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    Ts Grewal Class 12 Volume 3

    Uploaded by

    sakshi

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    © All Rights Reserved
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    © Statement of Profit and Loss © Format of Statement of Profit and Loss © Explanation of Heads and Contents of Statement of Profit and Loss © Objectives of Financial Statements © Essentials of Financial Statements © Parties Interested in Financial Statements or Users of Financial Statements © Limitations of Financial Statements OT accounting standards. Section 129 of the Companies Act, 2013 prescribes that Balance Sheet and Profit and Loss Account (Statement of Profit and Loss) are prepared im form prescribed in Schedule III of the Companies Act, 2013. A set of financial statements as per: Section 2(40) of the Companies Act, 2013 includes: 1. Balance Sheet: It is a statement of Assets, Liabilities and Equity (i.e, Shareholders’ 1 given date. It shows the financial position of a business Funds) of the company a and liabilities. It is also known as Position Statement: by detailing its assets, equity 2. Profit and Loss Account: It shows the financial performance, i.e., result of business operation during an accounting period. It is described as Statement of Profit and Loss in Part) of Schedule III of the Companies Act, 2013 and is also known as Income Statement: Balance Sheet and Statement of Profit and Loss are supported by i n the Balance Sheet and Statement of Profit and Loss t nt prepared in accordance with AS-3, Cash Fle 4. Cash Flow Statement: It is a statemer Statement, to show inflows and outflows of Cash and Cash Equivalents: 3. Notes to Accounts: notes giving det lal Statements of a Company Accounting Concepts: Pinancial Statements are prepared by following, the aves concepts. For example, under the Going Concern Concept, it is assumed thal business shall continue for a foreseeable future, i.c., indefinitely. Fixed are shown in the Balance Sheet at their historical value ri than their market value. The use of accounting concepts also makes the financial statements reliable, understandable and comparable. (ie) Accounting Standards; Accounting standards prescribed in the Companies Act, 2019 are mandatory in nature and are the guidelines for preparing the financial statements. They are followed by the companies. If they are not followed, the financial statements do not give a true and fair view. (0) Selection of Accounting Policies: Selection of Accounting Policies have important bearing on financial statements. For example, the choice of selecting a method of depreciation (Straight Line Method or Written Down Value Method) lies with the management which has a bearing on financial performance and position. Another example is selection of a method of inventory valuation (Weighted Average or LIFO). (vi) Estimates: Estimates are necessary for preparing, the financial statements and have a bearing on the financial statements. For example, useful life of a fixed asset is estimated to provide depreciation, estimating expenses to make provision, etc. (vii) Source of Financial Information: Financial Statements are the source of financial information on the basis of which conclusions are drawn about the profitability and the financial position of a company. annual report of a company, as per law, should disclose the prescribed information to ble the users to make informed judgments and decisions. The information is disclosed n the Financial Statements, Board Report and by a separate statement being, part of the ual report. set of Annual Report of a company has: . A Report by the Board of Directors containing: Report in terms of Section 134 of the Companies Act, 2013; Directors’ Responsibility Statement; Report on Corporate Governance; and Management Discussion and Analysis. Auditors’ Report to the Shareholders. Financial Statements: (i) Balance Sheet as at the end of the financial year; (ii) Statement of Profit and Loss for the year ended; (iii) Note