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Test: Accounting & Financial Management of Banking - 3 - Bank Exams MCQ


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30 Questions MCQ Test - Test: Accounting & Financial Management of Banking - 3

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Test: Accounting & Financial Management of Banking - 3 - Question 1

What is the purpose of using equivalent units in process costing?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 1

Equivalent units of production are a concept used to understand how much money partially completed products are worth to a company. They are useful for process costing, which is the analysis of money flow within the manufacturing process. Equivalent units is a cost accounting concept that is used in process costing for cost calculations
Hence, option (b) is the correct answer.

Test: Accounting & Financial Management of Banking - 3 - Question 2

Directions: On 1st April 2000, X Ltd purchased a Plant for 45,000. It was estimated that the effective life of the plant will be 10 years and after 10 years its scrap value will be 5000. On 1st April, 2001, the company purchased additional machine for 250000 of which the effective life will be 15 years and scrap value 2,500. On 1st October, 2002, a new machine was purchase for 12,000 of which the scrap value will be 2000 and the effective life 20 years. If the depreciation is provided on straight line method. Then,

Q. What will be the depreciation on first machine purchased.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 2

Depreciation on first machine will be = (Original Cost- Scrap Value)/ No of years
= (45,000-5000)/10
= 4000 per year.
Thus, the correct option is (a)

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Test: Accounting & Financial Management of Banking - 3 - Question 3

For which of the following entries, compound entries can be passed?
I. By debiting one account and crediting two or more accounts.
II. By crediting one account and debiting two or more accounts.
III. By debiting two or more accounts and crediting two or more accounts such as Opening Entry.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 3

Sometimes, two or more transactions relating to one particular account take place on the same date. In such cases, instead of passing separate entries for all such transactions, only one entry is passed. Such a journal entry is termed a compound entry. Such entries can be passed in any of the following three ways:-

  • By debiting one account and crediting two or more accounts.
  • By crediting one account and debiting two or more accounts.
  • By debiting two or more accounts and crediting two or more accounts such as Opening Entry.

Thus, the correct option is (c)

Test: Accounting & Financial Management of Banking - 3 - Question 4

What are the different kinds of adjustments which are made to the bank statement balance while reconciliation?
I. Bank errors
II. Interest fees
III. Unpresented checks

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 4

The first step in reconciling a bank statement is to compare financial record activities to bank statement activities. For any bank errors, unaccounted-for deposits, and unpresented checks, adjustments to the bank statement balance should be made. Some personal or business accounts do not account for bank-related additions and charges, such as interest and maintenance fees. Adjustments should be made to the cash account records for these differences. Once corrections and adjustments are made, compare the balances to see if they match. If not, repeat the process until the accounts are reconciled.
Thus, the correct option is (a)

Test: Accounting & Financial Management of Banking - 3 - Question 5

A company bought machinery at a cost of ₹ 6500 and spent ₹ 300 on erection charges. It is estimated that its working life is 2 years and the value of scrap is ₹ 1020. Calculate the amount of annual depreciation.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 5

[The total cost of the machinery including erection charges is ₹ 6500 + ₹ 300 = ₹ 6800. The estimated scrap value of the machinery is ₹ 1020. So, the total depreciable amount is ₹ 6800 - ₹ 1020 = ₹ 5780. Since the working life of the machinery is estimated to be 2 years
Depreciation = (cost of the asset - estimated salvage value) /estimated useful life of an asset.
Depreciation = (6500+300) - 1020/2= 2890]

Test: Accounting & Financial Management of Banking - 3 - Question 6

From the following statements choose the one statement that justifies the Deferred payment guarantees?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 6

Deferred payment guarantees are financial instruments used in international trade to provide assurance to the seller that they will receive payment for goods or service at a later date. A deferred payment guarantee is typically issued by a bank or financial institution on behalf of the buyer guaranteeing payment to the seller within a specified period.
Hence, the correct answer is Option (b).

