Presentation Script – Chapter 1: Background & Importance

🟦 [Slide 1: Title – Chapter 1: Background & Importance]

"Good morning, everyone! Let's dive into the very first chapter of this important Guidance Note –
the background and why it matters so much."

🟦 [Slide 2: Icebreaker Quiz Slide]

"But before we get into the serious stuff, let’s warm up your accounting brains with a quick quiz!"

(Show quiz slide)

"Which of these are non-corporate entities? Raise your hands for: A... B... C..."
(Engage with audience)

"Great job! The correct answers are B, C, E, F, and G. LLPs and Companies are corporate entities –
so they’re not included in the scope of this Guidance Note. We’ll come back to that shortly."

🟦 [Slide 3: Why Is This Important?]

"Now, let’s talk about the ‘Why’. Why is this Guidance Note needed at all?"

"The objective is simple yet powerful — to standardize the financial statement formats for non-
corporate entities. Why? To improve quality, consistency, and completeness of their financial
reporting."

“Let me ask you all — how many of you believe that small businesses should also follow some level
of accounting structure?”
(Take a few quick responses)

"Exactly! Even a sole proprietor or a small trust deals with money, resources, and stakeholders.
And that’s why strong financial reporting — even for non-corporate entities — builds trust."

🟦 [Slide 4: What Makes Financial Reporting Strong?]

"Now, imagine you’re an investor. What do you look for in a financial report? Trust, right?"

"And that trust comes when the system is backed by:"

 Strong governance

 High-quality standards

 A firm regulatory framework

"And when the report is:"

 Comparable
  Transparent

 Complete

 Unbiased

"Whether you're an investor or a lender, you need to rely on the numbers."

🟦 [Slide 5: Who Uses Financial Information?]

"Let’s now talk about the users of financial info from non-corporate entities."

"We often think only large companies have stakeholders. But what about a trust or a partnership
firm?"

"Who might rely on their financials?"

(Invite a few answers)

"Exactly! Users include:"

 Investors

 Employees

 Lenders

 Trade creditors

 Customers

"And yes, in some cases, these users have the same needs as corporate stakeholders — like in the
case of statutory bodies or public trusts raising capital."

🟦 [Slide 6: Corporate vs. Non-Corporate – Comparison Table]

"Here’s a quick comparison to show the key differences and similarities."

(Walk through 2-3 rows only – don’t overload)

“Notice how even non-corporate entities, when involved in commercial activities, have to follow
accounting standards — no matter how small the activity is.”

🟦 [Slide 7: Who Are Non-Corporate Entities?]

"So who exactly falls into this category?"

"Can anyone name a few non-corporate structures?"

(Take responses, then show table)

"Right! Here are some examples — sole proprietorships, HUFs, partnerships, societies, trusts, and
even statutory corporations. Basically, any business or professional entity that isn’t a company or
LLP."
🟦 [Slide 8: Who Is Excluded?]

"Now an important question — who is not covered under this Guidance Note?"
(Pause and let them think)

"The major exclusions are:"

 LLPs

 Entities with formats prescribed by law (like political parties or educational institutions)

 Autonomous bodies under specific government rules

🟦 [Slide 9: Effective Date & What It Replaces]

"Finally, this Guidance Note becomes effective from April 1, 2024. So if you’re preparing financials
for any period starting from this date — this is your new go-to guide."

"And yes, it officially replaces the old Technical Guide!"

🟦 [Slide 10: Wrap-Up & Quick Recap]

"Let’s wrap up with a 30-second recap:"

✅ We need standardized formats to ensure quality and trust

✅ Financial reporting impacts stakeholders in all entity types
✅ Non-corporate entities are diverse but significant
✅ This Guidance Note helps align their reporting with structured principles

Chapter 2 the financials.

Before I talk about the format here are a few keypoints you must keep in mind while preparing the
financials:

1. Application of Formats:

The first thing to remember is that these formats are mandatory for preparing the financial
statements of non-corporate entities. However, if Accounting Standards or statutory requirements
call for any changes—such as adding, amending, or removing certain details—you’ll need to adjust
the formats accordingly.

 Quick question for you: What type of entities might need to adjust descriptions for specific
line items? Yes, it’s entities like Association of Persons, where you might use terms like
"members' funds" instead of "owners' funds".

2. Disclosure Requirements:

Next, the disclosure requirements in these formats are in addition to the ones mentioned in the
Accounting Standards.
  Can anyone tell me what kinds of disclosures might be needed outside of the main financial
statements? That’s right! Notes to Accounts are where you elaborate on items that aren’t
fully explained on the face of the financial statements, such as items not recognized.

3. Notes to Accounts:

Now, when it comes to Notes to Accounts, these provide further detail and clarification on the items
listed in the Balance Sheet and Statement of Profit and Loss. Remember, we need a balance between
providing:

 Too much detail (which could confuse the users), and

 Not enough information (which could leave important things out).

Quick exercise: Think about a line item like "Accounts Payable". What could we need to explain in
the notes to ensure transparency?

4. Rounding off of Figures:

The next point is the rounding off of figures in the financial statements:

 If the total income is less than 100 crore, round to the nearest hundreds, thousands, lakhs,
or millions.

 If it’s 100 crore or more, round to the nearest lakhs, millions, or crores.

Question for the group: Why do you think it’s important to round figures consistently across the
financial statements?

5. Comparative Figures:

Comparatives are also crucial. You need to provide the figures from the previous period for all line
items. This gives a sense of how the entity is performing over time.

 Can anyone think of why this is important? Yes, it helps in tracking progress and
understanding trends in the financial health of the entity.

6. Accounting Standards:

Lastly, we must ensure that we’re following the appropriate Accounting Standards while preparing
the financial statements. These standards define how we classify and present information, so always
ensure the terms used align with the standards set by the ICAI
Absolutely! Here's a higher-difficulty, exam-oriented set of technical questions tailored to CA Final
(non-Ind AS) – Financial Statements for Non-Corporate Entities, focusing on deeper understanding
and application:

🧠 Challenging MCQs – Technical & Analytical

1. A firm purchases raw materials with a credit period of 15 months. As per general
instructions, how should this liability be classified?
A. Current liability since it relates to operating cycle
B. Non-current liability due to payment timeline
C. Deferred liability
D. Contingent liability
Answer: A
Reason: Even though the settlement is beyond 12 months, it is within the operating cycle if
related to inventory.

2. Which of the following is not included in the disclosure of “Other Operating Revenue”?
A. Export incentives
B. Duty drawback
C. Sale of scrap
D. Interest on delayed receivables
Answer: D
Reason: Interest is part of Other Income, not operating revenue.

3. If a liability is due in 10 months, but the entity has a refinancing agreement before the
balance sheet date for 3 years, how is it classified?
A. Current liability
B. Non-current liability
C. Deferred liability
D. It depends on the intent of the management
Answer: A
Reason: Non-corporate entities must assess the unconditional right to defer settlement. If
refinancing is not unconditional, it remains current.

4. In which of the following scenarios is disclosure under “Exceptional Items” required?

A. Annual increase in wages due to inflation
B. Loss on sale of an old delivery vehicle
C. Write-off of major fixed asset due to fire not covered by insurance
D. Payment of higher insurance premium
Answer: C
Reason: It is unusual and material, thus requiring separate disclosure.
 5. Partner’s interest is shown under:
A. Finance Cost
B. Other Expenses
C. Distribution of Profit
D. Appropriation of Surplus
Answer: A
Reason: Specifically required to be shown as a line item under finance cost in the statement
of profit and loss.

