aos n sole proprietorship or partnership firm to prepare final ation Uj fo statutory ObiB PON Sole on to prepare final accounts as required by Section i a statutory obligs manies have oF eral principles of preparing the final accounts of yin! tock ni ie The a eee _ The Bene sole proprietorship oF partnership firms ‘But. in addition to e sole Proform 10 certain legal provisions as given in the company Tcpatents ofthe final accounts; It may be remembers st 13 in resPnies Act, 2013 relating t0 forms 20 Contents of the final accounts do not ‘omp ating companies which are governed PY special Acts relating to such counts to be Maintained by a Company 2013 requires that every company shall prepare and KesP 2 ice books of accounts and other relevant ‘books and papers and financial statements for f the state of affairs of the company. including oval year which give a true and fair view f thref its neil J eftice or offices, if any. and explain the transastore effected both at the registered tuto My as branches and such books will be kept on ‘accrual basis and according to the doable «airy system of accounting. ‘ul or any of the books of account aforesaid and other relevant papers may be kept at such other yuce in India as the Board of Directors may decide ‘and where such a decision is taken, the company sl within seven days erie with the Registrar a notice in writing giving full address of that + place. ‘The company may keep such books of account or other relevant papers in electronic mode in such manner as may be prescribed. pi of account and other books and-papers-meintained-by-the company within India shall be eo inspection at the registered office of ‘the company or at such other place in India by any sears uetnase Roar and in the case of financial information, if any, maintained outside the Gat copies of such financial information shall be maintained and produced for inspection by any crmpat subject to such conditions as may be prescribed. The officers and other employees of the imran thal give to the person making such inspection all assistance in connection with the Thon which the company may reasonably be expected to give. inment COS of account of every company relating to a period i . tan ipnly Preceding a financial year, ot where the company hy i tioee ieee toe eight financial years Such book. “at®: in respect of all the preceding years together ite been in existence for a period less of account shall be kept in good order ith the vouchers relevant to any entry inWit FINAL ACCOUNTS of ¢ aoe sci ng ee, 4. Depending upon the wmover of the company, the figures appearing the Fina may be rounded off as below cial Sy Turnover Rounding off . () less than one hundred crore rupees To the nearest hundreds, thous, millions, oF decimals thereof. "2". lk, To the nearest, lakhs, mi + Millions o¢ Clore Gi) one hundred crore rupees or more decimals thereof. Once a unit of measurement is used. it should be used uniformly inthe Financial State Except in the case of the first Financial Statements laid before the Coma Y (ath 5. incorporation) the corresponding amounts (comparatives) for the immediately preven’, Period for all items shown in the Financial Statements including notes shall alse he gives "Pn 6. For the purpose of this Schedule, the terms used herein shall be as per the applicable Ac, Standards. con, Notes : This part of Schedule sets out the minimum requirements for disclosure on the face as “Financial Statens Balance Sheet, and the Statement of Profit and Loss (hereinafter referred to b-totals shall be pros for the purpose of this Schedule) and Notes. Line items, sub-line items and sul as an addition or substitution on the face ofthe Financial Statements when such presentatins Po to an understanding of the company’s financial position or performance or to cater to inet = specific disclosure requirements or when required for compliance with the amendmen ‘Companies Act or under the Accounting Standards. PART I - Form of BALANCE SHEET (Rupees in.. Note No. | Figures as at| Figures the end of | at the enc» current | the previous ‘Name of the Company... Balance Sheet as at ... Particulars reporting | reporting . —— - period | pence 3 4 |. EQUITY AND LIABILITIES (1) Shareholders’ funds (@) Share capital (6) Reserves and surplus (©) Money received against share warrants »» (2) Share application money pending allotment (3) Non-current liabilities (a) Long-term borrowings (4) Deferred tax