We need to classify each item into the correct Balance Sheet head under Schedule III (Division I) of the Companies Act, 2013. The key is to separate Equity & Liabilities into Shareholders’ Funds, Non-Current Liabilities, and Current Liabilities; and Assets into Non-Current and Current.

Classification of each item:

• Equity Share Capital – Shareholders’ Funds (Equity)
• Preference Share Capital – Shareholders’ Funds (Equity)
• Debenture Redemption Reserve – Reserves & Surplus (Shareholders’ Funds)
• Proposed Dividend – Current Liabilities (since it is a proposed dividend, not yet declared as final; under Schedule III, proposed dividend is shown under ‘Other Current Liabilities’)
• Outstanding Expenses – Current Liabilities
• Public Deposits – Non-Current Liabilities (unless repayable within 12 months, but given no maturity, treated as long-term)
• Short term loan from Zaveri Ltd. – Current Liabilities (explicitly ‘short term’)
• Land and Building – Non-Current Assets (Property, Plant & Equipment)
• Plant and Machinery – Non-Current Assets (Property, Plant & Equipment)
• Current Investments – Current Assets
• Inventories – Current Assets
• Cash Equivalent – Current Assets (Cash & Cash Equivalents)

Now, compute totals:

Equity & Liabilities:

• Shareholders’ Funds: Equity Share Capital ₹20,00,000 + Preference Share Capital ₹12,00,000 + Debenture Redemption Reserve ₹6,00,000 = ₹38,00,000
• Non-Current Liabilities: Public Deposits ₹12,00,000
• Current Liabilities: Outstanding Expenses ₹3,00,000 + Proposed Dividend ₹5,00,000 + Short term loan from Zaveri Ltd. ₹4,00,000 = ₹12,00,000
• Total Liabilities = ₹38,00,000 + ₹12,00,000 + ₹12,00,000 = ₹62,00,000

Assets:

• Non-Current Assets: Land and Building ₹20,00,000 + Plant and Machinery ₹10,00,000 = ₹30,00,000
• Current Assets: Current Investments ₹8,00,000 + Inventories ₹14,00,000 + Cash Equivalent ₹10,00,000 = ₹32,00,000
• Total Assets = ₹30,00,000 + ₹32,00,000 = ₹62,00,000

The Balance Sheet balances.

Balance Sheet of Gitanjali Ltd. as at … (date not given)

The first step in preparing a company’s Balance Sheet is to understand the nature of each item — is it an asset, a liability, or part of equity? And then, within those broad categories, we must apply the classification rules under Schedule III of the Companies Act, 2013 (as applicable for the exam). The Balance Sheet is not just a list; it is a classified statement that shows the financial position in a standardised format.

Let us go item by item.

Equity Share Capital (₹20,00,000) and Preference Share Capital (₹12,00,000) are part of Shareholders’ Funds — specifically, Share Capital. They appear under Equity and Liabilities on the side of ‘Equity’.

Debenture Redemption Reserve (₹6,00,000) is a reserve created out of profits for the redemption of debentures. It is part of Reserves and Surplus under Shareholders’ Funds.

Proposed Dividend (₹5,00,000) is a Current Liability — it is a dividend declared but not yet paid. It is shown under ‘Other Current Liabilities’.

Outstanding Expenses (₹3,00,000) are also a Current Liability — expenses incurred but not yet paid.

Short term loan from Zaveri Ltd. (₹4,00,000) — note the description: it is a short-term loan, and Zaveri Ltd. is a subsidiary of Twilight Ltd. (not of Gitanjali Ltd.). So it is a Short-Term Borrowing under Current Liabilities. The fact that it is from a subsidiary of another company does not change its classification for Gitanjali Ltd.

Public Deposits (₹12,00,000) — these are deposits accepted from the public. They are typically Non-Current Liabilities (if not repayable within 12 months) or Current Liabilities (if short-term). The question does not specify the tenure, but in typical exam problems, ‘Public Deposits’ are treated as Non-Current Liabilities (under ‘Other Long-Term Liabilities’ or ‘Long-Term Borrowings’). We will classify them as Non-Current Liabilities here.

Now for assets:

Land and Building (₹20,00,000) and Plant and Machinery (₹10,00,000) are Non-Current Assets — Property, Plant and Equipment.

Inventories (₹14,00,000) are Current Assets.

Current Investments (₹8,00,000) are Current Assets — investments that are readily realisable.

Cash Equivalent (₹10,00,000) is Cash and Cash Equivalents under Current Assets.

Now, we need to arrange these in the prescribed format. The Balance Sheet has two sides: Equity and Liabilities and Assets. We will present it in the vertical form (as per Schedule III) which is standard for company accounts.

Let us compute the totals.

Equity and Liabilities:

1. Shareholders’ Funds:

   • Share Capital: Equity Share Capital ₹20,00,000 + Preference Share Capital ₹12,00,000 = ₹32,00,000
   • Reserves and Surplus: Debenture Redemption Reserve ₹6,00,000
   • Total Shareholders’ Funds = ₹38,00,000

2. Non-Current Liabilities:

   • Public Deposits: ₹12,00,000

3. Current Liabilities:

   • Short-term loan from Zaveri Ltd.: ₹4,00,000
   • Outstanding Expenses: ₹3,00,000
   • Proposed Dividend: ₹5,00,000
   • Total Current Liabilities = ₹12,00,000

Total Equity and Liabilities = 38,00,000 + 12,00,000 + 12,00,000 = ₹62,00,000

Assets:

1. Non-Current Assets:

   • Land and Building: ₹20,00,000
   • Plant and Machinery: ₹10,00,000
   • Total Non-Current Assets = ₹30,00,000

2. Current Assets:

   • Inventories: ₹14,00,000
   • Current Investments: ₹8,00,000
   • Cash Equivalents: ₹10,00,000
   • Total Current Assets = ₹32,00,000

Total Assets = 30,00,000 + 32,00,000 = ₹62,00,000

The totals match, confirming the accounting equation.

Now, we present the Balance Sheet in the proper format.

Balance Sheet of Gitanjali Ltd. as at … (date not given)

Notes to Accounts: