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Financial Statements Preparation and Disclosures Explanation

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Financial Statements Preparation and Disclosures Explanation

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Questions and Answers

Define 'financial year' as per Companies Act, 2013.

Financial year, as per Companies Act, 2013, refers to the period ending on the 31st day of March every year.

What is a 'Contingent Liability'?

A Contingent Liability is a liability that is incurred for a future unexpected event.

Explain the purpose of a 'Cash Flow Statement'.

A Cash Flow Statement shows the changes in cash and cash equivalents over a specific period.

What type of information should be included in the 'Notes to Accounts' section besides what is presented in the Financial Statements?

Narrative descriptions or disaggregations of items recognized in the statements; Information about items that do not qualify for recognition in the statements Signup and view all the answers

How should each item on the Balance Sheet and Statement of Profit and Loss be linked to related information in the notes to accounts?

Cross-referenced Signup and view all the answers

What rounding-off rules should be followed in financial statements based on the company's turnover?

Based on turnover, figures can be rounded to the nearest hundreds, thousands, lakhs, millions, crores, or decimals thereof. Signup and view all the answers

How should the unit of measurement be applied in Financial Statements?

Uniformly Signup and view all the answers

When should comparative information for the preceding reporting period be included in the Financial Statements?

For all items shown in the Financial Statements, including notes, except for the first Financial Statements after incorporation. Signup and view all the answers

Why is it important to include comparative information in financial statements?

To show the changes and trends in financial performance and position over time. Signup and view all the answers

What is the importance of notes to the accounts in financial statements?

To state company policies, changes made, and liabilities not provided before. Signup and view all the answers

Why are significant accounting policies important in financial reporting?

They help readers understand how financial statements are prepared and the key accounting concepts followed. Signup and view all the answers

Where can one find significant accounting policies and notes to accounts in a company's annual report?

At the end, after the standalone and consolidated profit and loss account and Balance sheet. Signup and view all the answers

What type of information can be found in the notes to the accounts of a company?

Company policies, changes made, and unrecorded liabilities. Signup and view all the answers

How do notes to the accounts help readers of financial statements?

By providing insights into how the financial statements were prepared and the accounting concepts applied. Signup and view all the answers

Why are notes to the accounts considered the most important feature in financial statements?

As they reveal company policies, changes, and unrecorded liabilities. Signup and view all the answers