CMA Intermediate · Corporate Accounting and Auditing

Schedule III Balance Sheet and Statement of Profit and Loss

Schedule III of the Companies Act, 2013 gives the form in which a company's balance sheet and statement of profit and loss are presented. To solve a question, sort each trial balance item into its correct head and sub-head, adjust for the given information, and present the statements in the prescribed order with notes.

What this chapter covers

This chapter is about how a company presents its financial statements. Section 129(1) of the Companies Act, 2013 says the financial statements must give a true and fair view of the state of affairs of the company, comply with the accounting standards notified under section 133, and be in the form provided in Schedule III for the relevant class of company. So the chapter combines two ideas: what the statements must show, and how the items are arranged.

You will study the general instructions, the balance sheet in two halves (Equity and Liabilities, then Assets), the statement of profit and loss, the notes that support each line, and finally the full exercise of preparing both statements from a trial balance. The notes matter because the face of the statements shows only heads and totals. The detail sits in the notes.

This chapter is the base of the rest of Corporate Accounting and Auditing. Later accounting chapters, such as share capital, debentures and company-level adjustments, end up as lines in these statements. Audit questions also refer to the statements being audited. If you can place any item in its correct head, those later chapters become easier.

Questions from this chapter are mostly practical and can be scored well if you know the format. A trial balance question tests many items at once, so it gives step marks even if one figure goes wrong. Theory parts, such as the contents of a note or the legal basis of the format, are short and predictable. The chapter also supports MCQs, where a single classification point, such as which head an item goes under, decides the answer. Time spent here also helps you in other chapters of the paper, because their results must finally be shown in the Schedule III format.

Statement of Profit and Loss and Balance Sheet (Schedule III of Companies Act, 2013): topics in the order to study them

1Schedule III Overview and General InstructionsStart with the legal basis in section 129 and the general rules, because every format and note that follows depends on them.
2Format of Balance Sheet: Equity and LiabilitiesLearn the liabilities side first, as shareholders' funds, non-current and current liabilities set the structure of the statement.
3Format of Balance Sheet: AssetsOnce the liabilities side is clear, the assets side follows the same current and non-current logic and completes the balance sheet.
4Statement of Profit and Loss FormatMove to the profit and loss statement after the balance sheet, since its result flows into reserves and surplus.
5Notes to Accounts and Disclosure RequirementsStudy the notes after both statements, because each note breaks down a line you have already seen on the face.
6Preparation of Financial Statements from Trial BalanceFinish with full problems, as they need every earlier topic and show where your gaps are.

How to prepare Statement of Profit and Loss and Balance Sheet (Schedule III of Companies Act, 2013)

Treat this chapter as a classification skill plus a layout to memorise. Build the layout first, then practise placing items into it under time pressure.

Read section 129(1) and (5) in plain words and note what they require: true and fair view, compliance with accounting standards, Schedule III form, and disclosure of any deviation with reasons and financial effect.
Write the balance sheet format from memory on one page, with heads and sub-heads in order. Repeat until you can do it without looking.
Do the same for the statement of profit and loss, then note how its closing balance links to reserves and surplus in the balance sheet.
Make a list of common trial balance items and mark the head for each, for example whether it is current or non-current, and whether it is a liability, an asset, income or expense.
Learn the main notes and what each one shows, and practise writing short note-style schedules with sub-totals.
Solve trial balance problems in steps: handle the adjustments first, prepare the profit and loss statement, then the balance sheet. Show working notes so you earn step marks even if the final total differs.
Before the exam, attempt MCQs on classification and check that the balance sheet balances in every written problem.

Common mistakes in Statement of Profit and Loss and Balance Sheet (Schedule III of Companies Act, 2013)

Putting an item under the wrong head or sub-head, such as a current item under non-current.
Fix: For each item, ask when it will be settled or realised and place it accordingly. Practise with a classification list.
Preparing the balance sheet before processing the adjustments.
Fix: Read all adjustments first, update the affected accounts, and only then build the statements.
Forgetting to carry the profit or loss into reserves and surplus.
Fix: After finding the result, add or deduct it from the opening balance of the surplus and show the closing figure in the balance sheet.
Giving no notes or working notes in written answers.
Fix: Add short notes for items with several parts, such as share capital or fixed assets, and show your calculations.
Writing theory without the legal link, or quoting section numbers from memory.
Fix: Learn the key points of section 129 as given in the Act and quote only sections you are sure of.
Leaving the balance sheet unbalanced and submitting it.
Fix: Keep two minutes to compare the totals. If they differ, recheck the adjustments and the carried-forward profit.

Last-day revision: Statement of Profit and Loss and Balance Sheet (Schedule III of Companies Act, 2013)

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.

Statement of Profit and Loss and Balance Sheet (Schedule III of Companies Act, 2013) practice questions

Statement of Profit and Loss and Balance Sheet (Schedule III of Companies Act, 2013) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Statement of Profit and Loss and Balance Sheet (Schedule III of Companies Act, 2013): frequently asked questions

What does section 129 say about the form of financial statements?

Section 129(1) says financial statements must give a true and fair view, comply with the accounting standards notified under section 133, and be in the form provided in Schedule III for the class of company. Certain companies, such as insurance and banking companies, are covered by a separate form under their own law.

What happens if a company's statements do not follow the accounting standards?

Under section 129(5), the company must disclose in its financial statements the deviation from the standards, the reasons for it and the financial effects, if any. This is a disclosure requirement and does not remove the need to give a true and fair view.

When must consolidated financial statements be prepared?

Under section 129(3), a company with one or more subsidiaries must prepare consolidated financial statements of itself and all its subsidiaries, in addition to its own statements. These are laid before the annual general meeting along with its own statements.

How should I attempt a trial balance question in the exam?

Read the adjustments first and apply them to the relevant accounts. Then prepare the statement of profit and loss, followed by the balance sheet, with working notes for each major figure. Finish by checking that both sides of the balance sheet agree.

Is there negative marking in the MCQs of this chapter?

No. Neither the question papers nor the ICMAI prospectus provide for negative marking, so attempt every MCQ in Section A.