Company Accounts: Final Accounts of Companies
Company Accounts: Final Accounts of Companies tests the statutory financial statements and their presentation.
Core rules
- Under the Companies Act 2013, Schedule III prescribes the balance sheet and statement of profit and loss. The balance sheet has equity and liabilities (shareholders' funds, non-current liabilities, current liabilities) and assets (non-current and current).
- Share capital is shown net of calls in arrears; reserves and surplus are separately disclosed; debenture interest is a finance cost, not an appropriation.
- Dividend is an appropriation of profit, not an expense. Proposed dividend is not shown as a liability until approved by members.
- Tax provision is a charge against profit; transfer to general reserve is an appropriation.
Worked example
Revenue ₹10,00,000; cost of goods sold ₹6,00,000; depreciation ₹50,000; debenture interest ₹40,000; tax rate 30%. Profit before tax = 10,00,000 − 6,00,000 − 50,000 − 40,000 = ₹3,10,000. Tax = ₹93,000; profit after tax = ₹2,17,000. Transfer 10% to general reserve = ₹21,700; dividend 10% on equity capital of ₹5,00,000 = ₹50,000; retained earnings = ₹1,45,300.
Traps
Classify correctly under Schedule III; do not deduct dividend before tax; do not treat debenture interest as an appropriation; show calls in arrears as a deduction; do not create a liability for proposed dividend before approval.