AN INSIGHT TO REVISED SCHEDULE VI OF THE COMPANIES ACT, 1956

AN INSIGHT TO REVISED SCHEDULE VI OF THE COMPANIES ACT, 1956 CA. (Dr.) G.S. GrewalSlide 1

Approach in Discussion
The presentation is prepared to meet the course requirement of ISC. It should be noted that the treatment of Loss on Issue of Shares, Loss on Issue of Debentures and Preliminary Expenses is different than treatment of CBSE. Key elements / issues of Revised Schedule VI, both for Balance Sheet and Statement of Profit and Loss have been highlighted. The discussion of the key elements/issues are, in brief but where considered otherwise, they are discussed in detail. Individual items of Statement of Profit and Loss and Balance Sheet have been explained with the help of examples where considered appropriate. CA. (Dr.) G.S. Grewal

Companies Act, 1956 and Schedule VI
Schedule VI is prescribed under the Companies Act, 1956. It has prescribed forms for preparing financial statements of a company i.e. (a) Balance Sheet; and (b) Statement of Profit and Loss. CA. (Dr.) G.S. Grewal

Is it mandatory to follow Schedule VI?
Section 211 of the Companies Act, 1956 prescribes that: Balance Sheetand Profit and Loss Account (now titled Statement of Profit and Loss)shall be in the form setout in Schedule VI or as near thereto as circumstances admit. CA. (Dr.) G.S. Grewal

Highlights of Revised Schedule VI
General In case, Revised Schedule VI is in conflict with law and Accounting Standards, Provisions of Law and accounting standards will override Schedule VI. Detail of each item of statement of Profit and Loss and Balance Sheet shall be given in Note duly referenced to the Balance Sheet or Statement of Profit and Loss. Notes shall be part of the financial statements. CA. (Dr.) G.S. Grewal

Highlights
STATEMENT OF PROFIT AND LOSS and BALANCE SHEET CA. (Dr.) G.S. Grewal

Statement of Profit and Loss
Statement of Profit and Loss is to be prepared in the form prescribed in Schedule VI of the Companies Act, 1956. Income to be classified as ‘Revenue from Operations’ and ‘Other Income’. Expenses to be classified on the basis of its nature and not on the basis of activity. The form of Statement of Profit and Loss does not provide for appropriation of profits. CA. (Dr.) G.S. Grewal

Balance Sheet
Only vertical form of Balance Sheet is prescribed. Assets and liabilities (including provisions) are to be classified as into Non-current and Current. Non-current Liabilities, Current Liabilities, Non-current Assets, Current Assets, Trade Payables and Trade Receivables have been defined. Share Application Money Pending Allotment to be separately shown. Balance of Statement of Profit and Loss, whether ‘positive’ or ‘negative’ is to be shown under ‘Reserve and Surplus’. The head ‘Miscellaneous Expenditure’ has been deleted. CA. (Dr.) G.S. Grewal

Accounting Treatment of Miscellaneous Expenditure
Accounting treatment of following expenditure under the Revised Schedule VI is as discussed in the following slides: Preliminary Expenses (including Deferred Revenue Expenditure); Discount or Loss on Issue of Shares; Share Issue Expenses; and Discount or Loss on Issue of Debentures. CA. (Dr.) G.S. Grewal

Writing Off of Miscellaneous Expenditure
Miscellaneous Expenditure may be written off : Either from Securities Premium Reserve as provided in section 78 (if it exists); or from General Reserve (if it exists); or (ii) fromthe Statement of Profit and Loss. CA. (Dr.) G.S. Grewal

Writing Off of Miscellaneous Expenditure
Securities Premium Reserve may be used for the purposes provided in section 78 i.e. for: Issuing Fully Paid Bonus Shares; Writing off of Preliminary Expenses; Writing off discount allowed on issue of securities or debentures of the company; and Premium payable on redemption of Redeemable Preference Shares or Debentures. CA. (Dr.) G.S. Grewal