to Accounts; and " (iv) Cash Flow Statement. Notes to Accounts has different parts as follows: (Accounting Policies followed by the company; - (ii) Details of line items in Balance Sheet and Statement o ‘Reserves and Surplus ‘Money Received against Share Warrants 2. Share Application Money Pending Allotment 3. Non-Current Liabilities (a) Long-term Borrowings (b) Deferred Tax Liabilities (Net) (€) Other Long-term Liabilities (d) Long-term Provisions 4. Current Liabilities (a) Short-term Borrowings (0) Trade Payables (€) Other Current Liabilities (d) Short-term Provisions Total Ml. ASSETS 1, Non-Current Assets (0) Fixed Assets (i) Tangible Assets (id) Intangible Assets (i) Capital Work-in-Progress (iv) Intangible Assets under Development (6) Non-current investments (€)_ Deferred Tax Assets (Net (d) Long-term Loans and Advances (e) Other Non-current Assets 2. Current Assets (@) Current Investments (6) Inventories (c). Trade Receivables (@) Cash and Cash Equivalents (e) Short-term Loans and Advances (f) Other Current Assets ‘Authorised Capital 1,00,000 Equity Shares of % 10 each 10,000 Preference Shares of & 100 each Issued Capital 90,000 Equity Shares of & 10 each 9,000; 99% Preference Shares* of € 100 each Subscribed Capital Subscribed and Fully Paid-up 80,000 Equity Shares of & 10 each Subscribed but Not Fully Paid-up 10,000 Equity Shares of 10 each Less: Calls-in-Arrears (10,000 x & 3) 9,000; 9% Preference Share Less: Calls-in-Arrears (500 Total (To be shown against’Share Capital’) of & 100 each, 90 called-up 710) means dividend on Preference Shares *The use of 9%’ before Preference Shar paid @ 99 een made to two terms, i.e. “Called-up” and ” Tn the above discussion ference Called-ur Calle share capital. For example %10 each against which the compz In this case, 10,00,000 (7.e., 2,00,000 x & 5) is the Called-up Capital. | by the company to be paid by the shareholder company’s Subscribed Capital is 2,00,000 Equity's y has called % 5 per share to be paid by the SI p Capital me d ‘Share Capital Account witho example, company purchases machinery ‘of % 10,00,000, to the vendor, The company will credit % 10,00,000 to Share ‘a company reissues forfeited shares at a discount (say % 3 per credit the amount of discount ( 3 per share) to Share Capital ies Act, 2013] Share Capital” or “Share Capital Paid-up” means © up as is equivalent to the amount received | ‘0 includes any amount credited as pai j-up it mount received in respe as paid shares issued and als a company, but does not include any other ar by whatever name called: Calls-in-Arrears ount not received by the company’ against tl called-up by it towards share capital. Shares against which the calls ar are shown under “Subscribed but not fully paid-up” at the amount receivec company against those shares. For example, DBH International Ltd. issued 1, Equity Shares of ~ 10 each. All calls had been made and received except tit % 2 per share on 10,000 Equity Shares. shown in the Note to Accounts on Share Capital under Subscribed Capital Calls-in-Arrears means the ami Itis Subscribed and fully paid-up: z 1,40,000 Equity Shares of € 10 each Subscribed but not fully paid-up: 10,000 Equity Shares of % 10 each 1,00,000 Less: Calls-in-Arrears (10,000 x ® 2 20,000 Total Calls-in-Advance A company, if its Articles of Association permits, may receive amount age yet made. The amount so received is called ‘Calls-in-Advance’. It is c oa in the Balance Sheet as ‘Other Current Liabilities’ under the main head ‘Ci / which are not earmarked in any way to meet any part Analysts of Financial Statements—cos, «Reserve means amount set aside out of profits and other sup, ticular liability, known t0 exist on gar” ey the Balance Sheet.” Thus, reserves mean amount set aside out of profits and surpluses tg nancial position. meet future uncertainties, prospective losses or to strengthen fi and Loss means accumulated profits balance of profit remaining after st aly ‘ecording to William Pickels, Surplus, i.c., Balance in Statement of Profit appropriated or