BBS Financial Accounting and Analysis

State the meaning of book keeping accounting.

What is accounting information? Who are the user of accounting information and why do they need such information ? Explain.

Write any two importances of financial accounting.

Describe the users of accounting information. Why do they need such information? Explain.

a. Who are the internal and external users of accounting information? 

b. What is value added statement? Also explain the objectives of value added statement.

What is cash basis of accounting?

"Financial accounting is a specialized branch of accounting that keeps track of a company's financial transactions," discuss.

What is matching concept of accounting?

Define the meaning of NFRS.

What is realization concept of accounting?

The following information are given:

Started business with cash of Rs.50,000 and machinery of Rs.100,000

Salary paid Rs.20,000 and outstanding salary was Rs.4,000

Required: Accounting equation

 (a). What is financial statement? Also, mention the objectives of financial statement. 

(b) Differentiate between account receivable and note receivable 

The following are the transactions of a company:

a. Started business with cash Rs. 400,000 and bank balance Rs. 50,000.

 b. Deposited into bank Rs.100,000

c. Machinery costing Rs.100,000 was purchased payment made by a cheque.

d. Purchased merchandise goods for Rs.60,000 on account.

e. Sold merchandise goods on account for Rs.200,000.

f. Received a cheque from debtor, Rs.190,000 after deduction of 5% discount. The cheque was banked immediately.

g. Paid Rs.54,000 to creditor by issuing a cheque after deduction 10% discount. h. Rs.12,000 was paid for insurance premium. i. Paid wages and salary Rs.40,000 by issuing cheques. j.

Paid Rs.30,000 for rent.

Required:

a. Journal entries 

 b. T accounts (ledger) for sales, purchase, account receivable and account payable 

 c. Triple column cash book 

d. Trial Balance

 (a) What is double entry book-keeping system? Also write down the advantages and disadvantages of double entry book-keeping system. 

(b) What is accounting? Also, explain in details about the accounting cycle.

Following information are provided:

a) Goods sold for Rs. 10,000 on cash & Rs. 15,000 on credit with profit of Rs. 5,000

b) Paid Rs. 28,000 for wages including advance wages of Rs. 4,000

 Required: Accounting equation

What is going concern concept of accounting?

(a) A Company purchased a delivery Van for Rs. 560,000 on \( 1^{\text{st}} \) Jan 2018 and spent Rs. 40,000 on its repairs. On\( 1^{\text{st}} \)July, 2019 , it purchased another Van for Rs. 600,000. On \( 1^{\text{st}} \)July 2020 , it sold off the \( 1^{\text{st}} \) Van for Rs. 400,000. Depreciation is provided  @ 15% p.a. on diminishing balance method.

Required: Van Account for  three years ending \( 31^{\text{st}} \)December each year 

(b) Explain about the ethics of accounting.

What is materiality convention of accounting?

What is Trial Balance?

The following information are given:Started business with cash of Rs, 50,000 and goods of Rs. 150,000Received commission Rs. 26,000 including advance commission of Rs. 2,000Required: Accounting equation

The following transactions of the Furniture House are given below: Feb7 Returned by SH Furniture and Company10 Chairs @ Rs 2,000 each3 Sofa sets @ Rs 10,000 each(Trade discount 10%)Feb16 Returned from KK Furniture 6 Tables for Rs 5,000 eachFeb28 Returned to MM Furniture 2 Study Tables for Rs 6,000 eachRequired: Return Inward Book

Write down the meaning of the sources of document. Also, explain the importance of sources of documents. 

On January 1, ABC Company borrowed Rs. 200,000 from bank by signing a 3-month, 10% notes payable. It paid the principal and interest at due date. Required: Journal entries for issue and retirement of note.

The following transactions of the Light Company are given below:

Jestha 8: Returned to Ram Electric Shop:

                 10 Fans @ Rs.2,000 each

                 3 dozen Lamps @ Rs.500 each

                  Carriage charge Rs.2,000

  Jestha 20: Returned 10 Heaters from ABC Electricity for Rs.18,000

  Jestha 30: Returned 200 Led Lights to DD Electricity Rs.40,000

Required: Return outward book

Following transactions are given:

June 10: Purchased from Ratna Furniture House

5 Sofa Set @ Rs. 20,000 each

20 Chairs for Rs. 30,000

(Trade Discount @ 10%)

June 25: Purchased from Sita Furniture House:

10 Tables @ Rs. 3,000 each

15 Chairs @ Rs 1,000 each with trade discount @ 5%

 Required: Purchase Book

The following information are given:

Started business with cash of Rs. 80,000 and goods of Rs. 40,000.

