STATEMENTS

ANALYSIS OF
FINANCIAL

CHAPTER – 10

Financial Statements of Companies

Financial Statements are the end products of accounting Balance Sheet at their actual cost. They are not shown in
process and are prepared at end of the accounting period to the Balance Sheet at their realisable value or
reveal the financial position of the enterprise at a particular replacement Cost because as per the accounting records
date and the result of its business operations preparing an the cost price (not the realisable value or replacement
accounting period. cost) of the fixed cost is a recorded fact.
As per Section 2(40) of the Companies Act, 2013 Financial
Statements includes: (2) Accounting Conventions: Accounting Conventions
1. Balance Sheet or Position Statement imply certain fundamental accounting principles which
2. Statement of Profit and Loss or Income Statement have gained wide acceptance and which are -followed
3. Notes to Accounts. while preparing financial statements. For example, due
4. Cash Flow Statement. to the convention of 'Conservatism' provision is made in
5. Explanatory Notes. the books for expected future losses but expected profits
are ignored. Likewise, the closing inventory is valued at
Objectives of Preparing Financial Statements
cost or realisable value whichever is less. This means that
(i) To present a true and fair view of the financial
the actual financial position of the business may be much
performance (i.e profit/loss) of the business
better than disclosed by financial statements.
(ii) To present a true and fair view of the financial position
(i.e Assets/Equity & Liabilities) of the business. (3) Personal Judgements: Even though certain accounting
conventions are followed while preparing the financial
Characteristics of Financial Statements
statements, still personal judgement of the accountant
(i) Financial statements are related to past period and hence
plays a decisive role in accounting. For example, the
are historical documents.
accountant has to decide whether the asset is to be
(ii) They are expressed in terms of money
depreciated on straight line method, written down value
(iii) Financial statements show profitability through
method or some other method.
Statement of Profit and Loss and financial position
through Balance Sheet
Balance Sheet: It is a statement of assets, liabilities and
equities of a business and it is prepared to show the financial
Nature of Financial Statements
position of the company at particular date.
(1) Recorded Facts: The term recorded facts means that the
The balance sheet of a company is prepared as per the formal
data used for preparing financial statements are drawn
prescribed in part I of Schedule III of the Companies Act,
from accounting records. For example figures relating to
2013.
cash in hand, cash at bank, trade receivables etc. are
recorded facts. The financial statements do not include The Schedule III prescribes only the vertical format for
such facts which are not recorded in the books whether presentation of financial statements. Thus, a company will
or not such facts are significant. The assets purchased at now not have an option to use horizontal format for the
different times and at different prices are shown in the presentation of financial statements.
Format of Balance Sheet
PART I
FORM OF BALANCE SHEET
Name of the Company …………….
Balance Sheet as at ………………..
(₹ in …………………….)
Figures as at the end of Figures as at the end of the
Particulars Note No.
current reporting period previous reporting period
1 2 3 4
I. EQUITY AND LIABILITIES:
(1) Shareholders’ funds
(a) Share capital
(b) Reserves and surplus
(c) Money received against share warrants
(2) Share application money pending allotment
(3) Non-current liabilities
(a) Long-term borrowings
(b) Deferred tax liabilities (net)
(c) Other Long-term liabilities
(d) Long-term provisions
(4) Current liabilities
(a) Short-term borrowings
(b) Trade payables
(c) Other current liabilities
(d) Short-term provisions
TOTAL
II. ASSETS:
(1) 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
(2) Current assets
(a) Current investments
(b) Inventories
(c) Trade receivables
(d) Cash and cash equivalents
(e) Short-term loans and advances
(f) Other current assets
TOTAL

