Preparation of Final

UNIT 4 PREPARATION OF FINAL Accounts of A

Company
ACCOUNTS OF A COMPANY

Objective
After studying this unit, you should be able to:

 Discuss the applicability of various provisions in the preparation of the

financial statement
 Understand the structure and preparation of Profit and Loss Statement of
a company
 Understand the presentation and disclosure of company's Balance Sheet
 Understand the structure and preparation of Cash Flow Statement

Structure
4.1 Introduction
4.2 Schedule III of the Companies Act, 2013
4.3 General Instructions for the preparation of Financial Statement
4.4 Profit and Loss Statement Part II of Schedule III
4.5 Balance Sheet Part I of Schedule III
4.6 Cash Flow Statement
4.7 Statement of changes in Equity
4.8 Self Assessment Questions

4.1 INTRODUCTION
Companies are required to prepare their final accounts are per the provisions
of the Companies Act 2013. They should prepare and keep the books of
accounts of every financial year at their' registered office which gives a true
and fair view of the state of affairs of a company. Companies should keep the
books of accounts on an accrual basis and according to the double-entry
system of accounting.

As per Section 129 of the act, at the time of the company's annual general
meeting, it is mandatory for the board of directors to lay down the financial
statements before the company. The financial statements includes –

I. Profit and loss statement

II. Balance sheet
III. Cash flow statement
IV. Statement of changes in Equity
V. Notes to accounts

Note – Cash flow statement is not a part of financial statements in case of

One Person Company. 107
Accounting: An Final accounts must give a true and fair view of a company at the end of the
Overview
financial year. Further, Special acts are applicable for insurance, banking,
electricity supply or any other class of companies to prepare the financial
statements, while in case of all other companies, balance sheet and profit &
loss statement is prepared as per Part I and Part II of Schedule III.

It is mandatory for the companies to comply with the accounting standards as

notified by the Central Government from time to time.

4.2 SCHEDULE III OF COMPANIES ACT, 2013

The companies must prepare and present their final accounts as per the
Schedule III of the Company Act, 2013. The Schedule was formulated in
order to keep pace with changing economic philosophies leading to
privatisation, globalisation and subsequent desired changes in corporate
financial reporting practices. The several new features of Schedule III are as
follows –

 Vertical format of presenting the Balance Sheet items and their

classification into current and non-current heads.
 Vertical format of profit and loss statement with classification of
expenses based on nature.
 Elimination of the concept of "Schedules" and such information is now
furnished in "Notes to accounts"
 It does not contain any specific disclosure for items included in Schedule
VI under the head, "Miscellaneous Expenditure."
 Debit balance of profit and loss statement will be disclosed as a negative
figure under "Reserves and Surplus" head.
 Preparation of cash flow statement as per AS-3.
 The Schedule gives prominence to AS in case of any conflict between
AS and Schedule.

4.3 GENERAL INSTRUCTIONS FOR THE

PREPARATION OF FINANCIAL
STATEMENTS
 Schedule III sets provides minimum requirements for disclosure on the
face of the Balance Sheet, and the Statement of Profit and Loss (herein
after referred to as "Financial Statements") and Notes.
 This implies that new line items or sub-items can be added or substituted
in the Financial Statements when such presentation is:
o Relevant to an understanding of the company's financial position
o To meet industry/sector-specific disclosure requirements
o When required for compliance when statutory changes are made
especially in case of the amendments to the Companies Act or under
the Accounting Standards.
108
 Where compliance with the requirements of the Act, including Preparation of Final
Accounts of A
Accounting Standards as applicable to the companies, require any Company
change in treatment or disclosure, including addition, amendment,
substitution or deletion in the head or sub-head or any changes, interest,
in the financial statements or statements forming part thereof, the same
shall be made, and the requirements of this Schedule shall stand
modified accordingly.
 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 statements 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.
 Notes to accounts shall contain information in addition to that presented
in the Financial Statements and shall provide where required

o Narrative descriptions or disaggregation of items recognised in those

statements; and

o Information about items that do not qualify for recognition in those

statements.

