CA Final FR English | Demo Lecture - 1 - Division II of Schedule III of Companies Act 2013

Summary

This demo lecture by the A S Foundation dives into Division II of Schedule III of the Companies Act 2013, discussing the standardized format for financial statements that companies adhering to Ind AS must follow. It provides insights into the preparation of balance sheets, profit and loss accounts, and key disclosure requirements, comparing them to IFRS standards. The session emphasizes the importance of standardized presentations for easy comparison and better understanding by users. Key components of the balance sheet and profit statements as per new regulations are detailed, alongside practical examples to solidify understanding.

Highlights

• Explore how Division II of Schedule III aligns financial statements with IFRS standards. 📚
• Learn about the importance of standardized financial statement presentation. 🧐
• Discover how OCI impacts net worth and its classification into recyclable and non-recyclable. 🔍
• Understand the educational approach that bridges theoretical knowledge with practical application. 🛠️
• Dive into tax obligations, extraordinary items, and understand the crucial role of disclosures. 💼

Key Takeaways

• Division II of Schedule III mandates a standard format for financial statements, aligning closely with IFRS. 🌍
• Presentation of financial statements is crucial, much like the difference between street food and five-star dining presentation. 🍽️
• Standardized formats ensure financial statements are comprehensive and comparable globally. 📊
• OCI items, both recyclable and non-recyclable, affect net worth and must be handled carefully. 🔄
• Practical examples bridge the gap between theoretical learning and real-world application. 👨‍🏫

Overview

Division II of Schedule III under the Companies Act 2013 sets the tone for how Indian companies should prepare their financial statements, closely aligning them with IFRS standards. This lecture by the A S Foundation introduces students to the structured approach required and emphasizes why standardized formats are of paramount importance.

The session explores the details of balance sheet and profit and loss account preparations, highlighting critical aspects such as OCI (Other Comprehensive Income), its role, and its classification. It also discusses the impact that presentation of financial statements can have on their comprehensibility and attractiveness — a crucial element in today’s competitive market.

By providing practical, real-world examples, the lecturer guides students in connecting their theoretical knowledge to practical tasks. This not only demystifies complex accounting principles but also prepares them for application in professional settings post-qualification, ensuring they are ready to tackle real-world financial challenges effectively.

Chapters

• 00:00 - 01:00: Introduction This chapter titled 'Introduction' starts with a warm welcome to the topic of Division 2 of Schedule 3 to the Companies Act 2013. It poses questions to the reader about their familiarity with a balance sheet based on Indian Accounting Standards (IndAS), prompting them to reflect on when they last saw such a document in an annual report. The chapter begins to set the stage for a discussion likely focused on financial reporting and compliance under the specified act.
• 01:00 - 02:00: Purpose and Standardization of Financial Statements The chapter discusses the purpose and standardization of financial statements. It mentions downloading annual reports of companies, such as Signity, to understand how balance sheets are prepared, emphasizing the practical application of this knowledge in professional settings.
• 02:00 - 03:00: Presentation of Financial Statements Schedule 3 mandates that financial statements be prepared in a standardized format to ensure consistency across all companies. This involves the use of standard formats, methods, and disclosures, aligning closely with International Financial Reporting Standards (IFRS) to facilitate easy comparison between them.
• 03:00 - 04:00: Division of Schedule III The chapter discusses the harmonization of financial statements in India with global standards, highlighting that despite some changes due to the Indian business, economic, and legal environment, financial statements are becoming increasingly comparable. This standardization facilitates investor comparison and comprehension as users can be trained to understand financial statements presented in a uniform format.
• 04:00 - 05:00: Format of Financial Statements This chapter discusses the importance of presenting financial statements in a standardized format. When companies create financial statements according to their convenience, it can lead to misunderstandings. Similarly to how food from a roadside vendor is perceived differently than the same food from a five-star hotel due to presentation and quality, financial statements need proper formatting to be more comprehensible and appealing to the readers.
• 05:00 - 06:00: Total Comprehensive Income (TCI) The chapter discusses the significance of the presentation of financial statements, likening it to the presentation of food in a five-star hotel, which enhances enjoyment. It highlights that the presentation of financial statements has become a crucial marketing tool for companies, much like an attractively prepared annual report.
• 06:00 - 07:00: Other Comprehensive Income (OCI) The chapter discusses the presentation and quality of annual reports by different companies, using NDTV as an example. It highlights how NDTV, now owned by Adani, produces its annual report by photocopying and stapling it, indicating a casual approach to presentation.
• 07:00 - 08:00: Practice Question 1 The chapter titled 'Practice Question 1' appears to be a part of a segment involving either a lecture or a presentation relating to company analysis or presentations. The speaker muses over the differences in presentation skills among companies and shares their personal experience of engaging with company financial documents like balance sheets. They comment on their lack of inspiration to delve into certain documents compared to others. The chapter also includes the commencement of an online session or webinar, where the speaker addresses remote participants and opens the floor for questions.
• 08:00 - 09:00: Practice Question 2 The chapter titled 'Practice Question 2' emphasizes the importance of having the notes ready, particularly for those who attended online sessions. These notes, available as a PDF, are crucial for writing down additional information during study. Furthermore, the chapter discusses Schedule 3, which specifies the format for the balance sheet, profit and loss account, and outlines certain disclosure requirements.
• 09:00 - 10:00: OCI Items Discussion The discussion focuses on the classification of companies under three divisions in Schedule Three. Division One applies to companies adhering to accounting standards, while Division Two caters to companies following IndAS, excluding Non-Banking Financial Companies (NBFCs). The speaker emphasizes the importance of noting these details to engage students actively in the learning process.
• 10:00 - 11:00: Advanced OCI Example The chapter 'Advanced OCI Example' discusses the financial reporting formats for various companies, specifically noting how banking and insurance companies have distinct formats mandated by regulatory bodies like RBI (Reserve Bank of India) and IRDA (Insurance Regulatory and Development Authority). It builds upon foundational knowledge from intermediate syllabus chapters, particularly related to the financial statements of companies as outlined in division one of Schedule One.
• 11:00 - 12:00: Exam Tips and Preparation The chapter focuses on exam tips and preparation strategies, specifically related to accounting. It highlights the importance of preparing balance sheets, profit and loss accounts, and other financial disclosures according to the prescribed formats. The syllabus will include questions where these skills are necessary, following the guidelines of division two of schedule 3, even if not explicitly mentioned. Emphasis is placed on applying correct formats as per division two by India.
• 12:00 - 13:00: Question 5 Solution The chapter discusses the application of financial divisions on companies, specifically focusing on Non-Banking Financial Companies (NBFCs). It clarifies that Division 3 is applicable to NBFCs that follow IND AS (Indian Accounting Standards). However, there's good news; Division 3 is not applicable in the current syllabus being discussed.
• 13:00 - 14:00: Conclusion In the conclusion, the discussion centers on the preparation of financial statements for Non-Banking Financial Companies (NBFCs) in compliance with Indian Accounting Standards (IndAS). The lesson focuses on Division Two of Schedule III, with clarification provided on which NBFCs must follow this structure. A student's question delineates the difference in reporting standards based on compliance with IndAS. NBFCs not applying IndAS should adhere to Division One format instead.

CA Final FR English | Demo Lecture - 1 - Division II of Schedule III of Companies Act 2013 Transcription

• 00:00 - 00:30 hello good evening and welcome to this wonderful topic division 2 of schedule 3 to the companies act 2013 have you ever seen a balance sheet based on indas when did you see in your annual report annual reports so I have got the annual report of a
• 00:30 - 01:00 company called signity okay so today you will also download some annual report of any company and you will go through it then you'll get an idea how these companies prepare their balance sheet exactly same thing we are going to learn today and you will apply in your offices post qualification also you have to prepare financial statements so exactly what you learn is applied in practice
• 01:00 - 01:30 also so the purpose of schedule 3 is that financial statement should be prepared in a standardized format all companies should prepare financial statement using a standard format in a standard manner standard disclosures and it is very close to the financial statement under IFRS also so our financial statement can be compared with IFRS based financial statement also
• 01:30 - 02:00 although there are some uh changes because of Indian business economic legal environment but still more or less now it is very close to the financial statement prepared by other global companies so therefore easy for the investors to make the comparison and when the financial statements are standardized it is easy for users to understand it they can be trained to understand financial statement in a certain format if every
• 02:00 - 02:30 company prepares financial statement as per their convenience then you'll not be able to understand their financial statement and when they're presented in a proper format we love to read it also is it right it is like having snacks on the roadside vendor or when you go to a five star and enjoy the same snacks what is the difference not just the quality quality is better in the
• 02:30 - 03:00 roadside the teste but the presentation the presentation the way they present in a five star hotel uh that makes you really enjoy that food okay you like that food so that is why presentation of financial statement is also very important nowadays it has become like a marketing tool also if you look at the annual report like this annual report I called from the company so they will prepare very nicely also
• 03:00 - 03:30 okay with all the color combinations you feel like reading it also there are some companies which are not very much interested like this company NDTV now owned by adani so when I called for the annual report they probably did the photocopy and they did the stapling this is their presentation not I have done I got it from the crier just before day before yesterday only This Is How They present with
• 03:30 - 04:00 stapler also so different companies have different presentation skill so I read that other balance sheet fully almost fully not line by line but all pages but this I have not yet opened also it is not inspiring me to open that okay so good evening everybody who have joined online session and on the YouTube channel also if you have any doubt at any stage you can ask me so let us begin
• 04:00 - 04:30 I hope you have received the notes PDF notes those who have attended online you can download the notes keep it with you so that sometimes we have to write something in the notes you can write it keep the print out ready okay so first is schedule 3 is going to give you the format for the balance sheet profit and loss account and certain disclosure requirements
• 04:30 - 05:00 schedule three has three divisions division one is for companies which follow accounting standard division two is for companies which follow indas except nbfc so you have to write it down in the book to keep the students also engaged I will make you write down something in the notes so who will follow division one companies which follow accounting standards
• 05:00 - 05:30 of course other than Banking and insurance companies because for Banking and insurance companies we have separate format given by RBI and irda okay this you have already studied in the intermediate syllabus division one you have studied in the intermediate syllabus do you remember you had a chapter financial statement of companies that was schedule one they have taught you division one of schedule
• 05:30 - 06:00 3 and our final syllabus is this any chapter where they will ask you to prepare balance sheet pnl account notes to account disclosure it will be as per division two of schedule 3 whether they specifically mention it or not our syllabus will answer all formats or balance sheet P account Etc as per division two will be applied by by India
• 06:00 - 06:30 companies except nbfc except nbfc and then division 3 division 3 will be applied by nbfc which are falling IND days those nbfc which are folling inds will apply division three so should I share one good news that is division 3 is not applicable in your syllabus division 3 is not applicable so
• 06:30 - 07:00 we don't have questions where we have to prepare the financial statement of nbfcs which comply with indas is it right so we are going to learn today division two of schedule 3 have you noted it down one student has a query in the classroom yes come on NFC which are not following will do yes of course nbfc which are not applying inds they will follow division one format
• 07:00 - 07:30 will be non because in indas the requirements are very different presentation is different disclosures are different NFC for nbfc also I have not seen because it's not in the syllabus so I don't know exactly what is requirement because already our life is miserable learning so much so what is not in the syllabus right now we are not focusing using on
• 07:30 - 08:00 that okay but if time permits I will check next is what is the format of statement of pnl account if you want to read the bear text of division two of schedule 3 it is printed at the end of our book those who have the notes bear text means exactly what is division two of schedule 3 is printed on page 2.38 page 2 not page 2. sorry just a
