Financial Statements of a Company

fta

O Meanlig

study ol ttle Chaplr 6hould enable you io undBrandi ot Flnatuid Sralm.nE

o o

contnb ol annuar Raporls

Major Hadl.06 ol lh B6l6nc6 shl ol s company in rh Pr.edbd Foh ol rh6 &hn Shaar ol a Company bo$ in Hod&nrar Fom and

O P6palon
Essani
a

O Objdlivs

Slll6m.nb slaronods Pddsl 6st6d in Financld srabmgnE

oi Fin6rcial
s or Finaicrar

or

us.G o, Financlalstatm3nt6

Financial siabnents, ihe cnd produci of rhe a.counring process, a.e prcpared lollowins tbc rc.ounii.s .onceprs, accounbng principles consistently followed dnd thc legal environmeli in which the enierpri$ operales. Fimncial St.toments arc usedbyr nunbc.oluserslo univcarlhecDndusions.ndde.isions
MEANING OF FINANCIAI STATE ENIS ot ac.ouniing dat. produced a! proccss by enl$p.ise throush rhirh it coDrunicalcs lhe the e.d of lhc o.cou.ti.g oclounti.g inform.tion to ihe j n tcrn al ( M!n!gcncn!) a nd exlemal users 'l he extendl users co be iNeslors, lerders, suppliers $d h.de credilob. cu md theii agen. ies md enDloJees. Cuslonanly, a p!dffinan.isl stalthonk indudd:

Fi.ocisl Strrcmcnb *e thc sumnaised st.lcnents

rd liabiln'es, i.?., financillposition dste.Ii is rko known as Posibon St8temcni sivon \ii\ P.ofit an1 lats A..ount: Ii shows lhe net r$olt of busjnese ope.aiions duins!n accouting pfiod.Ii is also kno{n as ln$heStatemenr' liiit S.hedules atd Notes to Accolrrsi The Bslamc Sheet md Prolit a.d Loss A.count are suppnncd by the sc]redulcs hsvins dehns oittens ir the Balance Shee!and Profitmd LossAccour.Nhilcrhenotes t. a.counis arethtst.teheni ofaccountins policies 8nd exDloation to matenal iiums Flnanclal slatononrs-DeilnRlons "Finoncidl stdlrm?nti ofe p,?parad fDt the rxrpo:t ol p {ntinEapern\litdlrcti?\t of npan an prcst?si,tdd? b) tAz mnoznint nhd.l.al bth the status oltM!n, i thz business nrd th? fps,lts o.htzt2d .l,ri4 th. pena4 rndet rc&u. Ane.ilar Instftut. olcerrified Public Accounhnrs (AIoPA)
(i) aatdn. Sleai It is. slaneDt of.sseh
ofan ent.ry.ise at
a

r'idbs&

of

Fi@tuizl Statenent*n1

"?h. Fitutuidt strkmats prcurle d suMrJ of a^tuhts of a busi@ss .nt ryitg the Bdld@ SA.et refl.ctina ttu @sts, liabilitizs dnA epitot u ot a @nab date dnn ihtutu statemz Eh'uirE the ftsultt ond opereioB tlltinA a @flain peti.A.' John N. Myer "Fimacial Satewnts are thz ead prcaud of lituncidl d.6tu1ins pnpagd b! trz tucountr ol d busire$ enterytbe Nhtr puryort b ftued $e fiaancirt pBitios of trz enteryie, ttu Esuh Xi6 re@nt utio i.t dnC an dtu1rti6 of uhat h@ b@^.Lre unh

min$."

-Snith ud Ashbum

CHAFACTERISIICS AND NATURE OF FIIiIANCIAL STAIEIIENTS

I$e chdacieristi$ dfFindcial Siater@ts s: 1. They rclate io psi pe.iod od thu, are hiriotcal doMdts. 2. They arc dpressd in bonelary terft, 3. They shoe find:ial position iheugh b.lece sheet sd lrodtabnily ibmsh ptfi rd lNs aeout. N.tur. of Fin.n.lal Sl.ln..ta
The

i,lmiion uil

dat3 incluilrl in th

Finmisl Siatnats

are

tlo Esdi

of a

(t) RodiDg facls oi bwiness t msactions; adopld to fac iht deoutina tslniquF; Ct;) Accouti.g concepts; ed (t, ) Per6ondr judgiats ued jn the applicaiion ol cdnventions ad lNtulats. Re@derl FEtg ItE tm tocdrded f6ci6 nee reco.ililc ottr.es&iions li) based or sidences jn th aeodting bodks. Fd exnple, ngus relating to csh ; hmd, @h at hanl, debtors, bils deivable, sales, pucha*s, etc., d reco.dd facts, the Findridl Stateme s beins statemmb prpdd d tle basis ol recorded f&!s, thy do mt depid tne worded facts. Fdr eddpl., 6ied assets are shwn at dst irespective oftleir nsket or rplame lnce

(ii) Conveltions

(ii) Coruernda8j

(iiit

{olowed in deding *i!h smali iibs liLe peG, pencns, postag staDls, etc. TIE6 ite4 ae @nsideretl as oxpndii@ in the yee in vhich tley ue purchsed even urough they e dssets in mtu. TIE use oI accostins conventioDs nale Fimcial statenoiE simpl, c@larable ed roalisuc. Accou tin An ept* Fin@cial Statenerts are pr.parad folldiry th a.cdunting M.eptE. Fo. @ple, under tle Goina Cdncem C.n@I'l it is assuded that tle business dral @ntinue lor a fordeeable fniure, i,e,, ina6nii6ly. ll1e asets @ shom i! the Balmce Sheer ar ften bool value

sordil in th booLs. Celtain accouiils convennoN se folldred while prpdns Finatuirl StatdmtE. Fo! mmplq on accourt 0f olvntid df,mnsenatisn,, !tui.ion is nade of expected lcses but dlectrl profit de igm.eit. This meds t!8i ine .esl fnucial F.siiion ofthe busines may be bette. thr Rlai haE been shopn by tle Financial sra!nenrs. The cdnvdriotr of @teialitt is
eince such pri@ is bot

Fin ciotstctuN sofdconadrr

ratlo!

1.3

li,t

thir nark6! %lu. Monoy masrenent concept asElD4 that the valuo ofDoney qil rcD.in tl. sane in dilfer.ni peno&. Due td stlbility in lhe vrr& of b@r ulet3 puet4ed at difereli nEe! aDd prices would b dbbined r4etler dd.LM ai tle @3t o n ituD..tiw of tLe cndge itr prie la1. 'nB Re.li3.lio Conepi rquiE thal w.ne b d.a in the 1r in which tho sal wa. u ortikeo ev! though slle pti. bay be re@ivsrl itr a rMb6r ofyeffi. The u@ of qcouii4 .onept3 maled th Finocbl Siatonentg ondsFt$dable.nd conpdable. Pe@l,Iudarentc P$oaal judrE6t! at$ hlve s impor'at b.dirs or Finrci6l Strtdent!. For tuple, the choie of selectins r b.atod of d.pRi.aid (6rd in.ialdni o. *ntiD dod v.lue) li6 on ile aeolrist. Sihil. y, ssletion of ih. inverto.y valualion mihod .l.o depe!& on !h pe.eonal judc@t of lhs aEoutut,
COIIIENIS OF AIIIIUAI. REPORTS aopany @ reqDied udd bw to rliel@e th pE&nbed

tld

lb 9Dud epcte or r bfodaiio. to e$ble th. !&. t nal inloned j"t8aenl! dd dfti.iom. the i.fornaiion i6 di{lo*d i! ih Finmial Stain.nb! DieroE Rport dd by spdit etatb.rb beina ldi oa ti. .mual fpod. A conplet B.t of mual rBport of a @npsy has: 1. A r.pon 6y tle Board ol Directm ontlining: (t) Rp.rt ir te@ oa Setio! 2r? oa t[e CoDpoi A.t, 1966; (ti) DiF.tlB R.rpd.ibiliiy Shtebeni (Se.tid 217 (2AA) oftLe Cobp{i.. Aci"
1955)i

(,,t) Rpoi on Corpo.ats Cdsman@; (i') Me.gennt Disa.ion and Anrl$i.; 2. AudiioE R.Frt r, th. rh@noltlea lso.tio! 22? ofthG CobpMi$ A!t, 1965): 3. Barue Shet (Selior 211 &d P,n I or Scledure vI ofrhe Crnpuia &t, 1t66):
.1.

Proht and

ld. A@ut
@

(Sdion

2u dd Pan lI ofsclErlulg vI
th. cobpdy;
.Dd

of !n

CoEpeie

6. Notes to !c@u!ts

6inin8;
d by

(;)

A@sth8 Porici.. rdolt

(!i) Addi!@diofm.iionrequirdtob.di&lc.dint m.ofParimoN.I.nde

(t,) Balsc. Shet Ahrilet &d CoDpey. G.De.al Bu.in.6 Ptudle in tm. of Pdl IV of Scbdul. \'l or $e Companee Acl. 1956, 6. carhFl@ gtltel'Mt&!.rA@urtiDastoddd 3(se{i@2ll (3A)oriheC6t&i@
7. Sg@al B.port
Crsh ndw
@

(ii) EtpllMtdy lote dpl.iliDg

stFi6ot te@cti@ ud

@i';

14 oaih Compui. Act, 1955;

F! A.eurirg Sri!da!d-l?

