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100 Accounting Questions: For Class XII (M.P. Board)

This book contains approx 120 Most Important Guess Questions taken from 5 Years of M.P. Board Papers.
CHAPTER - 1 Distinguish between Del-Credere Commission and Over-Riding Commission? Basis of Del-Credere Commission Over-Riding Commission Difference It is paid for realizing It is paid for encouraging Why Paid amount of credit sale. sale at a higher than Invoice Price. It is usually computed on It is computed on the excess Computation the amount of credit sale. amount over invoice price. It is paid for avoiding the It is paid for getting extra Objective risk of bad debts. profit. Representation The recipient of such The recipient of such commission is called commission is called Credere Agent. Normal Agent. Difference between Invoice & Proforma Invoice Invoice Proforma It is sent to Buyers. It is sent to Consignee. It is sent after dispatch of goods. It is sent before dispatching of goods. It is prepared on the basis of actual It is not prepared on the basis of sale. actual sale. It is sent during the normal routine. It is sent only when it is necessary to do so. The buyer is bound to pay the The consignee is not bound to pay amount shown in the invoice. the amount, shown in such invoice. What do you mean by Abnormal Loss in Consignment A/c? When goods are lost due to accident or negligence, it is called Abnormal Loss. It can be insured, to reduce the extent of the loss to be suffered by consignor on his account since abnormal loss has nothing to do with a particular consignment, it should not be charged to any particular consignment account. www.bit.ly/imatharav Why does the consignor show invoice price higher than cost price? What adjustment entries are passed? When goods are sent in Invoice price, the consignor always writes the cost of consigned goods more than actual cost price. The following are the two main objects to goods sent in invoice price: - To earn maximum profit in consignment. - To keep the secrecy of Cost Price. Journal Entries: Goods sent on Consignment A/c Dr. To Consignment A/c Differentiate Consignment and Sale Basis of Consignment Sale Difference In consignment, In Sales, only the title to Ownership ownership always vest the goods are transferred. with the Consigner Relationship The relation between The relation between Consignor or Consignee Seller and Buyer is that of is Principal-Agent. Debtor-Creditor. Discount No discount is given. Discount is given. Proforma Invoice Proforma Invoice is sent. No such invoice is sent. www.bit.ly/imatharav CHAPTER - 2 In the absence of Partnership Deed, What rules are applicable? According to the Partnership Act, 1932, in the absence of Partnership Deed, the following points should be applied: i. Profits or Losses should be shared equally among the partner’s. ii. No partner is entitled to get any type of remuneration like salary, commission, etc. iii. Right to partnership in the conduct of the business. iv. Right to express his opinion. v. Inspection of any copy/books of the firm. What do you mean by Partner’s Current A/c? What items are included in Partner’s Capital A/c? When the capital accounts of partners are prepared under fixed capital system, a separate account called partner’s current account is prepared, where all the other entries excluding capital balance is recorded. It includes interest on capital, partner’s salary, commission, interest on drawing, share on profit and loss, etc. the account which is prepared in this way is called Partner’s Capital Account. What is Partnership? Write three characteristics? Partnership is the relationship between two or more persons, who have agreed to share the profits of the business, carried on by all or anyone of them acting for all is said to be Partnership. Characteristics: Three characteristics at partnership are as follows: a. Carrying out a Business: The existence of a business is necessary for a formation of a partnership firm. b. Agreement: A partnership firm is the outcome of agreement between partner’s. it may be oral or written. c. Unlimited Liability: With reference to the repayment of the firm’s external debt’s, the liability of each partner is unlimited. www.bit.ly/imatharav Differentiate between Fixed and Fluctuating Capital Method: Basis of Difference Fixed Capital A/c Fluctuating Capital A/c Number of Accounts Two separate a/c’s are Each partner has only maintained for each one account i.e., capital partner viz Capital and account. Current Account. Recordings of All adjustments related All adjustments related to partner’s drawings, to partner’s drawings, Adjustment salary, etc. are made in salary, etc. are made in current a/c not in the Capital A/c. Capital A/c. Change in Partner’s The capital a/c balance The balance of the Capital Balance remain unchanged capital account unless there is addition fluctuates from year to to or withdrawal of year. capital. Balance of Capital A/c Fixed capital accounts Fluctuating capital always show a credit accounts may show a balance. debit or credit balance. www.bit.ly/imatharav CHAPTER - 3 Define Goodwill. What are its characteristics? ‘Goodwill’ is defined as ‘The capacity of a business to earn profits in the future is basically what is meant by the