HOW TO

PREPARE FINAL
ACCOUNTS OF
PUBLIC LIMITED
COMPANIES ?

by :
DR. T.K. JAIN
AFTERSCHO☺OL
centre for social entrepreneurship
sivakamu veterinary hospital road
bikaner 334001 rajasthan, india
FOR – PGPSE PARTICIPANTS
mobile : 91+9414430763
 PREFACE
Ours is a great country with immense
entrepreneurial potential. However, our legal
system is so cumbersome that our creativity
and talent is wasted / unnecessarily diverted in
these sectors. I wish that these are simplified
so that an ordinary entrepreneur can
understand these without help from any expert.
I wish that more people should become
entrepreneurs, rather than becoming an expert
in avoiding taxation. Let us wish that some
likeminded person is able to reach policy
making level and is able to change these. I
have tried to simplify legal system with regard
to accounting / reporting for Indian
entrepreneurs – but it is so complicated that
even if you simplify it, it will remain
complicated. An ordinary Indian entrepreneur
wishes to remain an honest entrepreneur and
contribute to the development of the nation, so
latest honestly work to simplify our legal
systems and let us hope that law should be
made by those who practice it in their day to
day life. Just read the language of law, it is so
difficult that an ordinary person cannot
understand it – not to talk about remembering
it .....
 OBJECTIVES OF THIS E-BOOK
To familiarise the entrepreneurs with the statutory requirements of companies
act in India regarding format of balance sheet and profit and loss account.

Download links :

Kindly download following for basic readings :

http://www.scribd.com/doc/11627269/Final-Accounts

http://www.scribd.com/doc/22783825/Accounting-Process

http://www.scribd.com/doc/14676163/Accounting

http://www.scribd.com/doc/19492869/Accounting

http://www.scribd.com/doc/28442846/Accounting-for-Entrepreneurs

http://www.scribd.com/doc/28013426/Accounting-for-Public-Companies

Final accounts of a company consist of the following two statements:

1. Balance Sheet as at the end of the accounting period disclosing the

financial position of the company (as on a particular date)

2. Profit and Loss Account for that period disclosing the results of the
operations of the company (for the entire financial year)

A company is under legal obligation to keep proper books of account and to

prepare its final accounts every year in the prescribed manner. While preparing
its final accounts, each and every company must conform to certain legal
requirements as contained in the Companies Act, 1956.

1. PREPARATION AND PRESENTATION OF FINAL

ACCOUNTS
Section 210 of the Companies Act, 1956 governs the preparation and
presentation of final accounts of a company. It provides that -

1. At every general meeting of a company held in pursuance of Section

166, the Board of directors of the company shall lay before the company
-

a. a balance sheet at the end of the period specified in sub-

section (3); and
 b. a profit and loss account for that period.

2. If the company is a not for profit company (sec 25 company), it

will prepare income and expenditure statement and present it.

3. The profit and loss account shall relate -

a. in the case of the first annual general meeting of the company,

to the period beginning with incorporation of the company and
ending with the end of the financial year. The AGM has to be
called up in not more than nine months from the close of
financial year.

b. in the case of any subsequent annual general meeting of the

company, to the period beginning with the day immediately
after the period for which the account was last submitted and
ending with the the end of financial year (31 march). The AGM
has to be called up in not more than six months from the close
of financial year unless the time is extended as per sec. 166.

4. The accounting period is called a “financial year” and it may

be less or more than a calendar year, but it shall not exceed
fifteen months, unless special permission has been granted in
that behalf by the Registrar for upto 18 months. .

1. FORM AND CONTENTS OF BALANCE SHEET AND

PROFIT AND LOSS ACCOUNT
Section 211 of the Companies Act, 1956 prescribes the form and contents of
balance sheet and profit and loss account of a company which provides that-

1. Every balance sheet a company shall give a true and fair view of the
state of affairs of the company as at the end of the financial year and
shall, subject to the provisions of this section, in the format of Part I of
Schedule VI along with the prescribed notes

EXCLUSIONS : these are excluded – for them there are separate

provisions: (there are saparate laws for banking / insurance /
electricity companies )

a. banking companies

b insurance companies

c electricity generation / distribution companies .

2. Every profit and loss account of a company shall give a true and fair view
of the profit or loss of the company for the financial year and will be as
per Part II of Schedule VI:

EXCLUSIONS : these are excluded – for them there are separate

 provisions:

a. banking companies

b insurance companies

c electricity generation /distribution companies .

3. The central government may exempt some companies from schedule VI

of the companies act in public interest.

Any such exemption may be granted either unconditionally or subject

to such conditions as may be specified in the notification.

Every profit and loss account and balance sheet of company shall
comply with the accounting standards and if there is any deviation
from accounting standards, following must be disclosed : (a)
deviation from the accounting standards; (b) the reasons for such
deviation, and (c) the financial effect, if any, arising due to such
deviation.