• 08:00 - 08:30 minute on page 2.44 page 2.44 in your book if you have the notes in front of you an exture a for self reading that is exactly the uh requirement of division 2 of schedule 3 which gives you the format and the requirements and the disclosures Etc is it right we will simplify that for our classroom discussion okay and whenever you get
• 08:30 - 09:00 time you go through it once in the exam they usually ask a question on schedule 3 where a long problem will be given which will have a balance sheet pnl account several adjustment and you have to prepare the financial statement as per schedule 3 division 2 okay they don't usually ask Theory question on this so focus should be on understanding the requirement of division two are you ready yes okay so good evening everybody
• 09:00 - 09:30 who has joined just now so first we'll see the format of statement of profit and loss which is very similar to but not 100% same to what you have learned in intermediate division one so we'll start with the heading which is called statement of profit and loss okay in IFRS they call it statement of comprehensive income but in our division
• 09:30 - 10:00 two we have called it statement of profit and loss because companies act uses the terminology statement of profit and loss then you'll write the name of the company you will write the name of the company you will write statement of profit and loss for the year ended and rupees in whatever is the rounding of you have used in Thousand or in LHS or in million so as a student you will do the rounding off in the same way it is given in the question the question is in
• 10:00 - 10:30 million you also solve in million otherwise every figure you'll have to change okay and we give two columns first is the uh previous current year reporting current year and second is the previous year for comparison so that the users can check uh whether the sales are increasing or not profit is increasing or not so we have revenue from operation we'll discuss line item separately other income total
• 10:30 - 11:00 income right now don't ask question what is other income it will come in your discussion expenses have folling headings cost of material consumed purchase of stock in trade then change in inventory of finished goods stock in trade and work in progress change in the stock will be opening stock minus closing stock
• 11:00 - 11:30 if you look at these two together see the logic if you look at these two together you have opening stock plus purchase minus closing stock because purchases come here opening minus closing Has Come What together they are known as so basically cost of goods sold so what you have written is cost of goods sold then you have employee benefit expense so all employee related expense will come here then one Mr
• 11:30 - 12:00 Ramesh Paar is saying hi okay Paar name nowadays is very popular Finance cost okay you are AIT P seriously yes officially now I have to be little careful while talking anything employee benefit expense when when Mr Ajit Paar is
• 12:00 - 12:30 sitting in the classroom and sharat pawar is online Finance cost Finance cost means all interest and boring cost will come here depreciation and amortization other expense total expense so this is total expense here and this was total income so what will you get total income minus total expense you will get profit or loss before
• 12:30 - 13:00 exceptional item and tax then you have to present exceptional item if any in IFRS there is no concept of exceptional item but in indas we have exceptional item in schedule 3 we have exceptional item something which is not very frequent okay something which is not regular or related to day to-day operation where the management wants to
• 13:00 - 13:30 highlight it separately like for example you have a profit on sale of a machine now you don't sell machine every year or every day it's not your day-to-day activity so if you want you can show it separately so that somebody who is analyzing the performance of the company will understand that this item is not going to occur every year so when he's projecting the future profitability he will keep this item separate and then make projection about the future
• 13:30 - 14:00 profitability exceptional item then we have after exceptional item profit or loss before tax so it it should be five my plus - 6 why plus - 6 it can be profit also it can be profit also then we have tax expense current tax defer tax defer tax we will study after some days in India 12 current tax is tax payable as per the
• 14:00 - 14:30 income tax law defer tax is the tax adjustment for the difference in uh assets and liabilities appearing in books and their tax base as per the taxation law so which is a little complicated standard so we will not discuss defer tax today but only in one problem there are few adjustments which I have to take so you have to trust me today for defer tax calculation okay you
• 14:30 - 15:00 will get profit or loss for the period from continuing operation and if the entity has a discontinued operation which we are going to discuss in indas 105 you keep writing so that you will remember the numbers that is we will calculate any profit or loss from discontinued operation before tax tax expense of discontinued operation you will get profit or loss after tax from
• 15:00 - 15:30 discontinued operation so paragraph 9 on the screen is profit or loss after tax from continued operation paragraph 12 on the screen is profit or loss after tax from discontinued operation so if you add the two that will give you total profit is it right this up to this is called part one of the statement of profit and loss A to this is called part
• 15:30 - 16:00 one where we show profit and loss items part two is called other comprehensive income I will explain this don't worry what is the new thing you are going to learn which you have not learned in intermediate syllabus other comprehensive income because my intermediate was over after that line but IFRS require that companies
• 16:00 - 16:30 must disclose other comprehensive income also what is the difference between profit and loss part one and other comprehensive income in part two other comprehensive income are unintentional income or expense unintentional that means management does not put its time energy effort planning to earn this income but because this these are income or these are
• 16:30 - 17:00 expense I need to bring it at one place so that we can calculate the total income or total expense for the period earlier this item used to be directly adjusted in reserve in intermediate suppose there's a revaluation of fixed asset so what we used to do we used to directly write revaluation Reserve in reserve and surplus not rooting through statement of profit and loss but now you'll have to root it through statement of profit and loss by showing it separately let the
• 17:00 - 17:30 user understand why the company's net worth has increased because change in income will change the net worth change in income will change the net worth so by highlighting it on the face of the statement of profit and loss we get more clarity as to why the net worth of the company is changing is it right same thing in intermediate we were writing directly in the
• 17:30 - 18:00 reserve and surplus most of the item this also is divided into two types which two type those item which will not be reclassified to pnl account that means once they are realized or settled they will not be transferred to pnl account but they will transfer to other component of equity like for example res revaluation Reserve once the asset is sold it will not be transferred to
• 18:00 - 18:30 revaluation Reserve will not be transferred to pnl account but it will be transferred to General Reserve okay and income tax on this item that also you have to present then items which are which will be classified to pnl account which will be classified means once it is realized it will be transferred back to p and account example foreign exchange
• 18:30 - 19:00 difference example Forex foreign exchange difference related to suppose foreign subsidary so till you hold the subsidary The Exchange difference will come here but once the subsidiary is sold the accumulated exchange difference is recycled to profit and loss account and any income tax expense so this total will give me total of other comprehensive
• 19:00 - 19:30 income and once I add the profit and loss plus other comprehensive income what I get is called TCI total comprehensive income and this total comprehensive income is transferred to statement of changes in equity in the respective column profit will go to retained earning column revaluation Reserve will go to revaluation Reserve column Forex Reserve will go to Foreign Exchange Reserve
• 19:30 - 20:00 column Etc and you are also required to disclose earning per share earning per share will be disclosed separately for continuing operation there are two types of eps basic and diluted refer indas 33 but not today we'll discuss this after some time but it is similar to your accounting standard 20 in your intermediate with some changes also of
• 20:00 - 20:30 course both basic and diluted EPS you have to disclose then you have to also disclose EPS for discontinued operation both basic and diluted and you will also disclose the EPS for continuing and discontinued operation basic and diluted EPS is a very important number because the share price of the company is affected by the earning per share so
• 20:30 - 21:00 that is why there is a standard also it is calculated as per indas 33 and it is disclosed on the face of the pnl account immediately it will draw the attention of the users of financial statement that what is the EPS of this year what was the EPS last year you can compare it with some uh other companies also and you can understand the performance so one student had asked earlier sir where is is the extraordinary item under
• 21:00 - 21:30 indas there is no extraordinary item all items are ordinary item at the most some item can be shown as exceptional item then secondly what about prior period item sir in intermediate we were taught prior period item there is no prior period item then where will prior period item go you have to do retrospect itive adjustment oh my God so if you make
• 21:30 - 22:00 mistake in earlier year discovered in current year you can't Rectify current year pnl account you have to go to that year to which the mistake relates and rectify Rectify Rectify Rectify and bring it to the current year is it right so companies will have to be very careful now when they prepare financial statement because mistake means
• 22:00 - 22:30 retrospective application you can't just uh ignore by writing one line item in pnl account so in intermediate under accounting standard we disclose it in the current year pnl account as a separate line item but under indas we'll have to do retrospective adjustment now the another format which you have not learned in intermediate is the statement of changes
• 22:30 - 23:00 in equity s o c i e so in short we will call it s so c e is it right now what is s soe here basically we will show share capital and reserve and surplus reserve and surplus basically will start with opening balance and reach the closing balance by add deducting whatever changes which have
• 23:00 - 23:30 happened during the year and it will be divided into several columns depending upon how many types of reserves do you have is it right so it is not something extraordinary we have done the same thing in intermediate also but there there was no specific format for reserve and surplus we simply used to write one by one General Reserve opening balance add profit less dividend closing B balance same thing here we have to do
• 23:30 - 24:00 but in a format so don't worry it is very easy so what you'll do you will first prepare statement of changes in equity name of the company for the year ended or period ended rupees in one is equity share Capital where you will write opening balance any changes during the year and closing balance so changes means plus minus fresh issue add buy
• 24:00 - 24:30 back less bonus share add conversion of debenture into Equity add and there are some disclosures also which I will tell you later what are the disclosures to be given for equity share Capital this is a big format other Equity sir do we have to remember all these column the answer is no it is a format if some reserves are not in your question then there's no need to draw as
• 24:30 - 25:00 a student usually three four or five reserves will appear in your question so only those many columns you will draw and you have to move from opening balance to closing balance right that is the logic but there are some special points keep in mind you will write balance at the beginning if there is any change in accounting policy which has
• 25:00 - 25:30 retrospective application which has retrospective application for example under indas if you choose change the accounting policy voluntarily example if you change the accounting policy voluntarily always retrospective effect in some cases the standard will tell you whether you have to do retrospective or prospective is it right but if you volun Al change the accounting policy always
• 25:30 - 26:00 retrospective so you have to see what will be the effect of the change in accounting policy from retrospective effect and adjust your opening balance you have to do some working find out how much would have been the opening balance of Reserve if this accounting policy would have been applied from the beginning so that is your change in accounting policy similarly I just now told you if there is a mistake or error
• 26:00 - 26:30 or Omission which we call prior period item you have to do retrospective application and because of that how much will your reserve change that you have to adjust in the opening balance and after rectifying your prior paid item and retrospective change in accounting policy you will call restated balance at the beginning so revised opening balance it is called
• 26:30 - 27:00 revised opening balance and then you will prepare a pnl account which we did discussed just now from pnl account you will transfer the total comprehensive income profit will be added to profit capital reserve will be added to capital reserve General Reserve will be added to General Reserve revaluation Reserve will be added to revaluation Reserve so whatever you have written in that total comprehensive income column
• 27:00 - 27:30 by column you will add in that particular column if you have declared or paid any dividend declared or paid not proposed proposed dividend will come only after it is declared and paid only proposed dividend is not a liability hence not accounted only disclosed but dividend declared or paid will be deducted from the reserve from
• 27:30 - 28:00 which you have paid it usually it is paid from retained earning or general Reserve so deduct in that column then any transfer to retained earning so company may have a policy of transferring 10% profit from pnl account to General Reserve or from any other Reserve to retained earning so whatever is the inter Reserve transfer minus in one column Plus in another column