Received rent Rs. 21,000 including advance rent of Rs. 3,000.

Commission received Rs. 10,000 and accrued commission is Rs. 2,000.

Required: Accounting equation.

The following transaction of the Electricity Shop are given below:

Ashad 7 Returned to Ram Electricity Shop

30 Fans @ Rs. 2,000 each

3 dozen Lamps @ Rs. 200 each

Less: Trade discount 10%

Ashad 14 Returned 12 Heaters to Banshal Lights for Rs. 30,000

Required: Return outward book

An organization sold goods for Rs. 30,000 in terms of 2/10, net 30. The customer return goods of Rs. 10,000 after some days. The due amount is settled by the customer within the given period.

Required: Journal entries for the above transactions.

The following information are given:

• Started business with cash of Rs. 100,000 and goods of Rs. 50,000

• Paid rent Rs. 26,000

• Purchase machinery for Rs. 5,000

Required: Accounting equation

The following transactions of the company are given below:

• Jestha 8: Acceptance was given by Ram for 2 months for Rs. 20,000 .

• Ashad 20: Received from Raman an acceptance for 3 months for Rs. 10,000

• Shrawan 21: Acceptance was given to Rita for 3 months for Rs. 30,000

Required: Bills Receivable Book.

 Define the source of documents. Also, write down the types of source of documents.

The financial transaction of a trader are provided below:

a. Started business with cash Rs. 300,000, which was collected by issuing the shares of Rs. 100 each.

b. Rs. 200,000 was deposited into bank.

c. An equipment costing Rs. 100,000 was purchased and payment made by a cheque.

d. An equipment costing Rs. 60,000 was purchased on credit.

e. Sold goods on credit for Rs. 170,000.

f. Received a cheque from debtor, Rs. 135,000 after deduction of 10% discount.

g. Paid Rs. 47,500 to creditor after deducting 5% discount.

h. Rs. 15,000 was paid for electricity bill.

i. Paid wages Rs. 20,000 and office salary Rs. 25,000 by issuing cheques.

j. Paid Rs. 20,000 as rent by issuing a cheque for the period.

Required:

• i. Journal entries 

• ii. T accounts (ledger) for sales, purchase, account receivable and account payable 

• iii. Triple column cash book 

• iv. Trial Balance 

Write about the accrual basis of accounting.

The financial transaction of a trader are provided below:

a. Started business with cash Rs. 300,000 and bank balance Rs. 100,000.

b. Deposited into bank Rs. 150,000.

c. Purchased merchandise goods for Rs. 50,000 on account.d. Sold merchandise goods on account for Rs. 170,000.

e. Received a cheque from debtor, Rs. 142,500 after deduction of 5% discount. The cheque was banked immediately.

f. Paid Rs. 45,000 to creditor by issuing a cheque after deduction 10% discount.

g. Rs. 13,000 was paid for insurance premium.

h. Paid utilities Rs. 10,000

i. Paid office salary Rs. 26,000

j. Rent paid Rs. 18,000 through cheque.

Additional Information:

a. Unsold stock recorded at Rs. 20,000

b. Salaries remain unpaid amounted to Rs. 4,000

c. Insurance premium includes prepaid Rs. 1,000

Required:

i. Journal entries for the financial transactions.

ii. Triple column cash book.

iii. Ledger accounts of Debtors and Creditors.

iv. Trial balance

An unadjusted trial balance of a company are given below:

Adjustment:

a. Closing stock Rs. 40,000

b. Prepaid rent was Rs. 10,000

c. Outstanding interest on bank loan was Rs. 4,000

d. Depreciation on Plant and Machinery at 15% per annum

Required:

i. Adjusted Trail balance 

ii. Statement of Profit and Loss a/c 

iii. Statement of Financial Position 

iv. Statement of Cash flow Statement 

ABC Company provides you the following information related to the inventories for 6 months.Jan 1: Beginning Inventory 600 units @ Rs 10 each.Feb 9: Purchased 1,100 units @ Rs.12 eachMarch16: Sold 1,500 units @ 15 eachApril 24: Purchased 500 units @ Rs.13 eachMay 27: Purchased 300 units @ Rs.14 eachJune 30: Sold 800 units @ Rs.17 eachRequired:a. Ending inventory and cost of goods sold under the FIFO and weighted average costing methodb. Income statement showing net income, assume depreciation expenses Rs.5,000 and other operating expenses Rs.10,000. [6+4=10]

The following information are given,

Trial Balance

Adjustment:

       Additional bad debts to be written off Rs.10,000

      New provision for doubtful debts @ 5% on debtor

     Required: Provision for doubtful debt account.