(Sdim 2l t (3A) oltbc

Cmpdi*

'ith

tmd.r

Stlt@t

6nil Sogalt Bepo.i i! applicabl to li.t d onp6i$.obpmie in ere3. of n , 60 c@d or @bp@i$ havi.g a@ptd public dop@itg

not Let us dis. uss cach of dre above

1-

si

of Fiaanciol Stututht.ts_Xl

conre nts of

ihe annual repod.

REPORTBYTHE BOARD OF DIRECTOFS

to adopl, onsideand approve rhe rmusl ac@un1s, i.e, bslsn.e er md the pmnt md "-b${ n' -Ih" 3 do.D ith'"o't p.ompd, } f ?ourJ.J o),t ".,1 f;n,.

The Conlsnies Ac!, 1956 requires cvery conpa'y !o hold a neeijng ot its sherehotdca every year. T]re meeiing so hetd is lcmed as An.uat ccnerat Meetngand is @nvened

A,', t956'ldprSq'ion 2t. ro c',1.t iE r"oor a.heAnl,at FeFo.l t, lJ;",.. Dirccroa' Repo{ The cDntenrs ol lhc DiHroB, Beporr are speciiied in the " compmies Act. Eosever, ihey nay nahe stalencnk on sy subject rhat rhey .onsidu inp;.ia.t ihough il may noi be legally requiEd.
2. AUDITORS' REPORT TO THE SHAREHOLDERS

h" fin"n, B . "sr ) in the c$e ol rho p.ofii md loss a.out, ot the pofrr o. loss tor iis financisl )*i md (iti) Cash flow Ststeneni. The Central Gove.nnent under Seclion 22? 14A) otrhe Conlmies Ad, 1956 has -slcl"n"d"r.4nD"ni,",^ro' aF R,po, .OroH.2O0J,"qlinrsr\pa,ditur.o
(t;

obE , o s Lafornf io' a'dc,ptanrr01-wtrt!ac,"."""",y lbr the purpose of tlr! ' Bud t (6) Wnether ptupr book ol ac.omt s requir.d by law, have beDn kepi by the oophy. (.) whcther the Balancc Sheer, Protir and Loss Accolnr and Cash Ftow Statemni dealt with in the reFort are jn a*eencnt with the books ot aeourr (ll \{h!rhe. ihe Ralan.e sheei. p.ofit and Loss Accounr a cash Ftow sielcnenr .o nn y ^ " r\p d.tu.'1 r' c. ano-.os. p-.crb"d Lnd"r s"...n .. I rJr r of r1e |ohprn es A.t,1956. k) llhetlre. any direct . is dhquahned fton bcin,j appoinied . direcror i. ternr of Section 274(l)(g)of the Conlanies aci, 1956. (, Wheihe. in his opinion and ro ihe b*r ottris i o.nalion md acoding to rhe lornlrior cvcn ro him. la s..oun'c p n,omr on pqu,?d L. Lh" ' .onrdnir- A r'1 rl p aannd so requ..i d B si\d a'a, and rs,r \ ew and '1c r ;n I, .-a of r\p L1.an"p. l a"r oIh, rsrp o., orD-n\ s ana r

An auditor of r .onpany, on tle basis ot eEninarion ot books of a.counr and inrorndtion obtrined, rorns his opinion on the annust a.counts. t.s., Bala.ce Sheei 3ad o ofi r a' d Lo< Aro,n. Hp AyDr...dd ni" oo'n'or in ni6 .ppor ....r.d ro,1p sFsrC.rde,!,f DaavLnd-"sp- o12172,o r1".ohpa, hsA. 'lFion The sudilor is required io nake statemen! on the fotlowins:

r, wh h"-heIs

fi. ancial sralenents. Day be defined to be a sralenenr of liabiliiies .s on a parti.utar dale. tr necessarily neans the anounrs and ratues siaied againsr sch 3sser and liabitiir are hisloicsl,;.?., they do not retlect th. cunnr velue; fte a$ets or ih! mnpnl, lixcd asseh and curcnr . F-eaFdr'1, iaL ri, ."nd'cn, F-!..' 'ab.h'i"sJ1oslon{.,mt.1bIrF. oad \"ts\old"- d'tli). ,. li,d-LpsurpcsDrrt nuJi.-!!.
Ra

lance Sheet, a pa!1 ot

conpanJl lssels

dd

Fimncialsbb t ofacon@nt
Balan.. Sh6el ot . Conpeny Adre Sh@i of! CoDpsy is prepoFd fonowins lhe s.ne plieipla s e folNed in tl. prepdaiion ofthe Bdame shet of a sole prcp.i.ror d a plfin.ship 6n bui p.sented in tne fom pEsoihd nr Schedde r.l orthe Cdnpeied Act, 1956. A Bols@ Alet nut dhibit a hue dd lair view oftle fir@cid poeinoD dtlp cohpor at ih clo* of tlrer@@neEed. Thi. DMs tiat tt!6 Fsition dri)m in tte Bsle@ Shet lhould .oi b. bner d voE. thd ti. lctnal po.ition. Alrets @d Liabilili! nsr b rhod ar their odctvslues*neithe. in0atd nor denatod, Arso, ad6quats infmdrion mut be given to enabl one t jdse th fildcial stat of ldaiB.

.l $e a.l.N sh..t llle lre.fibeil {orn of tLe BalanE Shet is given in Pan I df Schednle vl ol ih Cdpsiea Act, 1966.ILe Conlries Act hs laid dosn two fohr ofBalane Sheei krm B (t) goimt l Fom nd (ii) Vsticrl Fon. conlonl. ot ihe B.l.ne st@r 1Le ho.izo.tar lom cb$i66 dl e.l6 dd liabiUtier id t)len qder of pheere. Ihz item. o" the liabititic. sidz li....left ha A sid.t .ft dd$ift.t into live mi.
Fomat

(,) Cuaert Uabiliiies sd Provisions. In aildition @ti!g&t liabilitis aE .terc.d e r fmtnote to tb B.leE Or tna dr&tr grC. {!.e., right hmd .td.), fw n.in cat.soits dE:
lttt) Cll*nt As.t!,I,m ed AdYeeq (ir) Misceleou. Expoditue; and (,) Profii md I4. Aeout (Debii Balu@).

l!) R.*M nd S@lu; (iu) U$ecured Lam; dd

Sler

fte

ot Bare SlEt p@ide ,or two min hadinAs ofFrrndq dd (!t) ApDli.atior of Fm&. S.aa of Fnnt @ cl4si6ed into: (t) SLE,lotdzr'f!d. rqui.ing deiails BepaFt ly rega.di.g Sbe C.pitsl Re@ryes od SunLu; .nd {i!) ,6r r,unds ?rovide delails of Secured sd Unscureil Ind6. Apprietior of Fd& G cl.$ifie{t irto:

(i)

venicar

fon

Sour@s

dd

liit) Cuftnt Aet , tao!

(,0) Mi..eUa!@us Eipndii@; dd (u) Rdllt oil L@s Ac@ut (Debit Bdlmce).

Irlr: Clftnt Usbilitie!

aDa Advanc*; oDd P.disioEi

Pdnh.d f@
ictru.iioN

ol Bald@ Shel ude. rhe

relaiing io varioud

it.d!:

Clrpuie

Aci i6

giM belo'

with

Atul!.b
schEo{J|.Eu,P|srl

of FiMNirl

Stu^4FnI

(s*slddozr)
or

m lH6E 6tu' hB dah d *hllh rrs Bi:nd srFd i,

0rE!

ldsb6 mm

$s

Mp!i,

h.d. !n0

Fituturn &d!.ben s ofa Conpdnl

halr.*'
dhdn .t original cori
(6) Unquotd.
16$ totsl

of

n&eiln
to

sbtecx
&to,

d.prsiaiion

Ir the q@ of quotil inv@tndL brL6l v.lue tu.i b di..rosd. Cd.ti4enl liabiliti* d. rhown sop.ratly by way of loottrot t th Bsl@@ 3. glEet. FollNins d t$o uual tr?. of ontjngent lenilitio.: (a) Cl.ib tle @Ep.ny mt lclffred3ld e d.bt. "srirlt (b) Uncond lability or.n@s parily paid. (.) Arred6 ol6rd dmulativ divid ls, (d) Estinated lnout of ontr4tl Ftsining to b oxocultl on capit.l a4out

sd mt p..vided fo.. (s) Oihs llm.y for ehi.n dre 6Dpu, is @rinrEtlr li.ble. The Baloce Si..t 6 be d!.h in uy ofih two fotus. Outline oftl6 two lomat! of the D.lece Shsi is srver blow:
rorrroF uJcrslrForoi?oirrr roaHrrl
aarM6 saErof-.ca trD
xE

ouao ,u

Not r A foohote b fte Bdee SL.ei

id adrlcd to

ahfl &pdaily
SHEfr

th6 contDAerl

8-!FTTCAL FORM 0f

B{4ic

hadneial Stutemenb of

Canpdnr

0l

(4

Not: Uswlly detail under oac! of the abNe itens is given br way of a slrste schedule. Tho ndbe. of the ehedules incoryoraling the i onstior is Denlioned sAahst ihe iten in Ure colunn fo.3chedule nlnbe.. slatolory cont.nb ot Llablltle3 srde ol conpany's ad.nce sheet t ei us exaniru the itens ofliabilities 5nd assexs to be presenred.
nrere e iwo trTes ofitens shown on rhe liabil ies Eiil. Fi6r, rhose fteds which a. related to omrs' equity. lt bai.ly includes share capiral, rseNeE md luplus. Seaond, those i!ns whicl cEate the clains olcrcdito.s in the conpmy. Exmples ofsuch iiens are seMed loms, unseared ldds, cure liabiliti$. a.d lrovisiom, etc. h this context, it seens nec.ssdrj to e4lai. the following ircns fo. on. beita udersianding ofurd .onlents:

Sia.e Capiial heans lhe shm of ile owne.E in tie conpdy. Undd ure headine Share Capital, the followi.g detah are shown: L li) Althoripd Share Cdpitdir Aulhorhed Shde Capiial is the anount ot Sh* caliial thai a conpany is aulhoriseil to iaise a@ording to it6 Meno.andm ofAlsocialion. lt may have o yquity share capital orboth p.eferen@ sha.e capiial md eqnity share capilal. Thc authdsed slar capilat for eqn y shares sd preierence sna.es iE shown separarely. The anour ofauthorhed share crpital is shosn by way of infdmatim in rhe balance 6h*r.It is nor adiled to liabiliiies ofur comlmy. (tt)lsued SrdD Caltral: Issned Shee Capix.l is tlai psrt ofihe auitoriscd 6hare cdpitsl which tle conpany h.6 issud for subs.riplion til rne date of bdmce sheei. It inchdes . numbe. of classes (qd!y d. p.fe.ence) olshares

ad

their face value, etc.

atrobtB ol Ftnd idt

got?Nn*BI

\iA Subwibd

ShaE Capitdl: lt FfF t! ilat palt of i!.!ed c.iLl (quiiy ud preIe.on@) *hich hqs been subdcribd by !h appliceb alolg wit! .aled up

\iul Pdid-Up ShdE Capitdl: tt lefer. !o inat part of 8!&dihd she piiar (equity ud lFroren6) shic! la3 ben paid-up by t!. suhsdib! towa 6 2. Infomation re3ddinA ilBres slloiteil for ondide.aiiod oil.r ilm csl od sle. alldtirt s lully paid boDu.6hda tu rle givn in tut$ hder Nh*ibed

@itd. The&'lMin ih forDof lmEl I!@e lo6tdd lal6uq@iiie pqlium a.cout de 3l3d rieted. 3. lf !.oFpDy hs i&ued ditrnt ir?6 orequiiy ud pfeM@ 6!e.. det ils of cach tr" ol.heo b srvn. 4. Anost ofcals'h'!ftq i! lhom s deduction ftoh @Ied'up 4pitsl or lubdibed @pital'to eertli! tle pani-up pibr ofthe @npuy lnil !!M 6 lidiriiy itr the Balan.. Shfti. Calls'in-Arar froD directoB ud oinB hlve to be sh@r
6. A@unt
capital, But
to lhe credit ol lha$ forfeitd is shor. d ldditio! t! pdd.up cas. of !.odt on !.-issu6 of fo.foild sh!m, it iE t ufEed to ro6Fe a@ouri

sto.lils

6pitd

ir

Schdul. \aI ofihe CoDpdie. Act, 1966 speci66,'RseFed dd Suplu' io irclude lhe following iteb. and be shom *p6Ei6ly: 1 Capital BesoNes: Ary rcsN which i! crealeil @t of capital prcit Md i! not edilr aveilabl lor dislribution dividnd th sheboi.lE G cltld pitdl r*.R.. P.odk plid imorpolatidn, prdi on acqubitio! oabBird!, prodt on r.le of frxed a..ets, profit on eissu df forreiLil riNs, prc6t on dlenptid of ilebeniftr @ aopld olsuch 2. Capibl Rednption R6oRe.

udg M..

4, OtE n6?.esi Naiure ud anoui ofelch resed sLould b e4laind &!oEt ly. Fo.6x@ple,E8enesnaybcat sod@d into g.e.er resNe, reodtie. p.eniuD, ilividend equalGation, spcid Ewe for dep@ia1i@ ed Prc6t ald Lds Ad@t
A d.bi! bdlarce ia ptufu and

b.

u@u r, shtuld

be d.duct4d

f@

the cz@rel

Supia: It refd to tne credii baluce of pro6! eit lo$ accolnt aii.r ptupoed ollsti@ or qpprcpnatio$ for divid@d, botru, t 8s,|r to lt!F4, etc. 6. P.olored addiiioa to resry$.
6.

sFa and enu r*F6 @ .hon r.puaily. Rdd6 rhich @ sp*iic.lly crcated sd repF6erted by eaddked investndts id outsid. 6.orilie6 @ Lnom d si.Lins Fmd. Illa tu!& e sed.tly ft.ltd to have a !ady hon y eithr lor ftplacemnl offr.n es.t or reddpiion ofliabiliti.d.
Capital

l-

FitdtuLlt stdt

hdk

ofd ca@dnr

Ifa @n!

y sivd Eeruity Id the lom by a mo.qsge m che4e on dI or rny of i1s properlies, ihe loan h classified s'SeclEd lnm'. In ihe Bslme Sheet ofa.ompuy, th$e are shown in the folloeing older: 1. Delenrlpsi In ca6 df dobnlures, inlormatioD aboui tems of edenpiion oi @nve.sion slo4'itl the erliesl il.te ol redenltion or onversion are shosn, 2. Lo5tr md sdvmces fton b8nlc.

3. LorE md advdces fiom subsidifies. 4. Olher loms md advdces, if anJ. Infonaiidn egdding Dt@ ofs*urily given
d.ue on 'Intercst ucrued 'nd i e.est is acmed md due.

for each

seued

loan is

give! erory with

E rEd loonr'

is shown along wiih ihe items on which

ra

cdmpmy takes loans silhou! prcviding security, tiey are classified as 'unseored loms'. Un*med lods imlude:

2, taoe od advmc$ fton subEiitieie8 3. Shori-tem loms ad adv&c* iom banks 4. Snon-lem loans and advances fton othe.E 5. Other lomE snd adYmE fton btb]l6 6. other lom6 and advans fron others, Sholt-!rn loans ae those loans which ar itue fo. .epaymni *ithin a piod ol one yod frdm !h. dr! of the Balance Sheet. 'I erest occrued avJ.lue ot unssczud l@ur' i3 shom ude. uecurd lods ed not under cunent liabilities. CurEnl f iEbllitl$ 5nd Provlslons This heading is ilivided intd lwo !ar!s: (A) Clrpnt !66rltrasi Th6e se those thbilitieE vhic! re Epayable sithin dn. yoar. (B) FoD6t'ror Sc-hdde VI ofthe Cmpdnios A.! 1956, in Pait m hd erTl.ined the tem 'Provision's oy uout miiten or.etained by wry oflmvidiag fo. depftciation, ftne*.Io. dininulion in value ol assets o. relaneit by p.ovidins for my linom riability of which lhe anount cannot be deteni.ed wiih subsioti.l accn.a.y. r ey !tuvisidn b nore !}E liabilily, then ex@ss will be lreaied as a resewe. Th heading Cunent liabililies ed l.ovisions' shosn in the Bal@ce Sheei includes
lh folowing

it

ms in

!!a! o.de.:

0) (tt) (iti) (;,)

Ac.eptdres (o. Bills Payabl.) SundrJ eeditoA Subsidir.y conpanies balan.eg Advdce pdlrent and urerTired discouis (,) Unclaimeil divide s

lLz

Amltz;: of Fi@ctnl

!fu'*,

Oi) OiI6. Iiab iiiee, irdy (uii) In!r.l acmeil bli lot iluo @ loe.. (B) &Duirr'cft@ Ey in.lude tlE fono{itrg: (utii) PDvi.ior tor tdation (s) P&!@cd drvidlib

Gio

(r) PFvi.ioD {o. mtiDsaci8 (ti) PDvi.ion for pNiilrt nsd Cn) Ptuviliotr f6i iDlfu@. FBion ed dDnd stlobaedt
Otls. provi.ioN.