term Goodwill. The following are the characteristics of goodwill: a) Goodwill is treated as an Asset of Business. b) Goodwill is an intangible asset. c) Goodwill helps to make more profits. d) Goodwill can be calculated. e) The value of goodwill always Fluctuate. f) Goodwill is a Fixed Asset. g) It is a Saleable Asset. What are the different types of Goodwill? On the basis of goodwill, it may be classified into three groups: a) Cat Goodwill: The main cause of arising cat goodwill is location of business. If the location of business firm is changed, it may be possible to lose some profits by business. b) Dog Goodwill: If the master of dog leaves his place, his dog always follows him. Same Way, the goodwill of the firm goes with the owner of the business, if he changes his business. c) Rat Goodwill: This type of goodwill has no value. The nature of rat is always to change its place. It doesn’t remain at a fixed place. The goodwill doesn’t remain in a particular business. Explain the causes of ‘Creation of Goodwill’? The following are the causes of creating of goodwill: a) Situation f a market: Business should be started in such a place, where the buyers can easily come and buy goods. It will increase the sale and profits of the business. www.bit.ly/imatharav b) Good Business Dealing: If the businessman, are keeping good relations with the customers, it will automatically increase the reputation and sales. c) Good Quality of Goods at Reasonable Price: If the businessman sell their goods of good quality at reasonable price, more customers will be attracted and the sales will normally be increased. d) Influence of Advertisement: Due to continuous, advertisement there should be chances of increasing the sales e.g., Nirma Powder. Differentiate between Sacrificing and Gaining Ratio: Sacrificing Ratio Gaining Ratio Sacrifice made by the old partners The profit sharing ratio of the out of their existing share in favor remaining partners increases due of new partner’s is called to retirement or death of the Sacrificing Ratio. partner. The ratio increases is recorded in Profit sharing ratio of the remaining partner’s. It is calculated at the time, when a It is calculated at the event of new partner enters into retirement or death of a partner. partnership. As per Accounting Standard 10, what are the provisions of goodwill when a new partner is admitted in partnership? th According to the resolution passed in the 144 meeting of the council of th th institute of chartered accountants of India, held on 7 to 9 June, 1990, in the Para 16 of the Accounting Standard, goodwill is recorded in the books only when some consideration in money worth or money has been paid for goodwill. Goodwill Account can be opened only when goodwill has been acquired by paying some consideration price. If no price or consideration is given goodwill a/c can’t be opened in the books on admission, retirement or death of a partner or in case of changes in profit ratio of partners. www.bit.ly/imatharav What are the factors affecting Goodwill? a) Suitable location of the firm. b) Popular name of the firm. c) Contacts with customers. d) Salesmanship. e) Fire Price Policy. f) Quality of products or goods. g) Monopolistic Condition. h) Service after sale. i) Quick response to customers. What is the Need for Valuation of Goodwill (when goodwill valued)? The valuation of goodwill is required normally in the following circumstances– i. When the existing partners decide to change their mutual Profit sharing ratio. ii. When a new partner is admitted in the partnership firm. iii. When a partner retires from firm and the remaining partners decide to continue the partnership business. iv. When a partner dies and the remaining partners decide to continue the partnership business. v. When the firm is dissolved due to sale of its business to a going concern. vi. When two partnership firms are amalgamated for averting competition or reducing the administrative expenditure. www.bit.ly/imatharav CHAPTER - 4 What is the reason of admitting new partner? Due to the following reasons, A partner may be admitted:  To Raise Capital: When the firm needs more capital, a new partner is admitted to fulfil their need.  Need of a Skillful Partner: If the firm needs an able, skillful and intellectual person for the development and efficient running of the business, the firm can admit a new partner to fulfil their needs.  On Death of a Partner: On the death or retirement of a partner, there gets a blank in the firm and in order to fill the space a new partner is admitted in the firm. This helps the firm to receive additional capital from the incoming partner and his experience. www.bit.ly/imatharav CHAPTER –5 How will you calculate amount payable to the legal representative on the death of a partner? The amount payable to his legal representative on the death of a partner is as follows: - a. Make the accounts up to the date of death of the partner. b. The debit balance shown by the partner’s capital account regarding drawings, interest on drawings, revaluation loss, any other loss of firm, up to the death of the partner. c. After entering all the above items, the balance amount is treated as the amount payable to the representative of the dead partner. On which circumstances, A Partnership