CHAPTER 1: FINANCIAL STATEMENTS OF A COMPANY

 CONTENTS:
1. Financial Statements of a company
a) Balance Sheet
b) Profit & Loss Account / Statement of Profit & Loss
c) Notes to Accounts
d) Cash Flow Statement (CFS)
Meaning of Financial Statements: The Financial Statements are a Summary of Accounts of a Business
Enterprise.
2. Format of Balance Sheet
Format of Balance Sheet prescribed in Part I of Schedule III of the Companies Act, 2013
Particulars Note No. CY PY
I. Equity and Liabilities
1. Shareholder’s 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) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment
(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
Note: 1. If the Accounting Income stands greater than the Taxable Income then it will be recorded
under the head Deferred Tax Liabilities (Net)
2. If the Taxable Income stands greater than the Accounting Income then it will be recorded under the
head Deferred Tax Assets (Net).

3. Format of Profit & Loss Account

4. Operating Cycle

5. Identification of an item as Current / Non-Current on the basis of its Operating Cycle

Eg: Classify the Liabilities (Trade Payables) given below as Non-Current liabilities and Current
liabilities giving reasons for such classification:
Case Particulars Operating Cycle Expected period of payment
(in Months) (in Months)
1. Trade Payables 10 08
2. Trade Payables 10 12
3. Trade Payables 10 15
4. Trade Payables 18 15
5. Trade Payables 18 24
6. Trade Payables 14 13
Note: 1.If the Expected period of Payment / Receipt is within the Operating Cycle or within 12 Months
then it is treated as Current Liability or Current Assets.
2. If the Expected period of Payment / Receipt is beyond the Operating Cycle and beyond 12 Months
then it is treated as Non-Current Liability or Non-Current Assets.

6. Classification of an items on the basis of Major Heads & Sub Heads

 Classification of an items on the basis of Major Heads & Sub Heads
 Important Major Heads: 6 (4 on Liability side of Balance Sheet & 2 on the Asset Side of Balance
Sheet)
Liability Side Asset Side
1. Shareholder’s Funds 1. Non-Current Assets
2. Share Application Money Pending Allotment 2. Current Assets
3. Non-Current Liabilities
4. Current Liabilities

 Important Sub Heads: 22 (3 items Under Shareholder’s Funds; 4 items Under Non-Current
Liabilities, 4 items Under Current Liabilities; 5 items under Non-Current Assets and 6 items Under
Current Assets)
Liability Side
1. Shareholder’s 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
Asset Side
1. Non-Current Assets
a) Property, Plant and Equipment and Intangible Assets
(i) Property, Plant and Equipment
(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

 Types of Capital & Reserves

Capital: 2 Types and Reserves 9 Types
Capital Reserves
1. Equity Share Capital 1. Security Premium Reserve (SPR)
2. Preference Share Capital 2. Capital Reserve
3. Tax Reserve
4. Subsidy Reserve
5. Debenture Redemption Reserve (DRR)
6. Capital Redemption Reserve (CRR)
7. General Reserve
8. Shares Options Outstanding Account
9. Revaluation Reserve

