Question: Are partnerships and sole proprietorships required to follow accounting standards when

preparing financial statements?

In general, small proprietorships and partnerships are not subject to any regulation that they file
periodic financial statements. However, when they cross a certain size threshold, their financial
statements will need to comply with the old Indian GAAP.

The CA Institute has divided all enterprises into Level 1, Level 2, Level 3 eneterprises.

For this discussion,

a. Level 1 enterprises are those that have Sales > ₹50 Crores or Borrowings > ₹10 Crores
b. Level 2 enterprises have sales ≤ ₹50 Crores but greater than ₹40 lakhs OR borrowings > ₹1 Crore
but ≤ ₹10 Crores.
c. Level 3 enterprises have sales ≤ ₹40 lakhs and borrowings ≤ ₹1 Crore.

Level 1 enterprises have to follow the old Indian GAAP in its entirety (29 accounting standards). Level 2
and Level 3 enterprises are exempt from many of the standards that consititute old Indian GAAP. More
details are here: https://www.icai.org/new_post.html?post_id=3046

Partnerships do not have to follow Ind AS.

Note that there are subset of partnerships called Limited Liability Partnerships (LLPs) that are regulated
by the LLP Act, 2008. This act clearly states that LLPs have to file annual auidited financial statements
with the registrar of companies. These statements should be in accordance with old Indian GAAP
depending on whether an enterprise is a level 1, level 2, or level 3 enterprise.

More details are here: https://www.mca.gov.in/MinistryV2/disclosureauditandfilingrequirements.html

The remaining partnerships are called unlimited liability partnerships. I suspect that these and sole
proprieterships do not prepare financial statements per GAAP. They will prepare financial statements
for their own internal consumption, but whether these will be in compliance with GAAP is an open
question. I am not aware of any act or law that requires such small firms to file financial statements with
a government agency. This will require more research.

Lastly, if you are a company that is a small or medium enterprise (SME), then the old Indian GAAP
applies to you. See here: https://taxguru.in/company-law/accounting-standards-defining-small-medium-
sized-company.html
Question: In the table below, related to Pearl Green Clubs IPO, what does maximum lot of 600 shares
mean?

Answer:

In the Indian IPO framework, investors are classified into

a. Institutional Investors
b. Non-institutional Investors (NII)
c. Retail Individual investors (RII)

Retail individual investors are those who submit bids whose value is < ₹2 Lakh. If the value of a bid by a
RII exceeds ₹2 lakhs, it get classified as a bid by an NII.

In the Pearl Green IPO, the minimum bid size is 600 shares. The next lot size has to be for 1,200 shares.
The value of this bid would be 1,200 * ₹186 = ₹223,200. This would classify the bid as one by a non-
institutional investor.

That’s why the maximum lot size for a retail individual investor is 600 shares.

You can bid for 1,200, 1,800, 2,400 shares, etc. Only you would be classified as NII.