less: Depreciation (11,25,000) 30,75,000 Plant & Machinery 73,50,000 Less: Depreciation (18,37,500) 55,12,500 Furniture & Fittings 6,56,250 Less: Depreciation (1,31,250) 5,25,000 Total 1,12,12,500 7 Inventories Raw Material 5,25,000 Finished goods 21,00,000 26,25,000 8 Trade receivables Debts outstanding for a period exceeding six months 5,70,000 Other Debts 15,30,000 Total 21,00,000 9 Cash and cash equivalents Cash at bank with Scheduled Banks including Bank deposits for period of 9 months amounting ` 7,50,000 25,66,500 with others 27,000 25,93,500 Cash in hand 3,15,000 Total 29,08,500 Join Us on Telegram http://t.me/canotes_ipcc Q-24 Kartik Ltd. is a non-investment company and has been incurring losses for the past few years. The company provides the following information for the current year: (` in lakhs) Paid up equity share capital 270 Paid up Preference share capital 45 Reserves (including Revaluation reserve ` 22.5 lakhs) 337.5 Securities premium 90 Long term loans 90 Deposits repayable after one year 45 Application money pending allotment 1620 Accumulated losses not written off 45 Investments 405 Kartik Ltd. has only one whole-time director, Mr. Kumar. You are required to calculate the amount of maximum remuneration that can be paid to him as per provisions of the Companies Act, 2013, if no special resolution is passed at the general meeting of the company in respect of payment of remuneration. Ans. Calculation of effective capital and maximum amount of monthly remuneration (` in lakhs) Paid up equity share capital 270 Paid up Preference share capital 45 Reserve excluding Revaluation reserve (337.5- 22.5) 315 Securities premium 90 Long term loans 90 Deposits repayable after one year 45 855 Less: Accumulated losses not written off (45) Investments (405) Effective capital for the purpose of managerial remuneration 405 Kartik Ltd. is incurring losses and no special resolution has been passed by the company for payment of remuneration. Effective capital of the company is less than 5 crores, maximum remuneration payable to the Managing Director should be @ `60,00,000 per annum. (Revaluation reserve and application money pending allotment are not included while computing effective capital of Kartik Ltd.) Join Us on Telegram http://t.me/canotes_ipcc Page 5 Q-23 On 31st March, 2020, Om Ltd. provides to you the following ledger balances after preparing its Profit and Loss Account for the year ended 31st March, 2020: Credit Balances ` Equity shares capital (fully paid shares of ` 10 each) 1,05,00,000 General Reserve 21,84,000 Loan from State Finance Corporation 15,75,000 (Secured by hypothecation of Plant & Machinery - Repayable within one year ` 3,00,000) Loans: Unsecured (Long term) 12,70,500 Sundry Creditors for goods & expenses (Payable within 6 months) 21,00,000 Profit & Loss Account 10,50,000 Provision for Taxation 12,25,350 199,04,850 Debit Balances : ` Calls in arrear 10,500 Land 21,00,000 Buildings 30,75,000 Plant and Machinery 55,12,500 Furniture & Fixture 5,25,000 Inventories : Finished goods 21,00,000 Raw Materials 5,25,000 Trade Receivables 21,00,000 Advances: Short-term 4,48,350 Cash in hand 3,15,000 Balances with banks 25,93,500 Patents & Trade marks 6,00,000 199,04,850 The following additional information is also provided in respect of the above balances: (i) 6,30,000 fully paid equity shares were allotted as consideration for land & buildings. (ii) Cost of Building ` 42,00,000 Cost of Plant & Machinery ` 73,50,000 Cost of Furniture & Fixture ` 6,56,250 (iii) Trade receivables for ` 5,70,000 are due for more than 6 months. (iv) The amount of Balances with Bank includes ` 27,000 with a bank which is not a scheduled Bank and the deposits of ` 7,50,000 are for a period of 9 months. (v) Unsecured loan includes ` 3,00,000 from a Bank and ` 1,50,000 from related parties. You are not required to give previous year figures. You are required to prepare the Balance Sheet of the Company as on 31st March, 2020 as required under Schedule III of the Companies Act, 2013. Join Us on Telegram http://t.me/canotes_ipcc Ans. Om Ltd. Balance Sheet as on 31st March, 2020 Particulars Notes Figures at the end of current reporting period (`) Equity and Liabilities 1 Shareholders’ funds a Share capital 1 1,04,89,500 b Reserves and Surplus 2 32,34,000 2 Non-current liabilities a Long-term borrowings 3 25,45,500 3 Current liabilities a Trade Payables 21,00,000 b Other current liabilities 4 3,00,000 c Short-term provisions 5 12,25,350 Total 1,98,94,350 Assets 1 Non-current assets a Property, Plant