DK Goel Solutions Chapter 1 Financial Statements of Companies

Read below DK Goel Solutions for Class 12 Chapter 1 Financial Statements of Companies. These solutions have been designed based on the latest Class 12 DK Goel Accountancy book used by commerce stream students issued for the current year and the questions given in each chapter.

In this chapter, students will understand the different types of financial statements of a company. it is important for the students to get a detailed understanding of different types of statements that are prepared at the end of the accounting period based on which the overall financial position of a company is understood. these financial statements are being used by people who run the company as well as various other stakeholders. students should understand this chapter very carefully as this will help them in long run.

The chapter contains a lot of questions which can be very helpful for Class 12 commerce students of Accountancy and will also help build strong concepts which will be really helpful in your career. These solutions are free and will help you to prepare for Class 12 Accountancy. Just scroll down and read through the answers provided below

Financial Statements of Companies DK Goel Class 12 Accountancy Solutions

Short Answer Questions

Question 1

Solution 1

Point for Students:-
As per Section 2(41) of the Companies Act, 2013, all companies are required to have a uniform financial year which shall be a period from 1st April to 31st March every year. Only companies which are a holding or subsidiary of a foreign company required to follow different financial year for the purpose of consolidation of its accounts outside India may apply to the Tribunal for a different financial year.

Question 2.

Solution 2

Point for Students:-
As per Section 2 (40) of the Companies Act, 2013, ‘Financial Statements’ in relation to a Company, include the following:
(i) A balance sheet as at the end of the financial year.
(ii) A statement of profit and loss for the financial year.
(iii) Cash flow statement for the financial year.
(iv) A statement of changes in equity, if applicable.
(v) Explanatory notes.

Question 3.

Solution 3

Point for Students:-
Financial statements are related to past period and hence are historical documents. They are expressed in terms of money. Financial statement shows profitability through Statement of Profit and Loss and financial position through Balance Sheet.

Question 4.

Solution 4

Question 5.

Solution 5

Question 6.

Solution 6

Question 7

Solution 7

Question 8

Point of Student:-
As per Schedule-III: “An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. Where the normal operating cycle cannot be identified, it is assumed to have duration of 12 months.”

Question 9

Solution 9

DK Goel Solutions Chapter 1 Financial Statements of Companies

Point for Students:-

There is distinction between ‘Reserves’ and ‘Provision’. Reserves means accumulated profits and it is created to strengthen the financial position of the Company and to meet unforeseen liabilities and losses.

‘Provision’ is an amount provided for any known liability whose amount as yet is uncertain. Provision is made to meet a specific liability of which the amount cannot be determined with substantial accuracy. Provision is also made for known losses such as ‘Provision for Depreciation’.

Question 10

Solution 10 Both will be classified under ‘Shareholder’s Funds’.

Question 11 A (new)

Solution A 11 (new) (i) Outstanding Salary shows in Current Liabilities under Other Current Liabilities.
(ii) Bank Balance shows in Current Assets under Cash and Cash Equivalents.
(iii) Unpaid Matured Deposits shows in Current Liabilities under Other Current Liabilities.
(iv) Preliminary Expenses not shown in balance sheet.
(v) Bills Payable shows in Current Liabilities under Trade Payables.

Question 11 B (new)

Solution 11 i) Patents and Trade Marks shows in Non-current assets under fixed assets (intangible assets).
(ii) Income Received in Advance shows in Current liabilities under Other current Liabilities.
(iii) Debentures issued by the Company shows in Non-Current Liabilities under Long-term Borrowing.
(iv) Stores and Spare-parts shows in Current Assets under Inventories.
(v) Motor Vehicles show in Non-Current Assets under Fixed Assets (Tangible Assets).
(vi) Forfeited Shares Account shows in Shareholder’s Fund added to Subscribed Capital.
(vii) Government Securities shows in Non-Current Assets under Non-Current Investments.
(viii) Uncalled Liabilities on Partly paid shares shows in Commitments in notes to accounts.

