Profit and Loss Account PDF
Profit and Loss Account PDF
Profit and Loss Account PDF
Chartered Accountants
PARTICULARS
12.
12.1
Whether the income from investments have been properly accounted &
disclosed in the profit and loss account as required by AS-13 and The
Companies Act, 1956? Have the TDS Certificates been verified ? (Note : the
requirements of AS-13 by which interest income received for pre-acquisition
period is to be credited to the cost of investments)
12.2
12.3.1 Whether interest accrued on fixed deposits and other securities including those
given as margins for Guarantees/LCs availed?
12..3.2 Whether Profit on sale of fixed assets have been properly arrived at (Refer
7.24)
Any items which is not falling under the above categories can be shown as
Miscellaneous Income/Other Income depending on materiality
Sales
12.4
12.5
12.6
12.7
How are the changes in prices authorized? And how are the alterations in rate
master in the EDP system carried out?
12.8
If changes are made in the rate master, is a dummy transaction run through
immediately to check the working of the system? If so, are the results of the
checks filed separately?
12.9
Are the invoices in accordance with the trade terms agreed with the customers?
Does the marketing department carries out any checking to ensure compliance?
12.10 Are there any price revisions in the following cases being negotiated?
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SRIPADA ASSOCIATES
Chartered Accountants
12.11 Sales rejections - what is the policy with regard to sales rejections
(a) in the manner of determin-ation and acceptance
(b) accounting policy and timing of accounting
(c) adjustment of sales tax
12.12 What are the cut-off procedures at the year end for ensuring that the following
procedures have been followed properly?
(a) That goods delivered have been invoiced
(b) That goods invoiced but not delivered have not been included in closing
stocks
(c) That goods sent on approval has been included in Closing Stock.
(d) That all goods (as mentioned in Paragraph 9 above) rejected have been
removed from sales
12.13 Consignment Sales: In the case of Consignment Sales the following needs to be
verified:
(a)
(b)
(c)
(d)
12.14 Is the sales tax assessments and status reports checked? Examine compliane
with maintenance of records for Sales tax, Central Excise and Customs.
12.15 What is the procedure for issuing credit notes in the case of
(a) Rejections in the ordinary course of business
(b) In the case of price revisions as per negotiations with OE customers.
12.16 Were the credit notes issued after the year-end to see if they relate to sales for
the year under review?
12.17 Do the companys products carry warranty? If so how is warranty accounted
i.e. on the settlement basis or on the basis of past experience for products with
warranties outstanding at the year-end.
12.18 Is the credit control system including the approval of credit notes satisfactory?
12.19 Whether the company has an established a procedure for ascertaining
(a) Related party transactions in accordance with Accounting Standard 18;
(b) Transactions with Associated Enterprises in accordance with Section 92
of the Income Tax Act, 1961; and
(c) Companies under the same management under section 370 (1B) in
accordance with The Companies Act, 1956.
Expenditure:
12.20 Managerial Remuneration : Whether compliance with Sec 198, 205, 349 & 350
of Companies Act and Schedule XIII to the Companies Act, 1956 is verified?
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Chartered Accountants
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Chartered Accountants
Revenue from sales and service transactions should be recognized when the following conditions satisfied.
1.
2.
In a transaction involving sale of goods performance should be regarded as achieved when the following
conditions are fulfilled.
a. The seller of goods has transferred to the buyer the property in the goods for a price or all
significant risks and rewards of ownership have been transferred to the buyer and the seller retains
no effective control of the goods transferred to a degree usually associated with ownership.
b. No significant uncertainty exists regarding the amount of the consideration that will be derived
from the sale of the goods.
In a transaction involving rendering of services performances should be measured either under the
completed service contract method or under the proportionate completion method whichever relates the
revenue to work accomplished. Such performance should be regarded as being achieved when no
significant uncertainty exists regarding the amount of the consideration that will be derived from rendering
of the service.
Disclose circumstances in which revenue recognition has been postponed pending significant uncertainties.
The disclosure of turnover should be made in the following manner (AS 14)
Turnover (Gross)
Less: Excise Duty
Turnover (Net)
Points For Consideration Under AS 17-Segment Reporting
This is a disclosure standard requiring the information in the financial statement to be segregated into
business and geographic segments.
Identification of segments into primary and secondary segments depends on certain conditions.
A business segment is a distinguishable component of an enterprise providing a product or service or group
of products or services that is subject to risks and returns that are different from other business segments.
A geographical segment is distinguishable component of an enterprise providing products or services in a
particular economic environment that is subject to risks and returns that are different from components
operating in other economic environments.
A reportable segment is business segment or a geographical segment identified on the basis of foregoing
definitions for which segment information is required to be disclosed as per this standard.
Internal financial reporting system can be the basis for identifying the segments.
