Test: Financial Statements And Their Analysis - 1 - Commerce MCQ

Classification of items:
Preliminary Expense --- Fictitious Asset
Income Tax ------ Expense of company
Loose Tools ------- Current Assets 
Goodwill---------- Intangible Asset

Indian Companies Act 2013 is in force these days. Earlier Companies Act 1956 was in force.

Securities premium reserve is shown under the heading Shareholders funds and sub heading Reserves and Surplus.

Goodwill is an intangible asset which comes under the heading of fixed assets. It is not a fictitious asset (for more detail see ultimate book of accountancy).

Assets are listed in the balance sheet in order of their liquidity where cash is listed at the top as it's already liquid no conversion is required. The next in the list are marketable securities like stocks and bonds, which can be sold in the market in a few days generally the next day can be liquidated.

A company can obtain special permission form registrar to extend the accounting period which can be up to 18 months.

Balance Sheet of a company is prepared as per the Schedule III of the Indian Companies Act, 2013.

Office building under construction is shown under fixed assets i.e. Capital work in progress.

Claim against the company not acknowledged as debt is shown as contingent liability after preparing the balance sheet. It is shown as a footnote to the balance sheet.

Bills of exchange is not shown under the heading Reserves and surplus but following items will be shown under this heading: 
•Securities Premium Reserve 
•Statement of profit and loss
•Capital Reserve