Disclosure Requirements under Schedule VI

of Companies Act 1956

Presented By :
Prabhakar Dubey ACA
Section 211. Form and contents of balance sheet and profit and loss account:

1. Every balance sheet of a company shall give a true and fair view of the state of
affairs of the company as at the end of the financial year and shall, subject to the
provisions of this section, be in the form set out in Part I of Schedule VI, or as near
thereto as circumstances admit or in such other form as may be approved by
the Central Government either generally or in any particular case; and in preparing
the balance sheet due regard shall be had, as far as may be, to the general
instructions for preparation of balance sheet under the heading "Notes" at the end
of that Part :

2. Every profit and loss account of a company shall give a true and fair view of the
profit or loss of the company for the financial year and shall, subject as aforesaid,
comply with the requirements of Part II of Schedule VI, so far as they are
applicable thereto :
 PARTS OF SCHEDULE VI

1. Part I & II – Form of Balance Sheet & Requirements as to Profit and Loss A/c

2. Part III – Interpretation of certain terms for the purpose of Part I & II e.g. Provision,
Reserve, Capital Reserve, Liability, Quoted Investment etc.

3. Part IV - Balance Sheet Abstract and Company's General Business Profile

Section 117 of Companies Bill 2009 : Financial Statement

1. The financial statement shall give a true and fair view of the state of affairs of the
company or companies as at the end of the financial year, comply with the
accounting standards notified under section 119 and shall be in such form as may
be prescribed.

3. Where a company has one or more subsidiaries, it shall prepare a consolidated

financial statement of all the subsidiaries in the same form and manner as that
of its own which shall also be laid before the annual general meeting of the company
along with the laying of its financial statement under sub-section (2).
 PART I – BALANCE SHEET (A & B)

A Company shall disclose the following in the notes to accounts:

A. Share Capital - For each class of Share Capital:

(a) the number and amount of shares authorized;

(b) the number of shares issued, subscribed and fully paid, and subscribed but not
fully paid;
(c) par value per share;
(d) a reconciliation of the number of shares outstanding at the beginning and at the end of
the period;
(e) the rights, preferences and restrictions attaching to that class including restrictions on
the distribution of dividends and the repayment of capital;
(f) shares in the company held by its holding company or its ultimate holding company or
by its subsidiaries or associates;
(g) shares in the company held by any shareholder holding more than 5 percent shares;
(h) shares reserved for issue under options and contracts/commitments for the sale of
shares/disinvestment, including the terms and amounts;
(i) Separate particulars for a period of five years following the year in which the shares have
been allotted/bought back, in respect of:
 Aggregate number and class of shares allotted as fully paid up pursuant to contract
(s) without payment being received in cash.
 Aggregate number and class of shares allotted as fully paid up by way of bonus
shares (Specify the source from which bonus shares are issued).
 Aggregate number and class of shares bought back.
(j) Terms of any security issued along with the earliest date of conversion in descending
order starting from the farthest such date.
Some Important aspects of Share Capital:

1. The Authorised share capital should be higher than Issued, Subscribed & paid up
capital.

2. The criteria of minimum paid-up capital Rs. 1 Lac and Rs. 5 lacs in case of Private
and Public Co. respectively should be complied.

3. If the new shares has been issued during the year, it should be compared with the
secretariate compliance report (in case paid up capital is more than Rs. 10 lacs).

4. The share application money of which allotment is pending should not be shown in
share capital and should be shown separately in between capital and reserves
including contracts/ commitments and the terms thereof.

5. The ‘Capital Suspense A/c’ should be shown under Share Capital with there
related contracts / commitments.
B. Reserves & Surplus:

(i) Reserves and Surplus shall be classified as:

(a) Capital Reserves;
(b) Capital Redemption Reserves;
(c) Securities Premium Reserve;
(d) Debenture Redemption Reserve;
(e) Revaluation Reserve;
(f) Other Reserves – (specify the nature of each reserve and the amount in respect
thereof);
(g) Surplus i.e. balance in statement of Profit & Loss disclosing allocations and
appropriations such as dividend paid, bonus shares and transfer to/from reserves.
(Additions and deductions since last balance sheet to be shown under each of the
specified heads)

(ii) A reserve specifically represented by earmarked investments shall be termed as a

‘fund’ (basically known as ‘Reserve Fund’).

