FINANCIAL OF THE BALANCE SHEET

Revised schedule III for preparing Balance sheet and statement of Profit and loss does not offer
horizontal format. The new vertical format is as follows:

Part- I
BALANCE SHEET
Name of the company………….
Balance sheet as at…………….. Rs. in ………

BOOK – II (20 Marks)

Revised schedule III for preparing Balance sheet and statement of Profit and loss does not offer
horizontal format. The new vertical format is as follows:

Part- I
BALANCE SHEET
Name of the company………….
Balance sheet as at……………..
Rs. in ………

Particulars Note Figures at the end Figures at the

No. of current end of previous
reporting period reporting period
1 2 3 4
I EQUITY AND LIABILITIES
(1)Share Holders’ funds
a) Share Capital 1
b) Reserves and surplus 2
c) Money received against share warrants 3
(2)Share Application money pending allotment 4
(3)Non current Liabilities 5

a) Long term borrowings

b) Deferred Tax Liabilities(net)
c) Other Long term Liabilities
d) Long term Provisions
(4)Current Liabilities 6
a) Short term borrowings
b) Trade payables
c) Other current Liabilities
d) Short term provisions

TOTAL _________ ________

II ASSETS
(1)Non current Assets 8
a) Fixed assets
i) Tangible assets
ii) Intangible assets
iii) Capital work in progress
iv) Intangible assets under development
b) Non Current Investments 9
c) Deferred Tax assets(net) 10
d) Long term loans and advances 11
e) Other Non-current assets 12
(2)Current Assets 13
a) Current Investments
b) Inventories
c) Trade receivables
d) Cash and its equivalents
e) Short term loans and advances
f) Other current assets
Total

_________ ________
NOTE: The accounting treatment of the following items will not be examined:
1) Money received against share warrants.
2) Share application money pending allotment.
3) Deferred Tax Liabilities(net)
4) Other long term liabilities
5) Capital work in progress
6) Intangible assets under development
7) Deferred Tax Assets (net).

NOTES TO ACCOUNTS
1. The disclosure of Share Capital in the Balance Sheet is as under:

BALANCE SHEET
Name of the company………….
Balance sheet as at……………..
Rs. in ………

Particulars Note Figures at the end Figures at the

No. of current end of previous
reporting period reporting period
1 2 3 4
I EQUITY AND LIABILITIES
(1)Share Holders’ funds

a) Share Capital 1
----- ----

Notes to Accounts (1)

Amount(Rs.)
Share Capital
Authorized Capital
…………no. of shares @ ……each
Issued Capital
…………no. of shares @ ……each
Subscribed Capital
Subscribed and fully paid up
…………no. of shares @ ……each
Subscribed but not fully paid up
…………no. of shares @ ……each……… called up………
Less: CALLS IN ARREARS ………
Add: Shares forfeited a/c ……… ------------
__________

Note: Equity Share Capital and Preference Share Capital to be shown separately.
Illustration: X Ltd. Was registered with an authorized capital of Rs. 50,00,000 divided in 5,00,000
equity shares of Rs. 10 each. Company invited applications for 3,00,000 equity shares at a premium
of Rs. 3 per share, payable as follows:
Rs. 4 on Application, Rs. 5 on Allotment (including premium); Balance as and when required.
Application were received for 2,75,000 shares and allotment was made to all the applicants. All
money due on allotment was duly received except from one shareholder holding 1,000 shares.
Show the Balance Sheet of the company.

BALANCE SHEET of X Ltd.

As at 31 March ………
Rs. in ………

Particulars Note Figures at the Figures at the

No. end of current end of previous
reporting period reporting period
1 2 3 4
I EQUITY AND LIABILITIES
(1)Share Holders’ funds

a) Share Capital 1 16,48,000

b) Reserves and Surplus 2 8,22,000 ----

24,70,000

II ASSETS
Current Assets:
Cash and its equivalents 3 24,70,000

Notes to Accounts (1)

Amount(Rs.)
(1)Share Capital
Authorized Capital
…5,00,000………no. of shares @ …10…each 50,00,000
Issued Capital
…3,00,000………no. of shares @ …10…each 30,00,000
Subscribed Capital
 Subscribed and not fully paid up
…2,75,000…no. of shares @ 10each, Rs. 6 called up 16,50,000
Less: CALLS IN ARREARS 2,000 16,48,000
(2) Reserves and Surplus:
Security premium reserve(2,75,000X3) 8,25,000
Less: Calls in arrears on 1000 shares@ 3 per share 3,000 8,22,000