The ABC Company sells a single product for Rs.2 per unit and uses a periodic inventory system. The following data are available for the year

Required:

 a. Cost of goods sold, ending inventory and gross profit under weighted average costing method

 b. Cost of goods sold, ending inventory and gross profit under FIFO method

Define going concern concept of accounting.

D. Enterprises provide you the following information related to the inventories for January 2022.

Jan. 1 Beginning inventory 700 units @ Rs.10 each

Jan. 11 Purchased 1,000 units @ Rs.14 each

Jan. 17 Sold 1,200 units @ Rs.21 each

Jan. 20 Purchased 500 units @ Rs.14 each

Jan. 27 Purchased 200 units @ Rs.15 each

Jan. 31 Sold 500 units @ Rs.26 each.

Jan. 31. Stock verification found 50 units damage

Required:

a. Ending inventory and cost of goods sold under the LIFO and weighted average costing method using a periodic inventory system

 b. Income statement under both method, assuming operating expenses Rs.5,000 and estimated tax @ 25%.

What is perpetual inventory system?

The XYZ Company sells a single product for Rs. 2 per unit and uses a periodic inventory system. The following data are available for the year.

Required :

(a) Cost of goods sold, ending inventory and gross profit under weighted average costing method

(b) Cost of goods sold, ending inventory and gross profit under LIFO method.

Write down the meaning of contingent liabilities.

ABC Enterprises provides you the following information related to the inventories for December 2020. ABC makes counting and recording of inventories items only at end of each month.

Dec 1 Beginning inventory 700 units @ Rs 10 each

Dec 6 Purchased 900 units @ Rs 12 each

Dec 11 Purchased 1,000 units @ Rs 14 each

Dec 17 Sold 1,200 units @ Rs 16 each

Dec 20 Purchased 500 units @ Rs 14 each

Dec 27 Purchased 200 units @ Rs 15 each

Dec 31 Sold 1,500 units @ Rs 18 each

Required:

(a) What inventory system the ABC Enterprises is adopting? 

(b) Ending inventory and cost of goods sold under the FIFO method assuming a periodic inventory system. 

(c) Income statement showing net income, assume depreciation expenses Rs. 10,000 and other operating expenses Rs. 14,000.

a. On Chaitra 2080, Bank Statement disclosed a balance of Rs.11,400 and Cash Book showed the balance of Rs.11,000i) Deposit in transit Rs.2,000ii) Cheque issued of Rs.6,000 but only Rs.2,000 presented for payment.iii) Notes receivable and interest collected by the bank Rs.2,500 and Rs.600 respectively.iv) Cheque of Rs.4,800 deposited by the company on Chaitra was recorded by the bank as Rs.4,200v) A customer's cheque for Rs.3,000 was returned by the bank due to insufficient fund.vi) EFT payment Rs.1,000.vii) Bank charge Rs.100 for the service provided by the bankRequired: Bank Reconciliation Statement [5]b. What is receivable? What are the different types of receivable? [2+3=5]

What are the objectives of internal control of a business?

(a). The bank statement of a company showed a balance of Rs. 52,000 on 30th Poush 2079. However the company balance showed a different balance of Rs. 48,000. On the investigation, the following differences were noticed:

i. Company issued check of Rs.12,000 but during Poush only Rs.8,000 was presented to bank for payment

 ii. Deposit in transit Rs.6,000

 iii. EFT payment Rs.1,500

 iv. Customer’s cheque of Rs.3,000 was return with the bank statement marked NSF.

v. Collection of notes and interest receivable was for Rs.8,000 and Rs.4,000 respectively

vi. Bank charge Rs.500 for the service provided by the bank

 vii. A cheque of Rs.10,000 was deposited by the bank. However, the amount recorded by the company was Rs.11,000 in its statement.

