Know all about the Financial Statements of Companies

Table of Contents

1. Financial Statements
2. Share Warrant
3. Share Application Money Pending Allotment
4. Schedule III to the Companies Act, 2013
5. General Instructions for Preparation of Balance Sheet

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1. Financial Statements of a Company

1.1 Meaning of Financial Statement

“According to S. 2(40) financial statement in relation to a company, includes—

(i) a balance sheet as at the end of the financial year;
(ii) a profit and loss account, or in case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;
(iii) cash flow statement for the financial year; and
(iv) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv).

However, the financial statement, with respect to One Person Company, small company and dormant company (S. 455) may not include cash flow statement.

1.2 Meaning of Financial Year

According to S. 2(41), financial year, in relation to any company or body corporate, means the period ending on the 31st day of March every year. Where a company has been incorporated on or after 1st day of January of a year, the first financial year will end on 31st day of March of the following year.

If a company or body corporate which is a holding company or a subsidiary or associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year.

1.3 Types of Financial statements on the Basis of Period

The following are the two types of financial statements:

1. 1. Annual financial statements: These are prepared once in a financial year
   2. Quarterly financial statements: These are prepared by listed companies on quarterly basis as per SEBI requirements.

1.4 Legal Requirements related to Financial Statements as provided in S. 129

Sections 128 to 138 deal with financial requirements. The following are the legal requirements as provided in section 129:

Section 129(1) of the Companies Act, 2013 provides that the financial statements

(i) shall give a true and fair view of the state of affairs of the company or companies,

(ii) comply with the accounting standards notified under S. 133,

(iii) shall be in the form or forms as may be provided for different class or classes of companies in Schedule III and (iv) the items contained in such financial statements shall be in accordance with the accounting standards.

However, the aforesaid provisions of S. 129(1) shall not apply to any insurance or banking company or any company engaged in the generation or supply of electricity, or to any other class of company for which form of financial statement has been specified in or under the Act governing such class of company.

Section 129(2) provides that at every general meeting of a company, the Board of Directors of the Company shall lay before such meeting financial statements for the financial year.

Section 129(3) provides that where a company has one or subsidiaries or associate companies, it shall, in addition to standalone financial statement prepared under section 129(2), prepare a consolidated financial statement of the company and of all the subsidiaries and associate companies. The consolidated financial statement shall be prepared by the company in the same form and manner as that of its own and in accordance with applicable standards. The consolidated financial statement shall also be laid before the annual general meeting of the company along with the laying of the standalone financial statement.

Section 129(4) states that the provisions of the Act applicable to the preparation, adoption and audit of the financial statements of a holding company shall, mutatis mutandis, apply to the consolidated financial statements referred in S. 129(3).

Section 129(5) provides that where the financial statements of a company do not comply with the accounting standards referred to in S. 129(1), the company shall disclose in its financial statements, the deviation from the accounting standards, the reasons for such deviation and the financial effects, if any, arising out of such deviation.

Section 129(6) empowers the Central Government to exempt any class or classes of companies from complying with any of the requirements of S. 129 or rules made thereunder, if it is considered necessary to grant such exemption in the public interest.
The Central Government may, by notification, constitute a National Financial Reporting Authority to provide for matters relating to accounting and auditing standards under the Companies Act, 2013 [S. 132].

The Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, in consultation with and after examination of the recommendations made by the National Financial Reporting Authority [S. 133].

2. Share Warrant

As per AS-20, Earnings of per Share, defines ‘share warrants’ as “financial instruments which give the holder the right to acquire equity shares”. Thus, share warrants would ultimately form part of the shareholders’ funds. As shares are yet to be allotted against share warrants, these are not shown as part of share capital. It is shown as a separate line item: ‘Money received against share warrants’.

3. Share Application Money Pending Allotment

Share application money pending allotment is to be disclosed as a separate line time on the face of the balance sheet between “Shareholders’ Funds” and “Non-current liabilities”. Share application money not exceeding the issued capital and to the extent not refundable is to be disclosed under line item: “Share application money pending allotment”. The balance of such money is shown under the head “Other current liabilities”. But the amount due for refund and interest thereon, if any, will be shown under the head “Other current liabilities”.