Contents of Balance Sheet (f) Calls unpaid (showing aggregate value of calls
Part I – Form of Balance Sheet unpaid by directors and officers)
1. EQUITY AND LIABILITIES Calls unpaid (Calls in arrears) will be shown as
2. (a) Shareholders’ funds deduction from subscribed but not fully paid up
• Share Capital: Under the head share capital, some of capital.
the important items to be shown are as under: (g) Forfeited shares (amount originally paid up)
(a) Number and amount of shares authorised It is shown by adding it to ‘Subscribed Capital’
(b) Number of shares issued, Subscribed and fully paid The various items used in connection with the Share capital
up and subscribed and not fully paid up. of a company are explained below:
(c) Par value per share (i) Authorised Capital: Authorised Capital refers to that
(d) A reconciliation of the number of shares outstanding amount which is stated in the Memorandum of
at the beginning and at the end of the reporting Association. This is the maximum Capital for which a
period. Company is authorised to issue shares during its lifetime.
(e) Shares in the company held by each shareholder The amount of authorized capital is disclosed for
holding more than 5% shares specifying the number information only. i.e., it is not added to the total.
of shares held.
(ii) Issued Capital: Issued Capital is that part of Authorised (c) Money received against share warrants: A share
Capital which is actually offered to the public for warrant is a financial instrument issue by a public
subscription. The remaining part of the Authorised company which gives the holder the right to acquire
Capital is known as the Unissued Capital' which can be certain number of equity shares specified therein at a
issued later on. It may be noted that issued capital can be later date. Amount received against share warrants is
equal to or less than the authorised capital. The amount included in shareholder’s funds as they will be converted
of issued capital is also disclosed for information only, into equity shares on specified date at a pre-determined
i.e., it is not added to the total. price. They are not shown as part of share capital but to
be shown as a separate line item.
(iii) Subscribed Capital Subscribed Capital is that part of
Issued Capital which has been subscribed for by the 2. Share Application Money Pending Allotment: If a
public If, say, 13,000 shares of 100 each are offered to the company has received application but due date of
public and the public applies for 12,000 shares, the allotment falls after the balance sheet date, such
Subscribed Capital will be Rs.12,00,000 application money pending allotment will be shown in
Subscribed capital is shown in the Balance Sheet under the following manner:
two heads (i) Share application money not exceeding the issued
(a) Subscribed and fully paid up, and capital and to extent not refundable is to be disclosed
(b) Subscribed but not fully paid up. under this line item.
(a) Subscribed and fully paid up: When entire nominal (ii) Share application money to the extent refundable or
(face) value of a share is called by the company and where minimum subscription is not met, such
also paid up by the shareholder, it is said to be amount shall be shown separately under ‘Other
'Subscribed and fully paid-up' Capital. It is shown in Current Liabilities’.
the balance sheet in the following manner 3. Non-current liabilities
(b) Subscribed but not fully paid up: Shares are said to be
A liability shall be classified as non-current if it is not a
‘Subscribed but not fully paid-up’ under the following
current liability. The following items shall be disclosed
situations:
under non-current liabilities.
(i) When the company has called-up the full nominal
(i) Long-term borrowings
value of share but the shareholder has not paid some
(ii) Deferred tax liabilities (Net)
part of the nominal value of share.
(iii) Other Long term liabilities
(ii) When the company has not called-up the full nominal
(iv) Long-term provisions
value of share.
(i) Long-term borrowings: Long term borrowings refer
• Reserves and surplus
to loans taken by the company. Borrowings shall be
• Money received against share warrants
classified as long term borrowings when they are
(b) Reserves and Surplus
(i) Reserves and Surplus shall be classified as : payable by the company after 12 months from the
(a) Capital Reserves; date of loan.
(b) Capital Redemption Reserve; It shall be shown under the following heads:
(c) Securities Premium Reserve; (a) Bonds/debentures;
(d) Debenture Redemption Reserve; (b) Term loans;
(e) Revaluation Reserve- It is a reserve which is From banks;
created by the upward revision of the book value of From other parties;
an asset. It cannot be used for payment of dividend (d) Deposits;
or for issuing bonus shares. (ii) Deferred Tax Liabilities (Net): A deferred tax
(f) Share Options Outstanding Account- It is a liability comes into existence when accounting
reserve which represents the difference between income is more than taxable income.
the market value and issue price of shares issued (iii) Other Long-term Liabilities: Examples are (a)
to ‘Employees Stock Option Scheme i.e, ESOP’. Premium payable on redemption of debentures (b)
(g) Other Reserves (Restricted to general reserve) Premium payable on Redemption of preference
(h) Surplus i.e. Balance in statement of Profit & Loss shares
after appropriations such as dividend, bonus (iv) Long term provisions: All provisions for which the
shares and transfer to/from reserves etc. related claims are expected to be settled beyond 12
(ii) A reserve specifically represented by earmarked months after the balance sheet date are classified as
investments shall be termed as ‘fund’. long term provisions. Examples are :
(iii) Debit balance of statement of profit and loss shall Provision for Employee benefits, such as provision for
be shown as negative figure under the head Gratuity and provision for earned leave, Provision for
‘surplus’. Warranty claims etc.
Current Liabilities (iv) Short-term Provisions
A liability shall be classified as current when it satisfies any Provisions which are expected to mature within 12
of the following criteria: months are classified as short term provisions.
(a) it is expected to be settled in the company’s normal The amounts shall be classified as :
operating cycle; or (a) Provision for doubtful debts;
(b) it is held primarily for the purpose of being traded; or (b) Provision for employee benefits (who will retire within
(c) it is due to be settled within twelve months after the 12 months from the date of balance sheet).
reporting date; or (c) Others (specify nature).
(d) the company does not have an unconditional right to Others would include Proposed Dividend, Provision for
defer settlement of the liability for at least twelve months Taxation, Provision for expenses, Warranty Provisions,
after the reporting date. Terms of a liability that could, at etc. These amounts should be disclosed separately
the option of the counter party, result in its settlement by specifying nature thereof.
the issue of equity instruments do not affect its Note:
classification. There is a distinction between a liability and a provision.
An operating cycle is the time between the acquisition of an If an amount is payable in future and figure is exact, it is
asset for processing and their realization in cash or cash a liability. If the amount of a liability is not certain, it will
equivalents. Where the normal operating cycle cannot be be a provision.
identified, it is assumed to have a duration of 12 months. 1. Assets
(i) Short-term borrowings 2. Non-Current Assets
(ii) Trade payables (a) Fixed assets
(iii) Other Current liabilities (i) Tangible assets: Tangible assets are the assets
(iv) Short-term provisions which can be physically seen and touched.
Classification shall be given as :
(i) Short-term borrowings: (a) Land
Short-term borrowings are the borrowings which are (b) Buildings
payable within 12 months from the date of Balance (c) Plant and Equipment
Sheet or within the period of operating cycle. The (d) Furniture and Fixtures
following items are included in short term borrowings: (e) Computers
(a) loans repayable on demand (f) Vehicles
(b) Bank overdraft and cash credit limit form banks; (g) Office Equipments
(c) Loans from other parties repayable within 12 (h) Railway tracks, Railway sidings
months; (i) Horses and Carts
(d) Deposits; and
(e) Other loans and advances (Specify nature). (ii) Intangible assets: Intangible assets are the assets which
(ii) Trade Payables: A payable shall be classified as ‘trade do not have a physical existence and thus, cannot be seen
payable’ if it is in respect of the amount due on account or touched
of goods purchased or services received in the normal Classification shall be given as:
course of business. (a) Goodwill
(b) Brands/Trademarks
(iii) Other current liabilities
(c) Computer software and Mining rights
The amounts shall be classified as:
(d) Mastheads and publishing titles
(a) Current maturities of long-term debt;
(e) Copyrights and patents and other intellectual
(c) Interest accrued but not due on borrowings;
property rights, services and operating cycle.
(d) Interest accrued and due on borrowings;
(f) Recipes, formulae, models, designs and prototypes
(e) Income received in advance;
(g) Licenses and Franchise
(f) Unpaid dividends;
(iii) Capital work-in-progress: It refers to fixed tangible
(g) Excess application money which is due for refund
assets which are under construction such as building,
and interest accrued thereon is shown under
Plant and Equipment etc.
‘Other Current Liabilities’.
(iv) Intangible assets under development: Like patents,
(h) Unpaid matured deposits and interest accrued
intellectual property rights etc. which are being
thereon;
developed by the company.
(i) Unpaid matured debentures and interest accrued
thereon; (b) Non-current investments: Non Current investments
(j) Other Payables (such as Outstanding Expenses, are those investments which are held by company not to
Calls in advance and interest thereon, Unclaimed with the purpose of reselling but to retain them. Non-
dividends, Provident fund Payable, VAT payable current investments shall be classified as trade
etc.) investments and other investments:
 (i) Trade Investments: It refer to the investment made (i) Current Investments
by the company in shares or debentures of another Current Investments are the investments which are held
company, not being its subsidiary, to promote its to be converted into cash within, short period, i.e., within
trade and business. 12 months.
(ii) Other Investments: It refers to those investments Current investments shall be classified as :
which are not trade investments. (a) Investment in Equity Instruments;
(a) Investment in property (b) Investment in preference shares;
(b) Investment in Equity instruments (c) Investment in Government or trust securities;
(c) Investment in preference shares (d) Investment in debentures or bonds.
(d) Investment in government or trust securities (e) Investment in Mutual Funds;
(e) Investment in debentures and bonds (f) Investment in partnership firms;
(f) Investment in mutual funds (g) Other Investments (specify nature)
(g) Investment in partnership firms
(h) Other non-current investment (specify nature) (ii) Inventories: Inventories means stock held for the
purpose of trade in normal course in business
(c) Deferred tax assets (net): A deferred tax asset comes Inventories shall be classified as :
into force when accounting income is less than taxable (a) Raw materials;
income. (b) Work-in-progress;
(d) Long-term loans and advances: These are loans and (c) Finished goods;
advances which are expected to be received back after (d) Stock-in-trade (in respect of goods acquired for
more than 12 months from the date of balance sheet. trading);
They are classified as: (e) Stores and spares;
(i) Capital Advances: Advances given for acquiring (f) Loose tools;
assets are called ‘Capital Advances’. (g) Goods in transit
(ii) Security Deposits: Security deposits are given for
(iii) Trade Receivables
a period of more than 12 months from the date of
A receivable shall be classified as a ‘trade receivable’ if it
balance sheet. Examples are security deposits for
is in respect of the amount due on account of goods sold
electricity and telephone etc.
or services rendered in the normal course of business. A
(e) Other non-current assets: All other non-current assets
trade receivable will be treated as current if it is likely to
which do not fail into any of the above classification
be realized within 12 months from the date of Balance
under this heading. These may include the following:
(i) Trade receivables after 12 months from the date of Sheet or Operating cycle of the business. Trade
balance sheet. receivables include both Debtors and Bills Receivables.
(ii) Unamortised expenses such as share issue (iv) Cash and Cash Equivalents
expenses, discount or loss on issue of debentures As defined in AS-3, Cash flow Statement, cash and cash
that shall be written off after 12 months from the equivalents are share term highly liquid investments that
date of balance sheet. are readily convertible into known amount cash and
which are subject to an insignificant risk of change in
Current Assets value.
An asset shall be classified as current when it satisfies any of (i) Cash and cash equivalents shall be classified as :
the following criteria : (a) Balances with banks;
(a) it is expected to be realized in, or is intended for sale or (b) Cheques, drafts on hand,
consumption in the company’s normal operating cycle; (c) Cash in hand;
or (d) Other (specify nature)
(b) it is held primarily for the purpose of being traded; or (v) Short-term Loans and Advances: These are the loans
(c) it is expected to be realized within twelve months after
and advances which are expected to be realised within
the reporting date; or
12 months from the date of balance sheet or within the
(d) it is cash or cash equivalent unless it is restricted from
operating cycle of business.
being exchanged or used to settle a liability for at least
twelve months after the reporting date.
Other Current Assets (specify nature)
This is an all-inclusive heading, which incorporates current
All other assets shall be classified as non-current.
An operating cycle is the time between the acquisition of an assets that do not fit into any other asset, categories e.g.
asset for processing and their realization in cash or cash prepaid expenses, interest accrued on investments, advance
equivalents. Where the normal operating cycle cannot be tax and unamortized expenses to be written off within 12
identified, it is assumed to have a duration of 12 months. months from the date of balance sheet.
Contingent Liabilities: Contingent liabilities are liabilities (a) Estimated amount of contracts remaining to be executed
which have not arisen, but may arise upon the happening of a on capital account and not provided for
certain event. In other words, the liability itself is uncertain. (b) Uncalled liability on shares and other investments partly
It may or may not involve the payment of money. The amount paid
of contingent liabilities is never shown in the liabilities side. (c) Other commitments such as arrears of dividends on
These are always shown in the liabilities side of the balance Cumulative Preference Shares.
sheet.
Contingent liabilities shall be classified as : Statement of Profit and Loss
(a) Claims against the company not acknowledged as debt • Statement of Profit and Loss: It is a statement
(b) Guarantees given by company. prepared to show the result of business operations during
(c) Other money for which the company is contingently liable. an accounting period.
It shows the operating performance of a company during
Commitments: the accounting period.
Commitment is defined as ‘an agreement to perform a A Statement of Profit & Loss of a Company is prepared as
particular activity at a certain time in the future under certain per the format prescribed in Part II of Schedule III of the
circumstances. Commitment shall be classified as: Companies Act, 2013.
Statement of Profit & Loss
For the year ended
(₹ In………)
Name of the Company…………
Profit and loss statement for the year ended………..
(₹ in………..)
Note Figures for the current Figures for the previous
Particulars
No. reporting period reporting period
I. Revenue from operations xxx xxx
II. Other Income xxx xxx
III Total Revenue (I + IV) xxx xxx
IV. Expenses:
Cost of materials consumed xxx xxx
Purchases of Stock-in-Trade xxx xxx
Changes in inventories of finished goods, work-in- xxx xxx
progress and Stock-in-Trade
Employee benefits expenses
Finance costs
Depreciation and amortization expenses
Other expenses
Total expenses xxx xxx
V. Profit before tax (III-IV) xxx xxx
VI. Tax xxx xxx
VII. Profit after (V-VI) xxx xxx

