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COMPANY FINAL ACCOUNTS

10
Company
As per section 2(20) of the Companies Act, 2013 “Company” means a company incorporated under
this act or under any previous company law.

Final Accounts
Under Section 129 of the Companies Act, 2013, at the annual general meeting of the company, the
Board of Directors of the company shall lay financial statements before the company:
Financial Statements as per Section 2(40) of the Companies Act, 2013, inter-alia include-
(i) A balance sheet as at the end of the financial year;
(ii) A profit and loss account, or in the 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;
(iv) A statement of changes in equity, if applicable; and
(v) Explanatory note
Provided that the financial statement, with respect to One Person Company, small company and
dormant company, may not include the cash flow statement.
Students may note that preparation of cash flow statement shall be separately studied in AS-3.

Provisions Applicable
(1) Specific Act is applicable for
(a) Insurance company
(b) Banking company or
(c) Any company engaged in generation or supply of electricity*or
(d) Any other class of company for which a form of balance sheet or Profit and loss
account has been prescribed under the Act governing such class of company
(2) In case of all other companies
Balance Sheet as per Part I of Schedule III and Statement of Profit and Loss as per Part II
of Schedule III

The Electricity Act, 2003 does not specify any format for presentation of Financial Statements.
Therefore, Schedule III of the Companies Act, 2013 is followed by Electricity Companies in
preparation of their financial statements.

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.2

Managerial Remuneration
Managerial remuneration is calculated as a percentage on profit. Managerial remuneration payable
by a company is governed by various sections of the Companies Act, 2013 and also Schedule V under
the Companies Act, 2013.
1. As per section 197 of the Companies Act, 2013, total remuneration payable by a public
company to its directors, including managing director and whole time director, and its
manager in respect of any financial year shall not exceed 11% of the net profits of that
company for that financial year computed in the manner laid down in section 198.
2. Provided that the company in general meeting may, with the approval of the central
government authorize the payment of remuneration exceeding 11% of the net profits of the
company subject to the provisions of Schedule V.
3. The remuneration payable to any one managing director; or whole time director or manager
shall not exceed 5% of the net profits of the company and if there is more than one such
director, remuneration shall not exceed 10% of the net profits to all such directors and
managers taken together.
4. The remuneration payable to directors who are neither managing directors nor whole-time
directors shall not exceed –
(a) 1% of the net profits of the company, if there is a managing or whole time director or
manager
(b) 3% of net profits in any other case
5. Remuneration payable by companies having no profit or inadequate profit without Central
Government approval
(a)
Where the effective capital is Limit of yearly remuneration payable
per managerial person shall not
exceed (`)
(i) Negative or less than 5 crores 60 lakhs
(ii) 5 crore and above but less than 100 84 lakhs
crores
(iii) 100 crores and above but less than 250 120 lakhs
crores
(iv) 250 crores and above 120 lakhs plus 0.01% of the effective
capital in excess of ` 250 crores.

Provided that if the resolution passed by the shareholders is a special resolution, this
limit shall be doubled.
Incase the period is less than 1 year, the limits shall be proportionate.

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.3
(b) In case of a managerial person who is functioning in a professional capacity, no approval
of Central Government is required, if such managerial person is not having any interest
in the capital of the company or its holding company or any of its subsidiaries directly or
indirectly or through any other statutory structures and not having any, direct or indirect
interest or related to the directors or promoters of the company or its holding company
or any of its subsidiaries at any time during the last two years before or on or after the
date of appointment and possesses graduate level qualification with expertise and
specialized knowledge in the field in which the company operates.
Provided that any employee of a company holding shares of the company not exceeding
0.5% of its paid up share capital under any scheme formulated for allotment of shares
to such employees including Employees Stock Option Plan or by way of qualification
should be deemed to be a person not having any interest in the capital of the company.

Provided further that the limits specified under items (A) ant (B) of this section should apply, if-
(i) Payment of remuneration is approved by a resolution passed by the Board and, in the
case of a company covered under Section 178(1) also by the Nomination and
Remuneration Committee;
(ii) The company has not committed any default in repayment of any of its debts (including
public deposits) or debentures or interest payable thereon for a continuous period of 30
days in the preceding financial year before the date of appointment of such managerial
person and in case of a default, the company obtains prior approval from secured
creditors for the proposed remuneration and the fact of such prior approval having been
obtained is mentioned in the explanatory statement to the notice convening the general
meeting;
(iii) An ordinary resolution or a special resolution, as the case may be, has been passed for
payment of Remuneration as per the limits laid down in item (A) or a special resolution
has been passed for payment of remuneration as per item (B), at the general meeting of
the company for a period not exceeding 3 years.
(iv) A statement along with a notice calling the general meeting referred to in clause (iii) is
given to the shareholders.