distributed as dividend, i.e. appropriations towards reserves and dividend. amount on the face of the Balance Sheet again nds. Detail of Reserves and Surplus is shown in ; Reserves and Surplus is shown as single opening balance, additions/deductions guy Reserves and Surplus under Shareholders’ Fu' Note to Accounts on Reserves and Surplus giving closing balance for each item under Reserves and Surplus. Schedule III of the Companies Act, 2013 prescribes the heads of Reserves and Surplus to be () Capital Reserve; (i Capital Redemption Reserve; (iii) Securities Premium Reserve; (iv) Debentures Redemption Reserve Synch Furst. (0) Revaluation Reserve; (vi) Shares Options Outstanding Account; (vit) Other Reserves (to specify the nature and purpose of each reserve); and (viii) Surplus, ie., Balance in Statement of Profit and Loss. ‘A company is required to show the reserves that are in the nature of reserves at serial () to (ui) above under the prescribed head. For example, if a company has Securities Premium Reserve, it is shown in the Note to Accounts on Reserves and Surplus as Securities Premium Reserye, Schedule III of the Companies Act, 2013 allows companies to have reserves other at serial numbers (i) to (vi) say, Workmen Compensation Reserve, Investments Fluct Reserve, Subsidy Reserve, etc. Each such reserve is shown separately in the lote t Accounts on Reserves and Surplus. Surplus, ie,, Balance in Statement of Profit and Loss is shown as a separate Reserves and Surplus. It is accumulated balance of profits of the past years and al year remaining after appropriations towards reserves and dividend. It may h balance or debit balance. Current year’s profit or loss is added to the balance _wansferred to Capital Redemption Reserve. The reserve may be issue fully-paid bonus shares. 7 Section 55 of the Companies Act, 2013, requires that wher redeemed out of profits which would be otherwise available for d sum equal to Nominal (Face) Value of the shares redeemed must be trans Redemption Reserve’ Securities Premium Reserve Securities Premium Reserve is a reserve to which amount received in excess 6 (face) value of securities (shares, debentures, etc.) is credited. It can be used, for the purposes stated in Section 52(2) of.the Companies Act, 2013. Debentures Redemption Reserve (DRR) Debentures Redemption Reserve is a reserve credited by the amount pI Section 71(4) of the Companies Act, 2013 and Rule 18(7)(b) of the Companies (St of debentures. DRR is not required for debentures issued by Banking Companies, All India| Institutions (AIFls) regulated by Reserve Bank of India and National Housing Bankes Revaluation Reserve) Revaluation Reserve is a reserve v of an asset. It is debited when th beused for payment of dividend or issuing bonus shares. Shares Options Outstanding Account Shares Options Outstanding Account is a reserve to which difference value and issue price of shares issued to employees is credited the market price of the share is € 75 and is to be iss = 26 , = 75 - % 50) should be credited to Statements of aCompany Ww imple I. Sony Ltd. has an opening debit balance of € 1,00,000 in Surplus, i,, Balas ‘Statement of Profit and Loss. During the year ended 31st March, 2019, it earned a € 3.00,000, Prepare Note to Accounts on Reserves and Surplus showing the amount to carried to Balance Sheet €e of € 2,00,000 in Surplus, ie, Balance in Statement of Profit and Loss shown uncer Reserves and Surplus in the Balance Sheet. ample 2, HP Computers Ltd, has an opening credit balance of Surplus, i.c., Balance in tatement of Profit and Loss and Securities Premium Reserve of % 1,00,000 and % 2,00,000 respectively. During the year, it incurred a loss of & 1,50,000. fow will it be shown in Note to Accounts on Reserves and Surplus? (Opening Balance) ‘Surplus, /e., Balance in Statement of Profit and Loss (Opening Balance) ‘Add: Profit (Loss) for the year Balance (a+ b) (To be shown in the Balance Sheet against Reserves and Surplus) Example 3. Casio Machines Ltd. has an opening balance of % 5,00,000 in Securities