• 28:00 - 28:30 understood any other change to be specified whatever any other item for example conversion of debenture uh uh into share or whatever and then you'll get the closing balance this closing balance will be transferred to balance sheet by taking the total of all these Reserve so it will appear in the balance sheet as other Equity it will appear in the balance sheet as other Equity is it
• 28:30 - 29:00 right right now I'm not discussing individual item they will come in the respective standards also okay because you not understand right now what do you mean by transfer transfer means transfer from share application account to share capital account is it right transfer just make a correction here transfer from make it from share application to
• 29:00 - 29:30 share Capital if there is a typing error Rectify once the shares are allotted share application money will be reduced share Capital will be added then from share warrant to share capital from revaluation Reserve to General Reserve from retained earning to General Reserve so these are the example of transfer although not important
• 29:30 - 30:00 anymore dividend distribution tax is withdrawn and I've not seen question also in the last 2 three years on dividend distribution tax but if suppose by mistake asked what will you do just like you have deducted dividend you deduct the dividend distribution tax also along with dividend so not very important just a passing remark if it is
• 30:00 - 30:30 given now the question was what is oci other comprehensive income why we need to present it separately other comprehensive income also affects my net worth is it right net worth is net asset asset minus liability is net worth or net asset our net worth changes due to two reasons net worth changes due to two reasons one
• 30:30 - 31:00 is when I bring more share Capital am I right if I issue shares will the net worth increase yes that is called Capital change that is called Capital change increase in net asset due to Bringing more capital or withdrawing capital buyb of share means your net worth will change another reason why net worth will change is due to profit or loss that is called performance change now
• 31:00 - 31:30 because of oci all your performance will appear on the statement of pnl account whether it was intentional which is pnl account or whether it was unintentional which is oci is it right so example of capital change is issue of share Capital share application money share warrant Securities premium
• 31:30 - 32:00 they also increase my net asset but that is not due to Performance of the company that is due to raising of capital and performance change example is profit and loss the part one of the pnl account is intended profit the objective was to un profit management had put their time energy effort resource to earn this profit example sale of goods interest
• 32:00 - 32:30 like that oci is unintentional we don't put our time energy effort Resource Management strategies planning for earning oci but they are part of the business if you're holding a land its value will increase okay so who has decided what items will come in oci iesb will decide it has already
• 32:30 - 33:00 decided in order to avoid confusion or different policies they have logged these items okay OC uh ISB says we are telling you these are the oci item no question that means you cannot say sir no no I think it was intentional forget it it will come in oci only otherwise half of the companies will show in pnl
• 33:00 - 33:30 account half will show in oci ETC so in order to avoid multiple treatment they have loged the items which will come in oci okay who has done that IB there are total nine items now next is one good news inds and IFRS will have same items in oci example of oci item revaluation
• 33:30 - 34:00 Reserve which you know so I given such example which you already know but in Intermediate Accounting standard we used to directly write in reserve and surplus here first we will present in oci and then we will also present in statement of changes in equity so that the users will get to know the total performance change total change in network due to Performance so in order to keep you engaged we are
• 34:00 - 34:30 going to solve one question are you ready those who have the notes we are going to solve in the notes only because I have drawn the format for you do you have the blank format with you yes this question is not from the study material this question is designed for conceptual understanding so if you only say that I want only study metal then
• 34:30 - 35:00 lot of gaps are there in the study metal that means they have not explained with example certain thing understood I'm going to take study metal question but wherever I find there is a gap in the study material they don't have sufficient example I have added some more example there so this is a concept problem they may not ask in the exam but that will help you to understand how
• 35:00 - 35:30 the companies now present under oci and pnl account are you ready a limited has share capital of rupes 10 lakh along with plant and Machinery of rupes 10 lakh so opening balance sheet has two item on the liability side you have share capital on the asset side you have one plant and Machinery of 10 lakh understood so this is my opening balance sheet at the year end plant and Machinery were revalued upward by 1 lakh
• 35:30 - 36:00 so this will become 11 lakh a limited earned a profit of 50,000 in cash on the last day of the year so this revaluation of plant and Machinery will be shown in oci but this profit earned from your day-to-day operation will come in first part called profit and loss to keep the matter simp simple ignore taxation prepare extract
• 36:00 - 36:30 of financial statement as per accounting standard and as per indas so what we we have done earlier under accounting standard and what we are going to do now under India so this will give you a good comparison also so those student who have got the notes class student and online student you can start writing in the notes other student will write in the notebook
• 36:30 - 37:00 if you don't have the notes you will write in the notebook question number one from schedule three division 2 chapter so first you understand case one under accounting standard if you are accounting standard student which item will come here both will come 50,000 and 1 lakh or only 50,000 will come only 50,000 revaluation Reserve does not come in pnl account it directly goes and sits in the reserve and surplus
• 37:00 - 37:30 so Pat will also be 50,000 and in balance sheet directly that revaluation Reserve I'll put it in balance sheet share Capital will come 10 lakh right reserve and surplus retained earning how much 50,000 directly revaluation Reserve will come in balance sheet 1 L we should have prepared reserve and surplus note also
• 37:30 - 38:00 but it's okay so otherwise you can prepare one more working reserve and surplus so the liability side will have 11 lakh 50,000 asset side non-current asset PP how much will you write in PPE 10 lakh plus 1 lakh 11 lakh assume no depreciation No Taxation and remaining 50,000 was earned in cash the profit was earn in cash so you will write current
• 38:00 - 38:30 asset cash and cash equivalent in 50,000 take the total it is telling this is what you have done in accounting standard or up to intermediate stage but now you are a final student you are a grownup kid so the same thing how it will appear under indas case 2
• 38:30 - 39:00 one thing I have to write here statement of profit and loss in short s o PL in the exam do not write short form okay but in the class to save time we can write so here I'm going to write other income Pat will also be 50,000 but then I will have one more component in the statement of profit and loss OC C and what will come here revaluation
• 39:00 - 39:30 Reserve how much 1 lak so Total oci 1 lakh 50,000 is profit 1 lakh is oci total of profit plus oci that is called total comprehensive income TCI will be 1 lakh 15,000 understood when we are going to solve questions we are going to present like this only we be very careful and then
• 39:30 - 40:00 we'll prepare one format called s so cie write down the format heading s so cie not printed in the book write in the notebook I think there is some typing issue so I sincerely request you write in the notebook s so c e write in the notebook no problem
• 40:00 - 40:30 s soe format will be there are two ways you can present you can present share Capital separately Reserve item separately but as a student you are allowed to put share Capital also in this format okay companies will not do that so s soe
• 40:30 - 41:00 total four columns on the right side share Capital retained earning revaluation reserve and total and total everybody write in The Notebook write in the notebook opening balance is given in the first line of the question opening balance is given
• 41:00 - 41:30 opening balance we have only one item share Capital 10 lakh is it right share Capital 10 lakh then write add total comprehensive income add total comprehensive income add total comprehensive income now go to your statement of profit and loss profit is
• 41:30 - 42:00 50,000 correct revaluation Reserve is 1 lakh total 150,000 and then you take the total of each column also 10 lakh in the First Column 50,000 1 lakh and total is 11 lak 50,000 how will you present this in the balance sheet 10 I will present as share capital and these two together I will
• 42:00 - 42:30 present as other Equity okay below this write down below this write down one more thing balance sheet in your notebook write down balance sheet in the notebook keep the notebook with you write there question number one page number reference write down your notebook is very important for exam notebook plus our class note if you do it thoroughly I think it will be very good very uh
• 42:30 - 43:00 sufficient material for you you have to trust me we have taken lot of efforts to prepare these notes so now in the schedule 3 division two it starts from asset side okay whereas in schedule three division one it starts from equity and liabilities
• 43:00 - 43:30 that is also one important care you have to take so first you will write assets non-current asset PP PP will be same 11 lakh current asset cash and cash equivalent cash and cash equivalent cash and cash equivalent will be how much 50,000 cash and cash equivalent will be
• 43:30 - 44:00 50,000 total 11 ,000 11 50,000 this is your uh asset side now write down equity and liabilities equity and liabilities will have two items one share Capital 10 lakh and other Equity will write other
• 44:00 - 44:30 Equity will be 150,000 Total 1 lakh 50 11 lakh ,000 so can you see the balance sheet format is also different under inds is it right balance sheet format is also different any query on the question number one can we go to question number two now
• 44:30 - 45:00 we'll take a little more advanced version of this you should have first feel the chapter okay that how the numbers are presented in different formats because this s so C may be something new for you probably you may not have done before this probably so one more practice I will take this is also a concept question
• 45:00 - 45:30 a limited had started the year with the following share capital is 10 lakh share application money is 5 lakh retained earning is 4 lakh General Reserve 2 lakh revaluation Reserve is 1 lakh then PP is 20 lakh and opening cash this is opening cash 2 lakh
• 45:30 - 46:00 understood just check whether the balance sheet is telling these are the equity and liabilities item 22 lakhs and these two are your asset side item 22 lakh okay during the year sales for R 50 lakh expense were 40 lakh so these two will come in the first part of the
• 46:00 - 46:30 profit statement of profit and loss dividend paid was 35,000 this I will deduct directly in s o e it was found that expense of 30,000 for previous year were still to be recorded this is prior period item so I will have to rectify the opening balance of Reserve this is the opening balance of
• 46:30 - 47:00 Reserve retained earning it is wrong because had we booked the expense in the earlier Year my opening balance would have been lower and my balance sheet would have a liability item expense outstanding balance sheet will have an outstanding item so we will have to pass an entry profit and loss to outstanding expense
• 47:00 - 47:30 30,000 and this profit and loss will be opening profit and loss which we are going to reduce rather than showing in the current year profit and loss if you're an accounting standard student it will appear in the current year profit and loss as a separate line item prior period expense but now you have to adjust the opening balance of the pnl account it is the policy of the company to transfer 1 lakh to General Reserve perom
• 47:30 - 48:00 so I'm going to deduct from retained earning and add in the general Reserve in sci PP was again revalued downward by 40,000 now you go to the opening balance you have a p revaluation Reserve 1 lakh is it right so we are going to reduce directly in the sci we'll also show in the oci also
• 48:00 - 48:30 but we are not going to put it in the PN account because I already have an opening balance in revaluation Reserve so when I have a balance in revaluation Reserve first I utilize that in case of downward revaluation is it right if it is revalued for downward for the first time then it is adjusted in profit and loss
• 48:30 - 49:00 so what is your question all the transactions were in cash except previous year expense which were not recorded so I will create a liability in the balance sheet for that 30,000 rupees fresh issue of share 8 lakh using share application money 5 lakh so 5 lakh you will transfer from share application money to share capital and remaining three lakh will be received in cash yes or
• 49:00 - 49:30 no bank account debit 3 lakh share application account debit 5 lakh to share Capital account 8 lakh prepare extract of financial statement ignore taxation because right now you don't know about defer taxation Etc so so we'll try to avoid taxation in this chapter except in one or two
• 49:30 - 50:00 question so first I'm going to prepare statement of profit and loss current year do you have the format in your book so student who have got our class notes I have drawn the format to save our time syllabus is very vast wherever possible I will give you the format but I will also make you solve questions in the notebook also
• 50:00 - 50:30 okay and all these question you have to today after going home or those who are at home will revise and come tomorrow because tomorrow we are going to take question which will run into multiple Pages question will run into multiple pages and those are exam questions so let us write down first Revenue from operations sales write down 50 lakh
• 50:30 - 51:00 question in front of you total 50 lakh because there is no other income then write down expenses other expenses 40 lakh that previous year expense will not come here tax is not there so directly Pat will be 10 lakh other comprehensive