Managerial Remuneration Summary


1. Total Managerial Remuneration – 11% of Net Profit u/s 198. Sitting Fee excluded.
2. Individual Limits
• MD, WTD or Manager – 5% to any one and 10% to all.
• Director
 If company has MD, WTD or Manager – 1%
 If company does not have MD, WTD or Manager – 3%

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.4

Profit u/s 198


Profit before Tax as per P/L A/c XX
+ Depreciation in books XX
+ Managerial Remuneration charged in books XX
+ Provision for Baddebt XX
XX
-Depreciation under Sch II (XX)
Profit u/s 198 XX

Note: Profit or Loss of capital nature should be ignored.

Perquisites not included in Managerial Remuneration


A managerial person shall be eligible for the following perquisites which shall not be included in the
computation of the ceiling of remuneration specified in case of no profit or inadequate profit:
(a) Contribution to provident fund, superannuation fund to the extent these are not taxable
under the Income Tax Act, 1961;
(b) Gratuity payable at a rate not exceeding half a month’s salary for each completed year of
service; and
(c) Leave encashment at the end of the tenure.

In addition to the perquisites specified in paragraph 1 of this section, an expatriate managerial


person (including a non-resident Indian) should be eligible to the following perquisites which should
not be included in the computation of the ceiling on remuneration:
(a) Children’s education allowance: In case of children studying in or outside India, an allowance
limited to a maximum of ` 12,000 per month per child or actual expenses incurred,
whichever is less. Such allowance is admissible up to a maximum of two children.
(b) Holiday passage for children studying outside India or family staying abroad: Return holiday
passage once in a year by economy class or once in two years by first class to children and to
the members ‘of the family from the place of their study or stay abroad to India if they are
not residing in India, with the managerial person.
(c) Leave travel concession: Return passage for self and family in accordance with the rules
specified by the company where it is proposed that the leave be spent in home country
instead of anywhere in India.

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.5

Effective Capital is computed as under:


Paid Up Share Capital (excluding share Application Money or Advances XX
against Shares)
Add: Securities Premium Account XX
Reserves and Surplus (excluding Revaluation Reserve) XX
Long Term loans repayable after one year (See Note 1) XX
Deposits repayable after one year XX
Less: Investments, (for Non-Investment Companies only) (See Note2) XX
Accumulated losses XX
Preliminary Expenses not written off XX
Effective Capital XX
Note:
1. Working capital Loans, Overdrafts, Interest due on loans unless funded, Bank Guarantee
etc., and other short-term arrangements shall not be included in “Long Term Loans”.
2. Investments shall not be “deducted” in the case of an Investment Company whose principal
business is acquisition of shares, Stock, Debentures or Other Securities.
3. Where the appointment of the managerial person is made in the year in which company has
been incorporated, the effective capital shall be calculated as on the date of such
appointment.
4. In any other case the effective capital shall be calculated as on the last date of the financial
year preceding the financial year in which the appointment of the managerial person is
made.

Remuneration Payable to a Managerial Person in two Companies


A managerial person shall draw remuneration from one or both companies, provided that the total
remuneration drawn from the companies does not exceed the higher maximum limit admissible
from anyone of the companies of which he is a managerial person.

Dividend
Under section 123(1) of the Companies Act, 2013, no dividend shall be declared or paid by a
company for any financial year except-
(a) Out of the profits of the company for that financial year arrived at after providing for
depreciation in accordance with the provisions of section 123(2), or
(b) Out of the profits for any previous financial years arrived at after providing for depreciation
in accordance with the provisions of that section and remaining undistributed; or
(c) Out of both the above;
(d) Out of the moneys provided by the central Government or any state government for the
payment of divided by the company in pursuance of any guarantee given by that
government

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.6
Provided that no dividend shall be declared or paid by a company from its reserves other than free
reserves.
A company may declare dividend out of accumulated profits earned by it in previous years and
transferred by it to the reserves, in the event of inadequacy or absence of profits in any year, subject
to the fulfillment of the following conditions as per companies (Declaration and Payment of
Dividend) Rules, 2014
(1) The rate of dividend declared shall not exceed the average of the rates at which dividend
was declared by it in the 3 years immediately preceding that year. Provided that this sub-
rule shall not apply to a company, which has not declared any dividend in each of the 3
preceding financial year.
(2) The total amount to be drawn from such accumulated profits shall not exceed 10% of the
sum of its paid-up share capital and free reserves as appearing in the latest audited financial
statement.
(3) The amount so drawn shall first be utilised to set off the losses incurred in the financial year
in which dividend is declared before any dividend in respect of equity shares is declared.
(4) The balance of reserves after such withdrawal shall not fall below 15% of its paid up share
capital as appearing in the latest audited financial statement.
(5) No company shall declare dividend unless carried over previous losses and depreciation not
provided in previous year are set off against profit of the company of the current year the
loss or depreciation, whichever is less, in previous years is set off against the profit of the
company for the year for which dividend is declared or paid.

