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423 views448 pagesTs Grewal Class 12 Volume 3
Uploaded by
Anshuma vijayCopyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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/ 448
© Statement of Profit and Loss
© Format of Statement of Profit and Loss
© Explanation of Heads and Contents of Statement of Profit and Loss
© Objectives of Financial Statements
© Essentials of Financial Statements
© Parties Interested in Financial Statements or Users of Financial Statements
© Limitations of Financial Statements
oT
accounting standards. Section 129 of the Companies Act, 2013 prescribes that Balance
Sheet and Profit and Loss Account (Statement of Profit and Loss) are prepared im form
prescribed in Schedule III of the Companies Act, 2013. A set of financial statements as per:
Section 2(40) of the Companies Act, 2013 includes:
1. Balance Sheet: It is a statement of Assets, Liabilities and Equity (i.e, Shareholders’
1 given date. It shows the financial position of a business
Funds) of the company a
and liabilities. It is also known as Position Statement
by detailing its assets, equity
2. Profit and Loss Account: It shows the financial performance, i.e., result of business operation
during an accounting period. It is described as Statement of Profit and Loss in Part)
of Schedule III of the Companies Act, 2013 and is also known as Income Statement:
Balance Sheet and Statement of Profit and Loss are supported by i
n the Balance Sheet and Statement of Profit and Loss
t nt prepared in accordance with AS-3, Cash Fle
4. Cash Flow Statement: It is a statemer
Statement, to show inflows and outflows of Cash and Cash Equivalents:
3. Notes to Accounts:
notes giving det lal Statements of a Company
Accounting Concepts: Financial Statements are prepared by following the aves
concepts. For example, under the Going Concern Concept, it is assumed thal
business shall continue for a foreseeable future, i.c., indefinitely. Fixed
are shown in the Balance Sheet at their historical value mi than their market
value. The use of accounting concepts also makes the financial statements reliable,
understandable and comparable.
(iv) Accounting Standards: Accounting, standards prescribed in the Companies Act, 2013
are mandatory in nature and are the guidelines for preparing, the financial statements.
They are followed by the companies. If they are not followed, the financial statements
do not give a true and fair view.
(0) Selection of Accounting Policies: Selection of Accounting, Policies have important
bearing on financial statements. For example, the choice of selecting a method of
depreciation (Straight Line Method or Written Down Value Method) lies with the
management which has a bearing on financial performance and position. Another
example is selection of a method of inventory valuation (Weighted Average or LIFO).
(vi) Estimates: Estimates are necessary for preparing the financial statements and have
a bearing on the financial statements. For example, useful life of a fixed asset is
estimated to provide depreciation, estimating expenses to make provision, etc.
(vii) Source of Financial Information: Financial Statements are the source of financial
information on the basis of which conclusions are drawn about the profitability
and the financial position of a company.
annual report of a company, as per law, should disclose the prescribed information to
ble the users to make informed judgments and decisions. The information is disclosed
n the Financial Statements, Board Report and by a separate statement being, part of the
ual report.
set of Annual Report of a company has:
. A Report by the Board of Directors containing: Report in terms of Section 134 of
the Companies Act, 2013; Directors’ Responsibility Statement; Report on Corporate
Governance; and Management Discussion and Analysis.
Auditors’ Report to the Shareholders.
Financial Statements:
(i) Balance Sheet as at the end of the financial year;
(ii) Statement of Profit and Loss for the year ended;
(tii) Note to Accounts; and
" (iv) Cash Flow Statement.
