MCQ Questions for Class 12 Accountancy Chapter 9 Analysis of Financial Statements with Answers

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Analysis of Financial Statements Class 12 MCQs Questions with Answers

Multiple Choice Questions (MCQs):

Question 1.
Which of the following is not recognized as tool for the analysis of financial statements?
(a) Cash Flow Statement
(b) Funds Flow Statement
(c) Trend Analysis
(d) Statement showing distribution of dividends

Answer

Answer: (d) Statement showing distribution of dividends


Question 2.
Which of the following is the objective of comparative statement?
(a) To making data simple
(b) To make data comparative
(c) To help in forcasting
(d) To detect financial irregularities

Answer

Answer: (d) To detect financial irregularities


Question 3.
Which of the following is not a tool of financial statement analysis?
(a) Cash Flow Statement
(b) Statement showing distribution of dividend
(c) Ratio Analysis
(d) Comparative Financial Statements

Answer

Answer: (b) Statement showing distribution of dividend


Question 4.
Which of the following objectives is not met by comparative statement of Profit and Loss?
(a) It helps to compare the figures of atlest two years
(b) It helps to assess absolute changes
(c) It helps to know the changes in the financial position
(d) It helps to know the percent changes in the statement of Profit and Loss

Answer

Answer: (c) It helps to know the changes in the financial position


Question 5.
Financial analysis can be done with which of the following tool?
(a) Ratio Analysis
(b) Cash Flow Statement
(c) Comparative Statements
(d) All of the above

Answer

Answer: (d) All of the above


Question 6.
Analysis of financial statements for two or more years is known as
(a) Horizontal analysis
(b) External analysis
(c) Vertical analysis
(d) Internal analysis

Answer

Answer: (a) Horizontal analysis


Question 7.
Which of the following is not an objective of financial statement analysis?
(a) Efficiency of the Management
(b) Price Level Changes
(c) Profitability of the Enterprise
(d) Solvency of the Enterprise

Answer

Answer: (b) Price Level Changes


Question 8.
Who of the following has no financial interest in the analysis of financial statements?
(a) Management
(b) Debtor
(c) Creditor
(d) Investor

Answer

Answer: (b) Debtor


Question 9.
Who has the interest in long-term solvency position of the firm?
(a) Creditors
(b) Bankers providing overdraft facilities
(c) Financial Institutions
(d) Short-term money lenders

Answer

Answer: (c) Financial Institutions


Question 10.
Which of the following is not a limitation in the analysis of financial statements?
(a) Ignores Price Level Changes
(b) Window Dressing
(c) Financial performance of the firm
(d) Bias of the Analyst

Answer

Answer: (c) Financial performance of the firm


State whether the following statements are true or false:

Question 11.
Comparative financial statements reflect changes in the items in absolute amount only.

Answer

Answer: False


Question 12.
Comparative Financial Statements are prepared at the end a financial year.

Answer

Answer: True


Question 13.
Shareholders are interested to know short-term financial position of an enterprise.

Answer

Answer: False


Question 14.
Compression of financial statements of two or more years of the same firm is known as inter-firm comparison.

Answer

Answer: False


Question 15.
Manipulation of accounts is known as window dressing.

Answer

Answer: True


Question 16.
Both quantitative and well as qualitative aspects are ignored in the analysis of financial statements.

Answer

Answer: False


Question 17.
Financial statements do not reflect price level changes.

Answer

Answer: True


Question 18.
Statement showing the pay roll in a company is one of the tool for the analysis of financial statements.

Answer

Answer: False


Question 19.
Comparative financial statements represent the date for two or more years.

Answer

Answer: True


Question 20.
Comparative Statement of Profit and Loss reflects changes in the financial position of an enterprise.

Answer

Answer: False


Fill in the blanks with correct word:

Question 21.
Financial statement analysis is the post-mortem of the business _________.

Answer

Answer: transactions


Question 22.
Comparative financial statements mean a comparative study of _______ of an enterprise for two or more years.

Answer

Answer: Financial Statements


Question 23.
_________ analysis is conducted by those who do not have access to the detailed records of an enterprise.

Answer

Answer: External


Question 24.
________ refers to the comparison of financial statements within an enterprise.

Answer

Answer: Intra-firm comparison


Question 25.
Preparation of financial statements are ________ in nature.

Answer

Answer: Historical


Question 26.
When the financial statements of two or more enterprises are compared, it is known as __________.

Answer

Answer: Inter-firm comparison


Question 27.
In ______ statement, components of balance sheets are compared with the total of balance sheet.

Answer

Answer: Common size balance sheet


Question 28.
Absolute changes in the comparative financial statements are found by comparing current year figure with _____ year’s figure.

Answer

Answer: Previous


Question 29.
The items of comparative income statement are converted into percentage by taking _______ as base.

Answer

Answer: Revenue from Operations


Question 30.
Cash Flow Statement reflects _____ and ______ of cash and cash equivalents during an accounting year.

Answer

Answer: Inflows, outflows


One word Questions:

Question 31.
State any one limitation of Financial Statement Analysis. (CBSE Compartment Delhi 2014, 2015)

Answer

Answer: Historical Analysis of financial Statement.


Question 32.
State any one objective of analysis of financial statements. (CBSE Compartment Delhi 2014)

Answer

Answer: To measure earning capacity of business.


Question 33.
State the type of Financial Statement Analysis in which figures of the same items of various years are compared.

Answer

Answer: Horizontal analysis.


Question 34.
Which type of financial statement analysis helps a company to establish the relationship between different items financial statement of a same year?

Answer

Answer: Vertical analysis.


Question 35.
“One of the objectives of Financial Statement Analysis is to assess solvency of business”. What does the term ‘solvency’ mean here ?

Answer

Answer: Solvency means ability to pay the debts.


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