CMA Intermediate · Corporate Accounting and Auditing

Statement of Profit and Loss and Balance Sheet (Schedule III of Companies Act, 2013): formula sheet

Full chapter guide

Key formulas

Legal basis of the format: Section 129(1): true and fair view + compliance with standards under section 133 + form per Schedule III; Cite section 129(1) when asked why Schedule III applies to a company.
Which division applies: Division I = AS companies; Division II = Ind AS companies; Division III = NBFCs following Ind AS; Read the question for the words 'Ind AS' or 'NBFC' before choosing the format.
Exclusions from section 129(1): Insurance, banking and electricity generation or supply companies, and classes with a form specified under their own Act, are outside Schedule III; These follow their governing Act's format.
Consolidation: Company with one or more subsidiaries: prepare consolidated financial statements in the same form and manner as its own (section 129(3)); Also attach a statement of salient features of subsidiaries' statements.
Laying before the AGM: Board lays financial statements before the AGM for the financial year (section 129(2)); Consolidated statements are laid along with the standalone ones.
Deviation from standards: Disclose: deviation + reasons + financial effects, if any (section 129(5)); All three must be stated.
Penalty for contravention: Imprisonment up to 1 year, or fine of ₹50,000 to ₹5,00,000, or both (section 129(7)); Applies to the MD, whole-time director in charge of finance, CFO or other person charged by the Board; if none, all directors.
Rounding off: Round off according to the scale the general instructions of Schedule III prescribe for the company's total income or turnover; use the same scale throughout; Check the thresholds and permitted units in your ICMAI study material. Round presented figures only, never the working.
Order of heads: Shareholders' funds → Share application money pending allotment → Non-current liabilities → Current liabilities; Keep this order in the answer. Marks are given for correct grouping.
Shareholders' funds: Share capital + Reserves and surplus + Money received against share warrants; A debit balance of the Statement of Profit and Loss reduces reserves and surplus.
Paid-up capital: Subscribed and fully paid-up capital + Subscribed but not fully paid-up capital (called-up less calls in arrears) + forfeited shares amount; Calls in arrears are deducted from called-up capital in the note.
Total equity and liabilities: Shareholders' funds + Share application money pending allotment + Non-current liabilities + Current liabilities; This must equal total assets.
Capital redemption reserve on buy-back (section 69): Transfer = Nominal value of shares bought back out of free reserves or securities premium; The rule applies where the buy-back is made out of free reserves or securities premium.
Current maturity: Instalment of long-term loan due within 12 months → Other current liabilities; The balance stays under long-term borrowings.
Deferred tax: Deferred tax liability (net) → Non-current liabilities always; Ind AS 1, para 56: never classified as current.
Net block of PPE: Net carrying amount = Gross cost − Accumulated depreciation − Accumulated impairment; Show gross block, depreciation and net block in the note. The balance sheet carries the net amount.
Trade receivables (net): Trade receivables = Debtors − Bad debts written off − Provision for doubtful debts; Bills receivable are part of trade receivables. Show secured, unsecured and doubtful categories in the note.
Inventories: Inventory = Lower of cost and net realisable value, for each item or group; Show raw materials, WIP, finished goods, stock-in-trade, stores and spares separately in the note.
Cash and cash equivalents: Cash and cash equivalents = Cash in hand + Bank balances (unrestricted) + Short-term highly liquid deposits; Restricted or earmarked balances and longer deposits go to 'Other bank balances' or other non-current/current assets.
Classification rule: current asset: Current if: realised or consumed in the operating cycle, or held for trading, or realisable within 12 months, or unrestricted cash; Otherwise non-current. Deferred tax assets are never current (Ind AS 1, para 56).
Total assets check: Total assets = Total equity and liabilities; The balance sheet must tally. A difference signals a missed adjustment or misclassification.
Total income: Total income = Revenue from operations + Other income; Both are shown as separate line items. Do not merge them.
Total expenses (nature method): Cost of materials consumed + Purchases of stock-in-trade ± Changes in inventories + Employee benefits expense + Finance costs + Depreciation and amortisation expense + Other expenses; An increase in inventories is deducted from expenses. A decrease is added.
Profit before exceptional items and tax: Total income − Total expenses; Exceptional items are not part of total expenses.
Profit before tax: Profit before exceptional items and tax − Exceptional items; An exceptional gain is added. An exceptional loss is deducted.
Profit from continuing operations: Profit before tax − Tax expense (current tax + deferred tax); Show current tax and deferred tax separately.
Profit for the period: Profit from continuing operations + Profit/(loss) from discontinued operations after tax; Discontinued operations appear as a single amount (Ind AS 1 para 82(ea)).
Total comprehensive income: Profit for the period + Other comprehensive income (net of tax); OCI is grouped into items not reclassified and items reclassified to profit or loss (para 82A). Income tax on each OCI item is disclosed on the face or in the notes (para 90).
Basic EPS: Profit attributable to equity shareholders ÷ Weighted average number of equity shares; Show basic and diluted EPS at the end of the statement. Detailed EPS rules are in Ind AS 33.
Share capital reconciliation: Shares at end = Shares at start + Shares issued during the year − Shares bought back or forfeited or cancelled; Show it separately for number of shares and for amount, class by class (equity, preference).
Shareholding percentage: % held = Shares held by the shareholder ÷ Total shares issued of that class × 100; Disclose each holder with more than 5% of the shares, with number of shares held. Use the class of shares as the denominator.
Current ratio: Current assets ÷ Current liabilities; Schedule III ratio. Give the numerator and denominator reasons when the change is more than 25%.
Debt-equity ratio: Total debt ÷ Shareholder's equity; Total debt means borrowings plus lease liabilities. Equity is total equity.
Return on equity ratio: (Net profit after tax − Preference dividend) ÷ Average shareholder's equity; Use the average of opening and closing equity.
Percentage change in a ratio: % change = (Current year ratio − Previous year ratio) ÷ Previous year ratio × 100; Explain the reason where the change exceeds 25% as compared to the preceding year.
Trade receivables turnover ratio: Net credit sales ÷ Average trade receivables; Average = (Opening + Closing) ÷ 2.
Change in inventories: Opening inventory − Closing inventory; A positive figure is an expense item; a negative figure (closing is higher) reduces expenses. Show it as its own line.
Total expenses: Cost of materials + Purchases of stock-in-trade + Changes in inventories + Employee benefit expense + Finance costs + Depreciation + Other expenses; Use the adjusted figure for each line, after outstanding and prepaid amounts.
Profit before tax (PBT): Total revenue (revenue from operations + other income) − Total expenses; Exceptional or extraordinary items, if any, are shown separately before arriving at PBT.
Profit after tax (PAT): PBT − Tax expense; Tax is usually given as a rate on PBT. The unpaid tax is a short-term provision in the Balance Sheet.
Closing surplus: Opening surplus + PAT − Transfers to reserves − Dividend paid or declared; Shown under Reserves and Surplus. A negative balance is shown in brackets.
Adjusted expense: Expense per trial balance + Outstanding − Prepaid; The outstanding amount is a current liability; the prepaid amount is a current asset.
Net carrying amount of asset: Cost − Accumulated depreciation; Depreciation for the year is added to any accumulated depreciation already in the trial balance.
Balance Sheet check: Equity + Non-current liabilities + Current liabilities = Non-current assets + Current assets; If this fails, recheck adjustments posted only once, or the surplus working.

