100 Assertion Reason MCQs of Financial statements of a company class 12
Looking for important Assertion Reason MCQs with answers of Financial statement of a company chapter of accountancy class 12 CBSE, ISC and State Board.
We have compiled very important assertion reason multiple-choice questions of financial statements of a company chapter class 12
Assertion Reason Multiple Choice Questions of Financial Statements of a company class 12 with answers class 12
Let’s Practice
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Financial Statements of a company are prepared in the form prescribed in Schedule III of the Companies Act, 2013
Reason (R): Section 129 of the companies Act, 2013 prescribes Schedule III as per which financial statements have to be prepared by all companies.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Certain accounting conventions like conventions of consistency, conservatism, full disclosure, etc. are allowed while preparing financial statements.
Reason (R): use of accounting conventions makes the financial statements comparable, simple and realistic.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): The Balance Sheet is a list of assets and liabilities of the company presented in the specified format for the year ended on that date.
Reason (R): The Balance Sheet is a statement of assets and liabilities of the company as of that day.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – d)
Explanation:- Balance Sheet is not a list. It is the statement.
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): The Management uses accounting information to arrive at various decisions like determination of selling price, cost controls, investment into new ventures, etc.
Reason (R): The management has the responsibility to safeguard the customer’s investment and increase its value by managing the business efficiently.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – c)
Explanation:- Cutomer does not invest in the business, he just purchase goods for his satisfaction. Management is not responsible to increase the value of his purchasing.
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Statement of Profit and Loss shows the results of business operations for the year ended on that date.
Reason (R): It is prepared in the form prescribed in Part II of Schedule III of the Companies Act, 2013.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – b)
Explanation:- Both Reason and Assertion are true. But Reason does not explain how profit and loss shows the results of Business operations.
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): The bank charges charged by the bank are included in the finance cost.
Reason (R): Bank charges are an expense not incurred in connection with raising finance but for availing the services of the bank.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – d)
Explanation:- finance charges are those charges which occur in raising the finance for the firm. But Bank charges are the charges to avail the services of the bank.
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Balance Sheet and Statement of Profit and Loss show the Line items and details thereof are given in the Notes to Account.
Reason (R): The Companies Act, 2013 has prescribed so far an easy understanding of the financial statements.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Bills receivable are shown as trade receivable in the balance sheet of the company.
Reason (R): Debtors and bills receivable form the part of trade receivables.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Financial statements are the summarised statements that give information as to the profitability and financial position of the company.
Reason (R): Statement of Profit and Loss given the information as to net profit or net loss for the year while Balance Sheet gives information of the financial position of the company as at that date.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Two broad heads under which the Balance Sheet is prepared are Equity and Liabilities and Assets.
Reason (R): Part I of Schedule III of the Companies Act, 2013 prescribes to show Equity and Liabilities in the first part followed by Assets in the second part.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Shares subscribed on which total nominal (face) value of the share is either not called up or where it has been called up but has not been received by the company is shown as ‘Shares Subscribed but Not Fully paid up’ Subscribed Capital in the Notes to Account on Share Capital.
Reason (R): Shares subscribed on which total nominal (face) value of the share is called up and has also been received by the company is shown as ‘Shares Subscribed and Full Paid up’ under Subscribed Capital in the Note to Accounts on Share Capital.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – b)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Share Capital shown in the Balance Sheet includes both Equity Share Capital and Preference Share Capital.
Reason (R): Share Capital shown in the Balance Sheet includes Equity Share Capital and not preference Share Capital.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – c)
Explanation:- Share capital includes both Equity and Preference share capital.
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Shares that have been forfeited and reissued, gain (profit) if any, is shown under Reserve Capital.
Reason (R): Gain (profit) on the reissue of forfeited shares is transferred to Capital Reserve and shown under Reserves and Surplus in the Balance Sheet.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – d)
Explanation:- Share gain on shares reissued is the capital profit thus transferred into capital reserve.
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Surplus, i.e., Balance in Statement of Profit and Loss can be positive or negative and in both cases, it is shown in Note to Accounts on Reserves and Surplus.
Reason (R): Schedule III of the Companies Act, 2013 prescribes that whether the balance in Surplus, i.e., Balance in Statement of Profit and Loss is positive (Undistributed or Accumulated Profits) or negative (Accumulated Losses), it is to be shown under Reserves and Surplus.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Surplus, i.e., Statement of Profit and Loss is another name for statement of Profit and Loss.
Reason (R): Surplus, i.e., statement of profit and loss is an item of the Balance Sheet that shows accumulated profits or losses whereas Statement of Profit and Loss shows the net profit or net loss for the year.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – d)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Non-current Liabilities are the liabilities that are not Current Liabilities.
Reason (R): Liabilities are of two types, i.e., Non-current Liabilities and Current Liabilities. Liabilities that are not current liabilities are shown as Non-current Liabilities.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Borrowings that are payable after 12 months or after the period of the Operating Cycle from the date of the Balance Sheet are long-term Borrowings.