Premium eserve and also debit balance of € 10,00,000 in Surplus, i.e., Balance in Statement of Profit and Loss under Reserves and Surplus. During the year ended 31st March, 2019, it incurred. a loss of & 15,00,000. How will it be shown in Note to Accounts on Reserves and Surplus? olution: ncial Statements of a Company 1s Share Application Money a Current Liability? Application Money received by the company and which is refundable to the applicants, i, against which shares will not be allotted, is shown as ‘Other Current Liabilities’ under rent Liabilities’ in the Equity and Liabilities part of the Balance Sheet Application Money becomes refundable in the following circumstances: i) When the Issue is Oversubscribed: The amount received in excess of issued capital being refundable to the applicants is classified or shown under major head ‘Current Liabilities’ and sub-head “Other Current Liabilities’ in the Equity and Liabilities part of the Balance Sheet. ii) When the issue is oversubscribed and the amount is payable in instalments, the amount retained by the company to be adjusted against calls is shown as ‘Other Current Liabilities’ under Current Liabilities. r iii) When the company receives amount against calls yet to be made, i.., Calls-in-Advance. iv) In case the Company has not received Minimum Subscription: In such a situation, it is classified or shown under major head ‘Current Liabilities’, and sub-head ‘Other Current Liabilities’ in the Equity and Liabilities part of the Balance Sheet because the share application money received is refundable to the applicants. bilities «9° abilities are claSsified or shown as Non-current Liabilities and Current Liabilities the Balance Sheet. The two terms have been defined in Schedule III of the companies Act, 2013. ie term ‘Current Liabilities’ is defined in Schedule III of the Companies Act, 2013 follows: rent Liability is that liability which is: (i) expected to be settled in compan) ii) due to be settled within 12 months after the reporting date, i.e, normal operating cycl (iv) there is no unconditional right to defer settlement for at least 12 months after the reporting date. a liability meets any of the above four conditions, it is classified | or t liability. ae . Statements of a Company of Debentures Issued as Collateral Security ntures issued as Collateral Security can be disclosed in any of the fallowing man When Entry is not Passed for Debentures Issued us Collateral Security In the Note to Accounts on Borrowings (Long-term or Short-term), in the partleulars column below the borrowings, it is disclosed that the loan is collaterally secured by issue of debentures as follows: Loan from Bank (say) —— (Secured by issue of 12,000, 9% Debentures of © 100 each as Collateral Security) When an Entry is Passed for Debentures Isswed us Collateral Security: The entry passed for issue of debentures as Collateral Security is 7 t Debentures Suspense A/c Or. 12,00,000 To 9% Debentures A/c ee (12,000; 9% Debentures & 100 each issued as Collateral Security against loan of € 10,00,000) Debentures issued as Collateral Security are shown in the Note to Accounts on Long-term/Short-term Borrowings as follows: e ® Loan from Bank (say) 10,00,000 12,000; 9% Debentures of & 100 each 12,00,000 Less: Debentures Suspense A/c urrent Maturities of Long-term Debts ‘A part of long-term borrowing may become due for repayment within 12 months from the date of Balance Sheet or within the period of Operating Cycle. In such a case, part of the rowing that becomes due for repayment is shown under major head ‘Current Liabilities’ and sub-head ‘Other Current Liabilities’ as ‘Current Maturities of Long-term Debts’, For example, term loan taken by the company from a bank, Instalments falling due for payments within 12 months from the Balance Sheet date (assuming Operating Cycle period ‘to be less than 12 months) will be shown as ‘Current Maturities of Long-term Debts’. Deferred Tax Liabilities (Net): Every year Accounting Income is compared with Taxable Income and if the