Dividend Distribution Tax


The salient features of DDT are as below:
(i) DDT is in addition to the income-tax chargeable in respect of the total income of a
domestic company.
(ii) With effect from 1st Oct, 2011 dividend and income distribution tax is leviable on gross
dividend/ income and not on the net dividend/ income distributed to shareholders and
unit holders as per Income Tax Act, 1961.
(iii) The dividends chargeable to DDT may be out of the current profits or accumulated
profits.
(iv) The rate of DDT is 15% (excluding surcharge of 12% plus secondary and higher education
cess is (2+1) 3%).
(v) DDT should be payable even if no income-tax is payable by the domestic company on its
total income.
(vi) DDT paid should be treated as the final payment of tax on the dividends and no further
credit therefore should be claimed by the company or by any person in respect of the
tax so paid.
(vii) The expression ‘dividend’ should have the same meaning as is given to ‘dividend’ in
Section 2 of the Companies Act, 2011

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.7
th
Example: X Ltd., a domestic company, has distributed on 5 April 2019, dividend of ` 230 lakh to its
shareholders. Compute the Dividend Distribution tax payable by X Ltd.
Solution: Calculation of corporate dividend tax
Particulars ` in lakh
Dividend distributed by X Ltd. 230

15 40.59
Add: Increase for the purpose of grossing up of dividend �100−15 × 230�

270.59
Gross dividend
40.59
Dividend distribution tax @ 15% [15% of ` 270.59 lakh]
4.88
Add: Surcharge@12%
45.47
1.36
Add: Education cess@ 2% and SHEC @ 1%
46.83
Dividend Distribution tax

Accounting for DDT


As per AS 4 (Revised), Final dividend declared after the balance sheet date is recognized in the
financial year in which it has been approved by the shareholder, i.e., there is no provision for
dividend on the balance sheet date. In view of this, DDT on dividend, being directly linked to the
amount of the dividend concerned, should also be reflected in the accounts of the same financial
year even though the actual tax liability in respect thereof may arise in a different year.

Disclosure and Presentation of DDT in Financial Statements


1. Dividend on shares is an appropriation of profit which is not shown in the Statement of
Profit and Loss as per the Schedule to the Companies Act, 2013. It is shown as an
appropriation or allocation of profit in the ‘Notes to Accounts’ of the Reserves and Surplus’
item of the Balance sheet.
2. Since dividends are appropriation to profits which is not the art of disclosure in the
Statement of Profit and Loss, therefore, a question arises with regard to disclosure and
presentation of DDT, as to whether the said tax should also be disclosed as appropriation or
should be disclosed along with the normal income-tax provision for the year.
3. The liability in respect of DDT arises only if the profits are distributed as dividends whereas
the normal income-tax liability arises on the earning of the taxable profits
4. Since the DDT liability relates to distribution of profits as dividends which are disclosed as
appropriation/allocation of profit in the ‘Notes to Accounts’ of ‘Reserves and Surplus’, it is
appropriate that the liability in respect of DDT should also be disclosed therein.
5. It is felt that such a disclosure would give a proper picture regarding payments involved with
reference to dividends.
6. DDT liability should be recognized in the accounts of the same financial year in which the
dividend concerned is recognized.
ELITE CONCEPTS CA. RAJ K AGRAWAL
COMPANY FINAL ACCOUNTS 10.8
7. DDT liability should be disclosed separately in the ‘Notes to Accounts’ of ‘Reserves and
Surplus’, as follows:
Dividend xxxxx
Dividend Distribution tax thereon xxxxx xxxxx

