Balance Sheet

GAAP Revisited
 Separate Entity
 Money Measurement
 Going Concern
 Historical Cost
 Conservatism
 Dual Aspect
 Schedule VI – Part I
 Accounts must be maintained on an accrual basis and
according to double entry book keeping system (sect.-209)

 The Balance Sheet and the Profit & Loss account must be
prepared for every financial year

 The financial statements must be laid before the Annual

General Meeting of the shareholders for approval within six
months of the close of the year (Section 210)

 The balance sheet of a company shall be either in

horizontal form or vertical form

 The Balance Sheet must show figures for the current year
and comparative figures for the previous year

 Information required under any head may be given in

separate `Schedule’
 Figures as at Figures as at
the end of the end of
Note
Particulars current previous
No
reporting reporting
period period
I. EQUITY AND LIABILITIES      
(1) Shareholder's Funds      
(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 payables      
(c) Other current liabilities      
(d) Short-term provisions      
Total
 Figures as at
Figures as at the
Note the end of
Particulars end of previous
No current
reporting period
reporting period
       
II. Assets      
(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      
(a) Current investments      
(b) Inventories      
(c) Trade receivables      
(d) Cash and cash equivalents      
(e) Short-term loans and advances      
(f) Other current assets      
Total      
Equity and Liabilities
 Share Capital
 Authorized, Issued, Subscribed, and Called up for each class of
shares
 Calls unpaid to be deducted from the Called up capital to arrive at
Paid up Capital
 Add: Forfeited Shares (amount paid up)
 Terms of redemption/conversion of redeemable preference shares
to be stated with date redemption/conversion
 Shares issued for consideration other than cash to be identified
 Shares allotted by way of bonus shares to be shown
 Sources from which bonus shares have been issued to be specified
 Calls unpaid by the Directors to be separately indicated
 Type of Capital
 Preference Capital
– Preference for payment of dividend at a fixed
rate and repayment of Capital
 Equity Capital
– Perpetual
– Last preference for dividend and repayment of
capital
 Type of Capital
 Authorized Share Capital – The maximum amount that the
company may raise by issuing capital is mentioned in the
Memorandum of Association
 Issued Share Capital – Part of Authorized Share Capital
that is offered by the company for subscription
 Subscribed Share Capital – Part of the Issued Share
Capital that is subscribed by the shareholders
 Called up Share Capital – Part of the Subscribed Share
Capital that has been called up by the Company
 Calls in Arrear – call amount not paid by the shareholders
 Paid up Capital – Called up share capital minus calls in
arrear
 Forfeited Shares – amount paid up on the shares forfeited
due to non payment of call money
 Reserve & Surplus
 Capital Reserves
 Capital Redemption Reserve;
 Securities Premium Reserve;
 Debenture Redemption Reserve;
 Revaluation Reserve
 Share Options Outstanding Account
 Other Reserves
– Specify the nature and purpose of each reserve and the amount in
respect thereof
 Surplus i.e. balance in Statement of Profit & Loss
 Reserve & Surplus
 Addition and deductions since the last balance sheet under
each specified head
 `Fund’ in relation to any `Reserve’ should be used only
where such reserve is specifically represented by
earmarked investments
 Debit balance of statement of profit and loss shall be
shown as a negative figure.
 The balance of ‘Reserves and Surplus’, after adjusting
negative balance of surplus, if any, shall be shown under
the head ‘Reserves and Surplus’ even if the resulting
figure is in the negative.
Liabilities
 Long Term Borrowings
 Bonds/debentures.
 Term loans
– from banks.
– from other parties
  Deferred payment liabilities.
  Deposits.
  Loans and advances from related parties.
 Long Term Borrowings
 Long term maturities of finance lease obligations
 Other loans and advances
– Borrowings shall further be sub-classified as secured
and unsecured. Nature of security to be specified
separately in each case.
 Deferred Tax Liability/Assets
 Relevant Accounting Standard – AS 22
 Due to difference between taxable income (as per
Income Tax Act) and accounting profit
– Permanent Difference
» Don’t reverse subsequently
» Expenses disallowed, exempt income
– Timing Difference
» Reversed in the subsequent period
» Expenses allowed on payment basis, depreciation
 Deferred Tax Liability/Assets
Cause Effect Accounting
Accounting Tax on Accounting Create
Income > Taxable Income > Tax Deferred Tax
Income payable as per Liability
Income Tax Act
Accounting Tax on Accounting Create
Income < Taxable Income < Tax Deferred Tax
Income payable as per Asset
Income Tax Act
 Other Long Term Liabilities
 Trade payables
 Others
 Long Term Provisions
 Provision for employee benefits.
 Others (specify nature).
 Current Liabilities
 Expected to be settled in the company’s normal operating
cycle;  
 Held primarily for the purpose of being traded;
 Due to be settled within twelve months after the reporting
date; or
  the company does not have an unconditional right to defer
settlement of the liability for at least twelve months after
the reporting date.
 Short Term Borrowings
 Loans repayable on demand
» from Banks
» from other parties
  Loans and advances from related parties.
  Deposits.
  Other loans and advances
 Further classified as secured and unsecured
mentioning nature of security
 Other Current Liabilities
 Current maturities of long-term debt;
 Current maturities of finance lease obligations;
 Interest accrued but not due on borrowings;
 Interest accrued and due on borrowings;
 Income received in advance;
 Unpaid dividends
 Other Current Liabilities
 Application money received for allotment
of securities and due for refund and interest
accrued thereon
 Unpaid matured deposits and interest
accrued thereon
 Unpaid matured debentures and interest
accrued thereon
 Other payables
 Short term provisions
 Provision for employee benefits.
 Others
Assets
Assets - Classification
 Tangible Assets
 Show at cost of acquisition less depreciation