Test: Accounting & Financial Management of Banking - 3 - Question 7

Which of the following statement/s is/are incorrect regarding the bill of exchange?
I. Drawer is a person on whom the bill is drawn
II. It is signed by the maker of the bill
III. It contains a conditional order
IV. It is an instrument in writing

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 7

Bills of Exchange
Bill of exchange is defined as

  • An instrument in writing
  • signed by the maker
  • containing an unconditional order
  • To pay a certain sum of money and money only
  • To a person, named in the instrument or, to his order to the bearer
  • On a certain fixed future date or on demand (Section 5 of Negotiable Instruments Act).

From the above definition, you will observe that there are three parties to a bill of exchange. They are: Drawer: a person who draws the bill
Drawee: a person on whom the bill is drawn, and
Payee: a person who is going to receive money.
Hence the correct answer is Option (c).

Test: Accounting & Financial Management of Banking - 3 - Question 8

As per the companies act 2013, there should be the gap of how many months between the two call of share?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 8

The gap between the two calls of share should not be less than one month unless it is provided by the article of association of the company. No company can make a call within 15 days or beyond a one month gap. Also the amount of the call money should not be more than 25% of the face value of the share.

Test: Accounting & Financial Management of Banking - 3 - Question 9

Before the method LERMS the Reserve Bank fixed the buying and selling rates and the forex market would remain within the ceiling and the floor, thus fixed by the Reserve Bank. What does 'L' stand for in LERMS

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 9

Indian Forex Market

  • In India the free movement of capital in and out of the country is restricted.
  • Before the 'Liberalised Exchange Rate Management System' (LERMS), the RBI controlled the buying and selling rate, and the market would stay within the Reserve Bank's ceiling and floor.
  • The Exchange rate is currently determined by the dynamics of supply and demand in the local Interbank market.

Hence, option (b) is the correct answer.

Test: Accounting & Financial Management of Banking - 3 - Question 10

Which one of the following is not a feature of a written down value method of depreciation?
I. The book value of the asset becomes zero at any one point of time.
II. The depreciation is calculated on the book value of assets and not on the cost.
III. The amount of depreciation charged on a specific asset reduces every year.
IV. There is no need to estimate the residual value and estimated life at the time of deciding the amount of depreciation.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 10
  • The concerned asset is depreciated with an unequal amount every year, as the depreciation is charged to the book value and not to the cost of the asset
  • Under the written down value method of Depreciation, Depreciation is calculated at the fixed rate on the reducing balance of the asset therefore, the value of an asset is never zero under this method.
  • Thus, the correct option is (a)
Test: Accounting & Financial Management of Banking - 3 - Question 11

Which of the following statements are correct regarding the Profit and Loss Appropriation account
I. Profit and Loss Appropriation account is different from profit and loss account and is normally put below the net profit figure in the same statement.
II. The net profit is transferred to the debit side of the profit and loss appropriation account.
III. Profit and Loss account shows only the net profit or net loss from operation of business while the Profit and Loss appropriation accounts shows all non-operational adjustments.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 11

Profit and Loss Appropriation account

Net profit, as arrived at in the P&L A/c, is utilised by the company, for providing dividend, dividend distribution tax, adjustments to income tax and transfer to reserves etc. This is done through the profit and Loss Appropriation account. Profit and Loss Appropriation account is different from profit and loss account and is normally put below the net profit figure in the same statement. The net profit is transferred to the credit side of profit and loss appropriation account. Profit and Loss account shows only the net profit or net loss from operation of business while the Profit and Loss appropriation accounts shows all non-operational adjustments.

The credit side of this account shows the following items:

  • Balance of surplus brought forward from previous year.
  • Net Profit for the year.
  • Amount withdrawn from general reserve or any other reserve.
  • Income tax provision no longer required or excess provision written back.
  • The debit side of this account shows the following items:
  • Transfer to reserve/general reserve.
  • Debenture redemption account.
  • Transfer to dividend/interim dividend/proposed dividend.
  • Dividend Distribution Tax (If applicable).
  • Income tax for previous year(s) not provided for.
  • Surplus transferred to balance sheet.

