BASIC FEATURE OF Financial Statement

1. Introduction
Simplicity and understandibility is one of the basic characteristics of Financial Statements.To
Simplify the presentation of Balance Sheet and Profit and Loss Account, The Central Government, in
exercise of the powers under section 641(1) of the Companies Act, 1956 has replaced the existing
Schedule VI with the revised Schedule VI on the 28th February, 2011 pertaining to the preparation of
Balance Sheet and Profit and Loss Account under the Companies Act, 1956.
This Revised Schedule is based on existing non-converged accounting standard notified by company
accounting standard rule, 2006. However a close analysis of the form, content and terminology of
Revised Schedule VI is concerned, concept has been imparted from Indian Accounting Standard (Ind
AS), approved by Ministry of Corporate Affairs without announcing applicability date.
These 35 notified Indian Accounting Standard is based on International Financial Reporting Standards
(IFRSs) issued by International Accounting Standard Board (IASB).
2. Effective Date
New Schedule VI is applicable for Balance Sheet and Profit / Loss Account prepared on or after
1.4.20XX for industry. As far as comparative of 31.3.20XX is concerned, question arise whether it
should be presented as per old schedule VI or new schedule VI. The framework for preparation of
financial statement prescribed comparability as one of the essential qualitative characteristics.
Accordingly it is better to present comparative of 31.3.20xx as per new schedule VI.
3. Supremacy of Accounting Standards
Whenever conflict arise between accounting standard and new schedule VI in that case accounting
standard will override the provision of Schedule VI as per general instructions number 1, 2 and 6.
Case Decision : Simplex Concrete Piles (India) Ltd. vs. Union of India (2007) The Calcutta High
Court held that Schedule VI to the Companies Act, 1956 deals with only presentation of the various
items of income and expenses, assets and liabilities. It does not deal with recognition and
measurement of various items of income and expenses, assets and liabilities. Recognition and
measurement should be in accordance with the Accounting Standards notified vide the Companies
(Accounting Standards) Rules, 2006. Thus, since AS and Schedule VI operate in different fields, the
conflict between them should not arise. However, if they arise, then AS shall prevail.
4. Compulsion of Vertical Form of Balance Sheet and Profit & Loss Account
New Schedule VI mandate vertical form of Balance Sheet and Profit & Loss Account, option of
horizontal format like old Schedule VI has been deleted.
5. Notes to Account in place of Schedules
New Schedule VI replace concept of preparing schedules for presentation of information, instead of
that concept of notes to account has been introduced for presentation of detail relating to balance
sheet, Profit & Loss Account and Summary of Accounting Policies.
6. Simplification of Disclosure
As per Old Schedule VI 1% of total revenue or Rs. 5,000 whichever is higher should be disclosed
separately and not to be merged in the head of miscellaneous expense in profit and loss account.
In the New Schedule VI the figure has been increased and it is now 1% of total revenue and Rs.
1,00,000 whichever is higher.
Rounding Off: Revised norms of rounding off is as follows:

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:
(i) Where turnover of the company in any financial year is less than Rs. 100 crores: Round
off permissible to the nearest hundreds, thousands, lakhs or millions or decimals thereof
(ii) Where turnover of the company in any financial year is Rs. 100 crores or more Round off
permissible to the nearest lakhs or millions or crores or decimals thereof
7. Applicability of Accounting Standards
As per general instruction no. 6 New Schedule VI contain both terminology accounting standards and
Indian Accounting Standards. Since applicability date of Indian Accounting Standard is still to be
notified hence balance sheet and profit & loss account should contain the concept of accounting
standard notified as per company accounting standard rule 2006. As and when applicability date of
Ind AS will be notified by The Government concept of existing and Ind AS both will be applicable.
8. Features of Notes to Account
Notes to account should contain (i) Narrative description or disaggregations of items recognised in
those statement (ii) Information about item that do not qualify for recognition in those statement

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FORMAT OF BALANCE SHEET

1. Balance Sheet
Balance Sheet of the entity present detail of Assets, Liabilities and Equities at the end of reporting
period. Therefore, it is important that information provided in the balance sheet should be simple and
understandable. It is also important that balance sheet must present true and fair picture of state of
affairs of the business. Ministry of Corporate Affairs has considered the similar requirement and
prescribed form and content of the Balance Sheet. A specimen format of prescribed balance sheet is
depicted below:

Figure of Figure of
Notes
Particulars Current Previous
No.
Year Year
I. EQUITY AND LIABILITIES
1. Share holder Fund
(a) Share Capital
(b) Reserves and Surplus
(c) Money received against share warrants
2. Share application money pending allotment
3. Non-current liabilities
(a) Long-term borrowings
(b) Deferred Tax Liabilities (Net)
(c) Other Long term liabilities
(d) Long term provisions
4. Current Liabilities
(a) Short-term borrowings
(b) Trade Payable
(c) Short-term Provision
Total

II. ASSETS
1. Non-current Assets
(a) Fixed Assets
Tangible Assets
Intangible Assets
Capital work in progress
Intangible under development
(b) Non-current Investment
(c) Deferred Tax Assets (Net)
(d) Long-term Loans and Advances
(e) Other Non-current Assets
2. Current Assets
(a) Current Investment
(b) Inventories
(c) Trade receivable
(d) Cash and Cash equivalent

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 (e) Short-term Loans and Advances
(f) Other current assets
Total

2. Profit and Loss Statement

Evaluator of Financial Statement is always concerned about the profit earned by the entities for
investment prospective in the entity and financial performance of the entities. Profit of the year
consists of profit from ordinary activities, extraordinary activities, continuing operation and
discontinuing operation. A part of profit is also attributable to Government in current year and future
year, therefore, it is necessary that detail of profit and loss should provide split of the profit from each
and every activities. Ministry of Corporate Affairs has therefore considered the requirement of
evaluator profit and loss account and prescribed mandatory reporting format of profit and loss
statement which is depicted below:

Notes Figure of Figure of

Particulars
No. Current Year Previous Year
I. Revenue from operations
II. Other income
III. Total Revenue (I + II)
IV. Expenses :
Cost of materials consumed
Purchases of Stock-in-Trade
Changes in inventories of finished goods
work-in-progress and Stock-in-Trade
Employee benefits expense
Finance costs
Depreciation and amortization expense
Other expenses
Total expenses
V. Profit before exceptional and extraordinary
items
and tax (III - IV)
VI. Exceptional items
VII. Profit before extraordinary items and tax (V -
VI)
VIII. Extraordinary Items
IX. Profit before tax (VII - VIII)
X Tax expense :
(1) Current Tax
(2) Deferred Tax
XI. Profit (Loss) for the peirod from continuing
operations (VII - VIII)
XII. Profit / (loss) from discontinuing operations
XIII. Tax expense of discontinuing operations
XIV. Profit / (loss) from Discontinuing operations
(after tax) (XII - XIII)
XV. Profit (Loss) for the period (XI + XIV)

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 XVI. Earnings per equity share :
(1) Basic
(2) Diluted

4. Notes to Account
As per general instruction no. 3 “Notes to Account” is required to be prepared for detail of
information of item of balance sheet and profit & loss account. Ministry has prescribed the content of
notes but presentation format has not been prescribed. Format for presentation of the notes should be
prepared as per the requirement of the Industry.

Based on content given by Ministry of Corporate Affairs specimen formats are detailed below for
examination point of view.
(1) Summary of Significant Accounting Policies

(2) Share Capital

Figure of Current Figure of Previous
Particulars
year Year

Authorised Share Capital

............ Equity shares @ ..... each.
............ Preference shares @ .... each
Total xxx xxx
Issued & Subscribed Share Capital
............ equity shares @ ..... each.
............ Preference shares @ .... each
Total xxx xxx
Paid-up Share Capital
............ equity shares @ ..... each.
............ Preference shares @ .... each
Less : Calls unpaid by directors and other officers
Add : Equity shares forfeited (Paid-up)
Add : Calls in advance
Total xxx xxx

(3) Reserves and Surplus

Opening Additio Deletio Closing
Particulars
Bal. n n Bal.
General Reserve
Capital Reserves
Capital Redemption Reserve
Securities Premium Account
Debenture Redemption Reserve
Revaluation Reserve
Share Options Outstanding
Account
Dividend equalisation Reserve

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Taxation Reserve
Reserve for contingent liability
Subsidy Reserve
Surplus of Profit and Loss Account
Total

(4) Long-term Borrowing

Total Secured Unsecure Rate of
Particulars
Amount Portion d Portion interest
Bond and Debenture
Term Loan from Bank
Term Loan from Other Party
Deferred Payment Liability
Deposit
Loans and Advances from relating party
Long-term maturity of finance lease obligation
Other Loans and advances
Total