Preliminary Expenses
Preliminary Expenses (including Deferred Revenue Expenditure) Preliminary expenses and Deferred Revenue Expenditure is to be written off in the year they are incurred. either from Securities Premium Reserve (if it exists); or from General Reserve (if it exists); or (iii) from the Statement of Profit and Loss in the year in which it is incurred. CA. (Dr.) G.S. Grewal

Discount or Loss on Issue of Shares
Discount or Loss on Issue of Shares (i.e. Discount on Issue of Shares and/or Premium Payable on Redemption of Preference Shares) are written off: either from Securities Premium Reserve (if it exists); or from General Reserve (if it exists); or (iii) from the Statement of Profit and Loss in the year in which it is incurred. CA. (Dr.) G.S. Grewal

Loss on Issue of Debentures
Loss on Issue of Debentures (i.e. Discount on Issue of Debentures and / or Premium Payable on Redemption of Debentures) are in the nature of borrowing costs. Accounting Treatment of Borrowing Cost is guided by AS 16, Borrowing Costs. It is written off: either from Securities Premium Reserve (if it exists); or from General Reserve (if it exists); or (iii) from the Statement of Profit and Loss in the year in which it is incurred. CA. (Dr.) G.S. Grewal

Meaning
“Terms” Used in STATEMENT OF PROFIT AND LOSS CA. (Dr.) G.S. Grewal

Meaning of Terms Used in Statement of Profit and Loss
CA. (Dr.) G.S. Grewal

Meaning
“Terms” Used in BALANCE SHEET (Equity and Liabilities Part) CA. (Dr.) G.S. Grewal

Meaning of Terms Used in Equity and Liabilities

Illustration: Classification of liability as non – current and current on the basis of Operating Cycle

Meaning
“Terms” Used in BALANCE SHEET (Assets Part) CA. (Dr.) G.S. Grewal

Meaning of Terms Used in Assets

Illustration: Classification of asset as non – current and current on the basis of Operating Cycle

Form of Statement of Profit and Loss CA. (Dr.) G.S. Grewal

Discussion on Heads of Accounts
Income is classified into: Revenue form Operations; and Other Income. CA. (Dr.) G.S. Grewal

Revenue from Operations It is revenue earned from the business operations (activities). For a manufacturing or trading company it includes: Sale of Products; Sale of Services; and Other Operating Revenues (Say Sale of Scrap). For a finance companyit includes: Interest; Dividend; Profit from sale of shares; and Income from Other Financial Services. CA. (Dr.) G.S. Grewal

Other Income Other Income includes revenue that is not revenue from operations. Other income is classified into: (a) Interest income; (b) Dividend income; (c) Profit on sale of investments; and (d) Other non-operating income. CA. (Dr.) G.S. Grewal

Expenses are shown under the following heads: Cost of Materials Consumed: It relates to manufacturing companies and is computed as follows: Opening Balance + Purchases – Closing Balance (b) Purchase of stock-in-trade: It relates to trading companies. (c) Changes in inventories of finished goods, WIP and Stock-in-trade. CA. (Dr.) G.S. Grewal

(d) Employees Benefits Expenses:Expensesincurred on employees are classified or shown under the head. It includes expenses on Salary Wages, Leave Encashment, Staff Welfare Expenses Retirement Benefits etc. Employees Benefits Expenses may be furtherdisclosedorshown asDirect Expenses (Wages and related costs or expenses) being part of Cost of Goods Sold and Indirect Expenses (Salaries and related costs or expenses). CA. (Dr.) G.S. Grewal

Finance Cost:Finance cost means expenses incurred on raising the loan and payment of interest on the borrowings, both Long – term borrowings and short – term borrowings. It does not include Bank Charges, which are shown as Other Expenses; it being the cost of services availed. CA. (Dr.) G.S. Grewal

Depreciation and Amortisation Expenses: The term ‘Depreciation’ is associated with tangible fixed assets and is the amount written off over the useful life of the tangible asset. For example: depreciation written off on compute₹ The term ‘Amortisation’ is associated with intangible fixed assets and is the amount written off over the useful life of the intangible asset. For example: Goodwill or patents being amortised. CA. (Dr.) G.S. Grewal