4. Schedule III to the Companies Act, 2013

Schedule III of the Companies Act, 2013 provides the manner in which every company registered under the Act shall prepare its Statement of Profit and Loss, Balance Sheet and Notes to Accounts or Notes to Financial Statements. There was a need of enhancing the disclosure requirements under the Old Schedule VI to the Companies Act, 1956 to harmonise them with the notified accounting standards. Therefore, the Ministry of Corporate Affairs issued a revised form of Schedule VI, vide Notification No. S.O. 447(E), dated February 28, 2011. The Revised Schedule VI to the Companies Act, 1956 was applicable to the companies for the Financial Statements to be prepared for the financial year commencing on or after April 1, 2011. As per the new Companies Act, 2013 this has been numbered as Schedule III.

Schedule III to the Companies Act, 2013 prescribes format of financial statements for the following three categories:

DIVISION I
Financial statements for a company whose financial statements are required to comply with the Companies (Accounting Standards) Rules, 2006.

DIVISION II
Financial Statements for a company whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015.

DIVISION III
Financial Statements for a Non-Banking Finance Company whose financial statements are drawn up in compliance of the Companies (Indian Accounting Standards) Rules, 2015.

4.1 Schedule III | Division-I Non Ind AS

Financial Statements for a company whose financial statements are required to comply with Companies (Accounting Standards) Rules, 2006.

General Instructions for Preparation of Financial Statements

1. Overriding status to other requirements of the Companies Act and to the Accounting Standards: Schedule III of the Companies Act, 2013 Act provides that where compliance with the requirements of the Act including Accounting Standards as applicable to the companies require any change in treatment or disclosure including addition, amendment, substitution or deletion in the head/sub-head or any changes inter se, in the Financial Statements or statements forming part thereof, the same shall be made and the requirements of the Schedule III shall stand modified accordingly. Thus, the Schedule III of the Companies Act, 2013 gives overriding status to the other requirements of the Companies Act, 2013 and the Accounting Standards as applicable to the companies. In other words, the requirements of the Accounting Standards and other provisions of the Companies Act would prevail over the Schedule.

2. Disclosure requirements of the Schedule III are in addition to and not in substitution of disclosure requirements of the Accounting Standards: Disclosure requirements specified in Part I (Form of Balance Sheet) and Part II (Form of Statement of Profit and Loss Account) of the Schedule are in addition to and not in substitution of the disclosure requirements specified in the Accounting Standards prescribed under the Companies Act, 2013. Additional disclosures specified in the Accounting Standards shall be made in the Notes to Accounts or by way of additional statement unless required to be disclosed on the face of the Financial Statements. Similarly, all other disclosures as required by the Companies Act shall be made in the Notes to Accounts in addition to the requirements set out in the Schedule.

3. Notes to Accounts shall contain information in addition to that presented in Financial Statements: The Notes to Accounts shall contain information in addition to that presented in the Financial Statements and shall provide where required

(a) narrative descriptions or disaggregations of items recognized in those statements and

(b) information about items that do not qualify for recognition in those statements. These items normally include contingent liabilities and commitments which are not shown on the face of the Balance Sheet.

It further provides that each item on the face of the Balance Sheet and Statement of Profit and Loss shall be cross-referenced to any related information in the Notes to Accounts. In preparing the Financial Statements including the Notes to Accounts, a balance shall be maintained between providing excessive detail that may not assist users of Financial Statements and not providing important information as a result of too much aggregation.
The manner of cross reference has been changed to “Note No.” as compared to “Schedule No.”

4. New norms of rounding off: New norms of rounding off have been introduced depending upon the turnover of the company. The figures appearing in the Financial Statements may be rounded off as below:

	Turnover	Rounding off
(i)	less than one hundred crores rupees	To the nearest hundreds, thousands, lakhs or millions, or decimals thereof.
(ii)	one hundred crore rupees or more	To the nearest lakhs, millions or crores, or decimals thereof.

Once a unit of measurement is used, it should be used uniformly in the Financial Statements.

5. Figures for immediately preceding period: Except in the case of the first Financial Statements laid before the Company (after its incorporation) the corresponding amounts (comparatives) for the immediately preceding reporting period for all items shown in the Financial Statements including notes shall also be given.

6. Terms used in the Schedule: The terms used in the Schedule shall be as per the applicable Accounting Standards.
Notes to General Instructions: This part of Schedule sets out the minimum requirements for disclosure on the face of the Balance Sheet, and the Statement of Profit and Loss (hereinafter referred to as “Financial Statements” for the purpose of this Schedule) and Notes, Line items, sub-line items and sub-totals shall be presented as an addition or substitution on the face of the Financial Statements when such presentation is relevant to an understanding of the company’s financial position or performance or to cater to industry/sector-specific disclosure requirements or when required for compliance with the amendments to the Companies Act or under the Accounting Standards.

4.2 Part I | Format of BALANCE SHEET

The following is the form of the Balance Sheet as per Schedule III (Division I – Non Ind AS) of the Companies Act, 2013, as amended in 2018:

Name of the Company ………
Balance Sheet as at ……………

(Rupees in………)

Particulars			Note No.	Figures as at the end of current reporting period	Figures as at the end of the 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 :- (A) total outstanding dues of micro enterprises and small enterprises; and (B) total outstanding dues of creditors other than micro enterprises and small enterprises.
		(c) Other current liabilities
		(d) Short-term provisions
		TOTAL
II.	ASSETS
	(1)	Non-current assets
		(a) Property, Plant and Equipment*
		(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

See accompanying notes to the financial statements.

5. General Instructions for Preparation of Balance Sheet

The general instructions for preparation of Balance Sheet as per Schedule III are reproduced below:

5.1 An asset shall be classified as current when it satisfies any of the following criteria

(a) it is expected to be realized in, or is intended for sale or consumption in, the company’s normal operating cycle;

(b) it is held primarily for the purpose of being traded;

(c) it is expected to be realized within twelve months after the reporting date; or

(d) it is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.

All other assets shall be classified as non-current.

Explanation of the definition of current assets

Clause (a): If an asset is expected to be realised in, or is intended for sale or consumption in the company’s normal operating cycle: It include debtors, finished goods, stock-in-trade and raw material. Debtors are expected to be realised within the operating cycle of the business and debtors are current assets. However, if some debtors are not expected to be realised within 12 months from the reporting date or in the normal operating cycle of the business, then those debtors will be classified as non-current assets.

Clause (b): If an asset is held primarily for the purpose of being traded: It include stock-in-trade and finished goods, as these are held primarily for the purpose of being traded, and hence these are current assets. Investments may also come under this clause, if these are primarily held for the purpose of being traded.

Clause (c): If an asset is expected to be realised within 12 months after the reporting date: It include investments made in the debentures of another company and maturing within 12 months after the reporting date. Such part of the investments are classified as current assets. 

Clause (d): If an asset is cash or cash equivalents unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date: Cash equivalents are short-term (upto 3 months), highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. However, if cash or cash equivalents is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date, then it will not be classified as current asset. For example, if a company has a bank balance of ` 50,000 in a bank and it has taken a loan of ` 5,00,000 and there is an agreement between the company, bank and the lender under which there is restriction for use of ` 40,000 out of the aforesaid ` 50,000 for more than 12 months after the reporting date (balance sheet), the bank balance of ` 40,000 out of ` 50,000 is not a current asset for the reporting date (balance sheet).

The period of three months should be counted from the date of investment to determine whether the investment is cash equivalent or not.

5.2 Operating Cycle

An operating cycle is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. Operating cycle may be a period of less than 12 months, equal to 12 months or more than 12 months. Where the normal operating cycle cannot be identified, it is assumed to have a duration of 12 months.

Items of inventory which may be consumed or realised within the company’s normal operating cycle should be classified as current even if the same are not expected to be consumed or realised within twelve months after the reporting date.

5.3 Liability

A liability shall be classified as current when it satisfies any of the following criteria:

(a) it is expected to be settled in the company’s normal operating cycle;

(b) it is held primarily for the purpose of being traded;

(c) it is due to be settled within twelve months after the reporting date; or

(d) the company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Terms of a liability that could, at the option of the counterpart, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities shall be classified as non-current.

Explanation of definition of current liabilities 

Clause (a): If a liability is expected to be settled in the company’s normal operating cycle: A liability, whether arising in the ordinary course of business or otherwise, will be classified as a current liability if it is expected to be settled in the company’s normal operating cycle. Therefore, trade creditors are classified as current liability as they are expected to be settled within the normal operating cycle of the business which may be less than, equal to or more than 12 months.

