New format of Co’s Income St

Sales xxxx
Less COS (xxxx)
GP xxxx
Other Incomes
Profit on Sale of NCA / Invt xxxx
Decrease in PFDD xxxx
Interest/Dividend received on investment xxxx
Commission received xxxx xxxx
xxxx
Other expenses
Increase in PFDD xxxx
Loss on sale of NCA / Invt xxxx
Salary xxxx
Bad debts xxxx
Electricity bill xxxx
Advt exp xxxx
Dep xxxx (xxxx)
Profit before Interest on Debentures (Profit from operations) xxxx
Less interest on loan / debentures xxxx
Profit before Tax (NP) xxxx
Less Tax (CY’s Provision) (xxxx)
Net profit for the year xxxx

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 Format of statement of changes in equity

OSC RE GR TOTAL
Balance b/d xxx xxx xxx xxx
Issues of shares xxx xxx
NP for the year(PAT) xxx xxx
Final Dividend paid (PY) (xxx) (xxx)
Interim dividend paid (CY) (xxx) (xxx)
Transfer to GR (xxx) xxx Nil
Balance c/d xxx xxx xxx xxx

Proposed dividend is not recorded in books of accounts. Only dividend paid is

recorded in books of accounts. Dividend proposed in current year is paid in next
year. So in this year final dividend paid for PY is recorded (deducted) in RE column.
Interim dividend is a dividend declared and paid during the year.
Format of SFP (B/S)
$ $ $
ASSETS Xxxx
NCA Xxxx
CA Xxxx

EQUITY & LIABILITIES

EQUITY
OSC Xxxx
GR Xxxx
RE Xxxx
Xxxx
NCL Xxxx
CL Xxxx
Xxxx

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Accounting treatment of Preference shares and its dividend in financial
statements

To determine the accounting treatment of preference shares and dividend on

such shares, first you have to identify if preference shares
are redeemable or irredeemable.
Accounting treatment for redeemable preference shares

If preference shares are redeemable then shares are reported as liability in

statement of financial position. This is an interesting fact that although they
are termed as shares but in nature they are liability as entity has to retrieve
the shares at a particular date by paying agreed amount to the holder of
redeemable shares.

And dividend paid on redeemable preference shares is recorded as expense

in income statement as any return paid towards liabilities is treated as an
interest expense in the income statement (profit or loss item).

Accounting treatment for irredeemable preference shares

Irredeemable preference shares are such shares that entity don’t have to
retrieve and in this case they are like ordinary shares. Therefore, they are
recorded as part of equity in the statement of financial position.

As irredeemable preference shares are part of equity therefore, any return

paid on such shares is treated as distribution of profits and reported in
statement of changes in equity.