and Equipment 6 1,12,12,500 b Intangible assets (Patents & Trade Marks) 6,00,000 2 Current assets a Inventories 7 26,25,000 b Trade receivables 8 21,00,000 c Cash and cash equivalents 9 29,08,500 d Short-term loans and advances 4,48,350 Total 1,98,94,350 Notes to accounts ` 1 Share Capital Equity share capital Issued, subscribed and called up 10,50,000 Equity Shares of ` 10 each (Out of the above 6,30,000 shares have been issued for consideration other than cash) 1,05,00,000 Less: Calls in arrears (10,500) 1,04,89,500 Total 1,04,89,500 2 Reserves and Surplus General Reserve 21,84,000 Surplus (Profit & Loss A/c) 10,50,000 Total 32,34,000 Join Us on Telegram http://t.me/canotes_ipcc 3 Long-term borrowings Secured Term Loans Loan from State Finance Corporation (` 15,75,000 less ` 3,00,000) (Secured by hypothecation of Plant and Machinery) 12,75,000 Unsecured Bank Loan 3,00,000 Loan from related parties 1,50,000 Others 8,20,500 12,70,500 Total 25,45,500 4 Other current liabilities Loan Instalment repayable within one year 3,00,000 5 Short-term provisions Provision for taxation 12,25,350 6 Property, Plant and Equipment Land 21,00,000 Buildings 42,00,000 Less: Depreciation (11,25,000) 30,75,000 Plant & Machinery 73,50,000 Less: Depreciation (18,37,500) 55,12,500 Furniture & Fittings 6,56,250 Less: Depreciation (1,31,250) 5,25,000 Total 1,12,12,500 7 Inventories Raw Material 5,25,000 Finished goods 21,00,000 26,25,000 8 Trade receivables Debts outstanding for a period exceeding six months 5,70,000 Other Debts 15,30,000 Total 21,00,000 9 Cash and cash equivalents Cash at bank with Scheduled Banks including Bank deposits for period of 9 months amounting ` 7,50,000 25,66,500 with others 27,000 25,93,500 Cash in hand 3,15,000 Total 29,08,500 Join Us on Telegram http://t.me/canotes_ipcc Q-24 Kartik Ltd. is a non-investment company and has been incurring losses for the past few years. The company provides the following information for the current year: (` in lakhs) Paid up equity share capital 270 Paid up Preference share capital 45 Reserves (including Revaluation reserve ` 22.5 lakhs) 337.5 Securities premium 90 Long term loans 90 Deposits repayable after one year 45 Application money pending allotment 1620 Accumulated losses not written off 45 Investments 405 Kartik Ltd. has only one whole-time director, Mr. Kumar. You are required to calculate the amount of maximum remuneration that can be paid to him as per provisions of the Companies Act, 2013, if no special resolution is passed at the general meeting of the company in respect of payment of remuneration. Ans. Calculation of effective capital and maximum amount of monthly remuneration (` in lakhs) Paid up equity share capital 270 Paid up Preference share capital 45 Reserve excluding Revaluation reserve (337.5- 22.5) 315 Securities premium 90 Long term loans 90 Deposits repayable after one year 45 855 Less: Accumulated losses not written off (45) Investments (405) Effective capital for the purpose of managerial remuneration 405 Kartik Ltd. is incurring losses and no special resolution has been passed by the company for payment of remuneration. Effective capital of the company is less than 5 crores, maximum remuneration payable to the Managing Director should be @ `60,00,000 per annum. (Revaluation reserve and application money pending allotment are not included while computing effective capital of Kartik Ltd.) Join Us on Telegram http://t.me/canotes_ipcc Q-25 On 31st March, 2021, Morya Ltd. provides the following ledger balances: Particulars Amount (`) Debit Credit Equity Share Capital, fully paid shares of ` 50 each 80,00,000 Calls in arrear 15,000 Land 25,00,000 Buildings 30,00,000 Plant & Machinery 24,00,000 Furniture &Fixture 13,00,000 Securities Premium 15,00,000 General Reserve 9,41,000 Profit & Loss Account 5,80,000 Loan from Public Finance Corporation (Secured by Hypothecation of Land) 26,30,000 Other Long Term Loans 22,50,000 Short Term Borrowings 4,60,000 Inventories: Finished goods 45,00,000 Raw materials 13,00,000 Trade Receivables 17,50,000 Advances: Short Term 3,75,000 Trade Payables 8,13,000 Provision for Taxation 3,80,000 Cash in Hand 70,000 Balances with Banks 3,44,000 Total 1,75,54,000 1,75,54,000 The following additional information was also provided in respect of the above balances: (1) 50,000 fully paid equity shares were allotted as consideration for land. (2) The cost of assets were: Building ` 32,00,000 Plant and Machinery ` 30,00,000 Furniture and Fixture ` 16,50,000 (3) Trade Receivables for ` 4,86,000 