Notes to Accounts has different parts as follows:
( Accounting Policies followed by the company;
" (ii) Details of line items in Balance Sheet and Statement o ‘Reserves and Surplus
‘Money Received against Share Warrants
2. Share Application Money Pending Allotment
3. Non-Current Liabilities
(a) Long-term Borrowings
(b) Deferred Tax Liabilities (Net)
{€) Other Long-term Liabilities
(d) Long-term Provisions
4. Current Liabilities
(a) Short-term Borrowings
(0) Trade Payables
(c) Other Current Liabilities
(d) Short-term Provisions
Total
M. ASSETS
1, Non-Current Assets
(0) Fixed Assets
(i) Tangible Assets
(id) Intangible Assets
(ii). Capital Work-in-Progress
(iv) Intangible Assets under Development
(6) Non-current investments
(€)_ Deferred Tax Assets (Net
(d) Long-term Loans and Advances
(e) Other Non-current Assets
2. Current Assets
(@) Current Investments
(6) Inventories
(c)_ Trade Receivables
(@) Cash and Cash Equivalents
(e) Short-term Loans and Advances
(f) Other Current Assets ‘Authorised Capital
1,00,000 Equity Shares of % 10 each
10,000 Preference Shares of ® 100 each
Issued Capital
90,000 Equity Shares of & 10 each
9,000; 996 Preference Shares* of € 100 each
Subscribed Capital
Subscribed and Fully Paid-up
80,000 Equity Shares of @ 10 each
Subscribed but Not Fully Paid-up
10,000 Equity Shares of € 10 each
Less: Calls-in-Arrears (10,000 x & 3)
9,000; 9% Preference Share
Less: Calls-in-Arrears (500
Total (To be shown against’Share Capital’)
of & 100 each, % 90 called-up
710)
means dividend on Preference Shares
*The use of ‘9%’ before Preference Shar
paid @ 99
een made to two terms, i.e., “Called-up” and #
Tn the above discussior ference
Called-ur
Calle
share capital. For example
%10 each against which the compe
In this case, € 10,00,000 (7.e., 2,00,000 x % 5) is the Called-up Capital.
| by the company to be paid by the shareholder
‘ompany’s Subscribed Capital is 2,00,000 Equity S
y has called % 5 per share to be paid by the SI
p Capital me d ‘Share Capital Account witho
example, company purchases machinery ‘of % 10,00,000,
to the vendor, The company will credit % 10,00,000 to Share
‘a company reissues forfeited shares at @ discount (say % 3 per
credit the amount of discount (% 3 per share) to Share Capital
jes Act, 2013]
Share Capital” or “Share Capital Paid-up” means ©
up as is equivalent to the amount received |
‘0 includes any amount credited as pai j-up it
mount received in respe
as paid-
shares issued and als
a company, but does not include any other ar
by whatever name called:
Calls-in-Arrears
ount not received by the company’ against tt
called-up by it towards share capital. Shares against which the calls ar
are shown under “Subscribed but not fully paid-up” at the amount receivec
company against those shares. For example, DBH International Ltd. issued 1,
Equity Shares of = 10 each. All calls had been made and received except tit
% 2 per share on 10,000 Equity Shares.
shown in the Note to Accounts on Share Capital under Subscribed Capital
Calls-in-Arrears means the ami
Itis
Subscribed and fully paid-up: z
1,40,000 Equity Shares of € 10 each
Subscribed but not fully paid-up:
10,000 Equity Shares of % 10 each 1,00,000,
Less: Calls-in-Arrears (10,000 x ® 2 20,000
Total
Calls-in-Advance
A company, if its Articles of Association permits, may receive amount age
yet made. The amount so received is called ‘Calls-in-Advance’. It is c oa
in the Balance Sheet as ‘Other Current Liabilities’ under the main head ‘Ci Analysis of Financial Statements—cos,
«Reserve means amount set aside out of profits and other sup,
ticular liability, known to exist on gar
ey
| which are not earmarked in any way to meet any part
the Balance Sheet.” Thus, reserves mean amount set aside out of profits and surpluses tg
nancial position. Meet
future uncertainties, prospective losses or to strengthen fi
and Loss means accumulated profits
balance of profit remaining ater st
aly
‘ecording to William Pickels,
Surplus, ic., Balance in Statement of Profit
appropriated or distributed as dividend, i.e.
appropriations towards reserves and dividend.
amount on the face of the Balance Sheet again
nds. Detail of Reserves and Surplus is shown in af
Reserves and Surplus is shown as single
opening balance, additions/deductions guy
Reserves and Surplus under Shareholders’ Fu’
Note to Accounts on Reserves and Surplus giving
closing balance for each item under Reserves and Surplus.
