12th Accountancy - Book Back Answers - Unit 8 - English Medium Guides

  

 

12th - Accountancy - Book Back Answers -  Unit 8 - English Medium

Tamil Nadu Board 12th Standard Accountancy - Unit 8: Book Back Answers and Solutions

    This post covers the book back answers and solutions for Unit 8 –  from the Tamil Nadu State Board 12th Standard Accountancy textbook. These detailed answers have been carefully prepared by our expert teachers at KalviTips.com.

    We have explained each answer in a simple, easy-to-understand format, highlighting important points step by step under the relevant subtopics. Students are advised to read and memorize these subtopics thoroughly. Once you understand the main concepts, you’ll be able to connect other related points with real-life examples and confidently present them in your tests and exams.

    By going through this material, you’ll gain a strong understanding of Unit 8 along with the corresponding book back questions and answers (PDF format).

Question Types Covered:

• 1 Mark Questions: Choose the correct answer, 
• 2 Mark Questions: Very Short Answer Questions
• 3, 4, and 5 Mark Questions: Short Answer Questions, Excercises
  

All answers are presented in a clear and student-friendly manner, focusing on key points to help you score full marks.

All the best, Class 12th students! Prepare well and aim for top scores. Thank you!

Topic: Unit 8 : Financial Statement Analysis

I. Choose the correct Answer

Question 1.
Which of the following statements is not true?
(a) Notes and schedules also form part of financial statements
(b) The tools of financial statement analysis include common – size statement
(c) Trend analysis refers to the study of movement of figures for one year
(d) The common – size statements show the relationship of various items with some common base, expressed as percentage of the common base
Answer Key:
(c) Trend analysis refers to the study of movement of figures for one year

Question 2.
Balance sheet provides information about the financial position of a business concern ………………
(a) Over a period of time
(b) As on a particular date
(c) For a period of time
(d) For the accounting period
Answer Key:
(b) As on a particular date

Question 3.
Which of the following tools of financial statement analysis is suitable when data relating to several years are to be analyzed?
(a) Cash flow statement
(b) Common size statement
(c) Comparative statement
(d) Trend analysis
Answer Key:
(d) Trend analysis
 
Question 4.
The financial statements do not exhibit ………………
(a) Non – monetary data
(b) Past data
(c) Short term data
(d) Long term data
Answer Key:
(a) Non – monetary data

Question 5.
Which of the following is not a tool of financial statement analysis?
(a) Trend analysis
(b) Common size statement
(c) Comparative statement
(d) Standard costing
Answer Key:
(d) Standard costing

Question 6.
The term ‘fund’ refers to ………………
(a) Current liabilities
(b) Working capital
(c) Fixed assets
(d) Non – current assets
Answer Key:
(b) Working capital

Question 7.
Which of the following statements is not true?
(a) All the limitations of financial statements are applicable to financial statement analysis also.
(b) Financial statement analysis is only the means and not an end.
(c) Expert knowledge is not required in analysing the financial statements.
(d) Interpretation of the analysed data involves personal judgement.
Answer Key:
(c) Expert knowledge is not required in analysing the financial statements

Question 8.
A limited company’s sales has increased from ? 1,25,000 to? 1,50,000. How does this appear in comparative income statement?
(a) + 20%
(b) + 120%
(c) – 120 %
(d) – 20 %
Answer Key:
(a) + 20 %
 
Question 9.
In a common-size balance sheet, if the percentage of non – current assets is 75, what would be the percentage of current assets?
(a) 175
(b) 125
(c) 25
(d) 100
Answer Key:
(c) 25

Question 10.
Expenses of a business for the first year were RS 80,000. In the second year, it was increased to RS 88,000. What is the trend percentage in the second year?
(a) 10%
(b) 110%
(c) 90%
(d) 11%
Answer Key:
(b) 110 %

II.Very short answer questions

1.   What are financial statements?

• Financial statements are the statements prepared by the business concerns at the end of the accounting period to ascertain the operating results and the financial position.

 

2.   List the tools of financial statement analysis.

• Comparative statement
• Common-size statements
• Trend analysis
• Funds flow analysis

 

 3.   What is working capital?

•  The term ‘fund’ refers to working capital. Working capital refers to the excess of current assets over current liabilities.
• Working capital = current assets – current liabilities

 

  

4.   When is trend analysis preferred to other tools?

•  Trend refers to the tendency of movement. Trend analysis refers to the study of movement of figures over a period.
•  The trend may be increasing trend or decreasing trend or irregular.
•  When data for more than two years are to be analysed, it may be difficult to use comparative statement.

 

 

III. Short answer questions 

1. Financial statements are prepared based on the past data. Explain how this is a limitation.

• All the limitations of financial statements such as ignoring non-monetary information, ignoring price level changes, etc.,
• Financial statement analysis is only the means and not an end, that is, it is only a tool in the hands of management and other shareholders.
• Expert knowledge is required in analysing the financial statements.

 

2. Write a short note on cash flow analysis.

• Cash flow analysis is concerned with preparation of cash flow statement which shows the inflow and outflow of cash and cash equivalents in a given period of time.
• Cash includes cash in hand and demand deposits with banks.
• Cash f low analysis helps in assessing the liquidity and solvency of a business concern.

 

3. Briefly explain any three limitations of financial statements.

 

i)   Record of historical data:

• Financial statements are prepared based on historical data. They may not reflect the current position.

ii)   Limited access to external users:

• The external users do not have detailed and frequent information of financial results as they have limited access.

 iii)   Influenced by personal judgement:

• Preparation of financial statements may be influenced by personal judgements and therefore these are not free from bias.

 

4. Explain the steps involved in preparing comparative statement.

 

1	2	3	4	5
Particulars	Year 1 (Rs)	Year 2 (Rs)	Absolute       amount        of increase (+) or decrease (-)	Percentage increase (+) or decrease (-)

(or)

Column 1: In this column, particulars of items of income statement or balance sheet are written.
Column 2: Enter absolute amount of year 1.
Column 3: Enter absolute amount of year 2.
Column 4: Show the difference in amounts between year 1 and year 2. If there is an increase in year 2, put plus sign and if there is decrease put minus sign.
Column 5: Show percentage increase or decrease of the difference amount shown in column 4 by dividing the amount shown in column 4

5.   Explain the procedure for preparing common-size statement.

 

Particulars

Absolute Amount

Percentage

(or)

Column 1: In this column, particulars of items of income statement or balance sheet are written.
Column 2: Enter absolute amount.
Column 3: Choose a common base as 100.

 

IV. Excercises

12th Accountancy