CONTENTS OF BALANCE SHEET The prescribed form of the Balance Sheet is given in Part I of Schedule VI of The Companies Act,

1956. The Companies Act has laid down two forms of the Balance Sheet known as: (i) Horizontal form (ii) Vertical form FORMAT OF SUMMARISED BALANCE SHEET (HORIZONTAL FORM) SCHEDULE VI PART I Balance Sheet of .CO.LTD. As at Figures for the Previous year Rs. Liabilities Figures Figures for the for the current previous year year Rs. Rs. Assets Figures for the current year Rs.

1. Share Capital 2. Reserves and surplus 3. Secured Loans 4. Unsecured Loans 5. Current Liabilities and Provisions (a) Current Liabilities (b) Provisions

1. Fixed Assets 2. Investments 3. Current Assets, Loans and Advances (a) Current Assets (b) Loans and Advances 4. Miscellaneous Expenditure 5. Profit and Loss A/c

Note: A footnote to the Balance Sheet may be added to show the contingent liabilities. The format of the detailed Balance Sheet of a company in a horizontal form is given below:

FORMAT OF THE DETAILED BALANCE SHEET IN A HORIZONTAL FORM Horizontal Form of Balance Sheet Balance Sheet of..... (Name of the company) as on.....
Figures for the Previous year Rs. Liabilities Figures for the current year Rs. Figures for the previous year Rs. Assets Figures for the current year Rs.

Share Capital: Authorised shares of Rseach Preference Equity Issued : shares of Rseach Preference Equity Less: Calls Unpaid: Add: Forfeited Shares Reserves and Surplus: Capital Reserve Capital Redemption Reserve Securities Premium Other Reserves Profit and Loss Account Secured Loans: Debentures Loans and Advance from Banks Loans and Advances from subsidiary Companies Other Loans and Advances Unsecured Loans: Fixed Deposits Loans and Advances from subsidiary companies Short Term Loans and Advances Other Loans and Advances Current Liabilities and Provisions: A. Current Liabilities Acceptances Sundry Creditors Outstanding Expenses B. Provisions: For Taxation For Dividends For Contingencies For Provident Fund Schemes For Insurance, Pension and Other similar benefits

Fixed Assets: Goodwill Land Building Leasehold Premises Railway Sidings Plant and Machinery Furniture Patents and Trademarks Live stock Vehicles Investments: Government or Trust Securities, Shares, Debentures, Bonds Current Assets, Loans and Advances: (A) Current Assets: Interest Accrued on investments Stores and Spare parts Loose Tools Stock in Trade Work in Progress Sundry Debtors Cash and Bank balances (B) Loans and Advances: Advances and Loans to Subsidiaries Bills Receivable Advance Payments and unexpired discounts Miscellaneous - Expenditure: Preliminary Expenses Discount on Issue of Shares and Other Deferred Expenses Profit and Loss Account (debit Balance: if any)

Format of the Balance Sheet in vertical form Balance Sheet of ..... as on ..... Particulars Schedule Figures as at Number the end of current financial year Figures as at the end of previous financial year

I. Source of Funds: 1. Shareholders Funds: (a) Share capital (b) Reserves and Surplus 2. Loan Funds: (a) Secured loans (b) Unsecured loans Total (Capital Employed) II. Application of Funds 1. Fixed Assets: (a) Gross block (b) Less: depreciation (c) Net block (d) Capital work-in-Progress 2. Investments: 3. Current Assets, Loans and Advances: (a) Inventories (b) Sundry Debtors (c) Cash and Bank Balances (d) Other Current Assets (e) Loans and Advances Less: Current Liabilities and Provisions: (a) Current liabilities (b) Provisions Net Current Assets 4. (a) Miscellaneous expenditure to the extent not written-off or adjusted. (b) Profit and Loss account (debit balance, if any) TOTAL