Schedule III of the Companies Act, 2013 prescribes the heads of Reserves and Surplus to be
(i) Capital Reserve;
(ii) Capital Redemption Reserve;
(iii) Securities Premium Reserve;
faynoiins Furs.
(iv) Debentures Redemption Reserves
(v) Revaluation Reserve;
(vi) Shares Options Outstanding Account;
(vii) Other Reserves (to specify the nature and purpose of each reserve); and
(viii) Surplus, i., Balance in Statement of Profit and Loss.
A company is required to show the reserves that are in the nature of reserves at serial (i) to (uj
above under the prescribed head. For example, if a company has Securities Premium Reserve,
it is shown in the Note to Accounts on Reserves and Surplus as Securities Premium Reserve,
Schedule III of the Companies Act, 2013 allows companies to have reserves other
at serial numbers (i) to (vi) say, Workmen Compensation Reserve, Investments Fluctu
Reserve, Subsidy Reserve, etc. Each such reserve is shown separately in the lote t
Accounts on Reserves and Surplus.
Surplus, ie, Balance in Statement of Profit and Loss is shown as a separate
Reserves and Surplus. It is accumulated balance of profits of the past years and al
year remaining after appropriations towards reserves and dividend. It may h
balance or debit balance. Current year’s profit or loss is added to the balance _wansferred to Capital Redemption Reserve. The reserve may be
issue fully-paid bonus shares. 7
Section 55 of the Companies Act, 2013, requires that wher
redeemed out of profits which would be otherwise available for d
sum equal to Nominal (Face) Value of the shares redeemed must be
trans
Redemption Reserve’
Securities Premium Reserve
Securities Premium Reserve is a reserve to which amount received in excess 6
(face) value of securities (shares, debentures, etc.) is credited. It can be used,
for the purposes stated in Section 52(2) of.the Companies Act, 2013.
Debentures Redemption Reserve (DRR)
Debentures Redemption Reserve is a reserve credited by the amount pI
Section 71(4) of the Companies Act, 2013 and Rule 18(7)(b) of the Companies (St
of debentures.
DRR is not required for debentures issued by Banking Companies, All India|
Institutions (AIFls) regulated by Reserve Bank of India and National Housing Banks)
Revaluation Reserve)
Revaluation Reserve is a reserve v
of an asset. It is debited when th
‘beused for payment of dividend or issuing bonus shares.
Shares Options Outstanding Account
Shares Options Outstanding Account is a reserve to which difference
value and issue price of shares issued to employees is credited
the market price of the share is % 75 and is to be iss
= 26 , = 75 - % 50) should be credited to Statements of aCompany Ww
waple I. Sony Ltd. has an opening debit balance of € 1,00,000 in Surplus, i,, Balas
Statement of Profit and Loss. During the year ended 31st March, 2019, it earned a
€ 3,00,000, Prepare Note to Accounts on Reserves and Surplus showing the amount to
carried to Balance Sheet
€e of € 2,00,000 in Surplus, ie, Balance in Statement of Profit and Loss
shown under Reserves and Surplus in the Balance Sheet.
ample 2. HP Computers Ltd, has an opening credit balance of Surplus, i.c., Balance in
tatement of Profit and Loss and Securities Premium Reserve of % 1,00,000 and % 2,00,000
respectively. During the year, it incurred a loss of & 1,50,000.
fow will it be shown in Note to Accounts on Reserves and Surplus?
(Opening Balance)
‘Surplus, /e., Balance in Statement of Profit and Loss (Opening Balance)
‘Add: Profit (Loss) for the year
Balance
(a + 6) (To be shown in the Balance Sheet against Reserves and Surplus)
Example 3. Casio Machines Ltd. has an opening balance of % 5,00,000 in Securities Premium
eserve and also debit balance of € 10,00,000 in Surplus, i.e., Balance in Statement of
Profit and Loss under Reserves and Surplus. During the year ended 31st March, 2019, it incurred.
a loss of & 15,00,000. How will it be shown in Note to Accounts on Reserves and Surplus?
olution: ncial Statements of a Company
1s Share Application Money a Current Liability?
