Skip to content

CMA Foundation · Fundamentals of Financial and Cost Accounting · Four Frameworks of Accounting and Forms of Organization

A statutory auditor of a company is reporting on its financial statements. Which of the following is a requirement of the Companies Act, 2013 as regards the financial statements that must be placed before the annual general meeting?

Company financial statements must give a true and fair view of the state of affairs and profit or loss and comply with notified accounting standards. They include a balance sheet and a statement of profit and loss, and need no prior approval from the Income Tax Department.

  1. AThey need only a profit and loss account, with no balance sheet
  2. BThey must give a true and fair view of the state of affairs and profit or loss, and comply with the notified accounting standardsCorrect
  3. CThey must show only the cash receipts and payments of the year
  4. DThey must be approved by the Income Tax Department before the meeting

Explanation

The Act requires financial statements to give a true and fair view of the state of affairs of the company at the year end and of its profit or loss, and to comply with the notified accounting standards. A balance sheet is mandatory, so omitting it is wrong. Receipts and payments alone is the format for some non-profit entities, not companies, and no tax department approval is needed.

Did you get it right without looking?

One question tells you little. A timed set on Four Frameworks of Accounting and Forms of Organization shows your real accuracy, how long you take and where you lose marks.

Practise Four Frameworks of Accounting and Forms of OrganizationFree diagnostic mock

More Four Frameworks of Accounting and Forms of Organization questions