• 51:00 - 51:30 income there you will write decline in revaluation Reserve bracket right 40,000 in bracket 40,000 total oci 40,000 this is 10 lakh this is 40,000 so what will be TCI TCI write down 9 lakh 60,000 very good
• 51:30 - 52:00 amazing these are just questions designed for conceptual understanding now we'll prepare s o c i e okay is the format in your book ready yes sir yes so first you start with opening balance go to question search for share capital how much 10 lakh application money 5 lakh
• 52:00 - 52:30 retained earning 4 lakh General Reserve 2 lakh revaluation Reserve total 22 lakh then we have to make one rectification of error Point number B rectification of error in retained earning reduced 30,000 because of the mistake committed in previous year I have to do retrospective adjustment so
• 52:30 - 53:00 total is 30,000 then below that point C revised opening balance share Capital 10 lakh application money 5 lakh retained earning will be 370,000 General Reserve 2 lakh revaluation Reserve total 21 L 70,000 Point number D total comprehensive income now you go to statement of profit and loss what was the profit for the year part one before
• 53:00 - 53:30 oci 10 lak and what was the revaluation Reserve adjustment there 40,000 negative is Right 40,000 negative so you have to present here also so total comprehensive income 9 lakh 60,000 do we have any other adjustment yes issue of share share Capital will increase by 8
• 53:30 - 54:00 lakh out of 8 lakh 5 lakh was transferred from share application money and three lakh was in cash that I will add in cash in balance sheet 3 lakh cash which we got will be added to the cash and cash and bank balance in balance sheet so my net effect is 3 lakh here then we have paid dividend also how much
• 54:00 - 54:30 dividend did we pay from retained earning reduce 35,000 35,000 this will reduce my cash balance so when we prepare balance sheet 35,000 will be reduced from cash balance now you write down transfer to General Reserve there is one more adjustment how much amount is transferred to General Reserve from where retained earning 1 lakh to
• 54:30 - 55:00 where General Reserve net effect zero any more adjustment here read the problem any more adjustment here no so now you are ready to write the closing balance so what is share Capital finally 18 lakh share application money zero retained earning 12 12 lakh 35,000 very good General Reserve 3 lakh revaluation Reserve 60,000 60,000 and
• 55:00 - 55:30 total 33 lak 95,000 just check you have to ensure vertical and horizontal total both match vertical and horizontal total very good it is matching just before going to the balance sheet this you will present as share capital in the balance sheet and the total of these three
• 55:30 - 56:00 item you will present as other Equity okay so now write down balance sheet now write down balance sheet you will start from asset side or liability side yes under indas will start from asset side so go to your opening balance sheet given in question you had one PPE item yes or no so first write down the
• 56:00 - 56:30 heading one non-current asset under that PP nothing is given except that it was revalued downward by 40,000 depreciation is not given ignore 20 lakh minus 40,000 yes students come on 19 lakh 60,000 very good current asset cash and cash equivalent what is opening balance 2 L 2 lakh What is the sales minus expense 10 lakh plus three lakh issue of share
• 56:30 - 57:00 minus 35,000 dividend paid this is dividend paid any student who wants to ask a query this is issue of share and this is Cash profit sales minus cash expense and this is opening balance in case if you have not understood okay so what is the answer
• 57:00 - 57:30 145,000 14 lakh 65,000 total of asset side is it telling now yes is it telling 3 4 25 25 tri0
• 57:30 - 58:00 3425 so this is how this was a very basic question we'll take one big question also but first we should learn small simple questions it is like learning car driving first they will take you to a ground where there is nobody okay and after 2 days they will take you to the main road then last 3 days they will take you to Highway
• 58:00 - 58:30 also so this is right now we are walking on a or driving on a empty ground or a place where there is nobody so that was my asset side now write down Part B equity and liabilities share Capital 18 lakh other Equity will be 12 lak 35,000 + 3 lakh +
• 58:30 - 59:00 60,000 15ak 95,000 Point 2 write down current liabilities under the trade payable in bracket expense payable trade payable in bracket expense payable that was 30,000 it is not yet paid if it was also paid you will write you will deduct it from cash total should match 34 lakh 25,000 that is the power
• 59:00 - 59:30 of double accounting double entry system this was my question number two just a warm-up question some more discussion on oci other comprehensive income is divided into two parts which two parts item which will not be reclassified or recycled which means they will not be
• 59:30 - 60:00 transferred to pnl account even if the asset is realized or the liability is settled okay like even if the pp is sold the balance in revaluation Reserve will not be transferred to pnl account it will be transferred to General Reserve so which are the items here which are the items here one is revalue valuation Reserve also called revaluation Surplus
• 60:00 - 60:30 which we are going to discuss in India 16 okay then fair value gain fair value change gain or loss on investment in equity suppose you have investment in equity share capital of other company and you have decided to designate it as ft oci can you tell me the full form of fvt oci
• 60:30 - 61:00 fvt fvt if there is a spelling error Rectify so what is fvt oci fair value through other comprehensive income FV means fair value t means through which means whenever there's a change in Fair Value that fair value will be rooted through other comprehensive income and even if that Equity investment is later on
• 61:00 - 61:30 sold you're not going to transfer the balance to pnl account you will transfer it to other component of equity means other Reserve item but not to pnl account more about this instrument we will discuss in inds 109 then some more discussion but not in detail right now third item is fair value changes fair value changes gain or loss on financial liability arising due to own credit risk
• 61:30 - 62:00 arising due to own credit risk that means your liability changes because of change in credit risk that change in the fair value will also be presented in oci non recyclable where will you study about it Ines 109 and then one more fourth item Consolidated adjustment like for example interesting
• 62:00 - 62:30 thing understand suppose you have an associate or a joint venture associate means companies where you have significant influence where you are holding between 20 to 50% generally not necessarily so you have to add you have to add their oci item in your oci to the extent of your share so if suppose your
• 62:30 - 63:00 associate has any oci item which is non recyclable you will add in your oci non- recyclable is it right if your joint venture have any oci item non recyclable one lakh your share is 20% so 20,000 in Consolidated financial statement you will add in your oci non recyclable okay so this I'm going to
• 63:00 - 63:30 discuss in consolidation standard IND 28 and fifth important item tick mark on which we have a question also in this chapter coming soon is remeasurement of defined benefit plan defined benefit plan means something like gratuity pension companies have to make provision for gratuity they have to estimate it but
• 63:30 - 64:00 what happens as it is an estimation the value keeps on changing so that change in the value will be rooted through oci item under the head non recyclable more about defined benefit plan we will discuss in indas 19 example if you want to understand gratuity pension where the compan is obliged to pay what
• 64:00 - 64:30 they have promised to the employee when he will retire and it is estimated by acty and the valuation keeps changing second type of oci item is recyclable or which will be reclassified to P account what are the examples here one is exchange difference on translation of foreign oper operation covered by India 21 so if you have a foreign
• 64:30 - 65:00 subsidiary foreign associate foreign joint venture till they are sold disposed exchange difference will be taken in oci and once they are disposed this will be transferred back to profit and loss then gain or loss on cash flow hedge under 109 right now I cannot explain what is cash flow it will require one full
• 65:00 - 65:30 lecture okay then fair value change on date underline date if it is a date instrument designated as fbci it will be reclassification it will be reclassified but if it is equity instrument then it is not reclassified de is reclassified equity is not reclassified more about that in indas
• 65:30 - 66:00 109 today is not the day for discussion of indas 109 and point number four is same consolidation adjustments if you have an associate if you have an associate and the associate is showing in their oci item some reclassified item which are re classifiable our share in that will be shown in Consolidated financial statement under oci under item which are
• 66:00 - 66:30 recyclable is it right so these are the nine items for your interview also remember these nine item or even in your audit paper also sometime they ask such questions I'm not an audit teacher but I've seen some paper where there is a question on oci also Okay so so five items are non recyclable four items are
• 66:30 - 67:00 recyclable okay today as a homework you will read this whole chapter once again and come tomorrow but today's lecture is not yet over okay now I will give you one example of uh non recyclable item come to question number three a plant whose Book value is rupe 10 lakh
• 67:00 - 67:30 was revalued upward in 201920 by 1 lakh [Music] rupees okay so where will that 1 lakh be shown revaluation Reserve oci non recyclable but this plant was sold in 2021 22 at R 12 LH 50,000 so how much profit you will make on
• 67:30 - 68:00 sale 12h 50,000 but the book value is 11 lakh because you have already increased by 1 lakh so one is lakh is profit on sale 150,000 this 150,000 profit on sale will go to pnl account it is not a revaluation Reserve and this 1 lakh will go to revaluation reserve oci and the year in which you
• 68:00 - 68:30 are going to sell the balance lying in that 1 lakh rupees will be recycled from revaluation Reserve to General Reserve or any other component of equity or any free Reserve but not to not to P account so this question is 201920 is one year 2021 is another year
• 68:30 - 69:00 but no event has happened in that year and then 21 22 so three years are involved here can you see that three years are involved prepare extract of the financial statement and also pass journal entries so journal entries are always the best way to understand accounting is it right the conceptual understanding comes from journal entry
• 69:00 - 69:30 so student will uh write in their I think book I have drawn the format these are basic concept question okay not from ICI material but this will make your concept very strong fundamentals must be right then you can handle different type of situation so first entry I will pass into 201920
• 69:30 - 70:00 201920 what is the entry you will write PPE account debit to revaluation Reserve 1 lakh is it right now write down being PP revalued then 2122 directly you have sold your PP for what amount 12
• 70:00 - 70:30 50,000 and the book value is 11 lakh right now Book value is 11 lakh right now so therefore gain on sale you will show gain on sale you will show 1 lakh 50,000 but there is a balance lying in your revaluation Reserve once the asset is is sold balance in revaluation Reserve is transferred to other
• 70:30 - 71:00 component of equity the standard does not tell you name of any particular Reserve so you can transfer it to retained profit you can transfer it to General Reserve so write down to other component of equity to other component of equity yes Mr Rahul Sund any answer one lakh and then I have written a note for you don't write printed in the B book
• 71:00 - 71:30 revaluation Reserve cannot be recycled but will be transfer to other component of equity which means it cannot be rooted through pnl account now we'll prepare statement of profit and loss I have drawn three columns here okay there are two parts here part A is the profit and loss part part B is the oci part so gain on sale
• 71:30 - 72:00 will come in which year 2122 and what amount you will write there, 150,000 then point B item which cannot be recycled revaluation Reserve 1 lakh will come in which year 1920 1920 1 lakh 1920 we'll write 1 lakh and that 1 lakh in the SCI in the third year I will transfer to other component of equity is it right is
• 72:00 - 72:30 everybody paying attention Okay so now you will prepare SCI one below the other year 1 year 2 year 3 is it right so scie 1920 opening balance is not there total comprehensive income so opening balance you can just put dash
• 72:30 - 73:00 dash dash total comprehensive income is 1 lakh is it there 1 lakh so my total will be 1 lakh 1 lakh this is the presentation of Sci for the first year okay then below that I have written 2020 21 opening balance 1 lakh in revaluation Reserve total comprehensive income
• 73:00 - 73:30 nothing is given 0 0 0 therefore total is again same just to check your confidence second year they have not given anything so you are getting one lakh okay below that I have written 2122 opening balance 1 lakh Now understand total comprehensive income in retained profit go to your pnl account
• 73:30 - 74:00 third year in pnl account third year how much was your profit on sale so that will come here and one more line item I will add transfer from revaluation Reserve because now the asset is sold I will not keep the balance in revaluation Reserve this we are going to learn in India 16 also but you have studied a similar standard as10 in uh accounting standard where
• 74:00 - 74:30 also we had same adjustment once the asset is sold you will not keep the balance in revaluation Reserve you will transfer it to other component of equity so we have decided to transfer it to retained earning retained earning 1 lakh revaluation 1 lakh total zero and then take the vertical total yes Mr Harry vertical total of First
• 74:30 - 75:00 Column 50, 250,000 second column zero third column 250,000 okay this is how the presentation will be done now one more paragraph I have added from my side not in the study material J journal entries for oci items journal entry for oci item and
• 75:00 - 75:30 you'll see I have divided into two columns the First Column is items which cannot be recycled example revaluation Reserve just now we have seen and second type is items which can be recycled example also we have discussed gain on investment in debt instrument designated as VT oci gain on uh investment in debt instrument