 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
necessary information as a result of too much aggregation.
 Depending upon the turnover of the company, the figures appearing in
the Financial Statements may be rounded off as given below: –
S.No. Turnover Rounding off
1 less than one To the nearest hundreds,
hundred crore thousands, lakhs or millions, or
rupees decimals thereof.
2 one hundred crore To the nearest lakhs, millions or
rupees or more crores, or decimals thereof
 Once a unit of measurement is used, it shall be used uniformly in the
Financial Statements.
 Except in the case of the first Financial Statements laid before the
company (after its incorporation), the corresponding amounts
(comparatives) for the immediately preceding reporting period for all
items shown in the Financial Statements, including notes, shall also be
given.
 For this Schedule, the terms used herein shall be as per the applicable
Accounting Standards. 109
Accounting: An
Overview
4.4 PROFIT & LOSS STATEMENT – PART II OF
SCHEDULE-III

Note Figures Figures

Particulars No. for the for the
current previous
reporting reporting
period period
I. Revenue from operations xxx xxx
II. Other income xxx xxx
III. Total Revenue(I+II) xxx xxx
IV. Expenses: xxx xxx
Cost of materials consumed xxx xxx
Purchases of Stock-in-Trade xxx xxx
Changes in inventories of Finished xxx xxx
goods, Work-in-Progress and Stock-
in-Trade
Employee benefits expense xxx xxx
Finance costs xxx xxx
Depreciation and Amortisation xxx xxx
expense
Other expenses xxx xxx
Total expenses xxx xxx
V. Profit before exceptional and xxx xxx
extraordinary items and tax(III-IV)
VI. Exceptional items xxx xxx
VII. Profit before extraordinary items and xxx xxx
tax (V-VI)
VIII. Extraordinary Items xxx xxx
IX. Profit before tax (VII-VIII) xxx xxx
X. Tax expense:
(1)Current tax xxx Xxx
(2)Deferred tax xxx xxx Xxx xxx
XI. Profit(Loss) for the period from xxx xxx
continuing operations (VII-VIII)
XII. Profit/(Loss) from discontinuing xxx xxx
operations
XIII. Tax expense of discontinuing xxx xxx
operations

110
 Preparation of Final
4.5 BALANCE SHEET–PART I OF SCHEDULE-III Accounts of A
Company
 Assets are the resources controlled by the enterprise due to past events
from which future economic benefits are expected to flow to the
enterprise.
 Liabilities are the obligation of an enterprise arising from the past event,
the settlement of which leads to an outflow of resources embodying
economic benefits,
 Equity is the residual interest in the interest of an enterprise after
deducting all the liabilities.

Particulars Note Figures Figures

No. as at the as at the
end of end of
current the
reporting previous
period period
1 2 3 4

I. EQUITY AND LIABILITIES

(1) Shareholder’s 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
TOTAL
II. ASSETS
(1) Non-current assets
(a) Fixed Assets
(i) Tangible assets
(ii) Intangible assets
(iii) Capital work-in-
progress
(iv) Intangible assets
under
development
(b) Non-current investments
(c) Deferred tax assets (net)
(d) Long-term loans and
advances
111
Accounting: An (e) Other non-current assets
Overview (2) Current assets
(a) Current investments
(b) Inventories
(c) Trade receivables
(d) Cash and cash equivalents
(e) Short-term loans and
advances
(f) Other current assets

Some items are to be explained in the Notes to Accounts as follows:

A. Share Capital
For each class of share capital following points is to be kept in mind:
i) The number and amount of shares authorised.
ii) The number of shares which are issued subscribed and fully paid and
which are issued, subscribed but not fully paid.
iii) The par value per share.
iv) Shares outstanding at the beginning and at the end of the reporting
period should be reconciled.
v) Calls unpaid.
vi) Forfeited shares.
B. Reserves and Surplus
Reserves and surplus can be distributed among the following sub-heads:
i) Capital reserves
ii) Capital redemption reserves
iii) Securities Premium
iv) Debenture Redemption reserve
v) Revaluation reserve
vi) Surplus; the balance as per profit and loss statement
vii) Other reserves(specify the nature and purpose)
C. Long term Borrowings
Long term borrowings can be classified under the following sub-heads:
i) Bonds/Debentures
ii) Term loans
iii) Deferred payment liabilities
iv) Deposits
v) Long term maturities of finance lease obligations
vi) Loans and advances from related parties
vii) Other loans and advances(specify nature)

112
 Preparation of Final
Accounts of A
D. Long Term Provisions Company

These can be classified as follows:

i) Employee benefits provision like gratuity, provident fund etc.
ii) Other provisions (specify the nature)
E. SHORT TERM BORROWINGS
Short term borrowings can be classified among the following sub-heads:
i) Loans repayable on demand
ii) Loans and advances from related parties
iii) Deposits
iv) Other loans and advances(specify the nature)
F. Other Current Liabilities
Some of the other current liabilities can be grouped asunder:
i) Interest accrued but not/ and due on borrowings
ii) Income received in advance
iii) Unpaid dividends
iv) Applicationmoneyreceivedforallotmentofsecuritiesanddueforrefunda
ndinterestaccruedthereon
v) Other current liabilities(specify the nature)
G. Tangible Assets
Tangible assets can be classified as follows:
i) Land
ii) Buildings
iii) Plant and Equipment
iv) Furniture and Fixtures
v) Vehicles
vi) Office equipment
vii) Others (specify the nature)
A detailed report showing additions, disposals, acquisitions through
business combinations and other adjustments and amounts related to
depreciation, impairment losses, revaluation etc., should be provided for
each class of asset.
H. Intangible Assets
Intangible assets can be classified as follows:
i) Goodwill
ii) Brands/trademarks
iii) Computer software 113
Accounting: An iv) Mining rights
Overview
v) Publishing titles
vi) Copyrights, patents and other intellectual property rights, services
and operating rights
vii) Licence and franchise
viii) Recipes, models, designs, formulae and prototypes
ix) Others (specify the nature)
A detailed report showing additions, disposals, acquisitions through
business combinations and other adjustments and amounts related to
depreciation, impairment losses, revaluation etc., should be provided for
each class of asset.
I. Non-Current Investments
Investments can be classified as under:
i. Investments in property
ii. Investments in equity instruments
iii. Investments in preference shares
iv. Investments in governments or trust securities
v. Investments in debentures or bonds
vi. Investments in mutual funds
vii. Investments in partnership firms
viii. Other non-current investments(specify the nature)
J. LONG TERM LOANS AND ADVANCES
It can be classified under the following sub-groups:
i. Capital advances
ii. Security deposits
iii. Loans and advances to related parties
iv. Other loans and advances(specify nature)
The above shall also be sub-classified as follows:
i. Secured, considered goods
ii. Unsecured, considered goods
iii. Doubtful
K. Current Investments
It can be classified as follows:
i. Investments in equity instruments
ii. Investments in preference shares
iii. Investments in government or trust securities
iv. Investments in bonds or debentures
114
 v. Investments in mutual funds Preparation of Final
Accounts of A
vi. Investments in partnership firms Company

vii. Other investments(specify the nature)

L. Inventories
Inventories can be classified as:
i. Raw materials
ii. Work-in-progress
iii. Stores and spares
iv. Finished goods
v. Loose tools
vi. Stock in trade
vii. Goods in transit
viii. Others(specify the nature)
M. Cash and Cash Equivalents
The following head can be classified as follows:
i. Balances with banks
ii. Cheques, drafts in hand
iii. Cash in hand
iv. Others(specify the nature)

Illustration 4.1
The following is the Trial Balance of Alpha Limited as on 31.3.20X2:

(Figures in`‘000)

