Skip to content

CA Intermediate · Advanced Accounting · Framework for Preparation and Presentation of Financial Statements

Bharat Agro Ltd. has the following balances at year end: Land and building Rs 60 lakh, inventory Rs 12 lakh, trade receivables Rs 8 lakh, cash Rs 5 lakh, trade payables Rs 9 lakh, and a 10% bank loan of Rs 30 lakh repayable after 4 years. Under the Framework, what is the equity (residual interest) of the company?

Equity is Rs 46 lakh. Equity is the residual interest, being total assets of Rs 85 lakh less total liabilities of Rs 39 lakh, which include both trade payables of Rs 9 lakh and the long-term loan of Rs 30 lakh.

  1. ARs 37 lakh
  2. BRs 46 lakhCorrect
  3. CRs 76 lakh
  4. DRs 85 lakh

Explanation

Assets = 60 + 12 + 8 + 5 = Rs 85 lakh. Liabilities = 9 + 30 = Rs 39 lakh. Equity = 85 - 39 = Rs 46 lakh. Rs 37 lakh results from deducting only the loan and not the payables wrongly combined with other errors, and Rs 76 lakh ignores the loan.

Did you get it right without looking?

One question tells you little. A timed set on Framework for Preparation and Presentation of Financial Statements shows your real accuracy, how long you take and where you lose marks.

Practise Framework for Preparation and Presentation of Financial StatementsFree diagnostic mock

More Framework for Preparation and Presentation of Financial Statements questions