RATIOS - SOLVED QUESTIONS 1. From the following information, calculate current ratio and quick ratio : Stock Rs.1,20,000; Goodwill Rs.50,000; Preliminary Expenses Rs.16,000; Prepaid Expenses Rs.4,000; Short term Investments Rs.20,000; Cash Rs.30,000; Bills Receivable Rs.10,000; Debtors Rs.50,000 and carry following liabilities: General Reserve Rs.1,00,500; Sundry Creditors Rs.35,000; Proposed Dividends Rs.20,000; Profit and Loss A/c Rs.7,50,000; Outstanding Expenses Rs.10,000; Bills Payable Rs.5,000; Provision for Taxation Rs.2,000. Solution: Current Ratio = Current Assets (C.A.)/ Current Liabilities (C.L.) C.A. = Stock + Prepaid Expenses + Short term Investment + Cash + Bills Receivables + Debtors = Rs.1,20,000 + Rs.4,000 + Rs.20,000 + Rs.30,000 + Rs.10,000 + Rs.50,000 = Rs.2,34,000 C.L. = Sundry Creditors + O/s Expenses + Bills Payable + Proposed Dividend + Provision for Taxation = Rs.35,000 + Rs.10,000 + Rs.5,000 + Rs.20,000 + Rs.2,000 = Rs.72,000 Current Ratio = Rs.2,34,000/Rs.72,000 = 3.25 : 1 Quick ratio = Quick assets/ current liabilities = Current liabilities stock prepaid expenses/ current liabilities = 2,34,000 1,20,000 4,000/ 72,000 = 1.53 : 1

2. Calculate the following ratios from the Balance Sheet given below: (a) Liquid Ratio (b) Assets to Debt Ratio (c) Proprietary Ratio BALANCE SHEET as at Liabilities Rs. Assets Creditors 47,000 Bank Bills Payable 45,000 Investments (Short Term) Tax Provision 38,500 Book Debts Outstanding Expenses 4,50 Stock 6% Debentures 0 Fixed Assets 8% Preference Shares 3,15,000 8,10,000 Equity Shares 45,000 Less: Depreciation Reserve Fund 2,25,000 2,25,000 1,80,000 9,00,000 4

Rs. 22,500 67,500 90,000 1,35,000 5,85,500

9,00,000

Solution: (a) Liquid Ratio = Liquid Assets/Current Liabilities Liquid Assets = Bank + Investment (Short Term) + Book Debts = Rs.22,500 + Rs.67,500 + Rs.90,000 = Rs.1,80,000 Current Liabilities = Creditors + Bills Payable + Tax Provision + Outstanding Expenses = Rs.47,000 + Rs.45,000 + Rs.38,500 + Rs.4,500 = Rs.1,35,000 Liquid Ratio = Rs.1,80,000/Rs.1,35,000 = 1.33 : 1 (b) Total Assets to Debt Ratio = Total Assets/Long term Loan = Rs.9,00,000/Rs.3,15,000 = 2.86 : 1 (c) Proprietary Ratio = Shareholders Fund/Total Assets Shareholders Fund = 8% Preference Shares + Equity Shares + Reserve Fund = Rs.45,000 + Rs.2,25,000 + Rs.1,80,000 = Rs.4,50,000 Proprietary Ratio = Rs.4,50,000/Rs.9,00,000 = 0.5 : 1 3. Calculate Return on Investment (ROI), Earning Per Share (EPS) and Price Earning Ratio (P/E ratio) from the following: Rs. 10% Preference Share Capital @ Rs.10 each 10,00,000 Equity Share capital @ Rs.10 each 50,00,000 Reserves and Surplus 6,00,000 10% Debentures 20,00,000 12% Unsecured Loans 10,00,000 Fixed Assets 20,00,000 Trade Investments 5,00,000 Non-Trade Investments 25,00,000 Income Tax Rate 50% Market Price per Share 50 Profit Before Interest 45,00,000 Solution: (a) Return on Investment = Profit before interest & tax/ Capital Employed 100 Capital Employed = Preference Share Capital + Equity Share Capital + Reserves & Surplus + Debentures + Unsecured Loan Non Trade Investments = Rs.10,00,000 + Rs.50,00,000 + Rs.6,00,000 + Rs.20,00,000 + Rs.10,00,000 Rs.25,00,000 = Rs.71,00,000 Return on Investment = 45,00,000/71,00,000 100 5

