Which of the following statements are correct ? (a) Analysis and interpretation of financial statements, is a function of accounting. (b) Profit and Loss account is prepared for ascertaining financial position of a firm. (c) Goodwill is a wasting asset. (d) Balance Sheet is prepared for ascertaining financial position of a firm. Select the correct answer using the codes given below : Codes :
(a) and (d)
(a) is correct. Accounting covers recording, classifying and summarising transactions and also analysing and interpreting the resulting financial statements for users such as management, investors and lenders.
(b) is incorrect. The Profit and Loss Account is prepared to ascertain the operating result (net profit or net loss) for a period, not the financial position.
(c) is incorrect. Wasting assets are those whose value is exhausted through use or extraction, such as mines, quarries and oil wells. Goodwill is an intangible, non-physical asset and is not classed as a wasting asset.
(d) is correct. The Balance Sheet is a statement of assets, liabilities and capital on a particular date and is prepared to ascertain the financial position of the firm.
Hence, (a) and (d).
Similar Questions
Which of the following statements are correct ?
(a) Analysis and interpretation of financial statements, is a function of accounting.
(b) Profit and Loss account is prepared for ascertaining financial position of a firm.
(c) Goodwill is a wasting asset.
(d) Balance Sheet is prepared for ascertaining financial position of a firm.
Select the correct answer using the codes given below :
Codes :
Important Questions from Basic accounting principles
The policy ‘anticipate no profit and provide for all possible losses’ arises due to
“Advance received from a supplier is not taken as income or sales.” This comment is based on
Revenue from sale of goods ordinarily is reported as a part of the earning in the period
The generally acceptable accounting principles (GAAP) fulfill the conditions of
(i) Relevance
(ii) Objectivity
(iii) Feasibility
A firm purchases a piece of land after making full payment to the seller. However, the legal formalities are yet to be completed. According to which principle does the firm record the transaction in its books of accounts though the legal formalities are NOT completed?