Clause (b): If a liability is held primarily for the purpose of being traded: If a liability is primarily held for the purpose of being traded, it will be classified as a current liability. This happens when a company trades in the liability (current or non-current) of other organization for a commission or any other form of compensation.

Clause (c): If a liability is due to be settled within 12 months after the reporting date: If a liability is due to be settled within 12 months after the reporting date, it will be classified as a current liability. Such liability may or may not arise in the ordinary course of business of the company. For example, if creditors of the company are to be paid within 3 months of the reporting date, will be classified as a current liability. Further, if a part of the long term liability is payable within 12 months of the reporting date, that part of the long-term liability will be classified as current liability. For example, current maturity of the long-term debentures will be classified as a current liability.

Clause (d): When the company does not have an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date: A liability is classified as a current liability if the company does not have an unconditional right to defer the settlement of the liability for at least 12 months after the reporting date. For example, if a company declares dividend at an Annual General Meeting, the dividend is payable within one month of the declaration. If a part of the dividend payable remains unpaid within the prescribed time, the unpaid dividend is transferred to separate “Unpaid Dividend Account” and has to be transferred to separate bank account. The concerned shareholder can make a claim of the unpaid dividend from the company within 7 years. Thus, the company does not have unconditional right to defer the settlement of the liability for at least 12 months after the reporting date. Therefore, unpaid dividend will be classified as a current liability.

5.4 Definition of Trade Receivable

A receivable shall be classified as a ‘trade receivable’ if it is in respect of the amount due on account of goods sold or services rendered in the normal course of business.

5.5 Definition of Trade Payable

A payable shall be classified as a ‘trade payable’ if it is in respect of the amount due on account of goods (i.e. raw material, work-in-progress or stock-in-trade) purchased or services received in the normal course of business.

 

5.6 A company shall disclose the following in the Notes to Accounts

A. Share Capital

For each class of share capital (different classes of preference shares to be treated separately)

(a) the number and amount of shares authorized;

(b) the number of shares issued, subscribed and fully paid, and subscribed but not fully paid;

(c) par value per share;

(d) a reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period;

(e) the rights, preferences and restrictions attaching to each class of shares including restrictions on the distribution of dividends and the repayment of capital;

(f) shares in respect of each class in the company held by its holding company or its ultimate holding company including shares held by subsidiaries or associates of the holding company or the ultimate holding company in aggregate;

(g) shares in the company held by each shareholder holding more than 5 per cent shares specifying the number of shares held;

(h) shares reserved for issue under options and contracts/commitments for the sale of shares/disinvestment, including the terms and amounts;

(i) for the period of five years immediately preceding the date as at which the Balance Sheet is prepared—

• • • Aggregate number and class of shares allotted as fully paid up pursuant to contract(s) without payment being received in cash.
    • Aggregate number and class of shares allotted as fully paid up by way of bonus shares,
    • Aggregate number and class of shares bought back.

(j) terms of any securities convertible into equity/preference shares issued along with the earliest date of conversion in descending order starting from the farthest such date;

(k) calls unpaid (showing aggregate value of calls unpaid by directors and officers);

(l) forfeited shares (amount originally paid up).

The disclosure, inter alia, will be as follows:

Notes to Accounts

	Particulars	As at the end of current year (`)	As at the end of previous year (`)
1.	Share capital
	Authorised
	……..Share of ` …………. each	xxxx	xxxx
	Issued
	……..Shares of ` …………….each	xxxx	xxxx
	Subscribed and fully paid up
	……Shares of ` ……………. each	xxxx	xxxx
	Subscribed but not fully paid up
	……Shares of ` ……………. each, ` ……………. per share paid	xxxx	xxxx
	Add: forfeited shares	xxxx	xxxx
		xxxx	xxxx

Note: It may be noted that unpaid amount towards shares subscribed by the subscribers of the memorandum of association should be considered as ‘Subscribed and paid up capital’ in the balance sheet and debts due from the subscriber should be appropriately disclosed as an asset in the balance sheet.

Reconciliation of shares outstanding at the beginning and at the end of the reporting year will be shown as follows:

Particulars	Number of equity shares	Amount (`)
Balance at the beginning of the year	xxxxx	xxxxx
Equity shares issued during the year	xxxxx	xxxxx
Buy back of shares during the year	(xxxxx)	(xxxxx)
Balance at the end of the year	xxxxx	xxxxx

Similarly, reconciliation of preference shares will be shown:

B. Reserves and Surplus

(i) Reserves and Surplus shall be classified as :

(a) Capital Reserve;

(b) Capital Redemption Reserve*;

(c) Securities Premium [*****];

(d) Debenture Redemption Reserve;

(e) Revaluation Reserve;

(f) Share Options Outstanding Account;

(g) Other Reserves—(specify the nature and purpose of each reserve and the amount in respect thereof);

(h) Surplus i.e. balance in Statement of Profit and Loss disclosing allocations and appropriations such as dividend, bonus shares and transfer to/from reserves, etc.

(Additions and deductions since last Balance Sheet to be shown under each of the specified heads)

(ii) A reserve specifically represented by earmarked investments shall be termed as a ‘fund’.

(iii) Debit or negative balance of Statement of Profit and Loss shall be shown as a negative figure under the head ‘Surplus’. Similarly, the balance of ‘Reserves and Surplus’, after adjusting negative balance of Surplus, if any, shall be shown under the head ‘Reserves and Surplus’ even if the resulting figure is in the negative.

When there has been a change in the balance of any reserve as compared to the last year, disclose the movement in the reserve.

Similarly, show the additions and deductions since the last balance sheet in the surplus i.e. balance in the statement of profit and loss.

C. Long-term Borrowings

(i) Long-term borrowings shall be classified as : 

(a) Bonds/debentures 

(b) Terms loans

(A) From banks

(B) From other parties

(c) Deferred payment liabilities

(d) Deposits

(e) Loans and advances from related parties

(f) Long-term maturities of finance lease obligations

(g) Other loans and advances (specify nature)

(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each case.

(iii) Where loans have been guaranteed by directors or others, the aggregate amount of such loans under each head shall be disclosed.

(iv) Bonds/debentures (along with the rate of interest and particulars of redemption or conversion, as the case may be) shall be stated in descending order of maturity or conversion, starting from farthest redemption or conversion date, as the case may be. Where bonds/debentures are redeemable by instalments, the date of maturity for this purpose must be reckoned as the date on which the first instalment becomes due.

(v) Particulars of any redeemed bonds/debentures which the company has power to reissue shall be disclosed.

(vi) Terms of repayment of term loans and other loans shall be stated.

(vii) Period and amount of continuing default as on the Balance Sheet date in repayment of loans and interest, shall be specified separately in each case.

D. Other Long-term Liabilities

Other Long-term Liabilities shall be classified as :

(a) Trade payables

(b) Others

Dues payable in respect of purchase of property, plant and equipment, intangible assets, etc. cannot be included under trade payable. Such payables should be classified as “Others” and each such item should be disclosed nature-wise. However, long-term bills payable should be disclosed as part of trade payable.

E. Long-term Provisions

The amounts shall be classified as :

(a) Provision for employee benefits

(b) Others (specify nature)

F. Short-term Borrowings

(i) Short-term borrowings shall be classified as :

(a) Loans repayable on demand

• • • • From banks
      • From other parties

(b) Loans and advances from related parties

(c) Deposits

(d) Other loans and advances (specify nature)

(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature of security shall be specified separately in each case.

(iii) Where loans have been guaranteed by directors or others, the aggregate amount of such loans under each head shall be disclosed.

(iv) Period and amount of default as on the Balance Sheet date in repayment of loans and interest, shall be specified separately in each case.

(v) Current maturities of long-term borrowings* (inserted w.e.f. 1-4-2021).

Bank overdraft is shown under “short-term borrowings”. An overdraft is not ordinarily offset with the bank balance, unless there is a legal right to do so.