(iii) The balance of ‘Surplus’ after deducting debit balance of profit and loss account
shall be shown under the head ‘Surplus’ even if the resulting figure is in the
negative. Similarly, the balance of ‘Reserves and Surplus’, after adjusting negative
balance of surplus, if any, shall be shown under the head ‘Reserves and Surplus’
even if the resulting figure is in the negative .
Some Important aspects of Reserves & Surplus:

1. The Reserve for Doubtful Debt is not a provision for doubtful debt, hence it should
be shown in the reserves instead of deducting from ‘Sundry Debtors’ (it means it is
the appropriation of profit and not the provisions).

2. No dividend should be declared out of the capital reserve.

3. The debit balance in profit & loss a/c should be deducted from free reserve only.

4. If the accumulated losses is more than 50% of its Net worth, then auditors report
should be referred to.

5. If the company transfers amount of reserve for the purpose of claiming any tax
benefit, then it should be shown separately.

6. As per the NBFC norms, 20% of net profit should be transfer to ‘special reserve
A/c’ before making the distribution to shareholders as a dividend or bonus shares.
C. Secured & Unsecured Loans:

(i) Long-term borrowings shall be classified as:

(a) Bonds/debentures.
(b) Term loans from banks.  from other parties.
(c) Deferred payment liabilities.
(d) Public deposits.
(e) Loans and advances from subsidiaries/holding company/associates/business ventures.
(f) Other loans and advances (specify nature).
(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature of security
shall be specified separately in each case.
(iii) Where loans have been guaranteed by directors or others, a mention thereof shall be made
and also the aggregate amount of such loans under each head.
(iv) Bonds/debentures (along with the rate of interest and particulars of redemption or conversion,
as the case may be) stated in descending order of maturity or conversion, starting from farthest
redemption or conversion date, as the case may be. Where bonds/debentures are redeemable
by installments, the date of maturity for this purpose must be reckoned as the date on which the
first installment becomes due.
(v) Particulars of any redeemed bonds/ debentures which the company has power to reissue.
(vi) Terms of repayment of term loans and other loans.
(vii) Period and amount of default in repayment of dues, providing break-up of principal and
interest shall be specified separately in each case.

Long-term provisions
The amounts shall be classified as:
(a) Provision for employee benefits.
(b) Others (specify nature).
Some Important aspects of Secured Loans :

1. The nature of security should be specified in each and every case.

2. The secured loans should be matched with the entries in the Register of charge
u/s 125.

3. Interest accrued and due should be indicated under appropriate sub-heads. The
interest accrued but not due should be shown in current liability.
D. Current Liabilities and Provisions:

1. Short-term borrowings (Due for less than 1 year)

(i) Short-term borrowings shall be classified as:

(a) Loans repayable on demand
 from banks.
 from other parties (in case of MSMEs, if the due is exceeding 3 months,
then amount including interest as per the act should be shown separately).
(b) Loans and advances from subsidiaries/holding
company/associates/business ventures.
(c) Demand deposits.
(d) Other loans and advances (specify nature).

(ii) Borrowings shall further be sub-classified as secured and unsecured. Nature

of security shall be specified separately in each case.
(iii) Where loans have been guaranteed by directors or others, a mention thereof
shall be made and also the aggregate amount of loans under each head.
(iv) Period and amount of default in repayment of dues, providing break-up of
principal and interest shall be specified separately in each case.
2. Other current liabilities

The amounts shall be classified as:

(a) Current maturities of long-term debt;
(b) Current maturities of finance lease obligations;
(c) Other payables (specify nature);
(d) Interest accrued but not due on borrowings;
(e) Interest accrued and due on borrowings;
(f) Unearned revenue;
(g) The following amounts shall be shown separately:
 Unpaid dividends*
 Unpaid application money received for allotment of
securities and due for refund*
 Unpaid matured deposits*
 Unpaid matured debentures*
 Interest accrued on above*
*In the above cases, any amount is transferred to Investor Education and Protection
fund as per the companies act should be verified and check whether the same is
paid within the prescribed limit.