• 75:30 - 76:00 designated as fvt oci so first you focus in that uh non-recyclable item if there is a revaluation gain for example it can be any other item I have taken the example of pp because you have done questions on PP in accounting standard also and there are lot of similarities between accounting standard 10 and India
• 76:00 - 76:30 16 so when the pp will be revalued upward we'll pass the entry PP account debit to revaluation Surplus this I'm going to present in oci and plus I'm also going to present in scie in the year in which the pp will be sold or D recognized I will transfer from revaluation Reserve to other component of equity which we
• 76:30 - 77:00 did in the question number three being revaluation Surplus transferred but suppose the item is of this type which are recyclable to pnl account first entry will be say investment in debt instrument classified as fvt oci debit it to fair value gain on debt oci same thing you'll present in oci
• 77:00 - 77:30 under recyclable item which can be reclassified okay and you will also present in sci you'll open one column where you will write uh fair value gain on date instrument classified as fvt oci and there you'll write the amount then the in the year in which you're going to sell that debt
• 77:30 - 78:00 instrument whatever is the balance lying in oci will be recycled to pnl account so fair value gain will be debited to profit and loss account and in your pnl account you will present one line item reclassification gain in p account under other income or below other income you'll write reclassification gain and
• 78:00 - 78:30 then oci will be debited in pnl account and even in sci you will remove it in sci also you will remove it so I'm going to show you how to do the presentation of oci which are recyclable and which are non recyclable in the same problem again can write down concept problem so these are the four concept questions I will take and after that we
• 78:30 - 79:00 will take some exam questions also okay these four questions you will not find in any publication of The Institute but because students don't understand oci we thought that we'll just go little slow today first part of this lecture where you have to understand how the presentation is done are you ready yes a limited has following
• 79:00 - 79:30 assets PP rupes 5 lakh investment in equity instrument classified as every TPL what is the full form of fvtpl fair value through P account it means these are those investment in equity share when the fair value will change the change in Fair Value goes directly to pnl account so no problem with that is it right here the intention
• 79:30 - 80:00 of the management is to make profit by trading in those shares that is why ftbl but in F the intention of the management is long-term investment Strategic investment not to earn the profit by playing with the change in the market value of that that is why they are called fbt OC I so that will be any change in the fair value of this item will go to oci any
• 80:00 - 80:30 change in fair value of this item will go to P account any revaluation reserve of pp will go to oci understood now this is non recyclable this is already in pnl account so no problem and this is non recyclable okay understood what is going in pnl account the question of recycling does not arise
• 80:30 - 81:00 only there's nothing like from pnl account to Oi okay next point at the end of the first year market value of this asset increased by 40,000 for PP 10,000 for Equity instrument classified as fvtpl and 15,000 for Equity instrument classified as fvt oci tell me where will
• 81:00 - 81:30 this be shown oci non recyclable where will this 10,000 be shown pnl account 15,000 oci non recyc label in the second year second year the pp was sold for rupees 7 lakh now wait opening balance is 5 lakh + 40 so Book value is 540 sold for
• 81:30 - 82:00 7 lakh sold for 7 lakh so in second year profit is 1 lakh 60,000 that is the profit on sale where will you transfer that that will go to pnl account in second year and this balance of 40 which is lying in uh revaluation Reserve will be transferred to other component of equity so that is the story of
• 82:00 - 82:30 pp investment in equity at every TPL was sold for 120 very easy opening is 90 here + 10 one lakh is Book value sold for 120 so 20,000 where will you show again pnal account because it is ftpl and investment in equity at fvtpl I was sold for 1 lakh so first you check book value this is
• 82:30 - 83:00 80,000 + 15 so 5,000 this 5,000 oci will remain in oci it doesn't go to P account as per indas 109 if there is any fvtoci Equity instrument it never goes to P account so it will be shown in oci only it will be shown in oci because it's a Strategic investment okay and once you sell it whatever is
• 83:00 - 83:30 the balance lying in that account will be recycled to other component of equity is it right so total balance lying in oci account for Equity instrument designated as fbt oci will be 20 why 20 15 here + 5 so first I will take 15 + 5 20 and then 20 will be
• 83:30 - 84:00 transferred to other component of equity more about this fvtpl fvt I will explain in index 109 then question is prepare extract of pnl account SCI and balance sheet so a very good question for conceptual understanding they should have added one recycle cable item also okay anyway don't be so
• 84:00 - 84:30 greedy is the format drawn in your book yes so please trust me your syllabus is quite vast equal to two direct XX subject okay one f is equal to two direct XX subject so we need to really work hard and fast also so tell me if I ask you to do fill in the blanks will you be able to do
• 84:30 - 85:00 try first you will try use a pencil okay I request you to bring a pencil your book should look neat and clean bring an eraser also because when you will revise before the exam you should not be confused okay so first you try I've given the format I'm sure you can do it 5 minutes you not 5 minutes is too much 1 minute you will take 1 minute Starts Now
• 85:00 - 85:30 okay you will try first go year by year First Complete
• 85:30 - 86:00 year one okay then complete year two check what happened in year 1 check what happened in year one use a pencil if possible use a pencil and you can erase it in case if you go wrong there is no harm making
• 86:00 - 86:30 mistake yes Mr Harry are you trying Mr Rahul are you trying only complete pnl account first
• 86:30 - 87:00 done okay so we will check the answer first is other income under other income we have fair value change in equity designated at every TPL so first is 10,000 then gain on sale of pp will come in second year gain on sale of investment will come in second year then revaluation Reserve 40,000 you written and 15,000 in equity designated
• 87:00 - 87:30 at F total other comprehensive income 55,000 so how much was your TCI of the first year 65 let us try the year two uh gain on sale of pp 1ak 160,000 gain on sale of every TPL Equity instrument is it 20,000 the basic calculation you should be able to solve so therefore the total is 1 180,000 is there any revaluation Reserve
• 87:30 - 88:00 in second year no but is there any gain on Equity instrument yes that will come in oci only as per indas 109 so for the timing you have to trust me because you don't know indas 109 so total is 5,000 and then the total comprehensive income is 1 lakh 85,000 so in the first year you are going to add this
• 88:00 - 88:30 10,000 this 40 and this 15 in the respective column then in second year you are going to add this 160 this 20 and this 5 in the second column and because you have sold the PPE you have sold the ft Equity instrument the balance will be recycled to other component of
• 88:30 - 89:00 equity so now you come to associ year 1 very very important many students ignore Basics some student I have seen they directly practice from some kind of uh question answer book only you can't do that you can do question answer book no harm in that but first you have to clear your Concepts and in question answer book the
• 89:00 - 89:30 question comes in any sequence because they simply copy paste from MTP RTP in any sequence they come so that is not a good way our book is arranged in a sequence concept wise okay try this one opening balance is it given opening balance nothing is given so just ignore total comprehensive income go to the first year go to the first year start from the second line gain on sale
• 89:30 - 90:00 of how much was that 10,000 yes then revaluation Reserve somewhere below 40 and Equity instrument through oci 15 total so now you write down closing balance don't get board you have to write 10,000 40,000 15,000 65 some student don't write total or closing balance you have to write opening plus minus closing if you want
• 90:00 - 90:30 full marks then write full if you want half write half simple equation year to again write opening balance at the cost of repetion 10,000 40,000 15,000 65,000 and then you write transfer from revaluation Reserve to retained earning so once you have sold the pp
• 90:30 - 91:00 item you put 40,000 negative in revaluation Reserve column and 40,000 positive in retained earning column and then total comprehensive income go to the second year in pnl account from the top you see somewhere you have written 1 160,000 and 20,000 so both 160 plus 20 1880 will come in the retained earning you don't have to write separately there's nothing in
• 91:00 - 91:30 revaluation oci is there 5,000 total 185 it should match with your last line of pnl account or statement of profit and loss this total will now be recycled within the associ within associ not through pnl account that is the instruction given by the IFRS okay we can't change it like it or
• 91:30 - 92:00 don't like it there is no option here so 20,000 you put minus in oci column Equity instrument and 20,000 you add in retained earning the standard does not tell you name of the reserve to which you have to transfer is it right in India we have so many varieties of Reserve capital reserve General Reserve okay but in foreign country they don't have so many uh varieties of
• 92:00 - 92:30 Reserve they don't understand also sometime investment allowance Reserve used to be there development rebate Reserve now most of these have gone but still some of them still exist so now final total is 250 0 0 and and 250 250 sorry typing mistake 250,000 here got
• 92:30 - 93:00 it now prepare balance sheet balance sheet extract write down first you write here non-current asset side non-current assets under that write down PP in first year PP will be 5 lakh plus 40,000 is it
• 93:00 - 93:30 54,000 anybody second year we have sold we have sold so the answer is zero then write down investment in equity ftpl fvtpl first year it will be 90 + 10 1 lakh second year zero because it is sold then write down investment in equity fvt
• 93:30 - 94:00 oci fvt oci 80,000 + 15 95 what about second year all these uh three assets are sold so balance is zero in the second year okay now I have not written this properly this should come under current
• 94:00 - 94:30 asset because it is every TPL the intention itself is to uh trade and make profit out of it is it right anyway I will I will discuss current non-current in schedule 3 that I have not yet discussed now some notes I have written for you because you may have a doubt that why profit on sale of pp we have transferred to pnl account but profit on
• 94:30 - 95:00 sale of equity instrument classified as fbci we have not transferred to pnl account so write down the I think I've given you the notes in typing only it will save our time gain on sale of pp is transferred to pnl account because as per indas 16 we have to do that but gain on investment in equity at FCI is not transferred to pel account all gains are kept in oci
• 95:00 - 95:30 only as per indas 109 second thing is we also have to show the tax on oci item okay even though it is not payable as per the law because there is concept of defer tax if you're showing income then you have to create a defer tax liability also on that but because in the question it was not given we have
• 95:30 - 96:00 ignored it but I will take one question of defer tax also later in the given example we should have created defer tax liability don't worry right now we'll not discuss and in similarly if there is a loss if there is a loss then we are going to create defer tax asset also if you are gaining but not paying pay tax means your tax liability is only getting postponed and if you're having loss you're not able to get the benefit today
• 96:00 - 96:30 but you'll get the benefit at a future date and therefore it give rise to defer tax asset more about that in indas 12 Now quickly we will discuss explanation of items of profit and loss very quickly you already know most of it nothing great as far as students are concerned they don't ask such a minute detailed question okay but you should know it you
• 96:30 - 97:00 are a potential CA revenue from operation revenue from operation means you have to disclose your revenue from primary business operation of the entity revenue from primary business operation of the entity you will disclose your sale you can also disclose any incidental uh income relating to primary operation like sale of scrap also
• 97:00 - 97:30 because some companies have huge revenue from sale of scrap like Tata steel then what about GST underline the revenue is shown net of GST GST is not included in Revenue GST is not included in Revenue it is not your Revenue it is whose Revenue government revenue so you have to collect from the customer and pay to the government so it's not
• 97:30 - 98:00 your Revenue earlier long back long back before India before schedule 3 there was a schedule six under companies act 1956 and that time the tax rates were also very high so companies used to show in Reven Vue the indirect tax collected from customer also and they used to project a huge Revenue but out of that
• 98:00 - 98:30 30 40% was only tax collected on behalf of government so now they have clarified revenue is net of GST but excise duut is included in Revenue excise duty do we still have excise duty on very few item like petrol but we don't get a question on excise duty anymore so enjoy the reason is GST is also not treated as an expense excise
• 98:30 - 99:00 duties treated as manufacturing expense for example excise duties applicable on petrol I think they are planning to remove that also whether they have removed it or not I'm not very much sure but not yet and then what about other income so whatever you don't fit into revenue from operation you will write in other income of course if you think it is an exceptional item then instead of putting it in other income you can put
• 99:00 - 99:30 it in exceptional item also okay so income which are not intended but are from but intended but not from primary operation like for example in case of Reliance balance sheet you have interest income because they have so much of uh investment so they are investing management is putting their time energy on that but the primary business is not
• 99:30 - 100:00 uh interest generating activity so dividend income because companies invest their Surplus money in shares mutual fund bonds ppf not ppf sorry FD other corporate bonds and debenture so that will come then profit on sale of pp profit or loss on sale of pp that you can also put it under exceptional item but don't put at both the places and then if you have got any GST
