22 schedule vi

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SCHEDULE VI OF COMPANIESSCHEDULE VI OF COMPANIESACT,1956ACT,1956


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G eneral Requirements of theG eneral Requirements of theCompany ActCompany Act

TheThe joint joint stockstock companies,companies, areare legallylegally requiredrequired totoprepareprepare a a setset of of financialfinancial statementsstatements to to periodicallyperiodically

assessassess thethe profitsprofits earnedearned andand toto knowknow thethe financialfinancialpositionposition of of thethe companycompany asas onon aa specifiedspecified datedate. .

TheThe accountsaccounts mustmust bebe statutorilystatutorily auditedaudited byby ananexternalexternal personperson calledcalled thethe auditor auditor andand itit isis thethe dutyduty of of thethe auditor auditor toto submitsubmit aa reportreport inin thethe prescribedprescribed formatformattoto thethe shareholdersshareholders. .


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G eneral Requirements of theG eneral Requirements of theCompany ActCompany Act

TheThe objectiveobjective of of thethe CompaniesCompanies Act Act inin layinglaying downdownvariousvarious provisionsprovisions withwith respectrespect toto accountsaccounts andand auditaudit

isis;; toto ensureensure thatthat adequateadequate informationinformation isis providedprovided totothethe shareholdersshareholders. .

TheThe legallegal requirementsrequirements laidlaid downdown byby thethe CompaniesCompanies Act, Act, assumesassumes a a greatgreat importanceimportance inin thethe preparationpreparation of of thethe financialfinancial statementsstatements of of aa joint joint stockstock companycompany. .


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Books of AccountsBooks of Accounts

SectionSection 209209 of of thethe CompaniesCompanies Act Act specifiesspecifies thethe booksbooksof of accountsaccounts toto bebe maintainedmaintained byby aa companycompany. .

According According toto thisthis Section,Section, everyevery companycompany shouldshould keepkeepatat itsits registeredregistered officeoffice proper proper booksbooks of of accountsaccounts. .

CompaniesCompanies whichwhich areare engagedengaged inin manufacturing,manufacturing,production,production, processingprocessing or or miningmining activities,activities, shouldshouldprepareprepare a a setset of of costcost accountsaccounts inin additionaddition toto thethefinancialfinancial accountsaccounts. .


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Legal Requirements RegardingLegal Requirements Regarding

Annual AccountsAnnual AccountsAt At everyevery annualannual generalgeneral meetingmeeting of of thethe shareholders,shareholders,thethe BoardBoard of of DirectorsDirectors of of thethe companycompany shouldshould laylay

beforebefore thethe shareholders,shareholders, a a balancebalance sheetsheet andand profitprofitandand lossloss accountaccount asas atat thethe endend of of thethe accountingaccountingperiodperiod. .

TheThe annualannual accountsaccounts of of thethe companycompany mustmust bebesubmittedsubmitted inin anan annualannual generalgeneral meetingmeeting withinwithin sixsixmonthsmonths countedcounted fromfrom thethe lastlast dayday of of thethe accountingaccountingperiodperiod toto whichwhich thethe accountsaccounts relaterelate. .


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Legal Requirements RegardingLegal Requirements RegardingAnnual AccountsAnnual Accounts

TheThe periodperiod toto whichwhich thethe accountsaccounts relaterelate isis knownknown asasthethe financialfinancial year year andand itit maymay bebe lessless than,than, equalequal toto or or

greater greater thanthan 1212 monthsmonths butbut cannotcannot exceedexceed 1515 monthsmonths. .

TheThe CompaniesCompanies Act Act providesprovides thatthat aa statementstatement of of allallsignificantsignificant accountingaccounting policiespolicies adoptedadopted inin thethe

preparationpreparation andand thethe presentationpresentation of of thethe BalanceBalance SheetSheetandand ProfitProfit andand LossLoss accountaccount shallshall bebe discloseddisclosed inin thethecompanyscompanys BalanceBalance SheetSheet. .


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Legal Requirements with Respect toLegal Requirements with Respect to

Profit and Loss AccountProfit and Loss Account PartPart IIII of of ScheduleSchedule VIVI of of thethe CompaniesCompanies Act Act 19561956, ,

doesdoes notnot prescribeprescribe anyany formatformat for for thethe profitprofit andand lossloss

accountaccount butbut onlyonly outlinesoutlines thethe informationinformation toto bebeincludedincluded. .