Firm may be dissolved? / Methods of Dissolution of a Firm? Section 40 to 44 of the Indian Partnership Act, of 1932 tells that on the following circumstances, A partnership firm may be dissolved: a. Dissolution by Agreement: A firm may be dissolved with the consent of all the partners. b. Dissolution by Court: If any of the circumstances lays down, the court may under to dissolve firm: - When a partner becomes unsound mind. When a partner suffers from permanent incapacity. c. Dissolution by Notice: If the partnership is at will, the firm may be dissolved at any time by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. www.bit.ly/imatharav Difference between the Dissolution of Firm & Dissolution of Partnership Basis of Dissolution of Firm Dissolution of Partnership Difference Relation When the firm is dissolved, the When the partners are dissolved, personal relation among the the relation among them is also partners is not dissolved. dissolved forever. Business In this condition, the business of In this condition, the business of the firm will continue. the partners will come to an end. Dissolution of partnership doesn’t When the firm is dissolved, the Need need the winding up of the firm. partners are also winding up. Difference between the Revaluation A/c and Realization A/c Basis of Revaluation A/c Realization A/c Difference When is, it It is prepared at the time of It is prepared at the time of Prepared? admission, retirement or death of a dissolution of a firm. partner. Why is it It is prepared for the accounting of It is prepared to close the accounts increase or decrease of assets and of assets and liabilities. Prepared? liabilities. How is it In this account, the increase and The amount received from the sale Prepared? decrease of assets and liabilities of assets and the amount paid for the are recorded. liabilities are recorded What is the Accounts of assets and liabilities Accounts of assets and liabilities are effect on are opened. closed. Accounts? www.bit.ly/imatharav CHAPTER - 6 Characteristics of a Company: A Company has the following characteristics: - a. It is an artificial person, created by law. b. It is a voluntary association of persons. c. It is a separate legal entity. d. It has a common seal. e. It has a perpetual succession. f. It has a limited liability. g. It is effaced by law. h. It has registered office. Preference Shares:Shares which enjoy preferential rights as to the payment of dividend at a fixed rate during the life of the company and as the return of capital on winding up of the company. Categories of Preference Shares: a. Cumulative – Non-Cumulative Preference Share b. Participating – Non-Participating Preference Share c. Convertible – Non-Convertible Preference Share d. Redeemable – Irredeemable Preference Share When a Company can issue its shares at discount? Under Section 79 of the Companies Act, 1956, a company can issue shares at a discount subject to the following conditions: a. The company is completed one year of its business. b. The issue of shares at a discount has been authorized by the shareholders in a general meeting of the company and also has been sanctioned by court. c. Shares to be issued at a discount must be of a class already issued. Journal Entries: www.bit.ly/imatharav Share Application / Allotment A/c Dr. Discount on issue of shares A/c Dr. To Share Capital What do you mean by issue of shares at premium? What entries are made in this respect, when the premium amount is collected along with allotment money? When the shares issues higher price than the nominal value or the face value of the shares, it is said to be issue of shares at premium. When the shares are issued at Premium, Entries are Share Application A/c Dr. To Share Capital To Share Premium (Being Allotment due, including Premium) Explain any four characteristics of Equity Shares? The characteristics of Equity Shares are as follows: a. Voting Rights: - Equity shareholders enjoy voting rights over the others. b. Dividend: On such shares, rate of dividend is not fixed. c. Payment: Dividend on such shares is paid only after the preference dividend is paid. d. Redemption: At the event of liquidation, the equity capital is refunded only after the preference shares are paid back. What do you mean by a Stock? Write difference between Share & Stock? By Share and Stock, we mean aggregate of fully paid-up shares which have been consolidated to ensure convenience in holding. A stock is made up of sets of shares expressed in terms of money instead of number of shares assimilated in that stock. Share:Total capital of a company is divided into units of small denominations. Each such unit of capital is called ‘Share’. www.bit.ly/imatharav Difference between Equity Shares and Preference Share Basis of Equity Share Preference Share Difference Rate of Rate of dividend on these Rate on dividend on these shares Difference between Shares and Stock Basis of Shares Stock Difference Nominal / A share has face value. A stock certificate has no face Face Value value. Issue Shares are issued directly to Only fully paid-up shares are the public after Incorporation converted into stock. of Company. Fully Paid- For Shares, to be fully paid- For issuing a share, is necessary Up Value up is not necessary. for consolidating shares