!ctd.

llE! de tle liabiliti.. the di!t.n@ ofwhich tlepad or soh6 nrbe Lrrairs- For the irlomaiion ol t!6 u6dr, Ii id .Ioh in ile footnole in ite Balre lS..L llle itnr which ur ooe uiie. lhis sub-h-eilils e: 1- Claim agaiNl enpmy *hich @ not .eepteil by tls oEp6y, 2, Udbility for dost ucalled on pritly-taiil shared.
9. Ar.s olfit d Mulaiiv. divid.tulE. 4, &lihsted moull olinEnplot .ortracta (ca!it.le!Tenditd..), 6. oth.r cdntinecnt Liobitiq: exciso duty clain, ic.

u.lXlmnt of

Ft

x@ple, lielility for

bil dr@ula4 ilj6lut d

6rfiioryco .nrsotAs$t

srdo ot

conFny. B.b@ srEt

in

ItE 4*ts shoq udd ditr@r b6di4p iird Asst!

tle Dd@ Shrt

of

@F!r

ildude

$e
1.

i!

busi!.6 to

e tl@

sm

cast! rhicb !E purhasod not ao! Fsal bot tu l@s t r prc6i. R6l*dni infomtion to be 3ivn E8lrding in*e

& ld e

pd.ibl, difreEnt @set! lhonrd be shM epotateln For @pl, nred A$ets es catcoi!d iito ltrd, Buildin& Plan! dd Machinry, I\mite sil

2. Ii ir

Firt@s, V.!ict6, Compqtr:, etc. n*...ary to rhN onairsr @.t

of dv.ry tu.d ssot ed tbo sddrtiou theeto @d dedlctioN tbreftoD duing t!. y@r ed ih. t laL dopni.iion Eiit! olf or pMitd up b d nd ol ttre o! Mod of rsrud@ (o.l G b6L vsrue) of eycry sset shourd also b. .xplained ir tt!. b@t! ofaccolni.

yd

il

AEout of dspEiaiion sntiD ofi d pNidil for tbe rd shoultl b .Uoot d to 6ch let epaEt ly. Only lhe dout of deprdltion up b rhe ibte oa B.ld@ Shet for ach asset i. shown,
In ihe BalanF Sheei of ! .onpar\y, irvBtbent! are shom .ft.r fird s&t3, Invetocnt! ir natw N 6red R!,edina ln.tbdtl, tle Conpuie. Ad hd. laiil do@ .pcific pNilionq ia,

Fimncial Slteneak

of a Compdar

lnvestments are classified in!o: (a) Investnent in Covernnert dd lrnsl socuriliesi (r) Investneni in shdes, debenlures and bods ofconpanies; (c) INeshen! in shares, debentuEs sd bonds ofsubsidiary conpanisi md (d) InvesiDent in frred assets. 2. It is necessdry t dhdose the natue md nod. of valualion of every investmeni Naiure ofinveslmnt Deeq to disclose ilii tu a lons tm inveshn! or a cunent ssset. Modd ol valuaiion dhcloses how i]le intslmenls 6re valud, i s . on cost 3. Total anount oi conpany's quoted md uquoted investnents ud market valno df quoied inveslnntE nust also be disclosed in the belance sheei.

cuiidnl As.ets. Lo.B .nd Advanes

TlE3o are lhe assets which aE lihery b be converled inlo .ash sithin a year f.on thc dat ofbslance sheoi. These are broadly divided into two calegorics: (B) LomE md Adv.n.e6. (A) C!'anr Iss?rsr The cuent asset sbos. i. lh B3lsce Sneet inclnde: (;) Ac.tued inieresi on investnents. (ii) Slores and Spar Parts, (iu) Siocl i. T.ade. (iii) Loose TmlE, (D) Wo.k-in-Prceress, (o) Deblors more the 6 nonths old (6) Oure. Debto.s t $r Pro sioD lor Doubttul Debis, and (uii) Cash and Bank Balance.

(B)dns dnl.Adlamasi ltinclndes

pu.Aa.- or sood. rno vt.iols

loan

girdt

Pxpeneed bv

rhc.onp8n.. cu.

difierent psons, rdvmces ssahst

tne Balmce Sheet ol lhe .ompoy, the6e items are sho\vn under separate sub
1o

(t) Loss and advan.es

subsidiary con!8ny,

(itU Advmces rccoye.abte in cash or in hinit o. fo. value to be received, i e,, p.paid ralos, !ax$, insurece, etc., md (tu) Bslsnce {ith custons, por! trust, k. (wne.e payable or denand).

Miscellaneous E penditure:

stttd

'l s refas to that pari df orpeNes whic! aie .ot ofl up to the dale of Balan@ Sheet, Thy are shown in Bat3nce Shee! under
on

Mi*ellrneous Expendiiure Tley irdude: (i) P.clininary expenss. (;;) Expenses includilg onnission or brclnage

udcNriting

o. subsctption

ol

(tti) Discount aud{ed on lhe iss ue ol sha.es or debentuEE. (tu) Interest paid ou! ol capi!.l d urt ng onst uctior period ol the conpmy. (,) Dovelopnenl erpendiiure noi adjusted.

(,t) Oiher sums, specifyine natDr.

Anottri. of FtnduioL StotcruaB-n! Prollt and Los! account Debit balance olProii ud Loss A.couni cdi.d foNdd j. stloh unde. the hadin8. Ir the conpuy has soneml rcsery, it i6 deductd fron it.
L!d. ha ln. .ulhori*d !h.F 6dt.r 3i'lctuc E ldbs: I o,00o oquity .h6r6! ol F!. 10 .nd lO,00O prl.6nc. lhar.r of R.. lO.6ch, Cd th6 @mp.ny I 6,000 .qoily .h.re ..d 5,OOO pEf.lt@ rhrF.?

al t.t

BGb[ Sport

is.

Di3rlrcrlon b.rwEn . conp y'. PartneBhlp Flrn'. a.hn.. sh@r

B.l.nE ShBr end

:ddob$.dt.Mp@Hd*h

FrycdM}!4FiciaIdd6l
mdhoai@

hlPr'fulioFmg&tegndiq@d

ic.@ r'!3ih4.std
B.hF shld
h p,4ad

ddqkbvzci,@^tfud
A cmranr's

wial

we lried unde.siand so can be betler dderstood vith the help oi 6d illusi.atidtu. Look ai the lolowins illnstraiiom hd study hF ditrrent itmd shdvn under veious nor& in tle Balmcd She! of a cdnpony.

fr

nlktfaiion
and

1.

liabilitict

sides

Stai. thd nsjo. hea& udo. FLi.h th. itens sppea;.s offts Company'E Bslmce Sheei eo cla$iffed.

dn

th.

assetg

,4Js.ts Sider Fixed Assel; lnvesinontr; Currcni Assetr; Iram ard Advan.esi Nl isrella n@us Expendilu re and hoUl md Loss Acoun!. ,idblili?s Sd?j ShaE Clpilali Reew* Dd SurdNi Secwd I,d; UDddftd Ldan and Cunent Liabiliiies nnd P.dvisiotu.

nl$tratio!

2. Rarogc the folloeing iieE app.nng on thc as*rs sid ol the balm.e sheet ac@rding io lhe requircnents of schedul \iI, la.l l: (i) curent A$cLs; (i, Axd A3*ls; (iitj MilceUd@u6 E\pndiiuFj (ru) Prclil od Loss A.codt (Dobi! Balrne); lD) Lor.s and Advdn@s md (ri) lnveEtnents.
Thc itehs will apprr o. lb &6ets sjde in ine tollowing orde.:

FinanciaL

Sbkmnts

af d

Canpdnt
and Advaces

(;;;) Cureni Asseis,

(6)

I'ans

loans anil Advmces, (iu) Miscelmedus Expenditu.e, md (,) Polit and bsE Accout (Dobi! Balo.e)

Iuu.hrtion

A,

Ckssiry ure folowing itens

uder proper

headings on ih assets side

(;) Gdodwillj (i,) Loos Tools! (t;l) Prepad Insumcei C') Livestock; (D) Shaes in X Lid,i (Dt) Wo.!-in-Ptugressi (uti Covemnent Bondsj (Dttt) Discourt on lssue of Shms!(d) Dobt sj and (r) Bills Receivable.
(;) Ii:ed Aserrj C.odwill! l,iveslock. (tt) Iau?s.nenrsi Shares in t Ltd.; GNe.ndon! Bonds. liii) Ctrefi As!6, Inans and Aduar@! (d) Cur@i-4ssersi In6o lools; Wo.l< in Pr4tess; Debt $ lb) hdns ad Aduances: Prepaid Insurmcei Bill6 Receiv.ble. \iu) MG9llamous E peh.liture: Discouni od lssue 0f Sha.$.

nlugtration

4. Uniler

vhal headioss wiu

you show tno following

ibns ir

ihe Balmce

(t) Secufties P.emium A@out, (tt) Prlininary Expenses,

(u) Autho.ised
li

Shar Capital?

) Se.urities P,zDtiun Aenun| Under 'Resenes and Surrrlus o. ite lisbilities side (ii) Pplininar! Eap.nses: Vnier 'Iiiscellaneou ExFnditure'on rhe assets sida. (iii) Birs fie.eirarls: Under'lotns and Advancs'on tn3 assels side

(t,) Goodl;rlr Under'Fixed Assets on the assls sside lD) AuthatiselJ Share Cdpital: Vrdc. Shlre Capilal on tne liabililies

side

al
.

1.2

Ashok, rhe accountani of Uhimar svston Pm. Ltd., has Bills Feoeivsble amounriig to tu,60.000 whichrh6 dompany had received lrofr G3laxy Expo.ts, a debror. He has showdth. alllR*eivabls as olii.nt.ssat in the Balanoe Sh.t becausd honlv roDresents a replacom^i ot slndry debrors,ls ho cor6cr in.uch
dopiction? Give rcasons for

yorview.