difference between the two exists which is temporary in nature, income tax on the difference amount is termed as deferred tax. 3a ‘ STR es. 26 (Classip , hedule IL We the following items under (iit) Goodwin, m (ei) Debtors (ix) Stocksincty (i) Le Equipment marks, ) Bi ) Building te a i ; i ae (xi) Vehictes, and Spare Part i) Pur ce to bibeidtont (xiv) Cash at Bank \tndtinean (@P) Cash in Hand. (xvi) Work-in-Prog ; : ieee (vei!) Plant (awit) Interest Accrued On S, and (X) Deposits with Electricity Supply Company Solution; Jing, Furniture, Vehiel (0 Fixed Assets (Tangible): Office Equipment, Land, Build (i) Fixed Assets (Intangible); Goodwill, Trademarks (ii) Capital Work-in-Progress: Work-in-Progress (Machinery). a (i) Long-term Loans and Advances: Advance to Subsidiaries, Deposits with: Supply Company, (®) Inventories: Loose Tools, Stock-in-Trade, Stores and Spare Parts, (@/) Trade Receivables: Bills Receivable, Debtors. {Pii) Cash and Cash Equivalents: Cash at Bank, Cash in Hand (@iti) Other Current Assets: Interest Accrued on Investments. Mustration 27. Give the heads under which following items are shown in a company’s Balay Per Schedule Il, Part 1 of the Companies Act, 2013? (i) Mortgage Loan, (ii) Patents, (iti) Investments, (iv) General Reserve, (@) Bills Receivable, and (vi) 10% Debentures, Will the following items appear ‘Shedule I Pa Tof the Companies Act, 2013? =A. Loos Tools, (iii) Calls-in- ae —— of a Con 139 " Under what heads and sub-heads the following items will appear in the Balance Sheet of 3 Per Schedule Ill of the Companies Act, 20137 emium on Redemption of Debentures (i) Loose Tools: (ii) Balances with Banks. (Delhi 2013, Modified) Solution ‘Mustration 30. d what heads and sub-heads the following items will appear in the Balance Sheet of a /company as per Schedule IIL, Part I of the Companies Act. 2013? i - i wa the Be, 0 Inv . (i) Fixed Assets—Intangible Assets; (i) Current L yrt-term Borrowings; (iv) Long-term Provisions; (o) Non Current Investmenta; (v/) Other Current Assets, f a5, I) ul State which major @ cony lings the following items will be presented in the Balance ly a8 per Schedule I of Companies Act, 2013: (ii) Capital Redemption Reserve » Received in Advance (iv) Stores and Spares (©) Office Equipments (al) Chareen Teviletaieee (AI 2014 C, Modified) () Trad (iii) Incon Solu Major Headings; (i) Non-Current Assets; (ii) Shareholders’ Funds; (ii) Current Liabilities; (iv) Current Assets; (») Non-Current Asseta; (vi) Current Assets, Ilustration 36. Under what main heads and sub-heads of Assets part are the following items classified or shown in the Balance Sheet of a company as per Schedule III? (i) Bills Receivable, (ii) Sundry Debtors, (iii) Long-term Investments, (iv) Shares in Listed Companies _ (v) Prepaid Insurance, (vi) Deposit with Customs Authorities, and (vii) Building. items will be presented in the of the Companies Act, 2013? f Financial of . jatement of Profit and Loss is a statement that shows the financial performance of a jompany, ie, profit earned or loss incurred during the accounting, period. format of Statement of Profit and Loss Format of the Statement of Profit and Loss is prescribed in Part Il of Schedule Ill of the ‘Companies Act, 2013, as follows STATEMENT OF PROFIT AND LOSS for the years ended .. Financial Statements of a Company Peoreurkee tia \. REVENUE 4. Revenue trom Operations — Salt evenue from Operations means revenue earned by the company from its operating . activities carried on by the company to earn profit. Commonly, it is Net S i Sales Return) for a manufacturing company or trading company, fee med by a service company and interestand-dividend.eamed by a financial company, and Total Revenue for a finan, Calculate Revenue from Operations, Other Income ee pany from the following information: laneous Income % 5,000; Interest on Lo: (Profit) on Sale of Building € 15,00,000. ans © 8,00,000; Dividend @ 1,00,000; Gay ancial Statements of a Company Compute Cost of Materials Consumed from the following: ‘ning Inventory of