Preparation of balance sheet as per ‘Companies Act’ 2013 under vertical format

The balance sheet of a company summarizes its financial position. It presents an account of where a company has obtained its funds and where it has invested them.

Companies receive funds from two sources; lenders and shareholders. The amount invested by shareholders is called equity and the amount borrowed from lenders is called debt. Debt, combined with the company’s other financial obligations is called liability.

Companies invest their equity and borrowings in assets that help them generate revenue. Thus, a company’s liabilities and equity must equal its assets. This gives you the basic equation that is key to understanding balance sheets:

Assets = Liabilities + Equity

• The Revised schedule as eliminated the concept of ‘Schedule’ and such information is now to be furnished in the notes to accounts.
• The revised schedule follows Accounting Standards in case there is any conflict prevails.
• The revised schedule prescribes the vertical format for presentation of balance sheet.
• All assets and liabilities classified into current and non-current and presented separately in the balance sheet.
• The shareholder holding more than 5% shares must be disclosed in the notes to accounts.
• Any Debit balance in the statement of Profit and Loss will be disclosed under the head “Reserve and Surplus”.
• Specific disclosures are prescribed for Share Application Money.
• The term ‘Sundry Debtors’ has been replaced with the term ‘Trade Receivables’.
• ‘Capital Advances’ are specifically required to be presented separately under the head ‘Loans and Advances.’
• Tangible assets under lease are required to be separately specified under the head ‘Loans and Advances’.