Rearrange the following items of “Equity and Liabilities” head of Balance Sheet in an order as prescribed in Companies Act 2013, Schedule III. (A) Current Liabilities (B) Shareholders’ funds (C) Share application money pending allotment (D) Non-Current Liabilities Choose the correct answer from the options given below:
(B), (C), (A), (D)
Understanding Balance Sheet Equity and Liabilities Order
The Balance Sheet of a company is prepared according to the format prescribed in Schedule III of the Companies Act, 2013. The "Equity and Liabilities" side shows how the company's assets are financed. It is divided into major headings, which are further subdivided.
Items for Rearrangement
The items provided for rearrangement under the “Equity and Liabilities” head are:
- (A) Current Liabilities
- (B) Shareholders’ funds
- (C) Share application money pending allotment
- (D) Non-Current Liabilities
Arrangement of Equity and Liabilities Items
As per the structure outlined in Schedule III, Part I of the Companies Act 2013, the main heads under "Equity and Liabilities" appear in a specific order. The general sequence starts with ownership funds, followed by funds from share applications, then long-term borrowings and provisions, and finally, short-term obligations.
Let's examine the provided items in the sequence (B), (C), (A), (D):
- (B) Shareholders’ funds: This represents the funds contributed by the owners (shareholders) and accumulated profits. It is the first major head under Equity and Liabilities.
- (C) Share application money pending allotment: This represents money received from applicants for shares which has not yet been allotted. This head appears after Shareholders' funds.
- (A) Current Liabilities: These are obligations expected to be settled within the company's normal operating cycle or within twelve months from the reporting date.
- (D) Non-Current Liabilities: These are obligations that are not Current Liabilities, typically meaning they are due for settlement beyond twelve months from the reporting date or operating cycle.
Based on the sequence (B), (C), (A), (D), the items would be arranged as follows:
| Order | Item | Description |
|---|---|---|
| 1st | (B) Shareholders’ funds | Funds belonging to the owners |
| 2nd | (C) Share application money pending allotment | Money received for shares not yet issued |
| 3rd | (A) Current Liabilities | Short-term obligations |
| 4th | (D) Non-Current Liabilities | Long-term obligations |
Therefore, arranging the given items in the sequence (B), (C), (A), (D) places Shareholders' funds first, followed by Share application money pending allotment, then Current Liabilities, and finally Non-Current Liabilities.
Revision Table: Balance Sheet Structure Key Points
| Section | Main Head (Equity and Liabilities) | Key Components |
|---|---|---|
| Equity and Liabilities | Shareholders' Funds | Share Capital, Reserves & Surplus, Money against share warrants |
| Share application money pending allotment | Money received for shares not yet allotted | |
| Non-Current Liabilities | Long-term borrowings, Deferred tax liabilities, Other long-term liabilities, Long-term provisions | |
| Current Liabilities | Short-term borrowings, Trade Payables, Other current liabilities, Short-term provisions |
Additional Information: Companies Act 2013 Balance Sheet Order
According to Schedule III, Part I of the Companies Act, 2013, the standard order for the major heads under "Equity and Liabilities" is strictly defined to ensure comparability and transparency in financial reporting. The sequence is as follows:
- Shareholders' Funds
- Share application money pending allotment
- Non-current Liabilities
- Current Liabilities
This order is logical as it moves from owners' equity to long-term debt and then to short-term debt. Shareholders' funds represent the permanent capital, followed by temporary funds (share application money), then liabilities extending beyond a year (non-current), and finally liabilities due within a year (current).
Understanding this prescribed order is crucial for preparing and analysing financial statements in compliance with the Companies Act, 2013.
Important Questions from Financial Statements of a Company
Salaries and wages are shown in the Statement of Profit and Loss under the head:
The amount of Capital Reserve is:
Loan taken by A Ltd from Punjab National Bank will be classified under the following head:
Shareholder’s fund will be:
Book value per share will be:
