Financial Statements of a Company

Given: 47 items to be classified under Major Heads and Sub-heads as per Schedule III of the Companies Act, 2013.

Classification Table:

| S. No. | Item | Major Head | Sub-head (if any) |
|---|---|---|---|
| 1 | Goodwill | Non-Current Assets | Fixed Assets – Intangible Assets |
| 2 | Forfeited shares | Shareholders' Funds | Share Capital (shown as addition) |
| 3 | Acceptances | Current Liabilities | Trade Payables |
| 4 | Preliminary expenses | Non-Current Assets | Other Non-Current Assets (to be written off) |
| 5 | Capital reserve | Shareholders' Funds | Reserves and Surplus |
| 6 | Loans from banks | Non-Current Liabilities (if long-term) / Current Liabilities (if short-term) | Long-Term Borrowings / Short-Term Borrowings |
| 7 | Investment in shares and debentures | Non-Current Assets | Non-Current Investments |
| 8 | Interest accrued and due on debentures | Current Liabilities | Other Current Liabilities |
| 9 | Interest accrued but not due on Secured Loans | Current Liabilities | Other Current Liabilities |
| 10 | Interest accrued but not due on Unsecured Loans | Current Liabilities | Other Current Liabilities |
| 11 | Interest accrued on Investments | Current Assets | Other Current Assets |
| 12 | Surplus | Shareholders' Funds | Reserves and Surplus |
| 13 | Securities Premium Reserve | Shareholders' Funds | Reserves and Surplus |
| 14 | Loose Tools | Current Assets | Inventories |
| 15 | Provision for Taxation | Current Liabilities | Short-Term Provisions |
| 16 | Underwriting Commission | Non-Current Assets | Other Non-Current Assets (fictitious asset, to be written off) |
| 17 | Bills of Exchange | Current Assets | Trade Receivables |
| 18 | Unclaimed dividend | Current Liabilities | Other Current Liabilities |
| 19 | Short-term loans & advances | Current Assets | Short-Term Loans and Advances |
| 20 | Live stock | Non-Current Assets | Fixed Assets – Tangible Assets |
| 21 | Calls unpaid / Calls in arrears | Shareholders' Funds | Share Capital (shown as deduction from subscribed capital) |
| 22 | Uncalled liability on shares partly paid | Contingent Liabilities | Notes to Accounts (Contingent Liabilities) |
| 23 | Pre-paid Insurance | Current Assets | Other Current Assets |
| 24 | Stores and spare parts | Current Assets | Inventories |
| 25 | Advances from customers | Current Liabilities | Other Current Liabilities |
| 26 | Debentures Redemption Reserve | Shareholders' Funds | Reserves and Surplus |
| 27 | Premium on redemption of debentures | Non-Current Liabilities | Other Long-Term Liabilities |
| 28 | Loss on issue of debentures | Non-Current Assets | Other Non-Current Assets (to be written off) |
| 29 | Debentures Redemption Fund | Shareholders' Funds | Reserves and Surplus |
| 30 | Debentures Redemption Fund Investment | Non-Current Assets | Non-Current Investments |
| 31 | Vehicles | Non-Current Assets | Fixed Assets – Tangible Assets |
| 32 | Advances to suppliers | Current Assets | Short-Term Loans and Advances |
| 33 | Patents, trademarks, design | Non-Current Assets | Fixed Assets – Intangible Assets |
| 34 | Calls in advance | Current Liabilities | Other Current Liabilities |
| 35 | Deposits with custom authorities | Non-Current Assets | Long-Term Loans and Advances |
| 36 | Arrears of fixed cumulative dividend | Contingent Liabilities | Notes to Accounts (Contingent Liabilities) |
| 37 | Furniture and fittings | Non-Current Assets | Fixed Assets – Tangible Assets |
| 38 | Brokerage on issue of shares | Non-Current Assets | Other Non-Current Assets (to be written off) |
| 39 | Statement of Profit & Loss (Dr.) | Shareholders' Funds | Reserves and Surplus (shown as negative/debit balance) |
| 40 | Capital work-in-progress | Non-Current Assets | Fixed Assets – Capital Work-in-Progress |
| 41 | Provision for doubtful debts | Current Assets | Trade Receivables (shown as deduction) |
| 42 | Statement of Profit & Loss (Cr.) | Shareholders' Funds | Reserves and Surplus |
| 43 | Uncalled liability on partly paid shares held as investments | Contingent Liabilities | Notes to Accounts (Contingent Liabilities) |
| 44 | Claims against the company not acknowledged as debt | Contingent Liabilities | Notes to Accounts (Contingent Liabilities) |
| 45 | Capital Redemption Reserve | Shareholders' Funds | Reserves and Surplus |
| 46 | Public deposits | Non-Current Liabilities | Long-Term Borrowings |
| 47 | Authorised Capital | Shareholders' Funds | Share Capital (disclosed in Notes to Accounts) |

Meaning of Financial Statements:

Financial statements are the end products of the accounting process. They are formal records that summarise the financial activities and position of a business, person, or other entity.

For a company, financial statements consist of:
1. Statement of Profit and Loss – shows revenues earned and expenses incurred during a specific accounting period, thereby revealing the net profit or net loss.
2. Balance Sheet – shows the financial position of the company on a particular date by listing all assets, liabilities, and shareholders' funds.

These statements are prepared at the end of each accounting period and are published for the benefit of various stakeholders such as shareholders, creditors, investors, government, etc.

In short: Financial statements are structured financial reports that present the financial performance and financial position of an enterprise.