Illshrtior

5, Unde. whai headnrss

will you sho{ ihe lollosirg ilns ir the Bdl.nce

(;) Sh.re lorfeitd Aeout. (r;) Se.urilies (tu) Unclained Dividcnd, and (u) Arrsrs

Preniun Acmut, (iit) ProDosed Dividend, oflixed Cunulaiive Dividend?

anattts al Fnontal Stctetunt*Xll

is slDm uder 'Share capital SLNn by way of addifion to paid trp Fpit3l Nlter sub_lead subscribed capital (it) SecunfieE Pdiuh Accoui is shown mder lesNes mrl surplus'. (;;;) Prcposed dividril i3 shown under ?.odsion' (tu) Undained divided is snod udsr'Cullat Liabilities' (u) Aress offfril cMulativ dividenil is show! uder'Contingent liabiliiies

(,

Shm Fdrroiied Ac@ut

R!-atane the fo]lowing ilens udu thfte hads of sseis: (t) Fixed &Eets; (;;) Curent Alsels! dnd (,!,) Loos dd Advan@3:

IllustEtion

6.

(J) Stores

uit Spre

Paris

(m)Adva

to Suhidiaris

(n) Csh at Banl (p) wmL-in-Progress (r) lnier$! Aeruil on Investnents

(s) Deposits

witl

Port l,.usi

od Eledhicity

supply

cdrany.

(r Ired

Assetsi Livestock,

G.oilwil, Trade M&tl,

ltrd,

Lsehold,

Funiiw,

(ii) C,ranr.4Jsebi l,oose Tdols, Debto.s, StdcL_in_1lod, Stde6 hd Spare Parts. Csh al Bsn!, Cash.in'Hod, Work-in-Pro$ess, Inttlt Acdud m Invesimlt liii) Ituns dnd Adnnes: Prils Reeivable, Advdces to SubEiilidis, Delcits vith Pon lYusi dd Electriciiy Suplly Cdnpany. Illu*rdiio! ?. Give ihe heailings udor which lhe follouing iteN w b shNn in a

onpeys

Babnse Sleet

per Schedde \aI, Patt

Il

(,u) Gae.ar Resene,

Eit

Fiwnciol Stotneats Xd Cohpdal

lllultration a. Undd wh* nsds of liablities itls ir a ConpmYs Balmce Sleet:

(t)

side,

*ill

you classifr the following

Debentms, (i;) Pnblic Deposits, (;;;) SeNities Premim A@d!, (t,) Capital lseFe Accout. (u) Fodeiied Shres A(omt, (,;) Inter6i Acfted dd Due on Debenlures. (,it) A@eptances, (d;;) Advoce6 Received f.on custoners and (a) sundry Creditos?

IUultEtion L Urder whai najor headings, vill you dassi& the following itens {nne p.eprinA the Bald.c Sheet ofa Compsy: (i) Unclaimed Dividenil, (ti) Calls-in-Arear6, (iiU Calls-in.Advance, (tu) Interest Acmed but nol du dn Debentures and (u) Areas ollixed Cunllaiive PEIrene

(') 10. Unde. wh8i heads vil you classi& ure liabilities side ofihe b3lmce sheet of a linitd conpmy: (,) Ploposed Divide.d, (!') Undaimed Di'ide.d, (!,,) Inleresf Accrued and Due or Seu.ed Lomq (t') Inlor$t Accrued and Drc on Umecured taans,

nbrtntion

(D)

(utt) Se.uritis Prcmiun A.oun!, (uitt) Shde lorfeileil Ac.ount?

('i) Arears offild Cumul.tive

P.dision for

T*tidn.

Dividends.

dd

Atutlsc ol Ftmnthl stalqnrnb XIt

(;) Proposed DiYidonil-PlwGions. (;i) Unclaimd DiwideDd {unent l,iabilihes. (ttt) InteEst Acmed md Due o. S*u.d Lons Jecured Inms. (t') Inlerest Acdued and Due on Unseured l0aDs Unsecured taane. (D) hovision fdr Tdaiion-Prorisions. (!i) Ar.ess of Fixed Cnnulaiive Diwide Fas a footnote unde. ih. Balance

She.Fcdniingnt liabilily.

(u;;) Secuities P.obiun Acount-Roscnes and Su.plus. (Dttt) Sh*e Forfited Acmul-dded to paid up capiral-Sha.e Capiial Accout. lUutrafior 11. Give the heailings ude. which ihe follo{ing itens sill be shom in a conpmy's Balmce Sheel as per Schedule \4, Psri I: (;) Sundry Crediiors, (it) Dabentures Sinling F!.d,
(tD) DiscoDni on Issue

ofDebenlues. and

t'l

lllEtrstion

majo. headinss

any iwo iiens wnich &e inchded in each ofthc folowing sub-hcadingd: (i) ReseNs rd Surplus, (;;)Prorisions, (ii!) Ldans and Advances, (tr) Mhcellseous Erpendiiuc a'd (r) Coniingent l-iabilities.
12.

E.mersie

kl

P'ofl

ridto$ A.orr 1c6di3"n4

16)

D$d trh

edshare*enbres

Fiadtuill9btum.ntsafacamqonr
iluahation
13. Undr what

119

!ad! of assel3 side, vilt vou dasli& tLe fonowing itens id tie Bsldce Sheet of a linitd conpdy: (r) Iiose T0ols, (r, Bins R.ceivsble, (i;i) Sud'v Debt s, (ir) P.eliminarv Eipemes, Clod$nll. irni Il crcs' Ac,dei oo Inveslneni' rur lrne tsm tnveslmcnk,,' ' tiii) F?paio LnsuruP, u' Dopoqr wi h.i$om Au$odr:'s sd 'I L \c*ocl'

t-"*.
(i4 (t)
dgsrbMd
m

ldsfi4b

Dsp6itrmcshad,o'ii!.
show ih

ntushation 11,llov wonld you

followig itms in tle Bsrm.e Shai of

.11.2 Ltd. ss on 31st M8'ch, 20031 (i) Tohr Deprecj*ion io da! as on

Apnl, 2007, R.- 10,00'000; (ii) Wriltn Dom V61* of Fixerl A!6ek as oD 13i April, 200?, Ib 92 50'000i (it Depreoaiior td be witter otr ai 25% p a. on {ritten dou value?

bl

cididcd

*J0.0m

1. onginal cos!: (Rs. 22,50,000 + &. 10,00,000) De!.ciarion lor 2007 {3: (25% of Rs. 22,50,0001 = 5,62,500 (Rl. 1o,oo,ooo + R! 5,62,500) 3. loial Dep.ecirlion to daie: = 16,62,500 Illutr.tio! 15. Ilow vould you sndw !h foloeins two i!6ns a Conpaiys Balence 'n Sneet ds dn 31st Mnch. 2OO3 s !d tne requiEmni! of Schdule VII General ReENe Gin 31!t M&ch, 200?) Rs. 3,00,000, Pndi @d Inss Ac@ut (Debit Bald@) fo. 2007-2003 tu 2,00,000?

Aaot!4r of

Fr

m nctol

StoknPnt. xJI

Gd!

FseroirleD
lD saansl

300,m

Illustiafion

shd the lollowing t{o iLbs in a Con!m/3 Bal.nce 16. Ho* wonld Shcel as on 31st Mdeh, 2003 as pe. ihe equirenents of Schedule \rI: 'ou Cneral Resene (since 3lst Mdt!,2OO7)Rs 4,50,000, !.offt md ljss A@ount (Debit Balan@) lor 2007-2003 Rs. 6,00,000?

Prcrhsdrdlarc{Dl sa

600m0

nlNhaiion
Ltd,,

1?,

rhe lolloFi4 balrn.es have been orlracted fron the booli

df Rama

on 31si March, 2003:

1,00,000; 12% DebentureE 1O,OO,OO0! Secuniies l.eniun Rs. 5.00,000; Creditors Rs. 2,00,000; Proposed Dividenil R3 50,000i P.ont dd Lrss Accoul (Debil) Rs. 5O,OOO; Live StocL Rs. 9,00,000; CoYmen! Bonds Rs 4,00,0001 Wo.h-in-Progress Rs. 4,00,0 00 and Dis@unt on Issue ol 12% Debenlures Rs. 1,00,00 0 Prepare lalmce S]leel oi the conpary a5 p.r Schedule \aI, Pan I olthe Compmies tDdhi 1ee7 ti4odfied)

Shar. Capital Es.

tu

831!tl2ll1\2{3

ls.@!

9q!9!

Fwncbt stutewnb xa co@dnt

m@tlatior

13.

P*pa Balsce

sneet ofa

.onpdv

pei pmvisions ofschedlle

VI

lotl]lina

of Balance

Shet

iE not

tquired.

,.::

*,t."

6.ch undd tho h6adlng'Scu6d Lonland'Un6.cLtd Loan'in DBDard a6 p6r Sohdule Vl of lho Conpnioe Act.

trlust stion 19. Fron ihe lisi offolding assets sd ]isbilitios, prepare the Bsldca Sheet ol fie Conpmy a6 let Schedule \4, Pari I of the Conlmies Ac!, 1956

5e'm0
1!,!@

rJ4.m

Atullai!

of Fituncial

sh*he*s

x1I

cldA'eiildBfidld'id

{b

d.

dd'dsfre

6i

a4!*d)

Illmi.,tior
Ere

l,id ,s

on

20. FoLlowins bala.cs lave beD ext.acted frod the bdoLs of slst Marh.20oa:

T!e.eis

loi

aco iqeni

acknowledsd

liability in .espct
debt.

of a

claii

of Rs. 10,000

aglinst th6 c0npany

You

dc rqlired t0 prepae the Baiece Sh@t of Exe Ltd. s or 31st MEch, 2003 in ilorizontal Fom, ed (il) in Vertical Fom as presdibed udq Part I of S.hedule VI ofile Conpeies Ac!, 1956.