TheThe variousvarious itemsitems of of receiptsreceipts andand expensesexpenses shouldshould bebearrangedarranged under under mostmost convenientconvenient headsheads. .


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Legal Requirements with Respect toLegal Requirements with Respect to

Profit and Loss AccountProfit and Loss Account According According toto PartPart IIII of of Schedule,Schedule, certaincertaininformationinformation hashas toto bebe providedprovided byby wayway of of notesnotes

toto profitprofit andand lossloss accountaccount. . TheThe profitprofit andand lossloss appropriationappropriation showsshows inin detaildetail

thethe appropriationsappropriations mademade fromfrom thethe profitsprofits ininrespectrespect of of dividendsdividends andand transfer transfer toto reserves,reserves,etcetc..


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Legal Requirements with Respect toLegal Requirements with Respect toBalance SheetBalance Sheet

PartPart II of of ScheduleSchedule VIVI of of thethe CompaniesCompanies Act Act specifiesspecifiesbothboth thethe formform andand contentcontent of of thethe balancebalance sheetsheet of of aacompanycompany. .

TheThe assetsassets of of aa companycompany shouldshould bebe classifiedclassified intointo;;FixedFixed assets,assets, Investments,Investments, CurrentCurrent assetsassets; ; LoansLoans &&

Advances Advances andand MiscellaneousMiscellaneous ExpenditureExpenditure. .


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Legal Requirements with Respect toLegal Requirements with Respect toBalance SheetBalance Sheet

TheThe liabilitiesliabilities of of aa companycompany shouldshould bebe classifiedclassified intointo;;ShareShare capital,capital, ReservesReserves andand surplus,surplus, SecuredSecured loans,loans,unsecuredunsecured loans,loans, CurrentCurrent LiabilitiesLiabilities andand ProvisionsProvisions. .

A A companycompany maymay prepareprepare itsits balancebalance sheetsheet either either inin thethehorizontalhorizontal specifiedspecified inin partpart II ScheduleSchedule VIVI or or maymay

prepareprepare it it inin aa statementstatement form,form, statingstating thethe liabilitiesliabilities asassourcessources of of fundsfunds inin thethe firstfirst partpart andand listinglisting thethe assetsassetsasas applicationsapplications of of fundsfunds inin thethe secondsecond partpart..


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PARTICULARSPARTICULARS

Authorised Authorised

..... Shares of Rs....... each..... Shares of Rs....... eachIssuedIssued..... Shares of Rs....... each..... Shares of Rs....... eachSubscribedSubscribed

..... Shares of Rs....... each..... Shares of Rs....... eachRs. .... per share called upRs. .... per share called upLess:Less: Unpaid callsUnpaid calls Add: Add: Forfeited sharesForfeited shares

AMOUNT AMOUNT(Rs)(Rs)

Balance Sheet of ........................ (name of the company) ..........................Balance Sheet of ........................ (name of the company) ..........................As at ........................................................(date as at which it is made out)As at ........................................................(date as at which it is made out)


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SECURED LOANSSECURED LOANS

DebenturesDebenturesLoans and Advances from BanksLoans and Advances from BanksLoans and Advances from SubsidiariesLoans and Advances from SubsidiariesOther Loans and AdvancesOther Loans and AdvancesUNSECURED LOANSUNSECURED LOANS Fixed DepositsFixed DepositsLoans and Advances from SubsidiariesLoans and Advances from Subsidiaries

ShortShort--term Loans and Advances:term Loans and Advances:from Banksfrom Banksfrom othersfrom others


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Other Loans and AdvancesOther Loans and Advancesfrom Banksfrom Banks

from othersfrom othersCURRENT LIABILITIES &CURRENT LIABILITIES &

PROVISIONSPROVISIONSCurrent LiabilitiesCurrent Liabilities

Acceptances AcceptancesSundry CreditorsSundry Creditors

Total outstanding dues of small scale industrialTotal outstanding dues of small scale industrialundertaking(s).undertaking(s).

Total outstanding dues of creditors other thanTotal outstanding dues of creditors other thansmall scale industrial undertaking(s).small scale industrial undertaking(s).

Subsidiary companiesSubsidiary companies Advance payments and unexpired discounts Advance payments and unexpired discounts

Unclaimed DividendsUnclaimed Dividends


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Other Liabilities (if any)Other Liabilities (if any)Interest accrued but not due on loansInterest accrued but not due on loans

ProvisionsProvisionsProvision for TaxationProvision for TaxationProposed DividendsProposed Dividends

For contingenciesFor contingenciesFor Provident Fund SchemeFor Provident Fund SchemeFor Insurance, pension and similar For Insurance, pension and similar staff benefit schemesstaff benefit schemes

Other provisionsOther provisions


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FIXED ASSETSFIXED ASSETS GoodwillGoodwill

LandLandBuildingsBuildingsLeaseholdsLeaseholds

Railway SidingsRailway SidingsPlant and MachineryPlant and MachineryFurniture and FittingsFurniture and FittingsDevelopment of PropertyDevelopment of PropertyPatents, trademarks and designsPatents, trademarks and designs LivestockLivestockVehicles etc.Vehicles etc.


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INVESTMENTSINVESTMENTSInvestments in Govt. or Trust SecuritiesInvestments in Govt. or Trust Securities

Investments in shares, debentures or Investments in shares, debentures or bondsbonds

Immovable propertiesImmovable properties

Investments in the capital of partnershipInvestments in the capital of partnershipfirmsfirmsBalance of unutilised monies raised byBalance of unutilised monies raised by

IssueIssue


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CURRENT ASSETS, LOANS &CURRENT ASSETS, LOANS &ADVANCESADVANCES

Current AssetsCurrent AssetsInterest accrued on investmentsInterest accrued on investmentsStores and spare partsStores and spare partsLoose toolsLoose tools

StockStock--inin--tradetradeWorksWorks- -inin--progressprogress

Sundry debtors :Sundry debtors :Debts outstanding for a period exceeding 6 monthsDebts outstanding for a period exceeding 6 monthsOther debtsOther debts

Less:Less: ProvisionProvision

Cash balance on handCash balance on hand

Bank balances :Bank balances :With Scheduled BanksWith Scheduled Banks


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Advances and Loans Advances and LoansTo subsidiariesTo subsidiaries

To partnership firms in which the co./its subsidiary is aTo partnership firms in which the co./its subsidiary is apartner partner

Bills of ExchangeBills of Exchange Advances recoverable in cash or in kind or for Advances recoverable in cash or in kind or for

value to be received; e.g., Rates, Taxes,value to be received; e.g., Rates, Taxes,Insurance, etc.Insurance, etc.

Balances with Customs, Port Trust, etc. (whereBalances with Customs, Port Trust, etc. (wherepayable on demand).payable on demand).


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MISCELLANEOUS EXPENDITUREMISCELLANEOUS EXPENDITURE(to(to the extent not written off or adjusted)the extent not written off or adjusted)

Preliminary ExpensesPreliminary ExpensesExpenses including commission/ brokerage onExpenses including commission/ brokerage on

underwriting or subscription of shares or underwriting or subscription of shares or debenturesdebentures

Discount allowed on issue of shares or debenturesDiscount allowed on issue of shares or debenturesInterest paid out of capital during constructionInterest paid out of capital during constructionDevelopment expenditure not adjustedDevelopment expenditure not adjustedOther items (Specifying nature)Other items (Specifying nature)

PROFIT AND LOSS ACCOUNTPROFIT AND LOSS ACCOUNT(Debit Balance)(Debit Balance)


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Accounting Treatment of SpecialAccounting Treatment of SpecialItems in the Financial Statements of Items in the Financial Statements of

a Limited Companya Limited Company


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TheThe CompaniesCompanies Act Act requiresrequires thethe provisionprovision of of adequateadequatedepreciationdepreciation for for thethe followingfollowing purposespurposes: :

For For determinationdetermination of of thethe profitsprofits outout of of whichwhich dividendsdividendscancan bebe declareddeclared. .

For For determinationdetermination of of profitsprofits for for thethe purposepurpose of of calculationcalculation of of managerialmanagerial remunerationremuneration. .

DepreciationDepreciation


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DepreciationDepreciation asas anan expenseexpense is is broughtbrought intointo thethe booksbooksbyby passingpassing either either oneone of of thethe followingfollowing entriesentries: :

DepreciationDepreciation Account Account Dr.Dr.To Asset AccountTo Asset Account

or or Depreciation AccountDepreciation Account Dr. Dr.

To Provision for Depreciation AccountTo Provision for Depreciation Account

DepreciationDepreciation


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When a company has raised funds by floatingWhen a company has raised funds by floatingdebentures, the Profit and Loss Account must bedebentures, the Profit and Loss Account must becharged with the interest on the debentures for thecharged with the interest on the debentures for thefinancial year.financial year.

Interest on DebenturesInterest on Debentures


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DividendsDividends toto bothboth thethe equityequity andand thethe preferencepreferenceshareholdersshareholders cancan bebe paidpaid onlyonly outout of of profitsprofits availableavailableafter after takingtaking accountaccount thethe incomeincome taxtax..

When advance tax is paid, the journal entry to recordWhen advance tax is paid, the journal entry to recordthis would be:this would be:

Advance Income Tax a/c Advance Income Tax a/c Dr. Dr.To Bank a/cTo Bank a/c

Income TaxIncome Tax


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TheThe accountingaccounting treatmenttreatment of of incomeincome taxtax mustmust taketake intointoaccountaccount thethe followingfollowing threethree stagesstages: :

-- PaymentPayment of of Advance Advance IncomeIncome TaxTax..

-- DeterminationDetermination of of thethe taxtax liabilityliability byby thethe companycompany fromfromitsits booksbooks of of accounts,accounts, makingmaking aa provisionprovision for for suchsuchliabilityliability andand paymentpayment of of difference,difference, if if any,any, betweenbetweenadvanceadvance taxtax andand taxtax nownow computedcomputed. .

-- CompletionCompletion of of thethe assessmentassessment by by thethe IncomeIncome TaxTaxOfficer Officer..



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Tax Tax deducted deducted a t a t sourcesource: : As As per per SectionsSections 193193 andand 194194of of thethe IncomeIncome TaxTax Act, Act, 19611961, , itit isis thethe dutyduty of of thetheperson,person, whowho payspays interest,interest, salariessalaries or or dividends,dividends, totodeductdeduct thethe taxtax atat thethe prescribedprescribed raterate andand depositdeposit thethesamesame withinwithin aa specifiedspecified periodperiod of of timetime withwith thetheGovernmentGovernment. .



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The following accounting entries are made:The following accounting entries are made:Salaries/Dividend/Interest a/c Dr.Salaries/Dividend/Interest a/c Dr.

To Bank a/cTo Bank a/c

To Tax deducted at source a/cTo Tax deducted at source a/c(Being (Being thethe s ala ry/dividend/interest s ala ry/dividend/interest p a id pa id af ter af ter deducting deducting thethe t ax t ax a t a t source)source)

Tax deducted at source a/cTax deducted at source a/c Dr. Dr.To Bank a/cTo Bank a/c

(Being (Being thethe am ount am ount o f o f t ax t ax deducted deducted a t a t sourcesource p a id pa id totothethe Govern m ent)Govern m ent)



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DividendsDividends maymay bebe defineddefined asas thethe shareshare of of profitsprofits thatthatisis payablepayable toto eacheach shareholder shareholder of of thethe companycompany. .

TheThe CompaniesCompanies Act Act layslays downdown thatthat dividendsdividends cancan bebepaidpaid outout of of profitsprofits onlyonly andand prohibitsprohibits thethe paymentpayment of of anyany dividenddividend outout of of capitalcapital. .

TheThe directorsdirectors generallygenerally recommendrecommend thethe percentagepercentage of of dividenddividend payablepayable onon thethe equityequity sharesshares. .

DividendsDividends


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The dividend recommended by the directors is termedThe dividend recommended by the directors is termedas Proposed Dividend till such time it is adopted byas Proposed Dividend till such time it is adopted bythe shareholders in the annual general meeting. Thethe shareholders in the annual general meeting. Theentry to record proposed dividend is:entry to record proposed dividend is:

Profit and Loss a/cProfit and Loss a/c Dr.Dr.To Proposed Dividend a/cTo Proposed Dividend a/c

Proposed DividendProposed Dividend


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TheThe dividenddividend finallyfinally decideddecided byby thethe shareholdersshareholders in in thetheannualannual generalgeneral meetingmeeting asas payablepayable isis termedtermed asasDeclaredDeclared DividendDividend..

If the articles of the company permit, the Directors canIf the articles of the company permit, the Directors candeclare an interim dividend between two annualdeclare an interim dividend between two annualgeneral meetings. When interim dividend is paid, thegeneral meetings. When interim dividend is paid, the

entry to record the payment will be,entry to record the payment will be,Interim Dividend a/cInterim Dividend a/c Dr.Dr.

To Bank a/cTo Bank a/c

Declared Dividend and InterimDeclared Dividend and InterimDividendDividend


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FinalFinal dividenddividend: : After After declaringdeclaring interiminterim dividend,dividend, thethecompanycompany maymay alsoalso declaredeclare another another dividenddividend whichwhich isistermedtermed asas finalfinal dividenddividend.. ThisThis dividenddividend declareddeclared isisover over andand aboveabove thethe interiminterim dividenddividend. .

Final DividendFinal Dividend


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WhenWhen aa companycompany revaluesrevalues itsits fixedfixed assetsassets andand if if therethereisis aa profitprofit onon revaluation,revaluation, it it shouldshould bebe transferredtransferred totoCapitalCapital ReserveReserve accountaccount. . TheThe entriesentries areare asas followsfollows::

ii.. Asset Asset a/ca/c Dr Dr..(Revalued amount(Revalued amount Book Value)Book Value)

To Revaluation a/cTo Revaluation a/c

ii.ii. Revaluation a/cRevaluation a/c Dr.Dr.To Capital Reserve a/cTo Capital Reserve a/c

Profit on Revaluation of Fixed AssetsProfit on Revaluation of Fixed Assets


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ThoughThough thethe CompaniesCompanies Act Act providesprovides thatthat dividendsdividends totoshareholdersshareholders areare payablepayable onlyonly outout of of profits,profits, inin certaincertaincircumstancescircumstances withwith thethe previousprevious sanctionsanction of of thetheCentralCentral Government,Government, interestinterest maymay bebe paidpaid totoshareholdersshareholders outout of of capitalcapital. .

Interest out of CapitalInterest out of Capital


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ItemsItems whichwhich cannotcannot bebe postedposted toto thethe correctcorrect accountaccountfor for somesome reasonreason or or thethe other other areare shownshown inin thethesuspensesuspense accountaccount. .

SuspenseSuspense accountaccount maymay bebe creditedcredited withwith thethe salesaleproceedproceed of of thethe assetasset accountaccount. .

The entry to be made for adjustment isThe entry to be made for adjustment isSuspense a/cSuspense a/c Dr.Dr.

To Asset a/cTo Asset a/c

Suspense AccountSuspense Account


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TheThe entryentry for for forfeitureforfeiture isis passed,passed, butbut moneymoney ononreissuereissue isis creditedcredited toto capitalcapital suspensesuspense accountaccount. . TheThe

entryentry toto bebe mademade for for adjustmentadjustment is is::

Capital suspenseCapital suspense a/c a/c Dr. (Money Received)Dr. (Money Received)Share forfeiture a/cShare forfeiture a/c Dr. (Discount on Reissue)Dr. (Discount on Reissue)

To Share capital a/cTo Share capital a/c

Suspense AccountSuspense Account


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Managerial RemunerationManagerial Remuneration

ManagerialManagerial remunerationremuneration payablepayable toto directors,directors,managers,managers, managingmanaging director director isis basedbased onon netnet profitprofit..

A A companycompany maymay enter enter intointo anan agreementagreement to to paypaycommissioncommission atat aa percentagepercentage of of profitprofit after after chargingchargingsuchsuch commissioncommission. .


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SummarySummary

TheThe CompaniesCompanies Act Act prescribesprescribes a a fewfew provisionsprovisions totoprepareprepare andand presentpresent thethe financialfinancial statementsstatements of of thethe

joint joint stockstock companiescompanies. .

TheThe legallegal requirementsrequirements laidlaid downdown byby thethe CompaniesCompanies Act, Act, assumesassumes a a greatgreat importanceimportance inin thethe preparationpreparation of of thethe financialfinancial statementsstatements of of aa joint joint stockstock companycompany. .

SectionSection 209209 of of thethe CompaniesCompanies Act Act specifiesspecifies thethe booksbooksof of accountsaccounts toto bebe maintainedmaintained byby aa companycompany. .


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SummarySummary

PartPart IIII of of ScheduleSchedule VIVI of of thethe CompaniesCompanies Act Act 19561956(Appendix(Appendix II)II) doesdoes notnot prescribeprescribe anyany formatformat for for thetheprofitprofit andand lossloss accountaccount butbut onlyonly outlinesoutlines thetheinformationinformation toto bebe includedincluded. .

PartPart II of of ScheduleSchedule VIVI of of thethe CompaniesCompanies Act Act specifiesspecifiesbothboth thethe formform andand contentcontent of of thethe balancebalance sheetsheet of of aacompanycompany

22 schedule vi

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