(iv) Other income such as:

(1) Revenue from Operations: It refers to the revenue (a) Rent received
earned by the company from its business operations. (b) Discount received, Commission received
It will be shown in notes to accounts as follows: (c) Transfer fees
(a) Revenue from sale of products (Gross) (d) Sundry creditors written back
Less: returns (e) Excess provision for bad debts written back
(b) Revenue from sale of services (f) Profit on sale of fixed assets
(c) Other operating revenues such as sale of scrap (vii) Prior period income
Less: Excise duty collected (viii) Sale of miscellaneous items
(ix) Revenue from project consultancy
(2) Other Income: It refers to the revenue earned by the
company from activities other than its business (x) Fess received for arranging loans
operations. (xi) Refund of income tax
For example: (3) Cost of Material Consumed: Cost of materials
(i) Interest Income consumed means cost of raw materials and other
(ii) Dividend Income materials consumed in manufacturing the goods.
= Opening inventory of Raw Materials +Net Purchases
(iii) Gain on sale of investments.
Less: Loss on sale of investments of Raw Materials – Closing Inventory of Raw Materials.
 Note: Materials such as stores, fuel, spare parts etc. (ii) Other Borrowing Costs such as:
which do not enter physically into the composition of (a) Discount or loss on issue of debentures
finished product are excluded from raw materials and (b) Premium payable on redemption of
hence are shown under other expenses. debentures written off
(4) Purchase of Stock in trade: The term ‘Stock in trade’ (c) Loan processing charges
means goods purchased for reselling. In case company, (d) Guarantee Charges
carries out further processing on the goods purchased, (e) Commitment charges
they are not classified as ‘Purchase of Stock in trade’ (f) Commission paid for deposit mobilisation
but become part of ‘Cost of Materials consumed’.
8. Depreciation and Amortisation expenses:
Likewise, if any semi-finished goods or materials are
Depreciation is the cost of tangible fixed assets written
purchased for further processing, the same should be
of over their useful life such as on building, plant &
included in ‘Cost of materials consumed’ rather than as
machinery etc.
stock-in-trade.
Amortisation is the cost of intangible fixed assets
(5) Change in Inventories of finished goods, work-in-
written off over their useful life such as on patents,
progress and Stock in Trade:
This will be shown as follows: trademarks, computer software etc.
(a) Opening Inventory of Finished Goods xxxx 9. Other Expenses: Expenses that are not shown in any
Less: Closing Inventory of Finished Goods xxxx of the above mentioned heads are shown here.
(b) Opening Inventory of Work-in-progress xxxx For example:
Less: Closing Inventory of Work-in-progress xxxx (i) Carriage Inwards/Outwards
(c) Opening Inventory of Stock-in-trade xxxx (ii) Audit Fees
Less: Closing Inventory of Stock-in-trade xxxx (iii) Insurance charges
Total (a + b +c) xxxx (iv) Rent, Rates and taxes
6. Employees Benefit Expenses: It includes all expenses (v) Bank charges
incurred by the company on its employees such as: (vi) Advertisement expenses
(i) Wages, salaries, bonus etc. (vii) Administrative expenses
(ii) Leave encashment, staff welfare expenses, etc. (viii) Selling and distribution expenses
(iii) Contribution to employees provident fund and (ix) Power and electricity expenses
other funds like superannuation funds and (x) Loss on sale of Fixed Assets.
gratuity fund. (xi) Rent
7. Finance Cost: It means cost incurred by a company on (xii) Telephone expenses
its borrowings. (xiii) Sundry expenses
(i) Interest Expenses such as: (xiv) Consumption of Loose tools
(a) Interest paid on term loan from bank (xv) Freight
(b) Interest paid on Overdraft and cash credit limit (xvi) Excise Duty paid
from bank (xvii) Director’s fees
(c) Interest paid on debentures, Bonds and public (xviii) Business Promotion Expenses
deposits

Solved Examples

Q1. Anupam Ltd. has the following balances as on 1st April,2016

₹
Statement of Profit & Loss (2,00,000)
Debenture Redemption Reserve 6,00,000
Capital Reserve 5,00,000
It earned a profit of ₹10,00,000 for the year ended 31 March, 2017. It decided to transfer ₹2,00,000 to Debenture
st