Other expenses: Expenses that do not fall in any of the above expenses are shown under Other Expenses. The expenses may be further classified into: (i) Direct Expenses (such as Carriage Inwards, Octroi etc.) form part of the Cost of Goods Sold. (ii) Indirect Expenses (such as Administration, Selling and Distribution etc.) form part of the Operating Expenses. (iii) Activity wise Expenses (such as Printing & Stationery, Postage, Administration, Advertisement etc.) (iv)Non – Operating Expenses. Expenses incurred for other than operating activitiesare non – operating expenses. CA. (Dr.) G.S. Grewal

Form of Balance Sheet (Under Revised Schedule VI)

Discussion on Items in Liabilities Part of the Balance Sheet
Shareholders’ Funds Share Capital Share Capital includes both Equity Share Capital and Preference Share Capital. Information disclosed in Notes to Account relating to Share Capital is as follows: Authorised Capital; Issued Capital; Subscribed Capital; Subscribed and fully paid up Subscribed but not fully paid up CA. (Dr.) G.S. Grewal

Example 1: Share Capital
AB Ltd. has an authorised capital of Rs. 5,00,000 divided into 50,000 equity shares of Rs. 10 each. It issued 10,000 Equity Shares of Rs. 10 each at par. All the shares were subscribed for and the due amount was received. How will be Share Capital shown in the Balance Sheet of the company? CA. (Dr.) G.S. Grewal

Solution: To be shown in the Balance Sheet as follows:
Balance Sheet of …………. as at: …………………….. CA. (Dr.) G.S. Grewal

Solution: It will be shown in the Notes as follows:

Grand Ltd. has an authorised capital of Rs. 5,00,000 divided into 30,000 equity shares of Rs. 10 each and 2,000 Preference Shares of Rs. 100 each. It issued 10,000 Equity shares and also 2,000 Preference Shares at par. All shares offered were subscribed for and the money was duly received except final call of Rs. 3 per equity shares on 500 shares. How will be Share Capital shown in the Balance Sheet of the company? CA. (Dr.) G.S. Grewal

Balance Sheet of Grand Ltd. as at: …………………….. CA. (Dr.) G.S. Grewal

Matrix Ltd. is registered with an authorised capital of Rs. 5,00,000 divided into 50,000 equity shares of Rs. 10 each. It issued 10,000 equity shares of Rs. 10 each at par. Final call of Rs. 2 per share was yet to be called. All shares offered were subscribed for and the money was duly received. How will be Share Capital shown in the Balance Sheet of the company? CA. (Dr.) G.S. Grewal

Balance Sheet of Matrix Ltd. as at: …………………….. CA. (Dr.) G.S. Grewal

JBM Ltd. is registered with an authorised capital of Rs. 5,00,000 divided into 50,000 equity shares of Rs. 10 each. It issued 10,000 equity shares of Rs. 10 each at par. Calls were made of Rs. 8 per share. All shares offered were subscribed for and the money was duly received except final call of Rs. 3 on 500 shares. How will be Share Capital shown in the Balance Sheet of the company? CA. (Dr.) G.S. Grewal

Balance Sheet of JBM Ltd. as at: …………………….. CA. (Dr.) G.S. Grewal

M Ltd. has an authorised capital of Rs. 5,00,000 divided into 50,000 equity shares of Rs. 10 each. The company has existing issued and fully paid 15,000 shares of Rs. 10 each. It further issued 10,000 equity shares of Rs. 10 each at par. The money called was Rs. 8 per share. All shares were subscribed for and the money was duly received except final call of Rs. 3 per share on 1,000 shares. How will be Share Capital shown in the Balance Sheet of the company? CA. (Dr.) G.S. Grewal

