CBSE Set Qa4 Accounts Sample Test Papers For Class 12th for students online

Accounts Class - XII (CBSE) 
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PART 'B' (ANALYSIS OF FINANCIAL STATEMENTS)

Q 10) What is meant by 'Analysis of Financial Statements'? Give its advantages. (Marks 6)
Ans. 10) Meaning of analysis of financial statements :
Analysis of financial statements is a study of relationships among the various financial factors in a business. It is an attempt to determine the meaning and significance of financial statement data so that the forecast may be made regarding future earnings, profitability and the likes. Thus it is such treatment to information disclosed in financial statement to afford a full diagnosis of profitability and financial position of the firm.

Advantages :
(i) To know the earning capacity : Financial analysis helps in ascertaining whether sufficient profits are being earned on capital invested in the business or not. Also, it discloses whether the profit is increasing or decreasing.
(ii) To know the solvency : It discloses whether the business is in a position to pay its short-term and long term liabilities in time.
(iii) To know the financial strength : It basically disclosed the total position of the business regarding its goodwill, internal finance system and the likes.
(iv) Comparative study with other firms : The comparative study of the profitability of various firms engaged in the same trade can be done to study the position of the firm in respect of sales, profitability and the likes.
(v) Capability to pay interest and dividend : The analysis helps to assess whether the firm will have sufficient profits to pay the interest in time and whether it has the capacity to pay the dividend in future at a higher ratio.

Q 11) State the significance and method of calculation of any two of the following :
(i) Current ratio              (ii) Operating ratio
(iii) Return on investment. (Marks 6)
Ans. 11 Significance and method of calculation :
(i) Current ratio : This ratio is used to assess the firms' ability meet its short term liabilities on time. The ideal ratio is 2 : 1. Less than this indicates lack of liquidity. Much higher ratio than 2 : 1 may indicate poor investment policies.
Method of calculating :
                   Current Assets 
                  Current Liabilities
Where, current assets : Those assets that can be converted in cash in a year's time, for example stock.
Current liabilities : that are repayable in a year, for example creditors.

(ii) Operating ratio : This is a measurement of efficiency and profitability of an enterprise. It indicates the extent of sales absorbed by cost of goods sold and operating expenses.

Method of calculating :
         Cost of goods sold + operating expenses x 100
                                Net sales
Where, cost of goods sold = Opening stock + Purchases + Direct expenses - Closing stock.
Operating expenses = Office and administration exp. + Selling and Distribution exp.
Lower the ratio, the better as it leaves higher margin of profit on sales.

(iii) Return on investment : This is a measure of the overall performance of the business enterprise. It measures how efficiently the capital employed in the business is being used. 

Method of calculating :
         Profit before Interest, tax and dividend  x 100
             Capital employed
Where, capital employed = Equity share capital + Preference share capital + Reserves + P/L + Long term loans - Fictitious assets - Non operating assets like investment
                                     Or
                 Fixed assets + Working capital.

Q 12) From the following details, calculate (i) Opening stock, (ii) Closing stock :
Stock turnover ratio 6 times. Gross profit 20% on sales. Sales Rs. 1,80,000. Closing stock is Rs. 15,000 in excess of opening stock. (Marks 3)
Ans. 12) Gross profit = 20% on sales.
                             = 20% (180000)
                             = 36000
Cost of goods sold = Sales - Gross profit
                             = 180000 - 36000
                             = Rs. 144000
Stock turnover ratio = Cost of goods sold
                                     Average Stock
6 = 144000
    Avg. stock
.^.. Average stock = 24000
or Cl. Stock + Opg. Stock = 48000
Also, Cl. Stock = Opg Stock + 15000
.^.. 48000 - Opg Stock = Opg stock + 15000
= 33000 = 2 opg Stock
or Opening Stock = 16500
Closing stock = 31500 (16500 + 15000)

Q13) On the basis of following information, calculate
(i) Gross profit ratio, (ii) Working capital turnover ratio, (iii) Debt equity ratio. (Marks 6)

Ans13) (i) Gross Profit Ratio = Gross Profit x 100
                                              Net Sales
Gross Profit = Net sales - Cost of goods sold
= 3000000 - 2000000
= 1000000
Thus, the ratio = 1000000 x 100
                         3000000
                      = 33 1/3%.

(ii) Working Capital Turnover Ratio =       Net Sales      
                                                   Net Working Capital
Working Capital  = Current Assets - Current Liabilities
                         = 600000 - 200000
                         = 400000
Thus, 3000000
         400000
= 7.5 times

(iii) Debt. Equity Ratio =  Long term debt.
                                   Shareholders funds
Long term debt. = Debentures + Loan
                        = 250000 + 125000
                        = 375000
Thus, 375000
         500000
= 3 : 4
Or 0.75 : 1

Q14) From the following Balance Sheet of Avinash Ltd., you are required to prepare.
(i) A statement of changes in working capital and (ii) Funds Flow Statement.

BALANCE SHEET

Additional information :
A piece of machinery costing Rs. 50,000 was sold for Rs. 30,000, accumulated depreciation thereon being Rs. 10,000. (Marks 13)
Ans. 14

Avinash Ltd.          
Statement of Changes in Working Capital

Working notes :

Dr..................................Fixed Assets A/C..........................................Cr

Accumulated Depreciation A/c

Calculation of funds from operations:

Avinash Ltd.
Funds Flow Statement for the year ending 31st December, 1995

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