Limitations of Financial Statements:

1. Historical Information: Financial statements are based on historical cost and past data. They do not reflect the current market value of assets and liabilities, making them less useful for future decision-making.

2. Ignores Price Level Changes: Financial statements are prepared on the basis of historical cost and do not account for changes in the price level (inflation/deflation). Hence, comparison over different periods may be misleading.

3. Bias: These statements are the outcome of recorded facts, accounting concepts, conventions, and personal judgements. Hence, bias may be observed, and the financial position depicted may not be fully realistic.

4. Aggregate Information: Financial statements show aggregate (summarised) information and not detailed information, which may not help users in specific decision-making.

5. Vital Information Missing: The balance sheet does not disclose information relating to loss of markets, cessation of agreements, etc., which have a vital bearing on the enterprise.

6. No Qualitative Information: Financial statements contain only monetary information but not qualitative information like industrial relations, labour relations, quality of work, employee satisfaction, etc.

7. Only Interim Reports: The Statement of Profit and Loss discloses profit/loss for a specified period but does not give an idea about earning capacity over time. Similarly, the balance sheet reflects the financial position only at a specific point of time.

Three Objectives of Financial Statements:

1. To provide information about financial performance: Financial statements provide information about the revenues earned and expenses incurred during an accounting period, thereby showing the net profit or loss of the enterprise.

2. To provide information about financial position: The balance sheet shows the assets owned, liabilities owed, and the owners' equity on a particular date, helping stakeholders assess the financial strength of the company.

3. To assist in decision-making: Financial statements provide relevant and reliable financial data to various users — management, investors, creditors, government — to help them make informed economic decisions.

Importance of Financial Statements:

(i) Shareholders:
Shareholders are the owners of the company. Financial statements help them to:
- Assess the profitability and financial health of the company.
- Evaluate the return on their investment (dividend declared).
- Make decisions about buying, holding, or selling shares.

(ii) Creditors:
Creditors (suppliers, banks, debenture holders) use financial statements to:
- Assess the liquidity and solvency of the company.
- Determine whether the company can repay its debts on time.
- Decide whether to extend further credit or loans.

(iii) Government:
The government uses financial statements to:
- Assess the taxable income of the company and levy taxes.
- Regulate business activities and ensure compliance with laws.
- Formulate economic policies based on the financial data of industries.

(iv) Investors:
Prospective investors use financial statements to:
- Evaluate the profitability and growth prospects of the company.
- Compare the performance of different companies before investing.
- Assess the risk involved in investing in the company.

Disclosure of items in the Balance Sheet as per Schedule III:

(i) Current Assets – Inventory:
Shown under Current Assets on the Assets side of the Balance Sheet under the sub-head Inventories.
It includes: Raw materials, Work-in-progress, Finished goods, Stock-in-trade, Stores and spare parts, Loose tools, etc.

(ii) Contingent Liabilities in Notes to Accounts:
Contingent liabilities are not shown in the Balance Sheet itself. They are disclosed in the Notes to Accounts as a footnote. Examples: Claims against the company not acknowledged as debts, arrears of cumulative dividend, uncalled liability on partly paid shares.

(iii) Shareholders' Funds – Reserves and Surplus:
Shown under Shareholders' Funds on the Equity and Liabilities side. It includes:
- Capital Reserve
- Securities Premium Reserve
- General Reserve
- Debenture Redemption Reserve
- Capital Redemption Reserve
- Surplus (Credit balance of Statement of Profit & Loss)
- A debit balance of Statement of Profit & Loss is shown as a negative figure.

(iv) Fixed Assets – Intangible Assets:
Shown under Non-Current Assets → Fixed Assets → Intangible Assets.
Examples: Goodwill, Patents, Trademarks, Copyrights, Franchises, Computer software.

(v) Proposed Dividend for the current year:
As per the revised Schedule III and AS-4, proposed dividend (declared after the balance sheet date) is not recognised as a liability in the balance sheet. It is disclosed in the Notes to Accounts as a contingent liability or as a subsequent event.

(vi) Non-Current Liabilities:
Shown on the Equity and Liabilities side of the Balance Sheet under the head Non-Current Liabilities. Sub-heads include:
- Long-Term Borrowings (Debentures, Bank Loans repayable after 12 months)
- Deferred Tax Liabilities (Net)
- Other Long-Term Liabilities
- Long-Term Provisions

(vii) Arrears of Dividend on Cumulative Preference Shares:
This is a contingent liability and is not shown in the Balance Sheet. It is disclosed in the Notes to Accounts under Contingent Liabilities.

Nature of Financial Statements:

Financial statements are the end products of the accounting process. Their nature can be understood from the following points:

1. Recorded Facts: Financial statements are based on facts recorded in the books of accounts. Only transactions that have been recorded are reflected in these statements. They are based on actual historical cost.

2. Accounting Concepts and Conventions: Financial statements are prepared following generally accepted accounting principles (GAAP), concepts (going concern, accrual, consistency) and conventions (conservatism, materiality, full disclosure). These concepts and conventions influence the figures shown.

3. Personal Judgements: In many situations, accountants have to use personal judgement — for example, in estimating the useful life of an asset for depreciation, provision for doubtful debts, valuation of inventory, etc. Hence, personal bias can affect the statements.

4. Historical in Nature: Financial statements reflect past transactions and events. They are prepared at the end of an accounting period and show what has already happened.

5. Monetary Measurement: Only those transactions and events that can be expressed in monetary terms are recorded. Non-monetary aspects like employee morale, brand reputation, etc., are not reflected.

6. Interim Reports: Financial statements are prepared for a specific period (usually one year). They are interim reports and do not give a complete picture of the long-term earning capacity of the enterprise.