Debit Credit
Land at cost 4400 Equity Capital(Shares of Rs. 6000
10each)
Plant& Machinery at 15400 10%Debentures 4000
cost
Trade Receivables 1920 General Reserve 2600
Inventories(31.3.X2) 1720 Profit& Loss A/c 1440
Bank 400 Securities Premium 800
Adjusted Purchases 6400 Sales 14000
Factory Expenses 1200 Trade Payables 1040
Administration Expenses 600 Provision for Depreciation 3440
Selling Expenses 600 Suspense Account 80
Debenture Interest 400
Interim Dividend Paid 360
Total: 33,400 Total: 33,400
115
Accounting: An Additional Information:
Overview
(i) The authorised share capital of the company is 8,00,000 shares of Rs.
10 each.
(ii) The company, on the advice of an independent valuer, wishes to revalue
the land at Rs. 72,00,000.
(iii) Declared final dividend @10% on2nd April, 20X2.
(iv) Suspense account of Rs. 80,000 represents cash received for the sale of
some of the machinery on 1.4.20X1. The cost of the machinery was
Rs.2,00,000 and the accumulated depreciation thereon being Rs.
1,60,000.
(v) Depreciation is to be provided on plant and machinery at 10% on cost.

You are required to prepare Alpha Limited's Balance Sheet as on 31.3.20X2

and Statement of Profit and Loss with notes to accounts for the year ended
31.3.20X2 as per Schedule III. Ignore previous years' figures & taxation.

Solution

Balance Sheet

As at 31st March 20X2

Particulars NoteNo. (`in000)

Equity and Liabilities
1. Shareholders' funds
a Share capital 1 6000
b Reserves and Surplus 2 10600
2. Non-Current liabilities
a Long term borrowings 3 4000
3. Current liabilities
a Trade Payables 1040
Total 21640
Assets
1. Non-current assets
A PPE(Property, Plant& Equipment) 4 17600
2. Current assets
A Inventories 1720
B Trade receivables 1920
C Cash and bank balances 400
Total 21640

116
Profit and Loss Statement Preparation of Final
Accounts of A
For the period ending 31st March, 20X2 Company

Particulars Notes (`in000)

I. Revenue from operations 14000
II. Other Income 5 40
III Total Revenue 14040
IV Expenses:
Purchases 6400
Finance costs 6 400
Depreciation (10% of 15,200) 1520

Other expenses 7 2400

Total Expenses 10720
V. Profit (Loss) for the period (III – IV) 3320

Notes to accounts

(`in000)
1. Share Capital
Equity share capital
Authorised
800,000 shares of Rs. 10each 8000
Issued& subscribed & called up
600,000sharesof Rs. 10each 6000
2. Reserves and Surplus
Securities Premium Account 800
Revaluation reserve (7200–4400) 2800
General reserve 2600
Profit& loss Balance
Opening balance 1440
Profit for the period 3320 4760
Less: Appropriations
Interim Dividend (360) 4400
10600
3. Long term borrowing
10%Debentures 4000
4. PPE
Land
117
Accounting: An Opening balance 4400
Overview
Add: Revaluation adjustment 2800
Closing balance 7200
Plant and Machinery
Opening balance 15,400
Less: Disposed off (200)
15,200
Less: Depreciation (3440-160+1520) (4800)
Closing balance 10,400
Total 17,600
5. Other Income
Profit on sale of machinery:
Sale value of machinery 80
Less: Book value of machinery (10-8) (40) 40
6. Finance costs
Debenture interest 400
7. Other expenses:
Factory expenses 1200
Selling expenses 600
Administrative expenses 600 2400

Note: Dividend declared on 2nd April 20X2 will be accounted for in the next
financial year.

4.6 CASH FLOW STATEMENT

The cash flow statement is prepared in accordance with the provisions of
AS-3. It provides information about the cash flow position of an enterprise.
Further, the statement also identifies the cash from operating, investing and
financing activities. The purpose of the statement is to explain the cash
movement between two points of time. The sources of cash include the issue
of shares, debentures, raising of long term-loan, sale of an investment, sale of
fixed assets and cash from operations. In contrast, application of cash
includes redemption of shares, debentures, repayment of a long term loan,
purchase of fixed assets or investment, payment of tax, dividend and net
operating loss.

