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22_schedule_vi - SCHEDULE VI OF COMPANIES SCHEDULE ACT,1956...

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Unformatted text preview: SCHEDULE VI OF COMPANIES SCHEDULE ACT,1956 ACT,1956 1 Objective To Understand: • General Requirements of the Company Act • Requirements of the Company Act with respect to the Requirements Profit and loss account Profit • Requirements of the Company Act with respect to the Requirements Balance sheet. Balance 2 General Requirements of the General Company Act Company • The joint stock companies, are legally required to The prepare a set of financial statements to periodically assess the profits earned and to know the financial position of the company as on a specified date. position • The accounts must be statutorily audited by an The external person called the auditor and it is the duty of the auditor to submit a report in the prescribed format to the shareholders. to 3 General Requirements of the General Company Act Company • The objective of the Companies Act in laying down The various provisions with respect to accounts and audit is; to ensure that adequate information is provided to the shareholders. • The legal requirements laid down by the Companies The Act, assumes a great importance in the preparation of the financial statements of a joint stock company. 4 Legal Requirements Regarding Annual Accounts Annual • At every annual general meeting of the shareholders, At the Board of Directors of the company should lay before the shareholders, a balance sheet and profit and loss account as at the end of the accounting period. period. • The annual accounts of the company must be The submitted in an annual general meeting within six months counted from the last day of the accounting period to which the accounts relate. period 5 Legal Requirements Regarding Annual Accounts Annual • The period to which the accounts relate is known as The the financial year and it may be less than, equal to or greater than 12 months but cannot exceed 15 months. • The Companies Act provides that a statement of all The significant accounting policies adopted in the preparation and the presentation of the Balance Sheet and Profit and Loss account shall be disclosed in the company’s Balance Sheet. 6 Legal Requirements with Respect to Legal Profit and Loss Account Profit • Part II of Schedule VI of the Companies Act 1956, Part does not prescribe any format for the profit and loss account but only outlines the information to be included. included. • The various items of receipts and expenses should be arranged under most convenient heads. arranged 7 Legal Requirements with Respect to Legal Profit and Loss Account Profit • According to Part II of Schedule, certain According information has to be provided by way of notes to profit and loss account. to • The profit and loss appropriation shows in detail The the appropriations made from the profits in respect of dividends and transfer to reserves, etc. etc. 8 Legal Requirements with Respect to Legal Balance Sheet Balance • Part I of Schedule VI of the Companies Act specifies Part both the form and content of the balance sheet of a company. company. • The assets of a company should be classified into; The Fixed assets, Investments, Current assets; Loans & Advances and Miscellaneous Expenditure. Advances 9 Legal Requirements with Respect to Legal Balance Sheet Balance • The liabilities of a company should be classified into; The Share capital, Reserves and surplus, Secured loans, unsecured loans, Current Liabilities and Provisions. unsecured • A company may prepare its balance sheet either in the company horizontal specified in part I Schedule VI or may prepare it in a statement form, stating the liabilities as sources of funds in the first part and listing the assets as applications of funds in the second part. as 10 10 Balance Sheet of ........................ (name of the company) .......................... As at ........................................................(date as at which it is made out) As PARTICULARS AMOUNT (Rs) (Rs) Authorised ..... Shares of Rs....... each ..... Issued Issued ..... Shares of Rs....... each Subscribed Subscribed ..... Shares of Rs....... each ..... Rs. .... per share called up Less: Unpaid calls Add: Forfeited shares Add: 11 11 Dividends • Dividends may be defined as the share of profits that Dividends is payable to each shareholder of the company. • The Companies Act lays down that dividends can be The paid out of profits only and prohibits the payment of any dividend out of capital. • The directors generally recommend the percentage of The dividend payable on the equity shares. dividend 12 12 Proposed Dividend The dividend recommended by the directors is termed The as ‘Proposed Dividend’ till such time it is adopted by the shareholders in the annual general meeting. The entry to record proposed dividend is: entry Profit and Loss a/c Dr. To Proposed Dividend a/c 13 13 RESERVES AND SURPLUS Capital Reserves Capital Redemption Reserve Share Premium Account Other Reserves Other Less: Debit balance in profit and loss account, if any Balance in the profit and loss accounts after providing for proposed allocation namely Dividend Bonus or Reserves Proposed additions to Reserves Sinking Funds 14 14 SECURED LOANS Debentures Debentures Loans and Advances from Banks Loans and Advances from Subsidiaries Other Loans and Advances UNSECURED LOANS UNSECURED Fixed Deposits Loans and Advances from Subsidiaries Short-term Loans and Advances: from Banks from others Other Loans and Advances from Banks from others from 15 15 Interest on Debentures When a company has raised funds by floating debentures, the Profit and Loss Account must be charged with the interest on the debentures for the financial year. financial 16 16 CURRENT LIABILITIES & PROVISIONS Current Liabilities Acceptances Sundry Creditors Total outstanding dues of small scale industrial undertaking(s). Total outstanding dues of creditors other than small scale industrial undertaking(s). Subsidiary companies Advance payments and unexpired discounts Unclaimed Dividends 17 17 Other Liabilities (if any) Other Interest accrued but not due on loans Provisions Provision for Taxation Proposed Dividends For contingencies For Provident Fund Scheme For Insurance, pension and similar staff benefit schemes Other provisions Other 18 18 Income Tax • Dividends to both the equity and the preference Dividends shareholders can be paid only out of profits available after taking account the income tax. after • When advance tax is paid, the journal entry to record When this would be: this Advance Income Tax a/c Advance To Bank a/c Dr. 19 19 Income Tax • The accounting treatment of income tax must take into The account the following three stages: account - Payment of Advance Income Tax. - Determination of the tax liability by the company from Determination its books of accounts, making a provision for such liability and payment of difference, if any, between advance tax and tax now computed. advance - Completion of the assessment by the Income Tax Completion 20 20 Officer. Officer. Income Tax Tax deducted at source: As per Sections 193 and 194 of the Income Tax Act, 1961, it is the duty of the person, who pays interest, salaries or dividends, to deduct the tax at the prescribed rate and deposit the same within a specified period of time with the Government. Government. 21 21 Income Tax • The following accounting entries are made: Salaries/Dividend/Interest a/c Dr. To Bank a/c To Tax deducted at source a/c (Being the salary/dividend/interest paid after deducting (Being the tax at source) the Tax deducted at source a/c Dr. To Bank a/c (Being the amount of tax deducted at source paid to (Being the Government) the 22 22 FIXED ASSETS Goodwill Land Buildings Leaseholds Railway Sidings Plant and Machinery Furniture and Fittings Development of Property Patents, trademarks and designs Patents, Livestock Vehicles etc. 23 23 Depreciation • The Companies Act requires the provision of adequate The depreciation for the following purposes: depreciation For determination of the profits out of which dividends For can be declared. can For determination of profits for the purpose of For calculation of managerial remuneration. calculation 24 24 Depreciation Depreciation as an expense is brought into the books Depreciation by passing either one of the following entries: by Depreciation Account Dr. Depreciation Dr. To Asset Account To or Depreciation Account Dr. Depreciation Dr. To Provision for Depreciation Account To 25 25 INVESTMENTS Investments in Govt. or Trust Securities Investments Investments in shares, debentures or bonds Immovable properties Investments in the capital of partnership firms Balance of unutilised monies raised by Issue Issue 26 26 CURRENT ASSETS, LOANS & ADVANCES Current Assets Interest accrued on investments Stores and spare parts Loose tools Stock-in-trade Works-in-progress Sundry debtors : Debts outstanding for a period exceeding 6 months Other debts Other Less: Provision Cash balance on hand Bank balances : With Scheduled Banks With Others 27 27 Advances and Loans Advances To subsidiaries To partnership firms in which the co./its subsidiary is a partner Bills of Exchange Advances recoverable in cash or in kind or for value to be received; e.g., Rates, Taxes, Insurance, etc. Balances with Customs, Port Trust, etc. (where payable on demand). 28 28 MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted) (to Preliminary Expenses Expenses including commission/ brokerage on underwriting or subscription of shares or debentures Discount allowed on issue of shares or debentures Interest paid out of capital during construction Development expenditure not adjusted Other items (Specifying nature) PROFIT AND LOSS ACCOUNT PROFIT (Debit Balance) 29 29 Schedule VI Part 2 Schedule Profit And Loss 30 Summary • The Companies Act prescribes a few provisions to The prepare and present the financial statements of the joint stock companies. • The legal requirements laid down by the Companies The Act, assumes a great importance in the preparation of the financial statements of a joint stock company. • Section 209 of the Companies Act specifies the books Section of accounts to be maintained by a company. 31 31 Summary • Part II of Schedule VI of the Companies Act 1956 Part (Appendix II) does not prescribe any format for the profit and loss account but only outlines the information to be included. • Part I of Schedule VI of the Companies Act specifies Part both the form and content of the balance sheet of a company 32 32 ...
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