7. Combination of Art and Science: Preparation of financial statements involves both the application of accounting rules (science) and the exercise of judgement (art).

Significance of Financial Statements:

Financial statements are significant to various users for the following reasons:

1. To Management: Financial statements help management in planning, controlling, and decision-making. They provide data about profitability, liquidity, and solvency, which are essential for efficient management of the business.

2. To Shareholders/Owners: Shareholders use financial statements to assess the return on their investment, evaluate the performance of management, and decide whether to continue holding or sell their shares.

3. To Investors (Prospective): Potential investors use financial statements to evaluate the financial health, profitability, and growth prospects of the company before making investment decisions.

4. To Creditors and Lenders: Banks, financial institutions, and trade creditors use financial statements to assess the creditworthiness and repayment capacity of the company before granting loans or credit.

5. To Government and Tax Authorities: The government uses financial statements to assess taxable income, levy taxes, and regulate business activities. They also help in formulating economic policies.

6. To Employees: Employees use financial statements to assess the financial stability and profitability of the company, which affects their job security, wages, and bonus.

7. To Customers: Customers, especially those with long-term contracts, are interested in the financial stability of the company to ensure continuity of supply.

8. To Researchers and Analysts: Financial analysts and researchers use financial statements to study trends, compare companies, and provide recommendations.

9. Basis for Comparison: Financial statements of different years or different companies can be compared to assess relative performance and progress.

Conclusion: Financial statements serve as a mirror of the financial health of a company and are indispensable tools for all stakeholders.

Limitations of Financial Statements:

1. Based on Historical Cost: Financial statements are prepared on the basis of historical cost (original cost). They do not reflect the current market value or replacement cost of assets, making them less relevant for current decision-making.

2. Ignores Price Level Changes: Financial statements do not account for changes in the purchasing power of money due to inflation or deflation. As a result, comparison of financial statements over different periods may be misleading.

3. Bias: Financial statements are the outcome of recorded facts, accounting concepts, conventions, and personal judgements. Different accountants may use different methods (e.g., FIFO vs. LIFO for inventory, different depreciation methods), leading to bias and lack of comparability.

4. Aggregate Information: Financial statements present summarised/aggregate information. They do not provide detailed information about individual transactions, products, or departments, which limits their usefulness for specific decisions.

5. Vital Information Missing: The balance sheet does not disclose information about loss of markets, cessation of agreements, or other qualitative factors that have a vital bearing on the enterprise's future.

6. No Qualitative Information: Financial statements contain only monetary information. They do not reflect qualitative aspects like employee morale, industrial relations, quality of management, customer satisfaction, brand value, etc.

7. Only Interim Reports: The Statement of Profit and Loss shows profit/loss for a specific period but does not indicate the long-term earning capacity. The balance sheet reflects the financial position only at a specific point in time.

8. Window Dressing: Management may manipulate financial statements to present a more favourable picture than the actual situation (window dressing), misleading users.

9. Not Free from Errors: Financial statements may contain errors due to wrong recording, omissions, or incorrect application of accounting principles.

Conclusion: Despite these limitations, financial statements remain the most important source of financial information and should be carefully analysed before use in decision-making.

Format of Statement of Profit and Loss (as per Schedule III, Companies Act 2013):

$$\textbf{Statement of Profit and Loss for the year ended 31st March, 20XX}$$

| Particulars | Note No. | Current Year (Rs.) | Previous Year (Rs.) |
|---|---|---|---|
| I. Revenue from Operations | | | |
| II. Other Income | | | |
| III. Total Revenue (I + II) | | | |
| IV. Expenses: | | | |
| Cost of Materials Consumed | | | |
| Purchases of Stock-in-Trade | | | |
| Changes in Inventories of Finished Goods, WIP and Stock-in-Trade | | | |
| Employee Benefits Expense | | | |
| Finance Costs | | | |
| Depreciation and Amortisation Expense | | | |
| Other Expenses | | | |
| Total Expenses | | | |
| V. Profit Before Tax (III – IV) | | | |

Explanation of Items up to Profit Before Tax:

1. Revenue from Operations: This is the primary revenue earned from the main business activities of the company. For a manufacturing/trading company, it includes:
- Net Sales (Sales – Sales Returns)
- Revenue from services rendered
- Other operating revenues (scrap sales, commission, etc.)

2. Other Income: Income earned from activities other than the main business operations:
- Interest income, Dividend income, Profit on sale of assets, Rent received, etc.

3. Total Revenue = Revenue from Operations + Other Income

4. Cost of Materials Consumed:
$$\text{Opening Stock of Raw Material} + \text{Purchases} - \text{Closing Stock of Raw Material}$$
This represents the cost of raw materials actually used in production.

5. Purchases of Stock-in-Trade: Cost of goods purchased for resale (in case of trading companies).

6. Changes in Inventories:
$$\text{Opening Stock (FG + WIP + Stock-in-Trade)} - \text{Closing Stock (FG + WIP + Stock-in-Trade)}$$
A positive figure means stock has decreased (added to cost); a negative figure means stock has increased (deducted from cost).

7. Employee Benefits Expense: Salaries and wages, provident fund contributions, gratuity, staff welfare expenses, etc.

8. Finance Costs: Interest on borrowings (debentures, bank loans), bank charges, etc.

9. Depreciation and Amortisation Expense: Depreciation on tangible fixed assets and amortisation of intangible assets.

10. Other Expenses: All other expenses not covered above — rent, repairs, advertising, selling expenses, administrative expenses, etc.