liabilities (Net) (€) Other Long term liabilities (Long-term provisions (4) Current liabilities (a) Short-term borrowings (b) Trade payables (0) Other current liabilities (Short-term provisions TOTALPo counts OF COMPANIES wi ak C 15st assets oes assets Fixed @ (1) (Tangible assets intangible assets al work-in-progress iy a assets under development (0 ren investments (0) Nord tax assets (net) (@ Pai gem loans and advances 9 er non-current assets o a a a ‘current investments (op) irventones ‘Tae receivables ash and cash equivalents : shorter loans and advances tO current assets or TOTAL —eaarying 016s the financial safer Son @ ss Notes + General Instructions for Preparation of Balance Sheet 7 ‘nase shal be classified as current when it satisfies any of the following criteria (a) itis expected to be realized in, or is intended for sale or consumption in, the company's al ‘normal operating cycle; ip itis beld primarily for the purpose of being traded (0) itis expected to be realized within twelve months after the reporting date; or (d) itis cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for atleast twelve months after the reporting date Allotber assets shall be classified as non-current, Am operating cycle is the time between the acquisition of assets for processing and their realization incash or cash equivalents. Where the normal operating cycle cannot be identified, itis assumed to have a duration of 12 months. 4. Aliabiity shall be classified as current when it satisfies any of the following criteria: (a) itis expected to be settled in the Company's normal operating cycle; (0) it isheld primarily for the purpose of being traded; (6) itis 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. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification, Allotber liabilities shall be classified as non-current. A receivable shall be classified as a ‘trade receivable’ if it isin respect of the amount due n count of goods sold or services rendered in the normal course of business. A payable shall be classified as a ‘trade payable’ if itis in respect of the amount due on “count of goods purchased or services received in the normal course of business.wie 6. Acompany abl ine A " D. FINAL ACCOUNTS op MTS OF Mp, sw the Few heen tween hie Capital hare capital (different eli 1 of preference shies 10 he teatey wy oy euch clam of i ih cae and amount of ahares authorized ta) the ease wt moe and fully paid, a subscribed bu Fr fay tis sae P : the rights, preferenee 1 shite, ve and restrictions attaching 10 each Class of yh hare aoe ae dation of dvidends ad the repayment of capital, My Fanon. agregate value of eat cpa ry ditectons and offic . Canvount originally paid Up) ers) ey alls un () foxteited sh Reserves and Surplus (i) Reve and Surplus shut w ital Reserves « (by Capital Redemption Reserve, {oy Securities Premium Reserve: (d) Debenture Redemption Reserve: {e). Revaluation Reserve: (f Share Options Outstanding ‘Account; fa) Other Reserves ~ (peeify the nature and purpose of each reserve and the respect thereo!); co (hy Surplus Le, balance in Statement of Profit & Loss disclosing alloc appropriations such as dividend, bonus shares and transfer to/from reserves ee inditions and deductions since last balance sheet to be shown under each Of te specified heads) (ii) Arreserve specifically repre 1 be classified aw Hons ay sented by eurmarked investments shall be termed asa teaoareyetanee of statement of profit and loss shall be shown as a negative figure Ped sad "Surplus", Similarly, the balance of ‘Reserves and Surplus’, afer adjusin mal rere of surplus, if any, shall be shown under the head Reserves and San the resulting figure is in the negative oa Long-Term Borrowings {iy Longterm borrowings shall be classified a (a) Bonds/debentures. (0) ‘Term loansn from banks.» from other parties (c) Deferred payment liabilities. (d) Deposits Other Long-term Liabilities Other Long-term Liabilities shall be classified as: (a) ‘Trade payables () Otvers Long-term provisions ‘The amounts shall be classified a: (c) Provision fr employee benefit (b) Others (specify nature). Shon-erm borrowings (Sim oop hl had (a) Loans repayable on demanda from banks.n fo (H) Loans and advances from elated pares ae (c) Deposits, : (d) Other loans and advances (specify nature).yor « shall further be sub-classified a» secured and weseruned win 15 OF COMP, jp Boe tans have Been suaranteed by decors o eer (1 Where der each head