Question 11

Solution 11 The sub-headings under which Current Liabilities shall be classified in a Company’s Balance Sheet are:
i. Short term Borrowing
ii. Trade Payable
iii. Other Current Liability
iv. Short Term Provision

Question 12 (new)

Solution 12 (new)

Question 12

Solution 12 (i) Items:- Unclaimed Dividend
Major-Heading:- Current liabilities
Sub-Heading:- Other Current Liabilities

(ii) Items:- Proposed dividend
Major-Heading:- Contingent Liabilities in notes to accounts

(iii) Items:- Security Premium Reserve
Major-Heading:- Shareholder’s Fund
Sub-Heading:- Reserve and Surplus

(iv) Items:- Share forfeited Account
Major-Heading:- Shareholder’s Fund added to ’Subscribed Capital

(v) Items:- Public Deposits
Major-Heading:- Non-Current Liabilities
Sub-Heading:- Long -Term Liabilities

(vi) Items:- Debentures
Major-Heading:- Non-Current Liabilities
Sub-Heading:- Long Term provision

(vii) Items:- Bills discounted but not matured
Major-Heading:- Contingent Liabilities in notes to accounts

Question 13 (new)

Solution 13 (new)

Question 13

Solution 13 (i) Items:- Shares options outstanding Account
Major-Heading:- Shareholder’s Fund
Sub-Heading:- Reserve and Surplus

(ii) Items:- Excess Application money due for refund
Major-Heading:- Current liabilities
Sub-Heading:- Other Current Liabilities

(iii) Items:- GST payable
Major-Heading:- Current Liabilities
Sub-Heading:- Other Current Liabilities

(iv) Items:- Debenture redemption
Major-Heading:- Reserve Shareholder’s Fund
Sub-Heading:- Reserve and Surplus

(v) Items:- Premium Payable on Redemption of debentures
Major-Heading:- Non-Current Liabilities
Sub-Heading:- Other Long -Term Liabilities

(vi) Items:- Provision for Gratuity
Major-Heading:- Non-Current Liabilities
Sub-Heading:- Long Term provision

(vii) Items:- Outstanding Expenses
Major-Heading:- Current Liabilities
Sub-Heading:- Other Current Liabilities

Question 14 (new)

Solution 14 (new)

Question 14

Point of Student:-

As per Schedule-III: “An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. Where the normal operating cycle cannot be identified, it is assumed to have duration of 12 months.”

Question 15 (new)

Solution 15 (new)

Question 15.

Point for Students:-
As per Section 2 (40) of the Companies Act, 2013, ‘Financial Statements’ in relation to a Company, include the following:

(i) A balance sheet as at the end of the financial year.
(ii) A statement of profit and loss for the financial year.
(iii) Cash flow statement for the financial year.
(iv) A statement of changes in equity, if applicable.
(v) Explanatory notes.

Question 16 (new)

Solution 16 (new)

Question 16.

Solution 16. Sub-Headings Under Current Assets: Current Investment
Inventories
Trade receivables
Cash and cash equivalents
Short-term loans and advances

Question 17 A (new)

Solution 17 A (new)

Question 17 B (new)

Solution 17 B (new)

Question 17.

Solution 17

Point for Students:-

As per Section 2(41) of the Companies Act, 2013, all companies are required to have a uniform financial year which shall be a period from 1^st April to 31^st March every year. Only companies which are a holding or subsidiary of a foreign company required to follow different financial year for the purpose of consolidation of its accounts outside India may apply to the Tribunal for a different financial year.

Question 18 (new)

Solution 18 (new)

Question 18

Solution 18
Revenue from Operations:
Sales
Revenue from services rendered

Other Income:
Interest on Loans given,
Divided income,
Sale of miscellaneous items
Refund of income tax.

Question 19 (new)

Solution 19 (new)

Question 19

Solution 19
i. Revenue from Operations:
ii Revenue from serviced rendered
iii. Interest on loan given
vi. Dividend income

Other Income:
Refund on income tax
Sale of miscellaneous items

Question 20 (new)

Solution 20 (new)

Question 20

Question 20 (new)

Solution 21 (new)

Question 21

Solution 21

Question 22 (new)

Solution 22 (new)

Question 22

Solution 22

Question 23 (new)

Solution 23 (new)

Question 23

Question 24 (new) Show the following items in a company’s Balance Sheet as at 31st, March,2017:
Particular Rs.
i. Deferred Tax Assets 2,00,000
ii. Loose Tools 1,20,000
iii. Goods in Transit 5,00,000
iv. Prepaid Expenses 15,000
v. Interest Accrued on investments 10,000
Solution 24 (new)

Question 24

Question 25 (new)

Solution 25 (new) Revenue from Operations: Sales and Revenue from services rendered
Other Income: Interest on Loans given, Divided income, Sale of miscellaneous items and Refund of income tax.