🧩 Advanced Case-Based Question

Case:
M/s Shree Ganesh Traders has:

 ₹12 lakh in trade receivables (of which ₹2 lakh is overdue for 15 months)

 ₹10 lakh of advances to suppliers for goods to be delivered in 9 months

 ₹5 lakh invested in mutual funds for 9 months

 ₹20 lakh loan from a bank repayable in 18 months, but with a breach of covenant before
balance sheet date

 ₹4 lakh of partners' capital (with ₹1 lakh interest accrued)

Q: Classify each item as current or non-current with reasons.

Item Classification Justification

Trade receivables ₹10L current, ₹2L Due within 12 months → current; over 12 months → test
(₹12L) doubtful for impairment or doubtful classification

Advance to suppliers Current Settlement expected within 12 months

Mutual funds Current Short-term investments maturing within 12 months

Bank loan (covenant Breach removes unconditional right to defer; must classify
Current
breach) as current

Shown separately under Finance Cost in P&L, not an

Interest on capital Finance Cost
appropriation

💡 Conceptual Drill – Fill in the Gaps (Advanced)

1. A liability with no unconditional right to defer settlement beyond 12 months is treated as a

___________ liability, even if refinancing is expected.
Answer: Current

2. Any item of income or expense exceeding ___________ of revenue or ₹1,00,000 (whichever

is higher) must be separately disclosed.
Answer: 1%
 3. Deferred tax assets arising out of timing differences are shown under _________ assets.
Answer: Non-current

4. Unrealized gain on foreign currency held for capital expenditure purposes is disclosed under
__________.
Answer: Other Comprehensive Income (Note: if required as per AS 11, otherwise show
under finance cost if related to borrowings)

5. Repairs to machinery are part of __________ expenses and must be disclosed if material.
Answer: Other Expenses

Under the revised presentation format for non-corporate entities, “Sources and Application of
Funds” has been replaced by:
A. Income & Expenditure Statement
B. Statement of Affairs
C. Balance Sheet with bifurcation into Equity & Liabilities and Assets
D. Receipts and Payments Account

Q2. (MCQ)

Deferred Tax Liabilities should be presented under:

A. Current Liabilities
B. Non-Current Liabilities
C. Provisions
D. Other Long-Term Liabilities

Q3. (MCQ)

Which of the following is not considered part of “Other Comprehensive Income” for non-Ind AS
entities?
A. Revaluation surplus
B. Actuarial gains and losses
C. Foreign currency translation reserves
D. Profit on sale of fixed assets

Q4. (Case-Based)

A firm has the following loans:

 ₹10 lakh secured loan repayable after 5 years

 ₹5 lakh unsecured loan repayable in 10 months

How should this be presented in the financial statements?

A. Both under Non-Current Liabilities
B. ₹10 lakh under Long-term borrowings and ₹5 lakh under Short-term borrowings
C. ₹15 lakh under Unsecured loans
D. ₹10 lakh under Current Liabilities and ₹5 lakh under Other Loans

Q5. (MCQ)

Which schedule is mandatory for presenting Deferred Tax Assets and Liabilities?
A. Sch I
B. No separate schedule is needed
C. A separate note with bifurcation of timing differences
D. To be clubbed under “Other Liabilities”

Q6. (Assertion-Reason)

Assertion: Loans & advances must be bifurcated into secured/unsecured and related party/others.
Reason: This ensures proper compliance with accounting standards and enhances disclosure.
Choose the correct option:
A. Both Assertion and Reason are true, and Reason is the correct explanation
B. Both are true, but Reason is not the correct explanation
C. Assertion is true, Reason is false
D. Both are false

Q7. (MCQ)

In the notes to accounts, investments in partnership firms must include:

A. Partner names and their contribution only
B. Capital balances only
C. Firm’s total capital and partner's profit-sharing ratios
D. Details of only quoted investments

Q8. (Case-Based)

A firm has trade receivables of ₹25 lakhs, of which ₹5 lakhs are overdue beyond 6 months. ₹8 lakhs
are from MSMEs.
What is the correct disclosure requirement?
A. Show ₹25 lakhs under current assets
B. Bifurcate ₹8 lakhs under MSME and ₹17 lakhs under Non-MSME, along with ageing analysis
C. No bifurcation needed
D. Show ₹5 lakhs separately as impaired

Q9. (MCQ)

Which of the following must be disclosed under Significant Accounting Policies?