shall be disclosed oa iis eure lassified as r shall be la ts a of long-term debe the apgrepste secret “A carb tur Te Cen ties of finance lease obligations C2 corte me ed but not due on borrowings ) Oger ee and due on borrowings (ee ce ia) tre ceived n advance @ [ yd aividends: 0 ovisions shart 46 us shall be classified as sion for employee Benelits, (0 Pipers pect) nae) ible assets Tord gsificaion shall be given a (Fed) Buildings. (c) Plant and Equipment. (d) Furniture snd Fixtanes (1 Vettes (a a equipment (x) Others (specify nature) ¢ ts under lease shall be separately specified under each class of aovet (i) ee ciliation of the gross and net carrying amounts of cach class of sevets at the i iz and end of the reporting period showing additions, disposals. acqmsstcns ni . a business combinations and other adjustments and the related deprecvatiom and impairment losses! ible assets Ae Ciasistion shall be given as (a) Goodwill. (4) Brands /trademarks. (c) Computer software (d) Masthead snd publishing tiles. (e) Mining rights. (f) Copyrights, and patents and other intellectual opety righs, services and operating rights, (2) Recipes formulae, mares. deg an Frortypes. fh) Licenses and franchise () Others speciy nature) Non-current investments ‘(a Non-current investments shall be classified as trade investments and other investments and further classified as: {a) Investment property; (b) Investments in Equity Instruments; (c) Investments i= preference shares; (d) Investments in Government or trust securities: (¢) Investments s= eebentures or bonds; (f) Investments in Mutual Funds; (g) Investments in partsersip firms; (h) Other non-current investments (specify nature). Long-term loans and advances (i) Long-term loans and advances shall be classified as: (a) Capital Advances; (b) Security Deposits; (c) Loans and advances to related parses (giving details thereof); (d) Other loans and advances (specify nature) (i) The above shall also be separately sub-classified as: (a) Secured, considered good; (b) Unsecured considered good; (c) Doubeful Other non-current assets Other non-current assets shall be classified as: () Long-term Trade Receivables (including trade receivables cn deferred credit terms (i) Others (specify nature); (i) Long-term Trade Receivables, shall be sub-classified as: ' Secured, considered good; (b) Unsecured considered good: (c) Doubtful reversals shall be disclosed separatelyFINAL ACCOUNTS of Conp, Current Investments (iy Current investments shall be classified as (a) Investments in Equity Instruments; (b) Investment in Pref Investments in government or trust securities; (d) Investments in Pitan Invesirmetta in Mutual Funds; (f) Investments in partnership firms: (g) ove’, bona, (specify nature). Other invegt ney Inventories ‘ (i) Inventories shall be classified as: (a) Raw materials: (b) Work-in-progress; (c) Finished goods: (d) 5, cpect of goods acquired for trading): (e) Stores and spares: (f) Loose toot, "tae (specify nature). ols: (a) Gn, Trade Receivables (i) Aggregate amount of Trade Receivables outstanding for a period exce from the date they are due for payment should be separately stated (ii) Trade receivables shall be sub-classified as: (a) Secured, considered good: (b) Unsecured, considered good; (c) Doubtful 508 Six mong | Cash and cash equivalents (i) Cash and cash equivalents shall be classified as: (a) Balances with banks; (b) Cheques, drafts on hand; (c) Cash on hand: (d) Others (specify nature). Short-term loans and advances (@ Short-term loans and advances shall be classified as: (a) Loans and advances to related parties (giving details thereof): (b) Others (specify nature). (ii) The above shall also be sub-classified as: (a) Secured, considered good; (b) Unsecured, considered good; (©) Doubrful. Other current assets (specify nature). This is an all-inclusive heading, which incorporates current assets that do not fit into any os asset categories. Contingent liabilities and commitments(to the extent not provided for) (i) Contingent liabilities shall be classified as: (a) Claims against the company not acknowledged as debt: (b) Guarantees; (c) Other money for which the company is contingently liable (ii) Commitments shall be classified as: (a) Estimated amount of contracts remaining to be executed on caj provided for: (b) Uncalled liability on shares and other investments partly paid: (c) Other commitments (specify nature). pital account andAnes of STATEMENT