• 100:00 - 100:30 refund you can put it here then just now we discussed one item reclassification adjustment reclassification adjustment means from oci to pnl account from oci to pnl account that will also come here next is uh material consumption in expense side we have first item material consumption
• 100:30 - 101:00 so what will be matal consumption metal consumption will be opening raw material plus purchase of raw material minus closing stock of raw material then purchase of stock in trade means purchase of finished goods there is an item purchase of stock and trade in pnl account what you manufacture will come under ra metal consumed what you only do trading will come under purchase of stock in trade and change in the stock
• 101:00 - 101:30 means opening finish stock opening finish stock and actually opening stock in trade also finish stock and stock in trade minus closing finish stock and stock in trade for the closing stock valuation we will apply the standard in Des 2 which is very similar to not 100% similar but very similar to accounting standard 2 that has not yet
• 101:30 - 102:00 been upgraded so much so they have continued with the same um in 2 for a very long time but there are some differences so the basic rule of the game is cost or NRV whichever is lower and under employee benefit expense we have items like Sal Sal to employees even director sitting fees will come here all retirement benefits will come
• 102:00 - 102:30 here bonus will come even that ESOP benefit will come here okay then under Financial expense we will have interest calculated using effective interest method which we are going to discuss in indes 109 effective interest method means IR the whole whole accounting of interest will undergo a change now because we don't transfer coupon interest to pnl account
• 102:30 - 103:00 rather we transfer effective interest to pnl account coupon interest is only a payment made to the uh investor or the bond holder what goes to the pnl account is the effective interest that you are paying on your debt Securities and then we will show appreciation and amortization on both tangible and intangible asset and then finally we have other expense in pnl
• 103:00 - 103:30 account which is like a residual category if it doesn't fit into above category then you put everything in other expense okay and these expenses should be disaggregated and disclosed where will you disclose you will make a note in that notes you are going to write down the breakup of other expense like Printing and stationary auditor fees okay CSR expenditure all
• 103:30 - 104:00 these are shown separately mandator auditor fees irrespective of the amount so separately CSR expenditure show separately as per companies act schedule 3 if any item of expense exceeds a specified limit which is right now rupes 10 lakh or 1% of turnover whichever is higher will also be separately
• 104:00 - 104:30 disclosed then we have extraordinary item not applicable exceptional item will be disclosed as per indes one if the management thinks that disclosure is important for this item useful for future projection of profitability of the company and understanding the current year performance also okay then example of extraordinary items are decline in value of inventory now
• 104:30 - 105:00 student had a query here decline in value of inventory will I write in the change in the inventory or exceptional item at one place you have to show if you're showing the decline in the change in inventory then don't write it here but if you think the amount is significant okay a book publisher had printed lacks of books of CA final course suddenly the
• 105:00 - 105:30 course changed and 80% of their inventory is now obsolete so for them it will become an exceptional item because the cost was 300 rupees now they will have to sell it for 5 rupees per kg who is going to buy outdated syllabus are you going to pay even 3 00 rupees for that no so then it is an exceptional item show it here gain on sale of
• 105:30 - 106:00 investment provision for restructuring reversal of provision gain on sale of pp okay these items can be shown in uh other income and other expense also but if the management thinks that they needs to be they need to be disclosed separately then they can put it in exceptional
• 106:00 - 106:30 item what about tax expense as you know we have to present two types of Taxation current tax which is the tax payable as per the tax law current tax is actually paid to the government but defer tax is an accounting adjustment it is not paid to to the government it is to ensure that our profit does not fluctuate too
• 106:30 - 107:00 much otherwise what happens in one year you show very low tax liability because you'll pay tax in future year and in other year you show a very high tax liability because that item resulted into profit and you paid tax so there will be huge fluctuation in the pat figure just because of treatment which is different in accountancy and difference in taxation like for example if you revalue
• 107:00 - 107:30 a land upward is it right so you will increase in the books of account but you're not going to pay tax now when are you going to pay tax when you sell it when you sell it so books will show income now that revaluation Reserve or simple example Equity instrument at FTP you increase the value by 10 CR rupes in the books because the market price has gone up but you don't pay tax so this year your profit will be high next year
• 107:30 - 108:00 when you'll sell you have to pay more tax because your book value your value for income tax is still the same so next year your tax liability will be more Pat will be lower so one year high Pat second year low pad so defer tax is a shock absorber defer tax is a shock absorber defer tax is a profit smoothening exercise they have ask in the interview
• 108:00 - 108:30 also why defer tax is required even though you have learned the entire IND S2 with the basic question why it is required to smooth your profit figures so defer tax is calculated we have to see whether because of this adjustment we will have future tax advantage or future tax disadvantage if you're going to pay more tax in future we'll create defer tax
• 108:30 - 109:00 liability and if you're going to save tax in future we are going to create defer tax asset more about defer tax in the separate chapter in 12 what about proposed dividend already you know proposed dividend will not be accounted but it will be disclosed in the notes but when dividend is declared declared
• 109:00 - 109:30 means properly declared if it is an inm dividend the directors will declare it and then it becomes a liability of the company and if it is a final dividend it is declared by AGM so the moment AGM declares a dividend then it is accounted for only if it is proposed by the board is not a liability because it can be reversed by the
• 109:30 - 110:00 AGM oci oh my God already discussed earlier is it right so oci I'm not repeating two times we have already discussed so this was about only pnl account and S so one more item is spending that is balance sheet and after that you have lot of disclosures also we have to see so we'll take a 5 minutes
• 110:00 - 110:30 break please come fast 5 minutes break only I'm not stopping the video
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• 117:30 - 118:00 okay welcome
• 118:00 - 118:30 back we will now discuss the format of
• 118:30 - 119:00 balance sheet today you will read the bear text of schedule 3 division 2 which is printed at the end of the chapter okay and we have made a summary of
• 119:00 - 119:30 that all important points we will discuss today so balance sheet name of the company you will write balance sheet as at you will write and rupees in according to question you can write in Thousand LHS million Crow whatever they will write in the question you will do it and this will be the format this remark column I have added for explanation part remark is not a part of
• 119:30 - 120:00 the format okay so you have note number end of current year end of previous year this balance sheet starts from asset side this balance sheet starts from asset side you will say no sir equity and liabilities oh those days are over now you have become a big man so one
• 120:00 - 120:30 non-current asset only two parts are there on the asset side non-current asset current asset about what is current and non-current asset we will discuss in indas one is it right but basic information you already we have detailed discussion in indas one as to what is current and what is non-current asset so here we will disclose items property
• 120:30 - 121:00 plant and Equipment which items will come here example Factory building plant and Machinery Furniture office equipment and one more item Bearer plants the meaning of Bearer plant will be discussed indes 41 and also indes 16 example of a bearer plant is a mango
• 121:00 - 121:30 tree that is those plant which bear fruits and vegetables they themselves are not sold but the produce is sold like mango tree and they have a long life so therefore even the bearer plants are treated like PP they they are also depreciated revalued and like that then next item is capital work in
• 121:30 - 122:00 progress which means those PPE item which are not yet ready for use they are under construction like building under construction plant and Machinery under construction one more line item which was probably you have not studied in uh intermediate was in investment property there is a standard on that can you give me the number yes number inds 40 investment
• 122:00 - 122:30 property means investment in land and building for earning rent or capital appreciation not for use in the business don't write it will come in IND 40 Main objective is to R rent capital appreciation like investment in land in investment in real estate then next item you will disclose is separately
• 122:30 - 123:00 Goodwill then you have to disclose other intangible assets which standard deals with intangible asset any idea indes 38 and what are the examples of intangible asset brand software patents trademark Mark website copyright license Mining rights designs this are intangible asset
• 123:00 - 123:30 similarly you have intangible asset under development it takes long period of time for an intangible to be ready for example software it may take 3 years 5 years finally a software will be launched so that is intangible you have to disclose it separately because funds are blocked sometimes funds are blocked for a very long period of
• 123:30 - 124:00 time so it is better to inform your investor users that so much money has already been invested in this intangible which is under development and there are some disclosure requirement which I will tell you after some time so examples are software under development website under development covid medicine under development one more new item for you is biological
• 124:00 - 124:30 asset indes 41 indes 41 not applicable to many companies in India but yes for few companies it is still applicable like companies having tea plants coffee plants Liv stocks will come here plants other than Bearer plants because Bearer plants will come as a separate item under PPE then after that we will
• 124:30 - 125:00 disclose Financial assets there are three standards dealing with financial asset inds 32 109 107 now how do you differentiate Financial assets from other asset in financial asset there is a contractual right to receive cash cash cash or other financial asset from other party but I'm not going into detail discussion of this we'll discuss
• 125:00 - 125:30 in indas 32 10719 contractual right to receive cash then investment under financial asset we will show investment investment in fvt oci instrument separately disclosed investment in fvtpl investment at amorti Cost these are the three categories of financial asset as per indas fvtpl FV oci and amorti cost
• 125:30 - 126:00 similarly if you have investment in subsidiary associate joint venture it will be disclosed separately investment or then trade receivable oh some student will wonder why trade receivable has come in non-current asset suppose your dater will pay after 3 years so don't you think it will come as non-current asset you may have a agreement with the dater that you can pay after 3 years so daters will come
• 126:00 - 126:30 here less allowance for bad date any allowance for bad date or what we call now impairment loss will be deducted then loans and advances example loans given to staff loan given to others and other Financial assets under other financial asset we have Bank FD but it should have a maturity of more
• 126:30 - 127:00 than one year what if it is a maturity of less than 12 months current defer tax asset always non-current defer tax asset always non-current and then finally one last heading is other non-current asset what we will not fit specifically into the above heads you will put it under other non-current asset example gold
• 127:00 - 127:30 silver Capital advance that is building Advance building Advance is not a financial asset because here there is a contractual right to receive asset not cash so it is not a financial asset what about gold and silver interestingly there are no specific standard on gold and silver then the second part of the asset
• 127:30 - 128:00 side is current asset under current asset you will start with inventory different types of inventory you will present separately like raw material wiip finished goods stock in trade and then you will write financial asset under that you will write trade receivable if it is shortterm cash and cash equivalent under that we'll write cash in hand cash at bank bank FD whose maturity is 3
• 128:00 - 128:30 months Bank FD whose maturity is 3 months from the date of acquisition will come under cash equivalent other items will come as other bank balance for example Bank FD whose maturity is more than 3 months up to 12 months then year marked deposit year marked deposit means those amounts which are for specific purpose like for
• 128:30 - 129:00 example when the company declares dividend when the company they transfer the amount to a special account from which dividend will be paid or margin money that means sometime in order to get some contract or some job you have to deposit some money with the bank margin money loans and advances also will come here if it is short-term example loan to staff loans to other and
• 129:00 - 129:30 then other financial asset under other financial asset we will show acred interest interest receivable dividend receivable Etc and then next item is current tax asset current tax asset means TDS somebody has has deducted TDS so we are going to uh adjust it against tax liability we pay Advanced Tax any income
• 129:30 - 130:00 tax refund receivable and if you have a mat credit have you heard mat credit minimum alternate tax in some year we pay tax as per Matt that is when the tax liability as per book profit is more than tax liability as per normal provision of Income Tax Act that is called tax paid as per mat so the excess amount paid as per mat can be adjusted against future tax liability so