Hence option (c) is correct

Test: Accounting & Financial Management of Banking - 3 - Question 12

Which among the following is not a feature of the Basel Committee on Bank Supervision (BCBS)?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 12

Basel Committee on Bank Supervision (BCBS)

  • It is a committee under the Bank For International Settlements.
    • Established in 1930, the BIS is owned by 60 central banks, representing countries from around the world that together account for about 95% of world GDP.
    • Its head office is in Basel, Switzerland.
    • Its mission is to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks.
  • It is the primary global standard setter for the prudential regulation of banks and provides a forum for regular cooperation on banking supervisory matters.
  • The Committee identifies global systemically important banks (G-SIBs) using a methodology that includes both quantitative indicators and qualitative elements.

Hence, the correct answer is option (c).

Test: Accounting & Financial Management of Banking - 3 - Question 13

Mr A wants to implement the application and use of the same costing principles and procedures by different divisions of his company. Which of the following techniques of costing is more appropriate in the given situation?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 13
  • Standard Costing is defined as the preparation and use of standard cost, their comparison with actual costs and the measurement and analysis of variances to their causes and points of incidence. Standard Cost is a predetermined cost unit that is calculated from the management's standards of efficient operation and the relevant necessary expenditure.
  • Marginal Costing is the ascertainment of marginal costs and of the effect on profit of changes in volume or type of output by differentiating between fixed costs and variable costs.
  • Budgetary Control may be defined as the process of continuous comparison of actual costs and performance with the pre-established budgets in relation to the responsibilities of the executives to the specific budgets for the achievement of a target in accordance with the policy of the organisation and to provide a basis for revision of budget.
  • Uniform Costing may be defined as the application and use of the same costing principles and procedures by different Organizations under the same management or on a common understanding between members of an association. It is thus not a separate technique or method. It simply denotes a situation in which a number of organizations may use the same costing principles in such a way as to produce costs which are of the maximum comparability. From such comparable costs valuable conclusions can be drawn.

Hence, the correct answer is option (d).

Test: Accounting & Financial Management of Banking - 3 - Question 14

From the following equations find the correct accounting equation
I. Asset = liability + equity
II. Asset = liability + [Capital + (revenue - expenses) - drawings]
III. Asset + expenses + drawings = liability + Capital + revenue

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 14

The accounting equation is a representation of how the three important components of accounting namely asset, liabilities and equity are associated with each other. In the most simplistic form the accounting equation is represented as asset = liability + equity

Asset represent the valuable resources controlled by the company such as cash ,accounts receivable, fixed asset etc. liabilities represent its obligation of an organization to its external stakeholders while equity represents owners net claim on the asset. It is to be noted that, the liability and equity represent how the asset of the organization has been financed.

Expanded accounting equation
Asset = liability + equity
Asset = liability + [Capital + (revenue - expenses) - drawings]
Asset + expenses + drawings = liability + Capital + revenue

Test: Accounting & Financial Management of Banking - 3 - Question 15

Under Costing Profit and loss account which of the following are debited?
I. Cost of sales
II. Over-absorbed overheads
III. Abnormal losses

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 15

Costing Profit and loss account is debited with the cost of sales, under-absorbed overheads and abnormal losses and is credited with sales value, over-absorbed overhead and abnormal gains. The net profit or loss in this account is transferred to the Cost Ledger Control Account.

