Welcome to the NCERT Solutions for Class 12 Accountancy - Company Accounts and Analysis of Financial Statements - Chapter Financial Statements of a Company. This page offers a step-by-step solution to the specific question from Exercise 2, Question 7: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.
‘Financial statements reflect a combination of recorded facts, accounting
conventions and personal judgements’ discuss.
The financial statements not only help in presenting the true and real financial position of the company but they also help in taking managerial decisions. The nature of the financial statements depends upon the following aspects like recorded facts, conventions, concepts and personal judgement.
(i) Recorded Facts: The items recorded in the financial statements reflect their
original cost i.e., the cost at which they were acquired. Consequently, financial
statements do not reveal the current market price of the items. Further, financial
statements fail to capture the inflation effects.
(ii) Accounting Conventions: The preparation of financial statements is based on
some accounting conventions like, Prudence Convention, Materiality Convention, Matching Concept, etc. The adherence to such accounting conventions makes financial statements easy to understand, comparable and reflects the true and fair financial position of the company. Besides the above while preparing financial statements, certain concepts are adhered to. The nature of these concepts is reflected in the nature of the financial statements.
(iii) Personal Judgements: The nature of financial statement largely depends
upon the personal value judgements. Personal judgements are attached to
different practices of recording transactions in the financial statements, e.g.,
recording stock either at market value or at the cost requires value judgement
depending upon the personal judgement. Thus, personal judgements help in
determining the nature of the financial statements.
NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:
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Read MoreWelcome to the NCERT Solutions for Class 12 Accountancy - Company Accounts and Analysis of Financial Statements - Chapter . This page offers a step-by-step solution to the specific question from Excercise 2 , Question 7: ‘Financial statements reflect a combination of recorded facts, accounting conventions and per....
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