• 130:00 - 130:30 it is your asset so it will be presented as an separate item in current tax asset it is not shown as a financial asset because it is not contractual it is statutory uh item not a contractual item you get this right because of law not because of contract and then in the last item you'll put other current asset like
• 130:30 - 131:00 advances paid to supplier prepaid expense then GST input credit will come under other current asset so that was my asset side now we'll come to equity and liability side under equity and liability side you will start with Equity under that first will write share Capital the detailed discussion we have already had and we have to make a separate disclosure of all the paid up Capital authorized
• 131:00 - 131:30 Capital Etc in associ change in share capital in associ for other Equity also will prepare one associ then if you are preparing CFS Consolidated financial statement then non-controlling interest which you know as minority interest will also come under this heading Equity because they are also Equity shareholder of subsidiary
• 131:30 - 132:00 company is it right so we'll prepare one uh note on in associ then we will show non-current liabilities liability side has three item Equity non-current liability current liability and non-current liability first item Financial liability under that boring example Term Loan then amount which is payable within 12 months will be shown as current liability suppose
• 132:00 - 132:30 you have to pay loan in five installment one installment is payable next year so this one installment amount will go to current liability and remaining four will come in non-current liability then trade payable now you have to divide the trade payable into two categories payable to msme micro small medium Enterprise many companies don't
• 132:30 - 133:00 pay msme their money is getting blocked so they have a liquidity problem big companies are enjoying small companies are suffering so they have asked that you must disclose separately on the face of the balance sheet and there are some more disclos ERS here will come to that and trade payable others and now they have to give aging also do you know
• 133:00 - 133:30 aging up to 6 months 6 months to 12 months 12 months to 1 year 1 to 2 year so that as a user I will know that the company is delaying in making payment to the Creditor delaying payment to creditor will affect the reputation of the company then next item is other finan fincial liability long-term liabilities that is contractual obligation to pay Financial liability means contractual obligation to pay cash
• 133:30 - 134:00 defer tax liability as per inds 12 however if you're getting both DTA and dtl as per IND 12 it can be set off subject to certain condition one condition is that one condition is that DT and detail must arise under same tax law DT and detail must arise under same tax law
• 134:00 - 134:30 then in the balance sheet I Will Show net figure if liability is more than asset net dtl if asset is more than liability net DTA then we'll come to next item long-term provision under long-term provision example could be retirement benefit liability like provision for gratuity or provision for
• 134:30 - 135:00 warranty then we have other non-current liability so here we'll write down those long-term liabilities which are not contractual if it is contractual liability to pay cash it will come under Financial liabilities and after that the third item is current liabilities in current liabilities we have a Financial liability you'll find same presentation for current liability you have borrowing it will have short-term borrowing Bank
• 135:00 - 135:30 overdraft then trade payable will also come under Financial liability because there is a contractual obligation to pay cash divide into two categories payable to msme and other payable then after that we have other Financial liabilities example acred interest unclaimed dividend bills payable commercial paper commercial papers are short-term
• 135:30 - 136:00 borrowing then after that we have current tax liability where we will show tax payable to the government actual tax payable to the government calculated as per tax law and then all short-term Provisions will come here including provision for for losses and then other current liabilities which are contractual but not payable in cash
• 136:00 - 136:30 is it right like for example Advance taken for supply of goods so my contractual obligation is to deliver Goods or service so it will come under other current liability so this is about balance sheet item to make your task easier I have written some notes also while solving the question we will take care of these notes if the amount is due within 12
• 136:30 - 137:00 months from the end of the reporting date like in case of loan in case of lease liability then what we will do that portion of the liability which is payable within 12 months we are going to put it under under the head other Financial liability under current liability why because current ratio will get
• 137:00 - 137:30 affected current ratio tells you current asset divide by current liabilities the persons who are interested in knowing the liquidity of the company will check the current ratio and this liability will come within 12 months so therefore if you're interested in knowing the liquidity position you need to know which liability will fall due within 12 months and hence now whenever you have a liability whose some portion is payable within 12 months that also you show it in the current
• 137:30 - 138:00 liability very important ratio liquidity is very important factor otherwise what will happen what happened to go first air liquidity problem what happened to Jet Airways liquidity problem what is happening to spice jet liquidity problem okay so if the investor knows well in advance this compan is likely to have a liquidity problem you will stay away from that uh
• 138:00 - 138:30 company msme means micro small and medium Enterprises government is trying to protect them by making company show the amount due to MSM separately on the balance sheet so if the amount is due overdue it will bring uh disrepute to the company Goodwill will get affected is it right what about preference share Capital oh
• 138:30 - 139:00 my God it can be either Equity or liability depending upon the terms of the issue so in Des 32 you have to refer for that purpose and accordingly it will get classified what about compound Financial instrument like convertible debenture convertible debenture convertible preference share are mixture
• 139:00 - 139:30 of debt and Equity so the equity portion will come in equity and the liability portion will come in current or non-current liability as per indes 32 what about derivatives derivative will also appear in the balance sheet now if you have entered into forward Ward future option swap it will appear as an asset or a liability in the balance sheet under if it is asset it will come under
• 139:30 - 140:00 investment if it is liability it will come under as current liability then what about contingent liability contingent liability is shown in the notes outside the balance sheet because we need to inform our users that these are our potential liabilities sometime the amount can be too high like it happened in vone case they have to pay 10,000 CR Rupees to the government
• 140:00 - 140:30 as contingent liability if they lose the case they pay 10,000 CR company get get wound up also so lot of companies uh recently have heard lot of Casino companies gaming companies they were paying or not paying GS now they have to pay GST at the rate 28% and some of them have to pay 5,000 10,000 CR rupes of GST
• 140:30 - 141:00 liability and if they lose the case the company can can be wound up because they may not have so much of assets also disclose it as a contingent liability and then the users can take a more informed decision now we'll come to the disclosure part quickly uh normally not asked in the exam normally not asked means never asked is not an appropriate term otherwise you
• 141:00 - 141:30 will ignore it and if they ask you you'll blame me so I will read it what are the disclosures to be given in the notes for PP item you have to disclose the class of asset for example plant Furniture vehicle you can't mix all of them computer and you have to give reconciliation starting from opening balance addition deduction depreciation closing balance same disclosures
• 141:30 - 142:00 required for leased asset also for leases we have to also refer the disclosures given in indes 116 refer indes 116 Capital wi you have to give a Reconciliation from opening to closing and the same thing for leased asset also investment property same disclosures are required Goodwill you have to give disclosure
• 142:00 - 142:30 relating to amortization then intangible asset disclose the class of asset disclose reconciliation same disclosure required for leased asset intangible asset under development you have to disclose the class of asset whether it is software or patent or what then reconciliation is required for owned asset and disclosure is required for leased asset biological
• 142:30 - 143:00 asset write on biological assets like animals and plants you have to disclose again class of asset how many sheep goat cow elephant horses okay then reconciliation refer IND 41 for more detailed disclosure requirement that time there is one page disclosure I will tell you later and disclosure is required for leased asset also then
• 143:00 - 143:30 trade receival tick mark important they have asked question on this and we are going to take those three four questions you have to give disclosures about trade receivable who are considered good and secured good but unsecured the difference is here you own some security you have some security if it does not pay you can recover from the security unsecured means God will help you if he does not
• 143:30 - 144:00 pay trade receival having significant increase in credit risk that means those data where risk has gone up if suppose customer is not paying for last three to 3 months risk has gone up if the insolvency proceedings have started against a customer which means risk has gone up okay and those creditors which have
• 144:00 - 144:30 become credit impaired means they are bad recovery is very difficult disclose separately and any allowance for bad and doubtful debt will be disclosed here only as a deduction you also mention a refer d109 there we are going to see the meaning of credit impaired significant increase in credit risk Etc there are some meaning for that terms some terms
• 144:30 - 145:00 they have mentioned I'll tell you one example was insolvency proceedings have started not paying up to a certain time period what about investment disclosure market value you have to disclose if there is any impairment in the value of investment that you have to disclose and you have to also disclose the name of the company where you have invested that is invest company's name if you have subsidiary
• 145:00 - 145:30 company you have to disclose the name of subsidiary also okay then we will come to loans disclosure if you have uh given loan any loan to related party will be disclosed separately which standard deals with related party in as24 so we will see there is a long list of related party and they will be
• 145:30 - 146:00 disclosed if you have given loan same disclosure is there in this standard also then remaining classification is like daters for example secured unsecured significant increase in credit risk credit impaired allowance for bad and doubtful date again right here for this portion also refer inds 109 also refer inds 109 keep writing okay when you'll revise you will be
• 146:00 - 146:30 finding it useful now we are going to solve questions on schedule 3 but before we solve a question I want to give you some exam tips do you want to take it otherwise you will say unnecessary you are giving tips we are already well educated people you want yes sir so first thing what you do ano is saying sure and Rahul is
• 146:30 - 147:00 saying yes sir we want okay and aniket Kumar is saying you are the best teacher on this globe yes sir why Globe you should say universe also now and multiple and multiple universe and all the solar system that exist so first exam tip is you should read the question carefully now in this
• 147:00 - 147:30 chapter just to give you a heart attack kind of situation okay do you want heart attack say yes question number question number 10 question number 10 on page 2.67 this is a question on schedule 3 it starts on page 2.67 and it ends on page number
• 147:30 - 148:00 2.69 and our font size is also quite small in The Institute question paper it will be around five pages or six pages right so you have to read the question carefully you get 15 minutes before the exam when you can start writing so read the question paper carefully in those 15 especially the long
• 148:00 - 148:30 questions and in schedule three question and also in other chapters also you have to mark the dates because they will ask you to calculate depreciation interest which will depend on the dates present value then rate in the question for example for depreciation for income tax rate Etc then there will be lot of names also name of parent name of subsidiary
• 148:30 - 149:00 name of other investor will appear so take care of that second thing you have to read the adjustment carefully and if you given a trial balance take the item which have got adjustment or if you given balance sheet pnl account pick the items which will get affected P use a pencil not now then if item is already appearing in the trial
• 149:00 - 149:30 balance then it will have a single effect it will have a single effect you may have to bifurcate it for example question says loan is 550 out of 50 50 is interest acred so what I'll do loan 500 will be non-current liability and interest aced 50 will be current Li but it is single effect only only we are just bifurcating into two
• 149:30 - 150:00 numbers but if you are given adjustment like same adjustment interest not recorded 50 then it will have double Effect one will go to pnl account Financial expense and one one will go to balance sheet current liability other Financial liability so adjustments will have double effect if entry has already been
• 150:00 - 150:30 passed in the trial balance remember single effect only you have to uh adjust the numbers at two places then according to the given question draw the formats usually in this chapter I will require following five formats at least four I will require sopl statement of profit and loss s SOI statement of change in equity balance sheet notes working note if depending up uh
• 150:30 - 151:00 depending upon the question like for example for tax calculation you may have to prepare a working note like that so sometime we might require working note for tax calculation or depreciation calculation Etc but otherwise not required and very important last Point number six Institute is full of uh what should I say questions which