to be fully paid-up. Numbering Shares are numbered A share stock certificate doesn’t seriously. contain serial number. Shares are popular among the Share stock certificates are not Popularity investors. popular. www.bit.ly/imatharav Dividend shares are not fixed. are by Article of Association. Limited The income as dividend is not Income as dividend are fixed Income limited. and limited. Value The value is generally less. The value are generally more. Rate of Dividend is high. Rate of Dividend is less. Rate of Dividend Priority of Payment are done later. Payments are done at first. Payment CHAPTER-7 What do you mean by Debentures? When can debentures be issued? The word Debenture is derived from the Latin word ‘Debere’, which means to Owe. The term debenture is used to signify the acknowledgement of a debt given under the seal of the company and containing a contract for the repayment of the principal sum at a specified date and for the payment of interest at a fixed rate until the principal sum is repayed. What is the object of issuing Debentures? According to the guidelines, issued by Security Exchange Board of India (SEBI). Company can issue the debentures for the following objectives. a. For expanding expenditure on modernization of plants. b. Expansion and Diversification of plant. c. For meeting, long term requirement of working capital. d. For setting up new projects. Explain the advantage of Debenture to the Company? Following are the advantages of issuing debentures: www.bit.ly/imatharav a. Sufficient Funds are Raised: At the event of need of additional capital, A company may raise sufficient funds through issuing of debentures to public. b. No Intervention in Management: A Debenture Holder has no right to intervene in the management of the company, Since, they do not enjoy voting rights. c. Convenience in Repayment: A company may conveniently arrange for the repayment of debentures to be made after a specific period of time. What is meant by Redeemable and Irredeemable Debentures? Redeemable Debentures are those debentures, which are repayable after a stipulated period or after a fixed date is called Redeemable Debenture. Irredeemable Debentures are those debentures, which are not repayable so long as the Company exists is called Irredeemable Debenture. Differentiate between Share holder and Debenture holder? Basis of Share holder Debenture holder Difference Ownership They are the owners of the They are the creditors of the company. company. Remuneration They receive Dividend. They receive Interest. Repayment It is repaid at the end. It is repaid at first. Right Shares are part of capital. Debentures are part of capital. Control They have the right to control They have no rights to control the affairs of the company. the affairs of the company. Explain the essential characteristics of Debentures? The essential characteristics of debentures are: - i. A debenture is a certificate of debts. ii. Debenture is a convenient means of external borrowings. iii. A debenture includes debenture, stock, bonds or any of the security. www.bit.ly/imatharav iv. A debenture contains the provision for payment of interest at regular intervals on fixed dates. v. A debenture contains the provision for repayment of the principal sum on due date. Issue of Debentures Under the Companies Act, 1656, the board of directors is empowered to issue debentures but, of course, with the consent of the company in the ordinary General Meeting. The previous borrowings and present borrowings both together must not exceed the paid-up capital and reserve fund of the company. Debentures can be issued at par, at premium or at discount. If the debentures carry a charge on the assets of the company, the particulars of such charge must be furnished to the Registrar of Companies within 21 days of the charge so arose. The debentures can be issued for payment in a lump sum or in different installment like shares. The journal entries are made in the same manner as are made for the issue of shares. But, debentures cannot be forfeited like shares for non-payment of calls. What are the things kept in mind while redemption of debentures? Following things are kept in mind while redeeming the debentures: i. Redemption fund should be made. ii. The amount of that fund utilizes only that way whatever is redemption fund is created for. iii. It is compulsory for each and every company to deposit 50% amount issued amount. iv. Time of redemption amount should be arranged. Discuss the methods of Redemption of Debentures? There are various methods of redemption of debentures. Therefore, determination of redemption of debentures is made at the time of issuing debentures. Redemption By: www.bit.ly/imatharav a. Payment in Lump-Sum. b. Payment in Installment. c. At the Option of the Company. d. Purchasing from Open Market. e. Conversion. State the type of debentures. Explain any Five. A Company may issue following types of Debentures: Redeemable Irredeemable Registerable Mortgaged or Secured Registered Convertible Collateral Simple Bearer Right Debentures What is meant by ‘Redemption of Debentures’? Redemption of Debentures means Repayment of the number of debentures, to the debenture holders or discharge of the liability on account of debentures. Debentures are normally