Balance Sheet Overview

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Questions and Answers

What is the time frame during which companies must disclose details of Specified Bank Notes?

8th November 2016 to 30th December 2016 (correct)

1st November 2016 to 31st December 2016

1st December 2016 to 15th January 2017

1st January 2017 to 31st March 2017

Which item is deducted from the closing cash in hand as per the disclosure requirements for SBN?

Other income

Amount deposited in Banks (correct)

Permitted receipts

Revenue from operations

In the profit and loss statement, which of the following represents the total revenue?

Revenue from operations only

Total of permitted receipts and other income

Revenue from operations plus other income (correct)

Permitted payments subtracted from total income

What term describes the type of notes that companies need to report under the specified requirements?

Specified Bank Notes Signup and view all the answers

What is the closing cash in hand as of 30th December 2016 dependent on?

Permitted receipts and payments Signup and view all the answers

Which category does the 'Share capital' fall under on the Balance Sheet?

Shareholders' funds Signup and view all the answers

What is included in the current liabilities section of the Balance Sheet?

Trade payables Signup and view all the answers

Which of the following is a component of non-current assets?

Property, Plant and Equipment Signup and view all the answers

What does 'Deferred tax assets (net)' fall under in the Balance Sheet?

Non-current assets Signup and view all the answers

In which section would you find 'Short-term provisions'?

Current liabilities Signup and view all the answers

Which of the following does NOT belong to the equity and liabilities section?

Property, Plant and Equipment Signup and view all the answers

Which item is categorized as a current asset?

Trade receivables Signup and view all the answers

What does 'Money received against share warrants' classify as?

Shareholders' funds Signup and view all the answers

What is included in the amount of interest due and payable for the period of delay in making payment?

Interest that has been paid but beyond the appointed day during the year Signup and view all the answers

What must be disclosed for the proposed distribution of dividends to shareholders?

The related amount per share for both equity and preference shareholders Signup and view all the answers

How are contingent liabilities classified according to the regulations?

Claims against the company not acknowledged as debt, guarantees, and other contingent liabilities Signup and view all the answers

What is the purpose of disclosing further interest remaining due and payable in succeeding years?

To be accounted for disallowance under section 23 of the Micro, Small and Medium Enterprises Development Act Signup and view all the answers

What is included in the total expenses calculation?

Cost of materials consumed and other expenses Signup and view all the answers

What should be stated clearly in commitments according to the classification provided?

Estimated amounts of contracts and uncalled liabilities Signup and view all the answers

Which of the following correctly describes exceptional items?

They are non-recurring items that may affect the financial results. Signup and view all the answers

How is profit before extraordinary items and tax calculated?

By subtracting exceptional items from profit before exceptional and extraordinary items. Signup and view all the answers

What is a necessary inclusion for liabilities associated with assets classified as held for sale?

Compliance with relevant Indian Accounting Standards Signup and view all the answers

What component is missing when calculating profit before tax?

Extraordinary items Signup and view all the answers

Which of the following is NOT considered a contingent liability?

Commitments for capital account contracts Signup and view all the answers

Which tax is not included in the tax expense section?

Provisional tax Signup and view all the answers

Which terms are defined by the Micro, Small and Medium Enterprises Development Act?

All listed terms including appointed day, buyer, enterprise, and more Signup and view all the answers

What is the result when profit from discontinuing operations is calculated after tax?

Total profit for the period Signup and view all the answers

In which section would you find employee benefits expense?

Total expenses Signup and view all the answers

Which item represents the final profit or loss for the period?

Profit (Loss) for the period Signup and view all the answers

What is the formula used to calculate the Profit (Loss) for the period from continuing operations?

Profit/(loss) before tax - Tax expense Signup and view all the answers

Which of the following statements about Total Comprehensive Income is correct?

It consists of profit (loss) for the period and Other Comprehensive Income. Signup and view all the answers

What should be subtracted to determine Profit from discontinued operations after tax?

Tax expense of discontinued operations Signup and view all the answers

Which components contribute to the Other Comprehensive Income?

Items that will not be reclassified to profit or loss and items that will be reclassified Signup and view all the answers

In calculating Profit (Loss) for the period, which sections are added together?