(3) Cash and Cash Equivalents: 24,70,000

Cash at Bank

2. Reserves and Surplus:

The following items are shown under the head Reserves and Surplus and the following
sequence is to be followed:
• Capital reserve
• Capital redemption reserve
• Securities premium reserve
• Debenture redemption reserve
• Revaluation reserve (Accounting treatment not to be evaluated)
• Share options outstanding account
• Other reserves( restricted to General reserve only)
• Surplus( balance in statement of P&L after appropriations such as dividend, bonus shares and
transfer to/from reserve a/c)
How to Present the Addition or Subtraction
Illustration : Venus Ltd has the following balances in Reserves and Surplus
Debenture Redemption Reserve 4,00,000
General Reserve 2,00,000
Surplus i.e Balance in the Statement of Profit & Loss 6,00,000

Solution :
Notes to Accounts :
Particulars Amount (Rs.)
Reserves & Surplus
a) Debenture Redemption Reserve 4,00,000
Add: Transfer from Statement of Profit and Loss 1,20,000 5,20,000
b) General Reserve 2,00,000
Add: Transfer from Statement of Profit & Loss 80,000 2,80,000
C )Surplus i.e Balance in the Statement of Profit and Loss (Opening) 6,00,000
Add: Profit earned during the year 3,00,000
9,00,000
Less: Transfer to Debenture Redemption Reserve 1,20,000
 Less: Transfer to General Reserve 80,000
Less: Proposed Dividend (Previous Year ) 70,000 (2,70,000) 6,30,000
Total (a +b+c) 14,30,000

3. Money received against share warrants: A disclosure of money received against share
warrants is to be made since shares are yet to be allotted against the share warrants. As they
are to be converted into Equity Shares ,these are shown as Shareholder’s funds.
4. Share Application Money Pending Allotment :If a company has issued shares and has
received application money,but date of allotment falls after the Balance Sheet.
(I ) When Such Application Money is Not Refundable :
Share Application Money ≤ Issued Capital Shown as “Share Application Money
Pending Allotment”

(II) When such application money is Refundable:

Share Application Money ≥ Issued Capital Shown as “Share Application Money
Pending Allotment”
Excess Money Shown as “Current liabilities”
Subhead “Other Current Liabilities”
Shares Allotted For Cash Consideration:

5. Non Current Liabilities :

(A) Long Term Borrowings : Repayable after 12 months or after the period of operating cycle .
i)Debentures
ii) Bonds
iii) Term Loans
a) From Banks
b) Other Parties
iv) Public Deposits
v) Other Loans and Advances (Nature to be Specified)

B)Deferred Tax Liability (Net)

C) Other long term Liabilities
i) Trade Payables : A trade payable refers to the amount due on account of goods purchased or
services rendered in the normal course of business. It includes both sundry creditors and bills
payable.
Trade Payables are classified as Long-term Liabilities' when they are agreed to be settled after 12 months
of the date of Balance Sheet or after the period of Operating.

(ii) Others: Examples are:

• Premium Payable on Redemption of Debentures (provided debentures are shown as Long-term
Borrowings)
• Premium payable on Redemption of Preference Shares (provided Preference Shares are redeemable
after 12 months of the date of Balance Sheet or after the period of Operating
(D) Long Term Provisions : All provisions for which the related claims are expected to be
settled after 12 months of the date of Balance Sheet or after the period of Operating Cycle are
classified as Long-term Provisions.
Examples are: (i) Provision for Retirement Benefits like Provision for Provident Fund
(ii) Provision for Warranties or Provision for Warranty Claims.
(iii) Provision for Gratuity
(iv) Provision for Earned Leave .

6. Current Liabilities: According to Schedule III of the Companies Act,2013 Current liabilities shall be
classified as :
(i) Short-term Borrowings
(ii) Trade Payables
(iii) Other Current Liabilities
(iv) Short-term Provisions

(I ) Short-term Borrowings: Short-term borrowings are borrowings of the company which are due for
payment within 12 month from the date of Balance Sheet or within the period of Operating Cycle.

