Unit 4
Final accounts
Q1) Explain the general instruction in the preparation of financial statement of a company.
A1)
GENERAL INSTRUCTION FOR PREPARATION OF BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS OF A COMPANY(section 129) | |||||||
GENERAL INSTRUCTIONS | (1) Where compliance with the requirements of the Act including Accounting Standards as applicable to the companies require any change in treatment or disclosure including addition, amendment, substitution or deletion in the head or sub-head or any changes, in the financial statements or statements forming part thereof, the same shall be made and the requirements of this Schedule shall stand modified accordingly.(2) The disclosure requirements specified in this Schedule are in addition to and not in substitution of the disclosure requirements specified in the Accounting Standards prescribed under the Companies Act, 2013. Additional disclosures specified in the Accounting Standards shall be made in the notes to accounts or by way of additional statement unless required to be disclosed on the face of the Financial Statements. Similarly, all other disclosures as required by the Companies Act shall be made in the notes to accounts in addition to the requirements set out in this Schedule. (3) (i) Notes to accounts shall contain information in addition to that presented in the Financial Statements and shall provide where required a) narrative descriptions or disaggregation’s of items recognized in those statements; and b) Information about items that do not qualify for recognition in those statements. (ii) Each item on the face of the Balance Sheet and Statement of Profit and Loss shall be cross-referenced to any related information in the notes to accounts. In preparing the Financial Statements including the notes to accounts, a balance shall be maintained between providing excessive detail that may not assist users of financial statements and not providing important information as a result of too much aggregation (4) (i) Depending upon the turnover of the company, the figures appearing in the Financial Statements maybe rounded off as given below:—
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(ii) Once a unit of measurement is used, it shall be used uniformly in the Financial Statements.(5) Except in the case of the first Financial Statements laid before the Company (after its incorporation) the corresponding amounts (comparatives) for the immediately preceding reporting period for all items shown in the Financial Statements including notes shall also be given. (6) For the purpose of this Schedule, the terms used herein shall be as per the applicable | |||||||
Note: —this part of Schedule sets out the minimum requirements for on the face of the Balance Sheet, and the Statement of Profit and Loss (hereinafter referred to as —Financial Statements || for the purpose of this Schedule) and Notes. Line items, sub-line items and sub-totals shall be presented as an addition or substitution on the face of the Financial Statements when such presentation is relevant to an understanding of the company’s financial position or performance or to cater to industry/sector-specific disclosure requirements or when required for compliance with the amendments to the Companies Act or under the Accounting Standards. | |||||||
Q2) Explain the general instruction in the preparation of balance sheet.
A2)
GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET
| PARTICULARS |
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1. | When an asset shall be classified as current? | If it satisfies any of the given criteria | (a) it is expected to be realised, or is intended for sale or consumption, in the company’s normal operating cycle; or (b) it is held primarily for the purpose of being traded; or (c) it is expected to be realised within twelve months after the reporting date; or (d) It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date. |
2. | When an asset shall be classified as Non Current ? |
| Asset other than Current Asset shall be classified as non current |
| Operating Cycle | Time between The acquisition of assets for processing And Their realisation in cash or cash equivalents | Where the normal operating cycle cannot be identified: It is assumed to have a duration of 12 months |
| When liability shall be classified as current ? | If it satisfies any of the given criteria | (a) It is expected to be settled in the company normal operating cycle; or (b) It is held primarily for the purpose of being traded; or (c) It is due to be settled within twelve months after the reporting date; or (d)The company does not have an unconditional right to defer settlement of the liability for least twelve months after the reporting cm Terms of a liability that could, at the option the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. |
| When an liability shall be classified as Non Current ? |
| Liability other than Current liability shall be classified as Non-Current. |
| When receivable shall be classified as a “trade receivable” ? | If it is in respect of the amount due on account of goods sold or services rendered | In The Normal Course Of Business |
| When payable shall be classified as a “trade payable” ? | If it is in respect of the amount due on account of goods purchased or services received | In The Normal Course Of Business |
1 | Share Capital | For each Class of Share Capital(Different classes of preference shares to be treated separately) | a. The number and amount of shares authorized. b. The number of shares issued, subscribed and fully paid, and subscribed but not fully paid. c. Par value per share. d. A reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period. e. The rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution of dividends and the repayment of capital. f. Shares in respect of each class in the company held by its holding company or its ultimate holding company including shares held by or by subsidiaries or associates of the holding company or the ultimate holding company in aggregate. g. Shares in the company held by each shareholder holding more than 5 per cent, shares specifying the number of shares held. h. Shares reserved for issue under options and contracts/commitments for the sale of shares/disinvestment, including the terms and amounts. i. For the period of five years immediately preceding the date as at which the Balance Sheet is prepared. i. Aggregate number and class of shares allotted as fully paid-up pursuant to contract(s) without payment being received in cash. ii. Aggregate number and class of shares allotted as fully paid-up by way of bonus shares. iii. Aggregate number and class of shares bought back. j. Terms of any securities convertible into equity/preference shares issued along with the earliest date of conversion in descending order starting from the farthest such date. k. Calls unpaid (showing aggregate value of calls unpaid by directors and officers). l. Forfeited shares (amount originally paid-up). |
2 | Reserves and Surplus | shall be classified as | 1) Capital Reserves; 2) Capital Redemption Reserve; 3) Securities Premium Reserve; 4) Debenture Redemption Reserve; 5) Revaluation Reserve; 6) Share Options Outstanding Account; 7) Other Reserves(specify the nature and purpose of each reserve and the amount in respect thereof); 8) Surplus i.e., balance in Statement of Profit and Loss disclosing allocations and appropriations such as dividend, bonus snares and transfer to/from reserves, etc.; (Additions and deductions since last balance sheet to be shown under each of the specified heads); |
Reserve specifically represented | by earmarked investments shall be termed as a “fund”. | ||
Debit balance of statement of profit and loss | Shall be shown as a negative figure under the head “Surplus”. Similarly, the balance of “Reserves and Surplus”, after adjusting negative balance of surplus, if any, shall be shown under the head “Reserves and Surplus” even if the resulting figure is in the negative. | ||
3. | Long-Term Borrowings | shall be classified as | 1) Bonds/debentures; 2) Term loans: (i) from banks. (ii) from other parties 3) Deferred payment liabilities; 4) Deposits; 5) Loans and advances from related parties; 6) Long term maturities of finance lease obligations; 7) Other loans and advances (specify nature) |
shall be further sub-classified as | SECURED AND UNSECURED (Nature of security shall be specified separately in each case) | ||
Where loans have been guaranteed by directors or others | The aggregate amount of such loans under each head shall be disclosed. | ||
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| Bonds/debentures (along with the rate of interest and particulars of redemption or conversion, as the case maybe) | shall be stated in descending order of maturity or conversion, starting from farthest redemption or conversion date, as the case may be. Where bonds/debentures are redeemable by instalments, the date of maturity for this purpose must be reckoned as the date on which the first instalment becomes due. |
Particulars of any redeemed bonds/debentures | which the company has power to reissue shall be disclosed | ||
Shall state | Terms of repayment of term loans and other loans | ||
Shall specify | Period and amount of continuing default as on the balance sheet date in repayment of loans and interest(separately in each case) | ||
4. | Other Long-term Liabilities | shall be classified as | (1) Trade payables; (2) Others. |
5. | Long-term provisions | shall be classified as | 1) Provision for employee benefits; 2) Others (specify nature). |
6. | Short-term borrowings | shall be classified as | 1) Loans repayable on demand; (i) from banks. (ii) from other parties. (2) Loans and advances from related parties; (3) Deposits; (4) Other loans and advances (specify nature). |
Borrowings shall further be sub-classified as | secured and unsecured(Nature of security shall be specified separately in each case) | ||
Where loans have been guaranteed by directors or others | The aggregate amount of such loans under each head shall be disclosed. | ||
Shall specify | Period and amount of continuing default as on the balance sheet date in repayment of loans and interest (separately in each case) | ||
7. | Other current liabilities | shall be classified as | 1) Current maturities of long-term debt; 2) Current maturities of finance lease obligations; 3) Interest accrued but not due on borrowings; 4) Interest accrued and due on borrowings; 5) Income received in advance; 6) Unpaid Dividends; 7) Application money received for allotment of securities and due for refund and interest accrued thereon. Share application money includes advances towards allotment of share capital. The terms and conditions including the number of shares proposed to be issued, the amount of premium, if any, and the period before which shares shall be allotted shall be disclosed. It shall also be disclosed whether the company has sufficient authorised capital to cover the share capital amount resulting from allotment of shares out of such share application money. Further, the period for which the share application money has been pending beyond the period for allotment as mentioned in the document inviting application for shares along with the reason for such share application money being pending shall be disclosed. Share application money not exceeding the issued capital and to the extent not refundable shall be shown under the head Equity and share application money to the extent refundable, i.e., the amount in excess of subscription or in case the requirements of minimum subscription are not met, shall be separately shown under “Other current liabilities”; 8) Unpaid matured deposits and interest accrued thereon; 9) Unpaid matured debentures and interest accrued thereon; 10) Other payables (specify nature). |
8 | Short-term provisions | shall be classified as | 1) Provision for employee benefits 2) Others (specify nature). |
9. | Tangible assets | Classification shall be given as | 1) Land; 2) Buildings; 3) Plant and Equipment; 4) Furniture and Fixtures; 5) Vehicles; 6) Office equipment; 7) Others (specify nature). |
| Under lease shall be separately specified | under each class of asset | |
| A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period | showing additions, disposals, acquisitions through business combinations and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately. | |
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| Where sums have been written-off on a education of capital or revaluation of assets or where sums have been added on revaluation of assets, every balance sheet subsequent to date of such write-off, or addition | shall show the reduced or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of such reduction or increase. |
10 | Intangible assets | Classification shall be given as | 1) Goodwill; 2) Brands /trademarks; 3) Computer software; 4) Mastheads and publishing titles; 5) Mining rights; 6) Copyrights, and patents and other intellectual property rights, services and operating rights; 7) Recipes, formulae, models, designs and prototypes; 8) Licenses and franchise; 9) Others (specify nature). |
A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period | showing additions, disposals, acquisitions through business combinations and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately. | ||
Where sums have been written-off on a education of capital or revaluation of assets or where sums have been added on revaluation of assets, every balance sheet subsequent to date of such write-off, or addition | shall show the reduced or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of such reduction or increase. | ||
11. | Non-current investments | shall be classified as trade investments and other investments and further classified as | 1) Investment property; 2) Investments in Equity Instruments; 3) Investments in preference shares; 4) Investments in Government or trust securities; 5) Investments in debentures or bonds; 6) Investments in Mutual Funds; 7) Investments in partnership firms; 8) Other non-current investments (specify nature). Under each classification, details shall be given of names of the bodies corporate indicating separately whether such bodies are (i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled special purpose entities in which investments have been made and the nature and extent of the investment so made in each such body corporate (showing separately investments which are partly-paid). In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each partner) shall be given. |