Note – Cash includes cash in hand, demand deposits with banks, short-term
liquid investment, and securities with short-term maturity (less than three
months from the date of acquisition).

The cash flow statement includes three major elements, namely –

118
a. Cash Flow from operating activities – These are the principal revenue Preparation of Final
Accounts of A
generating activities of an enterprise. Positive cash flow from operating Company
activities helps an enterprise maintain its operating capability, pay
dividends, repay loans, make new investments, etc. It also provides
valuable information about financing through working capital.
b. Cash flow from investing activities – It deals with the acquisition and
disposal of long-term assets and other investments. In other words, it
represents the extent to which expenditures have been made for
resources intended to generate future income and cash flows.
c. Cash flow from financing activities – These are the activities that result
in changes in the size and composition of owner's and borrowed capital.
These are useful in predicting claims on future cash flows by providers
of capital to the entity. Examples include cash proceeds from the issue of
equity shares, loans, debentures, etc.

Cash Flow Statement Format

Particulars Amt. Amt.

Net profit before Tax and extraordinary Items xxx
Cash flow from Operating activities
Add: Non-cash and non-operating Items which have
already been debited to Profit and Loss Account like:
Depreciation xxx
Amortisation of intangible assets xxx
Provision for tax xxx
Loss on the sale of Long-term Investments xxx
Loss on the sale of Fixed assets xxx
Dividend paid xxx xxx
Less: Non-cash and Non-operating Items which have
already been credited to Profit and Loss Account like:
Profit on sale of fixed assets (xxx)
Profit on sale of Long-term investment (xxx) (xxx)
Operating profit before Working Capital changes (A) xxx
Changes in working capital:
Add: Increase in current liabilities xxx
Decrease in current assets xxx xxx
Less: Increase in current assets (xxx)
Decrease in current liabilities (xxx) (xxx)
Net increase/decrease in working capital (B) xxx
119
Accounting: An Cash generated from operations (C) = (A+B) xxx
Overview
Less: Income tax paid (Net tax refund received) (D) (xxx)
Cash flow from before extraordinary items (C-D) = (E) xxx
Adjusted extraordinary items (+/–) (F) xxx
Net cash flow from operating activities (E+F) = (G) xxx
Cash flow from Investing activities
Proceeds from the sale of fixed assets xxx
Proceeds from the sale of investments xxx
Purchase of shares/debentures/fixed assets (xxx)
Net cash from investing activities (H) xxx
Cash flow from Financing activities
Proceeds from the issue of shares xxx
Proceeds from issue of debentures xxx
Payment of dividend (xxx)
Net cash flow from financing activities (I) xxx
Net increase in cash and cash equivalents (G+H+I) = (J) xxx
Cash and cash equivalents and the beginning of the period xxx
(K)
Cash and cash equivalents and the end of the period (J+K) xxx

Illustration 4.2
Raymond Ltd provides the following information at the year-end, March31,
20X1:

Particulars Rs. Rs.

Sales 1,39,600
Cost of Goods Sold (1,04,000)
35,600
Operating Expenses
(including Depreciation Expense of Rs. 74,00) (29,400)
6,200
Other Income/(Expenses):
Interest Expense paid (4,600)
Interest Income received 1200
Gain on Sale of Investments 2,400
Loss on Sale of Plant (600)
(1600)
120
 4600 Preparation of Final
Accounts of A
Income tax (1400) Company

3,200

Information available:

31stMarch 31stMarch
20X1 20X0
Rs. Rs.
Plant 1,43,00 10,1000
Less: Accumulated Depreciation (20,600) (13,600)
1,22,400 87,400
Investments (Long term) 23,000 25,400
Inventory 28,800 22,000
Trade receivables 9,400 11,000
Cash 9,200 3,000
Prepaid expenses 200 1000
Share Capital 93,000 63,000
Reserves and surplus 28,000 26,400
Bonds 59,000 49,000
Trade payables 10,000 8,600
Outstanding liabilities 2400 1800
Income taxes payable 600 1000