OF PROFIT AND LOSS Fupees [Fores] «| Foes | me current) | # | reporsng | | previous | peroc | "sporting | + a | | Pe | — | = | — 5 rom decontinuing operations mt _ : Ee ee of discontinuing operations aad ‘pj Profeltoss) from Discontinuing operations (after xx wx ta) OC-XI) XV Profit (Loss) for the period (XI + XIV) cams ae 1) Eamings per equity share: "Basic rood 2 Dkaee = — ‘Se ccompanying notes to the financial statements Oceeral Instructions for Preparation of Statement of Profit and Loss I The provi mae ponte! this Part shall apply to the income and expenditure account referred to in sub- ‘ection 129 of the Act, in like manner as they apply to a statement of profit and loss. aFINAL ACCOUNTS DUNTS OF co, ea ™ company reventie OM operations shalt g, espect of # C0! than a finance separately in the NOt from (a) sale of products : (bh) sale of services: ()_ other operating Less jevenue from operations shall include revenue fy, (d) Excise duty (B) In respect of a finance company. F (a) Interest; and (b) Other financial services Jy by way of notes 0a re of Gross Profit is given in the Tr bove heads sh, WIS shall he ti Clg, s Revenue under each of the ‘ounts to the extent applicable it should be treated gs Revere Balan gure of Finance Costé ified as Finance costs shall be (a) Interest expens (6) Other borrowing cost (©) Applicable net gain/l Other income Other income shall be classified as: (a) Interest Income (in case of a company other th ‘son foreign curreney transactions and translation, an a finance company); (6) Dividend Income; (c) Net gain/loss on sale of investments (d) Other non-operating income (net of expenses directly attributable to such income), Additional Information ‘A Company shall disclose by way of notes additional information regarding aggregate expendi, and income on the following items: _ (i) (a) Employee Benefits Expense [showing se} to provident and other funds, (iii) expens and Employee Stock Purchase Plan (ESPP), (iv Depreciation and amortization expense; ‘Any item of income or expenditure which exceeds one per cent of the revenue fox parately (i) salaries and wages, (ji) contribu ‘e on Employee Stock Option Scheme (ESP )) staff welfare expenses] (a) © operations or @ 1,00,000, whichever is higher; (d) Interest Income; (e) Interest Expense; () Dividend Income; Net gainy loss on sale of investments; () (4) Adjustments to the carrying amount of investments; (iNet gain or loss on foreign currency transaction and translation (other than consis as finance cost); (@ Payments to the auditor as (a) auditor, (b) for taxation matters, (c) for compan) bw matters, (d) for management services, (e) for other services, (f) for reimbursemst expenses; (k) Details of items of exceptional and extraordi (D. Prior period items; aoe (ii) (a) In the case of manufacturing companies, (1) Raw materials under broad heads. (2) goods purchased under broad heads.r COMPANIES wat ase of wading companies, purchases in respect of goods traded in by the ny nde bro eas y nh ‘companies rendering or supplying services, gross income deriv ie oo a er suppied under broad heads coe Ms company. which falls under mote than one ofthe categories mentioned faite C4) above, it shall be sufiiet compliance with the requirements erin O nar or Sales and consumption of raw material and the gross income from services if pure nown under broad heads ered acother companies. gross income derived under broad heads, ens having works-in-progress, works-in-progress under broad heads Freee, if material, of any amounts set aside or proposed to bese aside to i a) THe ae not including provisions made to meet any specific liability, contingency or (2 sere, but own to exist atthe date as to which the balance-sheet is made up et fatal of any amounts witha from sah eseres Pee aeeree if material, of the amounts set aside to provisions made for meeting ree ties, contingencies or commitments. @ Meo all conee @ bilities wy a sf material, of the amounts withdrawn from such provisions, as no jo Te required pe con each of the following items, separately for each item: ure incured sgt on af stores and spare parts. (b) Power and ue. () Rent (f) Repairs to (o cosa to machinery. () insane (Rates and tats, exchanges vel Miscellaneous expenses vaidends from subsidiary companies losses of subsidiary companies. oad Pisin fr ‘ontain by way of a note the following information. Se profit and Toss account shall also c¢ i) ah mam Vale of