Financial Statements Interview Preparation Guide

Current Assets : are the assets which get generated during the course of operations and are likely to be converted in the form of cash or getting utilized during the normal operational cycle of the business within a short span of time of one year. Example: Sundry Debtors, Prepaid expenses, Stock etc.

Loans which comes under long term liabilities. It may consist of long term loan borrowed from banks or financial institutions and are paid off over a longer span of time say 5-10 years.

Advances are the sums paid or received before an obligation is fulfilled. This comes under current liabilities. Example: Advance received from customers and income received in advance.

Fixed Assets indicate the value of infrastructural properties acquired by the business where the benefits are likely to be received over a longer period of time. These assets are not supposed to be sold but they are used to do the business and to earn profits. Example: Plant, Machinery, Furniture, Building, Land etc.

Investments indicate the amount of funds invested by the organization outside the business for earning income by way of dividend, interest etc.

Current Liability includes loans, deposits and bank overdraft which fall due for payment in a relatively short time, normally not more than 12 months. Following are the current liabilities:
o Acceptance
o Sundry Creditors
o Subsidiary Companies
o Advance received and unexpired discount
o Unclaimed dividend
o Other liabilities
o Interest accrued but not due on loans

o Taxation
o Doubtful Debts
o Dividend
o Contingencies
o Provident Funds Scheme
o Insurance, pension
o Other provisions

Miscellaneous Expenditures are the incidental expenses which cannot be classified as manufacturing, selling, and administrative expenses. These expenses are not revenue in nature and hence shown in the asset side of the Balance Sheet and should be written off over a period of time. Example: Preliminary Expenses, Development expenditures and expenditure on raising of shares and debentures.

As per the business entity principle, owner is different from the business. Thus, the profit generated by the business belongs to the shareholders, and hence the business is liable to shareholders for the distribution of profits. In the same way, when loss is incurred in the business it is born by the owners. Hence, it is an asset for the business as it is a receivable from the owners.

Secured Loans are the loans which are secured wholly or partly against the assets of the company. Following are the secured loans:

- Debentures
- Loans and Advances from Banks
- Loans and Advance from Subsidiaries
- Other Loans and Advances