Question 25

Solution 25
Employee Benefit Expenses:
i. Salaries
ii. Medical Expenses
iv. Gratuity paid
vi. Contribution on provident fund.

Point for Students:-
Financial statements are related to the past periods and hence are historical documents. They are expressed in terms of money. The financial statement shows profitability through Statement of Profit and Loss and financial position through Balance Sheet.

Question 26 (new)

Solution 26 (new) Revenue from Operations: Revenue from serviced rendered, Interest on loan given, and Dividend income
Other Income: Refund on income tax and Sale of miscellaneous items.

Question 26

Question 27 (new)

Solution 27 (new)

Question 27

Solution 27
The following items shown in the Notes of Accounts on Finance Costs:
i. Interest paid in bank overdraft
ii. Interest paid on borrowings
iii. Deposit on issue of debentures written off
iv. Interest paid on term loan

Point for Students:-
Financial statements are related to the past periods and hence are historical documents. They are expressed in terms of money. The financial statement shows profitability through the Statement of Profit and Loss and financial position through the Balance Sheet.

Question 28 (new)

Solution 28 (new)

Question 28

Question 29 (new)

Solution 29 (new) Cost of Material Consumed: Rs.
Opening Inventory: Materials 4,20,000
Add: Material Purchased 20,00,000
24,20,000
Less: Closing Inventory of Material 3,80,000
20,40,000

Question 29

Solution 29 Below are the items will be shown in the notes of accounts on ‘other expense’:-
i. Consumptions of loose tools
iv. Courier expenses
v. Carriage outwards
vi. Discount allowed
vii. Bank Charges
viii. Rent for Warehouse

Question 30 (new)

Solution 30 (new)

Rs. 3,90,000 will be shown in the Statement of profit and Loss Against change in inventories.

Question 30

Solution 30 (i) Items:- Loss processing charges
Major-Heading:- Finance Costs

(ii) Items:- Sale of products
Major-Heading:-Revenue from Operations

(iii) Items:- Leave encashment expenses
Major-Heading:-Employee Benefit Expenses

(iv) Items:- Courier expenses
Major-Heading:-Other Expenses

(v) Items:- Computer software amortized
Major-Heading:-Depreciation and amortization exp.

(vi) Items:- Interest on cash credit
Major-Heading:-Finance costs

(vii) Items:- Materials purchased
Major-Heading:-Cost of Materials Consumed

Question 31 (new)

Solution 31 (new)

Question 31

Solution 31 (i) Item:- Loss on issue of debentures written off
Major Head:- Finance Costs

(ii) Item:- Dividend received
Major Head:- Other Income

(iii) Item:- Sale of services
Major Head:- Revenue from Operations

(iv) Item:- Contribution of gratuity fund
Major Head:- Employee Benefit Expenses

(v) Item:- Medical expenses
Major Head:- Employee Benefit Expenses

(vi) Item:- Bank charges
Major Head:- Other Expenses

(vii) Item:- Carriage outwards
Major Head:- Other Expenses

(viii) Item:- Bad-Debts written off
Major Head:- Other Expenses

Question 32 (new)

Solution 32 (new) Employee Benefit Expenses:
i. Salaries
ii. Medical Expenses
iv. Gratuity paid
vi Contribution on provident fund.

Question 32

Solution 32 (i) Items:- Commission paid for deposit mobilization
Major-Heading:- Finance Costs

(ii) Items:- Dividend received
Major-Heading:- Revenue from Operations

(iii) Items:-Refund of income tax
Major-Heading:-Other Income

(iv) Items:-Lease rent
Major-Heading:-Other Expenses

(v) Items:-Gain on sale of investments
Major-Heading:-Revenue from Operations

(vi) Items:-Expenses on employee’s stock option scheme
Major-Heading:-Employee Benefit Expenses

(vii) Items:-Audit fee
Major-Heading:-Other Expenses

(viii) Items:-Premium payable on redemption of debentures written off
Major-Heading:-Finance Costs

Question 33 A (new)

Solution 33 A (new)

Question 33 (A)

Solution 33 (A)
1. Outstanding salary: Current Liabilities under other Current Liabilities
2. Bank balance: Current Assets under cash and cash Equivalents.
3. Unpaid matured deposits: Current Liabilities under Other Current Liabilities.
4. Preliminary expenses: Not Shown in Balance Sheet since they are written off in the same year.
5. Bills payable: Current Liabilities under Trade payables
6. Sale of services: Revenue from Operations.
7. Goodwill written off: Depreciation and Amortization Expenses.
8. Medical Expenses: Employee Benefit Expenses.