The items included are:

(1) Loans repayable on demand;
• from Banks
• from Other Parties
(ii) Loans and Advances from related parties
(ii) Deposits;
(iv) Bank Overdraft or Cash Credit from banks
(v) Other Loans and Advances (Nature to be specified).

(II) Trade Payables: As stated before, Trade Payable refers to the amount due on account of goods
purchased or services rendered in the normal course of business. It includes both sundry creditors and bills
payable.

(III). Other Current Liabilities:

These include:
(i) Current Maturities of Long-term Debts: If a part of long-term borrowings is payable within 12
months from the date of the Balance Sheet or within the period of Operating Cycle, then such part is shown
as 'Current Maturities of Long-term Debts'
(ii) Interest accrued but not due on borrowings: It is the amount of interest that is provided in the
books of accounts but it has not become due for payment.
For example, suppose a company pays interest on 12% Debentures half-yearly on 30h June and 31st
December. If the company closes its books on 31st March, then it will provide for interest for the period from
January to March following the accrual concept of accounting. However such interest will become due for
payment on 30th June. The interest for the quarter January to March will be classified as 'Interest accrued but
not due
(iii) Interest accrued and due on borrowings: It is the amount of interest that is provided in the
books of accounts and is also due for payment. In the above example, if interest due on 31st December is
provided in the books of accounts but has not been paid, then it will be shown as 'Interest accrued and due'

(iv) Income Received in Advance: It is the advance received by the company against which sale is
yet to be made and / or services are yet to be rendered.

(v) Unpaid Dividends: It refers to the amount of dividend declared by the company but has not been
claimed by the shareholders yet.
(vi) Excess application money which is due for refund and interest accrued thereon.
(vii) Unpaid matured deposits and interest accrued thereon.
(viii) Unpaid matured debentures and interest accrued thereon.
(ix) Calls-in-Advance
(x) Other Payables (Nature to be Specified): Examples: Outstanding Expenses, Provident Fund Payable, etc.
7.Short Term Provisions. All provisions for which the related claims are expected to be settled within
12 months of the date of Balance Sheet or within the period of Operating Cycle are classified as Short Term
Provisions.Short term Provisions are classified into:
a) Provision for Tax
b) Provision for Expenses
c )Provision for Doubtful Debts (It can be Shown by way of deduction from the amount of Trade
Receivables)

Non Current Assets

(1 ) Fixed Assets : Fixed Assets are the assets which are required for purpose of reuse in the
business but not for purpose of resale. They are categorised into:
(1) Tangible Assets: Tangible Assets are assets which can be physically seen and touched.
Examples of Fixed Tangible Assets are: Land, Building, Plant and Equipment, Furniture and
Fixtures, Vehicles, Office Equipments, etc.
(2) Intangible Assets: Intangible Assets are the assets which do not have physical existence and, thus,
cannot be seen and touched.
• Goodwill
• Brand / Trademarks
• Computer Software and Mining rights
• Masthead and Publishing titles. (Accounting Treatment Not to be Evaluated)
• Copyrights, and patents and other intellectual property rights, services and operating rights.
(Accounting Treatment Not to be Evaluated).
• Recipes, formulae, models, designs and prototypes (Accounting Treatment Not to be evaluated)
• Licenses and Franchise (Accounting Treatment Not to be evaluated)

Examples of Fixed Intangible Assets are:

(ii) Capital Work-in-Progress (Accounting Treatment Not to be evaluated): It refers to
Fixed Tangible Assets which are under construction, such as Building, Plant and Equipment, etc.
(iv) Intangible Assets under Development (Accounting Treatment Not to be evaluated): It refers to
Fixed Intangible Assets which are under development, such as patents, intellectual property rights, etc.
9) Non Current Investments : Non-current Investments are investments which are held not with the
purpose to resell but to retain them. Non-current Investments are further classified into "Trade
Investments' and 'Other Investments'.

• Trade Investments are investments made by a company in share or debentures of another

company, not being its subsidiary, to promote its own trade and business.
• Other Investments are those investments which are not trade investments.
(i) Investments in Property;
(i) Investments in Equity Instruments;
(iii) Investments in Preference Shares
(iv) Investments in Government or Trust Securities
(v) Investments in Debentures or Bonds;
vi) Investments in Mutual Funds;
(vii) Investments in Partnership Firms; and
(viii) Other Non-current Investments (Nature to be specified).