Redemption Reserve and ₹3,00,000 to General Reserve. Directors proposed a final dividend of ₹1,20,000.
Show how these items will appear in the Balance Sheet and notes accounts.
Solution:
Anupam Ltd.
EXTRACT OF BALANCE SHEET
as at 31st March, 2017
Particulars Note No. 31.03.2017 31.03.2016
₹ ₹
 I. EQUITY AND LIABILITIES:
(1) Shareholder’s Funds:
Reserves and Surplus 1 17,80,000 9,00,000
(2) Current Liabilities:
Short term Provisions 2 1,20,000
19,00,000
Notes to Accounts:
31.03.2017
(1) Reserves and Surplus:
(a) Capital Reserve 5,00,000
(b) Debenture Redemption Reserve:
Opening Balance 6,00,000
Transfer from Surplus 2,00,000 8,00,000
(c) General Reserve:
Opening Balance ---
Transfer from Surplus 3,00,000 3,00,000
(d) Surplus:
Balance in Statement of Profit & Loss (Opening) (2,00,000)
Surplus for the Period 10,00,000
Available for Appropriations 8,00,000
Less: Appropriations:
Debenture Redemption Reserve 2,00,000
General Reserve 3,00,000
Proposed Dividend 1,20,000 6,20,000 1,80,000
17,80,000
(2) Short term Provisions:
Proposed Dividend 1,20,000

Q2. Compute Revenue from Operations, Other Income and Total Revenue for a non-financial company from the following
particulars:
Sales ₹20,00,000; Sales Return ₹1,00,000; Sale of Scrap ₹40,000; Sale of Miscellaneous items ₹5,000; Refund of Income
Tax ₹10,000; Interest on Time Deposits ₹25,000.
Solution:
Particulars ₹ ₹
I. Revenue from Operations:
Sales 20,00,000
Less: Sales Return 1,00,000 19,00,000
Sale of Scrap 40,000
19,40,000
II. Other Income:
Sale of Miscellaneous Items 5,000
Refund of Income Tax 10,000
Interest on Time Deposits 25,000 40,000
Total Revenue (I + II) 19,80,000

Q3. Under which major headings and sub-headings will the following items be shown in the Balance Sheet of a company
as per Schedule III Part I of the Companies Act, 2013:
(i) Net loss as shown by Statement of Profit and Loss. (ii) Capital redemption reserve.
(iii) Bonds. (iv) Loans repayable on demand.
(v) Unpaid dividend. (vi) Buildings.
(vii) Trademarks. (viii) Raw materials.
S. No. Items Headings Sub-Headings
(i) Net loss as shown by statement of profit Shareholders’ funds Reserve and Surplus as
and loss negative item
(ii) Capital redemption reserve Shareholders’ funds Reserve and Surplus
 (iii) Bonds Non-current liabilities Long-term borrowings
(iv) Loans payable on demand Current liabilities Short term borrowings
(v) Unpaid dividend Current liabilities Other current liabilities
(vi) Buildings Non-current assets Fixed assets – tangible
(vii) Trademarks Non-current assets Fixed assets – intangible
(viii) Raw materials Current assets Inventory
Q4. How would you disclose the following items in the Balance Sheet of a Company:
(i) Share Issue Expenses (to be written off in next 12 months)
(ii) Share Issue Expenses (to be written off after 12 months)
(iii) Premium on Redemption of Debentures
(iv) Debit balance of Statement of Profit & Loss
(v) Loan from Bank
(vi) Loan repayable on demand
(vii) Share in S.B.I.
(viii) Investments
(ix) Interest Accrued on Investments
(x) Guarantees given by the Company
Solution:
S.
Item Major Head Sub-head
No.
(i) Share Issue Expenses (to be Current Assets Other Current Assets
written off in next 12
months)
(ii) Share Issue Expenses (to be Non Current Assets Other Non Current Assets
written off after 12 months)
(iii) Premium on Redemption of Non Current Liabilities Other long term Liabilities
Debentures.
(iv) Debit balance of Statement of Shareholder’s Funds Reserve and Surplus (shown as
Profit & Loss. a negative figure) under
‘Surplus’.
(v) Loan from Bank Non Current Liabilities Long term Borrowings
(vi) Loan repayable on demand Current Liabilities Short term Borrowings
(vii) Shares in S.B.I. Non Current Assets Non Current Investments
(viii) Investments Non Current Assets Non Current Investments
(ix) Interest Accrued on Current Assets Other Current Assets
Investments
(x) Guarantees given by the Contingent Liability and
Company. commitments (to be shown under
Contingent Liabilities in ‘Notes to
Accounts’)

Q5. Prepare the Balance Sheet of Zee Ltd. as per the provisions of Schedule III of Companies Act, 2013:
₹
Share Capital (50,000) Shares of ₹ 10 each) 5,00,000
Statement of Profit & Loss (Cr.) 2,00,000
Securities Premium Reserve 1,50,000
Long term Borrowings 1,00,000
Inventory 2,10,000
Preliminary Expenses 80,000
Provision for Tax 40,000
Goodwill 50,000
Totalling of Balance Sheet is not required.
Solution: EXTRACT OF BALANCE SHEET OF ZEE LTD.
as at …………………….
Particulars Note No. Current year Previous year
₹ ₹
I. EQUITY AND LIABILITIES:
Shareholder’s Funds:
 (a) Share Capital 1 5,00,000
(b) Reserve and Surplus 2 2,70,000
Non Current Liabilities
Long term Borrowings 1,00,000
Current Liabilities:
Short term Provisions 3 40,000
II. ASSETS:
Non Current Assets
Fixed Assets
Intangible Assets 4 50,000
Current Assets
Inventory 2,10,000
Notes to Accounts:
₹
(1) Share Capital:
Authorised:
….... Shares of ₹......... each
Issued:
….... Shares of ₹......... each
Subscribed and Fully Paid
50,000 Shares of ₹ 10 each 5,00,000

(2) Reserve & Surplus:

(a) Securities Premium Reserve 1,50,000
Preliminary Expenses Written Off (80,000) 70,000
(b) Surplus
Balance of Statement of Profit & Loss 2,00,000
2,70,000
(3) Short term Provisions:
Provision for Tax 40,000
(4) Intangible Assets:
Goodwill 50,000

