Class 12 Accountancy Summary Notes PDF Download
FAQs on Company Accounts and Analysis of Financial Statement Class 12 Accountancy CBSE Notes - 2025-26
1. What are the key headers to remember for a quick revision of a company's Balance Sheet as per Schedule III?
For a quick recap of the Balance Sheet format, focus on the two main sides: Equity and Liabilities and Assets. Under Equity and Liabilities, the major heads to revise are Shareholder's Funds, Non-Current Liabilities, and Current Liabilities. Under the Assets side, the two main heads are Non-Current Assets and Current Assets. Remembering this basic structure is the first step in revision.
2. How can I quickly summarise the key elements of the Statement of Profit and Loss for Class 12?
To summarise the Statement of P&L, remember its flow: It starts with Revenue from Operations, to which you add 'Other Income' to get Total Revenue. From this, you subtract all expenses. The key expense categories to revise are Cost of Materials Consumed, Purchases of Stock-in-Trade, Changes in Inventories, Employee Benefit Expenses, Finance Costs, Depreciation and Amortisation, and Other Expenses. This gives you Profit before Tax.
3. What is the core purpose of financial statement analysis for a Class 12 student's perspective?
From an academic perspective, the core purpose is to simplify complex financial data to make it understandable. The key objectives to remember for revision are to assess a firm's earning capacity (profitability) and its financial position (solvency and liquidity). This analysis helps in understanding past performance and forecasting the future performance of a company.
4. What are the main tools for financial statement analysis that are essential for revision?
For a complete revision of this chapter, you must be familiar with the following primary tools of financial analysis as per the CBSE 2025-26 syllabus:
- Comparative Statements: Used for intra-firm comparison over different time periods.
- Common-Size Statements: Used for both intra-firm and inter-firm comparison by showing percentages.
- Ratio Analysis: Evaluates various aspects like liquidity, solvency, and profitability.
- Cash Flow Statement: Analyses the flow of cash from operating, investing, and financing activities.
5. Why is it crucial to present a company's Balance Sheet strictly according to the Schedule III format?
Presenting the Balance Sheet as per Schedule III of the Companies Act, 2013, is mandatory for ensuring uniformity and comparability. This standardised format allows stakeholders, like investors and analysts, to easily compare the financial position of different companies in the same industry. It removes ambiguity and provides a 'true and fair' view in a consistent manner, which is a legal requirement.
6. How do Comparative and Common-Size statements offer different insights during analysis?
They reveal different aspects of a company's performance. A Comparative Statement (horizontal analysis) is ideal for spotting the trend and direction of change over time, answering questions like 'By what percentage did sales grow?'. In contrast, a Common-Size Statement (vertical analysis) is best for understanding the internal structure of the financials, answering questions like 'What percentage of total assets is inventory?' This helps in comparing companies of different sizes.
7. What are the key limitations of financial statement analysis to keep in mind for exams?
When revising, focus on these critical limitations:
- Analysis relies on historical data, which may not accurately predict future trends.
- It ignores important qualitative factors like management quality or brand reputation.
- Financial data can be manipulated through 'window dressing' to present a misleadingly favourable picture.
- Variations in accounting policies between firms can make direct comparisons difficult.
8. Beyond just calculations, what is the most important skill in financial statement analysis?
The most important skill beyond calculation is interpretation. Simply computing a ratio or a percentage is not enough; the real analysis lies in understanding what that number signifies about the company's financial health and performance. It involves connecting different pieces of information, identifying trends, and drawing meaningful conclusions to support a decision. This interpretative skill is what makes the analysis useful.
9. When revising, what is a common mistake in classifying items under 'Finance Costs' in the Statement of P&L?
A common mistake is confusing finance costs with other operational expenses. For revision, remember that Finance Costs are strictly the costs associated with borrowing funds. This primarily includes interest paid on debentures, bonds, and loans. Items like bank charges for services should be classified under 'Other Expenses', not Finance Costs. Always link finance costs directly to borrowings.
