Prepare the format of balance sheet and explain the various elements of balance sheet.
For a business, the balance sheet is one of the main financial reports prepared by either the bookkeeper or the accountant. Its a snapshot view of your
businesss overall financial situation for a particular period of time. The balancesheet consists of three major elements: assets, liabilities and owners equity. The object of the statement is to prove true the accounting equation, "
Asset = Liabilities + Owners Equity." The statement places a business
assets on the left side of the equation and the liabilities and equity on the right and the amounts on each side of the equation should be equal. Overall Use of the Balance Sheet Your balance sheets show the position of the company on a given day, including its total assets, liabilities and equity, which equals its net worth. Lenders commonly use financial statements to assess your companys creditworthiness. A high debt-to-assets or debt-to-equity ratio is a concern.
How will you disclose the following items in the Balance Sheet of a company;
(i) Loose tools
(ii) Uncalled liability on partly paid-up shares
(iii) Debentures redemption reserve
(iv) Mastheads and publishing titles (v) 10% debentures
(vi) Proposed dividend
(vii) Share forfeited account
(viii) Capital redemtion reserve
(ix) Mining rights
(x) Work-in-progress
The current ratio provides a better measure of overall liquidity only when a
firm’s inventory cannot easily be converted into cash. If inventory is liquid, the
quick ratio is a preferred measure of overall liquidity. Explain.
Explain the usefulness of trend percentages in interpretation of financial performance of a company.
The liquidity of a business firm is measured by its ability to satisfy itslong-
term obligations as they become due. What are the ratios used forthis purpose?
What relationships will be established to study?
(a) Inventory Turnover (b) Debtor Turnover
(c) Payables Turnover (d) Working Capital Turnover
What do you understand by analysis and interpretation of financial statements? Discuss its importance.
State the importance of financial statements to
(i) shareholders
(ii) creditors
(iii) government
(iv) investors
What are liquidity ratios? Discuss the importance of current and liquid ratio.
What is the importance of comparative statements? Illustrate youranswer with particular reference to comparative income statement.
What do you mean by Ratio Analysis?
‘Financial statements reflect a combination of recorded facts, accounting
conventions and personal judgements’ discuss.
The average age of inventory is viewed as the average length of time inventory is held by the firm or as the average number of days’ sales in inventory. Why?
What do you understand by analysis and interpretation of financial statements? Discuss its importance.
What are liquidity ratios? Discuss the importance of current and liquid ratio.
What do you mean by Common Size Statements?
What do you mean by Ratio Analysis?
Explain how financial statements are useful to the various parties who are interested in the affairs of an undertaking?
The liquidity of a business firm is measured by its ability to satisfy itslong-
term obligations as they become due. What are the ratios used forthis purpose?
What relationships will be established to study?
(a) Inventory Turnover (b) Debtor Turnover
(c) Payables Turnover (d) Working Capital Turnover
Prepare the format of statement of profit and loss and explain its items.