11. Profit Before Tax = Total Revenue – Total Expenses

Format of Balance Sheet (as per Schedule III, Companies Act 2013):

$$\textbf{Balance Sheet of .............. Ltd. as at 31st March, 20XX}$$

| Particulars | Note No. | Current Year (Rs.) | Previous Year (Rs.) |
|---|---|---|---|
| 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 | | | |

Explanation of Elements:

EQUITY AND LIABILITIES SIDE:

1. Share Capital: The amount of capital raised by issuing shares — Equity Share Capital and Preference Share Capital. Details of authorised, issued, subscribed, called-up, and paid-up capital are given in Notes to Accounts.

2. Reserves and Surplus: Accumulated profits and reserves — Capital Reserve, Securities Premium, General Reserve, Debenture Redemption Reserve, Surplus (Profit & Loss balance). A debit balance is shown as a negative figure.

3. Long-Term Borrowings: Loans and borrowings repayable after 12 months — Debentures, Term Loans from banks, Public Deposits.

4. Other Long-Term Liabilities: Liabilities not classified elsewhere — Premium on Redemption of Debentures, etc.

5. Long-Term Provisions: Provisions for liabilities payable after 12 months — Provision for employee benefits (gratuity, leave encashment).

6. Short-Term Borrowings: Loans repayable within 12 months — Cash credit, overdraft, short-term loans.

7. Trade Payables: Amounts owed to suppliers for goods/services — Creditors, Bills Payable.

8. Other Current Liabilities: Current liabilities not covered above — Outstanding expenses, Advance from customers, Unclaimed dividend, Interest accrued and due.

9. Short-Term Provisions: Provisions for liabilities payable within 12 months — Provision for tax, Proposed dividend.

ASSETS SIDE:

10. Tangible Fixed Assets: Physical assets with long life — Land, Building, Plant & Machinery, Furniture, Vehicles. Shown at cost less accumulated depreciation.

11. Intangible Fixed Assets: Non-physical assets — Goodwill, Patents, Trademarks, Computer Software.

12. Non-Current Investments: Long-term investments in shares, debentures, government securities.

13. Long-Term Loans and Advances: Loans given and advances recoverable after 12 months — Security deposits, Capital advances.

14. Inventories: Stock of Raw Materials, WIP, Finished Goods, Stores & Spares, Loose Tools.

15. Trade Receivables: Amounts due from customers — Debtors and Bills Receivable (net of provision for doubtful debts).

16. Cash and Cash Equivalents: Cash in hand, Cash at bank, Short-term highly liquid investments.

Usefulness of Financial Statements to Various Parties:

1. Management:
- Helps in planning, budgeting, and controlling operations.
- Provides data for evaluating performance and taking corrective action.
- Assists in formulating policies and strategies.

2. Shareholders (Existing):
- Helps assess the profitability and financial health of the company.
- Enables evaluation of management's performance.
- Helps decide whether to hold, buy more, or sell shares.
- Shows the dividend declared and retained earnings.

3. Prospective Investors:
- Helps evaluate the risk and return before investing.
- Enables comparison of different companies.
- Provides information about growth prospects.

4. Creditors and Suppliers:
- Helps assess the short-term liquidity (ability to pay current dues).
- Enables decision on whether to extend credit and on what terms.

5. Lenders (Banks and Financial Institutions):
- Helps assess the long-term solvency and repayment capacity.
- Enables decision on granting loans and fixing interest rates.

6. Government and Tax Authorities:
- Used to assess taxable income and levy taxes.
- Helps in regulating business and formulating economic policies.
- Ensures compliance with the Companies Act and other laws.

7. Employees:
- Helps assess job security and financial stability of the employer.
- Provides basis for wage negotiations and bonus claims.

8. Customers:
- Helps assess the continuity and stability of the company.
- Important for customers who have long-term contracts or depend on the company for supplies.

9. Researchers and Financial Analysts:
- Used for academic research, industry analysis, and investment recommendations.

Conclusion: Financial statements serve as a common language of business and are indispensable for all parties connected with the enterprise.

Financial Statements: A Combination of Recorded Facts, Accounting Conventions and Personal Judgements

This statement is absolutely correct. Financial statements are not purely objective documents; they are influenced by three major factors:

1. Recorded Facts:
Financial statements are primarily based on facts that have been recorded in the books of accounts. These include actual transactions like purchases, sales, receipts, payments, etc. Only those events that have actually taken place and have been recorded are reflected in the financial statements. For example, the cash balance shown in the balance sheet is based on actual cash transactions recorded.

2. Accounting Conventions:
Financial statements are prepared following generally accepted accounting principles, concepts, and conventions:
- Going Concern Concept: Assets are valued assuming the business will continue.
- Conservatism Convention: Losses are anticipated but profits are not, leading to lower valuation of assets (e.g., stock valued at cost or market price, whichever is lower).
- Consistency Convention: Same methods are used year after year for comparability.
- Matching Concept: Revenues are matched with related expenses.
- Historical Cost Convention: Assets are recorded at original cost, not current market value.

These conventions affect the figures shown in financial statements and may not always reflect economic reality.

3. Personal Judgements:
In many situations, accountants have to exercise personal judgement:
- Estimating the useful life of fixed assets for calculating depreciation.
- Deciding the rate of provision for doubtful debts.
- Choosing the method of inventory valuation (FIFO, Weighted Average).
- Deciding whether an expenditure is capital or revenue in nature.
- Estimating contingent liabilities.

Different accountants may make different judgements in the same situation, leading to different figures in financial statements.

Conclusion:
Since financial statements are a combination of all three — recorded facts, accounting conventions, and personal judgements — they cannot be considered as perfectly objective or accurate. Users must understand these limitations and analyse financial statements carefully before making decisions.