4. The government may exempt a compnay from any of the provisions of

the companies act. However, otherwise, default in implementation of
Section 209, by MD / manager may result in penalty of Rs 10000 /
imprisonment

Since every balance sheet of a company shall in the form set out in Part I of
Schedule VI and every profit and loss account of a company shall comply with
the requirements of Part II of Schedule VI, or as near thereto as circumstances
admit it is important to study Schedule VI very carefully. A detailed discussion is
made on Schedule VI as follows:

1. SCHEDULE VI OF THE COMPANIES ACT, 1956

Schedule VI to the Companies Act, 1956, consists of the following parts:

Part I - Part I of Schedule VI prescribes two alternative forms of balance sheet,

i.e., horizontal form and vertical form.

It also indicates the information relating to different assets and liabilities which
should be disclosed, therein. Besides there are general instructions at the end
of the form which must be followed in preparing the balance sheet.

Part II - Part II of Schedule VI P & L Account – the company may adopt any
format – as no format is given. .

Part III - Part III of Schedule VI contains the interpretation of certain terms.

Part IV - Part IV of Schedule VI contains balance sheet abstract and general

business profile.
 SCHEDULE VI

(See Section 211)

PART I
FORM OF BALANCE SHEET
The balance sheet of a company shall be either in horizontal form or vertical
form:

A. Horizontal Form

Balance Sheet of...............................................(Here enter the name of the

company) as at.......................................................................(Here enter the
date as at which the balance sheet is made out).

Fig Fig
s. s.
Figs. Figs.
for For
For for
the the
the the
LIABILITIES curr pre ASSETS
prev. curr.
. v.
year Year
Yea yea
Rs. Rs.
r r
Rs. Rs.

(1) (2) (3) (4) (5) (6)

Share Capital: Fixed Assets:

Authorised..... Shares of Rs..... each. Distinguishing

as far as
Issued: (distinguishing between the possible
various classes of capital and stating between
the particulars specified below in expenditure
respect of each class)..... shares of upon:
Rs..... each.
(a) goodwill,
Subscribed: (distinguishing between
the various classes of capital and (b) land,
stating the particulars specified below,
in respect of each class)..... shares of (c) buildings,
Rs..... each Rs..... called up.
(d) leaseholds,
Of the above shares..... shares are
allotted as fully paid-up pursuant to a (e) railway
contarct without payments being sidings,
received in cash. Of the above
shares..... shares are allotted as fully (f) plant and
paid-up by way of bonus shares. machinery,

(Specify the source from which bonus (g) furniture

shares are issued, e.g., capitalisation and fittings,
of profits or reserves or from share
premium account). (h)
development
Less: Calls unpaid: of property,