Analysis of selected accounts and transactions during20X0-X1

1. Purchased investments for Rs. 15,600.
2. Sold investments for Rs. 20,400. These investments cost Rs. 18,000.
3. Purchased plant assets for Rs.24000.
4. Sold plant assets that cost Rs. 2000 with accumulated depreciation of Rs.
400 for Rs.1000.
5. Issued Rs. 20000 of bonds at face value in exchange for plant assets
on31st March, 20X1.
6. Repaid Rs.10000 of bonds at face value at maturity.
7. Issued 3000 shares of Rs. 10each.
8. Paid cash dividends Rs. 1600.

Prepare Cash Flow Statement as per AS-3(Revised), using the indirect method.

Solution
Raymond Ltd.

121
Accounting: An Cash Flow Statement
Overview
For the year ending 31stMarch, 20X1
Particulars Rs Rs.
Cash flows from operating activities
Net profit before taxation 4600
Adjustments for:
Depreciation 7400
Gain on sale of investments (2400)
Loss on sale of plant assets 600
Interest expense 4600
Interest income (1200)
Operating profit before working capital changes 13,600

Decrease in trade receivables 1600

Increase in inventory (6800)
Decrease in prepaid expenses 800
Increase in trade payables 1400
Increase in outstanding liabilities 600
11,200
Cash generated from operations
Income taxes paid* (1800)
Net cash generated from operating activities 94,00
Cash flows from investing activities
Purchase of plant (24000)
Sale of plant 1000
Purchase of investments (15600)
Sale of investments 20400
Interest received 1200
Net cash used in investing activities (17,000)
Cash flows from financing activities
Proceeds from issuance of share capital 30000
Repayment of bonds (10000)
Interest paid (4600)
Dividends paid (1600)
Net cash from financing activities 13,800
Net increase in cash and cash equivalents 62,00
Cash and cash equivalents at the beginning of the 3,000
period
Cash and cash equivalents at the end of the period 92,00
122
*Working Note: Preparation of Final
Accounts of A
Company
Income taxes paid:
Income tax expense for the year 1400
Add: Income tax liability at the beginning of the year 1000
2400
Less: Income tax liability at the end of the year (600)
1800

4.7 STATEMENT OF CHANGE IN EQUITY

 It is the reconciliation between the opening and closing balance of
shareholder's equity.
 The statement summarises the transactions related to the shareholder's
equity over an accounting period.
 It records movement in retained earnings, other reserves and changes in
share capital.
 Statement of changes in equity is to be presented, and it includes the
following:

o Reconciliation of the opening and closing balances of equity,

describing changes in detail.

o Details of comprehensive income for the accounting period.

o Details of changes and the impact when components of equity are

restated

o applied retrospectively in accordance with the IAS/Ind-AS 8.

o Comprehensive income is the incomes listed after the net income on
the income statement.

4.8 SELF-ASSESSMENT QUESTIONS

1. State under which head these accounts should be classified in Balance
Sheet, as per Schedule III of the Companies Act, 2013:
a. Unpaid matured debenture and interest accrued thereon.
b. Uncalled liability on shares and other partly paid investments.
c. Share option outstanding account.
d. Calls unpaid.
e. Money received against share warrant.
f. Share application money received in excess of issued share capital.
2. From the following particulars furnished by Alpha Ltd., prepare the
Balance Sheet as on 31stMarch 20X1asrequired by Part I, Schedule III to 123
Accounting: An the Companies Act, 2013.
Overview
Particulars Debit Credit
Equity Share Capital (Face value of Rs. 5,00,000
100each)
Call in Arrears 500
Land& Building 2,75,000
Plant& Machinery 2,62,500
Furniture 25,000
General Reserve 1,05000
Loan from State Financial Corporation 75,000
Inventory:
Raw Materials Finished Goods 25,000
1,00,000 1,25,000
Provision for Taxation 64,000
Trade receivables 1,00,000
Short term Advances 21,350
Profit& Loss Account 43,350
Cash in Hand 15,000
Cash at Bank 1,23,500
Unsecured Loan 60,500
Trade payables (for Goods and Expenses) 80,000
Loans & advances from related parties 20,000
9,47,850 9,47,850