QUESTIONS FOR PRACTICE

MCQ 3. Under which of the following head/ sub-head is ‘forfeited

shares’ presented in the balance sheet of a company?
(a) Reserves and surplus
1. Which of the following points out the nature of financial (b) Share capital
statements? (c) Other long-term liabilities
(i) Financial statements are prepared on the basis of (d) Other current liabilities
recorded facts.
(ii) Certain accounting conventions are followed while 4. Staff Welfare Expenses are included in:
(a) Cost of materials consumed
preparing financial statements.
(b) Revenue from operation
(iii) Financial statements are prepared on certain basic
(c) Employee Benefit Expenses
assumptions. (d) Other Current Liabilities
Options:
(a) Only (i) (b) (i) and (ii) 5. A Company issued capital. A shareholder paid all money
on allotment while first call is not called by company. So
(c) (i), (ii) and (iii) (d) (ii) and (iii)
you are required to show this advance in balance sheet of
2. Which of the following is not included under the head company as
shareholders’ fund? (a) current liability (b) long-term liability
(a) Share capital (c) current assets (d) None of these
(b) Reserves and surplus 6. Public deposits appear under which of the following head
(c) Money received against share warrants in a company’s balance sheet?
(d) Long-term provisions (a) Current liabilities (b) Non-current liabilities
 (c) Reserves and surplus (d) Shareholders’ funds 13. Which of the following is not an item of sub-head other
7. A company issued shares calling application, allotment current liabilities in balance sheet?
and first and final call. A holder of shares not paid (a) Creditors (b) Outstanding expenses
allotment and first call. His shares are forfeited but not (c) Advance income (d) Both (b) and (c)
re-issued. As on balance sheet date, you are required to 14. In balance sheet, ‘Trade receivables’ is the shown under
show these forfeited shares in the balance sheet of the head ……..
company under the head (a) non-current assets (b) current assets
(a) current liability (b) shareholders’ fund (c) non-current liabilities (d) current liabilities
(c) current assets (d) None of these
15. External users of financial statements are:
8. 11% Debentures are included in: (a) Banks (b) Suppliers
(a) Current Liability (b) Fixed Assets (c) Both (a) and (b) (d) Director of company
(c) Current Assets (d) None of these
16. Compute cost of materials consumed from the following
9. From following information, calculate other incomes. information. Opening inventory of materials ₹ 5,00,000,
Sales of product = ₹54,000; Sale of services = ₹60,000; materials purchased ₹40,00,000 and closing inventory of
Commission received = ₹1,20,000; Excise duty paid = materials ₹6,00,000.
₹ 3,00,000; Dividend from investment = ₹20,000 (a) ₹40,00,000 (b) ₹51,00,000
(a) ₹1,40,000 (b) ₹2,54,000 (c) ₹27,00,000 (d) ₹39,00,000
(c) ₹(46,000) loss (d) None of these
17. What is the total under equity and liabilities side of the
10. From the following information, you are required to balance sheet when the following information is given?
compute profit after tax. Shareholders’ Funds = ₹10,00,000; Non-current
I. Revenue from operation = ₹80,00,000 Liabilities = ₹5,00,000; Current Liabilities = ₹3,00,000
II. Cost of material consumed = ₹10,00,000 (a) ₹10,00,000 (b) ₹15,00,000
III. Purchase of stock-in-trade = ₹30,00,000 (c) ₹18,00,000 (d) ₹13,00,000
IV. Employees salary = ₹4,00,000
18. What will be the amount shown under the head current
V. Tax rate = 50%
assets when the following data is given Inventories =
(a) ₹20,00,000 (b) ₹24,00,000
₹2,30,000; Trade Receivables = ₹70,000; Cash and Cash
(c) ₹15,00,000 (d) ₹18,00,000
Equivalents = ₹50,000, Current Investments = ₹50,000
11. A company purchased a business of a firm. When (a) ₹3,00,000 (b) ₹3,50,000
accountant was tallying all assets and liabilities, he found (c) ₹2,80,000 (d) ₹4,00,000
that the company has paid more amount than the worth
of it’s assets. You are required to find what this difference 19. What will be the amount shown under the head current
be called and where it will be shown? liabilities when the following data is given? Short-term
(a) Capital reserve, reserve and surplus borrowings = ₹3,00,000; Trade Payables = ₹2,00,000;
Other Current Liabilities = ₹1,00,000; Short-term
(b) Goodwill, intangible assets
Provisions = ₹1,00,000
(c) Accountants totalling is wrong, assets and liabilities
(a) ₹5,00,000 (b) ₹6,00,000
always tally without adjustment
(c) ₹4,00,000 (d) ₹7,00,000
(d) None of the above
20. What is the total under assets side of the balance Sheet
12. Livestock is a item of ………. assets under sub-head fixed
when the following information is given?
assets and the major head non-current assets.
(a) intangible (b) inventories Non-current Assets = ₹5,00,000; Current Assets =
₹2,00,000; Current Liabilities = ₹3,00,000
(c) trade receivables (d) tangible
(a) ₹7,00,000 (b) ₹10,00,000
(c) ₹5,00,000 (d) None of these

