Important Points Related to Balance Sheet
1.Balance Sheets prepared after the balance sheet of the first year should display the figures for previous year.
2.Figures in the balance sheet should be rounded off to nearest rupee. Currently, amount in the balance sheet of the company is shown to the nearest thousand, lakhs or crore rupees.
3.If several items are to be shown under one heading in the balance sheet, it can be shown in a separate schedule attached to the balance sheet.
4.Profits liable to accrue to the firm in future due to some contracts, should not be shown in the balance sheet. It should be mentioned in the Directors’ Report.
5.It should also include the details of debentures which have been paid and the debentures for which the rights to reissue have been obtained,
6.The Balance Sheet of the company should be placed prior to the Profit &, Loss A/c.
7. The above forms of balance sheet shall not apply to any banking, insurance or electricity companies for which a form of balance sheet has been specified under the Act governing them.
Profit & Loss Account
The Companies Act has not prescribed a specific
format in which Profit and Loss account is to be presented. The Companies Act says that the Profit & Loss Account of a company should be prepared in such a way that it gives the true and fair picture of the profit made or loss incurred
by the company in the given time period.
According to the Schedule VI of the Companies Act, the Profit & Loss A/c should contain following items:
Amount withdrawn for repayment of loans and share capital.
1.(i) Total Turnover. of the company; (ii) Commission paid to sole selling agent; (iii) Commission paid to other selling agents; (iv) Discount and brokerage on sales. (v) Profit or Loss from non-operating activi-
2.(i) Purchases, opening and closing stock of raw materials and finished goods of manufacturing companies. (ii) In case of trading companies, the total purchases made during the year. (iii) In case of companies rendering or supplying services, the gross income received out of various services provided by the company. (iv) In other companies, net income from different sources.
3.In case of those companies, where processing of raw materials is continuing, the opening and closing workin-process should be given.
4.Provision for depreciation, renewals or diminution in the value of fixed assets.
5.Interest payable on loans and the debentures of the To company.
6. Income-tax and other taxes on the profits of the company.
8.(i) Transfers to various reserve, and (ii) Amount withdrawn from these reserves.
9.Provision for special liabilities and amount with drawn from these provision.
10.Expenses made on the following heads: (i) Stores utilised, (ii) Power and Fuel, (iii) Rent, (iv) Repairs of buildings. (v) Repairs of machinery, (vi) Salaries, Wages and Bonus. (vii) Contribution to Provident Fund and other such Funds. (viii) Expenses incurred for the welfare of the labourers and workers, (ix) Insurance, (x) Rates and Taxes, (xi) Others.
11.(i) Income from investments distinguishing between trade investments and other investments,
(ii) other income by way of interest, specifying the nature of the income.
12.(i) Profits or losses on investments to the extent not adjusted from any previous provision or reserve, (ii) Profits or losses in respect of transactions of a kind. not usually undertaken by the company, (iii) Miscellaneous income.
13.(1) Dividend from subsidiary companies, (ii) Provisions for losses of subsidiary companies.
14..Proposed dividend and amount of dividend paid.
15.Amount, if material, by which any items shown in the Profit and Loss Account are affected by any change in the basis of accounting.
Profit and Loss A/c of a company should be pre-
pared keeping in mind the above points. Profit and Loss A/ c of a company may be prepared either in horizontal form or vertical form depending on convenience.