Process of Preparing Income Statement (Statement of Profit and Loss) and Balance Sheet:

A. Process of Preparing Statement of Profit and Loss:

The Statement of Profit and Loss is prepared to determine the net profit or net loss of the company for a specific accounting period.

Steps:

Step 1 – Determine Revenue from Operations:
Calculate net sales (Sales – Returns) and other operating revenues.

Step 2 – Add Other Income:
Add income from non-operating sources like interest received, dividend received, profit on sale of assets.

Step 3 – Calculate Total Revenue:
$$\text{Total Revenue} = \text{Revenue from Operations} + \text{Other Income}$$

Step 4 – Calculate Total Expenses:
List all expenses:
- Cost of Materials Consumed = Opening Stock of RM + Purchases – Closing Stock of RM
- Purchases of Stock-in-Trade
- Changes in Inventories
- Employee Benefits Expense
- Finance Costs
- Depreciation and Amortisation
- Other Expenses

Step 5 – Calculate Profit Before Tax:
$$\text{Profit Before Tax} = \text{Total Revenue} - \text{Total Expenses}$$

Step 6 – Deduct Tax:
$$\text{Profit After Tax} = \text{Profit Before Tax} - \text{Tax Expense}$$

Step 7 – Transfer to Balance Sheet:
The net profit (after tax) is transferred to Reserves and Surplus in the Balance Sheet.

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B. Process of Preparing Balance Sheet:

The Balance Sheet is prepared to show the financial position of the company on a specific date.

Steps:

Step 1 – List Shareholders' Funds:
- Share Capital (Equity + Preference)
- Reserves and Surplus (including current year's profit transferred from P&L)

Step 2 – List Non-Current Liabilities:
- Long-Term Borrowings
- Other Long-Term Liabilities
- Long-Term Provisions

Step 3 – List Current Liabilities:
- Short-Term Borrowings
- Trade Payables
- Other Current Liabilities
- Short-Term Provisions

Step 4 – Calculate Total of Equity and Liabilities.

Step 5 – List Non-Current Assets:
- Fixed Assets (Tangible, Intangible, Capital WIP)
- Non-Current Investments
- Long-Term Loans and Advances
- Other Non-Current Assets

Step 6 – List Current Assets:
- Inventories
- Trade Receivables
- Cash and Cash Equivalents
- Short-Term Loans and Advances
- Other Current Assets

Step 7 – Calculate Total of Assets.

Step 8 – Verify:
$$\text{Total of Equity and Liabilities} = \text{Total of Assets}$$

If both sides are equal, the balance sheet is correctly prepared.

Step 9 – Prepare Notes to Accounts for all items requiring detailed disclosure.

Given items and their classification:

| Item | Amount (Rs.) | Head | Sub-head |
|---|---|---|---|
| Goodwill | 30,000 | Non-Current Assets | Fixed Assets – Intangible Assets |
| Motor Vehicles | 4,75,000 | Non-Current Assets | Fixed Assets – Tangible Assets |
| Preliminary Expenses | 2,40,000 | Non-Current Assets | Other Non-Current Assets |
| Discount on issue of shares | 20,000 | Non-Current Assets | Other Non-Current Assets |
| 10% Debentures | 2,00,000 | Non-Current Liabilities | Long-Term Borrowings |
| Stock in trade | 1,40,000 | Current Assets | Inventories |
| Loose tools | 12,000 | Current Assets | Inventories |
| Bills receivable | 1,20,000 | Current Assets | Trade Receivables |
| Cash at bank | 1,35,000 | Current Assets | Cash and Cash Equivalents |
| Provision for tax | 16,000 | Current Liabilities | Short-Term Provisions |

Balance Sheet (Partial) as per Schedule III:

$$\textbf{Balance Sheet as at ...}$$

| Particulars | Note No. | Amount (Rs.) |
|---|---|---|
| I. EQUITY AND LIABILITIES | | |
| Non-Current Liabilities | | |
| Long-Term Borrowings | 1 | 2,00,000 |
| Current Liabilities | | |
| Short-Term Provisions | 2 | 16,000 |
| Total Liabilities | | 2,16,000 |
| II. ASSETS | | |
| Non-Current Assets | | |
| Fixed Assets | | |
| Intangible Assets (Goodwill) | | 30,000 |
| Tangible Assets (Motor Vehicles) | | 4,75,000 |
| Other Non-Current Assets | 3 | 2,60,000 |
| Current Assets | | |
| Inventories | 4 | 1,52,000 |
| Trade Receivables (Bills Receivable) | | 1,20,000 |
| Cash and Cash Equivalents (Cash at Bank) | | 1,35,000 |
| Total Assets | | 11,72,000 |

Notes to Accounts:

| Note | Particulars | Amount (Rs.) |
|---|---|---|
| 1 | Long-Term Borrowings: 10% Debentures | 2,00,000 |
| 2 | Short-Term Provisions: Provision for Tax | 16,000 |
| 3 | Other Non-Current Assets: Preliminary Expenses: 2,40,000; Discount on Issue of Shares: 20,000 | 2,60,000 |
| 4 | Inventories: Stock-in-Trade: 1,40,000; Loose Tools: 12,000 | 1,52,000 |

*Note: The balance sheet is shown partially as only the given items are provided. The totals of Assets and Liabilities will balance only when all items (Share Capital, other assets/liabilities) are included.*

Given:
- Number of debentures issued = 10,000
- Face value = Rs. 100 each
- Discount = 20%
- Redeemable after 5 years
- Date of issue = April 1, 2017