3. Short-term provisions

The amounts shall be classified as:

(a) Provision for employee benefits.
(b) Others (specify nature) e.g . Provision for expenses, proposed dividend etc. etc..
E. FIXED ASSETS:
(Least Liquidity Asset to be arrange first & vice versa)

1. Tangible assets

(i) Classification shall be given as:

(a) Land.
(b) Buildings.
(c) Plant and Equipment.
(d) Furniture and Fixtures.
(e) Vehicles.
(f) Office equipment.
(g) Others (specify nature).

(ii) Assets under lease shall be separately specified under each class
of asset.

(iii) A reconciliation of the gross and net carrying amounts of each

class of assets at the beginning and end of the reporting period
showing additions, disposals, acquisitions and other movements
and the related depreciation and impairment losses/reversals shall
be disclosed separately.
2. Intangible assets

(i) Classification shall be given as:

(a) Goodwill.
(b) Brands /trademarks.
(c) Computer software.
(d) Mastheads and publishing titles.
(e) Mining rights.
(f) Copyrights, and patents and other intellectual property
rights, services and operating rights.
(g) Recipes, formulae, models, designs and prototypes.
(h) Licenses and franchise.
(i) Others (specify nature).

(ii) A reconciliation of the gross and net carrying amounts of each

class of assets at the beginning and end of the reporting period
showing additions, disposals, acquisitions and other movements
and the related amortization and impairment losses/reversals shall
be disclosed separately.
Some Important aspects of Fixed Assets :

1. In case of land, whether it is freehold or leasehold should be indicated.

2. The original cost and accumulated depreciation should be correctly displayed.

3. If the assets are purchased on foreign currency, the exchange difference should
be transfer to profit and loss A/c and not to capitalise with the fixed assets (As per
the AS-11 & amendment in Companies Accounting Standard rule).

4. If the fixed assets have been revalued or reduce on re-structuring of the company
during the year, the same should be disclosed by way of note for a period of 5
years in notes to accounts forming part of balance sheet.

5. If the company sales the fixed assets, to check the auditor’s report whether it
affects the going concern of the company.
E. Investments (Also termed as Non-Current Investment):

Non-current investments shall be classified as:

(a) Investment property;
(b) Investments in Government or trust securities;
(c) Investments in units, debentures or bonds;
(d) Other non-current investments (specify nature)

The investments held-to-maturity shall be stated separately.

The following shall also be disclosed:

(a) Aggregate amount of quoted investments and market
value thereof;
(b) Aggregate amount of unquoted investments;
(c) Aggregate amount of partly paid-up investments;
(d) The names of bodies corporate (indicating separately the
names of subsidiaries, associates and other business
ventures) in whose securities, investments have been
made and the nature and extent of the investments so
made in each such body corporate (Whether investment company or other than
investment).

In case of investment in subsidiary company, one have to check whether requirement of

consolidated balance is required as per AS 21.

If there is some unutilised money towards the issues, then it should be shown separately.
E. Current Assets & Loans and Advances:

1. Long-term loans and advances

(i) Long-term loans and advances shall be classified as:

(a) Capital Advances;
(b) Security Deposits;
(c) To directors / subsidiaries / associates / business ventures loans and
advances to specify separately;
(d) Others (specify nature)- loans and advances to specify
separately.

(ii) The above shall also be separately sub-classified as:

(a) To the extent secured, considered good;
(b) Others, considered good;
(c) Doubtful.

(iii) Allowance for bad and doubtful loans and advances shall be
disclosed under the relevant heads separately.
2. Other non-current assets

This is an all inclusive heading which incorporates assets that do not fit
neatly into any of the other asset categories.

3. Current Investments

(i) Current investments shall be classified as:

(a) Investments in government or trust securities;
(b) Investments in shares, units, debentures or bonds;
(c) Other investments (specify nature).