Balance Sheet of M Ltd. as at: …………………….. CA. (Dr.) G.S. Grewal

Casio Ltd. is registered with the capital: 1,00,000, Equity Shares of Rs. 10 each; and 50,000, 9% Preference Shares of Rs. 10 each. It issued 90,000 Equity Shares and 50,000, 9% Preference Shares for subscription. 85,000 Equity Shares were subscribed on which the company had called Rs. 8. It did not receive first call of Rs. 2 on 3,000 shares, out of which 2,000 allotted to Atul were forfeited. Out of the forfeited shares 1,500 shares were reissued at Rs. 6, Rs. 8 paid up. 9% Preference Shares were fully paid up. How will it be shown in balance sheet as per Revised Schedule VI? CA. (Dr.) G.S. Grewal

Balance Sheet of Casio Ltd. as at: …………………….. CA. (Dr.) G.S. Grewal

Reserve and Surplus
Reserve is a portion of earnings, receipts or other surplus set aside for a specific purpose. Reserve and Surplus is part of Shareholders’ Funds.Revised Schedule VI has prescribed that reserves be shown under the following heads: Capital Reserves Capital Redemption Reserve Securities Premium Reserve Debentures Redemption Reserve Revaluation Reserve Share Options Outstanding Any Other Reserves (to specify the nature and purpose of each reserve) CA. (Dr.) G.S. Grewal

Reserves and Surplus
Any Other Reserve Revised Schedule VI is flexible and allows a company to have reserves as per its requirements besides the six prescribed reserves. For example: a company may have following reserves : Workmen Compensation Reserve; or Investments Fluctuation Reserve; C) Statement of Profit and Loss is an important reserve because (i) it shows the profit or loss for the year; and (ii) appropriation of profit is made through this reserve. CA. (Dr.) G.S. Grewal

Reserve and Surplus
All reserves must have information as to opening balance, addition / deletion and closing balance. The sum total of all the reserves is shown on the face of the Balance Sheet. Each item of Reserves and Surplus to have following details: CA. (Dr.) G.S. Grewal

Amount of Reserves and Surplus – How shown
Individual reserves are shown in the Note for Reserves and Surplus giving details of opening balance; addition / deletion and closing balance. Closing Balances under each reserve are totalled; and The total is shown as one amount in the Balance Sheet. CA. (Dr.) G.S. Grewal

Loss from Statement of Profit and Loss
Current year’s loss is deducted from existing credit balance in Statement of Profit and Loss under ‘Reserves and Surplus’. If the existing balance is negative, current year’s loss is added to it. The net amount after transfer whether positive or negative amount, it is shown as negative amount under the head Statement of Profit and Loss in the Note for Reserves and Surplus. CA. (Dr.) G.S. Grewal

Appropriation of Profit
Appropriation of Profit out of Balance – Statement of Profit and Loss: Profit for the accounting period is transferred and added to the existing Balance of Statement of Profit and Loss under Reserves and Surplus. Thereafter appropriations for transfer to reserves and proposed dividend etc. is made as follows: CA. (Dr.) G.S. Grewal

Example 1: on Reserves and Surplus
A company has a opening credit balance in Statement of Profit and Loss of Rs. 1,00,000. During the year, it earned a profit of Rs. 1,50,000. Questions: (i) How will it be shown in the Balance Sheet? (ii) What amount will be shown therein? CA. (Dr.) G.S. Grewal

Solution:
1. Balance of Statement of Profit and Loss will be shown under Reserves and Surplus. 2. The amount shown will be: Statement of Profit and Loss Balance – Statement of Profit & Loss Rs. Opening 1,00,000 Add: Profit for the Period 1,50,000 Balance (to be shown in the Balance Sheet) 2,50,000 CA. (Dr.) G.S. Grewal

A company has a opening credit balance in Statement of Profit and Loss of Rs. 1,00,000. During the year, it incurred loss of Rs. 1,50,000. Questions: (i) How will you show the balance of Statement of Profit and Loss in the Balance Sheet? (ii) What amount will be shown therein? CA. (Dr.) G.S. Grewal

Solution:
1. Balance of Statement of Profit and Loss will be shown under Reserves and Surplus as a negative amount. 2. The amount shown will be: Statement of Profit and Loss Rs. Statement of Profit & Loss (Opening) 1,00,000 Add: Profit (Loss) for the Period (1,50,000) Balance (50,000) CA. (Dr.) G.S. Grewal