Profit from continuing operations and Profit from discontinued operations Signup and view all the answers

Study Notes

Balance Sheet

This is a financial statement that shows a company's assets, liabilities, and equity at a specific point in time.
It helps determine a company's financial health and stability.
Information is presented in two columns, one for the current reporting period and the other for the previous reporting period.
The balance sheet adheres to the fundamental accounting equation: Assets = Liabilities + Equity.

Assets

Assets are everything a company owns that has a monetary value.
Assets are categorized into two groups: Non-current assets and Current assets.
Non-current assets are long-term assets expected to be used for more than one year – Examples include property, plant, and equipment, intangible assets, long-term investments.
Current assets are short-term assets that are expected to be converted to cash within a year. – Examples include cash and cash equivalents, short-term investments, accounts receivable, and inventories.

Liabilities

Liabilities are financial obligations that the company owes to others.
Liabilities are categorized into two groups: Non-current liabilities and Current liabilities.
Non-current liabilities are long-term obligations that are due in more than one year. – Examples include long-term debt, deferred tax liabilities, and long-term provisions.
Current liabilities are short-term obligations that are due within one year. – Examples include short-term debt, accounts payable, accrued expenses, and taxes payable.

Equity

This represents the owners' stake in the company.
Equity is the difference between assets and liabilities.
It encompasses share capital, reserves, and surplus.
It also includes items like share application money pending allocation, non-current investments.

Trade Payables

This section requires disclosure of total outstanding dues of micro and small enterprises and total outstanding dues of creditors other than micro enterprises and small enterprises.
This signifies the importance of highlighting payment practices with small enterprises.
The text notes that the requirements for trade payables were updated by Notification No. G.S.R. 679(E) on September 4, 2015.

Specified Bank Notes (SBNs)

The information presented includes instructions for disclosing transactions related to Specified Bank Notes (SBNs) during a specific period (November 8, 2016, to December 30, 2016).
This pertains to the demonetization of certain banknotes in India in 2016.
This requirement was introduced by notification number S.O. 3407(E), dated November 8, 2016.

Statement of Profit and Loss

This statement, also known as the income statement, reveals a company's financial performance over a period of time, typically a fiscal year.
It presents revenue, expenses, and ultimately profit or loss for the period.
The statement presents data from two reporting periods: the current period being examined and the previous reporting period.
It includes specific line items for revenue, expenses, and calculations of profit before tax, tax expense, and profit after tax.

Revenue

This represents the income a company generates from its primary operations.
It includes revenue from operations and other income.

Expenses

These comprise costs incurred by the company while generating revenue.
Major categories include cost of materials consumed, employee benefits expense, finance costs, depreciation and amortization expense, and other expenses.

Exceptional Items

These are unusual, infrequent events that significantly impact a company's financial performance, such as gains or losses from asset sales or settlements with creditors.

Extraordinary Items

These are typically unexpected events that are both unusual and infrequent, such as natural disasters or government seizures of assets.

Discontinued Operations

These are significant parts of a company’s operations that have been or are in the process of being sold or abandoned.
This section aims to separate the performance of continuing operations from discontinued ones.

Other Comprehensive Income

This represents changes in equity that are not directly related to profit or loss, such as unrealized gains or losses on investments.
It represents the total comprehensive income.

Further Important Points

Footnotes: The footnotes provide detailed explanations of the accounting methods and policies used in preparing the statements.
Micro, Small, and Medium Enterprises Development Act, 2006: The text includes provisions related to interest payment disclosures for transactions involving micro and small enterprises.
Indian Accounting Standards (Ind ASs): The text emphasizes the importance of adhering to Ind ASs for specific reporting requirements like the presentation of liabilities associated with assets classified as held for sale.
Contingent Liabilities and Commitments: These are disclosed separately as potential liabilities and commitments that may or may not materialize in the future.
Shareholders' Dividends: Disclosures regarding proposed dividends for equity and preference shareholders and any arrears on preference shares are mandatory.

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Description

This quiz covers the essential components of a balance sheet, focusing on assets, liabilities, and equity. It explores the importance of these concepts in determining a company's financial health and stability. Understanding the classification of assets into current and non-current categories is also highlighted.