(i) By directors. (i) patents,

trade marks
(ii) By others. and designs,

Add: Forfeited shares: (j) livestock,

(Amount originally paid-up) (i) vehicles,

etc.
(Any capital profit on re-issue of
forfeited shares should be transferred Notes:
to capital reserve).
(1) Under
Notes: each head the
original cost
(1) Terms of redemption or conversion and the
(if any) of any redeemable preference additions
capital are to be stated together with thereto and
earliest date of redemption or deductions
conversion. therefrom
during the
(2) Particulars of any option on un- year, and the
issued share capital are to be total
specified. depreciation
written off or
(3) Particulars of the different classes provided upto
of preference shares are to be given. the end of the
year are to be
(4) In the case of subsidiary stated.
companies the number of shares held Depreciation
by the holding company as well as by written off or
the ultimate holding company and its provided shall
subsidiaries shall be separately stated be allocated
in respect of subscribed share capital. under the
The auditor is not required to certify different asset
the correctness of such shareholding heads and
as certified by the management. deducted in
arriving at the
Reserves and Surplus: value of Fixed
Assets.
1. Capital Reserves.
(2) Where the
2. Capital Redemption Reserve. original cost
aforesaid and
3. Securities Premium Account additions and
(showing details of its utilisation in the deductions
manner provided in Section 78 in the thereto, relate
year of utilisation). to any fixed
asset which
4. Other reserves specifying the nature has been
of each reserve and the amount in acquired from
respect thereof. a country
outside India,
Less: Debit balance in profit and loss and in
account (if any) consequence
of a change in
(The debit balance in the profit and the rate of
loss account shall be shown as a exchange at
deduction from the uncommitted any time after
reserves; if any). the acquisition
of such asset,
5. Surplus, i.e., balance in profit and there has
loss account after providing for been an
proposed allocations, namely: increase or
Dividend, Bonus or Reserves. reduction in
the liability of
6. Proposed additions to Reserves. the company,
as expressed
7. Sinking Funds. in Indian
currency, for
Notes: making
payment
(1) Addition to and deductions since towards the
last balance sheet to be shown, under whole or a part
each of the specified heads. of the cost of
the asset or
(2) The word “fund” in relation to any for repayment
“Reserve” should be used only where of the whole or
such Reserve is specifically a part of
represented by earmarked moneys
investments. borrowed by
the company
Secured Loans: from any
person,
1. Debentures directly or
indirectly in
2. Loans and Advance from Bank. any foreign
currency
3. Loans and Advances from specifically for
Subsidiaries. the purpose of
acquiring the
4. Other Loans and Advances. asset (being in
either case the
Notes: liability
existing
(1) Loans from directors and manager immediately
should be shown separately. before the
date on which
(2) Interest accrued and due on the change in
Secured Loans should be included the rate of
under the appropriate sub-heads exchange
under the head “Secured Loans”. takes effect),
the amount by
(3) The nature of security to be which the
specified in each case. liability is so
increased or
(4) Where loans have been reduced
guaranteed by managers and/or during the
directors, a mention thereof shall also year, shall be
be made and also the aggregate added to, or,
amount of such loans under each as the case
head. may be,
deducted from
(5) Terms of redemption or conversion the cost, and
(if any) of debentures issued to be the amount
stated together with earliest date of arrived at after
redemption or conversion. such addition
or deduction
Unsecured Loans: shall be taken
to be the cost
1. Fixed Deposits. of the fixed
asset.
2. Loans and Advances from
subsidiaries. Explanation: In
this paragraph
3. Short-term Loans and Advances: unless the
context
(a) From banks. otherwise
requires, the
(b) From others. expressions
“rate of
(Short-term Loans will include those exchange”,
which are due for repayment for not “foreign
more than one year as at the date of currency” and
the balance sheet). “Indian
currency” shall
4. Other Loans and Advances: have the
meanings
(a) From banks. respectively
assigned to
(b) From others. them under
Sub-section
Notes: (1) of Section
43A of the
(1) Loans from directors and manager Income-tax
should be shown separately. Act, 1961 (43
of 1961), and
(2) Interest accrued and due on Explanation 2
Unsecured Loans should be included and
under the appropriate sub-heads Explanation 3
under the head “Unsecured Loans”. of the said
sub-section
(3) Where loans have been shall, as far as
guaranteed by manager, and/or may be, apply
directors, a mention thereof shall also in relation to
be made together with the aggregate the said
amount of such loans under each paragraph as
head. they apply to
the said Sub-
Current Liabilities and Provisions: section (1).

A. Current Liabilities (3) In every

case where
1. Acceptances. the original
cost cannot be
2. Sundry creditors ascertained
without
(a) total outstanding dues of micro unreasonable
enterprises and small enterprises; and expense or
delay the
(b) total outstanding dues of creditors valuation
other than micro enterprises and small shown by the
enterprises. books shall be
given. For the
3. Subsidiary companies. purpose of this
paragraph,
4. Advance payments and unex-pired such valuation
discounts for the portion for which shall be the
value has still to be given, e.g., in the net amount at
case of the following companies: which an asset
stood in the
Newspapers, Fire Insurance, company’s
Theatres, Clubs, Banking, Steamship books at the
Companies, etc. commenceme
nt of this Act
5. Investor Education and Protec-tion after deduction
Funds shall be credited by the of the amounts
following amounts namely: previously
provided or
(a) Unpaid dividend written off for
depreciation or
(b) Unpaid application money received diminution in
by the companies for allotment of value and
securities and due for refund where any
such asset is
(c) Unpaid Matured Deposits sold the
amount of
(d) Unpaid Matured Debentures sales
proceeds,
(e) Interest accrued on (a) to (d) shall be shown
above. as deduction.

6. Other liabilities (if any). (4) Where

sums have
7. Interest accrued but not due on been written
loans. off on a
reduction of
(a) the principal amount and the capital or a
interest due thereon (to be shown revaluation of
separately) remaining unpaid to any assets, every
supplier as at the end of each balance sheet
accounting year; (after the first
balance sheet)
(b) the amount of interest paid by the subsequent to
buyer in terms of section 16 of the the reduction
Micro, Small and Medium Enterprises or revaluation
Development Act, 2006, along with the shall show the
amount of the payment made to the reduced
supplier beyond the appointed day figures and
during each accounting year; with the date
of the
(c) the amount of interest due and reduction in
payable for the period of delay in place of the
making payment (which have been original cost.
paid but beyond the appointed day
during the year) but without adding the (5) Each
interest specified under the Micro, balance sheet
Small and Medium Enterprises for the first five
Development Act, 2006; years
subsequent to
(d) the amount of interest accrued and the date of the
remaining unpaid at the end of each reduction,
accounting year; and shall show
also the
(e) the amount of further interest amount of the
remaining due and payable even in the reduction
succeeding years, until such date made.
when the interest dues as above are
actually paid to the small enterprise, (6) Similarly,
for the purpose of disallowance as a where sums
deductible expenditure under section have been
23 of the Micro, Small and Medium added by
Enterprises Development Act, 2006. writing up the
assets, every
B. Provisions: balance sheet
subsequent to
8. Provision for taxation such writing
up shall show
9. Proposed dividends. the increased
figures with
the date of the
10. For contingencies. increase in
place of the
11. For provident fund scheme. original cost.
Each balance
12. For insurance, pension and similar sheet for the
staff benefit schemes. first five years
subsequent to
13. Other provisions. the date of the
writing up shall
A footnote to the balance sheet may also show the
be added to show separately: amount of
increase
1. Claims against the company not made.
acknowledged as debts.
Investments:
2. Uncalled liability on shares partly
paid. Showing
nature of
3. Arrears of fixed cumulative investment
dividends. and made of
valuation; for
(The period for which the dividends example, cost
are in arrear or if there is more than or market
one class of shares, the dividends on value, and
each such class are in arrear, shall be distinguishing
stated. The amount shall be stated between:
before deductions of income-tax,
except that in the case of tax-free 1. Investments
dividends the amount shall be shown in Government
free of income-tax and the fact that it is or Trust
so shown shall be stated). securities.

