Class 12 Account Model Question Paper 2080 | Part 2
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| Class 12 Account Model Question |
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| Class 12 Account Model Question |
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| Class 12 Account Model Question |
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| Class 12 Account Model Question |
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| Class 12 Account Model Question |
Grade 12 Important Questions with Answers
Unit: 2
Final Accounts of a Company
1. write the meaning of the Final Account of a Company in five to seven sentences.
Final accounts are prepared to depict the true and fair financial state of affairs of the company at the end of the financial year. The final account of a company consists of a Trading Account, a Profit and Loss Account, a Profit and Loss Appropriation Account, and a Balance Sheet. Gross Profit or Loss is ascertained by preparing a Trading account. Net profit or loss is calculated by preparing a profit and loss account. The profit and loss Appropriation account is prepared to show the distribution of net profit as disclosed by Profit and Loss A/C. The P/L Appropriation shows profit distribution profit to dividends transfer to various reserves etc. The balance sheet is a statement of Assets and Liabilities that depicts the real financial position of the company at the end of the accounting year. A manufacturing company may prepare a manufacturing account to calculate the cost of goods sold or to determine manufacturing profit before the Trading A/C is prepared.
2. Give the meaning of Profit and Loss A/C.
The profit and loss A/C is the 2nd statement prepared under Final Account. It is opened by transferring the gross profit or loss from Trading A/C. It is prepared to determine the net profit or loss of the company. The preparation of a profit and loss account is based on all items of indirect revenue expenses indirect revenue receipts and other operating expenses during a particular accounting period. The profit and loss A/C is prepared on an accrual basis. This statement is closed by transferring the net profit or loss to the profit and loss Appropriation Account.
3. Write any four advantages of the Profit and Loss Account.
1. The Profit and Loss account is prepared to determine the net profit or loss of the company of a particular accounting period. The net profit of the current year can be compared with that of the previous year to judge the efficiency of the business.
2. It helps to control the indirect expenses and eliminate wastage of the business enterprises.
3. This statement is very helpful in judging the operational efficiency of the business. The net profit ratio to sales can be calculated. So, the strengths and weaknesses of the business can easily be tested. Necessary measures can be applied to make- up the weakness.
4. Estimation of future profitability is possible. Future planning can be easily made with the help of Profit and Loss A/C.
4. Give the meaning of profit and loss Appropriation Account.
The profit and Loss Appropriation Account is prepared in the 3rd step of the final Account. It shows the distribution of net profit as ascertained by the Profit and Loss Account. The items that usually appear on the debit side of this statement are transfers of profit to reserve, dividend paid, dividend proposed, issue of bonus share out of profit, excess of actual liability over provision made, and surplus profit to be carried forward. The credit items of the P/L Appropriation Account are previous years' undistributed profit, net profit of the current year transferred from P/L A/C, and Excess of provisions made over the actual liability.