Module No.

3
FINAL ACCOUNTS OF JOINT STOCK COMPANIES
Statutory Provisions regarding preparation of Company Final
Accounts – Treatment of Special Items, Managerial Remuneration, Tax
deducted at source, Advance payment of Tax, Provision for Tax,
Depreciation, Interest on debentures, Dividends, Rules regarding payment
of dividends, Transfer to Reserves, Preparation of Profit and Loss
Account and Balance Sheet (Vertical Form Schedule -III) (Practical
Problems).
 Companies have a statutory obligation to prepare final accounts as required
by Sec. 128 of the Companies Act, 2013.
 Books will be kept on accrual basis and according to the double entry system
of accounting.
 Rule 3 of the Companies (Accounts) Rule, 2014 prescribes the manner of
books of account to be kept in an electronic mode.
 Sec. 129 of the Companies Act, 2013 requires that the financial statements
shall give a true and fair view of the state of affairs of the company or
companies.
 Sec. 133 of the Companies Act, the Accounting Standards recommended by
the Institute of Chartered Accountants of India and prescribed by the Central
Government in consultation with NFRA are mandatory and applicable to all
companies.
 Every Balance Sheet of a company shall be prepared in the form given in
Part I of the Schedule III of the Companies Act, 2013.
NATIONAL FINANCIAL REPORTING AUTHORITY:
Sec. 132 of the Companies Act, 2013 provides as follows:
a) The Central Govt. may, by notification, constitute a NFRA to provide for
matters relating to accounting and auditing standards under this Act.
b) Notwithstanding anything contained in any other law for the time being in
force the NFRA shall-
i) Make recommendations to the Central Govt. on the formulation and laying
down of accounting and auditing policies and standards for adoption by
companies or their auditors, as the case may be.
ii) Monitor and enforce the compliance with accounting standards and auditing
standards in such manner as may be prescribed.
iii) Oversee the quality of service of the professions associated with ensuring
compliance with such standards.
SCHEDULE – III
General Instruction:
1. Where compliance with the requirements of the Act including Accounting
Standards as applicable to the companies require any change in treatment or
disclosure, same shall be made and the requirements of this Schedule shall
stand modified accordingly.
2. The disclosure requirements specified in this Schedule are in addition to and
not in substitution of the disclosure requirements specified in the AS.
3. Notes to accounts shall contain information in addition to that presented in
the FS and shall provide where required.
4. Depending upon the turnover of the company, the figures appearing in the
FS may be rounded off as below:
a) Less than one hundred rupees crore – to the nearest hundreds, thousands,
lakhs or millions or decimals thereof.
b) One hundred crore rupees or more – to the nearest lakhs, millions or crores
or decimals thereof.
5. Except in the case of first FS the corresponding amounts for the
immediately preceding reporting period for all items shown in the FS
including notes shall also be given.
 PART I – Form of BALANCE SHEET
Name of the Company……..
Balance Sheet as at……… (Rupees in………)
Figures as
Figures as
at the end
at the end
Note of the
Particulars of current
No. previous
reporting
reporting
period
periods
I. Equity and Liabilities
1) Shareholder’s Fund 1
a) Share capital
b) Reserves and Surplus
c) Money received against share warrants
2) Share application money pending 2
allotment
3) Non-current liabilities 3
a) Long-term borrowings
b) Deferred tax liabilities (Net)
c) Other long
d) Long-term provisions
4) Current Liabilities 4
a) Short-term borrowings
b) Trade payables
c) Other Current liabilities
d) Short-term provisions
TOTAL
II. Assets 5
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 6
a) Current investments
b) Inventories
c) Trade receivables
d) Cash and cash equivalents
e) Short-term loans and advances
f) Other current assets
TOTAL
 PART II – Form of Statement of Profit and Loss
Name of the Company……….
Profit and loss statement for the year ended….. (Rupees in…….)