4. Estimated amount of contracts 2. Investments

remaining to be executed on capital in shares,
account and not provided for. debentures or
bonds.
5. Other moneys for which the (Showing
company is contingently liable. separately
shares, fully
(The amount of any guarantees given paid-up and
by the company on behalf of directors partly paid-up
or other officers of the company shall and also
be stated and where practicable, the distinguishing
general nature and amount of each the different
such contingent liability, if material, classes of
shall also be specified). shares and
showing also
in similar
details
investments in
shares,
debentures or
bonds of
subsidiary
companies).

3. Immovable
properties.

4. Investments
in the capital
of partnership
firms.

5. Balance of
unutilised
monies raised
by issue.

Notes:

(1) Aggregate
amount of
company’s
quoted invest-
ments and
also the
market value
thereof shall
be shown.

(2) Aggregate
amount of
company’s
unquoted
invest-ments
shall also be
shown.

(3) All
unutilised
monies out of
the issue must
be separately
disclosed in
the Balance
Sheet of the
company
indicating the
form in which
such unutilised
funds have
been invested.
Current
Assets, Loans
and
Advances:

(A) Current
Assets

1. Interest
accrued on
investments.

2. Stores and
spare parts.

3. Loose tools.

4. Stock-in-
trade.

5. Work-in-
progress.

Notes:

(1) Mode of
valuation of
stock shall be
stated and the
amount in
respect of raw
materials shall
also be stated
separately
where
practicable.

(2) Mode of
valuation of
works-in-
progress shall
be stated.

6. Sundry
debtors:

(a) Debts
outstanding for
a period
exceeding six
months.

(b) Other
debts.

Less:
Provision

Notes:

(1) The
amounts to be
shown under
sundry debtors
shall include
the amounts
due in respect
of goods sold
or services
rendered or in
respect of
other
contractual
obligations but
shall not
include the
amounts
which are in
the nature of
loans or
advances.

(2) In regard to
sundry debtors
particulars to
be given
separately of:

(a) debts
considered
good and in
respect of
which the
company is
fully secured;

(b) debts
considered
good for which
the company
holds no
security other
than the
debtors
personal
security; and

(c) debts
considered
doubtful or
bad.

(3) Debts due

by directors or
other officers
of the
company or
any of them
either
severally or
jointly with any
other person
or debts due
by firms or
private
companies
respectively in
which any
director is a
partner or a
director or a
member to be
separately
stated.

(4) Debts due

from other
companies
under the
same
management
within the
meaning of
Sub-section
(1B) of Section
370 to be
disclosed with
the name of
the
companies.

(5) The
maximum
amount due by
directors or
other officers
of the
company at
any time
during the
year to be
shown by way
of a note.

(6) The
provision to be
shown under
this head
should not
exceed the
amount of
debts stated to
be considered
doubtful or
bad and any
surplus of
such
provision, if
already
created,
should be
shown at
every closing
under
“Reserves and
Surplus” (on
the Liabilities
side) under a
separate sub-
head
(“Reserve for
Doubtful or
Bad Debts”).

(7A) Cash
balance on
hand.

(7B) Bank
Balances:

(a) With
Scheduled
Banks; and

(b) With
others.

Notes:

In regard to
bank
balances,
particulars to
be given
separately of:

(a) the
balances lying
with scheduled
banks on
current
accounts, call
accounts and
deposit
accounts;

(b) the names

of the bankers
other than
Scheduled
Banks and the
balance lying
with each such
banker on
current
accounts, call
accounts, and
deposit
accounts and
the maximum
amount
outstanding at
any time
during the
year with each
such banker;
and

(c) the nature

of the interest,
if any, of any
director or his
relative in
each of the
bankers [other
than
Scheduled
Banks referred
to in (b)
above].

(d) All
unutilised
monies out of
the issue must
be separately
disclosed in
the balance
sheet of the
company
indicating the
form in which
such unutilised
funds have
been invested.

(B) Loans and

Advances:

(8) (a)
Advances and
Loans to
subsidiaries.

