Chapter 5

ParticularsNote NoFigures as at the end of current reporting periodFigures as at the end of previous reporting periodI. EQUITY AND LIABILITIES(1) Shareholder's Funds(a) Share Capital(b) Reserves and Surplus(c) Money received against share warrants(2) Share application money pending allotment(3) Non-Current Liabilities(a) Long-term borrowings(b) Deferred tax liabilities (Net)(c) Other Long term liabilities(d) Long term provisions(4) Current Liabilities(a) Short-term borrowings(b) Trade payables(c) Other current liabilities(d) Short-term provisionsTotal

ParticularsNote NoFigures as at the end of current reporting periodFigures as at the end of previous reporting periodII. Assets(1) Non-current assets(a) Fixed assets (i) Tangible assets (ii) Intangible assets (iii) Capital work-in-progress (iv) Intangible assets under development(b) Non-current investments(c) Deferred tax assets (net)(d) Long term loans and advances(e) Other non-current assets(2) Current assets(a) Current investments(b) Inventories(c) Trade receivables(d) Cash and cash equivalents(e) Short-term loans and advances(f) Other current assetsTotal

Equity and Liabilities

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.Financial Accounting for ManagersAuthor: Sanjay DhamijaFinancial Accounting for ManagersAuthor: Sanjay Dhamija

Share CapitalAuthorized, issued, subscribed, and called up for each class of shares.Calls unpaid to be deducted from the called up capital to arrive at paid up capital.Add: Forfeited shares (amount paid up).Terms of redemption/conversion of redeemable preference shares to be stated with date redemption/conversion.Shares issued for consideration other than cash to be identified.Shares allotted by way of bonus shares to be shown.Sources from which bonus shares have been issued to be specified.Calls unpaid by the directors to be separately indicated.


Type of CapitalPreference capitalPreference for payment of dividend at a fixed rate and repayment of capital.

Equity capitalPerpetualLast preference for dividend and repayment of capital.


Type of CapitalAuthorized share capital: The maximum amount that the company may raise by issuing capital is mentioned in the Memorandum of Association.Issued share capital: Part of authorized share capital that is offered by the company for subscription.Subscribed share capital: Part of the issued share capital that is subscribed by the shareholders.Called up share capital: Part of the subscribed share capital that has been called up by the Company.Calls in arrear: Call amount not paid by the shareholders.Paid up capital: Called up share capital minus calls in arrear.Forfeited shares: Amount paid up on the shares forfeited due to non payment of call money.


Reserve and SurplusCapital reserves Capital redemption reserveSecurities premium reserveDebenture redemption reserve Revaluation reserveShare options outstanding accountOther reserves Specify the nature and purpose of each reserve and the amount in respect thereofSurplus i.e. balance in statement of profit and loss


Reserve and SurplusAddition and deductions since the last balance sheet under each specified head.`Fund in relation to any `reserve should be used only where such reserve is specifically represented by earmarked investments.Debit balance of statement of profit and loss shall be shown as a negative figure.The balance of reserves and surplus, after adjusting negative balance of surplus, if any, shall be shown under the head reserves and surplus even if the resulting figure is in the negative.


Liabilities


Long Term BorrowingsBonds/debenturesTerm loansFrom banksFrom other partiesDeferred payment liabilitiesDepositsLoans and advances from related partiesLong term maturities of finance lease obligationsOther loans and advances Borrowings shall further be sub-classified as secured and unsecured. Nature of security to be specified separately in each case.


Deferred Tax Liability/AssetsRelevant Accounting Standard AS 22Due to difference between taxable income (as per Income Tax Act) and accounting profitPermanent differenceDont reverse subsequentlyExpenses disallowed, exempt income Timing differenceReversed in the subsequent periodExpenses allowed on payment basis, depreciation

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd.Financial Accounting for ManagersAuthor: Sanjay Dhamija

Deferred Tax Liability/Assets

CauseEffectAccounting Accounting income > Taxable incomeTax on accounting income > Tax payable as per Income Tax ActCreate deferred tax liabilityAccounting income < Taxable incomeTax on accounting income < Tax payable as per Income Tax ActCreate deferred tax asset


Other Long Term LiabilitiesTrade payablesOthers


Long Term ProvisionsProvision for employee benefits.Others (specify nature)


Current LiabilitiesExpected to be settled in the companys normal operating cycle.Held primarily for the purpose of being traded.Due to be settled within twelve months after the reporting date; or The company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.


