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The balance sheet of a company is prepared as per the formal prescribed in part I of Schedule III of the Companies Act, 2013.
The Schedule III prescribes only the vertical format for presentation of financial statements. Thus, a company will now not have an option to use horizontal format for the presentation of financial statements.
At contents of Balance Sheet
An asset is a resource controlled by the enterprise as a result of past events Pam which future economic benefits are expected to flow to the enterprise.
Liabilities is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits.
Equity is the residual interest in the assets of the enterprise after deducting all its liabilities.
Part I – Form of Balance Sheet
Share capital equity AND LIABILITIES- (1) Shareholders’ funds
- Reserves and surplus
- Money received against share warrants
- (1)b.Reserves and Surplus
(i) Reserves and Surplus shall be classified as :
(a) Capital Reserves;
(b) Capital Redemption Reserve;
(c) Securities Premium Reserve;
(d) Debenture Redemption Reserve;
(e) Revaluation Reserve;
(f) Share Options Outstanding Account;
(g) Other Reserves – (Specify the nature and purpose of each reserve and the amount in respect thereof such as Tax Reserve);
1.3 Non-current liabilities
A liability shall be classified as non-current if it is not a current liability. The following items shall be disclosed under non-current liabilities.
Long-term borrowings
Deferred tax liabilities (Net)
Other Long term liabilities
Long-term provisions
1.3.a. Long-term borrowings :
1.3.a. 1. Long-term borrowings shall be classified as :
(a) Bonds/debentures;
(b) Term loans;
From banks;
From other parties;
(c) Deferred payment liabilities;
(d) Deposits;
(e) Loans and advances from related parties;
(f) Long term maturities of finance lease obligations;
(g) Other loans and advances (Specify nature).
- An operating cycle is the time between the acquisition of an asset for processing and their realization in cash or cash equivalents. Where the normal operating cycle cannot be identified, it is assumed to have a duration of 12 months.
Short-term borrowings
Trade payables
Other Current liabilities
Short-term provisions
1.4.a. Short-term borrowings
Short-term borrowings are the borrowings which are payable within 12 months from the date of Balance Sheet or within the period of operating cycle. The following items are included in short term borrowings:
(a) loans repayable on demand;
(b) Bank overdraft and cash credit limit form banks;
(c) Loans from other parties repayable within 12 months;
(d) Deposits; and
(e) Other loans and advances (Specify nature).
1.4.c. Other current liabilities
The amounts shall be classified as :
(a) Current maturities of long-term debt;
(b) Current maturities of finance lease obligations;
(c) Interest accrued but not due on borrowings;
(d) Interest accrued and due on borrowings;
(e) Income received in advance;
(f) Unpaid dividends;
(g) Application money received for allotment of securities and due for refund and interest accrued thereon;
Short-term Provisions
Provisions which are expected to mature within 12 months are classified as short term provisions.
The amounts shall be classified as :
(a) Provision for employee benefits;
(b) Others (specify nature).
Others would include Proposed Dividend, Provision for Taxation, Provision for expenses, Warranty Provisions, etc. These amounts should be disclosed separately specifying nature thereof.
- Assets
- Non-Current Assets
(a) Fixed assets
(i) Tangible assets
(ii) Intangible assets
(iii) Capital work-in-progress
(iv) Intangible assets under development
(b) Non-current investments
(c) Deferred tax assets (net)
(d) Long-term loans and advances
(e) Other non-current assets
- 1.a.i. Tangible assets
Tangible assets are the assets which have a physical existence. Assets that can be touched and seen are known as tangible assets.
The company shall disclose the following in the notes to accounts as per Part
I of the Schedule III :
(a) Land;
(b) Buildings;
(c) Plant and Equipment;
(d) Furniture and Fixtures;
(e) Vehicles;
(f) Office equipment;
(g) Other (specify nature).
II.1.a.ii. Intangible Assets
Intangible Assets are the assets which do not have a physical existence. These assets cannot be seen and touched.
(h) Classification shall be given as:
(a) Goodwill;
(b) Brands/trademarks;
(c) Computer software;
(d) Mastheads and publishing titles;
(e) Mining rights;
(f) Copyrights, patents and other intellectual property rights, services and operating rights;
(g) Recipes, formulae, models, designs and prototypes;
(h) Licenses and franchise;
(i) Other (specify nature).
- 1.a.iii. Capital Work-in-progress
It includes Fixed Assets which are under construction by the company itself.
Non-Current Investments
(i) Non-currents investments shall be classified as :
- Trade investments; and
- Other investments.
Trade investments
The “trade investment” is an investment mad by a company in shares or debentures of another company, to promote the trade or business of the first company.
Non-Current Investments is further classified as :
(a) Investment in property;
(b) Investment in Equity Instruments;
(c) Investment in preference shares;
(d) Investment in Government or trust securities;
(e) Investment in debentures or bonds.
(f) Investment in Mutual Funds;
(g) Investment in partnership firms;
(h) Other non-current Investments (specify nature)
Note :If a debenture is to be redeemed partly within 12 months and balance after 12 months, the amount to be redeemed within 12 months should be disclosed as current and balance should be shown as non-current.