Figures for Figures of

Note the current the previous
Particulars
No. reporting reporting
period periods
Revenue from Operation 1
Other Income 2
Total Revenue
Less. Expenses
a) Cost of materials consumed 3
b) Purchase of Stock-in-Trade 4
c) Changes in inventories of finished goods 5
work-in-progress and Stock-in-trade
d) Employee benefits expense 6
e) Depreciation and Amortization expenses 7
f) Other expenses 8
Total expenses
Profit before exceptional and extraordinary
items and tax
Less. Exceptional items
Profit before extraordinary items and tax
Less. Extraordinary items
Profit before tax
Less. Tax expenses; current tax & deferred tax
Profit for the period from continuing
operations
Profit /loss from discounting operation
XXXX
Less. Tax expense of discounting operation
XXX
Profit/loss for the period
DIVIDEND:
 Dividends are usually paid in proportion to the amount paid on shares in the
absence of any indication to the contrary in the AOA.
 No dividend paid on calls in advances.
 When the calls are in arrears, dividend is payable on the amount actually paid
by shareholders.
 Sources of declaring dividend:
 Sec. 123 of the Companies Act, dividend may be declared out of (i) current
profits, (ii) past reserves. (iii) money provided by the Govt.
 Types of Dividend: (i) Interim Dividend, (ii) Final Dividend.
 Interim dividend is an appropriation of profits and has to be shown as a
deduction from Surplus.
 Dividend on Preference Shares
 Arrears of dividends on cumulative Preference Shares are shown as a
contingent liability by way of a foot-note to the Balance Sheet.
 Scrip Dividend: companies used to distribute dividend in the form of shares
of other companies which may have been held by them as investments.
PROVISION FOR TAXATION:
 Liability for tax is estimated and provided for while preparing the final
accounts.
 Such provision is a charge in the statement of profit and loss and credited to
provision for taxation account.

ADVANCE PAYMENT OF TAX AND PROVISION FOR TAXATION:

 u/s 207 of the Income Tax Act, 1961, advance tax is payable on all taxable
incomes other than capital gains and income from lotteries, crossword
puzzles, races, card games etc.

MANAGERIAL REMUNERATION:
 U/S 197 of the Companies Act, the total remuneration payable by a public
company to directors, manager and managing director in any financial year
should not exceed 11% of the net profits computed u/s 198 of the Companies
Act,
Where the effective capital of Company Early remuneration payable shall not
is exceed
i) Negative or less than rupees 5 crores 30 lakhs
ii) 5 crores and above but less than
42 lakhs
rupees 100 crore
iii) 100 crore and above but less than
60 lakhs
rupees 250 crore
60 lakhs + 0,0`% of the effective capital
iv) Rupees 250 crores and above
in excess of Rupees 250 crore
General Instructions for Preparation of Balance Sheet:
1. An asset shall be classified as current when it satisfies any of the following
criteria:
a) It is expected to be realized in, or is intended for sale or consumption in, the
company’s normal operating cycle.
b) It is held primarily for the purpose of being traded.
c) It is expected to be realized within twelve months after the reporting date.
d) It is cash or cash equivalent unless it is restricted from being exchanged or
used to settle a liability.
All other assets shall be classified as non-current.

2. A liability shall be classified as current when it satisfies any of the following

criteria:
e) It is expected to be settled in the company’s normal operating cycle.
f) It is held primarily for the purpose of being traded.
g) It is due to be settled within twelve months after the reporting date.
h) The company does not have an unconditional right to defer settlement of the
liability for at least twelve months after the reporting date.
All other liabilities shall be classified as non-current
3. A receivable shall be classified as a trade receivable if it is in respect of the
amount due on account of goods sold or services rendered in the normal
course of business.
4. A payable shall be classified as a trade payable if it is in respect of the
amount due on account of goods purchased or services received in the
normal course of business.

A. Share Capital
Particulars Amount
Number and amount of shares authorized XXX
Number of share issued, subscribed and fully paid, and XXX
subscribed but not fully paid
Less: Calls unpaid XXX
Add: Forfeited Shares XXX
Add: Calls in Advance XXX
B. Reserves and Surplus:

Particulars Amount
Capital Reserve XXX
Capital Redemption Reserve XXX
Securities Premium XXX
Debenture Redemption Reserve XXX
Revaluation Reserve XXX
Share Options Outstanding Account XXX
Surplus XXX
C. Long-Term Borrowings:
Particulars Amount
Bonds and Debentures XXX
Term Loans: from Banks and From other parties XXX
Deferred Payment Liabilities XXX
Deposits XXX
Loans and advances from related parties XXX
Long-term maturities of finance lease obligations XXX
Other loans and advances XXX

D. Other Long-term Liabilities:

Other Long-term Liabilities shall be classified as (a) Trade payables,
(b) Others.
E. Long-term Provision:
Particulars Amount
a) Provision for employee benefits XXX
b) Others XXX