Materials & 2,50,000; Materials Purchased % 20,00,000; and Closing Inventory of Materials & 3,00,000. Golution: ‘Cost of Materials Consumed = Opening Inventory of Materials + Purchases of Materials ~ Closing Inventory of Materials = % 2,50,000 + & 20,00,000 ~ % 3,00,000 = & 19,50,000. fllustration 47. ompute Cost of Materials Consumed from the following: s 550,000 Finished Goods 2,50,000 of Materials Consumed = Opening Inventory of Materials + Purchases of Materials ~ Closing Inventory of Materials ; = © 5,50,000 + % 22,50,000 — & 4,50,000 = % 23,50,000. ing Inventory of Finished Goods, i.e., € 2,50,000 and Closing Inventory of ie 1,50,000 will not be considered to compute Cost of Materials Consumed to calculate Changes in Inventories of Finished Goods, tion 48, Financial Statements Men, 5,50,000, On 1) © | in, Jas Prog gaounten of Axis Monutacturin a Faapemeaes showing Coto Maia seman tt Ai Saoieg Inventory of Materials end pee Aa dnd Stock-it nTraae Trade — Closing 1A OT ed ae Ki mined the Cost of Materials = Purchases of Stock-in-Trade eth ~ eselling. If the company i ed for reselling: Y ca in eans goods pur for reset i. Trade means goods pu! ase ain Seinen ‘out further i Processing on the goods purchased, the Part of the Cost of Materials eps For example, if a comPANY purchases pape, ear tM B Conse ror cx incTrade’- But, JE PARE BUbsitoag ame wn as ‘Purchases of Stoc! ost of Materials Consumed’, " (sa ' : (Say) manufacturing copies, it will be shown under ‘C 3. : eae In Inventories of Finished Goods, Work-in-P' Pea ra ives tasien of Finished Goods, Work-in-Proste’s ©" St0S METAS he, jock) of Finished Gj, a rogress and Stock-in-Trage the difference between the Opening and Closing Inventories (St ventory (Stock) less Closing Progress and Stock-in-Trade, i.e., Opening lv ae i.e, Opening Inventory (Stock) is more negative, ie., Opening Inventory (Stock) is less than the Closing Im to Accounts on Changes in Inventories of Fi r each item of Inventory is shown separately and the dded to show one amount against the entry in the jple (with imaginary data) illustrates how it Inventories of Finished Goods, WIP ancial Statements of a Company 4 is6 Are opening and closing inventories considered in the amount shown against Purchases of Stock-in-Trade? Give reasons. Mlustration 50 ‘ Seg ay unts for Change in Inventories of Bakers Ltd. for the year on 7 3ist March, 2019 from the following information and determine the amount that wil shed ora in the’ Statement of Proft tad Lane sonkat Charter ty Levnatiael GP BKe 7 Goods, WIP and Stock-in-Trade: a aie “Tr 1.52 : Financial 5! 8: E nefit Expenses May be 4, *XPenses de ia example (With imaginary | Fina ieee 28 direct expenses an joyees Benefit Expens, ORs haw tt bone Note to Accounts f 3 } bor | Fir | fer ei a ) . i | =e Mlustration 51, Out of the following, identify the items that are shown in the Benefit Expenses: (® Wages; (ii) Salaries; (iii) Entertainment Expenses; (iv) Bonus; (0) Gratuity Paid; ang (2!) Conveyance Expenses. Solution: Items to be shown in Note to Accounts on Employees Benefit Expenses are: (® Wages; (ii) Salaries; (iv) Bonus and (v) Gratuity Paid. Mlustration 52. : From the following information for the year ended 31st March, 2019, prepare Accounts on Employees Benefit Expenses: ( Wages % 2,40,000; (ii) Salaries % 3,60,000; (iii) Entertainment Expenses: gellasrae ; (0) Gratuity Paid % 1,20,000; (vi) Conveyance Expenses & 25,0 Expenses % 40,000. Note to Accounts on Employe, ents of a Company © Costs mean costs incurred by the company on the borrowings, i.e., loans taken by it, It therefore, includes interest-paid on borrowings (such as term loans, bank overdraft and_cash-credit limit) from banks and from others (such as public deposits, debentures, bonds, etc.) Finance Costs also include expenses incurred for the borrowings such as loan processing, eof debentures and premium payable on redemption of debentures, are incurred by the company for borrowings. However, Bank Charges i Costs but are shown under ‘Other Expenses’, they being