Investments carried at other than at cost | should be separately stated specifying the basis for valuation thereof; | ||
The following shall also be disclosed | 1) Aggregate amount of quoted investments and market value thereof; 2) Aggregate amount of unquoted investments; 3) Aggregate provision for diminution in value of investments. | ||
12. | Long-term loans and advances | loans and advances shall be classified as: | 1) Capital Advances; 2) Security Deposits; 3) Loans and advances to related parties (giving details thereof); 4) Other loans and advances (specify nature). |
The above shall also be separately sub-classified as: | 1) Secured, considered good; 2) Unsecured, considered good; 3) Doubtful. | ||
Allowance for bad and doubtful loans and advances | shall be disclosed under the relevant heads separately. | ||
Loans and advances due by directors or other officers of the company or any of them either severally or jointly with any other persons or amounts due by firms or private companies respectively in which any director is a partner or a director or a member | should be separately stated. | ||
13. | Other non-current assets | shall be classified as | 1) Long-term Trade Receivables (including trade receivables on deferred credit terms); 2) Others (specify nature); 3) Long term Trade Receivables, shall be sub-classified as: |
| (i) Secured, considered good; (ii) Unsecured, considered good; (iii) Doubtful Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated. | ||
14. | Current Investments | shall be classified as | 1) Investments in Equity Instruments; 2) Investment in Preference Shares; 3) Investments in Government or trust securities: 4) Investments in debentures or bonds; 5) Investments in Mutual Funds; 6) Investments in partnership firms; 7) Other investments (specify nature). |
Under each classification | Details shall be given of names of the bodies corporate indicating separately whether such bodies are: (i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled special purpose entities in whom investments have been made and the nature and extent of the investment so made in each such body corporate (showing separately investments which are partly paid). In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each partner) shall be given. | ||
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| following shall also be disclosed: | 1) The basis of valuation of individual investments 2) Aggregate amount of quoted investments and market value thereof; 3) Aggregate amount of unquoted investments; 4) Aggregate provision made for diminution in value of investments |
15. | Inventories | Inventories shall be classified as: | 1) Raw materials; 2) Work-in-progress; 3) Finished goods; 4) Stock-in-trade (in respect of goods acquired for trading); 5) Stores and spares; 6) Loose tools; 7) Others (specify nature) |
Goods-in-transit | shall be disclosed under the relevant sub-head of inventories | ||
Mode of valuation | shall be stated | ||
16. | Trade Receivables | Shall separately state shall be sub-classified as | Aggregate amount of Trade Receivables outstanding for a period exceeding six months from the date they are due for payment |
1) Secured, considered good; 2) Unsecured, considered good; 3) Doubtful. Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated. | |||
17. | Cash and cash equivalents | shall be classified as | 1) Balances with banks; 2) Cheques, drafts on hand; 3) Cash on hand; 4) Others (specify nature) |
Earmarked balances with banks (for example, for unpaid dividend) | shall be separately stated | ||
Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments | shall be disclosed separately. | ||
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| Repatriation restrictions, if any, in respect of cash and bank balances | shall be disclosed separately. |
Bank deposits with more than twelve months maturity | shall be disclosed separately. | ||
18. | Short-term loans and advances | shall be classified as: | 1) Loans and advances to related parties (giving details thereof); 2) Others (specify nature). |
above shall also be sub-classified as | 1) Secured, considered good; 2) Unsecured, considered good; 3) Doubtful. | ||
Allowance for bad and doubtful loans and advances | shall be disclosed under the relevant heads separately | ||
Loans and advances due by directors or other officers of the company or any of them either severally or jointly with any other person or amounts due by firms or private companies respectively in which any director is a partner or a director or a member | shall be separately stated | ||
19. | Other current assets (specify nature) | an all-inclusive heading | which incorporates current assets that do not fit into any other asset categories |
20. | Contingent liabilities (to the extent not | shall be classified as | 1) Claims against the company not acknowledged as debt; |
| provided for) commitments (to the extent not provided for) | shall be classified as | 2) Guarantees; 3) Other money for which the company is contingently liable. 1) Estimated amount of contracts remaining to be executed on capital account and not provided for; 2) Uncalled liability on shares and other investments partly paid; 3) Other commitments (specify nature). |
Q3) Explain the instruction of share capital.
A3)
1 | Share Capital | For each Class of Share Capital(Different classes of preference shares to be treated separately) | a. The number and amount of shares authorized. b. The number of shares issued, subscribed and fully paid, and subscribed but not fully paid. c. Par value per share. d. A reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period. e. The rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution of dividends and the repayment of capital. f. Shares in respect of each class in the company held by its holding company or its ultimate holding company including shares held by or by subsidiaries or associates of the holding company or the ultimate holding company in aggregate. g. Shares in the company held by each shareholder holding more than 5 per cent, shares specifying the number of shares held. h. Shares reserved for issue under options and contracts/commitments for the sale of shares/disinvestment, including the terms and amounts. i. For the period of five years immediately preceding the date as at which the Balance Sheet is prepared. i. Aggregate number and class of shares allotted as fully paid-up pursuant to contract(s) without payment being received in cash. ii. Aggregate number and class of shares allotted as fully paid-up by way of bonus shares. iii. Aggregate number and class of shares bought back. j. Terms of any securities convertible into equity/preference shares issued along with the earliest date of conversion in descending order starting from the farthest such date. k. Calls unpaid (showing aggregate value of calls unpaid by directors and officers). l. Forfeited shares (amount originally paid-up). |
Q4) Explain the instruction of reserves and surplus.