Dominant source and nature of risk and returns of an enterprise should govern whether its primary
reporting format will be business segments or geographical segments.
A reportable segment arises if
a. Revenue from sales to external customers and from transactions with other segments exceeds 10%
of total revenues (external and internal) of all segments; or
b. Segment result, whether profit or loss, is 10% or more of
i.
combined result of all segments in profit or
ii.
combined result of all segments in loss whichever is greater in absolute amount; or
c. Segment assets are 10% or more of all the assets of all the segments.
In case it is concluded there is neither more than one business segment nor more than one geographic
segment, segment information as per AS 17, is not required to be disclosed. (AS1-20)
If total external revenue attributable to reportable segments constitutes less than 75% of total revenues then
additional segments should be identified till 75% level is reached.
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Chartered Accountants
Segment revenue is the aggregate of revenue that are directly attributable to the segment, enterprises
income that can be reasonably allocated to a segment, revenues arising from transactions with other
segments but does not include extra ordinary items. Interest or dividend income, profit on sale of
investments, are not considered as part of segment unless the enterprises activity are primarily of a
financial nature.
Segment expenses is the aggregate of expenses resulting from the operating activities of the segment and
enterprise expenses that can be reasonably allocated to the segment but does not include income tax, extra
ordinary items and general administrative expenses of head office. Interest paid, Loss on sale of
investments, are not considered as part of segment unless the enterprises activity are primarily of a
financial nature.
The interest expense relating to overdrafts and other operating liabilities identified to a particular segment
is not included as part of the segment expense unless the operations of the segment are primarily of a
financial nature or unless the interest included as part of the cost of inventories. (ASI 22)
Where according to AS 2 interest is included as part of inventory cost and those inventories are segment
assets of a particular segment, such interest should be considered as a segment expense.
Segment result is segment revenue less segment expenses
Segment assets are those operating assets identified with activities of the segment
Segment liabilities are those identified with the segment arising out of its operations.
Under primary reporting format for each reportable segment the enterprise should disclose external and
internal segment revenue, segment result, amount of segment assets and liabilities, cost of fixed assets
acquired, depreciation, amortization of assets and other non cash expenses.
Reconciliation between information about reportable segments and information in financial statements of
the enterprise should be provided.
Secondary segment information is required to be disclosed. This includes information about revenues,
assets and cost of fixed assets acquired.
When primary format is based on geographical segments, certain further disclosures are required.
Disclosures are also required relating to intra-segment transfers and composition of the segment.
Changes in accounting policies that have an effect on the segment reporting should be disclosed.
Matrix form of presentation is allowed.
This standard is applicable to reporting on related party relationship and transactions between a reporting
enterprise and its related parties. It also applies to consolidated financial statements presented by a holding
company.
The following related party relationships are considered by this standard
i.
Enterprises that directly or indirectly control or are controlled by or are under the common control
with the reporting enterprise;
ii.
Associates, joint ventures of the reporting entity; investing party or venturer in respect of which
reporting enterprise is an associate or a joint venture;
iii.
Individuals owning voting power giving control or significant influence;
iv.
Key management personnel and their relatives; and
v.
Enterprises over which any of the persons in (iii) or (iv) are able to exercise significant influence.
Parties are considered related if one party has ability to control or exercise significant influence over the
other party in making financial and/or operating decisions.
The following are not considered as related parties:
i.
Two companies simply because of common director,
ii.
A single customer, supplier, franchiser, distributor or general agent with whom an enterprise
transactions a significant volume of business merely by virtue of economic dependence; and
iii.
Parties such as Financier, trade unions, public utilities, government departments and bodies merely
by virtue of their normal dealings with the enterprise.
Disclosure under the standard is not required
i.
If such disclosure conflicts with duty of confidentially under statute, cast by a regulator or a
competent authority;
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Chartered Accountants
ii.
iii.
1.1
1.2
The profit and loss account shall set out the various items relating to the income and expenditure of the
company arranged under the most convenient heads; and in particular, shall disclose the following
information in respect of the period covered by the accountDisclosure Requirements
Turn over (Aggregate amount of sale, giving amount of sales in respect of each class of goods
dealt with by the company and indicating the quantities of such sales for each class separately)
Commission paid to sole selling agents
Commission paid to other selling agents
Brokerage and discount on sales other than usual trade discount
Item wise breakup of raw materials consumed and quantities thereof including their value for
all-important basic raw materials.
The intermediates or components procured from other manufactures maybe grouped under
suitable heading without mentioning quantities, provided all those items which in value account
for 10% or more of the total value of the raw material consumed shall be shown as separate and
distinct items with quantities thereof in the breakup.
The opening and closing stock of goods produced in respect of each class indicating the
quantities thereof.
