PART-B

CHAPTER 1

FINANCIAL STATEMENTS OF A COMPANY

Financial Statement
Financial Statements are the end products of accounting process for financial
position and the result of its business operations during an accounting
period.
As per Section 2(40) of the Companies Act, 2013 Financial Statements
includes :
1. Balance Sheet or Position Statement 2. Statement

of Profit and Loss or Income Statement

3. Notes to Accounts.
4. Cash Flow Statement.

S.No. Items Main Head Sub-head

1. Debentures Non-current Liabilities Long-term Borrowings
2. Public Deposits Non-current Liabilities Long-term Borrowings
3. Securities Premium Shareholders' Funds Reserves and Surplus
Reserve
4. Capital Reserve Shareholders' Funds Reserves and Surplus
5. Forfeited Shares Shareholders' Funds Subscribed Capital (Shown
Account by way of addition)
6. Interest Accrued and Current Liabilities Other Current Liabilities
due on
Debentures
7. Interest Accrued but Current Liabilities Other Current Liabilities
not due on Debentures
8. Bills Payable Current Liabilities Trade Payables
9. AdvancesReceived Current Liabilities Other Current Liabilities
from
Customers
10. Sundry Creditors Current Liabilities Trade Payables
11. Unclaimed Dividend Current Liabilities Other Current Liabilities
12. Calls-in-Arrears Shareholders' Funds Subscribed Capital (shown
by way of deduction)
13. Calls-in-Advance and Current Liabilities Other Current Liabilities
Interest

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14. Interest Accrued but Current Liabilities Other Current Liabilities
not due on Unsecured
Loans
15. Debentures Shareholders' Funds Reserves and Surplus
Redemption
Reserve
16. Capital Redemption Shareholders' Funds Reserves and Surplus
Reserve
17. Advancefrom Non-current Liabilities Other Long-term Liabilities
Customers
Loan-term)
18. Trade Payables Current Liabilities Trade Payables
19. provision for Tax Current Liabilities Short-term Provisions
20. surplus, Balance in Shareholders' Funds Reserves and Surplus (As
Statement and Loss negative amount)
(Dr.)
21. surplus, Balance in end Shareholders' Funds Reserves and Surplus
of
Profit and Los:
22. Mortgage Loan Non-current Liabilities Long-term Borrowings
23. Patents Non-current Assets Fixed Assets—Intangible
Assets
24. Investment Non-current Assets Non-current Investments
25. General Reserve Shareholders' Funds Reserves and Surplus
26. Bills Receivable Current Assets Trade Receivables
27. Borrowings Repayable Non-current Liabilities Long-term Borrowings
after
3yrs.
28. Loose Tools Current Assets Inventories
29. current Maturities of Current Liabilities Other Current Liabilities
Long-term

30. Premium on Redemption of Non-current Other Long-term Liabilities

Debentures Liabilities
31. Balances with Banks Current Assets Cash and Cash Equivalents
32. Tax Reserve Shareholders' Reserves and surplus
Funds
33. Stores and Spares Current Assets Inventories

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34. Mining Rights Non-current Assets Fixed Assets- Intangible
Assets
35. Encashment of Employees Non-current Long-term Provisions
Earned Leave Payable on Liabilities
Retirement
36. Subsidy Reserve Shareholders' Reserves and Surplus
Funds
37. Copyrights Non-current Assets Fixed Assets- Intangible
Assets
38. Accrued Incomes Current Assets Other Current Assets
39. Provision for Employees Non-Current Long-term Provisions
Benefits Liabilities
40. Unpaid/unclaimed Current Liabilities Other Current Liabilities
Dividend
41. Short-term Loans Current Liabilities Short-term Borrowings
42. Long-term Loans Non-Current Long-term Borrowings
Liabilities
43. Share Options Shareholders' Reserves and Surplus
Outstanding Funds
Account
44. Computers Non-current Assets Fixed Assets— Tangible
Assets
45. Goodwill Non-current Assets Fixed Assets— Intangible
Assets
46. Sundry Debtors Current Assets Trade Receivables
47 Long-term Investments Non current Assets Non-current Investment
48. Prepaid Insurance Current Assets Other Current / assets
49. Building Non-current Assets Fixed Assets— Tangible
Assets
50. General Reserve Shareholders' Reserves and Surplus
Funds
51. Bonds Non-current Long-term Borrowings
Liabilities
52. Loans repayable on Current Liabilities Short-term Borrowings
demand
53. Income received in Current Liabilities Other Current liabilities
advance
54. Office Equipment’s Non-current Assets Fixed Assets— Tangible
Assets