Question 33 (B)

Solution 33 (B) i. Patents and Trade Marks
Major- Heading: Non-Current Assets
Sub-Heading: Fixed Assets- Intangible Assets

ii. Income Received in Advance
Major- Heading: Current Liabilities
Sub-Heading: Other Current Liabilities

iii. Debentures issued in Advance
Major- Heading: Non-Current Liabilities
Sub-Heading: Long Term Borrowings

iv. Stores and Spare-parts
Major- Heading: Current Assets
Sub-Heading: Inventories

v. Motor vehicles
Major- Heading: Non-Current Assets
Sub-Heading: Fixed Assets- Tangible Assets

vi. Forfeited Shares Account
Major- Heading: Shareholder’s Funds; added to ‘Subscribed Capital’

vii. Government Securities
Major- Heading: Non-Current Assets
Sub-Heading: Non-Current Investments

viii. Uncalled Liabilities on Partly paid shares.
Major- Heading: Commitment (to be shown in Notes to Accounts)

Question 34 (new)

Solution 34 (new) Finance Cost:
i. Interest paid in bank overdraft
ii. Interest paid on borrowings
iii. Deposit on issue of debentures written off
iv. Interest paid on term loan

Question 34

Solution 34 i) Balance of the Statement of Profit and Loss
Major-Heading:- Shareholder’s Fund
Sub-Heading:- Reserve and Surplus

ii) Loan of Rs. 1,00,000 payable after three years
Major-Heading:- Shareholder’s Fund
Sub-Heading:- Reserve and Surplus

iii) Short term deposits payable on demand
Major-Heading:- Current Liabilities
Sub-Heading:- Short Term Borrowings

iv) Loose tools
Major-Heading:- Current Assets
Sub-Heading:- Inventories

v) Trade mark
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets – Intangible

vi) Land
ajor-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets -Tangible

vii) Cash at bank
Major-Heading:- Current Asset
Sub-Heading:- Cash and Cash Equivalents

viii) Trade Payable
Major-Heading:- Current Liabilities
Sub-Heading:- Trade Payables

Question 35 (new)

Solution 35

Finance Cost Rs. 6,86,000 (Interest Exp. RS. 6,50,000 plus Other Borrowing Costs Rs. 36,000)

Question 35

Solution 35 i) Public deposits
Major-Heading:- Non- Current Liabilities
Sub-Heading:- Long Term Borrowings

ii) Sinking fund
Major-Heading:- Shareholder Funds’
Sub-Heading:- Reserve and Surplus

iii) Office equipment
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets-Tangible Assets

iv) Prepaid expenses
Major-Heading:- Current Assets
Sub-Heading:- Other Current Assets

v) Outstanding salaries
Major-Heading:- Current Liabilities
Sub-Heading:- Other Current Liabilities

vi) Motor car
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets-Tangible Assets

Question 36 (new)

Solution 36 (new) Other Expenses:
i. Consumptions of loose tools
iv. Courier expenses
v. Carriage outwards
vi. Discount allowed
vii. Bank Charges
viii. Rent for Warehouse

Question 36

Solution 36 i) Loose tools
Major-Heading:- Current Assets
Sub-Heading:- Inventories

ii) Unpaid dividend
Major-Heading:- Current liabilities
Sub-Heading:- Other Current Liabilities

iii) Copyrights and patents
Major-Heading:-Current Assets
Sub-Heading:- Fixed Assets-Intangible Assets

iv) Land and building
Major-Heading:-Non-Current Assets
Sub-Heading:- Fixed Assets-Tangible Assets

Question 37 (new)

Solution 37 (new)

Question 37. Classify the following items under Major Head and Sub- Head in the Balance Sheet of a company as per schedule III part I of the companies Act, 2013/
i. Capital Work in Progress
ii. Provision for Warranties
iii. Income received in advance
iv. Capital Advances
v. Capital Reserve
vi. Bank Overdraft
Solution 37 i) Capital Work in Progress
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets

ii) Provision for Warranties
Major-Heading:- Non-Current liabilities
Sub-Heading:- Long Term Provision

iii) Income received in advance
Major-Heading:- Current Liabilities
Sub-Heading:- Other Current Liabilities

iv) Capital Advances
Major-Heading:- Non-Current Assets
Sub-Heading:- Long Term Loan and Advances

v) Capital Reserve
Major-Heading:- Shareholder’s Find
Sub-Heading:- Reserve and Surplus

vi) Bank Overdraft
Major-Heading:- Current Liabilities
Sub-Heading:- Short Term Borrowings

Question 38 (new)

Solution 38 (new)

Question 38.