(t

FiMMtat srat tuntu

of o

cmpdtt!

Baldrce Sheet in Horizotul Fom:

(b)

P@E@:Peisi

rdr*tn

tdhosnsrdwrl!4ddaqldd)

Not: Coniilqat lidlility in res!d ofclaim dist3 agaiEt the wlich i: not &ln@ledcd s debt.

{mpdv

for

tu

10'000

{ii) Bo.likce Shzet in Vefticrl Fom:

3'c@u*i9&ffitrdAdErcd

AMtt!!

ol

Fttuncni sloltnen^-xtr

(0 rs.jcuderLja!

fi

aid

a.

k)

s kies dprdiru 1b ho endmiw ddddrldd)

M

Not: Coniingent lisbility in respect ola claifl ensis agaitut the onpdy anodtiag to Bs 10,000 which is not ackno*leiked a6 itebi. IuUltntion 21. t Ltd. hs h anthoii.cd capilal of R3. 10,00,000 dividil inio equitt shares ofRs. 10 ach. The conpmy indtd appliations fd 50,000 shms. Applimtion3 lor 40,000 slares rE re@ived. All call3 wre made md were ddJ .eceived .rep, ilE fnal.all ofls. 2 pa &\e m 1,000 sll:E. 500 oftlde s]rdd on which the ffner call va nor .oceived {re forfe ed. show Low shde capit] will 4pe' in the Bal@e sht otiheonlmy s psschedrnevl Psnt otrne cmpmisact 1956. \cBsEna1)

]00'0C.Equl}sh.69!]F*]0ladr

'9500Eq'rilysl'esolFsr0adr3$m0 @5osr"Fs F. ? l@
394'000

1tushs6Fs.3)

4,m0

nlwtrafion 22, Prepare a Balance Sheet ofV-T. Ltd. u on 31st Mmh,2003, frd tle foldFing infomrlion ds per p.ovisioE of Part I, Schedule Vl uder S4tio! 211
ofthe Conpad$ Act, 1956:

tcBsEDethi2a0l,

G@(csr)

'1:
th ire

ftd

nd

hii

orssdidd)

23. The lollowing brtdces have ben errracted fron the bools ofvijsy L!d. dn 31st Mech, 2003. Sba. dpital Rs. 3,00,000, cene.sl Resde Rs. 2.00.000. 3% Debaiues Es. 4,00,000, Creditors Rs. 1,00,000, P.oposed Dividend Rr. ?0,000, P.oEt ed Losr Acoun! (D..) Rr. 30,000, Buil&lB Rs. 10,OO,OOO, Coremnar Bonds Rs- 2,00,000, Stock Rs. 2,50,000 srl Disounr oD issne of B% Dbenrues Rs. so.000 Plepm tLe Balace She6r ofth comp y. tc Bs E 1 ss7. Fot?teh M od 4id )
v'jry

nl$kation

!d.

2m'M

AnolFi; of Fiturciot SidenentFx

4. PROFIT AND LOSS ACCOUMI

Profit sd Loss Ac@unl shows the net tus{li of businesE opeBlions duilg u !.ounring pnod. The Cmpuia Act, 1956ld .o! prribd &y lom i! Rlicb tle pFdt dd lGs o@ut b prcpar.d. HrelE, tb. poniculs sil i.foB.tio! EquiFd to be sivd in ine Profit mil ldd A(out sE pre$nbed in S.hedul vI, Part II ol ih. Cdbpmies Act, 1966. As s .s!lt PDfit dd Lcs Ac.osi is pFpded in did6r.ni lorne baseil on tie reqnirmertE of ihe busje!! 6a tlTe ofindultry. Whatdr lom ofProfit md ljr6 Ac@ut may b, ilems ofin@Eo and erpeldituF ofthe bu6ine$ Ehould be ude. the Dosl @lveni.ni heails of ac.oht. T1le Prcit dd In$ Aounr Dwi erhibit a true od tan view of the prc6i or los of the @puy aujrg th ye&
In view of tle aquiren@t or ils Schedule vL Part Il ol tne CoEpdis Act, 1966, Profit od Ij$ Accouni can be divided into t]rae parts: (!t) Pro6t dd b$ Acmut; ud (iii) kofii a.d Lss Alprsp.ialion Aout. Trading A@ount i! preldrd to tiow the stui pbfit meit d. !m$ l6s sutrrd dui4 lhe yeu, Pbdi dil ln* A.cdnnt is prpar.d io kmw th lot Droit emil d ni los 6ulTered drins that year ed P.offt dd Loss App.oplioiio! Ac@uli ir prcpeed to lnow loF the net proii has ber i!v$ted. The ssrs. opning 3tock, dGiry stL, purchs6 dd dire.t elp6ns & @tded in Prd I (My be .6lled Thdtug Accort). lho B.lancirg of Trading acount .hotu sros6 profi! ror grod.lms) and $.5mpd ro nK pen In the s*otrd part, tie gross prcit or the gross lo!! brouglt fo dd frdn tne tEdirg accou is rso.ded. w slso rscod alL inilirect dperoes undsr .pptulriat hsdE .uch as qihinistraiion error.s, Eeling expeMe!, di6hibuti0n .xt6s, nn6n ial erpo@, tc ud oiher ir@4 .med bt th @bp.nt. Bald@ of this prt a6l! nl plofii (or ret l@) ofth. dhD.ry md is raj.rerEd t! the nen pqn (IMt ,nd l@
There is no lpecidc diference in Dr.parinA the Prodt dil In$ Ac.out fo. a conpany or ld any oiher nler?risr. Ms prpdeil i! the 3ue Bamd End priloples the md lrsr Acou! of a prrt, eBlip 5tu.

Prit

Pronr .nd

L@ Appreprialion Ac@nt

lh.

nei profii ora conpmy is di.close<l by the Proflt uil t sa A.@u!. Whcn i! is looen ihat tla onpany h$ eMsd pbfft, question of its dishibntidn o. appepdation uiBe. Some part of operaiing pbfil is .t{inod wi$ fte mpdny it dddt strengt}la ill 6tucir1 polition. Some prn j! dbhilLied dd.g snrehol&B a diriddd Thc mout, which i! lept with the mnp6ny, is s@..lly tss&zd to the R6FsAdur Bui m p6n of tE sllrlmii! daird iDtheMr ed laA@ut it&r. lhis mount is shom o! oedit side ol nqt yos's tIe Proit dd hss Aaoui.
Th6

itds of apprcpriatidn sbown on the debit 6id. oftne PDfi and Lss Ac@ut arc: (i) Ahoutrt irsnEfcftd t0 !h Oene.sl ReEwe A.6nni, (ii) Aooui trans&red to dividend equalisalion esenq (t Anoui tr@fcftd to deb. lEs redebptio. fiuil,

(tr) Anout ol.liyiildd didiliblirl

eil pnpo..i, md

u, rhe 6nal bolance or pEEl rnar sbd. tDprcprorioG ! .!med loNed b lbc oatle rsrs a@L This port g PmGi ad t@ A@ut i. rglrded s Prodt .nd ADpilpi.tion A@ut, 6vd, m &Du3t heil is u4d for ii. Ilft snil oflh a@ui showins apptupriadotr ofpFGr b abo 3o6..iIIE rd.d 'Eiloe iln
Afomt
for th

Dailing dd Proft
rE

ddIjs

Ac@ut @d PF6t dd

lrsAlpopriation

o$rrc

PFoFrro t06s rccsr{r

1. In cds ol OFs Ls6, ,h. bale@ Riu ap[Da in the reilii of ih lEdins AdoEt &d wiU h. cdierl down to ihe debit of !h Profft md In!! Acoui, 2. In c.s of Net Ls, t! bald@ will app.d in t[e c&dtt of the Profit md Ls Ac@i ud@ieitt tb. d.bif of &o6t ed l#s ApprcplirtioD A@unt.

A@l!"8

of Fvancral

StntlnP4ts xrr

muh.tion

2-t. The Alfa Meuf&luinF conEnv Ltd. wao registe.ed sith a noninal ca!ftal of Rs. 6,00,000 in eouftv sh@6 ofRs. 10 .dch. The lollNine is tle lilr olbalances diract d fiom itr book on 31st Mdch,
7J00

3,s000

sJ00

sdrbd'iduyc]ed!p.8pi:l

9'000

BdDlblsFseNedtlAli'e0 3J00 Prepare ure lYading md ihe P.o6r md t s Accout and rhe Bsloce sheet in proper forn sfter mahins the followins adiustnents; Dppr".d" PIs' r and Mscl nep oJ t0,,. wrf,oitR6. iOO llom p,dminsryExp.mo" Proviop lsl vpar. Dcb"1 utintsTd oue -rd\F ado a4dOorbr5j DebE Resene aL 5% on Sundry Dsbrdrs. stock on 31st Ma4h, 2oo3 was Rs.95,000. Ti!ardu dnd.di4
conpmy

!d.