The accounting treatment for Dividend Distribution tax in the financial statements of a company can
be explained with the help of following example:
On 31st March, 2018 Ltd. declared dividend amounting to ` 425 lacs for the year 2017-2018. The
Dividend Distribution tax liability (15% of Corporate dividend tax including surcharge @ 12%,
Education Cess @ 2% and SHEC @ 1% i.e. 17.304%) arises as per Income-tax Act, 1961. In this case,
calculate the grossing-up of dividend and separately disclose the charge for DDT in the ‘Notes to
Accounts’ of ‘Reserves and Surplus’.
Solution
Calculation of grossing-up of dividend:
Particulars ` in lacs
Dividend distributed by X Co. 425
75
15
Add: Increase for the purpose of grossing up of dividend � × 425�
100−15
500
Gross dividend
86.52
Dividend distribution tax

(An Extract)
 ‘Notes to Accounts’ of ‘Reserves and Surplus’
 For the year ended 31st March, 2018
` (lacs) ` (lacs)
Dividend 425.00
Dividend Distribution tax 86.52 11.52

The Dividend Distribution tax should be disclosed separately under, the head ‘Other Current
Liabilities’. The relevant extracts of the Balance Sheet of X Ltd. can be shown as follows:

Balance Sheet as on 31st March, 2018


‘Other Current Liabilities’ ` (lacs)
Dividend declared 425.00
Declared Distribution tax 86.52

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.9
Schedule III - Companies Act, 2013
General Instructions for Preparation of Balance-Sheet and Statement of Profit and Loss
1. Long Term Borrowing: Shall be stated in descending order of maturity or conversion.
Further period and amount of continuing default as on balance sheet date in repayment of
loans and interest also needs to be disclosed.
2. Trade receivables: The term sundry debtor has been replaced with trade receivables.
3. Cash and cash equivalents: Bank deposits with more than 12 months maturity to be
disclosed separately.
4. The limits of rounding off (on the basis of turnover) are as follows
Turnover Rounding off
Less than 100 Crores To the nearest hundreds, thousands, lakhs or millons, or
decimals thereof
More than 100 Crores To the nearest lakhs, millions or crores, or decimals
therof.
5. An asset shall be classified as current when it satisfies any of the following criteria:
(a) It is expected to be realized within twelve months after the reporting date; or
(b) Used to settle a liability for at least twelve months after the reporting date.
6. A liability shall be classified as current when it is due to be settled within twelve months
after the reporting date.
7. Reserves & Surplus: The balance of ‘Reserves and Surplus’ after adjusting negative balance
of surplus (profit & loss account), if any, shall be shown under the head ‘Reserves and
Surplus’ even if the resulting figure is in the negative.
8. Miscellaneous Expenditure such as share issue expenses, discount on issue of shares &
debentures or preliminary expenses are shown on the asset side of the Balance-Sheet as
‘Unamortized Expenses’ under the head ‘Other Current/Non-current Assets’ depending on
whether the amount will be amortized in the next 12 months or thereafter.

Part I: Balance Sheet


Name of the Company
Balance Sheet as at 31 March, 20X2
Particulars Note As at 31 As at 31
No. March, March,
20X2 20X1
` `
A EQUITY AND LIABILITIES
1 Shareholder’s funds
(a) Share Capital 1
(b) Reserves and Surplus 2
(c) Money received against share Warrants
2 Share application money pending allotment
3 Non-current liabilities
(a) Long-term borrowings 3
ELITE CONCEPTS CA. RAJ K AGRAWAL
COMPANY FINAL ACCOUNTS 10.10
(b) Deferred tax liabilities (net)
(c) Other long-term liabilities 4
(d) Long-term Provisions 5
4 Current liabilities
(a) Short-term borrowings 6
(b) Trade Payables
(c) Other current liabilities 7
(d) Short-term provisions 8
TOTAL
B ASSETS
1 Non-current assets
(a) Fixed assets
(i) Tangible assets 9
(ii) Intangible assets 10
(iii) Capital work-in-progress
(iv) Intangible assets under developments
(v) Fixed assets held for sale
(b) Non-current investments 11
(c) Deferred tax assets (net)
(d) Long-term loans and advances 12
(e) Other non-current assets 13
2 Current Assets
(a) Current Investments 14
(b) Inventories 15
(c) Trade receivables 16
(d) Cash and cash equivalents 17
(e) Short-term loans and advances 18
(f) Other current assets
TOTAL