(b) Advances
and loans to
partnership
firms in which
the company
or any of its
subsidiaries is
a partner.

(9) Bills of
Exchange.

(10) Advances
recoverable in
cash or in kind
or for value to
be received,
e.g., rates,
taxes,
insurance, etc.

(11) Balance
with Customs,
Port Trust, etc.
(where
payable on
demand).

Notes:

(1) The
instructions
regarding
sundry debtors
apply to
“Loans and
Advances”
also.

(2) The
amounts due
from other
companies
under the
same
management
within the
meaning of
Sub-section
(1B) of Section
370 should
also be given
with the
names of the
companies;
the maximum
amount due
from everyone
of these at any
time during the
year must be
shown.

Miscellaneous
Expenditure:

(to the extent

not written off
or adjusted)
(1) Preliminary
expenses.

(2) Expenses
including
commission or
brokerage on
underwriting or
subscription of
shares or
debentures.

(3) Discount
allowed on the
issue of
shares or
debentures.

(4) Interest
paid out of
capital during
construction
(also stating
the rate of
interest).

(5)
Development
expenditure
not adjusted.

(6) Other
sums
(specifying
nature).

Profit and
Loss Account:

(Show here
the debit
balance of
profit and loss
account
carried
forward after
deduction of
the
uncommitted
reserves, if
 any).

General Notes
1. Dividends declared by subsidiary companies after the date of the balance sheet
should not be included unless they are in respect of period which closed on or
before the date of the balance sheet.
2. Information relating to benefits expected from contracts to the extent not executed
shall not be made in the balance sheet but shall be made in the Board’s report.
3. Information must be given about redeemed debentures, which the company may
reissue.
4. Information must be given about debentures held by trustees / nomnees.
5. Detailed information should be given about trade investments (which is part of
current assets) – if these investments are in any partnership firms or in companies
with same management, the details should be furnished.
6. If there is any doubtful debt / assets, the board of director must mention their view
about that.
7. Each item must contain information about the amount mentioned last year. For
example – if you are showing buildings as Rs. 2 Crore, what was it just last year. So
mention it.
8. Current accounts of directors and manager (if any), whether credit or debit, must be
shown separately.
9. If there is some additional information, give it as a schedule. .
10.You can give information in paise also – if it is desired.
11.The terms ‘appointed day’, ‘buyer’, ‘enterprise’, ‘micro enterprise’, ‘small enterprise’
and ’supplier’, shall be as defined under clauses (b), (d), (e), (h), (m) and (n)
respectively of section 2 of the Micro, Small and Medium Enterprises Development
Act, 2006.
B - Vertical Form

Name of the Company ..............

Balance Sheet as at ..............

Figures as
at the end
Schedul Figures as at the end of
of previous
e No. current financial year
financial
year
(1) (2) (3) (4)
I. Sources of Funds
(1) Shareholders’ funds:
(a) Capital ... ... ...
(b) Reserves and surplus ... ... ...
(2) Loan funds:
(a) Secured loans ... ... ...
(b) Unsecured loans ... ... ...
TOTAL ... ... ...
II. Application of Funds
(1) Fixed assets:
(a) Gross block ... ... ...
(b) Less depreciation ... ... ...
(c) Net block ... ... ...
(d) Capital work in progress ... ... ...
(2) Investments
(3) Current assets, loans and
advances:
(a) Inventories ... ... ...
(b) Sundry debtors ... ... ...
(c) Cash and bank balances ... ... ...
(d) Other current assets ... ... ...
(e) Loans and advances ... ... ...
Less: Current Liabilities and
Provisions:
(a) Liabilities ... ... ...
(b) Provisions ... ... ...
Net current assets ... ... ...
(4) (a) Miscellaneous expenditure
to the extent not written off or ... ... ...
adjusted
(b) Profit and loss account ... ... ...
TOTAL ... ... ...
Notes:

1. As per schedule VI, additional information is presented in schedules.

2. The Schedules, referred to above, accounting policies and explanatory

notes that may be attached shall form a part of the balance sheet.

3. The figures in the balance sheet may be rounded off as under:

Where the turnover of the company

Rounded off permissible
in any financial year is:
(i) Less than one hundred crore rupees Upto thousand
 One hundred crore rupees or more
(ii) but less than five hundred crore Upto million
rupees
(iii
Five hundred crore rupees or more Upto crore
)
4. A footnote to the balance sheet may be added to show separately
contingent liabilities.

PART II

Requirements as to Profit and Loss Account

1. these provisions will also apply to income and expenditure account

(210(2))

2. The profit and loss account: will give proper information and will give
details regarding non-recurring expenditure.

3. The profit and loss account shall set out the various items
relating to the income and expenditure of the company
arranged under the most convenient heads; and in particular,
shall disclose the following information in respect of the period
covered by the account:

i. (a) Sales turnover should give following information

separately:

b. Commission paid to sole selling agents within the

meaning of Section 294 of the Act.

c. Commission paid to other selling agents.

d. Brokerage and discount on sale, other than the

usual trade discount.

ii. (a) In the case of manufacturing companies -

1. The value & quantity of the raw materials

consumed must be given with details of
each item (whenever the item is 10% or
more of total raw material).