- 1. d. Long-term loans & advances
Loans and advances that are not expected to be received back in cash or in the form of an asset within 12 months are known as Long-Term loans and advances.
(i) Long-term loans and advances shall be classified as :
(a) Capital Advances;
(b) Security Deposits;
(c) Loans and advances to related parties (giving details thereof);
(d) Other loans and advances (specify nature)
Capital advances are advances given for procurement of fixed assets which are non-current assets.
II.1.e. Other Non-Current Assets
Other non-current assets shall be classified as :
(i) Long Term Trade Receivables (including trade receivables on deferred credit terms);
(ii) Other (Specify nature)
A receivable shall be classified as ‘trade receivable’ if it is in respect of the amount due on account of goods sold or services rendered in the normal courses of business.
Important: The Schedule III does not contain any specific disclosure requirement for the unamortized portion of expense items such as share issue expenses, ancillary borrowing cost and discount or premium relating to borrowings.
We should disclose the unamortized portion of such expenses as “Unamortized expenses”, under the head ‘Other current assets”, depending on whether the amount will be amortized in the next 12 months or thereafter.
I.2. Current Assets
- An asset shall be classified as current when it satisfies any of the following criteria :
(a) it is expected to be realized in, or is intended for sale or consumption n 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 realized 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.
All other assets shall be classified as non-current.
- An operating cycle is the time between the acquisition of an asset for processing and their realization in cash or cash equivalents. Where the normal operating cycle cannot be identified, it is assumed to have a duration of 12 months.
II.2.a. Current Investments
Current Investments are the investments which are held to be converted into cash within, short period, i.e., within 12 months.
Current investments shall be classified as :
(a) Investment in Equity Instruments;
(b) Investment in preference shares;
(c) Investment in Government or trust securities;
(d) Investment in debentures or bonds.
(e) Investment in Mutual Funds;
(f) Investment in partnership firms;
(g) Other Investments (specify nature)
II.2.b. Inventories
Inventories shall be classified as :
(a) Raw materials;
(b) Work-in-progress;
(c) Finished goods;
(d) Stock-in-trade (in respect of goods acquired for trading);
(e) Stores and spares;
(f) Loose tools;
(g) Other (specify nature)
The heading Finished Goods should comprise of all finished goods other than those acquired of trading purposes.
II.2.c. Trade Receivables (current)
A 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.
A trade receivable will be treated as current if it is likely to be realized within 12 months from the date of Balance Sheet or Operating cycle of the business.
II.2.d. Cash and Cash Equivalents
As defined in AS-3, Cash flow Statement, cash and cash equivalents are share term highly liquid investments that are readily convertible into known amount cash and which are subject to an insignificant risk of change in value.
(i) Cash and cash equivalents shall be classified as :
(a) Balances with banks;
(b) Cheques, drafts on hand,
(c) Cash in hand;
(d) Other (specify nature)
II.2.e. Short-term Loans and Advances
(i) Short-term Loans and Advances shall be classified as :
(a) Loan and advances to related parties (giving details thereof):
(b) Other (specify nature)
(ii) Allowance for bad and doubtful loans and advances shall be disclosed under the relevant heads separately.
II.2.e.f. Other Current Assets (specify nature)
This is an all-inclusive heading, which incorporates current assets that do not fit into any other asset, categories e.g. Unbilled Revenue, Unamortized Premium on Forward Contracts, prepaid expenses, dividend receivable, advance taxes etc.
- Statement of Profit and Loss: It is a statement prepared to show the result of business operations during an accounting period.
It shows the operating performance of a company during the accounting period.
A Statement of Profit & Loss of a Company is prepared as per the format prescribed in Part II of Schedule III of the Companies Act, 2013.
for example –
the main and sub headings for the following are
PART II – FORM OF STATEMENT OF PROFIT AND LOSS
Statement of Profit & Loss
For the year ended
(Rs. In………)
Revenue from Operations : It refers to the revenue earned by the company from its business operations.CONTENTS OF STATEMENT OF PROFIT AND LOSS
Fox example :
(1) Revenue from sale of products or services
(2) Revenue from sale of scrap.
- Other Income : It refers to the revenue earned by the company from activities other than its business operations.
For example :
(i) Interest Income
(ii) Dividend Income
(iii) Profit from sale of investments or fixed assets.
(iv) Bad debts recovered
(v) Excess provisions written back etc.
- Cost of Material Consumed:
= Opening inventory of Raw Materials +Net Purchases of Raw Materials – Closing Inventory of Raw Materials.
Note: Inventory of Work-in-progress, Finished goods and Stock-in-trade are no considered for calculating cost of material consumed.
- Purchase of Stock-in-Trade: It includes goods purchased for resale purpose in same form i.e., without any further processing.
- Changes in Inventories of work-in-progress, finished goods and stock-in-trade.
= Opening Inventories – Closing Inventories
- Employees Benefit Expenses : It includes all expenses incurred by the company on its employees such as :
(i) Wages, salaries, bonus etc.
(ii) Leave encashment, staff welfare expenses, etc.
(iii) Contribution to employees provident fund and other funds.