Advanced Accounting – CA Final – Useful Notes
- ADVANCED ACCOUNTING
- THEORY QUESTIONS
- BULLET POINTS FOR REVISION
Chapter 2 – COMPANY ACCOUNTS
Chapter – 2, Unit 1 – Statutory Financial Statements
What are the limitation of Financial Statements?
(a) Financial statements provide mostly historical data since its elements like assets & liabilities etc are measured mostly using historical cost.
(b) In India financial statements are prepared recognizing legal form of the transactions and ignoring the substance.
(c) They are essentially based on going concern assumption, the applicability of which may sometimes be highly illogical & misleading.
(d) They don’t reflect and include a cash flow report to explain movement of cash.
(e) They are over generatised as sometimes interests of different sectors may be conflicting in nature.
(f) It can’t be understood by all.
(g) It doesn’t show all information at one place as they may also be given in notes & explanation.
(h) It different companies follow different accounting policies comparison becomes different.
What are the advantages of Vertical Financial Statements?
(a) Financial position can be readily comprehended by a layman.
(b) Profit & loss A/c. clearly shows amount of Trading / Non Trading profit earned during the year, previous year B/F figures and appropriation proposed by directors.
(c) It clearly shows amount of debt by shareholders equity and correspondence position of assets regregated into FA and WC.