Calculations:

Face value of debentures = $10,000 \times Rs. 100 = Rs. 10,00,000$

Discount on issue = $20\% \times Rs. 10,00,000 = Rs. 2,00,000$

Issue price = $Rs. 10,00,000 - Rs. 2,00,000 = Rs. 8,00,000$

Journal Entry at the time of issue:

| Particulars | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|
| Bank A/c Dr. | 8,00,000 | |
| Discount on Issue of Debentures A/c Dr. | 2,00,000 | |
| To 12% Debentures A/c | | 10,00,000 |

Balance Sheet of Jumbo Ltd. (Immediately after issue, i.e., on April 1, 2017)

| Particulars | Note No. | Amount (Rs.) |
|---|---|---|
| I. EQUITY AND LIABILITIES | | |
| Non-Current Liabilities | | |
| Long-Term Borrowings | 1 | 10,00,000 |
| Total | | 10,00,000 |
| II. ASSETS | | |
| Non-Current Assets | | |
| Other Non-Current Assets | 2 | 2,00,000 |
| Current Assets | | |
| Cash and Cash Equivalents (Bank) | | 8,00,000 |
| Total | | 10,00,000 |

Notes to Accounts:

| Note | Particulars | Amount (Rs.) |
|---|---|---|
| 1 | Long-Term Borrowings: 10,000; 12% Debentures of Rs. 100 each (redeemable after 5 years) | 10,00,000 |
| 2 | Other Non-Current Assets: Discount on Issue of Debentures (to be written off on 31.03.2018) | 2,00,000 |

*Note: The discount on issue of debentures (Rs. 2,00,000) is shown as an asset (Other Non-Current Assets) since it has not yet been written off. It will be written off on March 31, 2018.*

Step 1: Classify all items

| Item | Amount (Rs.) | Classification |
|---|---|---|
| Equity Share Capital | 20,00,000 | Shareholders' Funds – Share Capital |
| Preference Share Capital | 12,00,000 | Shareholders' Funds – Share Capital |
| Debenture Redemption Reserve | 6,00,000 | Shareholders' Funds – Reserves & Surplus |
| Public Deposits | 12,00,000 | Non-Current Liabilities – Long-Term Borrowings |
| Outstanding Expenses | 3,00,000 | Current Liabilities – Other Current Liabilities |
| Proposed Dividend | 5,00,000 | Current Liabilities – Short-Term Provisions |
| Short-term loan from Zaveri Ltd. | 4,00,000 | Current Liabilities – Short-Term Borrowings |
| Land and Building | 20,00,000 | Non-Current Assets – Fixed Assets (Tangible) |
| Plant and Machinery | 10,00,000 | Non-Current Assets – Fixed Assets (Tangible) |
| Current Investments | 8,00,000 | Current Assets – Current Investments |
| Inventories | 14,00,000 | Current Assets – Inventories |
| Cash Equivalent | 10,00,000 | Current Assets – Cash and Cash Equivalents |

Step 2: Verify Balance Sheet equation

Total Equity & Liabilities:
$$= 20,00,000 + 12,00,000 + 6,00,000 + 12,00,000 + 3,00,000 + 5,00,000 + 4,00,000$$
$$= Rs. 62,00,000$$

Total Assets:
$$= 20,00,000 + 10,00,000 + 8,00,000 + 14,00,000 + 10,00,000$$
$$= Rs. 62,00,000 \checkmark$$

Balance Sheet of Gitanjali Ltd. as at ...

| Particulars | Note No. | Amount (Rs.) |
|---|---|---|
| I. EQUITY AND LIABILITIES | | |
| 1. Shareholders' Funds | | |
| (a) Share Capital | 1 | 32,00,000 |
| (b) Reserves and Surplus | 2 | 6,00,000 |
| 2. Non-Current Liabilities | | |
| (a) Long-Term Borrowings | 3 | 12,00,000 |
| 3. Current Liabilities | | |
| (a) Short-Term Borrowings | 4 | 4,00,000 |
| (b) Other Current Liabilities | 5 | 3,00,000 |
| (c) Short-Term Provisions | 6 | 5,00,000 |
| Total | | 62,00,000 |
| II. ASSETS | | |
| 1. Non-Current Assets | | |
| Fixed Assets – Tangible Assets | 7 | 30,00,000 |
| 2. Current Assets | | |
| (a) Current Investments | | 8,00,000 |
| (b) Inventories | | 14,00,000 |
| (c) Cash and Cash Equivalents | | 10,00,000 |
| Total | | 62,00,000 |

Notes to Accounts:

| Note | Particulars | Amount (Rs.) |
|---|---|---|
| 1 | Share Capital: Equity Share Capital: 20,00,000; Preference Share Capital: 12,00,000 | 32,00,000 |
| 2 | Reserves and Surplus: Debenture Redemption Reserve | 6,00,000 |
| 3 | Long-Term Borrowings: Public Deposits | 12,00,000 |
| 4 | Short-Term Borrowings: Short-term loan from Zaveri Ltd. (Subsidiary of Twilight Ltd.) | 4,00,000 |
| 5 | Other Current Liabilities: Outstanding Expenses | 3,00,000 |
| 6 | Short-Term Provisions: Proposed Dividend | 5,00,000 |
| 7 | Tangible Fixed Assets: Land and Building: 20,00,000; Plant and Machinery: 10,00,000 | 30,00,000 |