F. Short-term borrowings:

Particulars Amount
a) Loans repayable on demand from banks, from other
XXX
parties.
b) Loans and advances from related parties. XXX
c) Deposits XXX
d) Other loans and advances XXX
G. Other current liabilities:
Particulars Amount
a) Current maturities of long-term debt XXX
b) Current maturities of finance lease obligations XXX
c) Interest accrued but not due on borrowings XXX
d) Interest accrued and due on borrowings XXX
e) Income received in advance XXX
f) Unpaid dividends XXX
g) Interest on calls-in-advance XXX
h) Unpaid matured deposits and interest accrued thereon XXX
i) Unpaid matured debentures and interest accrued thereon XXX
j) Other payables XXX
H. Short-term provision:
Particulars Amount
a) Provision for employee benefits XXX
b) others XXX

I. Tangible assets:
Particulars Amount
a) Land and Building XXX
b) Pant and Machinery XXX
c) Furniture and fixtures XXX
d) Vehicles XXX
e) Office equipment XXX
g) others XXX
j. Intangible assets:

Particulars Amount
a) Goodwill XXX
b) Brands / Trademarks XXX
c) Computer software XXX
d) Mining rights XXX
e) copyrights, patents and other IPR XXX
f) Licenses and franchise XXX
g) Recipes, formulae, models, designs and prototypes XXX
k. Non-Current investments:
Particulars Amount
a) Property XXX
b) Equity Instruments XXX
c) Preference Shares XXX
d) Government or trust securities XXX
e) Debentures or bonds XXX
f) Investments in mutual funds XXX
g) Partnership firm XXX
h) Other non-current investments XXX
L. Long-term loans and Advances
Particulars Amount
a) Capital advances XXX
b) Security deposits XXX
c) Loans and advances to related parties XXX
d) Other loans and advances XXX

M. Other non-current assets:

Particulars Amount
a) Long-term trade receivables XXX
b) others XXX
N. Current Investment:
Particulars Amount
a) Equity Instruments XXX
b) Preference Shares XXX
c) Government or trust securities XXX
d) Debentures or bonds XXX
e) Mutual funds XXX
f) Partnership firms XXX
g) Others XXX
O. Inventories:

Particulars Amount
a) Raw materials XXX
b) work-in-progress XXX
c) Finished goods XXX
d) Stock-in trade XXX
e) Stores and spares XXX
f) Loose tools XXX
g) others XXX

P. Trade receivables:
Q. Cash and Cash Equivalents:

Particulars Amount
a) Balance with banks XXX
B) cheques, drafts on hand XXX
c) Cash on hand XXX
d) Others XXX

R. Short-term loans and advances:

Particulars Amount
a) Loans and advances to related parties XXX
b) others XXX
S. Other current assets
T. Contingent Liabilities and Commitments:
i) Contingent Liabilities:
a) Claims against the company not acknowledge as debt.
b) Guarantees
c) Other money for which the company is contingently liable
ii) Commitments:
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.
A. Other than a finance company revenue from operations shall disclose
separately
Particulars Amount
a) Sale of products XXX
b) sale of service XXX
c) other operating revenues XXX
less :Excise duty. XXX

B. In case of finance company (a) interest, (b) other financial services revenue.
C. Other income;

Particulars Amount
a) interest income (in case of a company other than a finance
company
XXX
b) Dividend income XXX
c) Net gain/loss on sale of investments XXX
d) other non-operating income (net of expenses directly
attributable to such income)
XXX
D. Cost of materials consumed
Particulars Amount
Opening Stock XXX
Add. Purchases XXX
XXX
Less; Closing Stock XXX

E. Employees Benefits Expenses:

Particulars Amount
a) Salaries and wages XXX
b) Contributions to PF and other funds XXX
c) Employees Stock Option Scheme and Employees Stock
Purchase Plan
XXX
d) Staff welfare expenses XXX
F. Purchase of Stock-in-Trade
G. Changes in inventories of finished goods work-in-progress and Stock-in-
trade
H. Depreciation and Amortization expenses
I. Other expenses

Particulars Amount
a) Interest expenses XXX
b) Consumption of stores and spare parts XXX
c) Power and fuel XXX
d) Rent XXX
e) Repairs to buildings, machinery XXX
f) Insurance XXX
g) Rates and taxes XXX
h) Miscellaneous expenses XXX
i) Payment to auditor XXX
J. Finance Cost:

Particulars Amount
a) Interest expenses XXX
b) Other borrowing costs XXX
c) Applicable net gain/loss on foreign currency transactions XXX