Financial Statements of Companies
Company final accounts follow Schedule III; the marks come from knowing where each item sits, not from inventing a new format.
Statement of Profit and Loss
Structure: revenue from operations plus other income gives total revenue; then expenses - cost of materials consumed or purchases, changes in inventories, employee benefit expenses, finance costs, depreciation and amortisation, other expenses - giving profit before exceptional and extraordinary items, then profit before tax, tax expense (current and deferred), and profit after tax. Earnings per share, basic and diluted, is disclosed in the statement itself. Finance cost is always a separate line.
Balance Sheet
Equity and liabilities: shareholders' funds (share capital, reserves and surplus, money received against share warrants), share application money pending allotment, non-current liabilities (long-term borrowings, deferred tax liabilities, long-term provisions) and current liabilities (short-term borrowings, trade payables, other current liabilities, short-term provisions). Assets: non-current assets (property, plant and equipment, intangible assets, capital work-in-progress, non-current investments, deferred tax assets, long-term loans and advances) and current assets (inventories, trade receivables, cash and cash equivalents, short-term loans and advances).
Worked example
Revenue ₹20,00,000; other income ₹50,000; purchases ₹12,00,000; closing inventory exceeds opening by ₹20,000, so change in inventories is −₹20,000; employee benefits ₹2,00,000; depreciation ₹1,00,000; finance cost ₹30,000. Total expenses = ₹12,00,000 − ₹20,000 + ₹2,00,000 + ₹1,00,000 + ₹30,000 = ₹15,10,000. Profit before tax = ₹20,50,000 − ₹15,10,000 = ₹5,40,000.
Traps
Netting items that Schedule III requires gross; losing the sign on change in inventories; placing finance cost under other expenses; omitting the share capital note reconciling shares outstanding at the beginning and end of the year.