Show the following items in the balance sheet as per the provisions of the Companies Act, 2013 in Schedule III:
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| Preliminary Expenses | 2,40,000 | Goodwill | 30,000 |
| Discount on issue of shares | 20,000 | Loose tools | 12,000 |
| 10% Debentures | 2,00,000 | Motor Vehicles | 4,75,000 |
| Stock in trade | 1,40,000 | Provision for tax | 16,000 |
| Cash at bank | 1,35,000 | Bills receivable | 1,20,000 |
The items are classified and presented under the appropriate heads and sub-heads of the Balance Sheet as per Schedule III of the Companies Act, 2013. The final answer is the completed Balance Sheet extract.
The Companies Act, 2013, through Schedule III, mandates a specific format for the Balance Sheet. This format is not just about listing items; it's about grouping them into meaningful categories that reflect the liquidity and nature of the assets and liabilities. The core principle is to show the financial position clearly, distinguishing between what the company owns (Assets), what it owes (Liabilities), and the owners' claim (Equity).
Let's classify each item based on its nature.
Liabilities are obligations of the company. They are split into 'Shareholders' Funds', 'Non-Current Liabilities', and 'Current Liabilities'.
- 10% Debentures (₹2,00,000): These are long-term borrowings, repayable after more than 12 months. They are a Non-Current Liability under the head 'Long-term Borrowings'.
- Provision for Tax (₹16,000): This is a provision for a current obligation (tax on current year's profit) expected to be settled within 12 months. It is a Current Liability under the head 'Short-term Provisions'.
Assets are resources controlled by the company. They are split into 'Non-Current Assets' (held for long-term use) and 'Current Assets' (expected to be converted to cash or used within 12 months).
- Goodwill (₹30,000): An intangible asset representing the company's reputation and brand value. It is a Non-Current Asset under 'Intangible Assets'.
- Motor Vehicles (₹4,75,000): Tangible assets used in the business for more than one year. They are a Non-Current Asset under 'Tangible Assets' (specifically 'Plant, Property and Equipment').
- Loose Tools (₹12,000): These are small tools used in operations. They are typically classified as a Current Asset under 'Inventories' because they are consumed or replaced within a year.
- Stock in Trade (₹1,40,000): Goods held for sale in the ordinary course of business. This is a Current Asset under 'Inventories'.
- Bills Receivable (₹1,20,000): Amounts due from customers, backed by a bill of exchange, expected to be collected within 12 months. This is a Current Asset under 'Trade Receivables'.
- Cash at Bank (₹1,35,000): The most liquid asset. It is a Current Asset under 'Cash and Cash Equivalents'.
- Preliminary Expenses (₹2,40,000): These are expenses incurred before the company starts business (e.g., legal fees for incorporation). Under the Companies Act, 2013, these are not shown as an asset. They are written off from the Securities Premium Reserve or Retained Earnings. They do not appear in the Balance Sheet.
- Discount on Issue of Shares (₹20,000): This is a loss incurred when shares are issued at a discount. It is not an asset. It is written off against the Securities Premium Reserve or Retained Earnings. It does not appear in the Balance Sheet.
Common Mistake
Students often show 'Preliminary Expenses' and 'Discount on Issue of Shares' as assets (like 'Miscellaneous Expenditure' under the old format). Under Schedule III of the Companies Act, 2013, these are not assets. They are losses to be written off and do not appear on the face of the Balance Sheet.
Now, let's present the extract of the Balance Sheet.
Balance Sheet of XYZ Ltd. as at ...
(Extract showing only the relevant heads)
| Particulars | Note No. | Amount (₹) |
|---|---|---|
| I. EQUITY AND LIABILITIES | ||
| 1. Shareholders' Funds | ||
| (a) Share Capital | ... | |
| (b) Reserves and Surplus | ... | |
| 2. Non-Current Liabilities | ||
| (a) Long-term Borrowings | 1 | 2,00,000 |
| 3. Current Liabilities | ||
| (a) Short-term Provisions | 2 | 16,000 |
| TOTAL EQUITY AND LIABILITIES | 2,16,000 | |
| II. ASSETS | ||
| 1. Non-Current Assets | ||
| (a) Tangible Assets | 3 | 4,75,000 |
| (b) Intangible Assets | 4 | 30,000 |
| 2. Current Assets | ||
| (a) Inventories | 5 | 1,52,000 |
| (b) Trade Receivables | 6 | 1,20,000 |
| (c) Cash and Cash Equivalents | 7 | 1,35,000 |
| TOTAL ASSETS | 9,12,000 |
Notes to Accounts
| Note 1: Long-term Borrowings | Amount (₹) |
|---|---|
| 10% Debentures | 2,00,000 |
| Total | 2,00,000 |
| Note 2: Short-term Provisions | Amount (₹) |
|---|---|
| Provision for Tax | 16,000 |
| Total | 16,000 |
| Note 3: Tangible Assets | Amount (₹) |
|---|---|
| Motor Vehicles | 4,75,000 |
| Total | 4,75,000 |
| Note 4: Intangible Assets | Amount (₹) |
|---|---|
| Goodwill | 30,000 |
| Total | 30,000 |
| Note 5: Inventories | Amount (₹) |
|---|---|
| Stock in Trade | 1,40,000 |
| Loose Tools | 12,000 |
| Total | 1,52,000 |
| Note 6: Trade Receivables | Amount (₹) |
|---|---|
| Bills Receivable | 1,20,000 |
| Total | 1,20,000 |
| Note 7: Cash and Cash Equivalents | Amount (₹) |
|---|---|
| Cash at Bank | 1,35,000 |
| Total | 1,35,000 |
The items are classified and presented in the Balance Sheet as per Schedule III. Preliminary Expenses (₹2,40,000) and Discount on Issue of Shares (₹20,000) are not shown as assets; they are written off against reserves. The final extract shows Non-Current Liabilities of ₹2,00,000, Current Liabilities of ₹16,000, Non-Current Assets of ₹5,05,000, and Current Assets of ₹4,07,000.
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