A4)
Share Capital | For each Class of Share Capital(Different classes of preference shares to be treated separately) | a. The number and amount of shares authorized. b. The number of shares issued, subscribed and fully paid, and subscribed but not fully paid. c. Par value per share. d. A reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period. e. The rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution of dividends and the repayment of capital. f. Shares in respect of each class in the company held by its holding company or its ultimate holding company including shares held by or by subsidiaries or associates of the holding company or the ultimate holding company in aggregate. g. Shares in the company held by each shareholder holding more than 5 per cent, shares specifying the number of shares held. h. Shares reserved for issue under options and contracts/commitments for the sale of shares/disinvestment, including the terms and amounts. i. For the period of five years immediately preceding the date as at which the Balance Sheet is prepared. i. Aggregate number and class of shares allotted as fully paid-up pursuant to contract(s) without payment being received in cash. ii. Aggregate number and class of shares allotted as fully paid-up by way of bonus shares. iii. Aggregate number and class of shares bought back. j. Terms of any securities convertible into equity/preference shares issued along with the earliest date of conversion in descending order starting from the farthest such date. k. Calls unpaid (showing aggregate value of calls unpaid by directors and officers). l. Forfeited shares (amount originally paid-up). |
Reserves and Surplus | shall be classified as | 1) Capital Reserves; 2) Capital Redemption Reserve; 3) Securities Premium Reserve; 4) Debenture Redemption Reserve; 5) Revaluation Reserve; 6) Share Options Outstanding Account; 7) Other Reserves(specify the nature and purpose of each reserve and the amount in respect thereof); 8) Surplus i.e., balance in Statement of Profit and Loss disclosing allocations and appropriations such as dividend, bonus snares and transfer to/from reserves, etc.; (Additions and deductions since last balance sheet to be shown under each of the specified heads); |
Reserve specifically represented | by earmarked investments shall be termed as a “fund”. | |
Debit balance of statement of profit and loss | Shall be shown as a negative figure under the head “Surplus”. Similarly, the balance of “Reserves and Surplus”, after adjusting negative balance of surplus, if any, shall be shown under the head “Reserves and Surplus” even if the resulting figure is in the negative. |
Q5) What elements comes into liabilities and assets.
A5)
| Notes | Current Year | Previous Year |
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EQUITY AND LIABILITIES |
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Shareholders Fund |
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Share Capital | 1 |
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Reserves & Surplus | 2 |
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Money Received against Warrants |
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Share Application Money pending allotment |
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Non-current Liabilities |
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Long Term Borrowings | 3 |
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Deferred Tax Liabilities (Net) | 4 |
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Other Long Term Liabilities | 5 |
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Long Term Provisions | 6 |
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Current Liabilities |
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Short Term Borrowings | 7 |
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Trade Payables | 8 |
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Other Current Liabilities | 9 |
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Short Term Provisions | 10 |
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Total |
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ASSETS |
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Non-current Assets |
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Fixed Assets | 11 |
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Tangible Assets |
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Intangible Assets |
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Capital Work-in-Progress |
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Intangible Assets under development |
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Non-current Investments | 12 |
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Deferred Tax Assets (Net) |
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Long Term Loans & Advances | 13 |
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Other Non-current Assets | 14 |
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Current Assets |
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Current Investments | 15 |
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Inventories | 16 |
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Trade Receivables | 17 |
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Cash and Cash Equivalents | 18 |
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Short Term Loans & Advances | 19 |
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Other Current Assets | 20 |
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Total |
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Significant Accounting Policies |
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The accompanying notes are an integral part of the financial statements |
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Q6) Draw the formal of balance sheet and profit and loss account of a company.
A6)
PART 1- FORMAT OF BALANCE SHEET
Name of the Company
Balance Sheet as at
| Notes | Current Year | Previous Year |
(in Rs.) | (in Rs.) | ||
EQUITY AND LIABILITIES |
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Shareholders Fund |
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Share Capital | 1 |
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Reserves & Surplus | 2 |
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Money Received against Warrants |
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Share Application Money pending allotment |
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Non-current Liabilities |
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Long Term Borrowings | 3 |
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Deferred Tax Liabilities (Net) | 4 |
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Other Long Term Liabilities | 5 |
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Long Term Provisions | 6 |
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Current Liabilities |
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Short Term Borrowings | 7 |
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Trade Payables | 8 |
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Other Current Liabilities | 9 |
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Short Term Provisions | 10 |
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Total |
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ASSETS |
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Non-current Assets |
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Fixed Assets | 11 |
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Tangible Assets |
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Intangible Assets |
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Capital Work-in-Progress |
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Intangible Assets under development |
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Non-current Investments | 12 |
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Deferred Tax Assets (Net) |
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Long Term Loans & Advances | 13 |
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Other Non-current Assets | 14 |
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Current Assets |
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Current Investments | 15 |
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Inventories | 16 |
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Trade Receivables | 17 |
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Cash and Cash Equivalents | 18 |
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Short Term Loans & Advances | 19 |
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Other Current Assets | 20 |
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Total |
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Significant Accounting Policies |
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The accompanying notes are an integral part of the financial statements |
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PART 2- FORMAT OF STATEMENT OF PROFIT OR LOSS
| Notes | Current Year | Previous Year |
(in Rs.) | (in Rs.) | ||
Continuing Operations |
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REVENUE | 2 |
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Revenue from Operations |
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Less : Excise Duty |
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Revenue from Operations (Net) | 21 |
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Other Income | 22 |
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Total Revenue |
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EXPENSES |
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Cost of Materials Consumed | 23 |
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Purchases of Stock-in-Trade | 24 |
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(Increase)/Decrease in Inventories of FG/WIP/Stock-in-trade | 25 |
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Employee Benefit Expenses | 26 |
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Finance Cost | 27 |
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Depreciation & Amortisation Expenses | 28 |
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Other Expenses | 29 |
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Total Expenses |
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Profit Before Exceptional and Extraordinary Items & Tax |
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Exceptional Income / Expenses |
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Profit Before Extraordinary Items & Tax |
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Prior Period Items |
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Extraordinary Items |
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Profit Before Tax |
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Provision for Taxation | 30 |
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Profit/(Loss) for the period from continuing operations |
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Discontinuing Operations |
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Profit/(Loss) from Discontinuing operations |
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Tax expense of Discontinuing operations |
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Profit/(Loss) from Discontinuing operations after Tax |
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Profit/(Loss) for the period |
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Earnings per Share | 3 |
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Basic EPS (in Rs.) |
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Diluted EPS (in Rs.) |
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Q7) Draw the statement of balance sheet of a company.
A7)
PART 1- FORMAT OF BALANCE SHEET
Name of the Company
Balance Sheet as at
| Notes | Current Year | Previous Year |
(in Rs.) | (in Rs.) | ||
EQUITY AND LIABILITIES |
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Shareholders Fund |
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Share Capital | 1 |
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Reserves & Surplus | 2 |
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Money Received against Warrants |
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Share Application Money pending allotment |
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Non-current Liabilities |
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Long Term Borrowings | 3 |
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Deferred Tax Liabilities (Net) | 4 |
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Other Long Term Liabilities | 5 |
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Long Term Provisions | 6 |
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Current Liabilities |
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Short Term Borrowings | 7 |
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Trade Payables | 8 |
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Other Current Liabilities | 9 |
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Short Term Provisions | 10 |
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Total |
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ASSETS |
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Non-current Assets |
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Fixed Assets | 11 |
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Tangible Assets |
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Intangible Assets |
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Capital Work-in-Progress |
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Intangible Assets under development |
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Non-current Investments | 12 |
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Deferred Tax Assets (Net) |
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Long Term Loans & Advances | 13 |
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Other Non-current Assets | 14 |
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Current Assets |
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Current Investments | 15 |
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Inventories | 16 |
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Trade Receivables | 17 |
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Cash and Cash Equivalents | 18 |
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Short Term Loans & Advances | 19 |
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Other Current Assets | 20 |
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Total |
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Significant Accounting Policies |
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The accompanying notes are an integral part of the financial statements |
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Q8) Draw the statement of profit and loss account.
A8)
PART 2- FORMAT OF STATEMENT OF PROFIT OR LOSS
| Notes | Current Year | Previous Year |
(in Rs.) | (in Rs.) | ||
Continuing Operations |
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REVENUE | 2 |
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Revenue from Operations |
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Less : Excise Duty |
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Revenue from Operations (Net) | 21 |
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Other Income | 22 |
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Total Revenue |
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EXPENSES |
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Cost of Materials Consumed | 23 |
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Purchases of Stock-in-Trade | 24 |
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(Increase)/Decrease in Inventories of FG/WIP/Stock-in-trade | 25 |
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Employee Benefit Expenses | 26 |
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Finance Cost | 27 |
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Depreciation & Amortisation Expenses | 28 |
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Other Expenses | 29 |
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Total Expenses |
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Profit Before Exceptional and Extraordinary Items & Tax |
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Exceptional Income / Expenses |
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Profit Before Extraordinary Items & Tax |
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Prior Period Items |
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Extraordinary Items |
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Profit Before Tax |
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Provision for Taxation | 30 |
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Profit/(Loss) for the period from continuing operations |
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Discontinuing Operations |
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Profit/(Loss) from Discontinuing operations |
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Tax expense of Discontinuing operations |
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Profit/(Loss) from Discontinuing operations after Tax |
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Profit/(Loss) for the period |
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Earnings per Share | 3 |
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Basic EPS (in Rs.) |
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Diluted EPS (in Rs.) |
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Details to be disclosed in the notes
a. Amount of “Revenue from operations” will be divided in –
i. Sale of products (including excise duty)
ii. Sale of services
iii. Other operating revenues
b. Finance cost will be distributed in –
i. Interest
ii. Dividend on redeemable preference shares
iii. Exchange Differences regarded as an adjustment to borrowing costs, and
iv. Other borrowing costs (if any)
c. Other Income will be distributed in –
i. Interest Income,
ii. Dividend Income, and
iii. Other non-operating income
d. Other Comprehensive Income shall be classified into –
i. Items that will not be reclassified to profit or loss
1. Changes in revaluation surplus
2. Remeasurements of the defined benefit plans
3. Equity Instruments through Other Comprehensive Income
4. Fair value changes relating to own credit risk of financial liabilities designated at fair value through profit or loss
5.Share of Other Comprehensive Income in Associates and Joint Ventures, to the extent not to be classified into profit or loss, and
6. Others
ii. Items that will be reclassified to profit or loss
1. Exchange differences in translating the financial statements of a foreign operation;
2. Debt instruments through Other Comprehensive Income;
3. The effective portion of gains and loss on hedging instruments in a cash flow hedge;
4. Share of other comprehensive income in Associates and Joint Ventures, to the extent to be classified into profit or loss; and
5. Others
e. Employees benefit expense
i. Salaries and wages,
ii. Contribution to provident and other funds,
iii. Share-based payments to employees
iv.staff welfare expenses
f. Depreciation and amortisation expense,
g. Interest Income,
h. Interest Expense,
i. Dividend Income,
j. Net gain or loss on sale of investments,
k. Net gain or loss on foreign currency transaction and translation (other than considered as finance cost),
l. Payment to the auditor as
i. Auditor
ii. For taxation matters
iii. For company law matters
iv. For other services
v. For reimbursement of expenses
m. Amount of expenses incurred on corporate social responsibility activities,
n. Details of items of exceptional nature
o. Any other expense or income which exceeds higher of Rs. 10, 00,000 or 1% of revenue from operations.