QUICK VIEW
Classification of various items of balance sheet under main head, sub head and sub-sub head (if any)
S.No Items Main Head Sub Head Sub- Sub
Head
1. Debentures / 10% Debentures Non-Current Liabilities Long term Borrowings
2. Public Deposits Non-Current Liabilities Long term Borrowings
3. Mortgage Loan Non-Current Liabilities Long term Borrowings
4. Bonds Non-Current Liabilities Long term Borrowings
5. Long term loans Non-Current Liabilities Long term Borrowings
6. Premium on Redemption of Debentures Non-Current Liabilities Other Long-term liabilities
7. Advances from Customers (Long Term) Non-Current Liabilities Other Long-term liabilities
8. Encashment of Employees earned leave Non-Current Liabilities Long term Provisions
Payable on Retirement
9. Provision for Employees Benefits Non-Current Liabilities Long term Provisions
10. 5% Debentures Repayable After 3 years Non-Current Liabilities Long term Provisions
11. Provident Fund Non-Current Liabilities Long term Provisions
12. Provision for Warranties Non-Current Liabilities Long term Provisions
13. Security Premium Reserve Shareholders’ Funds Reserves and Surplus
14. Capital Reserve Shareholders’ Funds Reserves and Surplus
15. Tax Reserve Shareholders’ Funds Reserves and Surplus
16. Subsidy Reserve Shareholders’ Funds Reserves and Surplus
17. Debenture Redemption Reserve Shareholders’ Funds Reserves and Surplus
18. Capital Redemption Reserve Shareholders’ Funds Reserves and Surplus
19. General Reserve Shareholders’ Funds Reserves and Surplus
20. Shares Options Outstanding Account Shareholders’ Funds Reserves and Surplus
21. Revaluation Reserve Shareholders’ Funds Reserves and Surplus
22. Net Loss as shown by Statement of Shareholders’ Funds Reserves and Surplus
Profit & Loss
23. Net Profit as shown by Statement of Shareholders’ Funds Reserves and Surplus
Profit & Loss
24. Forfeited Share Account Shareholders’ Funds Added with
Subscribed Capital
25. Calls in arrears Shareholders’ Funds Deducted From
Subscribed Capital
26. Loans Repayable on Demand Current Liabilities Short term Borrowings
27. Short term Loans Current Liabilities Short term Borrowings
28. Current Maturities of Long-term Debts Current Liabilities Short term Borrowings
29. Bank Overdraft Current Liabilities Short term Borrowings
30. Interest Accrued but not due on Current Liabilities Other Current Liabilities
Debentures
31. Advance received from Customers Current Liabilities Other Current Liabilities
32. Unclaimed Dividend Current Liabilities Other Current Liabilities
33. Unpaid Dividend Current Liabilities Other Current Liabilities
34. Interest Accrued but not due on Current Liabilities Other Current Liabilities
Debentures
35. Interest Accrued and due on Current Liabilities Other Current Liabilities
36. Debentures
37. Interest on calls in advance Current Liabilities Other Current Liabilities
38. Accrued interest on Calls in Advance Current Liabilities Other Current Liabilities
39. Interest Accrued and due on Secured Current Liabilities Other Current Liabilities
40. Loans
41. Interest Accrued but not due on Current Liabilities Other Current Liabilities
42 Unsecured Loans
43. Commission received in advance Current Liabilities Other Current Liabilities
44. Calls in advance Current Liabilities Other Current Liabilities
45. Outstanding Salary Current Liabilities Other Current Liabilities
46. Employees Provident Fund Payable Current Liabilities Other Current Liabilities
47. Matured Debentures Current Liabilities Other Current Liabilities
48. Income received in Advance Current Liabilities Other Current Liabilities
49. Interest Payable Current Liabilities Other Current Liabilities
50. Bills Payable Current Liabilities Trade Payables
51. Sundry Creditors Current Liabilities Trade Payables
52. Provision for Tax Current Liabilities Short term Provisions
53. Proposed Dividend Current Liabilities Short term Provisions
54. Trade Payables Current Liabilities -
55. Mining Rights Non-Current Assets Property Plant &
Equipment – Intangible
Assets
56. Goodwill Non-Current Assets Property Plant &
Equipment – Intangible
Assets
57. Brands / Trademarks Non-Current Assets Property Plant &
Equipment – Intangible
Assets
58. Patents Non-Current Assets Property Plant &
Equipment – Intangible
Assets
59. Copyrights Non-Current Assets Property Plant &
Equipment – Intangible
Assets
