Skip to content

CA Intermediate · Advanced Accounting · Introduction to Accounting Standards

Mehta Pharma Ltd. is a company whose securities are not listed and not in the process of listing. Its turnover for the preceding year was ₹80 crore, borrowings were ₹10 crore, and it has no subsidiary, holding or associate company that is not an SMC. Under the Companies (Accounting Standards) Rules, 2021, which statement best describes its classification?

Mehta Pharma is a Small and Medium-Sized Company. It is unlisted, its turnover of ₹80 crore is within the ₹250 crore limit, and its borrowings of ₹10 crore are within the ₹50 crore limit under the Companies (Accounting Standards) Rules, 2021, so SMC exemptions are available.

  1. AIt is an SMC because turnover is ₹250 crore or less and borrowings are ₹50 crore or less, and it is unlistedCorrect
  2. BIt is a Non-SMC because turnover exceeds ₹50 crore
  3. CIt is a Non-SMC because borrowings exceed ₹5 crore
  4. DIt is a Non-SMC because every company with turnover above ₹25 crore must apply all Accounting Standards

Explanation

For the 2021 rules, a company is an SMC if it is unlisted, turnover (excluding other income) does not exceed ₹250 crore, borrowings do not exceed ₹50 crore, and it is not a bank, financial institution or insurer. Here turnover ₹80 crore ≤ 250 and borrowings ₹10 crore ≤ 50, so it qualifies. The ₹50 crore/₹5 crore thresholds are older, superseded limits.

Did you get it right without looking?

One question tells you little. A timed set on Introduction to Accounting Standards shows your real accuracy, how long you take and where you lose marks.

Practise Introduction to Accounting StandardsFree diagnostic mock

More Introduction to Accounting Standards questions