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- Company Final Accounts – Explained!
Companies are governed by the Companies Act, Section and of the companies act specifies regarding preparation of final accounts. Section 2. The Act does not specify form to which the Profit and Loss Account to be presented.
Company final account pdf reader
The period to which the accounts relate is known as the financial year of it may be less then, equal to or greater than 12 months but cannot exceed the 18 months. Section of the Companies Act makes it compulsory for every company to keep proper books of an account with respect to:.
All sums of money received and spent by the company and the money in respect of which the receipt and expenditure take place. The assets and liabilities of the company.
The books of accounts and the relevant vouchers to any entry relating to period of at least eight immediately preceding the current must be preserved. Section of the Companies Act governs the preparation of final account of a Company.
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In case of non-profit Companies, an Income and expenditure Account should be submitted. The period to which the account relates is called a Financial Year of the Company. It may be less or more of a calendar year but must not exceed 15 months. It may also be extended to 18 months provided the Register has granted special permission.
The Profit and Loss Account or Income and Expenditure Account the relate, in the case of the first Annual General Meeting of the Company, in a period from the date of a incorporation to a day which shall not precede the day of the meeting by more than nine months.
And in case of any subsequent Annual General Meeting, the period runs from the date of the previous accounts to a date not more than six months prior to the date of meeting. Every Balance Sheet of Company shall give a true and fair view of the state of affairs of the Company as at the end of the financial year.
It shall also be in the form set out in part 1 of Schedule VI, or in such other form as may be approved by the Central Government [ 1 ]. Provided that nothing contained in this sub-section shall apply to any Insurance or Banking Company or any Company engaged in the generation of supply of electricity or to any other class of Company for which a form of Balance Sheet been specified in or under the Act governing such class of Company.
Every Profit and Loss Account of a Company shall give a true and, fair view of the profit and loss the Company for the financial year.
One of the Directors who sign shall be a Managing Director where there is one. The Balance Sheet and Profit and Loss Account must be approved by the Board before they are submitted to the auditors who must in turn attach their report thereto. If there is any separate, special supplementary report by the auditor, it shall also be attached to the Balance Sheet. If any person, being a Director of a Company, fails to take all reasonable step to company with the previsions, he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with imprisonment for a term which may extend to six months, or with fine which may extend to Rs.
However, the punishment of imprisonment is given only when the offence is committed willfully. The profit and Loss Account of a Company should give a true and fair view of the profit or loss of the Company for the financial year. The first account covers the period since the incorporation of the Company, and subsequent accounts cover the period since the date of the preceding account. Profit and Loss Account shall be so made out as to clearly disclose the result of the working of the Company during the period covered by the account and shall disclose every material feature including credits or receipts and debits or expenses in respect of non-recurring expenditure or expenditure of an exceptional nature.
It shall set out the various items relating to the income and expenditure of the Company under the most convenient heads and in particular shall disclose the following information in respect of the accounting period.
The important provisions are given below:. In the case of all concerns having work-in-progress, the amounts for which such works have been completed at the commencement and at the end of the accounting period. The amount provided for depreciation, renewals or diminution in value of fixed assets.
If such provision is not made by means of a depreciation charge, the method adopted for making such provision. If not provision is made for depreciation, the fact that no provision has been made shall be stated and the quantum of arrears of depreciation computed in accordance with Section 2 of the Act shall be disclosed by way of a note.
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The amount of charge for Indian Income-tax and other Indian taxation on profit and distinguishing them. The aggregate amount of dividends paid and proposed, and stating whether such amounts are subject to deduction of income tax or not.
Journal to Final Accounts - Transaction trail with Example
Amount, if material, by which any items shown in the Profit and Loss Account is affected by any change in the basis of accounting. Commission or other remuneration payable separately to a Managing Agent or his associate under Section , and Commission received or receivable under Section by the Managing Agent or his associate as selling agent of other concerns in respect of contracts entered into by such concerns with the Company. The money value of the contracts for the sale or purchase of goods and materials or supply of services, entered into by the Company with the Managing Agent or his associate under Section during the financial year.