SUBJECTIVE QUESTIONS

1. Multiple Paper Solutions Ltd. received applications for (i) Bank Overdraft
5,00,000 preference shares against an issue of 4,00,000 (ii) Revaluation Reserve
preference shares of ₹10 each. Allotment has not been (iii) Capital Redemption Reserve
made against the applications yet. How will you show the (iv) Mining Rights
amount in the Balance Sheet of company? (v) Patents
(vi) Debit balance in Statement of Profit and Loss
2. Under which major heads and sub-heads will the (vii) Debenture Redemption Reserve
following items be presented in the Balance Sheet of the (viii) Provision for Taxation
company as per Schedule III, Part I of the Companies Act,
2013?
3. Under which major headings and sub-headings will the 6. Under which major sub-headings, the following items
following items be shown in the Balance Sheet of a will be placed in the Balance Sheet of a company as per
company as per Schedule III Part I of the Companies Act, Schedule III, Part I of the Companies Act, 2013:
(i) Accrued Income
2013: (ii) Loose Tools
(i) Sinking Fund (iii) Provision for Employees benefits
(ii) Capital redemption reserve (iv) Unpaid dividend
(iii) Bonds (v) Short-term loans
(iv) Loans repayable on demand (vi) Long-term loans
(v) Unpaid dividend 7. Under which sub-headings, will the following items be
(vi) Buildings placed in the Balance Sheet of a company as per Schedule
(vii) Trademarks III Part I of the Companies Act, 2013:
(viii) Raw materials. (i) Capital Reserve
(ii) Bonds
4. Under which major headings and sub-headings will the
following items be shown in the Balance Sheet of a (iii) Loans repayable on demand
company as per Schedule III Part I of the Companies Act, (iv) Vehicles
2013: (v) Goodwill
(i) Balance of the Statement of Profit and Loss (vi) Drafts on Hand
(ii) Loan of ₹1,00,000 payable after three years 8. State under which major headings the following items
(iii) Investment in Mutual Funds will be presented in the Statement of Profit and Loss of a
(iv) Loose tools company as per the Companies Act, 2013:
(v) Trademark Bonus, Internet Expenses, Materials Purchased, Goodwill
(vi) Land Amortized
(vii) Cash at bank
(viii) Trade payables 9. Under which heads of the Statement of Profit and Loss of
a Financial Company will be shown
5. Name the major heads under which the following items
(i) Interest Paid on Debentures
will be presented in the Balance Sheet of a company as
(ii) Prior Period Expenses
per Schedule III of Companies Act, 2013:
(i) Provision for Employee Benefit (iii) Interest Earned
(ii) Unpaid Dividend (iv) Profit on Sale of Investments
(iii) Interest on Calls-in-Advance 10. State the major headings under which the following
(iv) Patents items will be put as per Schedule III, Part I of the
(v) Short-term Loans Companies Act, 2013:
(vi) Trade payables (i) Long-term investments; (ii) Bills of Exchange; (iii)
(vii) Stores and Spare Parts Motor Car; (iv) Loss on Issue of Debentures; (v)
(viii) Goodwill Unpaid matured debentures and interest accrued
thereon and (vi) Unclaimed Dividend; (vii) Security
Deposits for Electricity.
HOMEWORK
(a) Underwriting Commission
MCQ (b) Current Investment
(c) Inventory
1. Under which heading the item ‘Bills discounted but not (d) Patents
yet matured’ will be shown in the Balance Sheet of a
company? 4. ‘Interest accrued but not due on loans, is shown in the
(a) Current liability companies balance sheet under the sub-head_________
(b) Current Assets (a) Reserves and Surplus (b) Other Current Liabilities
(c) Contingent Liabilities (c) Contingent Liabilities (d) Shareholders Funds
(d) Unamortized Expenditure 5. Claim against the company not acknowledged as debts
are shown under:
2. While preparing the Balance Sheet of a company, 6% (a) Current Liabilities (b) Contingent Liabilities
debentures is shown under which head? (c) Non-current Liabilities (d) Capital commitments
(a) Share capital (b) Long term borrowings
(c) Short term borrowings (d) None of these 6. Which of the following is not a subhead of Current
Liabilities?
3. Which of the following items is shown under the head (a) Short Term Provisions
‘Non-Current Assets’, while preparing the Balance sheet (b) Trade Payables
of a company? (c) Deferred Tax Liabilities
 (d) Other Current Liabilities (d) None of the above
7. As per Schedule III, Part I of the companies Act, 2013 17. Under which head will ‘Leave Encashment Expenses ‘ be
‘Unpaid Dividend’ will be presented under which of the shown in Statement of Profit and Loss ?
following head/sub-head, in the Balance Sheet of a (a) Other expenses
company? (b) Finance costs
(a) Reserves and Surplus (b) Current Liabilities (c) Depreciation and Amortization expenses
(c) Contingent Liabilities (d) Shareholder’s Funds (d) Employee benefit expenses
8. Interest accrued but not due on investment will be 18. Which of the following is not included in ‘Revenue from
shown under which head of current assets? operations’ in Statement of Profit and Loss?
(a) Short term loans and advances (a) Sale of products
(b) Current investments (b) Sale of Services
(c) Other current assets (c) Other operating revenues
(d) Cash and cash equivalents (d) Interest Income
9. Money received against share Warrants is shown as 19. Which of the following is/are a component of Cash and
(a) Shareholder’s funds Cash equivalents ?
(b) Other Long Term Liabilities (a) Balances with Banks
(c) Long term provisions (b) Cash in hand
(d) Other current liabilities (c) Cheques/Drafts in hand
10. Which of the following is not a component of other (d) All of the above
income?
20. Which of the following is not a part of finance cost(in the
(a) Dividend Income
(b) Interest Income Statement of Profit and Loss) ?
(c) Proceeds from the sale of scrap (a) Bank charges
(d) Gain on sale of investment (b) Interest paid on debentures
(c) Interest paid on public deposits
11. Calls in Advance and interest payable thereon is shown
(d) Loss on issue of Debentures
as
(a) Shareholders funds 21. Preliminary expenses of are treated as ‘short term
(b) Other non-current liabilities borrowings’ in the balance sheet of the company?
(c) Other current liabilities (a) True (b) False
(d) Trade Payables (c) Partially true (d) Can’t say
12. Purchase of goods for resale is shown in Statement of 22. ___ reserve can be used freely for any purpose .
Profit and Loss as: (a) Capital (b) General
(a) Revenue from Operations (c) Securities premium (d) Capital redemption
(b) Cost of Material consumed
(c) Purchase of Stock in trade 23. Which of the following is not a subhead under the current
(d) Change in inventories assets ?
(a) Cash and Cash equivalents
13. Interest and dividend earned by a financial company is
shown in Statement of Profit and Loss under the sub- (b) Trademarks
head: (c) Short term loans and advances
(a) Revenue from Operations (d) Inventories
(b) Other income 24. Premium payable on redemption of debentures is shown
(c) either a) or b) under the head ‘ Non Current Liabilities’ and sub-head
(d) neither a) nor b) ‘Other Non Current Liabilities’ in the balance sheet of the
14. Loose Tools appear in the company’s Balance Sheet company.
under the head/sub-head. (a) True (b) False
(a) Inventory (b) Non-current assets (c) Partially true (d) Can’t say
(c) Other current assets (d) stores and spare parts
25. Livestock is an item of ___ under sub-head fixed asset and
15. In a company’s Balance Sheet, computer software is the major head non-current assets.
shown under the main head. (a) Tangible (b) Inventories
(a) Non-current Liabilities (b) Current Liabilities (c) Trade Receivables (d) Inventories
(c) Non-current Assets (d) Current Assets
26. Under which head will ‘Commission paid for deposit
16. Carriage inwards is shown in statement of profit and loss
under ___ . mobilisation‘ be shown in Statement of Profit and Loss ?
(a) Cost of materials consumed (a) Other Expenses
(b) Other expenses (b) Finance costs
(c) Employee benefit expenses (c) Cost of materials consumed
 (d) None of these 28. Assertion (A): Certain accounting conventions like
conventions of consistency,
27. Under which head will ‘Business promotion expenses‘ be
conservatism, full disclosure, etc. are
shown in Statement of Profit and Loss ?
followed while preparing financial
(a) Other expenses
statements.
(b) Finance costs Reason (R): Use of accounting conventions makes
(c) Cost of materials consumed the financial statements comparable,
(d) Employee benefit expenses simple and realistic.
Directions (Q. Nos. 28 to 30) There are two statements 29. Assertion (A): The bank charges charged by the bank
marked as Assertion (A) and Reason (R). Read the statements are included in finance cost.
and choose the appropriate option from the options given
Reason (R): Bank charges is an expense not incurred
below.
in connection with raising finance but
(a) Both Assertion (A) and Reason (R) are true and
Reason(R) is the correct explanation of Assertion (A) for availing the services of the bank.
(b) Both Assertion (A) and Reason (R) are true, but Reason 30. Assertion (A): Bills receivable are shown as trade
(R ) is not the correct explanation of Assertion (A)
receivables in the balance sheet of the
(c) Assertion (A) is false, but Reason (R) is true
(d) Assertion (A) is true, but Reason (R)is false company.
Reason (R): Debtors and bills receivable forms the
part of trade receivables.

SUBJECTIVE QUESTIONS

1. Under what headings and sub-headings of the Balance General Reserve (31st March, 2018) ₹4,00,000, Surplus
Sheet of a company, following will be presented: i.e., Balance in Statement of Profit and Loss (Debit
(i) Proposed Dividend Balance) for 2018-19 ₹7,50,000.
(ii) Calls-in-Arrears
4. Calculate total revenue from operations for the year
(iii) Patents and Trade Marks
ended 31st March, 2019 of MNO Finance Ltd. (a financing
(iv) Prepaid insurance
company) from the following information:
(v) Outstanding Salary
Commission Received ₹10,000, Interest on Loans
(vi) Shares in R.M.L. Limited
₹60,00,000, Dividend Received ₹2,00,000, Profit on sale
2. Under which headings and sub-headings, would you of Land ₹ 30,00,000.
disclose the following items in the Balance Sheet of a
5. From the following information of Ratna Ltd., prepare a
limited company?
Statement of Profit and Loss for the year ended 31st
(i) Forfeited share Account (ii) Capital Advances (iii)
March, 2017:
Factory Building under construction (iv) Premium on
Revenue from operations ₹1,15,000, Commission
Redemption of Debentures (v) Shares in Wipro Ltd. (vi)
Received ₹35,000, Cost of Material Consumed ₹12,500,
Interest Accrued and due on Unsecured Loan (vii)
Purchases of stock-in-trade ₹5,000, Changes in
Interest Accrued and due on Secured Loan (viii) Interest
Inventories ₹22,500, Employees Benefit Expenses
Accrued but not due on Loan.
₹10,000, Finance Cost ₹6,000, Depreciation ₹2,500,
3. Show the following items in the Balance Sheet of ABC Advertising Expenses ₹8,500.
Ltd. as at 31st March, 2019 as per the requirements of
Schedule III of the Companies Act, 2013:
6. Calculate Cost of Material Consumed from the following information:
₹
Opening Inventory: Material 2,75,000
Finished Goods 1,25,000
Material purchased 11,25,000
Closing Inventory : Material 2,25,000
Finished Goods 75,000
7. Calculate the amount of change in inventories of finished goods, work-in-progress and stock-in-trade, that will be shown
in the Notes to Accounts from the following information:
Opening Inventories Closing Inventories
(₹) (₹)
Finished Goods 2,50,000 2,75,000
Work-in-progress (WIP) 2,25,000 2,12,500
Stock-in-Trade 3,25,000 3,00,000

8. The following balances were extracted from the books of Perfect Sports Ltd. as on 31st March, 2017:
Plant and Machinery ₹2,00,000, Shares in RXL Ltd. ₹1,00,000, Stock-in-Trade ₹80,000, Bills Receivable ₹10,000, Prepaid
Expenses ₹10,000, Share capital ₹2,00,000, Capital Redemption Reserve ₹1,20,000, 10% Debentures ₹60,000, Short-term
loan from Bank ₹10,000 and provision for taxation ₹10,000. Prepare Balance Sheet of the company as per Schedule III Part
I of the Companies Act, 2013.