Test: Accounting & Financial Management of Banking - 3 - Question 16

Which of the following statements are correct regarding the Features of a Joint Stock Company
I. A company has a perpetual succession. Death or insolvency of any shareholder does not affect the existence of the company.
II. The common seal is treated as the company's signature and is affixed on all important documents and contracts as per the resolutions passed by the Board.
III. The liability of the members of the joint stock company is unlimited.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 16

Features of a Joint Stock Company

  • Incorporated association: A company is a registered body of individuals. According to the Companies Act, 2013, it is compulsory to register a joint stock company.
  • Artificial person: It is an artificial person created by law. It is different from its members. It can enter into contracts, purchase and sell the properties, can sue and be sued upon. Even a member can enter into a contract with the company.
  • Perpetual succession: A company has a perpetual succession. Death or insolvency of any shareholder does not affect the existence of the company.
  • Common seal: As the company is an artificial person created by law, it cannot sign its name. So it has a common seal on which the company's name is engraved. The common seal is treated as the company's signature and is affixed on all important documents and contracts as per the resolutions passed by the Board. Companies Act 2013 required common seal to be affixed on certain documents like share certificates, bill of exchange etc. CA Amendment 2015 has made the use of common seal optional. Such documents may now instead be signed by two directors or one director and a company secretary of the company.
  • Limited liability: The liability of the members of the joint stock company is limited to the face value of shares held by them.
  • Separation of management from ownership: Even though the shareholders are true owners, they do not participate in the management of the company. They elect their representatives known as the Board of Directors.

Hence option (b) is correct

Test: Accounting & Financial Management of Banking - 3 - Question 17

Which of the following statement/s is/are correct regarding calls in advance?
I. Interest on Calls-in-Advance must be paid even when no profit is earned by the company
II. The interest payable on Calls-in- Advance is an appropriation of the profits of the company
III. A Company is liable to pay interest @ 12% p.a on Calls-in- Advance, if the articles do not specify the rate of interest.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 17
  • If authorized by the articles, a company may receive from a shareholder the amount remaining unpaid on shares, even though the amount has not been called up. This is known as calls-in-advance. It is a debt of a company until the calls are made and the amount already paid is adjusted. Calls-in-advance may also arise when the number of shares allotted to a person is much smaller than the number applied for and the terms of issue permit the company to retain the amount received in excess of application and allotment money. Of course, the company can retain only so much as is required to make the allotted shares fully paid ultimately. The calls-in-advance account is ultimately closed by transfer to the relevant call accounts. It is noted that the money received on calls-in-advance does not become part of share capital. It is shown under a separate heading, namely 'calls-in-advance' on the liabilities side. No dividend is paid on calls-in-advance.
  • The amount received as calls-in-advance is a debt of the company, the company is liable to pay interest on the amount of Calls-in-Advance from the date of receipt of the amount till the date when the call is due for payment. Generally the Articles of the company specify the rate at which interest is payable. If the articles do not contain such rate, Table F will be applicable & company liable to pay interest @ 12% p.a.It is to be noted that the interest payable on Calls-in- Advance is a charge against the profits of the company.
  • As such, Interest on Calls-in-Advance must be paid even when no profit is earned by the company.
Test: Accounting & Financial Management of Banking - 3 - Question 18

Accounting Standard Board was set up by

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 18

The Institute of Chartered Accountants of India, recognizing the need to harmonize the diverse accounting policies and practices at present in use in India, constituted an Accounting Standards Board (ASB) on 21st April, 1977.

Hence option (a) is correct.

Test: Accounting & Financial Management of Banking - 3 - Question 19

Match the following classification of ratios?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 19

Classification of ratios is done on the basis of the financial statements from which the ratios are calculated.

Test: Accounting & Financial Management of Banking - 3 - Question 20

Which of the following statement/s is/are correct about forward rate agreement
I. A forward rate agreement (FRA) is an over-the-counter (OTC) contract between parties that determines the rate of debt to be paid on an agreed-upon date in the future.
II. A forward rate agreement (FRA) is an over-the-counter (OTC) contract between parties that determines the rate of interest to be paid on an agreed-upon date in the future.
III. A forward rate agreement (FRA) is an over-the-counter (OTC) contract between parties that determines the rate of commodity to be paid on an agreed-upon date in the future.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 20

A forward rate agreement (FRA) is an over-the-counter (OTC) contract between parties that determines the rate of interest to be paid on an agreed-upon date in the future. In other words, an FRA is an agreement to exchange an interest rate commitment on a notional amount. The forward rate agreement determines the rates to be used along with the termination date and notional value. FRAs are cash-settled. The payment is based on the net difference between the interest rate of the contract and the floating rate in the market - the reference rate. The notional amount is not exchanged. It is a cash amount based on the rate differentials and the notional value of the contract.