Application Money received by the company and which is refundable to the applicants)
i, against which shares will not be allotted, is shown as ‘Other Current Liabilities’ under
rent Liabilities’ in the Equity and Liabilities part of the Balance Sheet
Application Money becomes refundable in the following circumstances:
i) When the Issue is Oversubscribed: The amount received in excess of issued capital being
refundable to the applicants is classified or shown under major head ‘Current Liabilities’
and sub-head ‘Other Current Liabilities’ in the Equity and Liabilities part of the
Balance Sheet.
ii) When the issue is oversubscribed and the amount is payable in instalments, the amount
retained by the company to be adjusted against calls is shown as ‘Other Current
Liabilities’ under Current Liabilities. r
iii) When the company receives amount against calls yet to be made, i.., Calls-in-Advance.
iv) In case the Company has not received Minimum Subscription: In such a situation, it is
classified or shown under major head ‘Current Liabilities’, and sub-head ‘Other
Current Liabilities’ in the Equity and Liabilities part of the Balance Sheet because
the share application money received is refundable to the applicants.
bilities \ 9°
jabilities are claSsified or shown as Non-current Liabilities and Current Liabilities
the Balance Sheet. The two terms have been defined in Schedule III of the
companies Act, 2013.
ie term ‘Current Liabilities’ is defined in Schedule III of the Companies Act, 2013
follows:
rent Liability is that liability which is:
(i) expected to be settled in compan)
ii) due to be settled within 12 months after the reporting date, i.e,
normal operating cycl
(iv) there is no unconditional right to defer settlement for at least 12 months after the
reporting date.
a liability meets any of the above four conditions, it is classified | or
t liability. aie . Statements of a Company
of Debentures Issued as Collateral Security
ntures issued as Collateral Security can be disclosed in any of the fallowing man
When Entry is not Passed for Debentures Issued us Collateral Security
In the Note to Accounts on Borrowings (Long-term or Short-term), in the partieulars
column below the borrowings, it is disclosed that the loan is collaterally secured by
issue of debentures as follows:
Loan from Bank (say) ee
(Secured by issue of 12,000; 9% Debentures
FF 100 each as Collateral Security)
(i) When an Entry is Passed for Debentures Isswed us Collateral Security:
The entry passed for issue of debentures as Collateral Security i
: t
Debentures Suspense A/c Dr 14,00,000
To 9% Debentures A/c oe
(12,000; 996 Debentures & 100 each issued as
Collateral Security against loan of € 10,00,000)
Debentures issued as Collateral Security are shown in the Note to Accounts on
Long-term/Short-term Borrowings as follows:
e ®
Loan from Bank (say) 10,00,000
12,000; 9% Debentures of € 100 each 12,00,000
Less: Debentures Suspense A/c
‘A part of long-term borrowing may become due for repayment within 12 months from the
date of Balance Sheet or within the period of Operating Cycle. In such a case, part of the
rrowing that becomes due for repayment is shown under major head ‘Current Liabilities’
and sub-head ‘Other Current Liabilities’ as ‘Current Maturities of Long-term Debts’,
For example, term loan taken by the company from a bank, Instalments falling due for
‘payments within 12 months from the Balance Sheet date (assuming Operating Cycle period
‘to be less than 12 months) will be shown as ‘Current Maturities of Long-term Debts’.
Deferred Tax Liabilities (Net): Every year Accounting Income is compared with Taxable
Income and if the difference between the tivo exists which is temporary in nature, income tax.
the difference amount is termed as deferred tax. x Loy denigateie SRE ees.
26 (Classipi A hedule IL re
the following items under (iit) Goodwin, m
(ei) Debtors
(ix) Stocksincty
(ii) Le
Equipment
marks, ) Bi
) Building de a
i ; i nae (xi) Vehictes,
and Spare Part (xf) Burnie’
we to. wisbont (xiv) Cash at Bank ‘tation
(®) Cash in Hand (xvi), Work-in-Progress (Machinery),
a a (eh interest Accrued on Investments, ang
@X) Deposits with Electricity Supply Company
Solution;
Jing, Furniture, Vehiel
(0 Fixed Assets (Tangible): Office Equipment, Land, Build
(i) Fixed Assets (Intangible); Goodwill, Trademarks.
