CBSE Set Qa5 Accounts Sample Test Papers For Class 12th for students online
Accounts Class - XII (CBSE)
You are on Set no 1 Answer 16 to 18
Q16) What is analysis of
financial statements? State any four of its limitations. (Marks 6)
Ans16) 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.
Limitations :
(1) Limitations of financial statements :
As the analysis is based on financial statements so all the limitations of
financial statements are its limitations like giving of incomplete, biased
information.
(2) Affected by window dressing :
The firm resorting to this practice cover up their bad financial position on the
eve of accounting period end example by overvaluing their closing stock and the
likes and hence the result are misleading.
(3) Different accounting policies :
Firms adopting different accounting policies may not have the result which may
be comparable. For example the method of valuing closing stock of two firms may
differ.
(4) Lack of Qualitative analysis :
The financial statements record only those events that can be expressed in terms
of money. Qualitative aspect like cordial management-labour relations,
efficiency of management and more which may have a vital bearing on the firm's
profitability are ignored.
Q17) The following information is provided to you :
| Share Capital | Rs. 80,000/- |
| General Reserve | Rs. 40,000/- |
| 15% loan | Rs. 50,000/- |
| Sales for the year | Rs. 1,00,000/- |
| Tax paid during the year | Rs. 20,000/- |
| Profit after interest & Tax | Rs. 40,000/- |
From the above information, calculate any
three of the following ratios :
(a) Debt Equity Ratio
(b) Capital Turnover Ratio
(c) Interest coverage ratio
(d) Return on Investment
(e) Debt to total funds ratio (Marks 6)
Ans17) (a) Debt Equity Ratio = Long term debts/Shareholders funds
Shareholders funds = Share capital + General Reserve + Profit
=
80000 + 40000 + 40000
=
160000
Thus, the ratio = 50000/160000
=
5 : 16
(b) Capital Turnover Ratio = Sales/Capital Employed
Capital Employed = Share capital + General Reserve + 15% loan + Profit
= 80000 + 40000 + 50000 + 40000
= 210000
Thus, the ratio = 100000/210000
= .47 times
(c) Interest coverage ratio = (Net profit before interest, tax and dividend) /
Interest charges
Net profit before interest, tax = Net profit after interest, tax + tax +
interest
= 40000 + 20000 + 7500
= 67500
Interest charges = 15/100 x 50000
= 7500
... Interest coverage ratio = 67500/7500
= 9 times
(d) Return on Investment = (Net profit before interest, tax, dividend/Capital
Employed) x 100
= (67500/210000) x 100
= 32.14%
(e) Debt to total funds ratio = Long term debts/capital employed
= 50000/210000
1 : 4.2
Q18) From the following Balance Sheets prepare Schedule showing changes in Working Capital and Funds Flow Statement :
Balance Sheet
| Liabilities |
1998
Rs. |
1997
Rs. |
Assets
|
1998
Rs. |
1997
Rs. |
| Share Capital Debentures Current Liabilities General Reserve PandL Account |
4,50,000 3,50,000 1,50,000 2,10,000 70,000 12,30,000 |
4,00,000 2,40,000 1,20,000 2,00,000 9,60,000 |
Fixed Assets Investments Current Assets Discount on shares PandL Account |
7,20,000 1,30,000 3,75,000 5,000 12,30,000 |
6,10,000 50,000 2,40,000 10,000 50,000 9,60,000 |
Additional information :
(a) Depreciation charged on Fixed Assets was Rs. 60,000/-.
(b) A machine of book value of Rs. 40,000/- was sold for Rs. 30,000/-.
(Marks 12)
Ans18)
Schedule of changes in Working Capital
| Particulars | 1997 | 1998 | Inc. | Dec. |
| Current Assets
A Current liabilities B Working Capital A - B Increase in working capital |
240000 120000 120000 105000 225000 |
375000 150000 225000 225000 |
135000 135000 |
30000 105000 135000 |
Funds flow Statement for the year ended
| Particulars | Amt. | Particulars | Amt. |
|
Funds from operation
Issue of Shares Issue of Debentures Sale of machine |
205000 |
Purchase of Investment
Purchase of Fixed Assets Increase in working capital |
80000 |
Fixed Assets A/C
|
To balance b/d
To Cash A/C (bal fig) (Purchases) |
610000 |
By P/L A/C (Depreciation)
By cash A/C (Sale) By P/L A/C (Loss on Sale) By balance c/d |
60000 |
Adjusted P/L A/C
|
To balance b/d
To Fixed Assets (Depreciation) To Fixed Assets (loss on sale) To tfr to General Reserve To Discount on share To balance c/d |
50000 |
By funds from
operation |
205000 |
|
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