2. The opening and closing stocks of goods

produced with details must be given
(both quantity and quality (price, type
etc.).

b. In the case of trading companies, the purchases

made and the opening and closing stocks, giving
break-up in respect of each class of goods trade in
by the company and indicating the quantities
 thereof.

c. In the case of companies rendering or supplying

services, the gross income derived from services
rendered or supplied.

d. In the case of a company, which falls under more

than one of the categories mentioned in (a), (b) and
(c) above, it shall be sufficient compliance with the
requirements herein if the total amounts are shown
in respect of the opening and closing stocks,
purchases, sales and consumption of raw material
with value and quantitative break-up and the gross
income from services rendered is shown.

e. In the case of other companies, the gross income

derived under different heads.

Note: (1) The quantities of raw materials, purchases,

stocks and the turnover, shall be expressed in quantitative
denominations in which these are normally purchased or
sold in the market.

2. For the purpose of items (ii)(a), (ii)(b) and (ii)(d), the

goods will be classified on the basis of licences
obtained by the company. In case the goods are
imported / exported, their classification for import /
export will be adopted.

3. In giving the break-up of purchases, stocks and

turnover, items like spare parts and accessories
may be given separately and all the items which are
10% or more must be mentioned separately.

iii. Opening and closing working in progess must be mentioned.

iv. Amount of depreciation and method of depreciation must be

disclosd.

v. Interest paid / payable on debenture / loans taken must be

shown with details of amount paid to manager / MD in this
head.

vi. Charge of Income tax / other taxes must be given separately.

vii.The amounts reserved for -

a. repayment of share capital; and

b. repayment of loans.

viii.(a) amount set aside for contingencies

 b. The aggregate, if material, of any amounts
withdrawn from such reserves.

ix. (a) The aggregate, if material, of any amounts set aside to

provisions made for meeting specific liabilities, contingencies
or commitments.

b. The aggregate, if material, of the amounts

withdrawn from such provisions, as no longer
required.

x. Expenditure incurred on each of the following items,

separately for each item:

a. Consumption of stores and spare parts.

b. Power and fuel.

c. Rent.

d. Repairs to buildings.

e. Repairs to machinery.

f. (1) Salaries, wages and bonus.

2. Contribution to provident and other

funds.

3. Workmen and staff welfare expenses to

the extent not adjusted from any
previous provision or reserve.

Notes: 1. Information in respect of this item should also be

given in the balance sheet under the relevant provision or
reserve account.

g. Insurance.

h. Rates and taxes, excluding taxes on income.

i. Miscellaneous expenses:

Any expenses, which exceed 1% of the total

revenue of the company or Rs. 5,000,
whichever is higher, shall be shown as a
separate and distinct item against an
appropriate account head in the Profit and Loss
Account and shall not be combined under
‘Miscellaneous Expenses’.

xi. (a) The amount of income from investments, distinguishing

 between trade investments and other investments.

b. Other income by way of interest, specifying the

nature of the income.

c. The amount of income-tax deducted from the gross

income is stated under sub-paragraph (a) and (b)
above.

xii.(a) Profits or losses on investments with detials regarding

profit from partnership

Note: Information in respect of this item should also be

given in the balance sheet under the relevant provision or
reserve account.

b. Profits or losses due to non- recurring / exceptions

transactions.

c. Miscellaneous income.

xiii.(a) Dividends from subsidiary companies.

b. Provisions for losses of subsidiary companies.

xiv.The aggregate amount of the dividends paid, and proposed,

and stating whether such amounts are subject to deduction of
income- tax or not.

xv.Amount, if material, by which any items shown in the profit and

loss account are affected by any change in the basis of
accounting.

4. The profit and loss account must give details of following -

i. managerial remuneration under Section 198 of the Act paid or

payable during the financial year to the directors (including
managing directors), or manager, if any;

ii. other allowances and commission including guarantee

commission (details to be given);

iii. any other perquisites or benefits in cash or in kind (stating

approximate money value where practicable);

iv. pensions, etc. -

a. pensions,

b. gratuities,

c. payments from provident funds, in excess of own

 subscriptions and interest thereon,

d. compensation for loss of office / VRS payment,

e. consideration in connection with retirement from

office.

4A. commission paid to MD / manager as per sec. 349 of the Act

with relevant details

4B. The profit and loss account shall further contain or give by way of
a note detailed information in regard to amounts paid to the auditors,
whether as fees, expenses or otherwise for services rendered -

a. as auditor,

b. as advisor, or in any other capacity, in respect of -

i. taxation matters;

ii. company law matters;

iii. management services; and

c. in any other manner.