 Required: Bank reconciliation statement 

(b) Differentiate between bond and debenture

(a) On 30th Poush 2079, the bank statement of Info-Tech Company showed a balance of Rs. 11,400 and cash book showed the balance of Rs. 10,000. Other data are:

A cheque of Rs. 2,100 deposited but recorded by bank as Rs. 1,200

A bill receivable of Rs. 5,000 and interest of Rs. 500 collected by bank only.

A customer's cheque for Rs. 2,000 was returned with the bank statement marked NSF

Bank service charge for the month Rs. 200

Deposit in transit of Rs. 6,000

Outstanding cheque Rs. 5,000 of the month.

 Required: Bank Reconciliation statements as on 30th Poush 2079 

(b) Differentiate between capital and revenue income.

What is internal control to a business?

a) The following information is available for GG Company on \( 31^{\text{st}} \) Chaitra 2075

Balance as per bank statement = Rs. 15,000

Balance as per company records = Rs. 11,000

Cheque not deposited upto \( 31^{\text{st}} \) Chaitra = Rs. 2,400

Bank service charge for the month = Rs. 100

Bill receivable collected by bank only = Rs. 2,000

Interest on bill is recorded on company = Rs. 500Outstanding cheque of Chaitra = Rs. 4,000

Required : Bank Reconciliation Statement as on \( 31^{\text{st}} \) Chaitra 2075. 

b) Define treasury stock with its features.

The following information is provided:

  Adjustments : 

 Additional bad debts to wtitten off Rs.20,000

New Provision for doubtful debts @ 5% on debtors 

Requires : Provision for doubtful debt account 

What are the different types of receivable?

Write down the meaning of bad debts.

 a) On \( 31^{\text{st}} \) Chaitra 2075 Bank Statement of KK Company disclosed a balance of Rs. 25,000 and Cash Book showed the balance of Rs. 30,000.

i. Number of cheques were deposited in the bank but on \( 31^{\text{st}} \) Chaitra, 2075, a cheque for Rs. 5,000 was not credited in the Bank Statement.

ii. Cheques issued of Rs. 8,000 but only Rs. 3,000 presented before \( 31^{\text{st}} \) Chaitra.

iii. Notes receivable collected by the bank Rs. 5,000.

iv. Cash of Rs. 6,000 deposited by the company on Chaitra was recorded by the bank as Rs. 4,000.

v. A cheque for Rs. 8,000 received from a customer was returned by the bank due to insufficient fund with the bank.

Required : Bank Reconciliation Statement as on \( 31^{\text{st}} \) Chaitra 2075.

b) Differentiate between account receivable and note receivable. 

Write down the meaning of contingent liabilities.

On January 1, a Company borrowed Rs. 600,000 from bank by singing a 6 month, 12% notes payable. It paid the principal and interest at due date.Required: Journal entries for issue and retirement of note

Define the meaning of current liabilities.

Write down the meaning of contingent liabilities.

On 1st Shrawan, MM Grocery Shop borrowed Rs. 120,000 from National Bank by signing a 6-month, 10% note. Grocery Shop paid the principal and interest at due date.

Required: Journal entries for issue and retirement of note

Following are the transaction a consultant agency during the month of Baishakh:

Baishakh 1: Collected Rs. 1,000,000 from owners of the agency in exchange of shares.

Baishakh 2: Deposited into bank Rs. 800,000

Baishakh 5: Paid 3 month's rent in advance Rs. 30,000

Baishakh 8: Purchased office equipment for Rs. 100,000 and paid 20% of cash and balance through cheque.

Baishakh 10: Billed to customers for service provided Rs. 200,000

Baishakh 12: Purchased office supplies Rs. 45,000

Baishakh 14: Received Rs. 190,000 after deduction of 5% discount from the customers billed on Baishakh 10

Baishakh 20: Paid Rs. 10,000 to the advertising company.

Baishakh 25: Paid electricity bill of Rs. 2,000.

 Baishakh 30: Paid office salary Rs. 50,000 by issuing cheques.

Required:

a. Journal Entries for the above transactions

 b. Triple Column Cash book

c. Cash, Bank, Accounts Receivable and Account Payable Account

d. Trial Balance

On Bhadra \( 1^{\text{st}} \) S.S. Company borrowed Rs. 200,000 from bank by signing a 3-month, 15% notes payable. It paid the principal and interest at due date.

