6. Explain with suitable examples the accounting treatment of the following items while
preparing the cash flow statement of a company:
Redemption of Preference Shares at Premium; Profit or Loss on Sale of Fixed Assets; Issue of
Share Capital for Purchase of Stock; Issue of Bonus Shares; Proposed Dividend; Provision for
Taxation; Provision for Bad and Doubtful Debts, Interim Dividend.
Answers
Answer:
Schedule III
(See section 129)
GENERAL INSTRUCTIONS FOR PREPARATION OF BALANCE SHEET AND
STATEMENT OF PROFIT AND LOSS OF A COMPANY
GENERAL INSTRUCTIONS
1. Where compliance with the requirements of the Act including Accounting Standards
as applicable to the companies require any change in treatment or disclosure including
addition, amendment, substitution or deletion in the head or sub-head or any changes,
inter se, in the financial statements or statements forming part thereof, the same shall be
made and the requirements of this Schedule shall stand modified accordingly.
2. The disclosure requirements specified in this Schedule are in addition to and not in
substitution of the disclosure requirements specified in the Accounting Standards prescribed
under the Companies Act, 2013. Additional disclosures specified in the Accounting Standards
shall be made in the notes to accounts or by way of additional statement unless required to
be disclosed on the face of the Financial Statements. Similarly, all other disclosures as
required by the Companies Act shall be made in the notes to accounts in addition to the
requirements set out in this Schedule.
3. (i) Notes to accounts shall contain information in addition to that presented in the
Financial Statements and shall provide where required (a) narrative descriptions or
disaggregations of items recognised in those statements; and (b) information about items
that do not qualify for recognition in those statements.
(ii) Each item on the face of the Balance Sheet and Statement of Profit and Loss shall
be cross-referenced to any related information in the notes to accounts. In preparing the
Financial Statements including the notes to accounts, a balance shall be maintained between
providing excessive detail that may not assist users of financial statements and not providing
important information as a result of too much aggregation.
I. EQUITY AND LIABILITIES
(1) Shareholders’ funds
(a) Share capital
(b) Reserves and surplus
(c) Money received against share
warrants
(2) Share application money pending
allotment
(3) Non-current liabilities
(a) Long-term borrowings
(b) Deferred tax liabilities (Net)
(c) Other Long term liabilities
(d) Long-term provisions
(4) Current liabilities
(a) Short-term borrowings
(b) Trade payables
(c) Other current liabilities
(d) Short-term provisions
GENERAL INSTRUCTIONS FOR PREPARATION OF STATEMENT OF
PROFIT AND LOSS
1. The provisions of this Part shall apply to the income and expenditure account
referred to in sub-clause (ii) of clause (40) of section 2 in like manner as they apply to a
statement of profit and loss.
2. (A) In respect of a company other than a finance company revenue from operations
shall disclose separately in the notes revenue from—
(a) Sale of products;
(b) Sale of services;
(c) Other operating revenues;
Less:
(d) Excise duty.
(B) In respect of a finance company, revenue from operations shall include revenue
from—
(a) Interest; and
(b) Other financial services.
Revenue under each of the above heads shall be disclosed separately by way of notes
to accounts to the extent applicable.
3. Finance Costs
Finance costs shall be classified as:
(a) Interest expense;
(b) Other borrowing costs;
(c) Applicable net gain/loss on foreign currency transactions and translation.
4. Other income
Other income shall be classified as:
(a) Interest Income (in case of a company other than a finance company);
(b) Dividend Income;
(c) Net gain/loss on sale of investments;
(d) Other non-operating income (net of expenses directly attributable
to such income).
5. Additional Information
A Company shall disclose by way of notes additional information regarding aggregate
expenditure and income on the following items:—
(i) (a) Employee Benefits Expense [showing separately (i) salaries and wages,
(ii) contribution to provident and other funds, (iii) expense on Employee Stock Option
Scheme (ESOP) and Employee Stock Purchase Plan (ESPP), (iv) staff welfare expenses].
(b) Depreciation and amortisation expense;
(c) Any item of income or expenditure which exceeds one per cent. of the revenue
from operations or Rs.1,00,000, whichever is higher;
(d) Interest Income;
(e) Interest expense;
(f) Dividend income;
(g) Net gain/loss on sale of investments;
(h) Adjustments to the carrying amount of investments;
(i) Net gain or loss on foreign currency transaction and translation (other than
considered as finance cost);
(j) Payments to the auditor as (a) auditor; (b) for taxation matters; (c) for company
law matters; (d) for management services; (e) for other services; and (f) for
reimbursement of expenses;
(k) In case of Companies covered under section 135, amount of expenditure
incurred on corporate social responsibility activities