Solution 38 i) Capital Reserve
Sub-Heading:- Reserve and Surplus

ii) Bonds
Sub-Heading:- Long term Borrowing

iii) Loans repayable on demand
Sub-Heading:- Short term borrowing

iv) Vehicles
Sub-Heading:- Fixed Assets- Tangible Assets

v) Goodwill
Sub-Heading:- Fixed Assets -Intangible Assets

vi) Loose tools
Sub-Heading:- Inventories

Question 38 A (new)

Solution 39 A (new)

Question 39 (A)

Solution 39 (A) i) Computer Software
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets-Intangible Assets

ii) Bills Receivable
Major-Heading:- Current Assets
Sub-Heading:- Trade Receivables

iii) Interest Accrued and Due on Debentures
Major-Heading:- Current Liabilities
Sub-Heading:- Other Current Liabilities

iv) Interest Accrued on Investments
Major-Heading:- Current Assets
Sub-Heading:- Other Current Assets

v) Calls in Arrears
Major-Heading:- Deducted from Subscribed but not fully paid Capital under the head ‘Shareholder’s Funds’

vi) Discount on Issue of Debentures written off
Major-Heading:- Financial Costs

vii) Fees received for arranging loans
Major-Heading:- Other Incomes

viii) Telephone and Internet Exp.
Major-Heading:- Other Expenses

Question 39 (B)

Solution 39 (B) (i) Authorized Capital
Heading:- Shareholder’s Fund under Share Capital to be shown only in the notes to Accounts

(ii) Share Forfeiture Account
Heading:- Shareholder’s Fund Added to ‘Subscribed Capital’

(iii) Capital Reserve
Heading:- Shareholder’s Fund under reserve and Surplus

(iv) Secured Debentures
Heading:- Non-Current Liabilities under Long Term Borrowing

(v) Provision for Tax
Heading:- Current Liabilities Under Short Term Provision

(vi) Trade Payable written back
Heading:- Other Income

(vii) Loan Processing Charges
Heading:- Finance Costs

Question 40 (new)

Solution 40 (new) These five items shown under Reserve and Surplus are:
i. Capital Reserves;
ii. Securities Premium Reserve;
iii. Debenture Redemption Reserve;
iv. Revaluation Reserve;
v. Capital Redemption Reserve

Question 40

Solution 40 i) Mining Rights
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets-Intangible Assets

ii) Debtors
Major-Heading:- Current Assets
Sub-Heading:- Trade Receivables

iii) Interest on Calls in Advance
Major-Heading:- Current Liabilities
Sub-Heading:- Other Current Liabilities

iv) Working in progress
Major-Heading:- Current Assets
Sub-Heading:- Inventories

v) Mortgage Loan
Major-Heading:- Non-Current Liabilities
Sub-Heading:- Long-term Borrowings

vi) Bonds
Major-Heading:- Non-Current Liabilities
Sub-Heading:- Long term Borrowings

Question 41 (new)

Solution 41 (new)

Question 41

Solution 41 i) Credit Balance of Statement of profit & loss
Major-Heading:- Shareholder’s Fund
Sub-Heading:- Reserve & Surplus

ii) Discount on issue/loss on issue of debentures (to be amortized in the next 12 months)
Major-Heading:- Current Assets
Sub-Heading:- Other Current Assets

iii) Employees earned leave payable on retirement
Major-Heading:- Non-Current Liabilities
Sub-Heading:- Long Term Provision

iv) Provision for provident fund scheme
Major-Heading:- Non- Current Liabilities
Sub-Heading:- Long term provision

v) Provision for employee benefits
Major-Heading:- Current Liabilities
Sub-Heading:- Short Term Provision

vi) Provision for doubtful debts
Major-Heading:- Current Liabilities
Sub-Heading:- Short Term Provision

vii) Contracts remaining to be executed
Major-Heading:- Commitment (it is shown in Notes to Accounts)

Question 42 (new)

Solution 42 (new) Other Current Assets Other Current Liabilities
Unpaid dividend Prepaid expenses
Interest accrued and due Accrued income
Income received in advance Advance taxes
Calls in Advance

Question 42.