60. Computer Software Non-Current Assets Property Plant &
Equipment – Intangible
Assets
61. Licences Non-Current Assets Property Plant &
Equipment – Intangible
Assets
62. Franchise Non-Current Assets Property Plant &
Equipment – Intangible
Assets
63. Mastheads and Publishing Titles Non-Current Assets Property Plant &
Equipment – Intangible
Assets
64. Computer Software under Development Non-Current Assets Property Plant &
Equipment Intangible
Asset under
Development
65. Intellectual Property rights Non-Current Assets Property Plant &
Equipment Intangible
Asset under Development
66. Patents being developed by Company Non-Current Assets Property Plant &
Equipment Intangible
Asset under Development
67. Vehicles Non-Current Assets Property Plant &
Equipment – Tangible
Assets
68. Motor Vehicle Non-Current Assets Property Plant &
Equipment – Tangible
Assets
69. Livestock Non-Current Assets Property Plant &
Equipment – Tangible
Assets
70. Land and Building Non-Current Assets Property Plant &
Equipment – Tangible
Assets
71. Office Furniture Non-Current Assets Property Plant &
Equipment – Tangible
72. Assets
Office Equipment Non-Current Assets Property Plant &
Equipment – Tangible
73. Assets
Computers Non-Current Assets Property Plant &
Equipment – Tangible
74. Assets
Machinery Non-Current Assets Property Plant &
Equipment – Tangible
75. Assets
Capital Work-in-Progress Non-Current Assets Property Plant &
Equipment - & Intangible
Assets – Capital Work
76. In Progress
77. Long term Investments Non-Current Assets Non-Current Investments
78. Shares of XYZ Ltd. Non-Current Assets Non-Current Investments
79. Shares in Listed Companies Non-Current Assets Non-Current Investments
80. Investments in Debentures Non-Current Assets Non-Current Investments
81. Investments in Bonds Non-Current Assets Non-Current Investments
82. Investment in Mutual Funds Non-Current Assets Non-Current Investments
83. Investment in Partnership Firms Non-Current Assets Non-Current Investments
85. Long term investments Non-Current Assets Non-Current Investments
86. Investment Non-Current Assets Non-Current Investments
87. Investment in Government Securities Non-Current Assets Non-Current Investments
88. Investment in Trust Securities Non-Current Assets Non-Current Investments
89. Deposit with Customs Authorities Non-Current Assets Other Non-Current Assets
90. Capital Advances Non-Current Assets Long term loans & Advances
91. Deferred Tax Assets (Net) Non-Current Assets Deferred Tax Assets (Net)
92. Loose Tools Current Assets Inventories
93. Stores and Spares Current Assets Inventories
94. Raw Materials Current Assets Inventories
95. Stock-in-Trade Current Assets Inventories
96. Stock of Finished Goods Current Assets Inventories
97. Work-in-Progress Current Assets Inventories
98. Sundry Debtors Current Assets Trade Receivables
99. Bills Receivable Current Assets Trade Receivables
100. Bills of Exchange Current Assets Trade Receivables
101. Trade Receivables Current Assets -
102. Inventories Current Assets -
103. Prepaid Insurance Current Assets Other Current Assets
104. Interest Accrued on Investment Current Assets Other Current Assets
105. Prepaid Rent Current Assets Other Current Assets
106. Advances Recoverable in Cash Current Assets Other Current Assets
107. Accrued Incomes Current Assets Other Current Assets
108. Balance with Banks Current Assets Cash and Cash Equivalents
109. Cash at Bank Current Assets Cash and Cash Equivalents
110. Cheques in hand Current Assets Cash and Cash Equivalents
111. Loans provided Repayable on Demand Current Assets Short term Loans & Advances
Provision for Doubtful Debts Current Assets Deduction from Trade
112. Receivables
Authorised Capital Share Capital (In Notes -
To Accounts)

Items that need special attention

1. Arrear of Fixed Cumulative Preference Dividend: As a Footnote as Contingent Liability
2. Bill Discounted but not Matured: Contingent Liability in Notes to Accounts
3. Dividend not paid on Cumulative Preference Shares: Contingent Liability in Notes to Accounts
4. Share Application Money Pending Allotment: To be shown as a separate line item between Equity and
Non-Current Liabilities.
5. Uncalled Liability on Partly paid Shares: Commitments in Notes to Accounts
6. Contingent Liabilities and Commitments: To be shown in Notes to Accounts

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