(i) Capital Work-in-Progress: Work-in-Progress (Machinery). ‘i
(i) Long-term Loans and Advances: Advance to Subsidiaries, Deposits with:
Supply Company,
(®) Inventories: Loose Tools, Stock-in-Trade, Stores and Spare Parts,
(@/) Trade Receivables: Bills Receivable, Debtors.
(Pi) Cash and Cash Equivalents: Cash at Bank, Cash in Hand.
(eit!) Other Current Assets: Interest Accrued on Investments.
Mlustration 27.
Give the heads under which following items are shown in a company’s Balay
Per Schedule 111, Part 1 of the Companies Act, 2013?
(i) Mortgage Loan, (ii) Patents,
(iti) Investments, (iv) General Reserve,
(@) Bills Receivable, and (vi) 10% Debentures,
Will the following items appear
‘Shedule I Pa Tof the Companies Act, 2013?
SU Loose Tools, (iii) Calls-in- en —
of a Con 139 "
Under what heads and sub-heads the following items will appear in the Balance Sheet of ;
Per Schedule
III of the Companies Act, 20137
emium on Redemption of Debentures
(i) Loose Tools;
(ii) Balances with Banks. (Delhi 2013, Modified)
Solution
‘Mustration 30.
d what heads and sub-heads the following items will appear in the Balance Sheet of
a /company as per Schedule IIL, Part I of the Companies Act, 2013? es -
| 1a
the
Be,
Ine . (i) Fixed Assets—Intangible Assets;
(i) Current L yrt-term Borrowings; (iv) Long-term Provisions;
(o) Non Current Investmenta; (v/) Other Current Assets,
a a5,
I) ul
State
which major
@ con)
lings the following items will be presented in the Balance
ly a8 per Schedule IM of Companies Act, 2013:
(ii) Capital Redemption Reserve
» Received in Advance (iv) Stores and Spares
(e) Office Equipments (al) Chireent Te ilettaee
(Al 2014 C, Modified)
() Trad
(iti) Incon
Solu!
Major Headings:
(i) Non-Current Assets; (ii) Shareholders’ Funds;
(iil) Current Liabilities; (iv) Current Assets;
(») Non-Current Assets; (vi) Current Assets,
Mlustration 36.
Under what main heads and sub-heads of Assets part are the following items classified
or shown in the Balance Sheet of a company as per Schedule III?
(i) Bills Receivable, (ii) Sundry Debtors,
(iii) Long-term Investments, (iv) Shares in Listed Companies
(v) Prepaid Insurance, (vi) Deposit with Customs Authorities, and
(vii) Building.
items will be presented in the
of the Companies Act, 2013? f Financial Se
of . atement of Profit and Loss is a statement that shows the financial performance of a
jompany, ie. profit earned or loss incurred during the accounting, period.
format of Statement of Profit and Loss
Format of the Statement of Profit and Loss is prescribed in Part II of Schedule Ill of the
‘Companies Act, 2013, as follows
STATEMENT OF PROFIT AND LOSS for the years ended .. Financial Statements of a Company
Pecks tia
|. Revenue from Operations — Sa
evenue from Operations means revenue earned by the company from its operating,
activities carried on by the company to earn profit. Commonly, it is Net
S i Sales Return) for a manufacturing company or trading company, fee
med by a service company and interest.and-dividend.eamed by a financial company, and Total Revenue for a finan,
Calculate Revenue from Operations, Other Income
oe pany from the following information:
laneous Income 5,000; Interest on Lo:
(Profit) on Sale of Building 15,00,000.
ans © 8,00,000; Dividend @ 1,00,000; Gay ancial Statements of a Company
Compute Cost of Materials Consumed from the following:
‘ning Inventory of Materials & 2,50,000; Materials Purchased ® 20,00,000; and Closing
Inventory of Materials & 3,00,000.
