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NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce PDF Download

Numerical Questions:
Question 1: Following are the balance sheets of Alpha Ltd. as at March 31st, 2016 and 2017:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce
ANSWER:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - CommerceNCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

Page No 195:
Question 2: Following are the balance sheets of Beta Ltd. at March 31st, 2016 and 2017:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce
ANSWER:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

Question 3: Prepare Comparative Income Statement from the following information:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce
ANSWER:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

Working Notes:
1. Calculation of Net Sales
Net Sales = Cost of Goods Sold + Gross Profit - Sales Return
or, Net Sales = Purchases + Manufacturing Expenses + Change in Inventory + Gross Profit - Sales Return
Net Sales (2016) = 80,000 + 20,000 +30,000 + 90,000 - 4,000 = Rs 2,16,000
Net Sales (2017) = 1,40,000 + 50,000 - 60,000 - 30,000 - 80,000 = Rs 92,000
2. Calculation of Finance Cost
Finance Cost = Interest on short-term loans + Interest on 10% Debentures
Finance Cost (2016) = 20,000 + 1,000 = Rs 21,000
Finance Cost (2017) = 20,000 + 2,000 = Rs 22,000
3. Calculation of Other Expenses
Other Expenses = Freight Outward + Carriage Outward + Loss on sale of office car
Other Expenses (2016) = 10,000 + 10,000 + 60,000 = Rs 80,000
Other Expenses (2017) = 20,000 + 20,000 + 90,000 = Rs 1,30,000

Page No 196:
Question 4:
Prepare Comparative Income Statement from the following information:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce
*There is a misprint in the book, this should be 2,00,000 
ANSWER:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

Working Notes:
1. Calculation of Net Purchases and Change in Inventory
2. Calculation of Finance Cost
Finance Cost = Interest on Bank Overdraft + Interest on Debentures
Finance Cost (2016) = 5,000 + 20,000 = Rs 25,000
Finance Cost (2017) = 0 + 20,000 = Rs 20,000
3. Calculation of Other Expenses
Other Expenses = Carriage outward + Other operating expenses
Other Expenses (2016) = 10,000 + 20,000 = Rs 30,000
Other Expenses (2017) = 30,000 + 10,000 = Rs 40,000

Page No 197:
Question 5: Prepare a Common-size income statement of Shefali Ltd. with the help of following information:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce
ANSWER:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

Working Notes:
1. Calculation of Other Expenses
Other Expenses = Indirect Expenses = % of Gross Profit
2016=6,00,000×50%×25%=Rs 75,000
2017=8,00,000×45%×25%=Rs 90,000

Question 6: Prepare a Common Size balance sheet from the following balance sheet of Aditya Ltd. and Anjali Ltd.:

NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce
*The total of Liabilities side must be equal to the total of Assets side, therefore, it should be 10,00,000.
ANSWER:
NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce

The document NCERT Solutions (Part - 2) - Analysis of Financial Statements | Accountancy Class 12 - Commerce is a part of the Commerce Course Accountancy Class 12.
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FAQs on NCERT Solutions (Part - 2) - Analysis of Financial Statements - Accountancy Class 12 - Commerce

1. What is the purpose of analyzing financial statements?
Ans. Analyzing financial statements helps in assessing the financial health and performance of a company. It provides valuable insights into the company's profitability, liquidity, solvency, and efficiency. This analysis helps stakeholders, such as investors, creditors, and management, make informed decisions regarding investments, lending, and business strategies.
2. What are the key components of financial statements?
Ans. Financial statements typically consist of three key components: the balance sheet, the income statement, and the cash flow statement. The balance sheet provides information about a company's assets, liabilities, and shareholders' equity. The income statement displays the company's revenue, expenses, and net income or loss. The cash flow statement shows the company's cash inflows and outflows from operating, investing, and financing activities.
3. How can financial ratios be used to analyze financial statements?
Ans. Financial ratios are tools used to analyze financial statements and assess a company's performance. They provide insights into various aspects, such as profitability, liquidity, solvency, and efficiency. For example, the gross profit margin ratio indicates the profitability of a company's core operations, while the current ratio measures its short-term liquidity. By comparing these ratios to industry benchmarks or historical data, analysts can evaluate a company's financial position and identify areas of strength or weakness.
4. What are the limitations of analyzing financial statements?
Ans. While analyzing financial statements can be useful, it is important to consider their limitations. Financial statements are based on historical data and may not reflect the current or future market conditions. Additionally, financial statements may be subject to manipulation or misrepresentation. Moreover, financial statements do not provide a complete picture of a company's operations, as they may not capture non-financial factors like management quality or market trends. Therefore, it is advisable to use financial statement analysis in conjunction with other tools and sources of information.
5. How can trend analysis be used in financial statement analysis?
Ans. Trend analysis involves comparing financial statement data over multiple periods to identify patterns and trends. It helps in assessing a company's performance and identifying changes in key financial indicators over time. By examining trends in revenue, expenses, and ratios, analysts can gain insights into a company's growth, profitability, and efficiency. For example, a declining trend in profit margins may indicate a decrease in the company's competitiveness or increasing costs. Trend analysis provides a long-term perspective and helps in making more accurate forecasts and predictions.
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