*FA. Trade payables

The following details relating to Micro, Small and Medium Enterprises shall be disclosed in the notes:-

(a) the principal amount and the interest thereon (to be shown separately) remaining unpaid to any supplier at the end of each accounting year;

(b) the amount of interest paid by the buyer in terms of section 16 of the Micro, Small and Medium Enterprises Development Act, 2006, along with the amount of the payment made to the supplier beyond the appointed day during each accounting year;

(c) the amount of interest due and payable for the period of delay in making payment (which) have been paid but beyond the appointed day during the year) but without adding the interest specified under the Micro, Small and Medium Enterprise Development Act, 2006;

(d) the amount of interest accrued and remaining unpaid at the end of each accounting year; and

(e) the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues above are actually paid to the small enterprise, for the purpose of disallowance of a deductible expenditure under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.

Explanation.- The terms ‘appointed day’, ‘buyer’, ‘enterprise’, ‘micro enterprise’, ‘small enterprise’ and ‘supplier’, shall have the same meaning assigned to those under clauses (b), (d), (e), (h), (m), and (n) respectively on section 2 of the Micro, Small and Medium Enterprises Development Act, 2006.]

G. Other Current Liabilities

The amounts shall be classified as :

(a) Omitted w.e.f. 1-4-2021

(b) Current maturities of finance lease obligations

(c) Interest accrued but not due on borrowings

(d) Interest accrued and due on borrowings

(e) Income received in advance

(f) Unpaid dividends

(g) Application money received for allotment of securities and due for refund and interest accrued thereon.

Share application money includes advances towards allotment of share capital. The terms and conditions including the number of shares proposed to be issued, the amount of premium, if any, and the period before which shares shall be allotted shall be disclosed. It shall also be disclosed whether the company has sufficient authorized capital to cover the share capital amount resulting from allotment of shares out of such share application money. Further, the period for which the share application money has been pending beyond the period for allotment as mentioned in the document inviting application for shares along with the reason for such share application money being pending shall be disclosed. Share application money not exceeding the issued capital and to the extent not refundable shall be shown under the head Equity and share application money to the extent refundable i.e., the amount in excess of subscription or in case the requirements of minimum subscription are not met shall be separately shown under ‘Other current liabilities.’

(h) Unpaid matured deposits and interest accrued thereon

(i) Unpaid matured debentures and interest accrued thereon

(j) Other payable (specify nature); 

Term deposits and security deposits which are not in the nature of borrowings should be classified under ‘Other Non-current liabilities’ or ‘Other current liabilities’, as the case may be.

H. Short-term Provisions

The amounts shall be classified as :

(a) Provision for employee benefits

(b) Others (specify nature) 

Others would include all provisions other than provision for employee benefits such as provision for taxation, provision for warranties, etc. These should be disclosed separately specifying nature thereof.

Schedule III provides that current tax (i.e. provision for tax) is to be disclosed under ‘short-term provisions’ on the equity and liabilities part of the balance sheet; and advance tax is to be disclosed under ‘Loans and advances’ on the Assets side part of the balance sheet.

AS-22, Accounting for Taxes on Income, has a specific requirement with respect to off-setting. As per paragraph 27, an enterprise should offset asset and liabilities representing current tax (i.e. provision for tax) if the enterprise:

(a) has a legally enforceable right to set off the recognised amounts; and

(b) intends to settle the asset and liability on a net basis.

Therefore, where the enterprise can in fact fulfil the criteria set in paragraph 27 of AS-22, disclose the advance tax/current tax (i.e. provision for tax) on a net basis, mentioning the adjusted amount in the inner column.

I. Property, Plant and Equipment

(i) Classification shall be given as :

(a) Land

(b) Buildings

(c) Plant and Equipment

(d) Furniture and Fixtures

(e) Vehicles

(f) Office equipment

(g) Others (specify nature)

(ii) Assets under lease shall be separately specified under each class of asset.

(iii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and at end of the reporting period showing additions, disposals, acquisitions through business combinations, amount of change due to revaluation (if change is 10% or more in the aggregate of the net carrying value of each class of Property, Plant and Equipment) and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately.

(iv)  Where sums have been written off on a reduction of capital or revaluation of assets or where sums have been added on revaluation of assets, every Balance Sheet subsequent to date of such write-off, or addition shall show the reduced or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of such reduction or increase.