FtMui'| Stotncnh

of o

canpont

ri.,'lplEMl'd'hgcomlaiyu'

e000EqJilyShasolR!.10@i

anorrsis af Fino^tbt
5. NOTES TO ACCOUNTS

stdt2n?nt*m

Accouts i6 the statement attached to ihe fnmciel statnmts mriahing requned t be disclmed in tens of Sche&ne \.I of tne Compuies Aci,'I'he Nota toAccouh hs inforution s to qllatitstiye iletib, @stDg poriciG adoptit h prepuing the nn@cbl siaine.ts md e4lratiou ed clarifi@tions qs to whai tle healpmlt co.sideE io b impo.t@i {o. bi1a udarstdding by lhe lsers.
NoreE to

dilitioml infonatior

6. CASH FLOW STATEIIEI{T

A cuh Ftnb stat hent is d rtdt tuht sh4uina rtz llou of NsL. Wob a .I outtnb, dwinA dr aeau^tinE p2tiod.mjs stetemot i3 inportdt fd band ddeGldding of nmcial staienmts. It is so b.ace the Enancial stateEento N prepared foDopi4 !h accrual netloil of accoutilg wlncn @y snow ptunt emed hui aciually !h {xnpmy bay b facin8 .ash tuch bc.$e oi p@r ollaiion ion debto.s, Csh !'low Statenent has been discused lat. in a chapie. titled-{asl Flow Statemcni.
7. SEGMENT REPORT

An nierprise nay be hrving a rumber o{ ploduci! o. may be op.aiing in ilitrelat ee$apljcal deas. The ns! dd retuh 6ied by each 8uc! !.oilut o.8@ie or eegraphical area N didelent. The users of the n.rcbl siatemnis shal be bila inldmed df ris*s 6d relms ed can bake bettr aslessnent of the eltrlnse ss a {!dle, if thsy have rhis vital infomation about each ofthe seDmt. A sesnent Repon is th. repon .onrdinina fr.ndviol i\fomtion about ttu differeat

*crunts afttu 6mpdn!.

OBJECTIVESOFFINANCIALSTATEIIEN'TS

of Chariered Acomt nts of Inilia hs statil tlat ih obj echve of ihe fflancial starenent! is io p.ovide 'inform,ior abolt tho financidl positioa, pe.fotun@ dnd. c6h tltu d an enterpris th4t is upfut to a uide NnEe of ue6 in mkins ecanomi daisio4.' Th Objectivs o{Ihmcisl Sialenenh se; 1. To prcvide nnmcial ilata on economic.esoues md oblisatiom o{m entrtris. 2, To reved imllication of o!@tile proft on ihe nndcitl posiiion of d entdpris. 3. To pmviile sufrcieni uil relisble hfonation to vdiox parti$ htftsted in

IlE Instilut

4. 6.

To To

pre*ni true md fair via of the bBin$E. E* ds the lasis oftutue dpdatidns.
SSEMNALS OF FIXANCIAL STATEMENTS

It

us

uileEtdil tle Es*nti6t

of

lindcial

Stalobcnts. Tlese

discusred

<1)

A..urete

InfuMriot Fi,raDcial Statenelts should dbclose the faciul infomaiion about ile 6nmci31 positior o{ ih onpny. In other wods, il snould not disclo* the position bttd 0r wo$e thu tle facisl,

Fim$iat stot wab

ot a conpony

i, Vna.r.td dabilitt: Fneial

(rll)

Stateherta should be prepsed folloving the ac@pt d d.couting prin.i ples for beitd ude.sleding ol rhe us.!. Cortaturr.r Finociar S1ainents Ehoutd disclose the ilfomairotr ir a hanner tbat lle uer cd @Dpe tls iDfo.nation ol the ss entily over yess (inha-

<ia, VenfiobL: I omaiio! dhclosit by the Finuciar Statne s snouh be venffabl frob ihe.ecords ol|]r compqny. (u) I"t uaDti IntomatioD dtdo6ed by t! Financial Slaienenh should be in aMrde sith th. legal requnnent . Il id 60 heau.e fhey m .o.lidered rlddl L the lEB baving ben *t .fi. rhlrrnsh Cublic dbrte. Option.l i.fon,tion, ho@., should be iliscrc.d judsilg its .levo@ b tne us8. (ui) TteriM.i Fiwial Stat.nenk s)rolld be sspared dd predted wiihin d

6m @Epdi.on) ed abo ih.t t!y co mparc the tupnting conpdys fndcial inlomation *iih ildt olorbE (inier-fd dnpdnson).

rsolabl

le

period afrer ihe

iheil releydo

bsale

adduliig

period is sa.lrin.ncier ShtenonLs nsy of Mdn delay eued in Eleam olsuch inlodation,

PAFNES NIEFEsTED IN FII{ANCIAL STATETEflTS OR USERS OF FINANCI.AI STATEXENIS U.ers or Fine.itl staiemnk Day be cdiogonsed irto (U Inremal UsEi

sd

(t) O@zrui Osners @ntribuie mpitil in the bu6iness ud ihu @ always expopd to risk. ID vid olthe risL inhlvd, the oqrds e alway. interestd in knoriDg th. pofitability, 6n.nci.l .tftne$, c.6h position, *gment inyeslbni ed profikbiliiy, md tui@ plss ofthe onpdy. \ii) Moriswt:ln1*Ee Ei.eJentrpliser, omsBhip od Dudsenent are sepurt. Buhe$os dre nsagd by prcfessio!.l neag.s whd de in airsd contrcl. MaapEent hs the ED.ndibfitr' !o not only sdf4rdd th one. E invo.lbeni but abo io inRse its vdlue bJ n n4ina tlie bEin6i elli.inlly so iblt it em ihe nrinun p.o6t. The nuagmenl haks :i!6ive uee of,aounring i.fmaiiont @iye al intomed dcisi@s 3uch s detriralio ofleUing price, cost .dtrcb und rcduction, iw.stDent ilio nd pojsi6, 6tc. liii) EnplaJe.r an l Worhe8: Enployes a l eorkers do entitled lo bonus di the yd dd bediiles ih sallry sDrl sage. talen sry honih. Boru6 is directly li.!d to the prc6t e@d by s entrp.ilo tnrefole, th eDploys erd wort6 N iltE3rcd i! i@ci.l st idne.ti.

\i)

\ii)

lnDatura dnd Pabnridl lnu.6d8: Inv$tnn! involv* rbk and slso the invegto.s do lot have dio.l contbl Ner tle buihedr sflaiF. Iberefore, tny rely on tle 6@uting irfonaiid Nail3lle to tloo ed @e$ !o ihe qu$tiN such ,Fvb.t i! il'e @iDs qprcityolthe@trpd* tud hM sde il ften irvllmt?

lil]4ier InEtituiio.s provid loms dd Anucial Insiitutions Fill watdr the perro@ ottlebaine$ t ki6, wlotlor itt h"Hnspiogrs s pili4td io tuE the $lety md @ery of the roo advolc<l. Colb Flow statn.ni ed s4rMr S4porls eDbb thn ro N4s @h pcftim and vhi!r tne bnEiness segmmts ds Daldng pro8rers $ planned .nd Fojectd.
Baahs and FiMnc;at l^stitutioroi Bsn& and tD lhe businees$. Ii is lalural tnat t! Banb

*L

Atdl$&

of naaui.rl

stalement-nl

lttt) Cftdiiorsr CEdito.s

are the parties ryho supply Seds o. pri@s on.reilft. Befoe gxmtnry credit, crediloE saiislJ rhetrelves snout rhe ddft worrtriless oi rh. bwiness. Tle finucial stdtene s help then irrnemely in baLing suct m a$dsnenl. Also, Firmciel Starenents tel! rlen ro decide wherhu rney should .ontinne doing business with th GD) eouethtueat and n, Autho.titesi The gorernnenr dates use offinancial st3tenol, to conpnc miio.al inone accomiE md oiher inlordaiion. The intormalion so svsilable !o it dables tlen to take poticy ile.isio.s, G.vemment laies vaied tdes such s E:cise Drty, VAT, SeNi@ Td md r"--e Td Tlege govelnnenl auitorftis assess ttre @soct t: dnes Aon an satvsis
or

nrecn. sDtrners

(u) Aes?arnorsj Eesea&lors int*sted jn i nt rlrling ihe finmeial sialenenrs of the coDcem for s given objEctivc. Stocl bmters also car.y our rse*ch oa nnscialstalenenkloassessihetutuepofi!.bi y ed s a result assegs what should be the valne oflhe shae. (ut) C,rulaers: Conslners reqlire a@ountins info.mrtion for esrablisling C.od a.coundns corhol so that cost of !.oduciio. nay be &dued wftn rne resulrmr rednction ofthe prices of!.oilucrs they buy. Somerines, prices of some producrs are fr.d by ure sNe.rmen!, so ii nee& trcouting infoturion r. ffx lair prjces so thai orsuner dd p.oducers are not *pldited.
LIIIITATIONS OFFINANCIAISTATEMENTS

li) Hi$ori.dl

lii)