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Chartered Accountants
In case of all concerns having work in progress the amount for which works have been completed at
the commencement and end of the accounting period.
1.4.1 The amount provided for depreciation renewals or diminution in value of fixed assets.
1.4.2 If such a provision is not made by means of depreciation charged the method adopted for making such
provision.
1.4.3 If no provision is made for depreciation, the fact that no provision has been made shall be stated and the
quantum of arrears of depreciation computed in accordance with section 205(2) of the Act shall be
disclosed by way of a note.
1.5
The amount of interest on the companys debentures and other fixed loans, that is to say, loans for fixed
periods, stating separately the amount of interest, if any, paid or payable to the managing director and the
manager if any.
1.6
The amount of charge for Indian income tax and other Indian taxation on profits, including, where
practicable, with Indian income tax any taxation imposed elsewhere to the extent of the relief, if any,
from Indian income tax and distinguishing, where practicable, between income tax and other taxation.
1.7
1.8.1 The aggregate, if material, of any amount set aside or proposed to be set aside, to reserves, but not
including provisions made to meet any specific liability, contingency or commitment known to exist at
the date as at which the balance sheet is made up.
1.8.2 The aggregate, if material, amounts withdrawn form such reserves.
1.9.1 The aggregate, if material, of the amounts set aside to provisions made for meeting specific liabilities,
contingencies or commitments.
1.9.2 The aggregate, if material, of the amounts withdrawn form such provisions, as no longer required.
1.10
Expenditure incurred on each of the following items, separately for each item:
(a) Consumption of stores and spare parts.
(b) Power and fuel.
(c) Rent.
(d) Repairs to buildings.
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Chartered Accountants
Amount, if material by which any items shown in the profit and loss account is affected by any change in
the basis of accounting.
2.1 The profit and loss account shall also contain or give by way of a note, detailed information showing separately
the following payments provided or made during the financial year to the directors (including managing
directors) or manager, if any, by the company, the subsidiaries of the company and any other person:
(i)
Managerial remuneration under section 198 of the act paid or payable during the financial year to the
directors (including managing directors or manager if any)
(ii)
(iii)
Any other perquisites or benefits in cash or in kind (stating approximate money value where practicable);
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(iv)
Pension etc;
Pensions
Gratuities
Payments from provident funds in excess of own subscriptions and interest thereon,
Compensation for loss of office
Consideration in connection with retirement from office
3.1 The profit and loss account shall contain or give by way of note a statement showing the computation of net
profits in accordance with section 349 of the act with relevant details of the calculation of the commissions
payable by way of percentage of such profits to the directors (including Managing Directors) or manager (if
any)
4.1 The profit and loss account shall further contain or give by way of a note detailed information in regard to
amounts paid to the auditor whether as fees, expenses or otherwise for services rendered.
(a)
As auditors
(b)
(c)
Taxation Matters
(d)
(e)
(f)
5.1 In the case of manufacturing companies the profit and loss account shall also contain by way of a note in respect
of each class of goods manufactured, detailed quantitative information regard to the following namely:(a)
(b)
(c)
Note 1
For the above purpose the licensed capacity and installed capacity of the company as on the last date of the year
to which the profit and loss account relates shall be mentioned.
Note 2
The actual production in respect of the finished products meant for sale shall be mentioned in cases. Where semi
processed products are also sold by the company separate details there of shall be given
Note 3
The items for which the company is holding separate industrial licences shall be treated as separate classes of
goods. But, where a company has more than one industrial licence for production of the same item at different
places or for expansion of the licensed capacity, the item covered by all licences shall be treated as one class.
6.1 The profit and loss account shall also contain by way of a note the following information namely
(a)
Value of imports calculated on CIF basis by the company during the financial year in respect of
(i)
Raw materials
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Chartered Accountants
(i)
Royalty
Raw materials
Raw materials
The amount remitted during the year in foreign currencies on account of dividends with a specific
mention of the number of non-residents share holders and the number of shares held by them on which
the dividends were due and the year to which the dividends related
(f)
(ii) Royalty
(iii) Know-how
(iv) Professional and consultation fees
(v) Interest and dividend
(vi) Other Income indicating the nature there of
7.1 The central may direct that the company shall not be obliged to show the amount set aside to provisions other
than those relating to depreciation, renewal or diminution in value of assets, if the central government is
satisfied that the information should be disclosed in the public interest and prejudice the company, but subject to
the condition that in any heading stating an amount arrived at after taking into account the amounts set aside as
such, the provisions shall be so framed or marked as to indicate that fact.
8.1 Except in the case of the first profit and loss account laid before the company after the commencement of the act
the corresponding amounts for the immediately preceding financial year for all items shown in the profit and
loss account shall also be given in the profit and loss account.
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