9. X Ltd. has an authorised capital of ₹15,00,000 divided into 1,00,000 Equity shares of ₹10 each and 50,000, 9% preference
shares of ₹10 each.
The whole of preference shares were subscribed, called and paid. However the company issued only 90,000 equity shares.
85,000 equity shares were subscribed for. During the first year ₹8 per share were called. Ram holding 1,000 shares did not
pay first call of ₹2. Also Shyam holding 2,000 shares did not pay first call of ₹2. Only Shyam’s shares were forfeited after
the first call and later on 1,500 of the forfeited shares were reissued at ₹6 per share, ₹8 called up.
(a) Show capital in Balance Sheet as per Schedule III of Companies Act, 2013 as at 31st March, 2017.
(b) Prepare relevant ‘Notes to Accounts’.
10. Midas Shoes Ltd. had the following opening balances in the Reserves and Surplus:
(₹)
Debenture Redemption Reserve 50,000
Securities Premium Reserve 1,00,000
Surplus, i.e., Balance in Statement of Profit and Loss 4,50,000
Profit after tax during the year 2018-19 amounted to ₹2,50,000.
The following appropriations to the profit earned were proposed: (₹)
Transfer to Debenture Redemption Reserve 2,00,000
Transfer to General Reserve 2,00,000
Transfer to Securities Premium Reserve 1,50,000
Determine how the above items shall be shown in the Notes to Accounts on Reserves and Surplus.

SOLUTION FOR PRACTICE QUESTIONS

SOLUTION FOR MCQ QUESTIONS

1. (c) liabilities side of balance sheet under ‘shareholders’
2. (d) fund’ head.

3. (b): Forfeited shares are shown by adding it to 8. (d)

subscribed capital. 9. (a): Other Incomes Amt (₹)
4. (c) (i) Commission Received = 1,20,000
(ii) Dividend from Investment
5. (a): Calls-in-advance is always treated as current Received = 20,000
liability because it is reversed when call money is = 1,40,000
called-up by company. Sale of products and services are revenue from
6. (b) operation and excise duty is revenue from operation
in negative nature.
7. (b): Amount received before forfeiture is kept by the
company and therefore, it is a gain for the company. 10. (d):
However, forfeiture reduces the share capital by Particulars Amt (₹)
amount of forfeited shares. Hence, it is shown on the Revenue from Operations 80,00,000
(--) Expenses
Cost of Material Consumed 10,00,000
 Purchase of Stock-in-trade 30,00,000 Current Liabilities
Employees Benefit Expense 4,00,000 (44,00,000) = 10,00,000 + 5,00,000 + 3,00,000
Profit before Tax 36,00,000 = ₹18,00,000
(–) Tax @ 50% (18,00,000)
Profit after Tax 18,00,000 18. (d): Current Assets = Inventories + Trade Receivables
+ Cash and Cash Equivalents
11. (b): When net assets are less and payment for business + Current investments
purchase is more, then it is called goodwill and it is Current Assets = 50,000 + 70,000 + 50,000
shown under intangible assets. + 2,30,000 = ₹4,00,000
12. (d) 13. (a) 14. (b) 19. (d): Current Liabilities = Short-term borrowings
15. (c) + Trade Payables
+ Other current Liabilities
16. (d): Cost of materials consumed + Short-term Provisions
= Opening Inventory of Materials + Purchases Current Liabilities = 3,00,000 + 2,00,000 + 1,00,000
– Closing Inventory of Materials + 1,00,000 = ₹7,00,000
= 5,00,000 + 40,00,000 – 6,00,000
= ₹39,00,000 20. (a): Total under Assets Side = Non-current Assets
+ Current Assets
17. (c): Total under equity and liabilities side = 5,00,000 + 2,00,000
= Shareholders Funds + Non-current Liabilities + = ₹7,00,000

SOLUTIONS FOR SUBJECTIVE

QUESTIONS

1. ₹40,00,000 (4,00,000 × ₹10) will be shown against ‘Share Application Money Pending Allotment’ and ₹10,00,000
(1,00,000 × ₹10) will be shown as ‘Other Current Liabilities’ under the head ‘Current Liabilities’.
2.
S.No. Items Headings Sub-Headings
(i) Bank Overdraft Current Liabilities Short Term Borrowings
(ii) Revaluation Reserve Shareholder’s Funds Reserves and Surplus
(iii) Capital Redemption Reserve Shareholder’s Funds Reserves and Surplus
(iv) Mining Rights Non-Current Assets Fixed Assets -Intangible
(v) Patents Non-Current Assets Fixed Assets -Intangible
(vi) Debit balance in Statement of P and L Shareholder’s Funds Reserves and Surplus (as negative amount)
(vii) Debenture Redemption Reserve Shareholder’s Funds Reserves and Surplus
(viii) Provision for Taxation Current Liabilities Short-term Provisions
3.
S.No. Items Headings Sub-Headings
(i) Sinking Fund Shareholder’s Funds Reserves and Surplus
(ii) Capital Redemption Reserve Shareholder’s Funds Reserves and Surplus
(iii) Bonds Non-Current Liabilities Long Term Borrowings
(iv) Loans repayable on demand Current Liabilities Short-term Borrowings
(v) Unpaid dividend Current Liabilities Other Current Liabilities
(vi) Buildings Non-Current Assets Fixed Assets -Tangible
(vii) Trademarks Non-Current Assets Fixed Assets – Intangible
(viii) Raw Materials Current Assets Inventories

4.
S.No. Items Headings Sub-Headings
(i) Balance of Statement of Profit and Loss Shareholder’s Funds Reserves and Surplus
(ii) Loan of ₹1,00,000 payable after 3 years Non-Current Liabilities Long Term Borrowings
(iii) Investment in Mutual Funds Current Assets Current Investments
(iv) Loose Tools Current Assets Inventories
(v) Trademarks Non-Current Assets Fixed Assets – Intangible
(vi) Land Non-Current Assets Fixed Assets – Tangible
 (vii) Cash at Bank Current Assets Cash and Cash Equivalents
(viii) Trade Payables Current Liabilities Trade Payables

5.
S.No. Items Headings
(i) Provision for Employee Benefits Non-Current Liabilities
(ii) Unpaid Dividend Current Liabilities
(iii) Interest on Calls in Advance Current Liabilities
(iv) Patents Non-Current Assets
(v) Short Term Loans Current Liabilities
(vi) Trade Payables Current Liabilities
(vii) Stores and Spare Parts Current Assets
(viii) Goodwill Non-Current Assets

6.
S.No. Items Sub-Headings
(i) Accrued Income Other Current Assets
(ii) Loose Tools Inventories
(iii) Provision for Employee Benefits Long-term Provisions
(iv) Unpaid Dividend Other Current Liabilities
(v) Short-term Loans Short-term Borrowings
(vi) Long-term Loans Long-term Borrowings

7.
S.No. Items Sub-Headings
(i) Capital Reserve Reserves and Surplus
(ii) Bonds Long-term Borrowings
(iii) Loans Repayable on demand Short-term Borrowings
(iv) Vehicles Fixed Assets- Tangible
(v) Goodwill Fixed Assets- Intangible
(vi) Drafts on Hand Cash and Cash Equivalents

8.
S.No. Items Headings
(i) Bonus Employee Benefit Expenses
(ii) Internet Expenses Other Expenses
(iii) Materials Purchased Cost of Materials Purchased
(iv) Goodwill Amortized Depreciation and Amortization Expenses