Q9) Explain the provision in final accounts.
A9)
1. Section 129 of companies act 2013, provides for preparation of financial statements.
2. 2(40) to include balance sheet, profit and loss account/income and expenditure account, cash flow statement, statement of changes in equity and any explanatory note annexed to the above.
3. New section 129 corresponds to existing section 210. It provides that the financial statements shall give a true and fair view of the state of affairs of the company and shall comply with the accounting standards notified under new section 133.
4. It is also provided that the financial statements shall be prepared in the form provided in new schedule III of Companies Act, 2013.
5. It may be noted that in the new schedule III the provisions for preparation of balance sheet and statement of profit and loss have been given which are on the same lines as in the existing schedule VI.
6. Further, in the new Schedule III detailed instructions have been given for preparation of consolidated financial statements as consolidation of accounts of subsidiary companies is now made mandatory in section 129.
7. It may be noted that for the first time a provision has been made in the new section 129(3)that if a company has one or more subsidiaries it will have to prepare a consolidated financial statement of the company and of all the subsidiaries in the form provided in the new schedule III of Companies Act, 2013.
8. The company has also to attack along with its financial statement, a separate statement containing the salient features of the financials of the subsidiary companies in such form as may prescribed by the rules.
9. It is also provided that if the company has interest in any associate company or a joint venture the accounts of that company as well as joint venture shall be consolidated.
10. For this purpose associate company has been defined in new section 2(6) company has significant influence i.e. it has. 20% of the total share capital of the company or has control on the business decision under an agreement.
11. The Central Government has power to exempt any companies from complying with any of the requirements made under the section.
Q10) Explain general instruction of a company statement.
A10)
GENERAL INSTRUCTION FOR PREPARATION OF BALANCE SHEET AND STATEMENT OF PROFIT AND LOSS OF A COMPANY(section 129) | |||||||
GENERAL INSTRUCTIONS | (1) Where compliance with the requirements of the Act including Accounting Standards as applicable to the companies require any change in treatment or disclosure including addition, amendment, substitution or deletion in the head or sub-head or any changes, in the financial statements or statements forming part thereof, the same shall be made and the requirements of this Schedule shall stand modified accordingly.(2) The disclosure requirements specified in this Schedule are in addition to and not in substitution of the disclosure requirements specified in the Accounting Standards prescribed under the Companies Act, 2013. Additional disclosures specified in the Accounting Standards shall be made in the notes to accounts or by way of additional statement unless required to be disclosed on the face of the Financial Statements. Similarly, all other disclosures as required by the Companies Act shall be made in the notes to accounts in addition to the requirements set out in this Schedule. (3) (i) Notes to accounts shall contain information in addition to that presented in the Financial Statements and shall provide where required a) narrative descriptions or disaggregation’s of items recognized in those statements; and b) Information about items that do not qualify for recognition in those statements. (ii) Each item on the face of the Balance Sheet and Statement of Profit and Loss shall be cross-referenced to any related information in the notes to accounts. In preparing the Financial Statements including the notes to accounts, a balance shall be maintained between providing excessive detail that may not assist users of financial statements and not providing important information as a result of too much aggregation (4) (i) Depending upon the turnover of the company, the figures appearing in the Financial Statements maybe rounded off as given below:—
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(ii) Once a unit of measurement is used, it shall be used uniformly in the Financial Statements.(5) Except in the case of the first Financial Statements laid before the Company (after its incorporation) the corresponding amounts (comparatives) for the immediately preceding reporting period for all items shown in the Financial Statements including notes shall also be given. (6) For the purpose of this Schedule, the terms used herein shall be as per the applicable | |||||||
Note: —this part of Schedule sets out the minimum requirements for on the face of the Balance Sheet, and the Statement of Profit and Loss (hereinafter referred to as —Financial Statements || for the purpose of this Schedule) and Notes. Line items, sub-line items and sub-totals shall be presented as an addition or substitution on the face of the Financial Statements when such presentation is relevant to an understanding of the company’s financial position or performance or to cater to industry/sector-specific disclosure requirements or when required for compliance with the amendments to the Companies Act or under the Accounting Standards. | |||||||
GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET
| PARTICULARS |
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1. | When an asset shall be classified as current? | If it satisfies any of the given criteria | (a) it is expected to be realised, or is intended for sale or consumption, in the company’s normal operating cycle; or (b) it is held primarily for the purpose of being traded; or (c) it is expected to be realised within twelve months after the reporting date; or (d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date. |
2. | When an asset shall be classified as Non Current ? |
| Asset other than Current Asset shall be classified as non current |
| Operating Cycle | Time between The acquisition of assets for processing And Their realisation in cash or cash equivalents | Where the normal operating cycle cannot be identified: It is assumed to have a duration of 12 months |
| When liability shall be classified as current ? | If it satisfies any of the given criteria | (a) It is expected to be settled in the company normal operating cycle; or (b) It is held primarily for the purpose of being traded; or (c) It is due to be settled within twelve months after the reporting date; or (d)The company does not have an unconditional right to defer settlement of the liability for least twelve months after the reporting cm Terms of a liability that could, at the option the counterparty, result in its settlement by the issue of equity instruments do not affect its classification. |
| When an liability shall be classified as Non Current ? |
| Liability other than Current liability shall be classified as Non-Current. |
| When receivable shall be classified as a “trade receivable” ? | If it is in respect of the amount due on account of goods sold or services rendered | In The Normal Course Of Business |