A company has an opening debit balance in Statement of Profit and Loss of Rs. 1,00,000. During the year, it incurred a loss of Rs. 1,50,000. Questions: (i) How will you show the balance in Statement of Profit and Loss in financial statements? (ii) What amount will be shown therein? CA. (Dr.) G.S. Grewal

Solution:
1. Balance of Statement of Profit and Loss will be shown under Reserves and Surplus as a negative amount. 2. The amount shown will be: Statement of Profit and Loss Rs. Statement of Profit and Loss (Opening) (1,00,000) Add: Profit (Loss) for the Period (1,50,000) Balance (to be shown in the Balance Sheet) (2,50,000) CA. (Dr.) G.S. Grewal

A company has a opening credit balance in Statement of Profit and Loss of Rs. 1,00,000. During the year, it earned a profit of Rs. 75,000. It decided to transfer Rs.15,000 to Debenture Redemption Reserve (DRR) and also proposed to pay dividend of Rs. 25,000. Question: How will you show the appropriations in the financial statements? CA. (Dr.) G.S. Grewal

Solution:
It will be shown in the Note on Reserves and Surplus as follows: Statement of Profit and Loss Rs. Statement of Profit & Loss (Opening) 1,00,000 Add: Profit for the Period 75,000 1,75,000 Less: Appropriation Proposed Dividend 25,000 Transfer to DRR 15,000 40,000 Balance 1,35,000 CA. (Dr.) G.S. Grewal

Solution Contd/…
Debenture Redemption Reserve Opening Balance Nil Transfer from Balance in Statement of Profit and Loss 15,000 Balance 15,000 Reserves and Surplus to be shown on the face of the Balance Sheet (Rs. 1,35,000 + Rs. 15,000) 1,50,000 Current Liabilities Short – term Provisions Proposed Dividend 25,000 CA. (Dr.) G.S. Grewal

A company has opening credit balance in Statement of Profit and Loss of Rs. 1,00,000. During the year, it incurred loss of Rs. 1,50,000. It has a opening balance in Debenture Redemption Reserve of Rs. 60,000. Question: How will you show the two in the financial statements? CA. (Dr.) G.S. Grewal

Solution:
Reserves and Surplus Debenture Redemption Reserve (DRR) Opening Balance 60,000 Statement of Profit and Loss Statement of Profit & Loss (Opening) 1,00,000 Add: Profit for the Period (1,50,000) Balance (50,000) Amount to be shown under Reserves and Surplus 10,000 CA. (Dr.) G.S. Grewal

A company has opening debit balance in Statement of Profit and Loss of Rs. 1,00,000. During the year, it earned a profit of Rs. 3,00,000. It decided to transfer Rs. 50,000 to Debenture Redemption Reserve (DRR) and also proposed to pay dividend of Rs. 25,000. Question: How will you show them in the financial statements? CA. (Dr.) G.S. Grewal

Solution:
Reserves and Surplus Statement of Profit and Loss Rs. Statement of Profit and Loss (1,00,000) Add: Profit (Loss) for the Period 3,00,000 Balance 2,00,000 Less: Appropriations Transfer to DRR 50,000 Proposed Dividend 25,000 75,000 Balance – Statement of Profit and Loss 1,25,000 CA. (Dr.) G.S. Grewal

Solution Contd/…
Debentures Redemption Reserve (DRR) Opening Balance Nil Transfer from Statement of Profit and Loss 50,000 50,000 Balance – Reserves and Surplus 1,75,000 Current Liabilities Short – term Provisions Proposed Dividend 25,000 CA. (Dr.) G.S. Grewal

Money Received Against Share Warrant
A share warrant is a bearer document of title to shares and can be issued only by public limited companies and that too as fully paid up. A share warrant cannot be issued by a private company, because the share warrant are bearer security and bearer is entitled to the number of shares against the warrant. It is a negotiable document and is transferable by mere delivery. The holder of the share warrant is entitled to receive dividend as declared by the company. Share warrant is accompanied by attached coupon for the payment of dividend. CA. (Dr.) G.S. Grewal