Reason (R): Current Liabilities are those liabilities that are payable within 12 months or within the period of the Operating Cycle from the date of the Balance Sheet. Since loans that are not payable within the above period are Long term Borrowings.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Long-term Borrowings that become due for payment within 12 months or within the period of Operating Cycle from the date of Balance Sheet are shown as Short term Borrowings.
Reason (R): Schedule III of the Companies Act, 2013 prescribes that Long-Term Borrowings that become due for payments within 12 months or with the period of Operating Cycle from the date of Balance Sheet shall also be shown as Long-term Debts.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – c)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Borrowings taken during the year that are due for payment within 12 months or within the period of the Operating Cycle from the date of the Balance Sheet are shown as Short Term Borrowings.
Reason (R): Schedule III of the Companies Act, 2013 prescribes that a borrowing taken during the year which is due for payments within 12 months or within the period of operating Cycle from the date of Balance Sheet shall be shown as Current Maturities of Long term debts.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – c)
Explanation:-
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Trade payables are the amount payable against the purchase of goods and/or services are taken in the normal course of business.
Reason (R): Trade Receivables are the amount receivable against the sale of goods and/or services rendered in the normal course of business.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – b)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Trade Payables is the amount payable against the purchase of goods and/or services are taken in the normal course of business, if payable after 12 months or after the period of operating cycle from the date of Balance Sheet is shown as other Long term liabilities.
Reason (R): Schedule III of the Companies Act, 2013 prescribes that a liability that is due for payment after 12 months or after the period of Operating Cycle from the date of Balance Sheet is Non-current Liabilities.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Interest accrued but not due and interest accrued and due are shown as other current liabilities.
Reason (R): Since both interests accrued but not due and interest accrued and due are payable within 12 months from the date of the Balance Sheet, they are shown as other current liabilities.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Income received in advance is shown as other current liabilities.
Reason (R): Income received in advance as an income, therefore, it is shown as Revenue from operations in the statement of Profit and Loss.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True.
Ans – c)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Dividend Payable or Unpaid Dividend is a short-term Provision and shown under the main head current liabilities.
Reason (R): Dividend Payables or Unpaid Dividend is not a provision but a liability and is shown under other Non-Current Liabilities.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Both Assertion (A) and Reason (R) are False.
Ans – d)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Property, Plant, and Equipment (Fixed Assets) are shown as Non-Current Assets in the Balance Sheet of a company.
Reason (R): Property, Plant, and Equipment (Fixed Assets) are used for a long time hence, is Non-Current Asset. Schedule III (Part – I) of the Companies Act 2013 requires it to be shown as Non-Current Assets.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Both Assertion (A) and Reason (R) are False.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Loans and Advances that are receivable after 12 months or after the period of Operating Cycle from the date of Balance Sheet are shown as Non-current Asset in the Balance Sheet of a Company.
Reason (R): Since the loan is receivable after 12 months or after the period of the Operating Cycle, it is not a Current Asset. An asset that is not a Current Assets is shown as Non-current Asset as is prescribed by Schedule III (Part – I) of the Companies Act, 2013.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Both Assertion (A) and Reason (R) are False.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Goods sold on a credit period of 36 months will be shown as other current assets if the Operating Cycle Period is more than 36 months.
Reason (R): An asset that is receivable within 12 months or with the period of the Operating Cycle is shown as current assets while all other assets are Non-current Assets.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Both Assertion (A) and Reason (R) are False.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Inventories may be shown as Non-current assets.
Reason (R): Inventories are shown as current assets because they are held to be realized at the earliest.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true.
Ans – d)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Cash and Cash Equivalents are always shown as Current Asset.
Reason (R): Cash and Cash Equivalent is current Assets because they are the most liquid asset and are thus current assets.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Trade Receivables are shown as Current Asset unless they are receivable after 12 months or after the period of Operating Cycle from the date of the Balance Sheet.
Reason (R): Trade Receivables are Current Assets But if it is agreed to be received after 12 months or after the period of the Operating Cycle, they will be shown as Non-current Asset.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true.
Ans – a)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Contingent Liabilities are not the liabilities payable yet but will become liabilities when an event associated with it happens in the future.
Reason (R): Proposed Dividend is a Contingent Liability because it will become a liability after the shareholders declare, i.e., approve it.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true.
Ans – b)
Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:
Assertion (A): Operating Cycle is the time between the acquisition of an asset for processing and its realization into cash and cash equivalents.
Reason (R): Any product takes time to be converted into finished goods, i.e., before it is ready for sale. This time period involved in the activity is the period of the Operating Cycle.
Alternatives:
a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A).
b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
c) Assertion (A) is true but Reason (R) is False
d) Assertion (A) is false but Reason (R) is true.
Ans – a)
