Financial Accounting DEC 2026

Description

 

Financial Accounting

Dec 2026 Examination

 

 

Q1 A newly established retail business has started expanding its operations and is now seeking a bank loan for further growth. The owner maintains basic records of transactions but is unsure how accounting information can support different stakeholders. As a financial consultant, explain how accounting information can be applied to support the decisions of the owner, managers, employees, bankers and government authorities. Also explain how the financial statements prepared from accounting records can assist these users in evaluating the business. (10 Marks)

Ans 1.

Introduction

Accounting data does more than simply record what businesses spend and make. This information becomes a common communication system. Different people use this language to take different choices about the same enterprise. This retail business is now growing rapidly. The business is looking for a bank loan for growth. At present, the owner keeps minimal transaction records. Moving to properly prepared accounting statements is now a must. Managers, owners, employees, bankers and governments all look at these numbers differently. As a financial consultant, explaining this can help the person in

 

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Q2 (A) A company’s finance manager asks the accountant to postpone the recognition of certain expenses so that the current year’s profit appears higher and the company can meet its performance target. The accountant is concerned that doing so may mislead investors and other stakeholders. As the accountant, propose an appropriate course of action in this situation and justify your recommendation using relevant ethical principles of accounting. (5 Marks)

Ans 2(A).

Introduction

Finance manager is looking to put off certain expenditures. This will make the profits look better. This would allow the business to hit its performance target. But this is not really an accounting question. It’s an ethical matter. An accountant has to choose between pleasing management and reporting the truth.

Concept and Application

Why This Violates the

 

 

 

Q2 (B) The following information is available for ABC Ltd.: Year 2022, Sales Rs. 2,500 lakh, Profit Before Tax Rs. 400 lakh; Year 2023, Sales Rs. 2,750 lakh, Profit Before Tax Rs. 450 lakh; Year 2024, Sales Rs. 3,000 lakh, Profit Before Tax Rs. 500 lakh. Using 2022 as the base year, calculate the trend percentages for Sales and Profit Before Tax for 2023 and 2024. Based on the results, comment briefly on the trend in the company’s performance. (5 Marks)
Ans 2(B).

Introduction

Trend analysis transforms raw profits and sales figures into percentages. These figures are compared against an average year. This makes it easy to see real growth. Also, it shows whether the profit is growing in tandem with sales. The use of 2022 as the basis calendar year reveals a clear structure in the case of ABC Ltd.

Concept and Application