impor cal respect of — [Rew materi by Expenditure in fore culated on C.LF. basis by the company during the financial year in tals; I. Components and spare parts; II. Capital goods, ign currency during the financial year on aecount of royalty, know- ape ofesional and consultation fees, interest and other matters io) Tot value if all imported ra material, spare arts and components consumed during © Te financial year and the total value of all indigenous raw materials, spare parts and arenponents similarly consumed and the percentage ofeach tothe total consumption; g) The amount remited during the year in foreign cutences on aeount of dividends with ? pecfic mention of the total number of non-resident shareholders, the total number of ‘hoses held by them on which the dividends were due and the year to which the dividends related, {e) Eamings in foreign exchange classified under the following heads, namely: |. Export of goods calculated on F.0.B. basis; Il. Royalty, know-how, professional and consultation fees: IIL. Interest and dividend; IV. Other income, indicating the nature thereof. Nate: 1. Broad heads shall be decided taking into account the concept of materiality and presentation of true and fair view of financial statements,”. OSome Special Features Dia general principles governing the preparation of the Profit and Loss Account of a sole . or a partnership firm and those of a company are the same ; but in addition to the general inFINAL ACCOUNTS OF Con, A 1A-42 fa company must comply principles, Statement of Profit and Loss of IL of Schedule III. In case of a joint stock company, Statement of Profit and Loss as per Scl the tempts, Loss Account ta Statem vit and Loss of a company should depict a true and fair view of y ofa cnneny ti eure by the Companies Act that all material facts as far as ona oh sh full derail under the most convenient heads. The Companies Act requites thatthe Statemerr' && Lose must exhibitatruc and fai view ofthe profit eamed or loss suffered by the company petiod for which the statement has been prepared. The term true and fait has not been defined ye been the subject of any judicial decisions. But on the whole, one may say that if on sa Statement of Profit & Loss properly, one should not be misled about the size of the Profit ist i the significant factors that have contributed to the profit situation. If the user is misled on g'®! these points the Statement of Profit and Loss cannot be treated as true and fair. One may argue legal requirement is merely that the information under Part Il of Schedule II to the Compan should be disclosed. However, this may not strictly he correct since the spirit of the law is clear" truth should be quite apparent. Undoubtedly, the requirements of Part II of Schedule Ill haye 1° compiled with but one should remember that it is not required that the Statement of Profi g ,* should contain all the disclosures and should be absolutely correct. Both of these, absolute scay."" and complete disclosures are impossible to achieve. However, from accounting point of viey Statement of Profit & Loss should be drawn upon the principles stated below : & (a) Materiality—If material change/impact should be disclosed (b) Prior Period Items—should be shown separately (©) Extraordinary claims—should be separately shown (d) Change in the Accounting Policy —Impact on Profit/Loss should be shown separately. Window dressing, (ie., showing position better than what actually itis) or creating secret resens (ie., showing position worse than what actually it is) is against the spirit of the law. The fact of ut providing depreciation should be stated ahd the quantum of arrears of depreciation should be discoei by way of a note. If the method of valuation of closing stock is changed, it should also be disclose appending a note. 3. As per Schedule III only broad and significant items are to be shown on the face of finan statements and detailed information of significant and broad heads is to be given in the Not Accounts. 