4C. In the case of manufacturing companies, the profit and loss

account shall also contain, by way of a note in respect of each class
of goods manufactured, detailed quantitative information in regard to
the following, namely:

a. the licensed capacity (where licence is in force);

b. the installed capacity; and

c. the actual production.

Notes: 1. The licensed capacity and installed capacity of the

company as on the last date of the year to which the profit and loss
account relates, shall be mentioned against items (a) and (b) above
respectively.

2. Against item (c), the actual production in respect of the

finished products meant for sale shall be mentioned. In cases
where semi-processed products are also sold by the company,
separate details thereof shall be given.

3. Here items will be taken up as per licence.

4D. The profit and loss account shall also contain by way of a note
the following information namely:
 a. value of imports calculated on C.I.F. basis by the company
during the financial year in respect of -

i. raw materials;

ii. components and spare parts;

iii. capital goods;

b. expenditure in foreign currency during the financial year on

account of royalty, know-how, professional, consultation fees,
interest, and other matters;

c. value of all imported raw materials, spare parts and

components consumed during the financial year and the value
of all indigenous raw materials, spare parts and components
similarly consumed and the percentage of each to the total
consumption;

d. the amount remitted during the year in foreign currencies on

account of dividends with a specific mention of the number of
non-resident shareholders, the number of shares held by them
on which the dividends were due and year to which the
dividends related;

e. earnings in foreign exchange classified under the following

head, namely -

i. export of goods calculated on F.O.B. basis;

ii. royalty, know-how, professional and consultation

fees;

iii. interest and dividend;

iv. other income, indicating the nature thereof.

5. In some cases the government may allow a

company not to disclose provisions etc other than
depreciation etc.

6. (1) for each item in P & L account, show the amount last year. (unless it
is the first year).

2. Just like annual statement, follow these rules while preparing

quarterly / half yearly statements.

PART III
Interpretation
7. (1) For the purpose of Parts I and II of this Schedule, unless the context
otherwise requires -
 a. the expression “Provision” shall, subject to sub-
clause (2) of this clause, mean any amount written
off or retained by way of providing for depreciation,
renewals or diminution in value of assets, or
retained by way of providing for any known liability
of which the amount cannot be determined with
substantial accuracy;

b. reserve will not include known liabilities

c. the expression “capital reserve” shall not include

any profit freely distributable.

and in this sub-clause the expression “liability” shall include all

liabilities in respect of expenditure contracted for and all disputed or
contingent liabilities.

2. Where -

a. any amount written off or retained by way of

providing for depreciation, renewals or diminution in
value of assets, not being an amount written off in
relation to fixed assets before the commencement
of this Act; or

b. any amount retained by way of providing for any

known liability;

8. Quoted investments – means investments which are quoted in stock

exchanges.

PART IV

Balance Sheet Abstract and Company’s General Business

Profile

I. Registration
Details

Registration No. State Code (Refer Code List 1)

Balance Sheet Date

Yea
Date Month
r
II. Capital Raised during the Year (Amount in Rs. Thousands)

Public Issue Public Issue

Bonus Issue Private Placement

III. Position of Mobilisation and Deployment of Funds

(Amount in Rs. Thousands)

Total Liabilities Total Assets

Sources of Funds

Paid-Up Capital Reserves & Surplus

Secured Loans Unsecured Loans

Application of Funds

Net Fixed Assets Investments

 Net Current Assets Misc. Expenditure

Accumulated Losses

IV. Performance of Company (Amount in Rs. Thousands)

Turnover Total Expenditure

+– Profit/Loss Before Tax + – Profit/Loss After Tax

(Please tick Appropriate box + for

Profit, - for Loss)

Earning Per Share in Rs. Dividend rate %

V. Generic Names of Three Principal Products/Services of Company

(as per monetary terms)

Item Code No.

(ITC Code)

Product
Description

Item Code No.

(ITC Code)

Product
Description

Item Code No.

(ITC Code)

Product
Description

*Note: for ITC Code of Products please refer to the publication Indian Trade
Classification based on harmonized commodity description and coding system
by Ministry of Commerce, Directorate General of Commercial Intelligence &
Statistics Calcutta - 700 001.

Annexure I

Code List 1 : State Codes

State State Name State State Name

Code Code
01 Andhra Pradesh 02 Assam
03 Bihar 04 Gujarat
05 Haryana 06 Himachal Pradesh
07 Jammu & Kashmir 08 Karnataka
09 Kerala 10 Madhya Pradesh
11 Maharashtra 12 Manipur
13 Meghalaya 14 Nagaland
15 Orissa 16 Punjab
17 Rajasthan 18 Tamil Nadu
20 Uttar Pradesh 21 West Bengal
22 Sikkim 23 Arunachal Pradesh
24 Goa 52 Andaman Islands
53 Chandigarh 54 Dadra Islands
55 Delhi 56 Daman & Diu
57 Lakshwadeep 58 Mizoram
59 Pondicherry

1. Profit and Loss Account

Although, the Companies Act, 1956 does not recognise Trading Account or
Profit and Loss Appropriation Account as such, it is desirable to make out the
Profit and Loss Account in three sections namely: (i) Trading Account, (ii) Profit
and Loss Account, and (iii) Profit and Loss Appropriation Account for the
obvious reason that, in such a manner, it is possible to know separately the
gross profit or loss, the net profit or loss and the disposition of the net profit, if
any.