C) Deferred Tax Assets (Net )and Deferred Tax Liabilities (Net ) : (Accounting Treatment
Not to be evaluated): Deferred Tax Asset comes into existence when Accounting Income is found to be less
than Taxable Income.

11) Long Term Loans and Advances : These are the loans and advances which are expected to be
received back after 12 months from the date of Balance Sheet or after the period of operating Cycle. These are
classified into

(i) Capital Advances: Advances given for acquiring fixed assets are termed as Capital Advances.
Generally, these advances are not received back in cash but are received in the form of some fixed assets. As
they get converted into fixed assets of the company, they are classified as long-term advances.
(ii) Security Deposits: Security deposits are the deposits given for a period of more than 12 months from
the date of Balance Sheet or after the period of Operating Cycle. Examples are: Security deposit for electricity
and telephone, etc.

12) Other Non Current Assets : Other Non-Current Assets (Accounting Treatment Not to be
evaluated): It includes all other non-current assets which do not fall into any of the above classification

They are classified into:

(i) Long-term Trade Receivables: If the amount of trade receivables is receivable aft 12 months from
the date of Balance Sheet and after the period of operating cycle. then it is classified or shown as Long-Term
Trade Receivables.
(ii) Others: It includes unamortised expenses or losses (like discount on issue or debentures, loss on issue
of debentures, etc.), insurance claim receivable, etc.

13) Current Assets :

According to Schedule III Current Assets shall be classified as:
a)Current Investments
b) Inventories
c) Trade Receivables
d) Cash & Cash Equivalents
e ) Short Term Loans and Advances and
f) Other Current Assets.

a)Current Investments
Current Investments: These are the investments which are held to be converted into cash within a short
period, i.e. within 12 months from the date of their purchase. They are classified into:
(i) Investments in Equity Instruments;
(ii) Investments in Preference Shares;
(iii) Investments in Government or Trust Securities;
(iv) Investments in Debentures or Bonds
(v) Investments in Mutual Funds
(vi) Investments in Partnership Firms; and
(vii) Other Current Investments (Nature to be specified).

(b) Inventories: It means stock held for the purpose of trade in the normal course of business. It includes
the following:
(i) Raw Materials
(ii) Work-in-Progress;
(iii) Finished Goods
(iv) Stock-in-Trade (in respect of goods acquired for trading);
(v) Stores and Spares;
(vi) Loose Tools.
(c ) Trade Receivables: Trade receivables refer to the amount due on account of goods sold or services
rendered in the normal course of business. It includes both Sundry Debtors and Bills Receivables.
As stated before, 'Provision for Doubtful Debts' is either shown under 'Short-term Provisions' on the
Equity and Liabilities side of the Balance Sheet or by way of deduction from the amount of Trade
Receivables.
( d) Cash and Cash Equivalents : Cash and Cash Equivalents: Cash and Cash Equivalents are
classified or shown as
(i) Balance with Banks
(ii) Cheques, drafts on hand;
(iii) Cash on hand;
(iv) Others (nature to be specified);
(v) Earmarked balances with banks (Accounting Treatment Not to be evaluated);
(vi) Balances with banks held as margin money or security against the borrowings guarantees, other
commitments (Accounting Treatment Not to be evaluated);
(vii) Bank deposits with more than 12 months maturity (Accounting Treatment Not to be evaluated)

(e) Short-term Loans and Advances: It includes those loans and advances which are expected to be
realised within 12 months from the date of Balance Sheet and within the period of operating cycle.
(f) Other Current Assets: It includes all other current assets which do not fall in any of the above
classifications of Current Assets. Examples are:
(i) Prepaid Expenses;
(ii) Accrued Incomes;
(i) Advance Taxes;
iv) Dividend Receivable (Accounting Treatment Not to be evaluated);
(v) Unamortised expenses or losses to be written off within 12 months from the date of Balance Sheet and
period of operating cycle.
g) Contingent Liabilities:
Contingent Liabilities: are those liabilities which have not arisen but may arise upon the happening
of a certain event. It is uncertain so may or may not involve the payment of money. It is never shown in
the Liability side of the Balance sheet but stated in Notes to Accounts below the Balance Sheet.
 a. Claims against the company not acknowledge as debt.
b. Guarantees given by the company
c. Other money for which the company is contingently liable.
d. Proposed Dividend (Current Year) because it is Subject approval by the shareholders

h) Commitments : Capital Commitments: These are financial commitments or future liabilities for
capital expenditure in respect of which contracts have been made.
They are classified into:
(i) Uncalled liability on shares and other investments partly paid; If the Company holds partly-paid shares of
other Companies as investment, then the uncalled amount on these shares is a capital commitment as it will
have to be paid as and when called
(ii) Estimated amounts of contracts remaining to be executed on Capital Account and not provided for;
(iii) Other commitments (specify nature) like arrears of dividends on Cumulative Preference Shares.

