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Ch 11 Unit 1 Preparation of Financial Statements - 1 | CA Inter Advanced Accounting | CA Parag Gupta

CA Parag Gupta 2.0・48 minutes read

Unit One covers the financial statements of a company, focusing on the balance sheet, PNL, and notes to accounts, with the format being crucial for presentation. The equity and liabilities section includes shareholders fund, share application money, non-current liability, and current liability, while assets are divided into non-current and current assets with different components under each category.

Insights

  • The format of the Companies Act 2013 Schedule Part One is essential for presenting a balance sheet, with four key columns: Particulars, Note Number, Current Year Figures, and Previous Year Figures for comparison.
  • Dividend calculations are based on paid-up capital, not face value, and are paid from free reserves, not restricted reserves, following specific conditions outlined in the Companies Declaration and Payment of Dividend Rules 2014.

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Recent questions

  • What are the components of financial statements?

    Financial statements include PNL, Balance Sheet, Notes, Cash Flow.

  • What is the format of the Companies Act 2013 Schedule Part One?

    The format includes Particulars, Note Number, Current Year Figures, Previous Year Figures.

  • What are the main heads under Equity and Liabilities in financial statements?

    Shareholders Fund, Share Application Money, Non-Current Liabilities, Current Liabilities.

  • What are the components of Assets in financial statements?

    Non-Current Assets, Current Assets.

  • How are expenses categorized in financial statements?

    Expenses are divided into A, B, C, D, E, F, G subheads.

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Summary

00:00

Financial Statements and Balance Sheet Presentation in Unit One

  • Chapter 11 of Unit One covers Financial Statements of a Company, with a weightage from 10 to 18.
  • Financial statements include PNL (Income Statement), Balance Sheet (Position Statement), Notes to Accounts, and Cash Flow Statement.
  • Unit One focuses on Balance Sheet, PNL, and Notes to Account, while Cash Flow Statement is covered in Unit Two.
  • The format of the Companies Act 2013 Schedule Part One is crucial for balance sheet presentation.
  • The format includes four columns: Particulars, Note Number, Current Year Figures, and Previous Year Figures for comparison.
  • Equity and Liabilities is the main head, with four subheads: Shareholders Fund, Share Application Money Pending Allotment, Non-Current Liabilities, and Current Liabilities.
  • Shareholders Fund comprises Share Capital, Reserve and Surplus, and Money Received Against Share Warrant.
  • Share Application Money Pending Allotment represents funds received but not yet allotted, shown separately until allotment.
  • Non-Current Liabilities include Long Term Borrowings, Deferred Tax Liability, Other Long Term Liabilities, and Long Term Provisions.
  • Current Liabilities consist of Short Term Borrowings, Trade Payables (Creditors and Bills Payable), and other liabilities.

20:20

Understanding Business Equity and Liabilities Structure

  • Other current liabilities include outstanding expenses, rent, and salary, as well as income received in advance.
  • Long-term provisions are made for expenses expected within 12 months, such as provision for tax.
  • Equity and liabilities consist of Shareholder Fund, Share Application Money, Non-Current Liability, and Current Liability.
  • Shareholder Fund includes Share Capital, Reserves, Surplus, and Share Warrant Money.
  • Non-Current Liability includes Long-Term Provisions, Long-Term Loans, and Advances.
  • Current Liability comprises Short-Term Provisions, Other Current Liabilities, and Short-Term Loans and Advances.
  • Assets are divided into Non-Current Assets and Current Assets.
  • Non-Current Assets include Non-Current Investments, Deferred Tax Assets, Long-Term Loans, and Advances.
  • Current Assets consist of Current Investments, Inventories, Trade Receivables, and Cash and Cash Equivalents.
  • Other Current Assets encompass Short-Term Loans and Advances, and miscellaneous items like Accrued Income or Prepaid Expenses.

43:29

Understanding Financial Statements: Income, Revenue, Expenses

  • Other income is anything that is not RFO, which includes all income apart from RFO.
  • Total Revenue is calculated by adding two components together.
  • Expenses are divided into seven subheads: A, B, C, D, E, F, and G.
  • The first expense is the cost of material consumed, calculated as opening raw material plus purchase of raw material minus closing raw material.
  • The second expense is the purchase of stock in trade.
  • The third expense is the change in inventories, including work in progress, finished goods, and stock in trade.
  • Employee benefit expenses cover costs related to employees like salaries, wages, travel allowance, and staff welfare.
  • Finance cost includes interest payments.
  • Depreciation is a non-cash expense.
  • Other expenses include carriage, selling expenses, freight, advertisement, printing, stationary, and bad debts.

01:05:58

Understanding Interim Dividend and Paid Up Capital

  • Interim dividend is recorded in books as an expense, reducing bank balance.
  • Losses or expenses decrease profit and bank balance, termed as Interim Dividend.
  • Paid up capital formula: Called up capital minus call sr yer.
  • Dividend is always calculated on paid up capital, not face value.
  • Dividend is paid from free reserves, not restricted reserves.
  • Companies Declaration and Payment of Dividend Rules 2014 impose conditions.
  • Rate of dividend cannot exceed average of last three years.
  • Total amount withdrawn from profits cannot exceed paid up capital plus free reserves.
  • Amount withdrawn from profits must first cover current year losses, then set off.
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