Solution 42 i) Stores and spares
Major-Heading:- Current Assets
Sub-Heading:- Inventories

ii) Debentures due for redemption
Major-Heading:- Current Liabilities
Sub-Heading:- Other Current Liabilities

iii) Live stock
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets-Tangible Assets

iv) Intellectual property rights
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets-Intangible Assets

v) Advance from customers
Major-Heading:- Current Liabilities
Sub-Heading:- Other Current Liabilities

vi) Advance to suppliers
Major-Heading:- Current Assets
Sub-Heading:- Other Current Assets

vii) Commission received in Advance
Major-Heading:- Current Liabilities
Sub-Heading:- Other Current Liabilities

Question 43 (new)

Solution 43 (new)

Question 43

Solution 43
i) Plant and Machinery
Major-Heading:- Non-Current Assets

ii) Building
Major-Heading:- Non-Current Assets

iii) Equity Share Capital (Authorized)
Major-Heading:- Shareholder’s Fund

iv) Equity shares of Rs, 100 per share Rs. 70 called and paid up
Major-Heading:- Shareholder’s Fund

v) 10% Debentures
Major-Heading:- Non-Current Liabilities

vi) Furniture and Fixtures
Major-Heading:- Non-Current Assets

vii) Long term bank loan (secured)
Major-Heading:- Non-Current Liabilities

Question 44 (new)

Solution 44 (new) Rs. 45,00,000 as Long term Borrowings
Rs. 15,00,000 as Other Current Liabilities

Question 44

Solution 44 These five items shown under Reserve and Surplus are:
i. Capital Reserves;
ii. Capital Redemption Reserve
iii. Securities Premium Reserve;
iv. Debenture Redemption Reserve;
v. Revaluation Reserve;

Point for Students:-
Share Options Outstanding Account: It is a form of employee compensation wherein employees are offered an option to apply and get allotment of Company’s shares at a future date at a specified price which is usually sufficiently below the market price of the share.

Question 45 (new)

Solution 45 (new)

Question 45

Solution 45 i) Preliminary Expenses
Major-Heading:- Not shown in the Balance Sheet as these expenses are written off in the same year.

ii) Discount on Issue of Debentures
Major-Heading:- Current/Non-Current Assets
Sub-Heading:- Other Current/Non-Current Assets

iii) 10% debentures
Major-Heading:- Non-Current Liabilities
Sub-Heading:- Long Term Borrowing

iv) Stock -in -trade
Major-Heading:- Current Assets
Sub-Heading:- Inventories

v) Cash at Bank
Major-Heading:- Current Assets
Sub-Heading:- Cash and Cash Equivalents

vi) Bills Receivable
Major-Heading:- Current Assets
Sub-Heading:- Trade Receivables

vii) Goodwill
Major-Heading:- Non- Current Assets
Sub-Heading:- Fixed Assets-Intangible Assets

viii) Loose Tools
Major-Heading:- Current Assets
Sub-Heading:- Inventories

ix) Horses and Carts
Major-Heading:- Non- Current Assets
Sub-Heading:- Fixed Assets-Tangible Assets

x) Motor Truck
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets-Tangible Assets

xi) Provision for Taxation
Major-Heading:- Current Liabilities
Sub-Heading:- Short Term Provisions

xii) Sundry Creditors
Major-Heading:- Current Liabilities
Sub-Heading:- Trade Payables

Question 46

Question 47

Point for Students:-
There is distinction between ‘Reserves’ and ‘Provision’. Reserves means accumulated profits and it is created to strengthen the financial position of the Company and to meet unforeseen liabilities and losses.
‘Provision’ is an amount provided for any known liability whose amount as yet is uncertain. Provision is made to meet a specific liability of which the amount cannot be determined with substantial accuracy. Provision is also made for known losses such as ‘Provision for Depreciation’.

Question 48 Show the following items in a company’s Balance Sheet as at 31st, March,2017:

Question 49

Solution 49 Long Term Borrowings RS. 60,00,000 Other Current liabilities Rs. 25,75,000.