Quick revision

Section 129(1): statements must give a true and fair view, comply with accounting standards notified under section 133, and follow Schedule III.
Section 129(5): if statements do not comply with the accounting standards, disclose the deviation, the reasons and the financial effect, if any.
Section 129(3): a company with subsidiaries also prepares consolidated financial statements, laid before the annual general meeting along with its own.
Section 129(2): the Board lays the financial statements for the financial year before every annual general meeting.
The balance sheet has two main parts: Equity and Liabilities, and Assets.
Both sides classify items as current or non-current.
The face of the statements shows heads and totals. Details go in the notes.
The profit and loss balance is carried to reserves and surplus in the balance sheet.
In a trial balance problem, do adjustments first, then the profit and loss statement, then the balance sheet.
Always check that total equity and liabilities equals total assets.
Show working notes clearly, as step marks depend on them.

Common mistakes

Applying Schedule III to a banking or insurance company. Fix: Recall the second proviso to section 129(1). Banks, insurers and electricity companies follow their own Acts.
Using Division I for an Ind AS company. Fix: Underline 'Ind AS' in the question and switch to Division II format.
Showing a debit balance of profit and loss as an asset Fix: Show it as a negative figure under reserves and surplus.
Putting the whole long-term loan under non-current liabilities Fix: Move the instalment due within twelve months to other current liabilities.
Showing gross PPE without deducting accumulated depreciation. Fix: Always compute closing net block = cost − total depreciation to date, and show it as one line.
Treating deferred tax asset as a current asset. Fix: Remember Ind AS 1 para 56: deferred tax assets are not classified as current. Show them under non-current.
Showing exceptional items inside Other expenses or Other income. Fix: Show them on a separate line after profit before exceptional items and tax. Disclose the nature of the item.
Showing an 'extraordinary item' line in an Ind AS statement. Fix: Ind AS 1 (para 87) bars extraordinary items in the statement and in the notes. Use exceptional items only if the item qualifies.
Including shareholders who hold exactly 5% or less in the 5% disclosure list. Fix: Disclose only holders with more than 5% of the shares of that class. Compare the percentage carefully.
Using total share capital of all classes as the denominator for the percentage held. Fix: Work class by class. Percentage of equity shares uses equity shares only.

Exam tips

Start every theory answer with section 129(1) and state the division. This earns the first marks.
In MCQs, spot the trap words 'Ind AS', 'NBFC', 'bank' and 'electricity' before reading the options.
Quote only the section numbers you are sure of: 129(1), 129(3), 129(5), 129(7), 133.
For rounding questions, show the scale used and apply it to every figure.
Link this topic to the balance sheet and profit and loss formats, since numerical questions apply these rules there.
Write the heads in Schedule III order even for a short extract. Order and labels earn marks.
In MCQs, check due dates first. A loan instalment due within twelve months is the favourite trap.
Give a short note on share capital and reserves and surplus. Show calls in arrears and forfeited shares there.