Other allowances and commission including guarantee commission. Any other perquisites or benefits in cash or in kind stating the money value where practicable. Pensions, gratuities, payments from provident funds in excess of own subscription and interest thereon, compensation for loss of office, consideration in connection with retirement from office. The Profit and Loss Account also contains by way of note detailed information in regard to amounts paid to the auditors whether as fees, expenses or otherwise for services rendered as auditor and in any other capacity.
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Provision is a change against profits and finds its places on the debit side of Profit and Loss Account. The net profit is arrived at after taking into account all provisions. The provisions are in the nature of expense.
Thus Profit is subjected to further any adjustment that is in order to make it available for distribution of dividend to shareholders. It is popularly known as above line adjustments. Reserve is an appropriation out of net profits i. The adjustments to reserve are made in Profit and Loss Appropriation Account.
It is popularly known as below line adjustments. Reserve for Taxation i. Moreover tax can be provided only after all the expenses are provided for.
Provision for Dividends as per law dividends can be paid out of profits. Profit means profit available after taking into all the statutory expenses and provision. This is applicable for interim dividend, final dividend and proposed dividend. Transfers to Reserves specifically like general reserve, sinking fund, and other specific reserves.
The items usually appearing in the Profit and Loss Appropriation Account are as shown below:. Details under each of the above items shall be given in separate schedules. The schedules shall incorporate all the information required to be given under A. Horizontal form read with notes containing general instructions for preparation of Balance Sheet. The schedules, referred to above, accounting policies and explanatory notes that may be attached shall form an integral pan of the Balance Sheet.
It refers to the amount not paid by the shareholders on the calls made on them by the company. This item is usually given in the trial balance. It should be deducted from the called up the liabilities side of the Balance Sheet to find paid up capital.
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If the Trial balance shows only the paid up capital and the call-in-arrears is given in the adjustment, the amount is first added to the paid up capital to show the called up capital and then deducted against so that the paid up capital can be shown in the outer column.
It refers to the amount of dividend not collected by the shareholders from the company. This item is always shown on the credit side of Trial Balance. This item appears as a credit item in the Trial Balance and is shown on the liabilities side of the Balance sheet by adding it to the paid up capital. A Ltd. The following is its Trial Balance on 31 March The Mafatlal manufacturing company Ltd. Chennai was registered with a nominal capital Rs.
But no entry in this respect had been made. Since interim dividend is for current year, dividend tax should also be provided in the current year. Surcharge on dividend tax is ignored since it changes from year to year.
The following information has been extracted from the books of account of Hema Ltd. As at 31st March Factory closure cost is to be pressured as an allowable expenditure for income tax purposes.
Assume depreciation for the year under the Income — tax Act comes to Rs. Prepare Hema Ltd.
Details of the schedulers are not required. The financial statements have been prepared on the basis of historical cost concept in accordance with the generally accepted accounting principles and the provisions of the Companies Act, Depreciation on fixed asserts is provided using the straight-line method, based on the period of five years. Depreciation on addition is provided for the full year but no depreciation is provided on the asserts sold in the year of their disposal.
According to sections94, 95 and 97 Of the Companies Act, a company can, if authorized by its Articles, alter the capital clause of its Memorandum of Association in any of the following ways:. For example, the existing 1, 00, shares Rs. Thus the total share capital remains the same, but the number of shares stands reduces and its face value is increased. For example, the company has 10, shares of Rs.
Company Final Accounts – Explained!
For example, a company having 10, shares of Rs. Reduction of capital by a company would be possible if it is authorized by Articles and by a special resolution and conformation of the Court Section When a company has been suffering losses continuously for any reason, its real capital is gradually lost and will not be represented by the available, tangible assets.
Internal reconstruction refers to the reduction of capital to cancel any paid-up capital which is so lost or unrepresented by available assets. This is generally resorted to, to write off the past accumulated losses and to make the Balance sheet show the true and fair value of the assets and capital.
The capital written off is used to eliminate the losses accumulated and to bring down the assets to their true values. Consider the following Balance Sheet of X Company. In the example given above the paid — up capital of the company is Rs. Thus the share of Rs.