Part II: Statement of Profit and Loss


Name of the Company
Statement of Profit and Loss for the year ended 31 March, 20X2
Particulars Note For the year For the year
No. ended ended
31 March, 31 March,
20X2 20X1
` `
A CONTINUING OPERATIONS
1 Revenue from operations (Net) 20
2 Other income 21
3 Total revenue (1+2)
4 Expenses
(a) Cost of materials consumed
(b) Purchase of stock-in-trade
ELITE CONCEPTS CA. RAJ K AGRAWAL
COMPANY FINAL ACCOUNTS 10.11
(c) Changes in inventories of
finished goods, work-in-
progress and stock-in-trade
(d) Employee benefits expense 22
(e) Finance costs 23
(f) Depreciation and amortisation
expense
(g) Other expenses 24
Total expenses
5 Profit / (Loss) before exceptional and
extraordinary items and tax (3 - 4)
6 Exceptional items
7 Profit / (Loss) before extraordinary
items and tax (5 ± 6)
8 Extraordinary items
9 Profit / (Loss) before tax (7 ± 8)
10 Tax expense:
(a) Current tax
(b) Deferred tax
11 Profit / (Loss) from continuing
operations (9 ± 10)
B DISCONTINUING OPERATIONS
12 Profit / (Loss) from discontinuing
operations (before tax)
13 Less: Tax expense of discontinuing
operations
14 Profit / (Loss) from discontinuing
Operations
C TOTAL OPERATIONS
15 Profit / (Loss) for the year (11 ± 14)
16 Earnings per equity share:
(1) Basic
(2) Diluted

Note 1: Share Capital


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Authorized Share Capital
______ Equity Share of ` ______ each
______ Preference Shares of ` _____each
Issued, Subscribed & Fully Paid up
______ Equity Share of ` ______ each
______ Preference Shares of ` _____each
Total

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.12

Note 2: Reserves and Surplus


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Capital Reserves
Capital Redemption Reserve
Securities Premium Reserve
Debenture Redemption Reserve
Revaluation Reserve
Share Options Outstanding Account
Profit and loss Balance
Opening Balance
Add: Profit for the Year
Less: Interim Dividend Declared
Final Dividend Declared
DDT
Other Reserves (specify the nature and purpose of
reserve and the amount in respect thereof)
Total

Note 3: Long-term borrowings


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Bonds/debentures
Term loans
• From banks
• Form other parties
Deposits
Loans and advances from related parties
Other loans and advances (specify nature)
Total

Note 4: Other Long-term liabilities


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Trade Payables
Others
Total

Note 5: Long-Term Provisions


Particulars As at 31 March, As at 31 March,
20X2 20X1
ELITE CONCEPTS CA. RAJ K AGRAWAL
COMPANY FINAL ACCOUNTS 10.13
` `
Provision for employee benefits
Others
Total

Note 6: Short-term borrowings


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Loans repayable on demand
• From banks
• From other parties
Loans and advances from related parties
Deposits
Others loans and advances (specify nature)
Total

Note 7: Other Current Liabilities


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Interest accrued but not due on borrowings
Interest accrued and due on borrowings
Income received in advance
Dividends
Other payables (specify nature)
Total

Note 8: Short-term Provisions


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Provision for employee benefits
Others (specify nature)
Total

Note 9: Tangible Assets


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Land
Buildings
Plant and Equipment
Furniture and Fixtures
Vehicles
ELITE CONCEPTS CA. RAJ K AGRAWAL
COMPANY FINAL ACCOUNTS 10.14
Office equipment
Others (specify nature)
Total

Note 10: Intangible Assets


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Goodwill
Brands /trademarks
Computer software
Copyrights, and patents and other intellectual property
rights, services and operating rights
Licenses and franchise
Others (specify nature)
Total

Note 11: Non-current Investments


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Investment in Equity Instruments
Investment in preference shares
Investment in Government or trust securities
Investment in debentures or bonds
Investment in Mutual Funds
Other Non-Current Investments (specify nature)
Total

Note 12: Long-term Loans and Advances


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Capital Advances
Security Deposits
Loans and advances to related parties (giving details
thereof)
Other loans and advances
(a) Secured, considered good
(b) Unsecured, considered good
(c) Doubtful
Total

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.15

Note 13: Other Non-Current Assets


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Long Term Trade Receivables (including trade
receivables on deferred credit terms)
Others (specify nature)
Total

Note 14: Current Investments


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Investments in equity Instruments
Investments in Preference Shares
Investments in Government or Trust Securities
Investments in Debentures or Bonds
Investments in Mutual Funds
Investments in Partnership Firms
Other Investments (specify nature)
Total

Note 15: Inventories


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Raw materials
Work-in-progress
Finished goods
Stock-in-trade (in respect of goods acquired for trading)
Stores and spares
Loose tools
Others (specify nature)
Total