• 151:00 - 151:30 have multiple answers wherever you have doubt that it can be this assumption or this assumption you write the Assumption at the end of the answer is it right so if you write assumption The Examiner will understand that you have write made your answer based on this assumption like for example only loan is appearing
• 151:30 - 152:00 in the problem it can be current or it can be non-current so write down we have assumed loan as current asset or non-current asset understood so what I'll do today we'll take question number five and I will solve in the book today you do one small uh homework on my behalf read this guidance note on division two
• 152:00 - 152:30 of schedule 3 to the companies act paragraph 7 in your book already I have explained most of it some more I will explain tomorrow okay so you will not take much time it is just about two three pages and to give you comfort they don't ask question on this so just you have a quick reading on this the only question which I have seen
• 152:30 - 153:00 till now is a question like the one we are going to solve now or a similar problem not this one but similar so let us start question five we have limited time and we will solve in the book only because I have drawn the format for you but in the exam you will have to draw the format so at least once you will solve the entire problem on your own in a
• 153:00 - 153:30 notebook we are in the classroom and we are bound by timing so sometime I have to save the time otherwise to draw the format itself takes 45 minutes okay the following information has been extracted from the books of P liit for the year ended 31st March 17 so as I said you have to write the underline the name of company the year ending is 31st March 17
• 153:30 - 154:00 then you are given figures which are rupees in th000 can you see that rupees in th000 so we will also prepare our answer in rupees in th000 Institute will agree for that don't worry then you are given employee benefit expense okay then where will you put employee benefit expense pnl account sopl similarly interest paid will go to sopl then called up share Capital will
• 154:00 - 154:30 go to uh share capital in balance sheet dividend six is appearing debit column means dividend paid debit side means paid credit side means received SCI will deduct from uh Reserve retained earning cash at bank will go to balance sheet income tax debit appearing so it's an it will go to tax expense
• 154:30 - 155:00 remaining balance from previous year so some amount was spending which you have paid okay warranty provision 90 will go to balance sheet under provision now it's not clear is it shortterm or longterm warranty can be long-term also shortterm also if you buy a say calculator 3 months warranty if you buy a mobile
• 155:00 - 155:30 phone one year warranty but if you buy a car or AC 6E warranty 3E warranty so you have to write an assumption for that then we have General expense will go to pnl account land and building we prepare a note for that cost is 1 lakh 10,000 1 lakh and depreciation is 48 whether this depreciation is on building or on land Building so that is
• 155:30 - 156:00 why they have not mentioned it student should know usually land is not depreciated then similarly plant and Machinery at Cost depreciation retained earning opening balance on 14 16 means opening balance accumulated depreciation 146 means opening balance now 10% loan 80 which means interest eight should also appear in the pnl account
• 156:00 - 156:30 but how much interest is appearing is you see here five second line five what is the mistake in the question when was the loan taken not given you assume full year and if it is full year then 8 - 5 three will appear as acred interest acred interest purchase will come in pnl account sales will come in pnl account opening stock
• 156:30 - 157:00 is given this is opening stock 1416 so we'll write in change in inventory trade payable balance sheet trade receivable balance sheet then we have additional information closing stock is given so one effect will be change in inventory one effect will be balance sheet current asset then building and plant and Machinery are depreciated on a straight line basis very good no
• 157:00 - 157:30 residual value very good at the falling rate building 5% and uh plant and Machinery 20% so rates are important these are all perom even if per anom is not written then there are no purchase or sale of non-current asset during the year very good so no purchase or sale of PPE item income tax for the year to 31st March
• 157:30 - 158:00 2017 in income tax for 20 31st March 17 rate is 30% but the calculation they have already done for you 1 lakh 35 this is current tax next is the loan is payable in five years so loan will come as non-current liability under finance that Financial liability year end provision for
• 158:00 - 158:30 warranty claim has been estimated at rupees 75,000 oh my God so what will I are you what you are going to do with that opening balance is how much 90 closing is how much 75 so 15,000 rupees we are going to reverse is it right land has been revalued at rupes 1 lakh 80 and what is the cost of land in
• 158:30 - 159:00 the problem 1 lakh 10,000 so 70,000 will go to revaluation reserve and because tax rate is given 21, 30% defer tax liability will also come defer tax liability will also appear required prepare pnl account and balance sheet on 31st March 17 so you have been given which
• 159:00 - 159:30 formats you are given sopl you are given SCI balance sheet is given notes is given under notes we are given change in stock and PP other income trade and trade receivable is it right and no loan is not
• 159:30 - 160:00 there just make a small correction it is node 3 is other income you make it other expense make it other expense note number three heading is other expense okay so how do you solve the way I have learned to solve a problem of financial statement is go line by line item
• 160:00 - 160:30 appearing in trial balance will have a single effect so first you spread that trial balance item over different formats and then look at the adjustment and give the effect so I'm going to follow that some uh teachers or some students for follow this also they first complete pnl account then s so then balance sheet you can do that also if you're comfortable
• 160:30 - 161:00 with that is it right but I find that is little difficult because every time you have to continuously read the problem okay if I have to finish P account I have to read the whole problem from beginning till the end then if I have to complete s so I have to again read the problem from beginning till the end so that nothing is missed out but if I go line by line we will not miss anything and if it is very urgent to make adjustment we'll do it so are you ready for that yes we'll
• 161:00 - 161:30 start with employee benefit expense do we have any adjustment in this no so come to pnl account Point B3 employee benefit expense amount tell me 170 170 then interest paid we have discussed there is an adjustment here so WR here 10% of 80 because the loan amount is 80
• 161:30 - 162:00 so this will be 8 but the trial balance is five so remaining three I have to put it in balance sheet so in balance sheet we have uh current liabilities there under other that other Financial liabilities there acred interest write down 8 - 5
• 162:00 - 162:30 3 please practice in Notebook also share Capital 200 so that will come in scie share Capital opening balance 200 just write here I'll come back to this dividend six will come in associate dividend paid from which Reserve retained earning or revaluation Reserve retained earning then uh cash at
• 162:30 - 163:00 bank balance sheet asset side current asset cash and cash equivalent no adjustment in that no adjustment no nine income tax this is last year income tax tax paid in this year so come to pnl Account Tax expense you write in bracket here
• 163:00 - 163:30 10 and plus because current year also we have to consider this is 10 warranty provision is 90 but there is an adjustment says uh year end warranty provision is 75 so what I'll do 15 I will reverse 15 I will reverse so how do I reverse it provision account debit to provision account debit to expense
• 163:30 - 164:00 account because last year we had expense to provision expense to provision so this year we will reverse it so I have prepared a note number three other expense in other expense I will reverse it second line reversal of excess warranty provision 90 minus 75 15 in bracket because we are reversing the
• 164:00 - 164:30 expense and what about uh second effect 75 balance sheet under the head non-current liability provision provision for warranty 75 now next item is uh General expense again that note number three how much is that 240 don't take any total anything can come again then we'll come
• 164:30 - 165:00 to note to property plant and Equipment property plant equipment you will write land opening balance you will write rupees in 1,000 so 1 one zero Building 100 wait wait wait and then accumulated depreciation depreciation opening balance in building right 48 plant and Machinery at
• 165:00 - 165:30 Cost 125 plant and Machinery opening depreciation accumulated 75 can you see that retained earning opening balance s soe s soe retained earnings second column amount 270 then 10% loan 80 balance sheet liability side
• 165:30 - 166:00 non-current liability Financial liability boring 10% loan is it 80 yes then purchase and sales will come in sopl purchase is how much uh 470 470 sales revenue from operation 1,300 inventory opening is
• 166:00 - 166:30 150 you come to this change in stock right here 150 opening stock minus I'll come back to this then trade payable 60 where current liabilities Financial liabilities trade payable 60 trade receivable financial asset trade receivable current asset 70 72
• 166:30 - 167:00 7208 why note four is written is there any note on that okay let us write down first here how much 728 728 assume secured and then we'll transfer it to balance sheet also 728 okay now trial balance is over
• 167:00 - 167:30 additional information closing inventory is 250 so one effect in balance sheet on the screen asset side inventory can I write 250 here balance sheet one inventory 250 and uh change in stock also we have to write 2 150 minus 250 how much is that 100 but we have a
• 167:30 - 168:00 note also on that anyway so if you have a note we'll write in note first go to note opening stock was how much 150 closing stock 250 so 100 is the increase in the stock negative write down negative figure write down negative figure and in balance sheet you have
• 168:00 - 168:30 written in pnl account S huh sopl negative correct 150 minus 250 okay adjustment number two building and plant and Machinery are depreciated on a straight line basis no residual value on building 5% plant and Machinery 20% but before that what I will do I will go to adjustment number seven land
• 168:30 - 169:00 has been revalued at 180 so entry for revaluation of land will be land account debit to revaluation Reserve revaluation Reserve will come under oci here how much is that 7 180 minus 11 0 70 but there is a tax
• 169:00 - 169:30 also so there will be a defer tax liability on this 30% of 70 how much is that 21 negative okay now we'll come to Second effect of that so first you come to uh PPE note two where is
• 169:30 - 170:00 PP okay note two land right down change 70 is it right and then we'll come to balance sheet for dtl come to liability side you'll find defer tax liability here how much was dtl 21 21 and then you'll come to SCI also come to SCI also in sci what will
• 170:00 - 170:30 you write revalu revaluation Reserve no net amount 49 revaluation Reserve net amount 49 70 minus 21 net amount and sorry not negative uh that is by mistake
• 170:30 - 171:00 49 so the net effect on the uh Reserve will be 49 o 21 negative yes that I have written occi 21 negative because uh revaluation Reserve will increase your income tax liability will reduce your income net increase in income will be 49 which we have written in
• 171:00 - 171:30 sci okay and in 70 separately you have to write in land and building and 21 you have to write in balance sheet as a defer tax liability now we'll come to that note number two which is spending so we'll complete this note now so first you tell me total of closing balance here 180 100 125 and then depreciation on building 5%
• 171:30 - 172:00 of the cost so 5% of 100 is 5 and 20% of plant and Machinery cost 125 25 so closing depreciation will be 48 + 5 75 + 25 net block will be 180 minus 0 180 100 -
• 172:00 - 172:30 53 125 - 100 25 so now we'll take total of all the columns Start From Here 335 70 this is how much 405 4 123 30 153 22 252 out of these
• 172:30 - 173:00 numbers depreciation for the year will go to pnl account net block closing balance will go to balance sheet is it right so please come to uh balance sheet PPE how much you got 22 252 and pnl account depreciation 30 yes 30 year adjustment
• 173:00 - 173:30 number three is not required no purchase or sale of non-current asset adjustment number four income tax are estimated at 135,000 on the screen pnl Account Tax expense 10 plus3 135 so how much is comes to 14 145 and what will you do with this 135 which is not in the trial balance balance sheet current liability
• 173:30 - 174:00 provision for tax so come to the last item in the balance sheet provision for tax 135 10 is already in the trial balance so no second effect of 10 next line is loan is repayable in 5 years so loan we have put in noncurrent year and provision for warranty claim we have done land revaluation we have done but what you do first to come to the notes 1 2 we have closed four we have
• 174:00 - 174:30 closed only three spending so how much is three 225 one is negative figure 225 other expense in pnl account go to pnl account 6 other expense 225 total of income side 1,300 total
• 174:30 - 175:00 of expenses here 803 PBT will be 1300 minus 839 497 tax expense 145 so Pat will be 352 352 EPS will be 352 and how many shares are there go to the trial balance 200 200 divide by
• 175:00 - 175:30 200 EPS is 1 Point 76 other comprehensive income 70 + 21 49 so this is 49 actually if you have a space Right Here and Now total comprehensive income will be Pat plus oci 40 1 41 49 I have already written in the S SOA this
• 175:30 - 176:00 352 352 we will write in sci here so first we'll complete the rows rows 200 + 270 47 470 352 + 49 presentation is important and this is six now take vertical total 200 second
• 176:00 - 176:30 column 616 49 last column 865 is it right yes in balance sheet share Capital 200 and this two total will come under other equity in balance sheet okay so come to balance
• 176:30 - 177:00 sheet share Capital write down 200 other Equity is how much 66 five now you come to asset side tell me the total of the asset side tell me the total of the asset side 239 1 1239 very good and tell me the total of liability
• 177:00 - 177:30 side tell power of double entry system this was a simple example it was in one of the Institute Publications only I have not written the year but it was there but that was simple we will take one or two more advanced question also tomorrow okay so thank you very much for watching this video see you
• 177:30 - 178:00 tomorrow bye-bye