Step 1: Classify all items

| Item | Amount (Rs.) | Classification |
|---|---|---|
| Equity Share Capital | 16,00,000 | Shareholders' Funds – Share Capital |
| 8% Preference Share Capital | 6,00,000 | Shareholders' Funds – Share Capital |
| General Reserves | 6,00,000 | Shareholders' Funds – Reserves & Surplus |
| 12% Debentures | 12,00,000 | Non-Current Liabilities – Long-Term Borrowings |
| Bills Payable | 1,50,000 | Current Liabilities – Trade Payables |
| Creditors | 2,00,000 | Current Liabilities – Trade Payables |
| Provision for Taxation | 2,50,000 | Current Liabilities – Short-Term Provisions |
| Land and Building | 16,00,000 | Non-Current Assets – Fixed Assets (Tangible) |
| Plant and Machinery | 8,00,000 | Non-Current Assets – Fixed Assets (Tangible) |
| Non-current Investments | 10,00,000 | Non-Current Assets – Non-Current Investments |
| Inventories | 7,00,000 | Current Assets – Inventories |
| Cash at Bank | 5,00,000 | Current Assets – Cash and Cash Equivalents |

Step 2: Verify

Total Equity & Liabilities:
$$= 16,00,000 + 6,00,000 + 6,00,000 + 12,00,000 + 1,50,000 + 2,00,000 + 2,50,000$$
$$= Rs. 46,00,000$$

Total Assets:
$$= 16,00,000 + 8,00,000 + 10,00,000 + 7,00,000 + 5,00,000$$
$$= Rs. 46,00,000 \checkmark$$

Balance Sheet of Jam Ltd. as at ...

| Particulars | Note No. | Amount (Rs.) |
|---|---|---|
| I. EQUITY AND LIABILITIES | | |
| 1. Shareholders' Funds | | |
| (a) Share Capital | 1 | 22,00,000 |
| (b) Reserves and Surplus | 2 | 6,00,000 |
| 2. Non-Current Liabilities | | |
| (a) Long-Term Borrowings | 3 | 12,00,000 |
| 3. Current Liabilities | | |
| (a) Trade Payables | 4 | 3,50,000 |
| (b) Short-Term Provisions | 5 | 2,50,000 |
| Total | | 46,00,000 |
| II. ASSETS | | |
| 1. Non-Current Assets | | |
| (a) Fixed Assets – Tangible Assets | 6 | 24,00,000 |
| (b) Non-Current Investments | | 10,00,000 |
| 2. Current Assets | | |
| (a) Inventories | | 7,00,000 |
| (b) Cash and Cash Equivalents | | 5,00,000 |
| Total | | 46,00,000 |

Notes to Accounts:

| Note | Particulars | Amount (Rs.) |
|---|---|---|
| 1 | Share Capital: Equity Share Capital: 16,00,000; 8% Preference Share Capital: 6,00,000 | 22,00,000 |
| 2 | Reserves and Surplus: General Reserves | 6,00,000 |
| 3 | Long-Term Borrowings: 12% Debentures | 12,00,000 |
| 4 | Trade Payables: Creditors: 2,00,000; Bills Payable: 1,50,000 | 3,50,000 |
| 5 | Short-Term Provisions: Provision for Taxation | 2,50,000 |
| 6 | Tangible Fixed Assets: Land and Building: 16,00,000; Plant and Machinery: 8,00,000 | 24,00,000 |

Step 1: Classify all items

| Item | Amount (Rs.) | Classification |
|---|---|---|
| Equity Share Capital (5,00,000 × Rs. 20) | 1,00,00,000 | Shareholders' Funds – Share Capital |
| Capital Redemption Reserve | 1,00,000 | Shareholders' Funds – Reserves & Surplus |
| Share Options Outstanding Account | 10,000 | Shareholders' Funds – Reserves & Surplus |
| Statement of P&L (Dr.) | (90,000) | Shareholders' Funds – Reserves & Surplus (negative) |
| 10% Debentures | 3,00,000 | Non-Current Liabilities – Long-Term Borrowings |
| Unpaid Dividends | 90,000 | Current Liabilities – Other Current Liabilities |
| Building | 10,00,000 | Non-Current Assets – Fixed Assets (Tangible) |
| Investments in shares of Metro Tyers Ltd. | 3,00,000 | Non-Current Assets – Non-Current Investments |
| Stores & Spares | 1,00,000 | Current Assets – Inventories |

Step 2: Calculate Equity Share Capital
$$5,00,000 \text{ shares} \times Rs. 20 = Rs. 1,00,00,000$$

Step 3: Verify Balance Sheet

Total Equity & Liabilities:
$$= 1,00,00,000 + 1,00,000 + 10,000 - 90,000 + 3,00,000 + 90,000$$
$$= Rs. 1,04,10,000$$

Total Assets:
$$= 10,00,000 + 3,00,000 + 1,00,000 = Rs. 14,00,000$$

*Note: The balance sheet does not balance with the given data. There appears to be a missing item (likely Cash/Bank balance). The balance sheet is prepared with the given items as follows:*

Balance Sheet of Jyoti Ltd. as at March 31, 2017

| Particulars | Note No. | Amount (Rs.) |
|---|---|---|
| I. EQUITY AND LIABILITIES | | |
| 1. Shareholders' Funds | | |
| (a) Share Capital | 1 | 1,00,00,000 |
| (b) Reserves and Surplus | 2 | 20,000 |
| 2. Non-Current Liabilities | | |
| (a) Long-Term Borrowings | 3 | 3,00,000 |
| 3. Current Liabilities | | |
| (a) Other Current Liabilities | 4 | 90,000 |
| Total | | 1,04,10,000 |
| II. ASSETS | | |
| 1. Non-Current Assets | | |
| (a) Fixed Assets – Tangible Assets (Building) | | 10,00,000 |
| (b) Non-Current Investments | 5 | 3,00,000 |
| 2. Current Assets | | |
| (a) Inventories (Stores & Spares) | | 1,00,000 |
| (b) Cash and Cash Equivalents (Balancing figure) | | 90,10,000 |
| Total | | 1,04,10,000 |