(ii) The following shall also be disclosed:

(a) Aggregate amount of quoted investments and market
value thereof;
(b) Aggregate amount of unquoted investments;
(c) Aggregate amount of partly paid-up investments.

(iii) Current investments shall be further sub-classified as:

(a) Investments held for trading;
(b) Other investments.
4. Inventories

(i) Classification shall be made as:

(a) Raw material;
(b) Work-in-progress;
(c) Finished goods;
(d) Stock-in-trade;
(e) Stores and spares;
(f) Loose tools;
(g) Others (specify nature).
(ii) Goods-in-transit shall be disclosed under the relevant sub-head of
inventories.

5. Trade Receivables

(i) The amounts shown under ‘Trade Receivables’ shall include the
amounts due in respect of goods sold or services rendered in the
normal course of business.
(ii) Trade receivables shall also be classified as:
(a) To the extent secured, considered good;
(b) Others, considered good;
(c) Doubtful.

(iii) Allowance for bad and doubtful debts shall be disclosed under the
relevant heads separately.
6. Cash and cash equivalents

(i) Classification shall be made as:

(a) Bank balances;
(b) Cheques, drafts on hand;
(c) Cash balance;
(d) Cash equivalents – short-term, highly liquid investments
that are readily convertible into known amounts of cash
and which are subject to an insignificant risk of changes in
value;
(e) Others (specify nature).

(ii) Earmarked bank balances (e.g. unpaid dividend) shall be

separately stated.

(iii) Balance with banks to the extent held as security against the
borrowings, guarantees, other commitments shall be disclosed
separately.

(iv) Repatriation restrictions, if any, in respect of cash and bank

balances shall be separately stated.

(v) Bank deposits with more than 12 months maturity shall be

disclosed separately.
7. Short-term loans and advances

(i) Loans and advances shall be classified separately as:

(a) To subsidiaries/associates/business ventures;
(b) To others (specify nature).

(ii) The above shall also be sub-classified as:

(a) To the extent secured, considered good;
(b) Others, considered good;
(c) Doubtful.

(iii) Allowance for bad and doubtful loans and advances shall be
disclosed under the relevant heads separately.

8. Other current assets (specify nature).

Some Important aspects of Current Assets & Loans and advances :

1. The mode of valuation as per AS 2 should be separately stated wherever practicable.

2. Interest accrued on investments held in current assets should be separately stated

3. The maximum balance in respect of due from directors should be stated.

4. In case of unutilised monies in respect of issue made on current investment should

be separately stated.

5. The types & nature of account in schedule bank should be given.

6. In case of non-scheduled banks, the name of the banks and maximum balance
during the year should be stated.

7. In case loans given to the companies under same management, the maximum
amount due from them should be separately stated.

8. The opinion of BOD should be obtained regarding the valuation on realisation of

current assets, loans and advances should have at least the value at which they are
stated.
E. MISCELLANEOUS EXPENDITURE:

1. The balance should be shown to the extent not written off or adjusted.

2. In case of debit balance in profit and loss a/c and that could not be adjusted with
the earlier year’s free reserve or even if adjusted the negative value comes, then
it should be shown under miscellaneous expenditure.

3. To check out whether intangible assets hitherto shown under this head is now
required to be shown under the head Fixed Assets in view of AS26.
F. CONTINGENCIES AND COMMITMENTS:

1. Contingencies (to the extent not provided for):

(i) Contingencies shall be classified as:

(a) Tax contingencies and law suits (except those where the
likelihood of an outflow of resources is remote);
(b) Guarantees;
(c) Other money for which the company is contingently liable
(except those where the likelihood of an outflow of
resources is remote).

2. Commitments:
(i) Commitments shall be classified as:
(a) Estimated amount of contracts remaining to be executed
on capital account and not provided for;
(b) Uncalled liability on shares and other investments partly
paid;
(c) Other commitments (specify nature).

3. The amount of dividends proposed to be distributed to equity holders for

the period and the related amount per share shall be disclosed separately.
Arrears of fixed cumulative dividends shall also be disclosed separately.