CA. Kamal Garg Company Balance Sheet and Profit & Loss Account under Accounting Standards & Schedule III

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Company Balance Sheet and Profit & Loss Account under Accounting Standards & Schedule III

Introduction

Every company registered under the Companies Act, 2013 is required to prepare its financial statements as per the Accounting Standards (AS) or Indian Accounting Standards (Ind AS) and in the format prescribed by Schedule III of the Act. These statements include the Balance Sheet, Profit & Loss Account, and accompanying notes and disclosures, ensuring transparency, comparability, and legal compliance.

1. Balance Sheet

The Balance Sheet presents a company’s financial position on a particular date, showing what the company owns (assets) and owes (liabilities), and the shareholders’ equity.

As per Schedule III (Division I & II):

A. Equity and Liabilities

1. Shareholders' Funds

   • Share Capital

   • Reserves and Surplus (or Other Equity under Ind AS)

2. Non-Current Liabilities

   • Long-term borrowings

   • Deferred tax liabilities (net)

   • Other long-term liabilities

   • Long-term provisions

3. Current Liabilities

   • Short-term borrowings

   • Trade payables

   • Other current liabilities

   • Short-term provisions

B. Assets

1. Non-Current Assets

   • Property, Plant and Equipment (PPE)

   • Intangible assets

   • Capital work-in-progress (CWIP)

   • Non-current investments

   • Deferred tax assets (net)

   • Long-term loans and advances

2. Current Assets

   • Inventories

   • Trade receivables

   • Cash and cash equivalents

   • Short-term loans and advances

   • Other current assets

Key Features of Schedule III Format:

• Vertical presentation (not horizontal like in older formats)

• Mandatory classification of assets and liabilities as current or non-current

• Detailed notes to accounts with disclosures on accounting policies

• Comparative figures for at least one preceding year

2. Statement of Profit and Loss Account

The Profit and Loss Account (P&L) shows the company’s financial performance over a financial year — how much it earned, spent, and the net result (profit or loss).

Key Components:

1. Revenue from Operations

   • Sale of goods/services

   • Other operating income

2. Other Income

   • Interest, dividend, rental income, etc.

3. Total Revenue

4. Expenses

   • Cost of materials consumed

   • Purchase of stock-in-trade

   • Changes in inventories

   • Employee benefits expense

   • Finance costs

   • Depreciation and amortization expense

   • Other expenses

5. Profit Before Tax (PBT)

6. Tax Expense

   • Current tax

   • Deferred tax

7. Profit After Tax (PAT)

8. Other Comprehensive Income (OCI) (applicable for Ind AS only)

9. Earnings Per Share (EPS)

   • Basic and Diluted

3. Accounting Standards (AS/Ind AS) Compliance

Accounting Standards guide how each element in the financial statements is recognized, measured, presented, and disclosed. Some important ones include:

• AS 10 / Ind AS 16 – Property, Plant, and Equipment

• AS 2 / Ind AS 2 – Inventories

• AS 9 / Ind AS 115 – Revenue Recognition

• AS 22 / Ind AS 12 – Income Taxes

• AS 26 / Ind AS 38 – Intangible Assets

The choice between AS and Ind AS depends on the company’s net worth and listing status.

4. Key Differences between AS and Ind AS Reporting

Conclusion

The Balance Sheet and Profit & Loss Account as per Accounting Standards and Schedule III serve as essential tools for assessing a company's financial health and regulatory compliance. Proper adherence ensures credibility with stakeholders, facilitates audits, and supports informed business decisions. Both presentation format and content must strictly follow the prescribed norms to maintain consistency, transparency, and legal validity.