Commitments: means an agreement to perform a particular activity at a certain time in the future under
certain circumstances. Commitments shall be classified as:
a) Estimated amount of contracts remaining to be executed on capital amount and not provided
for;
b) Uncalled liability on shares and other Investments partly paid;
c) Other commitments (specify nature) such as arrears of dividends on cumulative preference
shares.

a)
Format of statement of Profit and Loss
For the year ended 31 March 2016 & 2017
Particulars Note 2018-19 2017-18
No.
A B
I Revenue from operations …. ….

II Other Income …. ….

III Total Revenue(I+II) ….

IV Expenses:
a) Cost of material consumed …. ….
b) Purchase of stock in trade
c) Change in inventories of …. ….
finished goods, work in progress
…. ….
and stock in trade
d) Employees benefit expenses
 e) Finance costs
f) Depreciation and amortization
expenses …. ….
g) Other expenses which includes …. ….
office and administrative
expenses and selling &
distribution expenses

…. ….

Total expenses …. ….

V Profit before Tax(III-IV) …. ….

VI Tax …. ….

VII Profit after tax(V-VI) …. ….

Note: I) Revenue from operations includes revenue from sale of products and revenue from sale of services.
II) Other Income includes Interest received; Dividend received and gains on sale of Fixed assets and
Investments.
III) Employees benefit expenses includes Salaries and wages, Contribution to provident and other funds,
staff welfare expenses like canteen expenses etc.
IV) Finance costs include Interest expenses and other borrowing costs.

Important instructions to prepare Balance Sheet:

1) a) An asset can be classified as current if it is expected to realize / intended for sale / consumed in
company’s normal operating cycle.
b) It is held primarily for the purpose of being traded.
c) It is expected to realize within 12 months after the reporting date.
2) a) A Liability is classified as current when it is expected to be settled in the company’s normal
business cycle.
b) It is held primarily held for the purpose of being traded.
c) It is due to be settled within 12 months after the reporting date.
3) Operating cycle means time between the acquisition of assets for processing and their realization in
cash or cash equivalents.
4) Where normal operating cycle can’t be identified it is assumed 12 months.
5) Profit and Loss a/c Dr. balance can’t be shown in assets it is now presented as negative balance
within “RESERVES AND SURPLUS”
6) As per AS-26 Preliminary Expenses are to be written off in the year in which they are incurred.
Hence not to show in Balance Sheet.
7) The Schedule III has eliminated the concept of Schedules so such information is to be furnished in
terms of ‘NOTES to Accounts’.
8) Balance Sheet will be stated as at 31st March 20XX ant not as on 31st March 20XX. i.e. ‘at’ should
be used in place of ‘On’.
9) Illustration: Operating cycle and the period when the payment is made is given below. How will you
classify the Liability?
Particulars I ii iii iv v Vi vii
 Operating cycle(months) 9 10 10 15 15 15 16
Expected period of payment of 10 12 14 12 13 18 15
trade payables(months)

While classifying the Liabilities into current and non-current the following two points should be taken
into consideration:
1) All Liabilities, of which the payment is expected to made within 12 months from the date of Balance
sheet shall be treated as current. Period of operating cycle is irrelevant in such cases. Hence trade
payables in case i, ii, and iv shall be treated as current liabilities.
2) Liabilities of which payment is expected to be made beyond 12 months from the date of Balance
sheet:
• If payment period is less than the period of operating cycle, the liability shall be treated as current
liability. Hence trade payables in case v and vii shall be treated as current liabilities.
• If the payment period is more than the period of operating cycle, the liability shall be treated as non-
current liability. Hence case iii and VI shall be treated as non-current liabilities.
Note: The Liabilities which are not classified as current shall be classified as non- current
Liabilities.