Records: Pe*ons liko sharelold.s, iNesrors, etc., are nore intsl.d jn knosins ihe likely posftion h ihe turu.e. The lildciat starenents a.e .o! dfmuch help as rbe infdmarion siyer in rhese stat.nenrs is hi6bncat in naxue bd does not retlecr rte turure. Affelzll b! Pqsoaal Julenerfu: Iinancial Srarenents are the otrrMe of acconding concepts ad convenrions .odbined vfth the persoMl jndsmmt. Stock vallaiton, treatned ol delercd revdm dlerdiiure, provision for delre.ialion, .k are based or lersondl jndgnent !nd, iherdfd.e, m nor f.e

\iii)

Diffetua, Accoantina Prertcesj The Finscjal Stnremais can be dnun uD ob hd osi" or d'dere n r., oLDr c p r rec for *smp p. trp4i ElDn.an b; provided eiihe. or shighi-lhe ' basis or on vrftron dom val@ basis. piont eamed or loss sufiered rill be differenr whcn ditrrent prtrrices are tdllwed. lit) Ig-or4 the quaht tie Ei.tuntsj linancial Siaienenrs portray rhe posftion in noneldy tens. The lrolit or loss posiiion or Ure fhan.ial poEitior exctudes things shich cmnoi be exlresseil or remried i! nonerary tens. than.irl statebenls i8no.e the qualtalive elcmais like qualty ofnanagmri, qnatfty ol labou force, pdlic relalio$. L) IAaorer the Pri.e lp.el Chdr!.es DiIleren! dsdets ue slown ar rle hisroricd cost. It, thereforc, isnoEs ihe price lsel clanses o. Drese!! valne ofih assis. <tit cannot Met the Purtt%e ofau Pofti2': Th. nrflbet of parris irieresled in the Finaci.l Sratenenrs k lese dd rheir inteftsrs ditrer. The Finhcidl
statemenis camor

!ec!

rhe purpose of all parries inrercsred in them.

Anal!.it

of PiMrci.'L

gtt?Mnb-fr!

1 U^da {b! headi4 airl Fu dsi& (r'ir udtucd Divid.nd ,nd 0ur Pt!
Ri,

!h. rolldvi4

rbE! li)a L Rseivabl

tiii, cut Ld itis ond Medtd@uE Eadxufll R{rane the fou*inshca& dfd*ob llde drtrarseo sh&lds Fshedurs \rr (a) Mseiluur Expddituer (6) r,.E Dd idvMer G) Fixed tu*tq (d rnv*iEen* & 11 Fb.d a*d!) 2. rNedh.tk; 3. cu

Le8 r^n

,Jstd:

6t Cl.nat

A'*.

Lv)

ta

u!&.,bdh6diu

PEEilE.@unriG)Uur,jDedDvid.nd (dPro@ldDiddmd,c)alrE'o
l,t) Pnukioti dn,t Gl canti@nt Lisbiti1)

cr@t Aec rit Le.r od Ai6re wilr p 6he r}!

4r.t

L Mtnrcnbb Eeaanldl

und, Fhd

. liE

headr w r you dasi{r rn @pany: (.) b* Tolsi (ii) Birk

reiv,b.;
ad
(u

(ir: srldry ftbroB; (iu) Lil1&t;

ih! Bsroce sher ot

1(i)did rtit

clmn.aed

(,')

ait Mi'.tttcEou' E pe^ditu l

limlkd .mpey @ .how4 li) lnd (i,) curelt Lilbiriii* d

Urdd xbd

ted!

or

'!d

!esd.! ud sullu; (ii) Srured rjtu; (;,i) Vdecud ldr tuili.o dde viD ru dcj& rh. ronsi!: ill6 i tn
I!e3? ltt) cut\nt
ill, Rleiabrer
titr) (r'ii)

D.b!!tms bd

(,) r,o4 Tefu

sudry Debba;

E4nsaad(y)Bill.ofE.b4
ftd4 ti) Sbcl{i (iii) C.odqill; (i) (u) sruids lltGiuo A@ut?

o AbLaq liii) cumt r'Iet4 Meeltstuu, E,peanitu o.dt ) rruh.tbl lou d ds rorNing ibm pin be lhown in , oEp8r/i drErrdon rnv6.m!e: 0:!)co.diir, (tu)Pt ltuinq
Asdst \ii) hsnr l\a s4sr.n

,ttdw6

Lq@

Ext.nditure

fis

wourd you

di&los th' fouonilg t&tu id rle ldDo Dl..oun. o! bu. or

naa *{b: od dt L6n6 sd Anlcws) sh.er d& rinibd @Epsy: (, Ld.

o cu@t AM't tii

d.ba!I)s .d rl utbD

oF snd

(,siDldqFundl0i)PEdEinAryExpgnss;('i)!alan.o{ithcubds (i,) Pahb ad copydghb ud (u) autho*ed capiiar? to tu tlA o su4/l.)tin $i,e E4rdituE;liii) LadBdnd ajiBK,; "@u, ti!, fd tM. d^a 0\ sh4E coptzrl r0. shb tLc prw&i 6!in heding: ld b. dsdosd in !h! Biuco shel or a li'libd onp'!r: la) ciodwirrr (r) Prepdd eprnelj (c) A!6dsed c.pitili (d) ulde riiiq coDni$i (t) tttrd a) Lacn ad ad,snes; \., short csptbt; ^sPb, td) Mixe|o..a!, ary.murt. dt.) Prtli!tuBl

9 Ud.r

{hat neadinF

^d.tir) n!) Mire .EdB E eMitun qlttv) R.rtuaotd Eqbj yN she ih. fo di4 roD! rn ihe rarae sh6r d ! eeprryl

(iJcutu

M.\n)c!tu

t\d ae4

UldE Fbf b..dbs win rou rhN the 6ipar: (d) Authod&d capttrlr (r) D6bnt@ eit (?) PrNtuid 6rT oc

l.lr@ sLd

of

.joilt!h!

G)cadtdrRetrrylr{d)56 ed tD.t i 1992) ste cqrrc4 (6r si.rt coflbl, {rdr .a sas2.t r^6 ad k P. rtiMl UId6rhriho.d'ia'iuru'hdthe ronovior ibu in ib. BdDe sret cdpry: 'rib. li) tu{ill, (ii) UDddosd Divid.!d!, (rit) EFviljod rd rq, (iu) s.ruidE PEoium a.@ui ho' *iU r.tnibit ih. 61lo*bs ieu! in rh! Bdee sh.d of I rEiid @EFy u on !&d31'200&{i)o!i!i!rlgtord.ry &. t'm,00o. ('i) B@l vlhD or d..l$!.ry @ r\an L m, 8.. 2,30,0{0, G D.@tu r.
sb@

, la.

rol.winr fillFr @.s.d!d fibb tb. T'i.lBdrneorxLid'shmc!'i1tl10'000 qujiy Bh3E ofEl. 10 sa.h tully 9dd:
l0'0e
,5'000

r.quir.d b {Lu up dc n niUds !id. of ds aun @nu ortle c.Dp!l.r A.r 16, PE!* th.l.l.ne shed (i' soriant,l ldm) d

YN

qm BdrN sld, .@dios b de

<D.lti tue)

l'tet
10.

of Ea1'

Pn

6n.tr Bduashd ofx Irn

6d Hqi'.rr.r

Forb)

'

u sha R'. 52,N,u1t d srd M,r-h, 2000 n b ltr.

l?,

a..qr
rlc

IM
ta. fouoi! ir rb.6rE ori A.ti 1956.

cuFdiE

c.r!.ay Bdru

al B.hM sh.+tu. 50,00,aao1 shet p.r s.hdul.d vI, P.d I of

Anobsit ol

Fi.rtui.! Sto!.renb-x
Drb?n

ls,TherolbFi4balseshaveben
16

Prtrr@ tu

60.000.

l3q

map'ny rs

pi I

'h" \hedd. r (. Per ro 5sfoDpui..4...1eb3.

PPprs

Eslm'" sh6t o,tb.

'.&sE.root. l trakt ol Br,law shtr E' s z',aaal

n5 2.d0

00: s0e".+ d fu l0'N'000 upr PlMt ed MtrhEe^ R! 3,00,000. Gloddr 0o0 b!4rnf!ts d shllE ol Ra! Ld R! 2.o0,00o, c.ned R.*df e ,.00 M' r.60.m0..rod,bd

r0 "a.b hrrr

Fd

-.-,-*'I|
I

u4d

Dl\id.nd R5

l'm'mo'

&d fi.h ,!e

cssE 2oa2. Mad,tvdtl 11ds!otBdN 's'.q Rt t7.o6.0aotI

b@l'r

eq.P'nIorrh.I

I ! I l

o R4ulLmibdm3rd Muh,1003.

fu' s'oo'

I s*l',"T*d.| .000, sh@ c.!i'n I

30 0oo

Pa\'dd iorTs$ !oR! 6'000

fdot at B slo+ t s

shor.sdl l

6'H

h,r
@

Fs., aa.oolla

3' M'n!.l

ii:* ,";... ."".",.,,",.. .",- ,"..".. "*",-." ,,,", " .*""",J sh e.rdarn3. r0{ D..
n3. r.20000

R|

r3.m.000.

l'00'om: su-d^

.Pd''odl

I
T

Vdot4Bqh@sb

Es. 13

6o,aa

I I
I

I
T T

I I
I I

T T T

I T