Share Application Money Pending Allotment
Share application money pending allotment is the amount received as Share Application Money against which shares are to be allotted by the company. Till the time shares are not allotted, amount remains in the account titled ‘Share Application Money Pending Allotment’. Amount refundable to the applicants are shown as ‘Other Current Liabilities’ under Current Liabilities. CA. (Dr.) G.S. Grewal

Non-Current Liabilities
Non-current liabilities are classified under the following four sub-heads on the face of the balance sheet. Long-term Borrowings Deferred Tax Liability (Net) Other Long term Liabilities Long-term Provisions. It may be noted that Deferred Tax Liability (Net) is classified as non-current without any consideration towards time. CA. (Dr.) G.S. Grewal

Non-Current Liabilities
Long – term Borrowings Borrowings are classified as long – term borrowing or short – term borrowing on the basis of it becoming due for payment from the date of loan. For example: A term loan of Rs. 5,00,000 granted to a company repayable in 20 equal quarterly installments along with interest will be classified or shown as Long – term borrowing. It is so because it is repayable after more than 12 months from the date of Balance Sheet. On the other hand, Cash Credit limit allowed that is repayable within 12 months from the date of Balance sheet is classified or shown as Short term borrowing. CA. (Dr.) G.S. Grewal

Examples of Long – term Borrowings
Bonds Debentures Term loans from banks from other parties Deposits CA. (Dr.) G.S. Grewal

Deferred Tax Liabilities (Net) and Deferred Tax Assets (Net)
Deferred Tax Liabilities or Deferred Tax Assets is a new entry on the face of the Balance Sheet. It is only a book entry. It is neither an actual Liability nor an actual asset. In a Balance Sheet, either Deferred Tax Liabilities (Net) or Deferred Tax Assets (Net) will appear. CA. (Dr.) G.S. Grewal

Concept of Deferred Tax
Deferred Tax Liabilities (Net) or Deferred Tax Assets (Net) is the amount of tax on difference between Accounting Profit and Taxable Profit arising because of items with timing difference. Example: Depreciation method applied may be SLMto determine accounting profit. Income Tax Act, allows only WDV method. Therefore, depreciation debited in the books of accounts and depreciation allowed under Income Tax Act will differ. As a result, difference between accounting profit and taxable profit will arise. CA. (Dr.) G.S. Grewal

If Accounting Profit is higher than Taxable Profit It will result in Deferred Tax Liability. Thus, an entry for Deferred Tax Liability will be passed. The entry is passed with the amount of income tax on amount of difference between accounting profit and taxable profit. In case of first entry or which has an effect of increasing the existing balance in Deferred Tax Liabilities, the journal entry passed is: Statement ofProfit and Loss … Dr. To Deferred Tax Liabilities (Net) If the existing balance is debit balance i.e. Deferred Tax Assets (Net), the journal entry passed is: Statement ofProfit and Loss … Dr. To Deferred Tax Assets (Net) CA. (Dr.) G.S. Grewal

Effect on Reserves and Surplus Lower amount is carried to Reserves and Surplus under Statement of Profit and Loss. Computation of Capital Employed:The amount of Deferred Tax Liabilities (Net) should be added to Reserves and Surplus. Computation of Net Profit Before Tax and Extraordinary Items in Cash Flow Statement: The difference between the Closing Balance and Opening Balance should be computed. If the difference is positive i.e. current year’s balance is higher add it to difference of Reserves and Surplus. If the difference is negative i.e. current year’s balance is higher deduct it from the difference of Reserves and Surplus. CA. (Dr.) G.S. Grewal

If Accounting Profit is Lower than Taxable Profit It will result in Deferred Tax Asset. The entry is passed with the amount of income tax on amount of difference between accounting profit and taxable profit. In case of first entry or which has an effect of decreasing the existing balance in Deferred Tax Assets, the journal entry passed is: Deferred Tax Assets (Net) … Dr. To Statement of Profit and Loss If the existing balance is credit balance i.e. Deferred Tax Liabilities (Net), the journal entry passed is: Deferred Tax Liabilities (Net)… Dr. To Statement ofProfit and Loss CA. (Dr.) G.S. Grewal

