Welcome to the NCERT Solutions for Class 12 Accountancy - Company Accounts and Analysis of Financial Statements - Chapter Financial Statements of a Company. This page offers a step-by-step solution to the specific question from Exercise 2, Question 7: . With detailed answers and explanations for each chapter, students can strengthen their understanding and prepare confidently for exams. Ideal for CBSE and other board students, this resource will simplify your study experience.
‘Financial statements reflect a combination of recorded facts, accounting
conventions and personal judgements’ discuss.
The financial statements not only help in presenting the true and real financial position of the company but they also help in taking managerial decisions. The nature of the financial statements depends upon the following aspects like recorded facts, conventions, concepts and personal judgement.
(i) Recorded Facts: The items recorded in the financial statements reflect their
original cost i.e., the cost at which they were acquired. Consequently, financial
statements do not reveal the current market price of the items. Further, financial
statements fail to capture the inflation effects.
(ii) Accounting Conventions: The preparation of financial statements is based on
some accounting conventions like, Prudence Convention, Materiality Convention, Matching Concept, etc. The adherence to such accounting conventions makes financial statements easy to understand, comparable and reflects the true and fair financial position of the company. Besides the above while preparing financial statements, certain concepts are adhered to. The nature of these concepts is reflected in the nature of the financial statements.
(iii) Personal Judgements: The nature of financial statement largely depends
upon the personal value judgements. Personal judgements are attached to
different practices of recording transactions in the financial statements, e.g.,
recording stock either at market value or at the cost requires value judgement
depending upon the personal judgement. Thus, personal judgements help in
determining the nature of the financial statements.
NCERT questions are designed to test your understanding of the concepts and theories discussed in the chapter. Here are some tips to help you answer NCERT questions effectively:
Stay updated with our latest educational content and study tips
One of the challenging things students face nowadays is procrastination. It hinders productivity, making it difficult for students to score well. We often associate procrastination as just being lazy. But there’s more to it. Various studies have shown that procrastination stems from negative feelings such as stress and anxiety. Oftentimes, when we start, we think […]
Read MoreThe CBSE Board Exam is a crucial milestone for millions of students across India. The Central Board of Secondary Education is famous for its imparting quality education and knowledge which reaches out to a large share of students. Also, it is important to know that, the CBSE board takes a slight unconventional route, since it […]
Read MoreHaryana government issued a notification on 31st December 2024 through its Gazette notification No. 42/119/2019-5HR-II for CET Haryana 2024. The Common Eligibility Test (CET) for Haryana is a significant opportunity for candidates seeking government jobs in Group C and Group D posts. Below is a comprehensive summary of the key information you need to know […]
Read MoreSacrificing your sleep to study more is doing more damage than you think. While it may seem like utilizing every hour of the day for study leads to better outcomes, the reality is quite the opposite. Lack of proper rest can negatively impact your brain, especially when it comes to sleep and memory retention. You’ll […]
Read MoreWelcome to the NCERT Solutions for Class 12 Accountancy - Company Accounts and Analysis of Financial Statements - Chapter . This page offers a step-by-step solution to the specific question from Excercise 2 , Question 7: ‘Financial statements reflect a combination of recorded facts, accounting conventions and per....
Add Comment