= 63.38% (b) Earning per share = Profit after interest, tax and preference dividend/Number of Equity Shares Profit after interest, tax and preference dividend Profit before interest and tax Less: Interest 2,00,000 1,20,000 Less: Tax Less Dividend Rs. 45,00,000

3,20,000 41,80,000 20,90,000 1,00,000 19,90,000

Earning per share = 19,90,000/ 5,00,000 = Rs.3.98 (c) Price earning Ratio = Market Price Per Share/EPS = Rs.50/Rs.3.98 = Rs.12.56 RATIOS - UNSOLVED QUESTIONS 1. The following are the summarized Profit & Loss account of Tee Industries Ltd for the year ended 31st December and a Balance Sheet of the Company as on that date. Dr. Particulars To Opening Stock To Purchases To Carriage Inwards To Gross Profit To Office Expenses To Selling Expenses To Financial Expenses To Loss on Sale of Asset To Net Profit Profit and Loss Account Rs. Particulars 1,990 By Sales 10,905 By Closing Stock 285 6,800 19,980 3,000 By Gross Profit 600 By Profit on sale of Share 300 By Interest on Investments 80 3,000 6,980 BALANCE SHEET as at. Rs. Assets Land and Building 1,000 Plant 3,000 Stock 1,800 Debtors 1,200 Bills Receivable 600 Cash at Bank 1,600 400 6 Rs. 3,000 1,600 2,800 1,400 200 600 Cr. Rs. 17,000 2,980

19,980 6,800 120 60 6,980

Liabilities Share Capital 100 Equity Shares of Rs.10 each Debentures (8%) Reserves Profit and Loss A/c Bank Overdraft Creditors Outstanding Expenses

9,600 Calculate the following ratio (a) Debt Equity Ratio (b) Liquid Ratio (c) Current Ratio

9,600

[Ans. Debt Equity Ratio = 0.75 : 1; Liquid Ratio = 0.85 : 1 ; Current Ratio = 1.92 : 1] 2. Following is the Trading and Profit and Loss Account of X.Y.Z & Co. for the year ended 31st March 2007. Trading and Profit and Loss Account of X.Y.Z & Co. for the year ended 31st March 2007 Cr. Liabilities Rs. Assets Rs. To Opening Stock 1,50,000 By Sales .7,10,000 To Purchases 2,10,000 Less Return 70,000 6,40,000 Less Return 89,000 1,21,000 By Closing Stock 15,000 To Carriage Inwards 35,000 To wages 25,000 To Gross Profit Transferred To profit & Loss A/c 3,24,000 6,55,000 6,55,000 To carriage outward 40,000 By Gross Profit 3,24,000 To Salaries 1,44,000 By Interest 11,000 To Commission 21,000 By Commission 500 By Interest 20,000 To Stationery 800 To Freight Outward 20,000 To Depreciation 5,000 To Net Profit transferred to capital 84,700 A/c 3,35,000 3,35,000 Compute Gross Profit and Net Profit Ratio. Dr. [Ans. Gross Profit Ratio = 50.63% ; Net Profit Ratio = 13.23%] 3. Following is the Balance Sheet of S Ltd. as on 31st March 2007 Liabilities Rs. Assets Equity Share Capital 20,00,000 Fixed Assets (Net) 2,00,000 equity share of Rs.10 Current Assets each 5,00,000 Preliminary Expenses General Reserves 2,50,000 Profit for the year 7,50,000 Current Liabilities 35,00,000 Compute Return on Capital Employed. [Ans. Return on Capital Employed = 9.43%[ Rs. 24,00,000 10,00,000 1,00,000

35,00,000