The company can also show P& L account in two parts - :

i. The Profit and Loss Account, proper, should include all income and
expenditure properly attributable to the year’s working and show the
figure of Profits or Loss for the year, and

ii. P & L appropriation account : it should include all appropriations for

dividends, transfer to and from reserves and income and expenditure, if
material, relating to previous years.

When the Profit and Loss Account is spilt up in two parts, i.e., (i) Profit and Loss
Account, proper, and (ii) Profit and Loss Appropriation Account, a line of
demarcation is drawn in between the two parts to separate the items
chargeable against profits from the items of appropriation or disposition of
profits. The items which are shown in the Profit and Loss Account proper are
referred to as items appearing “Above the line” and the items which are shown
in the appropriation section of the Profit and Loss Account are referred to as
items appearing “Below the line”.
 The corresponding amounts of incomes and expenses for the immediately
preceding financial year should be stated in the Profit and Loss Account except
in the case of the first Profit and Loss Account after incorporation. The Profit
and Loss Account should be made out in such a manner that it discloses a “true
and fair” view of the profit earned or loss incurred by the company during the
financial year. This implies that the items which are not related to the company’s
business or the items which are related to the previous years or the items of
exceptional nature should be stated separately.

6. The Profit and Loss Account can be prepared either (a) in the
conventional form of a ledger account, or (b) in the form of a statement.

Account Form

…..COMPANY LTD.

Profit and Loss Account for the year ended..........

Rs. Rs.
To Stock (opening) By Sales
To Purchases By Stock (closing)
To Wages
To Coal and coke
To Carriage inward
To Gross profit c/d
_____ _____
_____ _____

To General and administration By Gross profit b/d

salaries By Interest and dividend earned
To Sales salaries By Income from rent
To Advertising By Gain on sale of Investment
To Travel and entertainment
To Rates and taxes
To Insurance
To Freight and delivery
To Depreciation
To Interest paid
To Provision for taxes
To Net profit c/d
_____ _____
_____ _____
 Statement Form

…..Company Ltd.

Profit and Loss Account for the year ended........

Rs. Rs. Rs.

Sales:
Cash
Credit
Less: Returns ---------------
Net Sales --------------- --------------- ---------------
Less: Cost of goods sold ---------------
Gross Profit ---------------
Less: Operating expenses ---------------
General and administrative expenses ---------------
Selling expenses --------------- ---------------
Net operating profit ---------------

Add: Non-operating incomes: ---------------

Less: Non-operating expenses ---------------
Net profit before interest and tax ---------------
Less: Interest on debentures ---------------
Less: Provision for taxation ---------------
Net profit after tax ---------------

1. Profit and Loss Appropriation Account

It is not specified in law, but it is better to prepare it. It is called below the line
account. It shows distribution of profits.

The following provisions contained in Part II of Schedule VI to the Companies

Act relate to the appropriation of profit.

1. As per clause 3(vii) of Part II, the amounts reserved for:

a. repayment of share capital; and

b. repayment of loans.

2. As per clause 3(viii) of Part II:

a. transfers to reserves
 b. the aggregate, if material, of any amounts withdrawn from
such reserves.

3. As per clause 3(ix)(b) of Part II, provisions made

4. As per clause 3(xix) of Part II, dividends

Format of Profit and Loss Appropriation Account

Excess of actual liability over the

provisions made, if any

Prior Period Expenses

Last year’s surplus profit remaining
Transfer of profits to Reserves, if any
undistributed and carried forward, if any
Dividends paid, if any, i.e., interim
Current year’s net profits transferred from
dividend
the Profit and Loss Account proper
Dividend proposed, if any, i.e., final
Prior Period Incomes
dividend
Excess provisions made, if any, over actual
Tax on distributed profit (i.e., tax on
liability, which are no longer required
dividend - proposed, declared or paid)
Withdrawal from Reserves, if any
Bonus to shareholders (issue of bonus
shares out of profits)

Surplus profits, if any, to be carried

forward to the next year.

If there is any surplus left in the Profit and Loss Appropriation Account as
undistributed, the same has to be carried forward to the next year and must be
shown on the liabilities side of the Balance Sheet under the head, “Reserves
and Surplus”. On the other hand, if the company incurs losses, the Profit and
Loss Account proper will show a debit balance which has to be carried forward
to the next year and must be shown on the assets side of the Balance Sheet
under the head, “Profit and Loss Account”. If, however, there are any un-
committed reserves of the company, the same has to be deducted from such
reserves.