due for more than 6 months. (4) Balances with banks include ` 56,000, the Naya bank, which is not a scheduled bank. (5) Loan from Public Finance Corporation repayable after 3 years. (6) The balance of ` 26,30,000 in the loan account with Public Finance Corporation is inclusive of ` 1,34,000 for interest accrued but not due. The loan is secured by hypothecation of land. (7) Other long-term loans (unsecured) include: Loan taken from Nixes Bank ` 13,80,000 (Amount repayable within one year ` 4,80,000) Loan taken from Directors ` 8,50,000 (8) Bills Receivable for ` 1,60,000 maturing on 15th June, 2021 has been discounted. (9) Short term borrowings include: Join Us on Telegram http://t.me/canotes_ipccRead More
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FAQs on Financial Statements of Companies - 2 Important Question & Answer - Advanced Accounting for CA Intermediate
| 1. What are the different financial statements prepared by companies? |  |
Ans. Companies prepare three main financial statements: the income statement, the balance sheet, and the cash flow statement. The income statement shows the company's revenues, expenses, and net income or loss over a specific period. The balance sheet provides a snapshot of the company's financial position at a specific point in time, showing its assets, liabilities, and shareholders' equity. The cash flow statement reports the company's cash inflows and outflows during a specific period, categorizing them into operating, investing, and financing activities.
| 2. What is the purpose of preparing financial statements? | |
Ans. The main purpose of preparing financial statements is to provide relevant and reliable financial information about a company's performance and financial position to various stakeholders, including shareholders, investors, lenders, and regulatory authorities. These statements help stakeholders make informed decisions regarding investments, lending, and other financial transactions. Financial statements also assist management in evaluating the company's profitability, liquidity, and solvency, and in identifying areas for improvement.
| 3. What is the importance of the income statement? | |
Ans. The income statement is important as it provides a summary of a company's revenues, expenses, and net income or loss over a specific period. It helps stakeholders assess the company's profitability and its ability to generate income. By comparing the income statements of different periods, stakeholders can identify trends, determine the company's growth potential, and evaluate the effectiveness of its cost management strategies. The income statement also serves as a basis for calculating financial ratios, such as gross profit margin and net profit margin, which aid in analyzing a company's financial performance.
| 4. How does the balance sheet reflect a company's financial position? | |
Ans. The balance sheet reflects a company's financial position at a specific point in time by presenting its assets, liabilities, and shareholders' equity. Assets represent what the company owns, such as cash, inventory, property, and equipment. Liabilities represent what the company owes, such as loans, accounts payable, and accrued expenses. Shareholders' equity represents the residual interest in the company's assets after deducting its liabilities. By analyzing the balance sheet, stakeholders can assess the company's liquidity, solvency, and overall financial stability.
| 5. What information does the cash flow statement provide to stakeholders? | |
Ans. The cash flow statement provides information about a company's cash inflows and outflows during a specific period, categorizing them into operating, investing, and financing activities. It helps stakeholders understand how the company generates and utilizes cash. The cash flow statement reveals the company's ability to generate cash from its core operations, its investments in assets, and its financing activities such as borrowing and issuing equity. By analyzing the cash flow statement, stakeholders can assess the company's liquidity, cash flow sustainability, and ability to meet its financial obligations.
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Important Question & Answer: Financial Statements of Companies - 2 CA Intermediate Questions
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The content of Important Question & Answer: Financial Statements of Companies - 2 is prepared as per the latest CA Intermediate syllabus.
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