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55. Trademarks Non-current Assets Fixed Assets— Intangible
Assets
56. Advance Tax Current Assets Other Current issets
57. Bank Overdraft Current Liabilities Short-term Borrowings
58. Cheques/Drafts in Hand Current Assets Cash and Cash Equivalents
59. Stock-in-Trade Current Assets Inventories
60. Long-term Provisions Non-current Long-term Provisions
Liabilities
61. Stock of Finished Goods Current Assets Inventories
62. Computer software Non-current Assets Fixed Assets—Intangible
Assets
63. Work-in-Progress Non-current Assets Fixed Assets—Capital Work-
(Building) in Progress
64. Intellectual Property Rights Non-current Assets Fixed Assets—In angible
under Assets under Development
Development
65. Provision for Expenses Current Liabilities Short-term Provisions
66. Capital Advances Non-current Assets Long-term Loans and
Advance
67. Designs Non-current Assets Fixed Assets—Intangible
Assets
68. Shares in Companies Non-current Assets Non-current Investments

Illustration 1: Under which majors head and sub-head of the following items will be
placed in the Balance Sheet of a Company as per Schedule-III, Part I of the Companies
Act, 2013 :
(i) Accrued Incomes
(ii) Loose Tools
(iii) Provision for employee’s benefits
(iv) Unpaid dividend
(v) Short-term loans
(vi) Long-term loans Solution:
Item Sub-heading

Accrued Incomes Other Current Assets

Loose tools Inventories

Provision for Employees benefits Long-term provisions

Unpaid Dividends Other Current Liabilities

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 Short-term loans Short-term borrowings/Short-term
loans and advances

Long-term loans Long-term borrowings/Long-term

loans and advances

Illustration 2: List the items which are shown under the heading,
‘Current Assets’ in the Balance Sheet of a company as per provisions of Schedule
III,of the Companies Act, 2013.
Solution:
(a) Current Investments
(b) Inventories
(c) Trade Receivables
(d) Cash and cash equivalents
(e) Short-term loans and advances
(f) Other Current Assets
Illustration 3: Name the major headings under which the Equity and Liabilities side of
a company’s Balance Sheet is organised and presented.
Solution:
The major headings on the Equity and Liabilities side are:
I. Shareholder’s funds
II. Share Application money pending allotment
III. Non-Current Liabilities
IV. Current Liabilities
Illustration 4: List the items that are included under Inventories.
Solution:
(i) Raw materials
(ii) Work-in-progress
(iii) Finished goods
(iv) Stock-in-trade
(v) Stores and spares
(vi) Loose tools
Illustration 5: Name any three items that are shown under the head “Other Current
Liabilities” and any three items that are shown under the head “Other Current Assets”
in the Balance Sheet of a company as per Schedule III of the Companies
Act, 2013.
Solution:
Other Current Liabilities:
(a) Unpaid Dividend
(b) Interest accrued and due on borrowings
(c) Calls in advance
(d) Outstanding expenses etc.
Other Current Assets:
a) Prepaid expenses
b) Accrued Incomes
c) Advance Tax

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Illustration 6: Time Ltd. is in the process of preparing its Financial statements as per
schedule III, Part I and Part II of the companies Act, 2013 and provides its true and fair view
of the financial statements.
a) Under which head and sub-head will the companies show ‘stores and spares’
in its Balance Sheet?
b) What is the accounting treatment of ‘Stares and spares’ when the company will
calculate its Inventory Turnover Ratio?
c) The management of time Ltd. wants to analyses it financial statements.
State any two objectives of such analysis.
d) Identify the values being followed by time Ltd.
Sol. a) Head-Current Assets ; Sub head- Inventories.
b) It will not included in inventories.
c) Objectives- Assessing the earning capacity of the enterprise, Assessing the
ability of the enterprise to meet its short-term and long-term commitment.
d) Values: Transparency, Honesty, abiding by law.
MULTIPLE CHOICE QUESTIONS
1. Which of the following will not covered under finance cost?
(a) Discount on issue of debentures written off
(b) Interest paid on bank overdraft
(c) Bank charges
(d) Premium payable on redemption of debentures written off
2. Loose tools will be covered under main head ................................ and sub
head ............................... . (fill in the blanks)
3. Earmarked balances with bank like unpaid dividend will be shown under sub
head cash and cash equivalents. (True or false with reason).
4. Long term provisions does not include:
(a) Provision for Gratuity
(b) Provision for earned leave
(c) Provision for employees benefit
(d) Provision for warranty
5. Forfeited share account will be covered under main head .............. and sub
head ........................ .
Answers:
1. C
2. Current, Assets, Inventories
3. True
4. C
5. Shareholder's Fund, Subscribed Capital (Shown by way of Addition)

305 [Class XII : Accountancy]