4, Adjustments for prior years should be shown separately, unless they are immaterial. As fits possible, figures relating to prior years representing adjustments should be reported separately so tt correct profit or loss of the current year may be ascertained. Adjustments for prior period items bev: necessary because it is not possible to reopen the accounts for a period once these have been adopt! by the ‘shareholders in the annual general meeting. It is legally sufficient if these are re separately in the Statement of Profit and Loss, but it is preferable to adjust such items in the Supls A/c in the Balance Sheet for ascertaining correct profit or loss of the current period. al 5. Events which occur between the Balance Sheet date and the date on which the fina, statements are approved by the Board of Directors may indicate the need for adjustments to asse8 2 liabilities as at the Balance Sheet date or may require disclosure as per Accounting Standard ; Dividends proposed or declared by the enterprise after the Balance Sheet date but before the or approval of financial statements are adjusted in the financial statements. Disclosure should be ae the report of the approving authority (i.e. in Directors’ Report) of those events occurring Balance Sheet date that represent material changes and commitments affecting the financial posit the enterprise such as destruction of a major production plant by a fire after the Balance Sheet before the date of approval of financtal statements by the approving authority. yo 6. Changes in accounting policies, if any, such as change in the method of valuation of iN ‘or change in the method of providing depreciation should be disclosed along with the amount Y th the requirement gy Ven iy the term Profit and Loss Account has been re St ' hedule IIT, But for Journal Entries we can use these th —_—COMPANIES rs OF EO" mins affected. A fundame cument year is affect tal accounting assumption «1 ss of fy aptied 80 that Final statements of different years may ecco. et Sonne ‘i ye K ti ge ey itereted aries may know the performance ofthe company toot f ge in policy which has a material effect on final results shemd be deechecs 9 ace company, Trading AccoUM and Profit and Loss Account : e of Profit and Loss is prepared whict 1h prepared ‘statement Prep: ich shows operating recone OP 1 sir read 0 the business and shows income after tax Incense ont he” sis separately shown inthe Statement of Profit and Lows Net sone wy Sone ged Profit ot Loss forthe period) is taken to the Balance Sheet unde he heaee ross fo saris under surplus sub-head. In this Surplus A/c all appropriations of peofies are aie i follows it ceo Surlus Account at the beginning of the year ee aa oft for the year oat J. Adjustment on account of previous year such as shortfall of less for Taxation or any other dis Provision y screpancy of the previous year Transfer to General Reserve or any other surplus Proposed Dividend/Interim Dividend case of a company, it 8 necessary to show the corresponding amount for the immediately § rc year forall items shown in the Statement of Profit and Los. soe Fina f Profit and Loss of a Company has to give information about both quantities and sera types of raw materials purchased and about quantities and Values of various products vanes em ulsis of input-output may be made wotsotet ofa company. income-ax on profits though an appropriation of profit is treated as ao I sshown a a Separate item inthe Statement of Profit and Loss. en items such as profit or loss on sale of fixed assets, penalties imposed by the ° 1 aes on account offre should be disclosed separately and not mixed up with anyother 5 -rhe profit or loss disclosed by the Profit and Loss Account of a sole proprietor or partnership tex wnsfered to Capita’Current Account of the soe poprietoror CapitalCurrent Accounts of the atthe surplus left in the Statement of Profit and Loss is not transferred to Share Capital ‘account but is kept in a separate account known as Surplus A/c. It is so because called up capital ‘aout be more than the amount called on shares as capital. QDivisible Profits The tenn “Divisible Profit” is a very complicated term because all profits are not divisible profits (uly hose profits are divisible profits which are legally available for dividend to sharebolders Dndends cannot be declared except out of profits, i, excess of income over expenditure , ordinarily cagal profits are not available for distribution amongst shareholders because such profits are cot ‘ag ofits. Thus, profits arising from revaluation or sale of fixed assets or redemption of fixed ali should not be available for distribution as dividend amongst shareholders. The principles of Seernixation ofthe divisible profits are given below (1) No dividend shall be declared or paid by a company for any financial year except out of the Prt ofthe company for that