9.
S.No. Items Headings
(i) Interest Paid on Debentures Finance Costs
(ii) Prior Period Expenses Other Expenses
(iii) Interest Earned Revenue from Operations
(iv) Profit on Sale of Investments Revenue from Operations

10.
Items Major Headings
(i) Long-term Investments Non- Current Assets
(ii) Bills of Exchange Current Assets
(iii) Motor Car Non-Current Assets
 (iv) Unpaid matured debentures and interest Current Liabilities
accrued thereon
(v) Securities Premium Reserve Shareholder’s Funds
(vi) Unclaimed Dividend Current Liabilities
(vii) Security Deposits for Electricity Non-Current Assets

SOLUTION FOR HOMEWORK QUESTIONS

SOLUTION FOR MCQ QUESTIONS

1. (c) 4. (b) 7. (b) 10. (c) 13. (a) 16. (b) 19. (d) 22. (b) 25. (a) 28. (a)
2. (b) 5. (b) 8. (c) 11. (c) 14. (a) 17. (d) 20. (a) 23. (b) 26. (b) 29. (c)
3. (d) 6. (c) 9. (a) 12. (c) 15. (c) 18. (d) 21. (b) 24. (a) 27. (a) 30. (a)

SOLUTION FOR SUBJECTIVE QUESTIONS

1.
S.No. Items Headings Sub-Headings
(i) Proposed Dividend - To be shown as Contingent
Liability in Notes to Accounts
(ii) Calls in Arrears Deducted from Subscribed but not fully
paid up capital in shareholder’s funds
(iii) Patents and Trade Marks Non Current Assets Fixed Assets – Intangible
(iv) Prepaid Insurance Current Assets Other Current Assets
(v) Outstanding Salary Current Liabilities Other Current Liabilities
(vi) Shares in R.M.L Limited Non-Current Assets Non-Current Investments
2.
S.No. Items Headings Sub-Headings
(i) Forfeited Shares Account Shareholder’s Funds Share Capital (Shown by way of
adding it to subscribed capital)
(ii) Capital Advances Non-Current Assets Long term loans and Advances
(iii) Factory Building Under Non Current Assets Fixed Assets – Capital Work in
Construction progress
(iv) Premium on Redemption Non-Current Liabilities Other Long-Term Liabilities
of Debentures
(v) Shares in Wipro Ltd. Non-Current Assets Non-Current Investments
(vi) Interest Accrued and due Current Liabilities Other Current Liabilities
on Secured Loan
(vii) Interest Accrued and due Current Liabilities Other Current Liabilities
on Secured Loan
(viii) Interest Accrued but not Current Liabilities Other Current Liabilities
due on loan

3.
Balance Sheet of ABC Ltd.
as at 31st March, 2019
 Notes to Accounts:

4. Statement of Profit and Loss of MNO Finance Ltd.

for the year ended 31st March, 2019

Notes to Accounts:

5. Statement of Profit and Loss

for the year ended 31st March, 2017
Particulars Note 31st March,
No. 2017 (₹)
I. Revenue from Operations 1,15,000
II. Other Income 1 35,000
III. Total Revenue (I + II) 1,50,000
IV. Expenses:
Cost of Materials Consumed 12,500
Purchases of Stock-in-Trade 5,000
Changes in Inventories 22,500
Employees Benefit Expenses 10,000
Finance Cost 6,000
Depreciation 2,500
Other Expenses 2 8,500
67,000
V. Profit before tax (III - IV) 83,000
Notes to Accounts:
Particulars (₹)
1. Other Income
Commission Received 35,000
2. Other Expenses
 Advertising expenses 8,500

6. Cost of Material Consumed = Opening inventory of material + Purchase of material – Closing

inventory of material
= 2,75,000 + 11,25,000 – 2,25,000
= ₹11,75,000
7.
Notes to Accounts
Particulars (₹) (₹)
Change in Inventories of Finished Goods, WIP and Stock-in-Trade
(a) Finished Goods
Opening inventories 2,50,000
Less: Closing Inventories 2,75,000 (25,000)
(b) Work-in-Progress
Opening Inventories 2,25,000
Less: Closing Inventories 2,12,500 12,500
(c) Stock-in-Trade
Opening Inventories 3,25,000
Less: Closing Inventories 3,00,000 25,000
Net change to be shown in Statement of Profit and Loss (a + b + c) 12,500
8.
Balance Sheet of Perfect Sports Ltd.
as at 31st March, 2017
Particulars Note No. 31st March, 2017 (₹) 31st March, 2016 (₹)
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital 1 2,00,000
(b) Reserves and Surplus 2 1,20,000

2. Non-current Liabilities
(a) Long-term Borrowings 3 60,000

3. Current Liabilities
(a) Short-term Borrowings 4 10,000
(b) Short-term Provisions 5 10,000
Total 40,000

II. ASSETS
1. Non-current Assets
(a) Fixed Assets (Tangible) 6 2,00,000
(b) Non-Current Investments 7 1,00,000
2. Current Assets
(a) Inventories 8 80,000
(b) Trade Receivables 9 10,000
(c) Other Current Assets 10 10,000
Total 4,00,000

Notes to Accounts:
Particulars (₹)
1. Share Capital:
Subscribed and Paid-up Share Capital 2,00,000
2. Reserves and Surplus:
Capital Redemption Reserve 1,20,000
3. Long-term Borrowings:
10% Debentures 60,000
4. Short-term Borrowings:
Short-term Loan from Bank 10,000
5. Short-term Provisions:
 Provision for Taxation 10,000
6. Fixed Assets (Tangible):
Plant and Machinery 2,00,000
7. Non-current Investments:
Shares in RXL Ltd. 1,00,000
8. Inventories:
Stock-in-Trade 80,000
9. Trade Receivables:
Bills Receivable 10,000
10. Other Current Assets:
Prepaid Expenses 10,000

9. (a) Balance Sheet of X Ltd.

as at 31st March, 2017 (Extract)

(b) Notes to Accounts:

Particulars (₹)
1. Share Capital:
Authorised Capital:
1,00,000 equity shares of ₹10 each 10,00,000
50,000, 9% preference shares of ₹10 each 5,00,000
Issued Capital: 15,00,000
90,000 equity shares of ₹10 each 9,00,000
50,000, 9% preference shares of ₹10 each 5,00,000
14,00,000
Subscribed Capital:
Subscribed and fully paid up:
50,000, 9% preference shares of ₹10 each 5,00,000
Subscribed but not fully paid:
84,500 equity shares of ₹10 each, ₹8 called-up 6,76,000
Less: Calls-in-arrears (1,000 × 2) (2,000)
Add: Share Forfeited A/c (500 × 6) 3,000
11,77,000
2. Reserves and Surplus:
Capital Reserve 6,000

10. Notes to Accounts

Particulars (₹)
1. Reserves and Surplus
(a) Debenture Redemption Reserve
Opening Balance 50,000
Add: Transfer from Statement of Profit and Loss 2,00,000 2,50,000
(b) General Reserve
Opening Balance ––
Add: Transfer from Statement of Profit and Loss 2,00,000 2,00,000
(c) Securities Premium Reserve
Opening Balance 1,00,000
Add: Transfer from Statement of Profit and Loss 1,50,000 2,50,000
(d) Surplus, i.e., Balance in Statement of Profit and Loss
Opening Balance 4,50,000
Add: Profit for the year 2,50,000 7,00,000
Less: Appropriations
Transfer to Debenture Redemption Reserve 2,00,000
Transfer to General Reserve 2,00,000
Transfer to Securities Premium Reserve 1,50,000
(5,50,000) 1,50,000
Balance of Reserves and Surplus [as shown in Balance Sheet: (a) + (b) + (d)] 8,50,000