Test: Accounting & Financial Management of Banking - 3 - Question 21

Which of the following are features of the capital expenditure budget?
(l) Long-term perspective
(ll) Strategic focus
(lll) Comprehensive in nature
(lV) Cost Estimation

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 21

The features of the capital expenditure budget are:
(l) Long-term perspective: A capital expenditures budget is prepared for a long-term period, generally spanning over several years. This is because capital expenditures are made to acquire or improve fixed assets, which have a long useful life.
(ll) Strategic focus: The budget is prepared with a strategic focus to enhance the capacity and efficiency of the production process. The budget takes into consideration the strategic objectives of the organization and the need to remain competitive in the market.
(lll) Comprehensive in nature: A capital expenditures budget is comprehensive in nature, covering all the major capital projects that the organization is planning to undertake during the budget period. It includes both new projects and the replacement of old assets.
(lV) Cost estimation: The budget estimates the cost of each capital project. The cost estimation takes into account various factors such as material cost, labor cost, overhead cost, and other related expenses

Test: Accounting & Financial Management of Banking - 3 - Question 22

A company needs a methodology for quantifying risk and translating that risk into estimates of expected return on equity. Which approach of cost of equity will be used?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 22
  • An important task of the corporate financial manager is measurement of the company's cost of equity capital. But estimating the cost of equity causes a lot of head scratching; often the result is subjective and therefore open to question as a reliable benchmark.
  • A method for arriving at that figure, a method spawned in the rarefied atmosphere of financial theory. The capital asset pricing model (CAPM) is an idealized portrayal of how financial markets price securities and thereby determine expected returns on capital investments. The model provides a methodology for quantifying risk and translating that risk into estimates of expected return on equity.
  • Hence, the correct answer is option (c).
Test: Accounting & Financial Management of Banking - 3 - Question 23

Which of the following is the second step in accounting cycle?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 23

The accounting cycle's 8 steps are:

  • Identify and analyze transactions during the accounting period.
  • Record transactions in a journal.
  • Post transactions to the general ledger.
  • Calculate an unadjusted trial balance.
  • Analyze the worksheet to identify errors.
  • Adjust journal entries to fix errors.
  • Create and produce financial statements.
  • Close the books for the accounting period.

Hence option (d) is correct.

Test: Accounting & Financial Management of Banking - 3 - Question 24

__________ ratio are also known as financial ratios and used to evaluate the financial performance and position of the company.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 24

Accounting ratio are also known as financial ratios and used to evaluate the financial performance and position of the company. It is used by investors, analysts, creditors, and management to assess the financial health of the business.

  • Liquidity ratio measures the company's ability to meet its short term obligations and assess its liquidity position
  • Profitability ratio measures the company's ability to generate profits in relation to sales.

Solvency ratio measures a company's long term financial stability and its ability to meets long term obligations.
Hence, the correct answer is Option (b).

Test: Accounting & Financial Management of Banking - 3 - Question 25

____________ of a bond is the total return an investor can expect to receive if the bond is held until its maturity date.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 25

YTM (The yield to maturity) of a bond is the total return an investor can expect to receive if the bond is held until its maturity date. It is an essential measure for bond investors as it helps them assess the attractiveness of a bond investment and compare the potential return of different bonds .It is expressed as an annual percentage rate.
Hence, the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 3 - Question 26

Directions: Current ratio of X Ltd. is 4.5:1. It is found that the working capital of the company is Rs 81,000.

Q. The current assets of X Ltd. is Rs._______.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 26

[Working capital = current assets - current liabilities.
Current assets - current liabilities = 81,000
Also current ratio = current assets/current liabilities
Current ratio = 4.5/1
Current assets/ current liabilities = 4.5/1
Current assets = 4.5* current liabilities
Now putting the value of current assets in working capital formula
[4.5*current liabilities]- current liabilities= 81,000
Current liabilities = 81,000/3.5= 23,142
Current assets = 81,000- 23,142 = 57,858]
Hence, the correct answer is Option (a).

