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:
‘Financial statements reflect a combination of recorded facts, accounting
conventions and personal judgements’ discuss.
‘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:
Stay updated with our latest educational content and study tips
It’s not about starting over if you took a break to care for children, take care of yourself, be healthy or for any other reason. This is a realistic strategy for the recovery of skills, selection of the right job, and overcoming the resume problem. One year, three years or 10 years of a career … Read more
Read MoreThere’s no need to score 95% or achieve a JEE/NEET rank. You don’t need to score 95% or rank in JEE/NEET to build a solid career. A candid and pragmatic guide to the routes that actually work for students who have an average mark and what to do when faced with the options. If … Read more
Read MoreAI tools, online platforms that are much cheaper than coaching centres and the changing idea of what “structure” even means have upended this argument more in the past two years than in the decade preceding it. Here’s what is really the case for 2026 – and what has actually stayed the same. If you look … Read more
Read MoreStarting to make a new career after 30 isn’t a start from scratch. Marketing, teaching, financial, retail, healthcare, sales and other professionals can pursue careers in technology by applying the existing knowledge and skills they have acquired to new technology skills. There are various ways to enter the technology industry, such as in IT support, … Read more
Read MoreCalculate percentage from obtained marks and total marks.
Welcome 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....
Fresh educational articles and updates.
Most-read articles from SaralStudy.
Fast access to frequently used study resources.
Recently viewed articles based on SaralStudy activity.
Add Comment