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.16

Note 16: Trade Receivables


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Outstanding for a period exceeding 6 months
Secured, considered good xx
Unsecured considered good xx
Doubtful xx xx
Others
Secured, considered good xx
Unsecured considered good xx
Doubtful xx xx

Less: Provision for Bad debt xx


Total

Note 17: Cash and Cash Equivalents


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Balances with bank
Cheques, drafts on hand
Cash on hand
Others (specify nature)
Total

Note 18: Short-term loans and advances


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Loans and advances to related parties
Secured, considered good xx
Unsecured, considered good xx
Doubtful xx xx
Others (specify nature)
Secured, considered good xx
Unsecured, considered good xx
Doubtful xx xx
Less: Provision for Bad debt xx
Total

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.17
Note 19: Contingent Liabilities and Commitments
Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Contingent liabilities shall be classified as:
(a) Claims against the company not acknowledged
as debt
(b) Guarantees
(c) Other money for which the company is
contingently liable
Commitments shall be classified as:
(a) Estimated amount of contracts remaining to be
executed on capital account and not provided
for
(b) Uncalled liability on shares and other
investments partly paid
(c) Other commitments (specify nature)
Total

Note 20: Revenue from Operations


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
In Respect to Non-finance Company
Sale of Products
Sale of Services
Other Operating Revenues
In Respect to Finance Company
Interest
Other Financial Services
Total

Note 21: Other Income


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Interest Income (other than a finance company)
Dividend Income
Net Gain/Loss on Sale of Fixed Assets
Net Gain/Loss on Sale of Investments
Net Gain/Loss on foreign currency translation and
transaction (other than considered as finance cost)
Total

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.18
Note 22: Employee Benefits Expense
Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Salaries & Wages
Contribution to Provident & Other Funds
Expense on Employee Stock Option Scheme (ESOP)
Staff Welfare Expenses
Total

Note 23: Finance Cost


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Interest Expense
Other Borrowing Costs
Applicable Net Gain/Loss of Foreign Currency
translations & transactions
Total

Note 24: Other Expenses


Particulars As at 31 March, As at 31 March,
20X2 20X1
` `
Consumption of Stores and spare parts
Power and fuel
Rent
Repairs to Buildings
Repairs to Machinery
Insurance
Rates & Taxes (excluding Income tax)
Miscellaneous Expenditure
Payment to Auditors
• As Auditors
• For Taxation Matters
• For Company Law Matters
• For Management Services
• For Other Services
• For Reimbursement of Expenses
Total

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.19

Statement of Changes in Equity


This is a statement showing addition & deletions in Equity items. This is prepared as part of final
accounts of entity. Equity here means Share Capital & Reserve and Surplus.
Format:
Particular Opening Bal. Addition Deletion Closing Bal.
Equity Share Capital xx xx xx xx
Preference Share Capital xx xx xx xx
Capital Reserve xx xx xx xx
General Reserve xx xx xx xx
Profit & Loss xx xx xx xx
xx xx xx xx

Q1. The following is the Draft Profit & Loss A/c of Mudra Ltd., the year ended 31st March, 2019:
` `
To Administrative, Selling and By Balance b/d 5,72,350
distribution expenses 8,22,542 By Balance from Trading A/c 40,25,365
To Directors fees 1,34,780 By Subsidies received from 2,73,925
To Interest on debentures 31,240 Govt.
To Managerial remuneration 2,85,350
To Depreciation on fixed assets 5,22,543
To Provision for Taxation 12,42,500
To General Reserve 4,00,000
To Investment Revaluation
Reserve 12,500
To Balance c/d 14,20,185
48,71,640 48,71,640
Depreciation on fixed assets as per Schedule II of the Companies Act, 2013 was ` 5,75,345. You are
required to calculate the maximum limits of the managerial remuneration a per Companies Act,
2013.

Q2. The following extract of Balance Sheet of X Ltd. was obtained:


Balance Sheet (Extract) as on 31st March, 2019
Liabilities `
Authorized Capital:
20,000, 14% Preference shares of ` 100 20,00,000
2,00,000 Equity shares of ` 100 each 2,00,00,000
2,20,00,000
ELITE CONCEPTS CA. RAJ K AGRAWAL
COMPANY FINAL ACCOUNTS 10.20
Issued and Subscribed Capital:
15,000, 14% preference shares of ` 100 each fully paid 15,00,000
1,20,000 Equity shares of ` 100 each, ` 80 paid-up 96,00,000
Share suspense account 20,00,000
Reserves and Surplus:
Capital reserves (` 1,50,000 is revaluation reserve) 1,95,000
Securities premium 50,000
Secured loans:
15% Debentures 65,00,000
Unsecured loans:
Public deposits 3,70,000
Cash credit loan from SBI (short term) 4,65,000
Current Liabilities:
Trade Payables 3,45,000
Assets:
Investment in shares, debentures, etc. 75,00,000
Profit and Loss account (Dr. balance) 15,25,000

Share suspense account represents application money received on shares, the allotment of which is
not yet made.
You are required to compute effective capital as per the provisions of Schedule V. Would you answer
differ if X Ltd. is an investment company?

