Question by CA (Dr.) G.S.GREWAL – Series 40

Comparative and Common Size Financial Statements

True/False

  1. The statement that compares items of profitability of a firm of different periods of time is Common Size Balance Sheet.

Fill in the Blank

  1. The statement that shows percentage of items of profitability of a firm of the same period to a common base is called __________________.

Multiple Choice Question

  1. If Revenue from Operations for current year is ₹ 10,00,000 and proportionate increase is 25%, Revenue from Operations of the previous year?

(a)     ₹ 9,00,000

(b)     ₹ 6,00,000

(c)     ₹ 8,00,000

(d)     ₹ 7,00,000

Answer – Question by CA (Dr.) G.S.GREWAL – Series 40

True/False

  1. False

Reason: Profitability is shown by Statement of Profit and Loss. Comparative Statement is prepared to compare items of two or more years of the firm taking previous year value as the base. Hence, the answer is “Comparative Statement of Profit and Loss”.

Fill in the Blank

  1. Comparative Balance Sheet

Multiple Choice Question

  1. (c)

Reason: Current year’s Revenue from Operations is ₹ 10,00,000 and proportionate increase is 25% as compared to the previous year’s Revenue from Operations. Previous year’s Revenue from Operations is ₹ 8,00,000 calculated as follows ₹ 10,00,000X100/125.

Question by CA (Dr.) G.S.GREWAL – Series 41

Comparative and Common Size Financial Statements

True/False

  1. If Shareholders’ Funds in the current year are ₹ 20,00,000 and absolute change is ₹ 6,00,000 the percentage change will be 35%.

Fill in the Blank

  1. In preparing Common size Balance Sheet, Common base taken is _______________.

 Multiple Choice Question

  1. The statement that shows percentage of items of profitability of a firm of the same period to a common base is called:-

(a)     Comparative Statement of Profit and Loss.

(b)     Comparative Balance Sheet.

(c)     Common Size Statement of Profit and Loss.

(d)     Common Size Balance Sheet.

Comparative and Common Size Financial Statements

Answer – Question by CA (Dr.) G.S.GREWAL – Series 41

True/False

  1. False

Reason: Percentage Change = ₹ 6,00,000/₹ 15,00,000 X 100 = 40%.

Fill in the Blank

  1. Balance Sheet Total

Multiple Choice Question

  1. (c)

Reason: Profitability is shown by Statement of Profit and Loss. Common Size Statement is prepared to show percentage of items of Statement of Profit and Loss to a common base (Revenue from Operations) of the same year. Hence, the answer is “Common Size Statement of Profit and Loss”.

Question by CA. (Dr.) G. S. GREWAL – Series 45

True/False

  1. Notes to Accounts is not a technique of financial analysis.

Fill in the Blank

  1. Analysis and interpretation are ____________________ to each other.

Multiple Choice Question

  1. The term Financial Analysis includes:

(a)     Analysis.

(b)     Interpretation.

(c)     Both analysis and interpretation.

(d)     Preparation of financial statements.

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 45

  1. True

Reason: Notes to Accounts is an attachment to financial statements that states the Accounting Policies and Explanatory Notes of various entries in the Financial Statements. Common Size Statements, Ratio Analysis and Cash Flow Statements are the analytical tools.

  1. Complementary
  2. (c)

Reason: Analysis of financial statements are carried out using analytical tools like Comparative Statements, Common Size Statements, Accounting Ratios and Cash Flow Statement. Analysis will be useful only if it is interpreted to take a decision. Thus, Analysis and Interpretation are part of analysis of financial statements.

Question by CA. (Dr.) G. S. GREWAL – Series 49

True/False

  1. In preparing Comparative Financial Statements, percentage change is based on current year values.

Fill in the Blank

  1. Analysis and comparison of two enterprises will not be reliable if different _________________ are adopted by them.

Multiple Choice Question

  1. Choose the correct option from the following statements:

Statement I – Suppliers of long-term funds are concerned with firm’s long-term solvency

Statement II – Investors are interested about the credit worthiness of the firm.

(a)     Only Statement II is true

(b)     Only Statement I is true

(c)     Both Statements are true

(d)     Both Statements are false

Answer – Question by CA. (Dr.) G. S. GREWAL – Series 49

  1. False

Reason: In Comparative Financial statements, percentage change is based on previous year’s values and not current year’s values.

Correct Statement: In preparing Comparative Financial Statements, percentage change is based on previous year values.

  1. accounting policies

Multiple Choice Question

  1. (b) Only Statement I is true

Reason: Suppliers of long-term funds are interested in long-term solvency of the firm while investors are concerned with safety of their investments and return thereon.

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