Effect on Reserves and Surplus Higher amount is carried to Reserves and Surplus under Statement of Profit and Loss. Computation of Capital Employed:The amount of Deferred Tax Assets (Net) should be added to Reserves and Surplus. Computation of Net Profit Before Tax and Extraordinary Items in Cash Flow Statement: The difference between the Closing Balance and Opening Balance should be computed. If the difference is positive i.e. current year’s balance is higher deduct it from the difference of Reserves and Surplus. If the difference is negative i.e. current year’s balance is lower add it to the difference of Reserves and Surplus. CA. (Dr.) G.S. Grewal

Other Long Term Liabilities
Long – term Liabilities other than Long – term Borrowings are shown under this head. Other Long Term Liabilities shall be classified as: (a) Trade payables: Trade payable shall be classified as Other Long – term Liabilities if the purchases of goods and services are made on the terms that the payment is to be made after 12 months of the date of Balance Sheet. (b) Others: Any other Long –term Liability other than trade payables shall also be shown under ‘Other Long – term Liabilities’ but as a separate item. CA. (Dr.) G.S. Grewal

Long-term Provisions
Provision is a liability amount of which is not known but is estimated with substantial accuracy. On the other hand, Liability is a liability amount of which is ascertained. Provision of amount towards a liability that is likely to arise after more than 12 months from the date of Balance Sheet is shown as long – term provision. Examples Premium Payable on Redemption of Debentures; Premium Payable on Redemption of Preference Shares; Provision for Retirement Benefits; Provision for Warranties. CA. (Dr.) G.S. Grewal

Current Liabilities
Current Liabilities are required to be sub-classified on the face of the balance sheet as below: Short-term borrowings Trade payables Other current liabilities Short-term provisions. CA. (Dr.) G.S. Grewal

Short-term borrowings
Short-term borrowings are those borrowings which are payable within 12 months from the date of loan. Examples are: Loans repayable on demand form banks and from other parties; and Deposits. In case, short – term borrowings are other than the above two classes, its nature should be specified. Important Note Loan repayable within 12 months from the date of Balance Sheet out of the long – term borrowingsshall not be classified as Short – term Borrowing. It shall be classified as ‘Current Maturities of Long – term Debts’ under ‘Other Current Liabilities’. CA. (Dr.) G.S. Grewal

Trade Payable
Trade payable is the amounts payable in respect of goods purchased or services taken in the ordinary course of business. In case the terms of purchases or services taken requires payment to be made beyond a period of 12 months of the date of Balance Sheet, it shall be classified or shown as non-current liabilities, under Other Non-Current Liabilities. CA. (Dr.) G.S. Grewal

Other current liabilities
Liabilities that are not short – term borrowings or trade payables are shown under Other Current Liabilities. Following are shown as Other Current Liabilities: Current maturities of long-term debts; Interest accrued but not due on borrowings; Interest accrued and due on borrowings; Income received in advance; Calls-in-Advance; Unpaid dividends; Unpaid matured deposits and interest accrued thereon; Unpaid matured debentures and interest accrued thereon; and Other payables (specify nature). CA. (Dr.) G.S. Grewal

Short-term Provisions
Provision is a liability amount of which is not known but is estimated with substantial accuracy. On the other hand, Liability is a liability amount of which is ascertained. Provision of amount towards a liability that is likely to arise within 12 months from the date of Balance Sheet is shown as short – term provision. Examples: Provision for Doubtful Debts; Provision for Employee Benefits; Provision for Expenses; Provision for Tax; Proposed Dividend. CA. (Dr.) G.S. Grewal

Non-Current Assets
Assets side of the Balance Sheet is divided into two parts: i.e. Non–current Assets and Current Assets. Non–current Assets are classified as follows: Fixed assets; Non-current investments; Deferred Tax Assets (net); Long-term Loans and Advances; and Other Non-current Assets. CA. (Dr.) G.S. Grewal