Q3. Kumar Ltd., a non investment company has been incurring losses for the past few years. The
company provides the following information for the current year:
(` in lakhs)
Paid up equity share capital 120
Paid up Preference share capital 20
Reserves (including Revaluation reserve ` 10 lakhs) 150
Securities premium 40
Long term loans 40
Deposits repayable after one year 20
Application money pending allotment 720
Accumulated losses not written off 20
Investments 180
Kumar Ltd. has only one whole-time director, Mr. X. You are required to calculate the amount of
maximum remuneration that can be paid to him as per provisions of Part II of Schedule XIII, if no
special resolution is passed at the general meeting of the company in respect of payment of
remuneration for a period not exceeding three years.

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.21
st
Q4. Due to inadequacy of profits during the year ended 31 March, 2019, XYZ Ltd. proposes to
declare 10% dividend out of general reserves. From the following particulars, ascertain the amount
that can be utilized from general reserves, according to the Companies (Declaration of dividend out
of Reserves) Rule, 2014:
17,500 9% Preference shares of ` 100 each, fully paid up 17,50,000
8,00,000 Equity shares of ` 10 each, fully up 80,00,000
General Reserves as on 1.4.2018 25,00,000
Capital Reserves as on 1.4.2018 3,00,000
Revaluation Reserves as on 1.4.2018 3,50,000
st
Net profit for the year ended 31 March, 2019 3,00,000
Average rate of dividend during the last five year has been 12%.

Q5. The following is the Trial Balance of Omega Limited as on 31.3.20X2:


(Figure in `’000)
Debit Credit
Land at cost 220 Equity Capital (Shares of ` 10 each) 300
Plant & Machinery at cost 770 10% Debentures 200
Trade Receivables 96 General Reserve 130
Inventories (31.3.X2) 86 Profit & Loss A/c 72
Bank 20 Securities Premium 40
Adjusted Purchases 320 Sales 700
Factory Expenses 60 Trade Payables 52
Administration Expenses 30 Provision for Depreciation 172
Selling Expenses 30 Suspense Account 4
Debenture Interest 20
Interim Dividend Paid 18

2670 1670
Additional information:
(i) The authorized share capital of the company is 40,000 shares of ` 10 each.
(ii) The company on the advice of independent valuer wish to revalue the land at ` 3,60,000
(iii) Declared final dividend @ 10%.
(iv) Suspense account of ` 4,000 represents cash received for the sale of some of the machinery
on 1.4.20X1. The cost of the machinery was ` 10,000 and the accumulated depreciation
thereon being ` 8,000
(v) Depreciation is to be provided on plant and machinery at 10% on cost.

You are required to prepare Omega Limited’s Balance Sheet as on 31.3.20X2 and Statement of Profit
and Loss with notes to accounts for the year ended 31.3.20X2 as per Schedule III. Ignore previous
years’ figures & taxation.

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.22

Q6: You are required to prepare Balance sheet and statement of Profit and Loss from the following
trial balance of Haria Chemicals Ltd. for the year ended 31st March, 20X1.

Haria Chemicals Ltd.


Trial Balance as at 31st March, 20X1
Particulars ` Particulars `
Inventory 6,80,000 Equity Shares
Furniture 2,00,000 Capital (Shares of ` 10 each) 25,00,000
Discount 40,000 11% Debentures 5,00,000
Loan to Directors 80,000 Bank loans 6,45,000
Advertisement 20,000 Trade payables 2,81,000
Bad debts 35,000 Sales 42,68,000
Commission 1,20,000 Rent received 46,000
Purchases 23,19,000 Transfer fees 10,000
Plant and Machinery 8,60,000 Profit & Loss account 1,39,000
Rentals 25,000 Depreciation provision:
Current account 45,000 Machinery 1,46,000
Cash 8,000
Interest on bank loans 1,16,000
Preliminary expenses 10,000
Fixtures 3,00,000
Wages 9,00,000
Consumables 84,000
Freehold land 15,46,000
Tools & Equipments 2,45,000
Goodwill 2,65,000
Trade receivables 4,40,000
Dealer aids 21,000
Transit insurance 30,000
Trade expenses 37,000
Distribution freight 54,000
Debenture interest 55,000

85,35,000 85,35,000

Additional information: Closing Inventory on 31-3-20X1: ` 8,23,000.