Required: Journal entries for issue and retirement of note.

XYZ company receives a one year loan from Civil Bank Ltd. on \( 1^{\text{st}} \) Shrawan 2075. The face value of the Note of Rs. 200,000 must be repaid on \( 31^{\text{st}} \) Ashad 2076 along with 15% interest.

Required: Journal entries to record the loan and its repayment

a) A company purchased a machine costing Rs.220,000 on 1st Baishakh 2078. The useful life of the machine is 5 years with expected salvage value of Rs.20,000. The company decided to follow the straight line depreciation policy. At the end of Ashwin 2080, the company sold the machine for Rs.270,000 and purchased another machine for Rs.500,000. The books are closed on 31st Chaitra every year.Required: Machinery account for the 1st three years. [5]b. Differentiate between capital revenue and revenue expenditure. [5]

(a) A Company purchased machinery on Poush 30, 2077 for Rs. 80,000 and spent Rs. 20,000 on its installation. The company charged depreciation at 15% using SLM every year. At the end of Ashwin 2079, the company sold the machinery for Rs. 90,000 and purchased new machinery for Rs. 140,000. The books are closed on 31st Chaitra every year.

Required: Machinery account for 2077 to 2079 

(b) Differentiate between tangible and intangible assets.

(a) A Company purchased a machinery on Magh 1, 2076 for Rs. 90,000 and spent Rs. 10,000 on its installation. The company writes off depreciation at 15% on the diminishing value every year. At the end of Ashwin 2078, the company sold the machinery at Rs. 80,000 and purchased new machinery for Rs. 120,000. The books are closed on 31st Chaitra every year.

Required: Machinery account for 2076 to 2078 

(b) Define depreciation. Write in brief about the reasons for depreciating long-lived assets.

(a) XYZ Company purchase a machine on \( 1^{\text{st}} \) Jan 2016 for Rs. 500,000. The estimated life of machine is 10 years. Prepare machinery account for first three years on straight line method and the accounts are closed on \( 31^{\text{st}} \) Dec. 

(b) Differentiate between capital and revenue expenditure. 

 What is lease? Why is it needed? Also, explain the importance of lease. 

Following are the transaction of a company:a. Started business with cash Rs.1,000,000.b. Deposited into bank Rs.300,000c. Paid rent in advance Rs.52,000d. Sold merchandise goods for Rs.400,000 on account.e. Purchased merchandise goods for Rs.200,000 on accountf. Pre paid insurance paid Rs.12,000g. Received Rs.380,000 after deduction of 5% discount from the customers.h. Paid Rs.190,000 in full settlement by cheque.i. Paid electricity bill Rs.8,000.j. Paid office salary Rs.36,000 by issuing cheque.Additional Informationa) Unsold stock recorded at Rs.20,000.b) Salary remain unpaid Rs.4,000.c) Insurance premium expired Rs.8,000Required:a. Journal entries for above transactions [6]b. T accounts (ledger) for accounts receivable and accounts payable [2]c. Triple column cash book [4]d. Adjusted Trial balance [3]

GG Company issued Rs. 100,000 face value bond at discount of Rs. 10,000. The unamortized discount was Rs. 4,000 and the bond contains a call provision of Rs. 103.

Required: Gain or loss on early redemption of bond

"Lease is a legal and biding contracts that set forth the terms of rental agreements in real estate and real and personal property". Discuss.

ABC Company redeemed Rs. 200,000 face value bond issued at premium of 10 percentage. The unamortized premium was Rs. 12,000 and the bond contains a call provision of 105.

Required: Gain or loss on early redemption of bond.

What is treasury stock?

Write any two differences between stock dividend and stock splits.

Write about the disclosures required for financial statement under Nepal Financial Reporting Standard (NFRS).

Discuss in brief about the disclosures required for financial statement under Nepal Financial Reporting Standard (NFRS).

The income statement and other related information have been provided below: Income Statement for the year end 2080

Other Balance Sheet Items:

      Required : Cash Flow statement . [6+3+4+2]

Write about the accrual basis of accounting.

The balance sheet of a company for two years are given below:

Income Statement for the Year 2

Required: Cash flow statement

What is cash flow statement? Why it is important for the organization?