Notes to Accounts of Property, Plant and Equipment is to be prepared as follows:

Note No…… Property, Plant and Equipment

Particulars	Building	Plant and Machinery	Office Equipment
Gross carrying amount (Gross Block)
Original Cost in the beginning (A)	xxxxx	xxxxx	xxxxx
Additions	xxxxx	xxxxx	xxxxx
Disposals	(xxxxx)	(xxxxx)	(xxxxx)
Original Cost at the end (B)	xxxxx	xxxxx	xxxxx
Depreciation
Accumulated depreciation in the beginning (C)	xxxxx	xxxxx	xxxxx
Depreciation charge for the year	xxxxx	xxxxx	xxxxx
Depreciation on disposal of asset	(xxxxx)	(xxxxx)	(xxxxx)
Total accumulated depreciation at the end (D)	xxxx	xxxxx	xxxxx
Carrying Amount (Net Block)
Carrying amount in the beginning [(A)-(C)]	xxxxx	xxxxx	xxxxx
Carrying amount at the end [(B)-(D)]	xxxxx	xxxxx	xxxxx

J. Tangible Assets

(i) Classification shall be given as : 

(a) Land 

(b) Buildings

(c) Plant and Equipment

(d) Furniture and Fixtures

(e) Vehicles

(f) Office equipment 

(g) Others (specify nature) 

(ii) Assets under lease shall be separately specified under each class of asset.

(iii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and at end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately.

(iv) Where sums have been written off on a reduction of capital or revaluation of assets or where sums have been added on revaluation of assets, every Balance Sheet subsequent to date of such write-off, or addition shall show the reduced or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of such reduction or increase.

Note: Guidance note on Division I of Schedule III (second edition July, 2019) States that “Tangible Assets” be named as “Property, Plant and Equipment (Tangible Assets)”. Its Notes to Accounts may be prepared as follows:

Note | Tangible Assets

Particulars	Building	Plant and Machinery	Office Equipment
Gross carrying amount (Gross Block)
Original Cost in the beginning (A)	xxxxx	xxxxx	xxxxx
Additions	xxxxx	xxxxx	xxxxx
Disposals	(xxxxx)	(xxxxx)	(xxxxx)
Original Cost at the end (B)	xxxxx	xxxxx	xxxxx
Depreciation
Accumulated depreciation in the beginning (C)	xxxxx	xxxxx	xxxxx
Depreciation charge for the year	xxxxx	xxxxx	xxxxx
Depreciation on disposal of asset	(xxxxx)	(xxxxx)	(xxxxx)
Total accumulated dep. at the end (D)	xxxx	xxxxx	xxxxx
Carrying Amount (Net Block)
Carrying amount in the beginning [(A)-(C)]	xxxxx	xxxxx	xxxxx
Carrying amount at the end [(B)-(D)]	xxxxx	xxxxx	xxxxx

K. Intangible Assets

(i) Classification shall be given as : 

(a) Goodwill 

(b) Brands/trademarks

(c) Computer software

(d) Mastheads and publishing titles

(e) Mining rights

(f) Copyrights, and patents and other intellectual property rights, services and operating rights

(g) Recipes, formulae, models, designs and prototypes

(h) Licenses and franchise

(i) Others (specify nature).

(ii) A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and at the end of the reporting period showing additions, disposals, acquisitions through business combinations and other adjustments and the related amortization and impairment losses/reversals shall be disclosed separately.

(iii) Where sums have been written off on a reduction of capital or revaluation of assets or where sums have been added on revaluation of assets, every Balance Sheet subsequent to date of such write-off, or addition shall show the reduced or increased figures as applicable and shall by way of a note also show the amount of the reduction or increase as applicable together with the date thereof for the first five years subsequent to the date of such reduction or increase.

Note No. …… Intangible Assets

(in rupees)

Particulars	Goodwill	Computer software
Gross Carrying Amount
Original Cost in the beginning (A)	xxxxx	xxxxx
Purchase	xxxxx	xxxxx
Disposals	(xxxx)	(xxxxx)
Original cost at the end (B)	xxxxx	xxxxx
Amortisation
Total amortisation in the beginning (C)	xxxxx	xxxxx
Amortisation for the current year	xxxxx	xxxxx
Amortisation on disposal	(xxxxx)	(xxxxx)
Total amortisation as at the end (D)	xxxxx	xxxxx
Net Carrying Amount
Net carrying amount in the beginning [(A) – (C)]	xxxxx	xxxxx
Net carrying amount at the end [(B) – (D)]	xxxxx	xxxxx

L. Non-current Investments

(i) Non-current investments shall be classified as trade investments and other investments and further classified as :

(a) Investment in property

(b) Investments in Equity Instruments

(c) Investments in preference shares

(d) Investments in Government or trust securities

(e) Investments in debentures or bonds

(f) Investments in Mutual Funds

(g) Investments in partnership firms

(h) Other non-current investments (specify nature)

Under each classification, details shall be given of names of the bodies corporate (indicating separately whether such bodies are (i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled special purpose entities in whom investments have been made and the nature and extent of the investments so made in each such body corporate (showing separately investments which are partly-paid). In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each partner) shall be given.