year arrived at after providing for depreciation in accordance with the Fes of Schedule I of the Companies Act, 2013 or out of the profits of the company for any “i financial year or years arrived at after providing for depreciation in accordance with those ‘Sows and remaining undistributed or out of both or out of moneys provided by the Central Se vec ee eeceee ere eeewit-t4 FINAL ACC. 5s “OUNTS OF 6 of dividend in pursuance of Government or a State Government for the payment * Buaranee the Government Provided that a comy such percentage of its prof company. Transfer to reserves is no! 13) No dividend shall be payable except in cash he company for the capitalization of profit ofits (3) There is no prohibition on t company forthe purpose of issuing fly paid-up bonus shares. paying up any am amour shares held by the members of the company. v4) Any dividend payable in cash may be paid by cheque or warrant sent through th the to the repetered address ofthe shareholder entitled t0 the payment of the dividend Post joint shareholders to the registered address of that one of the joint shareholder which «tte Pi) the register of members or to such person and to such address as the sharchena nent shareholders may in writing direct.” older or the I) where a dividend is declared, a minimum distribution sufficient for the dividends to shareholders ata rate equal to the average of the rates at which di idend decname over the three years immediately preceding the financial year is ensured, except that n'a ce by sae tor more than the average net profits after tay sft of th net profits after tax are lower by 20 pe Fabel yours inmesinely preceding, it shall not be necessmy eocmeure euch ania th istibutig,, io pany may, before the declaration of any dividend in any A for that financial year as it may consider appro IAYeyy 1 compulsory. Transfer (0 reserve is optional the resern hy OF ese Nt np, and iy where no dividend is declared, the amount proposed toe transferred tis reser current profits shall be lower than the average amount ofthe dividends to the shareholders eee" stover the three years immediately preceding the financial year. S declared eine aaron 123 ofthe Companies Act, 2013 its clear that dividends cannot be declared ug les (1) depreciation has been provided for in respect of the curtent financial year for which dviny is to be declared (2) arrears of depreciation in respect of previous years have been deducted from the profits (3) losses incurred by the company in the previous years. i tr becomes clear that itis not compulsory for a company 10 Provide for depreciation on fi ‘assets. But it makes compulsory for the provision of the depreciation if dividend isto be declared y ind the amount involved has to be disclosed depreciation on fixed assets is not provided for, the facta way of @ note. ceoecmmes in an examination problem, rates for calculating the amount of depresiton au fixed assets along with the maximum amount of depreciation permissible as per income-tax rules my be piven. In such a case, Profit and Loss Account is debited ‘with the amount of depreciation callie, ve eitling tothe rates given and the same amount of deprecation deducted from fixed assets inthe Balence Sheet too. But the maximum limit of depreciation prescribed by the income-tax rulsis pase ato consideration for calculating provision for taxation ‘and managerial remuneration, ic, ener cess amount of depreciation charged according to the rae _given over the maximum lint: 6 creme-tax rules is added to the profits as disclosed by the ‘Statement of Profit and Loss and ‘the managerial remuneration is calculated, {nis adjusted profit, the provision for taxation a ‘They get dividends deck Shareholders expect some retul oh the money invested by them in the company te form of dividends given to them from time to time. This return on their investment in are the profits pf the company distributed amongst the shareholders. The compaty may deci ifividend shall exceed the amount recommended by te Bog : ividends luce the amount of dividen’® ‘of Directors. It is s0 Per hare considered a8 the expe dividends in general meeting, but no Directors. Thus, shareholders in annual general meeting can only redi eine increase the amount of dividends recommended by the Board sators are familiar with the financial affairs of the company and as suc to decide the amount to be distributed as dividend among shareholders. The directo! rs may Pt