Class 12 Accountancy Chapter 4 Questions and Answers - Free PDF Download
In NCERT Solutions Class 12 Accountancy Company Accounts And Analysis Of Financial Statements Chapter 4, you’ll discover how to break down financial data and truly understand a company’s performance. This chapter helps you learn important concepts like financial statements, ratio analysis, trend analysis, and more—making tricky topics feel simpler step-by-step.
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The solutions from Vedantu are written in a straightforward way, perfect for students who want to clear up their doubts before exams. You’ll learn how to compare balance sheets, figure out what numbers really mean, and spot common mistakes—all while following the CBSE syllabus. You can also get the full syllabus for Class 12 Accountancy here.
With free NCERT Solutions PDF downloads, you can study anytime, even offline. These answers will guide you for exam preparation, and help you build confidence to score well. You can find more NCERT Solutions for Class 12 Accountancy on our dedicated solutions page. This chapter carries 12 marks in your CBSE exam.
FAQs on NCERT Solutions For Class 12 Accountancy Chapter 4 Analysis Of Financial Statements - 2025-26
1. How do the NCERT Solutions for Class 12 Accountancy Chapter 4 explain the correct method for preparing a Comparative Statement?
The NCERT Solutions provide a clear, step-by-step method as per the CBSE 2025-26 pattern. To correctly prepare a Comparative Statement, you must:
- Create specific columns: Particulars, Note No., Previous Year's Figures, Current Year's Figures, Absolute Change, and Percentage Change.
- Calculate the Absolute Change by subtracting the previous year's figure from the current year's figure.
- Determine the Percentage Change using the formula: (Absolute Change / Previous Year's Figure) × 100.
Following this structured format is essential for accuracy and scoring full marks in exams.
2. What is the step-by-step process for preparing a Common-Size Statement as per the NCERT solutions?
The correct method for a Common-Size Statement involves expressing each line item as a percentage of a common base, which is a key technique shown in the solutions.
- For a Common-Size Statement of Profit and Loss, the base is always 'Revenue from Operations' (taken as 100%).
- For a Common-Size Balance Sheet, the base is 'Total Assets' or 'Total Equity and Liabilities' (taken as 100%).
The NCERT solutions guide you to create columns for absolute amounts and their corresponding percentages for both the current and previous years to facilitate analysis.
3. Which key Accounting Ratios are covered in the NCERT Solutions for this chapter?
The solutions focus on all ratios prescribed in the CBSE syllabus, which are essential for solving numerical problems. The main categories covered are:
- Liquidity Ratios: Current Ratio and Quick (or Liquid) Ratio.
- Solvency Ratios: Debt-to-Equity Ratio, Total Assets to Debt Ratio, and Proprietary Ratio.
- Activity (Turnover) Ratios: Inventory Turnover Ratio, Trade Receivables Turnover Ratio, and Working Capital Turnover Ratio.
- Profitability Ratios: Gross Profit Ratio, Operating Ratio, Net Profit Ratio, and Return on Investment (ROI).
4. Why is following the step-by-step format from NCERT Solutions crucial for solving Ratio Analysis questions?
A structured, step-by-step format is vital for both clarity and marks. The correct approach, emphasised in the solutions, involves:
- Step 1: Stating the precise formula for the ratio being calculated.
- Step 2: Showing the detailed calculation of the formula's components (e.g., calculating Current Assets or Total Debt separately in working notes).
- Step 3: Substituting the derived values into the formula to find the final answer.
This methodical process minimises calculation errors and demonstrates a clear understanding to the examiner.
5. What are some common mistakes to avoid when solving problems on Analysis of Financial Statements?
Based on typical student errors, the NCERT solutions implicitly help you avoid these pitfalls:
- Using an incorrect base for percentage calculations in Common-Size Statements.
- Confusing the formulas for Absolute Change and Percentage Change in Comparative Statements.
- Failing to provide clear 'Working Notes' for complex calculations, which is necessary for scoring.
- Incorrectly classifying items under Current/Non-Current categories when calculating ratios.
6. How do the NCERT solutions help differentiate between Horizontal (Dynamic) Analysis and Vertical (Static) Analysis?
The solutions explain this core concept through the practical application of different tools:
- Horizontal Analysis is demonstrated using Comparative Statements. This method involves comparing financial data across several years to analyse trends over time.
- Vertical Analysis is demonstrated using Common-Size Statements. This method involves analysing items within a single financial statement for one accounting period to understand their proportional significance.
Understanding this distinction helps in selecting the correct problem-solving tool.
7. Beyond calculations, how do the solved examples in NCERT Solutions guide students in writing the 'interpretation' for financial statements?
While the main focus is on accurate calculation, the clear presentation in the solutions is designed to aid interpretation. By analysing the final tables, students can learn to comment on:
- The positive or negative trend shown by an increase or decrease in key items like revenue and profit.
- The structural changes in assets and liabilities as a percentage of the total.
- Whether a calculated ratio indicates an improvement or a decline in a company's liquidity, solvency, or overall performance, a key skill for application-based questions.
8. What is the main objective of analysing financial statements from the perspective of a Class 12 student using NCERT Solutions?
The primary objective is to develop the skill of drawing meaningful conclusions from a company's financial data. NCERT solutions are structured to help students use analytical tools to assess a firm's:
- Profitability: The ability to generate earnings.
- Financial Soundness: The long-term and short-term stability.
- Operational Efficiency: The effectiveness in using its resources.
This prepares students for board exam questions and builds a strong foundation in business finance.