Test: Accounting & Financial Management of Banking - 3 - Question 27

According to which accounting concept fixed assets are kept at the cost of purchases and not their market value?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 27

Cost concept: Every business transaction is recorded in the books of accounts at cost price, irrespective of the market price, all the monetary transactions are recorded at the historical cost. e.g. the machinery is recorded in the books by that amount which is paid to the supplier plus the expenses of bringing and installing the machinery which are necessary to put it in working order.

Applications

  • Fixed assets are kept at the cost of purchases and not their market value.
  • Every transaction is recorded with the present value and not any future value.
  • Unrealized gains are ignored.
  • An item, that has no cost, is not taken in books.

Hence the correct answer is Option (c).

Test: Accounting & Financial Management of Banking - 3 - Question 28

Under the First In First out method of process costing, the Closing stock of work in process is valued at ____

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 28
  • Under the First In First out method of process costing, there is a segregation of opening WIP and Closing WIP.
  • The units completed and transferred are taken from both opening work-in-process (WIP) and freshly introduced materials/inputs.
  • The cost to complete the opening WIP and other completed units is calculated separately.
  • The cost of opening WIP is added to the cost incurred on completing the incomplete (WIP) units into a complete one.
  • The total cost of units completed and transferred is calculated by adding the opening WIP cost to the cost of freshly introduced inputs.
  • In this method, the closing stock of work in process is valued at the current cost.
  • The major difference between the FIFO method and the average method is that units of opening work in process and their cost are taken in full under the average method while under the FIFO method only the remaining work done now is considered.
Test: Accounting & Financial Management of Banking - 3 - Question 29

Which of the following terms represents the temporary assets acquired by the bank for granting loans and advances?

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 29

Non-banking Assets

  • These are the temporary assets acquired by the bank for granting loans and advances. Eg. Immovable properties, stock, title deeds etc. Such assets are acquired by a bank from defaulters in satisfaction of their outstanding to the bank. In short, the asset acquired in satisfaction of the claim of the bank is called Non-banking assets. It showed under Schedule No. 11 Other assets. Such assets acquired should be disposed of within a period of seven years from the date of their acquisition.

Hence, the correct answer is option (b).

Test: Accounting & Financial Management of Banking - 3 - Question 30

Which of the following statement/s is/are incorrect regarding the Balance sheet?
I. Balance sheet is always prepared for a particular period.
II. It is an account containing information regarding assets, liabilities and capital.
III. It shows the nature and value of assets, the nature and value of liabilities and the position of capital.

Detailed Solution for Test: Accounting & Financial Management of Banking - 3 - Question 30

Balance sheet is a statement which shows the financial position i.e. the balances of assets, liabilities and capital of a business entity at a given date. It is prepared from the real accounts and personal accounts of trial balance. A debit balance in a real account or personal account represents an asset of the concern/firm.Likewise a credit balance in a personal account represents a liability. There can be some newly opened accounts as well on account of adjustment entries. The assets and liabilities are arranged in a proper way and the resultant statement is the balance sheet. On the right hand side, assets are arranged while on the left hand side, liabilities are recorded. The totals of the two sides of the balance sheet must agree because of the equation, viz. Assets = Liabilities + Capital.

If there is a difference, it means that there is some mistake. The difference, if it does occur, should be placed on the deficit side as Suspense Account to make the two sides agree apparently.

Features of Balance Sheet

  • The primary objective of the preparation of balance sheet is to ascertain the financial position of a concern.
  • It shows (a) the nature and value of assets, (b) the nature and value of liabilities and (c) the position of capital.
  • Balance sheet is always prepared on a certain date, never for a particular period.
  • Balance sheet, unlike a trading and profit and loss account, is not an account. It is a statement containing information regarding assets, liabilities and capital.
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