Short Term BorrowingsLoans repayable on demandfrom banksfrom other partiesLoans and advances from related partiesDepositsOther loans and advancesFurther classified as secured and unsecured, mentioning the nature of security


Other Current LiabilitiesCurrent maturities of long-term debtCurrent maturities of finance lease obligationsInterest accrued but not due on borrowingsInterest accrued and due on borrowingIncome received in advanceUnpaid dividendsApplication money received for allotment of securities, and due for refund and interest accrued thereonUnpaid matured deposits and interest accrued thereonUnpaid matured debentures and interest accrued thereonOther payables


Short Term ProvisionsProvision for employee benefitsOthers

Assets


Classification of Assets


Tangible AssetsShow at cost of acquisition less depreciationThe cost comprise purchase price and any attributable cost of bringing the asset to its working condition for its intended use. (AS-10)Capitalize borrowing cost up-to the point the asset is ready for its intended use (AS-16)Import duties, taxes, delivery and handling costs, site preparations, installation cost, professional fees, start up and commissioning, test runsSubsequent expenditures to be added to its book value only if they increase the future benefits from the existing assetImprovementRepairs


Tangible AssetsShow, to the extent possible, under the following headingsLand.BuildingsPlant and equipmentFurniture and fixturesVehiclesOffice equipmentOthers (specify nature).


Tangible AssetsUnder each head show the original cost, addition and deduction during the year and total depreciation written off up to the end of the yearOriginal cost Gross blockLess accumulated depreciation Net block


Intangible AssetsIdentifiable, non-monetary assets without physical substanceAcquired intangible assets are recorded at their cost of acquisitionSelf-generated goodwill/brand value is not recognizedResearch costinventing or creating a new product, method or systemis not capitalizedDevelopment costconverting the result of research into a marketable productcan be capitalizedExpenses that provide future economic benefits but no intangible assets is createdtreat as expense when incurred e.g. start up costs, launching new product, training etc.


Intangible AssetsGoodwillBrands /trademarksComputer softwareMastheads and publishing titlesMining rightsCopyrights, and patents and other intellectual property rights, services and operating rightsRecipes, formulae, models, designs and prototypesLicenses and franchiseOthers (specify nature).


InvestmentsRelevant accounting standardAS 13Distinguish between current investments and long term investmentsCurrent investments: Intended to be held for not more than one yearCost of investment includes all the related costsValuation (Carrying amount)Current investmentat lower of cost or fair value preferably on individual basisLong term investmentsat cost subject to any non-temporary diminutionProfit or loss on disposal of investment to be shown in profit and loss accountSignificant restriction on right of ownership, remittance of income or proceeds of disposal to be disclosed


Non-current InvestmentsTrade investments and other investmentsInvestment propertyInvestments in equity instrumentsInvestments in preference shares Investments in government or trust securitiesInvestments in debentures or bondsInvestments in mutual fundsInvestments in partnership firms Other non-current investments (specify nature)


Current InvestmentsInvestments Equity instrumentsPreference sharesGovernment or trust securitiesDebentures or bondsMutual fundsPartnership firmsOther investments


Non-current InvestmentsAggregate amount of quoted investments and their market value should be shownAggregate amount of unquoted investments to be shownAggregate provision for diminution in value of investments


Long Term Loans and AdvancesLong-term loans and advances shall be classified as:Capital advancesSecurity depositsLoans and advances to related parties (giving details thereof)Other loans and advances (specify nature).

Sub-classified as:Secured, considered goodUnsecured, considered goodDoubtful.


Other Non-current AssetsLong term trade receivables (including trade receivables on deferred credit terms)Others (specify nature)Long term trade receivables, shall be sub-classified as:Secured, considered goodUnsecured, considered goodDoubtful.


Current AssetsExpected to be realized in, or is intended for sale or consumption in, the companys normal operating cycle.Held primarily for the purpose of being traded.Expected to be realized within twelve months after the reporting date; orCash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.


InventoriesRaw materialsWork-in-progressFinished goodsStock-in-trade (in respect of goods acquired for trading)Stores and sparesLoose toolsOthers (specify nature).


Trade ReceivablesAggregate amount of trade receivables outstanding for a period exceeding six months from the date they are due for paymentTrade receivables Secured, considered goodUnsecured considered goodDoubtful. Allowance for bad and doubtful debts


Cash and Cash EquivalentsCash and cash equivalents shall be classified as:Balances with banksCheques, drafts on handCash on handOthers (specify nature).Earmarked balances with banks (for example, for unpaid dividend) shall be separately stated.Balances with banks to the extent held as margin money or security against the borrowings, guarantees, other commitmentsRepatriation restrictions, if any, in respect of cash and bank balances Bank deposits with more than 12 months maturity.


Short Term Loans and AdvancesTo be classified as:Loans and advances to related parties (giving details thereof)Others (specify nature).

Further to be sub-classified as:Secured, considered goodUnsecured, considered goodDoubtful

Allowance for bad and doubtful loans and advances.

Off Balance Sheet Liabilities


Contingent LiabilitiesContingencyA condition or situation, the ultimate outcome of which, gain or loss, will be known or determined only on the occurrence, or non-occurrence, of one or more uncertain future events. Restricted to conditions or situations at the balance sheet date The estimates of the outcome and of the financial effect of contingencies are determined by the judgment of the management of the enterprise.


Contingent LiabilitiesClaims against the company not acknowledged as debtGuaranteesOther money for which the company is contingently liableCommitments shall be classified as:Estimated amount of contracts remaining to be executed on capital account, and not provided forUncalled liability on shares and other investments partly paidOther commitments

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Chapter 5

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