An unadjusted trial balance of a company is given below

Adjustment:

a. Closing stock Rs. 30,000

 b. Prepaid rent expired was Rs. 39,000

 c. Depreciation on Machinery at 15% per annum

Required:

i. Adjusted Trail balance 

 ii. Statement of Profit and Loss a/c as per NFRS 

iii. Statement of Financial Position as per NFRS 

 iv. Statement of Cash flow Statement as per NFRS 

The balance sheet of a company for two years are given below

Income Statement for the Year 2

Required: Cash flow statement showing operating, investing and financing activities.

The following information are provided to you:

Sales ........................................................................... Rs. 800,000

Opening stock of finished goods ................................ Rs. 150,000

Closing stock of finished goods .................................. Rs. 50,000

Materials purchased .................................................... Rs. 500,000

Store supplies .............................................................. Rs. 200,000

Power and fuel ............................................................ Rs. 80,000Required: Amount of Value added

You are provided the following information.

Required: Amount of value added.

What is value added statement?

You are provided the following information:

Required: Amount of value added

You are provided the following information.

Required: Amount of value added.

What is value added?

You are provided the following information:

• Sales = Rs. 500,000

• Salary to employee = Rs. 90,000

• Interest received = Rs. 12,000

• Income tax paid = Rs. 10,000

• Opening Stock = Rs. 50,000

• Closing Stock = Rs. 70,000

• Purchase = Rs. 200,000

• Carriage inward = Rs. 70,000

Required: Amount of value added

The following information is provided:Net working capital Rs.300,000 that represents Rs.100,000 inventory value Current liabilities Rs.200,000 Capital employed Rs.1,000,000 Debentures Rs.300,000 Accounts receivable Rs.80,000 Operating profit of the year Rs.100,000 being 10% of Sales. Income tax is 25% Required:a. Net profit after tax   b. Current ratioc. Debt to total capital ratio   d. Inventory turnover ratioe. Average of receivable   f. Return on shareholder's equityg. Net profit margin   Started business with cash of Rs.50,000 and goods of Rs.150,000Received commission Rs.26,000 including advance commission Rs.2,000Required: Accounting equation [1+ 6+1.5=10]

1. The following information is provided:

Net Working Capital Rs.700,000 that represents Rs.400,000 inventory value

Current Liabilities: Rs.400,000

Capital Employed: Rs.1,000,000

Shareholders equity: Rs.600,000

Account Receivable: Rs.300,000

Operating Profit of the year Rs.100,000 being 10% of Sales

Income Tax is 25%

Required:

a. Net profit after tax

 b. Quick Ratio

 c. Debt to Total Capital Ratio

d. Inventory Turnover Ratio

 e. Average Collection Period

f. Net Profit Margin g. Return on Shareholder's Equity

The following information is given to you:

Required:

 a. Amount of sales                                      b. Inventory at end

 c. Current ratio                                           d. Debt to total capital ratio

 e. Return on shareholders' equity              g. Dividend per share

h. Net profit margin

Define financial statement analysis. Explain the objectives of financial statement analysis.

The XYZ Company's Statement of profit and Loss a/c and Statement of Financial Position for two years have been given below:

Statement of Financial Position of a Company for 2074 and 2075

Required for 2075:

• a. Current Ratio

• b. Quick Ratio

• c. Debt Equity Ratio

• d. Debtors Turnover Ratio

• e. Fixed Assets Turnover Ratio

• f. Net Profit Ratio

• g. Return on Equity

• h. Return on Total Assets

• i. Interest Coverage Ratio

• j. Stock Turnover Ratio

The following information is provided:
Net Working Capital Rs. 500,000 that represents Rs. 350,000 inventory value.

Current Liabilities:       Rs. 300,000
Capital Employed:     Rs. 1,200,000
Shareholder Equity:    Rs. 800,000
Fixed Assets:        Rs. 600,000

Operating profit of the year Rs. 60,000 being 10% of sales income tax is 25%Required:

a. Net profit after tax
b. Quick Ratio
c. Debt to Total Capital Ratio
d. Stock Turnover Ratio
e. Return on Shareholder's Equity
f. Net profit margin
g. Total Assets Turnover Ratio

"The purpose of financial statement analysis is to reveal financial strengths and weaknesses of the firm," discuss.