– The cost comprise purchase price and any attributable cost of
bringing the asset to its working condition for its intended use.
(AS-10)
– Capitalize borrowing cost up-to the point the asset us ready for its
intended use (AS-16)
– Import duties, taxes, delivery & handling costs, site preparations,
installation cost, professional fees, start up & commissioning, test
runs
– Subsequent expenditures to be added to its book value only if they
increase the future benefits from the existing asset
» Improvement
» Repairs
 Tangible Assets
 Show, to the extent possible, under the
following headings
– Land.
– Buildings.
– Plant and Equipment.
– Furniture and Fixtures.
– Vehicles.
– Office equipment.
– Others (specify nature).
 Tangible Assets
 Under each head show the original cost, addition and
deduction during the year and total depreciation written off
up to the end of the year
– Original Cost – Gross Block
– Less Accumulated Depreciation – Net Block
 Intangible Assets
 Identifiable, non-monetary assets without physical substance
 Acquired intangible assets are recorded at their cost of
acquisition
 Self-generated goodwill/brand value is not recognized
 Research cost – inventing or creating a new product, method or
system – is not capitalized
 Development cost – converting the result of research into a
marketable product – can be capitalized
 Expenses that provide future economic benefits but no
intangible assets is created – treat as expense when incurred e.g.
start up costs, launching new product, training etc.
 Intangible Assets
 Goodwill.
 Brands /trademarks.
 Computer software.
 Mastheads and publishing titles.
 Mining rights.
 Copyrights, and patents and other intellectual property rights,
services and operating rights.
 Recipes, formulae, models, designs and prototypes.
 Licenses and franchise.
 Others (specify nature).
 Investments
 Relevant Accounting Standard : AS 13
– Distinguish between Current Investments and Long Term Investments
» Current Investments – Intended to be held for not more than one year
 Cost of Investment includes all the related costs
 Valuation (Carrying Amount)
– Current Investment – at Lower of Cost or Fair Value – preferably on
individual basis
– Long Term Investments – at Cost subject to any non-temporary
diminution
 Profit or Loss on disposal of investment to be shown in Profit & Loss
Account
 Significant restriction on right of ownership, remittance of income or
proceeds of disposal to be disclosed
 Non-current Investments
 Trade investments and other investments
– Investment property;
– Investments in Equity Instruments;
– Investments in preference shares
– Investments in Government or trust securities;
– Investments in debentures or bonds;
– Investments in Mutual Funds;
– Investments in partnership firms
– Other non-current investments (specify nature)
 Current Investments
 Investments
– Equity Instruments;
– Preference Shares
– Government or trust securities;
– Debentures or bonds;
– Mutual Funds;
– Partnership firms
– Other investments
 Non Current Investments
 Aggregate amount of quoted investments and their
market value should be shown
 Aggregate amount of unquoted investments to be
shown
 Aggregate provision for diminution in value of
investments
Long Term Loans and Advances
 Long-term loans and advances shall be classified as:
– Capital Advances;
– Security Deposits;
– Loans and advances to related parties (giving details thereof);
– Other loans and advances (specify nature).
 Sub-classified as:
– Secured, considered good;
– Unsecured, considered good;
– Doubtful.
 Other Non Current Assets
 Long Term Trade Receivables (including trade receivables
on deferred credit terms);
 Others (specify nature)
 Long term Trade Receivables, shall be sub-classified as:
– Secured, considered good;
– Unsecured considered good;
– Doubtful
 Current Assets
 Expected to be realized in, or is intended for sale or
consumption in, the company’s normal operating cycle;
 Held primarily for the purpose of being traded;
 Expected to be realized within twelve months after the
reporting date; or
 Cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least twelve
months after the reporting date.
 Inventories
 Raw materials;
 Work-in-progress;
 Finished goods;
 Stock-in-trade (in respect of goods acquired for
trading);
 Stores and spares;
 Loose tools;
 Others (specify nature).
 Trade Receivables
 Aggregate amount of Trade Receivables outstanding for a
period exceeding six months from the date they are due for
payment
  Trade receivables
– Secured, considered good;
– Unsecured considered good;
– Doubtful.
 Allowance for bad and doubtful debts
 Cash and Cash Equivalents
 Cash and cash equivalents shall be classified as:
– Balances with banks;
– Cheques, drafts on hand;
– Cash on hand;
– Others (specify nature).
 Earmarked balances with banks (for example, for
unpaid dividend) shall be separately stated.
 Cash and Cash Equivalents
 Balances with banks to the extent held as margin
money or security against the borrowings,
guarantees, other commitments
 Repatriation restrictions, if any, in respect of cash
and bank balances
  Bank deposits with more than 12 months maturity
 Short term loans and advances
 To be classified as:
– Loans and advances to related parties (giving details thereof);
–  Others (specify nature).
  Further to be sub-classified as:
– Secured, considered good;
– Unsecured, considered good;
– Doubtful.
  Allowance for bad and doubtful loans and advances
Off Balance Sheet Liabilities
 Contingent Liabilities
 Contingency
– A condition or situation, the ultimate outcome
of which, gain or loss, will be known or
determined only on the occurrence, or
nonoccurrence, of one or more uncertain future
events.
– Restricted to conditions or situations at the
balance sheet date
– The estimates of the outcome and of the
financial effect of contingencies are determined
by the judgment of the management of the
enterprise.
 Contingent Liabilities
 Claims against the company not acknowledged as debt;
 Guarantees;
 Other money for which the company is contingently liable
 Commitments shall be classified as:
– Estimated amount of contracts remaining to be executed on capital
account and not provided for;
– Uncalled liability on shares and other investments partly paid
– Other commitments