Notes to Accounts:

| Note | Particulars | Amount (Rs.) |
|---|---|---|
| 1 | Share Capital: 5,00,000 Equity Shares of Rs. 20 each, fully paid-up | 1,00,00,000 |
| 2 | Reserves and Surplus: Capital Redemption Reserve: 1,00,000; Share Options Outstanding Account: 10,000; Less: Statement of Profit & Loss (Dr. Balance): (90,000) | 20,000 |
| 3 | Long-Term Borrowings: 10% Debentures | 3,00,000 |
| 4 | Other Current Liabilities: Unpaid Dividends | 90,000 |
| 5 | Non-Current Investments: Investment in shares of Metro Tyers Ltd. | 3,00,000 |

Given:
- 25,000; 10% Debentures of Rs. 100 each
- Bank Loan of Rs. 10,00,000 (repayable after 5 years)
- Interest on debentures is yet to be paid (accrued and due)

Calculations:

Face value of debentures = $25,000 \times Rs. 100 = Rs. 25,00,000$

Interest on debentures (accrued and due) = $10\% \times Rs. 25,00,000 = Rs. 2,50,000$

*(Assuming interest is for one full year as no specific period is mentioned)*

Classification:
- 10% Debentures → Non-Current Liabilities → Long-Term Borrowings
- Bank Loan (repayable after 5 years) → Non-Current Liabilities → Long-Term Borrowings
- Interest accrued and due on debentures → Current Liabilities → Other Current Liabilities

Balance Sheet of Brinda Ltd. as at March 31, 2017 (Partial)

| Particulars | Note No. | Amount (Rs.) |
|---|---|---|
| I. EQUITY AND LIABILITIES | | |
| Non-Current Liabilities | | |
| Long-Term Borrowings | 1 | 35,00,000 |
| Current Liabilities | | |
| Other Current Liabilities | 2 | 2,50,000 |
| Total | | 37,50,000 |

Notes to Accounts:

| Note | Particulars | Amount (Rs.) |
|---|---|---|
| 1 | Long-Term Borrowings: 25,000; 10% Debentures of Rs. 100 each: 25,00,000; Bank Loan (repayable after 5 years): 10,00,000 | 35,00,000 |
| 2 | Other Current Liabilities: Interest accrued and due on 10% Debentures ($10\% \times 25,00,000$) | 2,50,000 |

*Note: The assets side is not shown as complete information is not provided. The balance sheet is shown partially with the given items only.*

Step 1: Classify all items

| Item | Amount (Rs.) | Classification |
|---|---|---|
| 6% Preference Share Capital | 5,000 | Shareholders' Funds – Share Capital |
| General Reserve | 3,000 | Shareholders' Funds – Reserves & Surplus |
| Balance in Statement of P&L | 1,200 | Shareholders' Funds – Reserves & Surplus |
| 10% Debentures | 3,000 | Non-Current Liabilities – Long-Term Borrowings |
| Current Liabilities | 2,500 | Current Liabilities |
| Gross Block | 9,000 | Non-Current Assets – Fixed Assets (Tangible) |
| Less: Depreciation | (700) | Deducted from Gross Block |
| Net Block | 8,300 | Non-Current Assets – Fixed Assets (Tangible) |
| Preliminary Expenses | 300 | Non-Current Assets – Other Non-Current Assets |
| Cash & Cash Equivalents | 6,100 | Current Assets – Cash and Cash Equivalents |

Step 2: Verify Balance Sheet

Total Equity & Liabilities:
$$= 5,000 + 3,000 + 1,200 + 3,000 + 2,500 = Rs. 14,700$$

Total Assets:
$$= 8,300 + 300 + 6,100 = Rs. 14,700 \checkmark$$

Balance Sheet of Black Swan Ltd. as at March 31, 2017

| Particulars | Note No. | Amount (Rs.) |
|---|---|---|
| I. EQUITY AND LIABILITIES | | |
| 1. Shareholders' Funds | | |
| (a) Share Capital | 1 | 5,000 |
| (b) Reserves and Surplus | 2 | 4,200 |
| 2. Non-Current Liabilities | | |
| (a) Long-Term Borrowings | 3 | 3,000 |
| 3. Current Liabilities | | 2,500 |
| Total | | 14,700 |
| II. ASSETS | | |
| 1. Non-Current Assets | | |
| (a) Fixed Assets – Tangible Assets | 4 | 8,300 |
| (b) Other Non-Current Assets | 5 | 300 |
| 2. Current Assets | | |
| (a) Cash and Cash Equivalents | | 6,100 |
| Total | | 14,700 |

Notes to Accounts:

| Note | Particulars | Amount (Rs.) |
|---|---|---|
| 1 | Share Capital: 6% Preference Share Capital | 5,000 |
| 2 | Reserves and Surplus: General Reserve: 3,000; Balance in Statement of Profit & Loss: 1,200 | 4,200 |
| 3 | Long-Term Borrowings: 10% Debentures | 3,000 |
| 4 | Tangible Fixed Assets: Gross Block: 9,000; Less: Accumulated Depreciation: (700); Net Block | 8,300 |
| 5 | Other Non-Current Assets: Preliminary Expenses (to be written off) | 300 |

Conclusion: The Balance Sheet of Black Swan Ltd. balances at Rs. 14,700 on both sides.