redeemed on the due date. www.bit.ly/imatharav CHAPTER-8 Write two names of the types of Financial Analysis? Statements prepared to ascertain the profit and loss, during the accounting period and position of assets and liabilities at a certain date. Types of Financial Statements: There are two basic Financial Statements are: - i. Balance Sheet or Position Statements: Balance Sheet is a statement of assets and liabilities disclosing the financial position of an enterprise at a given date. The purpose of balance sheet is to know the resources and obligations for acquiring assets and liabilities. ii. Profit and Loss A/c or Income Statement: Income statement or P&L A/c shows the net results of operation of business during an accounting period. Explain the items, which are shown on the asset side of balance sheet under the main heads of Public Limited Company. The following items are included on Asset side of the balance sheet of public limited company under the main heads: www.bit.ly/imatharav i. Fixed Assets: Under this heading, Fixed assets of the company are shown in their cost price. Appreciation of Depreciation are added or deducted. ii. Investments: To earn income securities are purchased for business purpose. iii. Current Assets, Loans & Advances: This heading is also divided into two subheads: - Current Assets & Loans and Advances iv. Miscellaneous Expenditure: Under this heading, Preliminary expenses, commission and brokerage on shares and debentures etc. are shown. v. Profits and Loss A/c: When there is a debit balance of Profit and Loss A/c. Write some important items showed as Indian Company’s Act, 1956 Schedule VI-I in Balance Sheet. Liabilities Amount Assets Amount Share Capital Rs. Fixed Assets Rs. Reserves and Surplus - Investments - Secured Loans - Loans & Advances/ - Current Assets Unsecured Loans - Miscellaneous Expenses - Contingent Liabilities - Profit and Loss A/c - Current Liabilities - (Dr. Balance) - www.bit.ly/imatharav CHAPTER-9 What do you mean by Ratio Analysis? Ratio Analysis explains the comparison between two numbers. It also explains the relationship between two items and two groups. By ratio analysis, we can simplify difficult and brief data and convert into simplest form, it will help for study of different ratio. Mention two objects of Ratio Analysis? Two objects of Ratio Analysis are as follows: a. Profitability Measurement. b. Examination of Solvency. c. Examination of Operational Efficiency of Firm. d. Financial Statement Analysis. Explain objectives of Financial Statement Analysis? The following are the main objective of financial statement analysis. a. Knowledge of Earning Capacity: The main object of analysis is to know whether there is appropriate profit on invested capital or not. www.bit.ly/imatharav b. Knowledge of regarding solvency: The financial analysis helps to determine the short-term as well as long firm solvency of the concern. c. Knowledge of Financial Position: Analysis of financial statement enables us to know the financial strength of the business enterprise. Through analysis of financial statement, we can ascertain whether requisite funds will be available. d. Knowledge of Trend of Business: Analysis of financial statements help us to make a comparative study of balance sheets of business of various years. e. Valuable Information for Management: One of the principal objective of the analysis of financial statement is to know the weakness or drawbacks of the undertaking. Explain the importance of Analysis of Financial Statements. Financial Analysis is usually significant to the following categories of persons: a. Significance for Management: The management needs to know what progress of business has been towards its objectives of profitability, economic soundness turned, etc. it is from the analysis, they can be made available. b. Significance for Investors: Investors invest their money with the expectation of the good return. They take decision on the basis of information disclosed for profitability, solvency and trend of business. c. Significance for Government: Government has to take various decisions for the economic development of the country. Government frames the industrial policy. d. Significance for Others: Financial analysis has importance to other categories of society. The employees are interested to know the profitability of concern. Methods / Devices / Tools for Financial Analysis The main motto of Analysis and interpretation of financial statements is to ascertain the financial results of operation and position of a business undertaking. The following devices be used: www.bit.ly/imatharav a. Comparative Financial Statements: Comparative Financial Statements refer to those statements, which exhibit the financial position of a business concern at different periods of times. b. Trend Analysis: Under this device, the financial statements are analyzed by finding out the trend of series of information. This method ascertains the upward and downward directions and entangles the computation of the percentage relationship of each item. c. Fund Flow Statement: Fund Flow statement refers to statement of sources and applications of funds or statement of sources and uses of working capital. d. Cash Flow Statement: Cash flow statement refers to that statement, which