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Analysis and Interpretation of Financial Statements – Accounting Grade 12

Interpreting financial statements requires analysis and appraisal of the performance and position of an entity. Candidates require good interpretation skills and a good understanding of what the information means in the context of a question

On this page we provide analysis and interpretation of financial statements for accounting Grade 12 learners on pdf format. This is for Accounting Grade 12 subject. The Analysis and interpretation of financial statements Grade 12 study content will help you with your Accounting Subject Revisions, Tests, Exams, and Assignments

It is important to note that interpretation is NOT a topic in isolation; it filters into almost all topics of the syllabus. This will also be relevant to Paper 1 and Paper 2 (Gr 12).

Basically, interpretation will include:

  • Using Financial Indicators to analyse and make meaningful comments;
  • Factors beyond financial indicators, such as comparisons, decisions and problem-solving

Main Questions for Analysis and Interpretation of Financial statements

Below are the main questions for Grade 12 Accounting for analysis and interpretation of financial statements:

  1. Can the business pay off its immediate debts in the short term?
  2. To what extent is the business financed by borrowed capital?
  3. Are investors interested in buying shares in this company?
  4. Is the business controlling expenses effectively?
  5. Is the business able to meet all their financial obligations with existing assets?
  6. Are shareholders receiving a favourable benefit from this business?

How to answer Interpretative Questions for Accounting Grade 12

  • Identify the appropriate financial indicators necessary to answer the question: At times, the question will not give any indications of the financial indicators to be used. Example, Comment on the liquidity of the business… You may need to calculate the ratios (if they are not given on the table of indicators).
  • Quote the figures and show the trend. Do some comparison (increase/decrease):Comparisons would include:
  • Information of the same business (previous financial year/s)
    • Other businesses in the same industry (competitors)
    • Targets set by the business (such as a mark-up percentage)
    • An alternative action (such as an investment in a fixed deposit)
    • External factors such as the inflation rate, interest rate and market price of shares.
  • Comment: Showing insight or understanding (focus on whether this is good or bad for the business). Provide short, concise statements. Be guided by the mark allocation as to how much information you need to provide.

Downloadable pdf Docs

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