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.23
Q7. You are required to prepare a Statement of Profit and Loss and Balance Sheet from the following
Trial Balance extracted from the books of the International Hotels Ltd., on 31st March, 20X2:
Dr. Cr.
` `
Authorized Capital-divided into 5,000 6%
Preference Shares of ` 100 each and 10,000
Equity Shares of ` 100 each 15,00,000
Subscribed Capital –
5,000 6% Preference Shares of ` 100 each 5,00,000
Equity Capital 8,05,000
Purchases – Wines, Cigarettes, Cigars, etc. 45,800
- Foodstuffs 36,200
Wages and Salaries 28,300
Rent, Rates and Taxes 8,900
Laundry 750
Sales – Wines, Cigarettes, Cigars, etc 68,400
- Food 57,600
Coal and Firewood 3,290
Carriage and Cooliage 810
Sundry Expenses 5,840
Advertising 8,360
Repairs 4,250
Rent of Rooms 48,000
Billiard 5,700
Miscellaneous Receipts 2,800
Discount received 3,300
Transfer fees 700
Freehold Land and Building 8,50,000
Furniture and Fittings 86,300
st
Inventory on hand, 1 April, 20X1
Wines, Cigarettes. Cigars, etc. 12,800
Foodstuffs 5,260
Cash in hand 2,200
Cash with Bankers 76,380
Preliminary and formation expenses 8,000
2,000 Debenture of ` 100 each (6%) 2,00,000
Profit and Loss Account 41,500
Trade payables 42,000
Trade receivables 19,260
Investments 2,72,300

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.24
Goodwill at cost 5,00,000
General Reserve 2,00,000
19,75,000 19,75,000
Wages and Salaries Outstanding 1,280
Inventory on 31st March, 20X2
Wines, Cigarettes and Cigars, etc. 22,500
Foodstuffs 16,400
Depreciation : Furniture and Fittings @ 5% p.a. : Land and Building @ 2% p.a.
The Equity capital on 1st April, 20X1 stood at ` 7,20,000, that is 6,000 shares fully paid and 2,000
shares ` 60 paid. The directors made a call of ` 40 per shares on 1st October 20X1. A shareholder
could not pay the call on 100 shares and his shares were then forfeited and reissued @ ` 90 per
share as fully paid. The Directors declare a dividend of 8% on equity shares, transferring any amount
that may be required from General Reserve. Ignore Taxation.

Q8. From the following particulars furnished by Pioneer Ltd., prepare the Balance Sheet as at 31st
March, 20X1 as required by Schedule III of the Companies Act. Give notes at the foot of the Balance
Sheet as may be found necessary –
Debit Credit
` `
Equity Capital (Face value of ` 100) 10,00,000
Calls in Arrears 1,000
Land 2,00,000
Building 3,50,000
Plant and Machinery 5,25,000
Furniture 50,000
General Reserve 2,10,000
Loan from State Financial Corporation 1,50,000
Inventory:
Finished Goods 2,00,000
Raw Materials 50,000 2,50,000
Provision for Taxation 68,000
Trade receivables 2,00,000
Advances 42,700
Dividend Payable 60,000
Profit and Loss Account 86,700
Cash Balance 30,000
Cash at Bank 2,47,000
Loans (Unsecured) 1,21,000
Trade payables (For Goods and Expenses) 2,00,000
18,95,700 18,95,700

ELITE CONCEPTS CA. RAJ K AGRAWAL


COMPANY FINAL ACCOUNTS 10.25

The following additional information is also provided:


(1) 2,000 equity shares were issued for consideration other than cash.
(2) Trade receivables of ` 52,000 are due for more than six months.
(3) The cost of assets:
Building ` 4,00,000
Plant and Machinery ` 7,00,000
Furniture ` 62,500
(4) The balance of ` 1,50,000 in the loan account with State Finance Corporation is inclusive of
` 7,500 f or interest accrued but not due. The loan is secured by hypothecation of the Plant
and Machinery.
(5) Balance at Bank includes ` 2,000 with Perfect Bank Ltd., which is not a Scheduled Bank.
(6) The company had contract for the erection of machinery at ` 1,50,000 which is still
incomplete.

ELITE CONCEPTS CA. RAJ K AGRAWAL

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