Fixed Assets
Recognising the significance of intangible assets, the revised Schedule VI requires them to be presented separately from Tangible Fixed Assets. Fixed assets are sub-classified on the face of the Balance Sheet as follows: Tangible Assets; Intangible Assets; Capital work-in-progress; and Intangible Assets Under Development. CA. (Dr.) G.S. Grewal

Non – current Investment
Non-current investmentsare classified as Trade Investments and Other Investments. Trade Investments are those investments which are made a company in another company for the promotion of its own business. They are further classified as follows: Investment property; Investments in Equity Instruments; Investments in preference shares Investments in Government or Trust securities; Investments in Debentures or Bonds; Investments in Mutual Funds; Investments in Partnership Firms; and Other non-current investments (specify nature) CA. (Dr.) G.S. Grewal

Long Term Loan and Advances
Long-term Loans and Advances are those advances which are recoverable in cash or kind beyond a period of 12 months from the date of Balance Sheet. They are classified as into: Capital Advances; Security Deposits; Loans and advances to related parties (giving details thereof); and Other loans and advances (specify nature). CA. (Dr.) G.S. Grewal

Other Non – current Assets
All non–current assets which do not fall within the categories i.e. fixed assets, long – term investments and long–term loans and advances are classified as ‘Other Non-current Assets’. They shall be classified as: Long Term Trade Receivables (including trade receivables on deferred credit terms) i.e. trade receivables payment of which is agreed to be received beyond a period of 12 months form the date of the Balance Sheet; Any other non – current asset, nature of which shall be specified. CA. (Dr.) G.S. Grewal

Current Assets
These are classified into following categories on the face of the balance sheet: Current investments; Inventories; Trade receivables; Cash and cash equivalents; Short-term Loans and Advances; and Other Current Assets. CA. (Dr.) G.S. Grewal

Current Investment
Current investments are those investments which are made with the purpose to sell within 12 months of the date of Balance Sheet. Investments are classified into: Investments in Equity Instruments; Investment in Preference Shares Investments in Government or Trust Securities; Investments in Debentures or Bonds; Investments in Mutual Funds; Investments in Partnership Firms Other investments (nature needs to be specified). CA. (Dr.) G.S. Grewal

Inventories
Inventories are goods held by a company to be consumed or sold in the normal course of its business. They are classified into: Raw materials; Work-in-progress; Finished goods; Stock-in-trade; Stores and spares; Loose tools; Others (nature to be specified). CA. (Dr.) G.S. Grewal

Trade Receivable
Trade receivables are receivables against sale of goods or services rendered in the ordinary course of business. Trade receivables are classified as current assets if they are expected to be realised within 12 months from the date of Balance Sheet or within the Operating Cycle of the business, whichever is longer. CA. (Dr.) G.S. Grewal

Cash and Cash Equivalents
Cash and Cash Equivalents is classified into: Balances with Bank Cheques, drafts on hand Cash in Hand Others (nature to be specified) e) Earmarked Balances with Banks (Unpaid Dividend) f) Balances with Banks as Margin Money or Security against borrowings, guarantees and other commitments etc. g) Bank Deposits with more than 12 months maturity. CA. (Dr.) G.S. Grewal

Short-term Loans and Advances
Short term loans and advances These need to be sub-classified in the notes as: - Loans and advances to related parties (giving details thereof) - Others (specifying nature). CA. (Dr.) G.S. Grewal

Other Current Assets
Other current assets is the residuary heading, which covers current assets that do not fall into any of the other ‘current asset’ categories. Examples of items that may be included in this category are unbilled revenue; interest accrued on investments, to the extent due for realisation within 12 months from the reporting date. Constituents of ‘other current assets’ are to be presented in the notes. CA. (Dr.) G.S. Grewal

THANK YOU Please be free to write to us on: CA. (Dr.) G. S. Grewal: cagsgrewal@gmail.com : gsgrewal@outlook .com CA. (Dr.) G.S. Grewal

AN INSIGHT TO REVISED SCHEDULE VI OF THE COMPANIES ACT, 1956