(ii) Investments carried at other than at cost should be separately stated specifying the basis for valuation thereof.

(iii) The following shall also be disclosed :

(a) Aggregate amount of quoted investments and market value thereof;

(b) Aggregate amount of unquoted investments;

(c) Aggregate provision for diminution in value of investments.

 

M. Long-term Loans and Advances

(i) Long-term loans and advances shall be classified as :

(a) Capital Advances;

(b) Security Deposits;

(c) Loans and advances to related parties (giving details thereof);

(d) Other loans and advances (specify nature).

(ii) The above shall also be separately sub-classified as :

(a) Secured, considered good;

(b) Unsecured, considered good;

(c) Doubtful.

(iii) Allowance for bad and doubtful loans and advances shall be disclosed under the relevant heads separately.

(iv) Loans and advances due by directors or other officers of the company or any of them either severally or jointly with any other persons or amounts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated.

N. Other Non-current Assets

Other non-current assets shall be classified as :

(i) Long-term Trade Receivables (including trade receivables on deferred credit terms);

(ia) Security Deposits.

(ii) Others (specify nature).

(iii) Long-term Trade Receivables, shall be sub-classified as:

(A) Secured, considered good;

(B) Unsecured considered good;

(C) Doubtful.

Allowance for bad and doubtful debts shall be disclosed under the relevant heads separately.

Debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or a director or a member should be separately stated.

(iv) For trade receivables outstanding, following ageing schedule shall be given:

Trade Receivables Ageing Schedule

(Amount in `)

Particulars	Outstanding for the following periods from the due date of payment
	Less than 6 months	6 months to 1 year	1 to 2 years	2 to 3 years	More than 3 years	Total
(i) Undisputed Trade Receivables: Considered Good
(ii) Undisputed Trade Receivables: Considered Doubtful
(iii) Disputed Trade Receivables: Considered Good
(iv) Disputed Trade Receivables: considered Doubtful

Similar information shall be given where no due date of payment is specified, in that case, disclosure shall be from the date of transaction.

Unbilled dues shall be disclosed Separately.

O. Current Investments

(i) Current investments shall be classified as : 

(a) Investments in Equity Instruments; 

(b) Investment in Preference Shares;

(c) Investments in Government or trust securities;

(d) Investments in debentures or bonds;

(e) Investments in Mutual Funds;

(f) Investments in partnership firms; 

(g) Other investments (specify nature).

Under each classification, details shall be given of names of the bodies corporate (indicating separately whether such bodies are : (i) subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled special purpose entities) in whom investments have been made and the nature and extent of the investment so made in each such body corporate (showing separately investments which are partly-paid). In regard to investments in the capital of partnership firms, the names of the firms (with the names of all their partners, total capital and the shares of each partner) shall be given.

(ii) The following shall also be disclosed :

(a) The basis of valuation of individual investments;

(b) Aggregate amount of quoted investments and market value thereof;

(c) Aggregate amount of unquoted investments;

(d) Aggregate provision made for diminution in value of investments. 

P. Inventories

(i) Inventories shall be classified as : 

(a) Raw materials; 

(b) Work-in-progress;

(c) Finished goods;

(d) Stock-in-trade (in respect of goods acquired for trading);

(e) Stores and spares;

(f) Loose tools;

(g) Others (specify nature).

_____________________

*Substituted by G.S.R. 1022(E), dated 11th October, 2018 for “Fixed Assets” (w.e.f 11-10-2018).

*The word “Reserve” omitted by GSR 1022(E), dated 11th October, 2018 (w.e.f. 11-10-2018)

*Inserted by G.S.R. 679(E), dated 4th September, 2015.