Golution:
‘Cost of Materials Consumed = Opening Inventory of Materials + Purchases of Materials
~ Closing Inventory of Materials
= % 2,50,000 + & 20,00,000 ~ % 3,00,000 = & 19,50,000.
fllustration 47.
ompute Cost of Materials Consumed from the following: s
550,000
Finished Goods 2,50,000
of Materials Consumed = Opening Inventory of Materials + Purchases of
Materials ~ Closing Inventory of Materials ;
= © 5,50,000 + % 22,50,000 — € 4,50,000 = % 23,50,000.
ing Inventory of Finished Goods, i.e., € 2,50,000 and Closing Inventory of
ie, 1,50,000 will not be considered to compute Cost of Materials Consumed
to calculate Changes in Inventories of Finished Goods,
tion 48, Financial Statements
Men,
5,50,000, On 1! ° |
in,
11s
Prog caaunten of Axis Menutacturin ss
Ragman showing Coto Maia serum gt
A Sania Inventory of Materials end ae Ae dnd Stock-it nTraae
Trade — Closing 18 ad date te Ki
mined the Cost of Materials
=
Purchases of Stock-in-Trade eth
. eselling. If the company
i ed for reselling: Y ca
in eans goods pur for reset 4
Trade means goods pu! eased seins Traia bar
‘out further ‘i
Processing on the goods purchased, the
Part of the Cost of Materials een For example, if a cOmPANY purchases pape,
eae & Conse revex incTrade’: But, Jf PAPE Ss Bubsitoeg
seal wn as ‘Purchases of Stoc! ost of Materials Consumed’, "
sa ' -
(Say) manufacturing copies, it will be shown under ‘C
3. :
ae In Inventories of Finished Goods, Work-in-P'
Becca is Tas tacies of Finished Goods, Work-in-Froste’s ©" S'0SS METAS ne,
jock) of Finished Gj,
a
rogress and Stock-in-Trage
the difference between the Opening and Closing Inventories (St
wentory (Stock) less Closing
Progress and Stock-in-Trade, i.e., Opening lv
Hag sa i.e, Opening Inventory (Stock) is more
negative, ie., Opening Inventory (Stock) is less than the Closing Im
to Accounts on Changes in Inventories of Fi r
each item of Inventory is shown separately and the
dded to show one amount against the entry in the
jple (with imaginary data) illustrates how it
Inventories of Finished Goods, WIP ancial Statements of a Company
4 is6
Are opening and closing inventories considered in the amount shown against
Purchases of Stock-in-Trade? Give reasons.
Mlustration 50 ‘
eee unts for Change in Inventories of Bakers Ltd. for the year os
7 dist March, 2019 from the following information and determine the amount that wil shed
iors in the’ Statement of Proft faa bene torial Charter ty Levnilened GP aBKe
7 Goods, WIP and Stock-in-Trade:
Eo es “Tr 1.52 : Financial 5! 8
E nefit Expenses May be 4,
*XPenses de — example (With imaginary | Fina
ieee 28 Alnect expenses and joyees Benefit Expens,
Mies how tt bare ie
Note to Accounts f 3
} bor
| Pir
| fer
ei
a
)
.
i
|
mre
Mlustration 51.
Out of the following, identify the items that are shown in the
Benefit Expenses:
(® Wages; (ii) Salaries; (iii) Entertainment Expenses; (iv) Bonus; (0) Gratuity Paid; ang
(e) Conveyance Expenses.
Solution:
Items to be shown in Note to Accounts on Employees Benefit Expenses are:
(® Wages; (ii) Salaries; (iv) Bonus and (v) Gratuity Paid.
Mlustration 52. :
From the following information for the year ended 31st March, 2019, prepare
Accounts on Employees Benefit Expenses:
(® Wages % 2,40,000; (ii) Salaries 3,60,000; (iii) Entertainment Expenses:
gellesrae ; (e) Gratuity Paid % 1,20,000; (vi) Conveyance Expenses % 25,0
Expenses % 40,000.
Note to Accounts on Employe, ents of a Company
© Costs mean costs incurred by the company on the borrowings, i.e., loans taken by
it, It therefore, includes interest-paid on borrowings (such as term loans, bank overdraft
and_cash-credit limit) from banks and from others (such as public deposits, debentures,
bonds, etc.)