an expense "ices availed from the bank. Illustration 53. Out of the following, identify the items that are shown in the Notes to Accounts on Finance Co: (DAnterest paid on Term Loan; (ii) Interest paid on Bank Overdraft; (iii) Discount on Issue of Debentures Written off; (iv) Interest Received on Fixed Deposits and (v) Bank Charges. Solution: Items that will be shown in the Notes to Accounts on Finance Costs ar (@ Interest Paid on Term Loan; (ii) Interest Paid on Bank Overdraft and (iii) Discount on Issue of Debentures Written off. "Illustration 54. From the following information of Abacus Ltd. for the year ended 31st March, 2019, pare Note to Accounts on Finance Costs: terest paid on Term Loan % 2,50,000; (ji) Interest paid on Bank Overdraft & ount on Issue of Debentures Written off € 10,000; (jv) Interest Received on] s & 25,000; (2) Bank Charges % 9,500 and (vi) Interest paid on Deposits ' sie ce oe ee ee cial ‘a Company Items that will be shown in the Note to Accounts on Other Expenses are: (ii) Courier Expenses; (iif) Internet Expenses; (iv) Rent for factory; (v) Carriage Outwards; (vif) Rent for warehouse; (viii) Rent for office and (ix) Audit fee. Let us now discuss, Statement of Profit and Loss being prepared as a statement: Illustration 56. | Following is the Trial Balance of Perfect Solutions Ltd. as at 31st March, 2019; ‘Machinery Land and Building “Depreciation on Machinery Purchases of Raw Materials (Adjusted) ing Stock ‘of ® 100 each (Fully paid) -1,000; 6% Preference Shares of% 100 each (Fully paid) 4, Long-term Bor 10% Debent 5, Short-term Borrowings Bank Overds 6, Other Current Liabilities Interest on Debentur Dividend Payable: On ity On Preference Shares 7. Tangible Assets Machinery Land and Building Notes: 1. Proposed Dividend for the year ended 31st March, 2019 is X 20,000 (9% on Equity Shares) and © 6,000 (6% on Preference Shares), 2, Transfer to Debentures Redemption Reserve and General Reserve and proposed Dividend on Equity Shares and Preference Shares for the year ended 31st March, 2018 are items of appropriation from Surplus, .e., Balance in Statement of Profit and Los ES TO ACCOUNTS Notes to Accounts is the statement attached to the financial statements and is a part of the financial statements. It has details of items of Balance Sheet and Statement of Profit and Loss besides Significant Accounting Policies and additional information required to be disclosed as per Schedule III of the Companies Act, 2013 and Explanatory Notes. Cash Flow Statement is a statement showing the flow of cash and cash equivalents —inflows and outflows, during an accounting period. This statement is important for better understanding, of financial statements. It is an essential tool for short-term financial analysis. It has been discussed in a separate chapter. Objectives of Financial Statements are: To provide financial data on economic resources and obligations of an enterprise . To show implications of operating profit on the financial position of an enterprise. . To provide information about cash flow to investors and creditors for assessing, comparing _ and evaluating, potential cash flow in terms of amount. To provide sufficient and reliable information to various parties interested in 1 e and fair view of the business. activities of business affecting the society. *s followed in the accounting process Financial Statements of a Company Name the major heads under which the Equity and Liabilities part of a cor organised and presented. ‘4. What is a contingent liability? Where is it shown in the Balance Sheet? Give: liabilities. 5. Name the major heads which appear in the Assets part of the Balance Sheet. "6. Name the major heads which appear in the Equity and Liabilities part of th 2 Name the head under which lo Name the head under which G 2013. Reserves State any fve items which are shown under the head Ma ‘ company as per Schedule I, Part I of the Companies ASN" ities, ® Give two examples each of Non-current Assets and Non-

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