| When payable shall be classified as a “trade payable” ? | If it is in respect of the amount due on account of goods purchased or services received | In The Normal Course Of Business |
1 | Share Capital | For each Class of Share Capital(Different classes of preference shares to be treated separately) | a. The number and amount of shares authorized. b. The number of shares issued, subscribed and fully paid, and subscribed but not fully paid. c. Par value per share. d. A reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period. e. The rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution of dividends and the repayment of capital. f. Shares in respect of each class in the company held by its holding company or its ultimate holding company including shares held by or by subsidiaries or associates of the holding company or the ultimate holding company in aggregate. g. Shares in the company held by each shareholder holding more than 5 per cent, shares specifying the number of shares held. h. Shares reserved for issue under options and contracts/commitments for the sale of shares/disinvestment, including the terms and amounts. i. For the period of five years immediately preceding the date as at which the Balance Sheet is prepared. i. Aggregate number and class of shares allotted as fully paid-up pursuant to contract(s) without payment being received in cash. ii. Aggregate number and class of shares allotted as fully paid-up by way of bonus shares. iii. Aggregate number and class of shares bought back. j. Terms of any securities convertible into equity/preference shares issued along with the earliest date of conversion in descending order starting from the farthest such date. k. Calls unpaid (showing aggregate value of calls unpaid by directors and officers). l. Forfeited shares (amount originally paid-up). |
2 | Reserves and Surplus | shall be classified as | 1) Capital Reserves; 2) Capital Redemption Reserve; 3) Securities Premium Reserve; 4) Debenture Redemption Reserve; 5) Revaluation Reserve; 6) Share Options Outstanding Account; 7) Other Reserves(specify the nature and purpose of each reserve and the amount in respect thereof); 8) Surplus i.e., balance in Statement of Profit and Loss disclosing allocations and appropriations such as dividend, bonus snares and transfer to/from reserves, etc.; (Additions and deductions since last balance sheet to be shown under each of the specified heads); |
Reserve specifically represented | by earmarked investments shall be termed as a “fund”. | ||
Debit balance of statement of profit and loss | Shall be shown as a negative figure under the head “Surplus”. Similarly, the balance of “Reserves and Surplus”, after adjusting negative balance of surplus, if any, shall be shown under the head “Reserves and Surplus” even if the resulting figure is in the negative. | ||
3. | Long-Term Borrowings | shall be classified as | 1) Bonds/debentures; 2) Term loans: (i) from banks. (ii) from other parties 3) Deferred payment liabilities; 4) Deposits; 5) Loans and advances from related parties; 6) Long term maturities of finance lease obligations; 7) Other loans and advances (specify nature) |
shall be further sub-classified as | SECURED AND UNSECURED (Nature of security shall be specified separately in each case) | ||
Where loans have been guaranteed by directors or others | The aggregate amount of such loans under each head shall be disclosed. | ||
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| Bonds/debentures (along with the rate of interest and particulars of redemption or conversion, as the case maybe) | shall be stated in descending order of maturity or conversion, starting from farthest redemption or conversion date, as the case may be. Where bonds/debentures are redeemable by instalments, the date of maturity for this purpose must be reckoned as the date on which the first instalment becomes due. |
Particulars of any redeemed bonds/debentures | which the company has power to reissue shall be disclosed | ||
Shall state | Terms of repayment of term loans and other loans | ||
Shall specify | Period and amount of continuing default as on the balance sheet date in repayment of loans and interest(separately in each case) | ||
4. | Other Long-term Liabilities | shall be classified as | (1) Trade payables; (2) Others. |
5. | Long-term provisions | shall be classified as | 1) Provision for employee benefits; 2) Others (specify nature). |
6. | Short-term borrowings | shall be classified as | 1) Loans repayable on demand; (i) from banks. (ii) from other parties. (2) Loans and advances from related parties; (3) Deposits; (4) Other loans and advances (specify nature). |
Borrowings shall further be sub-classified as | secured and unsecured(Nature of security shall be specified separately in each case) | ||
Where loans have been guaranteed by directors or others | The aggregate amount of such loans under each head shall be disclosed. | ||
Shall specify | Period and amount of continuing default as on the balance sheet date in repayment of loans and interest (separately in each case) | ||
7. | Other current liabilities | shall be classified as | 1) Current maturities of long-term debt; 2) Current maturities of finance lease obligations; 3) Interest accrued but not due on borrowings; 4) Interest accrued and due on borrowings; 5) Income received in advance; 6) Unpaid Dividends; 7) Application money received for allotment of securities and due for refund and interest accrued thereon. Share application money includes advances towards allotment of share capital. The terms and conditions including the number of shares proposed to be issued, the amount of premium, if any, and the period before which shares shall be allotted shall be disclosed. It shall also be disclosed whether the company has sufficient authorised capital to cover the share capital amount resulting from allotment of shares out of such share application money. Further, the period for which the share application money has been pending beyond the period for allotment as mentioned in the document inviting application for shares along with the reason for such share application money being pending shall be disclosed. Share application money not exceeding the issued capital and to the extent not refundable shall be shown under the head Equity and share application money to the extent refundable, i.e., the amount in excess of subscription or in case the requirements of minimum subscription are not met, shall be separately shown under “Other current liabilities”; 8) Unpaid matured deposits and interest accrued thereon; 9) Unpaid matured debentures and interest accrued thereon; 10) Other payables (specify nature). |
8 | Short-term provisions | shall be classified as | 1) Provision for employee benefits 2) Others (specify nature). |
9. | Tangible assets | Classification shall be given as | 1) Land; 2) Buildings; 3) Plant and Equipment; 4) Furniture and Fixtures; 5) Vehicles; 6) Office equipment; 7) Others (specify nature). |
| Under lease shall be separately specified | under each class of asset | |
| A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period | showing additions, disposals, acquisitions through business combinations and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately. | |