A. Auditor's Remuneration
B. Employee Benefit Policy
C. Trade Receivables ageing
D. Owner's Drawings

Q10. (MCQ)

Which is correct regarding provisions disclosure?

A. Provision for employee benefits can be clubbed with other provisions
B. No bifurcation required for provisions
C. Bifurcation is required into employment benefits and other provisions
D. Only tax-related provisions must be shown

Would you like the answer key with explanations as well?

4o

You said:

give answers and reasons

ChatGPT said:

Absolutely! Here's the answer key with detailed explanations for each of the 10 challenging and
technical quiz questions focused on the presentation of financial statements for non-corporate
entities (non-Ind AS):

✅ Answer Key + Explanations

Q1.

Answer: C. Balance Sheet with bifurcation into Equity & Liabilities and Assets
Explanation:
The traditional "Sources and Application of Funds" has been replaced with a balance sheet
structured into Equity & Liabilities and Assets, in alignment with revised formats and better financial
clarity.

Q2.

Answer: B. Non-Current Liabilities

Explanation:
Deferred Tax Liabilities are typically based on long-term timing differences and are not expected to
be settled within 12 months. Hence, they are classified under Non-Current Liabilities.

Q3.
Answer: D. Profit on sale of fixed assets
Explanation:
Profit on sale of fixed assets is recognized in Profit and Loss, not in Other Comprehensive Income
(OCI). OCI includes items like revaluation surplus and actuarial gains/losses (in Ind AS), though for
non-Ind AS entities, these may just form part of equity.

Q4.

Answer: B. ₹10 lakh under Long-term borrowings and ₹5 lakh under Short-term borrowings
Explanation:
Bifurcation is based on repayment period. Loans repayable beyond 12 months are Long-Term; within
12 months are Short-Term. Also, secured/unsecured status is disclosed in notes.

Q5.

Answer: C. A separate note with bifurcation of timing differences

Explanation:
Deferred Tax Assets/Liabilities are detailed in a separate schedule or note showing temporary
differences leading to the DTA/DTL—essential for transparency and understanding future tax
impacts.

Q6.

Answer: A. Both Assertion and Reason are true, and Reason is the correct explanation
Explanation:
Disclosure of loans and advances as secured/unsecured and related party/others is mandated for
transparency and compliance with standards. It gives users a complete view of recoverability and
risk exposure.

Q7.

Answer: C. Firm’s total capital and partner's profit-sharing ratios

Explanation:
When a firm has investments in partnership firms, details must include:

 Name of firm

 Name of partners and % profit sharing

 Total capital of the firm

This helps assess the stake and potential returns.

Q8.

Answer: B. Bifurcate ₹8 lakhs under MSME and ₹17 lakhs under Non-MSME, along with ageing
analysis
Explanation:
Per statutory requirements (especially MSME Act), creditors and trade receivables must be
bifurcated into MSME/Non-MSME, and ageing schedules are compulsory for transparency on
recoverability.

Q9.

Answer: B. Employee Benefit Policy

Explanation:
Significant Accounting Policies include methods and assumptions used in recognition of revenues,
provisions, depreciation, employee benefits, etc. It tells users how the accounts are prepared.

Q10.

Answer: C. Bifurcation is required into employment benefits and other provisions

Explanation:
Disclosure of provisions should show:

 Provision for employee benefits (like gratuity, leave encashment)

 Other provisions (like warranty, legal disputes)

This helps assess future obligations and contingencies separately.