Class 11 Accountancy - Chapter Financial Statements - 1 NCERT Solutions | What are financial statements? What info
What are financial statements? What information do they provide.
Financial statements are those statements which are prepared for reporting to the decision-maker on the basis of trial balance containing balances of ledger accounts.
These are prepared to throw light on the financial results of operation of business during the period under consideration and the financial position at the end of the period.
In financial accounting through financial statement profit is measured in two stages, i.e. Gross profit and Net profit.
To ascertain the gross profit, trading account is prepared and to ascertain the net profit, P&L account is prepared. To report on the financial position of a business enterprise, its assets, liabilities and owner's equity balance sheet is prepared. Financial statements are the statements, which present periodic reports on the process of business enterprises and the results achieved during a given period. Financial statements include Trading and Profit and Loss account, balance sheet and other statements and explanatory notes, which form part thereof. Information provided by financial statements is useful to management to plan and control the business operations. Financial statements are also useful to creditors, shareholders and employees of the enterprise.
Information Provided by Financial Statements
Trading and Profit and Loss accounts present a true and fair view of the financial performance of the business in the form of profit or loss during the year. Balance sheet presents a true and fair view of the financial position of the business.
More Questions From Class 11 Accountancy - Chapter Financial Statements - 1
- Q:-
Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure :
(a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
(c) Registration fees paid at the time of purchase of a building.
(d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
(e) Depreciation charged on a plant.
(f) The expenditure incurred in erecting a platform on which a machine will be fixed.
(g) Advertising expenditure, the benefits of which will last for four years. - Q:-
Choose the correct chronological order of ascertainment of the following profits from the profit and loss account :
(i) Operating Profit, Net Profit, Gross Profit
(ii) Operating Profit, Gross Profit, Net Profit
(iii) Gross Profit, Operating Profit, Net Profit
(iv) Gross Profit, Net Profit, Operating Profit - Q:-
What is meant by Grouping and Marshalling of assets and liabilities. Explain the ways in which a balance sheet may be marshalled.
- Q:-
Match the items given under ‘A’ with the correct items under ‘B’
(i) Closing stock is credited to (a) Trial balance
(ii) Accuracy of book of account is tested by (b) Trading account
(iii) On returning the goods to seller, the buyer sends (c) Credit note
(iv) The financial position is determined by (d) Balance sheet
(v) On receiving the returned goods from the (e) Debit note
buyer, the seller sends - Q:-
While calculating operating profit, the following are not taken into account.
(i) Normal transactions
(ii) Abnormal items
(iii) Expenses of a purely financial nature
(iv) (ii) & (iii)
(v) (i) & (iii) - Q:-
Choose the correct option in the following questions :
The financial statements consist of:
(i) Trial balance
(ii) Profit and loss account
(iii) Balance sheet
(iv) (i) & (iii)
(v) (ii) & (iii) - Q:-
State True or False :
(i) Gross profit is total revenue.
(ii) In trading and profit and loss account, opening stock appears on the debit side because it forms the part of the cost of sales for the current accounting year.
(iii) Rent, rates and taxes is an example of direct expenses.
(iv) If the total of the credit side of the profit and loss account is more than the total of the debit side, the difference is the net profit. - Q:-
What are closing entries? Give four examples of closing entries.
- Q:-
Which of the following is correct :
(i) Operating Profit = Operating profit – Non-operating expenses – Non-operating incomes
(ii) Operating profit = Net profit + Non-operating Expenses + Non-operating incomes
(iii) Operating profit = Net profit + Non-operating Expenses – Non-operating incomes
(iv) Operating profit = Net profit – Non-operating Expenses + Non-operating incomes - Q:-
Explain the concept of cost of goods sold?
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