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| Where sums have been written-off on a education of capital or revaluation of assets or where sums have been added on revaluation of assets, every balance sheet subsequent to date of such write-off, or addition | shall show the reduced or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of such reduction or increase. |
10 | Intangible assets | Classification shall be given as | 1) Goodwill; 2) Brands /trademarks; 3) Computer software; 4) Mastheads and publishing titles; 5) Mining rights; 6) Copyrights, and patents and other intellectual property rights, services and operating rights; 7) Recipes, formulae, models, designs and prototypes; 8) Licenses and franchise; 9) Others (specify nature). |
A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period | showing additions, disposals, acquisitions through business combinations and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately. | ||
Where sums have been written-off on a education of capital or revaluation of assets or where sums have been added on revaluation of assets, every balance sheet subsequent to date of such write-off, or addition | shall show the reduced or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of such reduction or increase. | ||
11. | Non-current investments | shall be classified as trade investments and other investments and further classified as | 1) Investment property; 2) Investments in Equity Instruments; 3) Investments in preference shares; 4) Investments in Government or trust securities; 5) Investments in debentures or bonds; 6) Investments in Mutual Funds; 7) Investments in partnership firms; 8) Other non-current investments (specify nature). Under each classification, details shall be given of names of the bodies corporate indicating separately whether such bodies are (i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled special purpose entities in which investments have been made and the nature and extent of the investment so made in each such body corporate (showing separately investments which are partly-paid). In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each partner) shall be given. |
Investments carried at other than at cost | should be separately stated specifying the basis for valuation thereof; | ||
The following shall also be disclosed | 1) Aggregate amount of quoted investments and market value thereof; 2) Aggregate amount of unquoted investments; 3) Aggregate provision for diminution in value of investments. | ||
12. | Long-term loans and advances | loans and advances shall be classified as: | 1) Capital Advances; 2) Security Deposits; 3) Loans and advances to related parties (giving details thereof); 4) Other loans and advances (specify nature). |
The above shall also be separately sub-classified as: | 1) Secured, considered good; 2) Unsecured, considered good; 3) Doubtful. | ||
Allowance for bad and doubtful loans and advances | shall be disclosed under the relevant heads separately. | ||
Loans and advances due by directors or other officers of the company or any of them either severally or jointly with any other persons or amounts due by firms or private companies respectively in which any director is a partner or a director or a member | should be separately stated. | ||
13. | Other non-current assets | shall be classified as | 1) Long-term Trade Receivables (including trade receivables on deferred credit terms); 2) Others (specify nature); 3) Long term Trade Receivables, shall be sub-classified as: |
| (i) Secured, considered good; (ii) Unsecured, considered good; (iii) Doubtful Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated. | ||
14. | Current Investments | shall be classified as | 1) Investments in Equity Instruments; 2) Investment in Preference Shares; 3) Investments in Government or trust securities: 4) Investments in debentures or bonds; 5) Investments in Mutual Funds; 6) Investments in partnership firms; 7) Other investments (specify nature). |
Under each classification | Details shall be given of names of the bodies corporate indicating separately whether such bodies are: (i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled special purpose entities in whom investments have been made and the nature and extent of the investment so made in each such body corporate (showing separately investments which are partly paid). In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each partner) shall be given. | ||
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| following shall also be disclosed: | 1) The basis of valuation of individual investments 2) Aggregate amount of quoted investments and market value thereof; 3) Aggregate amount of unquoted investments; 4) Aggregate provision made for diminution in value of investments |
15. | Inventories | Inventories shall be classified as: | 1) Raw materials; 2) Work-in-progress; 3) Finished goods; 4) Stock-in-trade (in respect of goods acquired for trading); 5) Stores and spares; 6) Loose tools; 7) Others (specify nature) |
Goods-in-transit | shall be disclosed under the relevant sub-head of inventories | ||
Mode of valuation | shall be stated | ||
16. | Trade Receivables | Shall separately state shall be sub-classified as | Aggregate amount of Trade Receivables outstanding for a period exceeding six months from the date they are due for payment |
1) Secured, considered good; 2) Unsecured, considered good; 3) Doubtful. Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately. Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated. | |||
17. | Cash and cash equivalents | shall be classified as | 1) Balances with banks; 2) Cheques, drafts on hand; 3) Cash on hand; 4) Others (specify nature) |
Earmarked balances with banks (for example, for unpaid dividend) | shall be separately stated | ||
Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitments | shall be disclosed separately. | ||
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| Repatriation restrictions, if any, in respect of cash and bank balances | shall be disclosed separately. |
Bank deposits with more than twelve months maturity | shall be disclosed separately. | ||
18. | Short-term loans and advances | shall be classified as: | 1) Loans and advances to related parties (giving details thereof); 2) Others (specify nature). |
above shall also be sub-classified as | 1) Secured, considered good; 2) Unsecured, considered good; 3) Doubtful. | ||
Allowance for bad and doubtful loans and advances | shall be disclosed under the relevant heads separately | ||
Loans and advances due by directors or other officers of the company or any of them either severally or jointly with any other person or amounts due by firms or private companies respectively in which any director is a partner or a director or a member | shall be separately stated | ||
19. | Other current assets (specify nature) | an all-inclusive heading | which incorporates current assets that do not fit into any other asset categories |
20. | Contingent liabilities (to the extent not | shall be classified as | 1) Claims against the company not acknowledged as debt; |
| provided for) commitments (to the extent not provided for) | shall be classified as | 2) Guarantees; 3) Other money for which the company is contingently liable. 1) Estimated amount of contracts remaining to be executed on capital account and not provided for; 2) Uncalled liability on shares and other investments partly paid; 3) Other commitments (specify nature). |