The following additional information is also provided:

(i) 10,000Equity shares were issued for consideration other than cash.
(ii) Trade receivables of Rs. 26,000aredueformorethan6months.
(iii) The cost of the Assets were:
Building Rs. 30,0,000, Plant&MachineryRs.35,0,000 and Furniture Rs.
31,250
(iv) The balance of Rs. 75,000 in the Loan Account with State Finance
Corporation is inclusive of Rs.3750 for Interest Accrued but not due. The
loan is secured by hypothecation of Plant &Machinery.
(v) Balance at Bank includes Rs. 1000 with Omega Bank Ltd., which is not
a Scheduled Bank.
(vi) Transfer Rs. 2,000 to general reserve is proposed by the Board of
directors.
(vii) The Board of directors declared a dividend of 5% on the paid-up capital
on 2nd April, 20X1.

124 3. From the following Balance Sheets and information, prepare the cash
 flow statement of Ryan ltd. by indirect method for the year ended Preparation of Final
Accounts of A
31stMarch, 20X1: Company

Particulars Notes 31stMarch20X1 31stMarch20X0

Rs. Rs.

Equity and
Liabilities
1 Shareholders’
funds
A Share capital 1 60,000 70,000
B Reserves and 2 42,000 30,000
Surplus
2 Non-current
liabilities
Long term 3 20,000 -
borrowings
3 Current liabilities
A Trade Payables 11,500 11,000
B Other current 4 3,000 8,000
liabilities
C Short term
provision(provision 9,500 6,000
for tax)
Total 1,46,000 1,25,000
Assets
1 Non-current assets
A Property, plant and 5 91,500 70,000
Equipment
B Non-Current 50,000 8000
Investments
2 Current assets
A Inventories 9500 9000
B Trade receivables 25,000 22,500
C Cash and Cash 5000 9000
equivalents
D Other Current assets 10,000 6500
Total 146000 125000

Notes to Accounts

No. 31stMarch, 31stMarch,

20X1 20X0
1. Share capital
125
Accounting: An Equity share capital 60000 50000
Overview
10%RedeemablePreferencesharecapital
-- 20000
Total 60000 70000
2 Reserves and Surplus
Capital redemption reserve 10000 -
Capital reserve 7000 -
General reserve 15000 2,5000
Profit and Loss account 10000 5000
Total 42000 3,0000
3 Long term borrowings
9%Debentures 20000 --

4. Other current liabilities

Dividend payable - 6000

Liabilities for expenses 3000 2000
Total 3000 8000

5 Property, plant and equipment

Plant and machinery 7,6500 5,0000

Land and building 1,5000 2,0000
Net carrying value 9,1500 7,0000

Additional Information:
(i) A piece of land has been sold out for Rs. 15000 (Cost – Rs. 1,2000), and
the balance land was revalued. Capital Reserve consisted of profit on
revaluation of land.
(ii) On1stApril,20X0, a plant was sold for Rs.9000(Original Cost–Rs.
7000and
W.D.V. – Rs. 5000) and Debentures worth Rs. 10,000 were issued at par
as part consideration for plant of Rs. 40500acquired.
(iii) Part of the investments (Cost–Rs. 5000) was sold for Rs. 7000.
(iv) Pre-acquisition dividend received Rs. 500was adjusted against the cost of
investment.
(v) Interim dividend was declared and paid @15%during the current year.
(vi) Income-tax liability for the current year was estimated at Rs. 13500.
Depreciation@15%has been charged on Plant and Machinery, but no
depreciation has been charged on Building.

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