Finance Costs also include expenses incurred for the borrowings such as loan processing,
eof debentures and premium payable on redemption of debentures,
are incurred by the company for borrowings. However, Bank Charges
i Costs but are shown under ‘Other Expenses’, they being an expense
"ices availed from the bank.
Illustration 53.
Out of the following, identify the items that are shown in the Notes to Accounts on
Finance Co:
(DAnterest paid on Term Loan; (ii) Interest paid on Bank Overdraft; (iii) Discount on Issue
of Debentures Written off; (iv) Interest Received on Fixed Deposits and (v) Bank Charges.
Solution:
Items that will be shown in the Notes to Accounts on Finance Costs ar
(0 Interest Paid on Term Loan; (ii) Interest Paid on Bank Overdraft and (iii) Discount on
Issue of Debentures Written off.
"Illustration 54.
From the following information of Abacus Ltd. for the year ended 31st March, 2019,
pare Note to Accounts on Finance Costs:
terest paid on Term Loan % 2,50,000; (ji) Interest paid on Bank Overdraft &
ount on Issue of Debentures Written off € 10,000; (jv) Interest Received on]
s & 25,000; (2) Bank Charges % 9,500 and (vi) Interest paid on Deposits '
ioe ree oe
ae cial ‘a Company
Items that will be shown in the Note to Accounts on Other Expenses are:
(ii) Courier Expenses; (iif) Internet Expenses; (iv) Rent for factory; (v) Carriage Outwards;
(vif) Rent for warehouse; (viii) Rent for office and (ix) Audit fee.
Let us now discuss, Statement of Profit and Loss being prepared as a statement:
Illustration 56.
| Following is the Trial Balance of Perfect Solutions Ltd. as at 31st March, 2019;
‘Machinery
Land and Building
“Depreciation on Machinery
Purchases of Raw Materials (Adjusted)
ing Stock
‘of 100 each (Fully paid)
-1,000; 6% Preference Shares of% 100 each (Fully paid) 4, Long-term Bor
10% Debent
5, Short-term Borrowings
Bank Overdr
6, Other Current Liabilities
Interest on Debentur
Dividend Payable: On
ity
On Preference Shares
7. Tangible Assets
Machinery
Land and Building
Notes: 1. Proposed Dividend for the year ended 31st March, 2019 is X 20,000 (9% on Equity Shares) and
© 6,000 (6% on Preference Shares),
2. Transfer to Debentures Redemption Reserve and General Reserve and proposed Dividend on Equity
Shares and Preference Shares for the year ended 31st March, 2018 are items of appropriation from
Surplus, .e., Balance in Statement of Profit and Los
ES TO ACCOUNTS
Notes to Accounts is the statement attached to the financial statements and is a part of
the financial statements. It has details of items of Balance Sheet and Statement of Profit
and Loss besides Significant Accounting Policies and additional information required to
be disclosed as per Schedule III of the Companies Act, 2013 and Explanatory Notes.
Cash Flow Statement is a statement showing the flow of cash and cash equivalents —inflows and
outflows, during an accounting period. This statement is important for better understanding
of financial statements. It is an essential tool for short-term financial analysis. It has been
discussed in a separate chapter.
Objectives of Financial Statements are:
To provide financial data on economic resources and obligations of an enterprise
. To show implications of operating profit on the financial position of an enterprise.
. To provide information about cash flow to investors and creditors for assessing, comparing
_ and evaluating, potential cash flow in terms of amount.
To provide sufficient and reliable information to various parties interested in
1 e and fair view of the business.
activities of business affecting the society.
2s followed in the accounting process Financial Statements of a Company Name the major heads under which the Equity and Liabilities part of a cor
organised and presented.
‘4. What is a contingent liability? Where is it shown in the Balance Sheet? Give.
liabilities.
5. Name the major heads which appear in the Assets part of the Balance Sheet.
"6. Name the major heads which appear in the Equity and Liabilities part of th
2 Name the head under which lo
Name the head under which G 2013. Reserves
State any five items which are shown under the head Ma" 0
‘ company as per Schedule I Part I of the Companies ASN ties,
® Give two examples each of Non-current Assets and Non-