Question 50

Solution 50 i) Consumption of Loose Tools
Major-Heading:- Other Expenses

ii) Sale of Services
Major-Heading:- Revenue from Operations

iii) Trade Marks written off
Major-Heading:- Depreciation and Amortization Exp.

iv) Trade Payable written off
Major-Heading:- Other Income

v) Canteen Expenses
Major-Heading:- Employee Benefit Expenses

vi) Purchase of Stock in Trade
Major-Heading:- Purchase of stock in Trade

vii) Courier Charges
Major-Heading:- Other Expenses

viii) Revenue from Project Consultancy
Major-Heading:- Other Income

ix) Computer Hiring Charges
Major-Heading:- Other Expenses

x) Commitment Charges
Major-Heading:- Finance Cost

Question 51

Solution 51 i) Loans provided repayable on demand
Major-Heading:- Current Liabilities
Sub-Heading:- Short-term Borrowing

ii) Goodwill
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets- Intangible Assets

iii) Copyrights and Patents
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets- Intangible Assets

iv) Cheques
Major-Heading:- Current Assets
Sub-Heading:- Cash and Cash Equivalents

v) General Reserve
Major-Heading:- Shareholder’s Fund
Sub-Heading:- Reserves and Surplus

vi) Goods acquired for trading and
Major-Heading:- Current Assets
Sub-Heading:- Inventories

vii) 9% Debentures repayable after three years
Major-Heading:- Non- Current Liabilities
Sub-Heading:- Long–term Borrowing

Question 52

Solution 52

Question 53

Solution 53 i) Bank overdraft
Major-Heading:- Current Liabilities
Sub-Heading:- Short-term Borrowing

ii) Draft in hand
Major-Heading:- Current Assets
Sub-Heading:- Cash and Cash Equivalents

iii) Trade Marks
Major-Heading:- Non-Current Assets
Sub-Heading:- Fixed Assets- Intangible Assets

iv) Long-Term Provision
Major-Heading:- Non-Current Liabilities
Sub-Heading:- Long -term provision

v) Calls in Advance
Major-Heading:- Current Liabilities
Sub-Heading:- Other current Liabilities

vi) Interest on Calls in Advance
Major-Heading:- Current Liabilities
Sub-Heading:- Other current liabilit

DK Goel Solutions Class 12th Chapter 1 Financial Statements of a Company

What do you mean by the financial statements of companies?

The company’s financial statement is basically the output of the accounting process and generally designed after the company’s accounting period. The financial statements reveal the company’s financial position and allow them to have a clear picture of the end products of their financial decisions.

What do the financial statements of companies include?

The financial statements of the companies primarily constitute of four fundamental components, which are –
● Balance Sheet or Position Statement of the company
● A statement of profit and loss of the company during the accounting period.
● Notes to Accounts.
● Cash Flow Statement.

What is a balance sheet?

A balance sheet is an official statement that depicts clear information about the assets, liabilities, and equities of a company. It is basically a document that depicts the financial position of the company at a specific time span. The balance sheet is a key element of the financial statement of a company, and it gives an in-depth picture of the company’s financial status.

Write the limitations of financial statements?

Here are some of the limitations of the financial statements –
● Financial Statements only present the quantitative data of the transactions. It does not highlight any qualitative aspect of the transaction like size, quality, or capabilities.
● Financial Statements portray the pre-defined price of the products or services. It fails to quote any modifications in the price. Thereby giving no data about the current price.
● Financial Statements are designed by humans. Therefore, it may contain errors.

State the primary objectives of the financial statements of a company?

Here is the sole objective of the financial statements –
● The financial statement is one of the most reliable sources for companies to understand their financial positions. It periodically supplies the companies with updated financial data.
● It portrays all details about the financial status of the companies, including profitability, liquidity, etc.
● Financial Statements evaluate the estimated earning capacity of the companies.

How are the financial statements important for the shareholders of the company?

Financial Statements are extremely fruitful for the shareholders as it allows them to understand the profit-making capacity of the firm. It supplies them with the most accurate information to grasp the company’s financial status, helping them make better business decisions.

Also refer to TS Grewal Solutions for Class 12

DK Goel Solutions

DK Goel Solutions Chapter 1 Financial Statements of Companies

Financial Statements of Companies DK Goel Class 12 Accountancy Solutions

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