shows the changes in the financial position of a business undertaking on cash basis. e. Ratio Analysis: Ratio Analysis refers to the mathematical expression of the relationship between two mutually related accounting figures. Thus, it shows a quantitative relationship between two items or group of items, which are mutually related. Explain the limitations of Financial Statement Analysis. The following are the limitations of financial Statement analysis: a. Limitations of Financial Statements: Financial Statements themselves have a number of limitations and so the analysis of financial statements suffer from limitations. b. Affected by Window Dressing: It is generally seen that window dressing is adopted in financial statements to conceal the bad aspect of financial position. c. Based on Past Events: Financial Statements represent the record of part events and historical facts. It is based on previous year data and events. d. Ignores Qualitative Element: Analysis of Financial Statements does not measure qualitative aspects of business concern. It discloses only those info, which can be expressed in terms of money. www.bit.ly/imatharav CHAPTER-10 Operating Activities: According to Accounting Standard – 3, Operating Activities constitute the main activities of a business enterprise. These are called Principal Revenue producing activities. Quick Asset: Quick Assets are those assets that can be converted into cash without any loss or delay. All current assets excepting stock and prepaid expenses are quick assets or liquid assets. Quick Assets = Current Asset – (Stock + Prepaid Expenses) How would you calculate cost of goods sold? Cost of goods sold can be calculated in the following manner: i. Cost of Goods Sold = Net Sales – Gross Profit where, Net Sales = Cash + Credit Sales – Sales Return ii. Cost of Goods Sold = Opening Stock + Net purchase + Direct Expenses – Closing Stock www.bit.ly/imatharav Mention four objects / importance of cash flow statement? The following are the objectives of cash flow statement: i. This is usually useful in the evaluation of cash of the institution. By this, through budget, the need of the cash of the institution can be estimated. ii. The use of cash can be controlled according to plan. iii. This analysis is also helpful in the evaluation of financial policies. iv. By cash flow analysis, the knowledge of redemption capacity of the institution is also possible. What are the uses of Cash Flow Statement? The uses of Cash Flow Statement may be studied under following: a. Analysis of Cash Position: Cash Flow Statement explains the reason for lower or higher cash balance. b. Assessment of Liquidity: Liquidity means ability to meet current obligations on due time, i.e., payment to creditors, repayment of bank loans, etc. It can be assessed with the help of Cash flow statement. Write the limitations of Cash Flow Statement? The limitations of cash flow statement are as follows: i. Non-Cash Transactions are ignored: Cash flow statements show only inflows and outflows of cash and cash equivalent. It ignores non-cash transactions like conversion of shares into debentures, purchase of building by issue of shares. ii. Lack of Accuracy: Cashflow Statement is prepared on the basis of financial statement. So, if financial statement is incorrect, the cashflow statement may be incorrect. iii. Long-Term Analysis not possible: Through cash flow statement long term analysis is not possible. It ascertains only the short term financial position of the business. Describe importance / objectives of Fund Flow Statement? www.bit.ly/imatharav The objectives of preparing a Fund Flow statement are as follows: a. Helpful in Financial Analysis: Financial Analysis is facilitated by Fund Flow statement. The balance sheet does show the financial position but change in various assets and liabilities is not shown by the balance sheet. b. Determination of Fund from Operation: Fund Flow statement provides the information of actual profit earned through operational activities. c. Management of Working Capital: In fund, items statement, the worked ‘Fund’ refers to working capital. d. Knowledge of Sources and Use of Funds: An Analysis of various searches of receipt and application of fund can be made through fund flow statement. Write the difference between Fund Flow Statement & Cash Flow Statement Basis of Fund Flow Statement Cash Flow Statement Difference Meaning It is a tool of financial It is statement that shows analysis that explains the inflows and outflows of cash changes in Working Capital. in a particular accounting period. Statement A statement of changes in No such statement is of Changes working capital is prepared. required in cash flow statement. in Working Capital Concept It is based on under the It is based on narrow concept concept of funds. (Working of funds. (Cash) Capital) Explanation Fund Flow Statement studies Cash Flow Statement depicts of Causes the changes in Working the causes of changes in Capital. Balance of cash. Basis of It follows Accrued Basis of It follows Cash Basis of Accounting Accounting. Accounting. www.bit.ly/imatharav Reference  All THE QUESTIONS ARE FROM THE FIVE YEARS OF PAPERS (2012-2016)  BOOK KEEPING AND ACCOUNTANCY – BY B.K. 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