Accounting

Step 1: Definition of Sweat Equity Shares.
Sweat equity shares are shares issued by a company to employees or directors at a discount or for consideration other than cash.
Step 2: Purpose.
They are issued to reward contribution in the form of know-how, intellectual property rights, or value additions made to the company.
Step 3: Conclude.
Therefore, sweat equity shares are issued to both employees and directors.
Final Answer:

Step 1: Liability concept.
One of the key features of a company form of business is “limited liability of shareholders”.
Step 2: Extent of liability.
Shareholders’ liability is limited only to the amount unpaid on their shares. They are not personally liable for company’s debts.
Step 3: Conclude.
Thus, liability of members in a company is limited.
Final Answer:

Step 1: Types of companies by incorporation.
- Companies may be incorporated under the Companies Act, 2013 (general companies).
- Some companies are created by a Special Act of Parliament (e.g., LIC, SBI).
Step 2: Eliminate wrong option.
Agreement of investors alone does not create a legal company. Registration under law is essential.
Step 3: Conclude.
Therefore, a company can be incorporated by both (A) Special Act of Parliament and (B) Companies Act.
Final Answer:

Step 1: Treatment in Income & Expenditure A/c.
Outstanding subscription (income accrued but not yet received) is added to subscription received during the year in the Income & Expenditure A/c, because accounts are prepared on accrual basis.
Step 2: Treatment in Balance Sheet.
It is also shown as an asset in the Balance Sheet under “Current Assets” since it is receivable.
Step 3: Conclude.
Thus, outstanding subscription appears in both Income & Expenditure A/c and Balance Sheet.
Final Answer:

Step 1: Fixed capital system.
Under the fixed capital system, capital accounts of partners remain fixed. Adjustments for drawings, interest, and profit/loss are recorded in Current Accounts.
Step 2: Normal balance of capital accounts.
Capital represents amount invested by partners in the firm. It is a liability for the firm, hence capital accounts normally show a credit balance.
Step 3: Conclude.
Therefore, when capital is fixed, partner’s capital accounts show a credit balance.
Final Answer:

Step 1: Current ratio formula.

Step 2: Classify each item.
- Creditors = Current liability (included).
- Debtors = Current asset (included).
- Bank overdraft = Current liability (included).
- Furniture = Fixed asset (not included).
Step 3: Conclude.
Since Furniture is a fixed asset, it is not considered in current ratio calculation.
Final Answer:

Step 1: Differentiate revenue and capital receipts.
- Revenue receipts are recurring in nature and are shown in Income & Expenditure A/c (or P& L).
- Capital receipts are non-recurring in nature and affect the financial position of the firm.
Step 2: Examples of capital receipts.
Capital receipts include loan taken, sale of fixed assets, issue of shares/debentures, etc.
Step 3: Treatment.
Since they affect assets and liabilities, they are shown in the Balance Sheet, not in income-related accounts.
Final Answer:

Step 1: Concept of trend analysis.
Trend analysis is a method to study the direction of financial statement items over a period of years. It helps identify growth, stability, or decline.
Step 2: Selection of year.
For calculating trend percentages, a base year is selected. In this year, each item is taken as 100, and subsequent years are expressed as percentages of the base year.
Step 3: Eliminate wrong options.
- Current year: Not taken as base, used only for comparison.
- Previous year: Not fixed, comparisons are always relative to base year.
- None: Wrong, because base year is correct.
Step 4: Conclude.
Hence, trend percentage is always calculated with respect to a base year.
Final Answer:

Step 1: Recall formula.

Step 2: Explanation.
- Gross profit measures the profitability from core trading activities before deducting administrative, selling, and financial expenses.
- Operating profit = Gross profit – Operating expenses.
- Net profit = Operating profit – Interest – Taxes.
Step 3: Conclude.
Thus, sales less cost of goods sold is called Gross Profit.
Final Answer:

Step 1: Investors.
They use financial analysis to judge profitability and risk before investing.
Step 2: Shareholders.
They assess dividend potential, growth prospects, and financial stability.
Step 3: Debenture holders.
They are interested in the capacity of the firm to repay interest and principal safely.
Step 4: Conclude.
Since all these groups benefit from financial analysis, the correct answer is “All of them”.
Final Answer: