Chapter 5: Balance Sheet

Solution to Problems and Cases

1. Issue of shares:

a)

Authorized Share Capital

10 Million Equity Shares of 10 each 100.00 Million

Issued and Called Up Share Capital

6.9 Million Equity Shares of 10 each 69.00 Million

Less: Call unpaid (50,000 shares @ 5 each) 0.25 Million

Paid Up Capital 68.75 Million

b. After forfeiture

Issued and Called Up Share Capital

6.85 Million Equity Shares of 10 each 68.50 Million

Add: Share Forfeited (50,000 shares @ 5 each) 0.25 Million

Paid Up Capital 68.75 Million

Amount paid on the 50,000 equity shares is forfeited and is shown separately.

2. Classification in the Balance Sheet:

a. Goodwill Intangible Assets

b. Sundry Creditors Current Liabilities

c. Provisions for doubtful debts Deduction from Trade Receivables

 d. Installments of long term loans due for repayment within the next 12 months -

Current Liabilities

e. Securities Premium Account Reserves And Surplus

f. Deferred Tax Assets (Net) Long Term Assets

g. Current Investments Current Assets

h. Revaluation Reserves Reserves and Surplus

i. Profit and Loss Account (Dr. Balance) Reserves and Surplus with a negative

sign

j. Investment property Non-current investment

k. Provisions for Gratuity and Employees Benefits (long term) Non-Current

Provisions (Liabilities Side)

l. Contingent liabilities Off Balance Sheet (Notes to Accounts)

3. Disclosures in Balance Sheet

a) Capital Work in Progress – Non-Current Assets

b) Other current assets – Current Assets

c) Other Intangible assets – Non-current Assets

d) Other non-current assets – Non-current Assets

e) Borrowings – Non-current liabilities at current exchange rate 16,500 million

f) Equity – 100 million, Other Equity 400 million

g) PPE – 1,540 million

4. Composition of Shareholders’ Funds: The shareholder funds have gone up by `163

million during the year. The reasons are:

 Increase in share capital by `70 million – The company has issued 50 million equity

shares of `1 each as bonus shares and additional 20 million shares.

 Decline in General Reserves by `18 million - `50 million of General Reserves have been

used for the issue of bonus shares. `32 million have been transferred from the Profit and

Loss A/c.

 Increase in Securities Premium by `80 million – the company has issued 20 million

equity shares of `1 each at a premium of `4 each.

 Balance in Profit & Loss A/c increased by `31 million after transferring to General

Reserves.

5. Classification of borrowed funds:

Equity And Liabilities

Non-Current Liabilities ` Crores

Term Loan (interest @ 10% per annum) 200.00

(Secured against the mortgage of company’s fixed assets)

Current Liabilities

Working Capital Loan (interest @ 12% per annum) 200.000

(Secured by way of hypothecation of current assets)

Public Deposits (interest @10% per annum) 120.000

(Unsecured)

Installment of Term Loan due within 12 months 25.000

Interest Accrued but Not Due

On Term Loan 5.625

On Working Capital Loan 6.000

 Interest accrued and due 6.000

6. Valuation of Investments: The details of investments of High Power Electricity

Limited as on 31st March 2017 are given below:

Non-Current Investments will appear at cost unless there is a permanent diminution in

value. Current Investments will be shown at `Lower of Cost or Market’.

` Million

Non – Current Assets

Investments

Equity Shares
- Regular Electricity Supply Company Limited (Unquoted) 500

Current Assets

Investments

Equity Shares
- British Softskills Limited (Quoted) 37

Mutual Funds (Unquoted) 120

Government Securities (Quoted) 85
Bonds of XYZ Limited (Quoted) 20
     
It is assumed that the fall in fair value of investments in subsidiary company is temporary in

nature.

7. Current Asset/ Current Liabilities:

In case payment received is higher than the revenue recognized, the excess will be treated

as Advance from Customers and will be shown as Current Liability. If however the

payment received is less than the revenue recognized the difference will be treated as

Current Asset. The current asset will be broken into two parts – difference between

invoice raised and payment received will be treated as Trade Receivables (or Sundry

Debtors) whereas the difference between revenue recognized and invoice raised will be

taken as Unbilled Revenue.

The information about Muscle Power Builder Limited will accordingly be shown as

follows:

Current Liabilities (` Million)

Advance from Customers (Project X: `67.00 mn– `50.20 mn) 16.80

Current Assets

Trade Receivables (Project XX: `110 mn-`98 mn) 12.00

Unbilled Revenue (Project XX: `120 mn – `110 mn) 10.00

8. Preparation of Balance Sheet:

Balance Sheet of Victoria Limited as on 31st March 2017

Equities and Liabilities ` Crores
Shareholders' Funds  
28
Share Capital 6  
 22,76 23,04
Reserves and Surplus (Note 1) 3 9
Non-Current Liabilities  
30 30
Non-Current Provisions for Gratuity & Employee Benefits 2 2
Current Liabilities  
53
Unearned Revenue 1  

Unclaimed dividend 2  
64
Outstanding Salaries and bonus 9  
64
Outstanding Expenses 5  
1
Sundry Creditors 0  
8
Advances from Customers 2  
1,81
Provisions - Current (Note 2) 0  
42 4,15
Other Current Liabilities 4 3
27,50
Total 4
Assets  
Non-Current Assets  
7,83
Fixed Assets (Gross Block) 9  
2,89
Less : Accumulated Depreciation 3  
4,94
Net Block 6  
40
Capital Work in Progress 9  
5,35
  5  

Long Term Investments (Note 3) 4  

43
Deferred Tax Assets 2  
23
Less: Deferred Tax Liability 2  
20
  0  
2,02 7,58
Long Term Loans and Advances (Note 4) 9 8
   
   
Current Assets  
10,55
Cash and Bank 6  
3,70
Current Investments 8  
3,49
Sundry Debtors (Note 5) 4  
84
Other Current Assets - Unbilled Revenue 1  
1,31 19,91
Current Loans and Advances (Note 6) 7 6
27,50
Total 4
     

Note 1: Reserves and Surplus    

5,31
General Reserves 1  
5
Capital Reserves 4  
3,02
Securities Premium Account 7  
14,37 22,76
Profit and Loss Account 1 3
   
Note 2: Current Provisions  
86
Proposed dividends 1  
72
Provisions for tax 4  
14
Provisions for tax on dividends 3  
8 1,81
Provision for warranties 2 0
   
Note 3: Long Term Investments  

Investment as Cost 7  

Less : Provision for diminution in value 3 4

   
Note 5: Sundry Debtors  
 3,59
Gross Receivables 6  
10 3,49
Less: Doubtful debts 2 4
   
Note 4: Long Term Loans and Advances  
9
Deposits - Electricity/ Rental 9  
1,89
Deposits - Financial Institutions 2  
3 2,02
Loans to Employees - Housing 8 9
   
Note 6: Current Loans and Advances  
66
Advance Income Tax 7  
14
Loans and Advances - Others 6  
43
Prepaid Expenses 1  
7 1,31
Salary advances 3 7
   
     

9. Preparation of Balance Sheet from the Trial Balance and additional

information:
Balance Sheet of Star Limited as on 31st March 2017
  Amount (` Million) Amount (` Million)
Equity and Liabilities  
Shareholders’ Funds  
Share Capital 548.00
General Reserve 102.75  
Add: Addition during the year 8.00  
Profit & Loss A/c 165.49 276.24
  824.24
Borrowed Funds  
Loan from Bank 68.50 68.50
   
Current Liabilities & Provisions  
Sundry Creditors 85.24  
Outstanding Wages 2.59  
Outstanding Salaries 1.64  
Provision for Income Tax 68.54  
Proposed Dividend 41.10  
Dividend Distribution Tax 6.17  
Accrued Interest 4.11 205.28
   
  1,098.02
Assets
Non-Current Assets  
Premises 274.00  
Less: Accumulated Depreciation 54.51 219.49
Machinery 445.25  
Less: Accumulated Depreciation 285.61 159.64
Furniture 9.32  
Less: Accumulated Depreciation 3.40 5.92
  385.05
Investments 119.19
   
Current Assets  
Cash 26.76  
Bank 132.70  
Debtors 144.40  
Closing Stock 171.03  
Interest Accrued on Investments 3.43  
Advance Tax 115.48  
  593.79
  1,098.02
     
 Balance Sheet of High Growth Fertilizers Limited as on 31st
March 2013 (` Crores)
   
A. Equity & Liabilities  
1. Shareholders' Funds  
Share Capital 28.26
Reserve & Surplus 2342.93
  2371.19
2. Non-Current Liabilities  
Long Term Borrowings 272.79
Deferred Tax Liabilities 67.45
Other Long Term Liabilities 33.99
Long Term Provisions 16.29
  390.52
3. Current Liabilities  
Short Term Borrowings 2144.75
Trade Payables 2042.72
Other Current Liabilities 224.51
Short Term Provisions 132.34
  4544.32
Total 7306.03
B. Assets  
1. Non-Current Assets  
Fixed Assets  
Tangible Assets 807.1
Capital Work in Progress 133.13
  940.23
Non-Current Investments 627.9
Long Term Loans and Advances 51.4
  1619.53
   
2. Current Assets  
Current Investments 322.04
Inventories 1855.61
Trade Receivables 887.02
Cash & Cash Equivalents 595.85
Short Term Loans and Advances 2013.38
Other Current Assets 12.6
  5686.50
Total 7306.03
10.

Working Notes
Reserves and Surplus    
     
General Reserves    
Balance as per Trial Balance 1300.2  
+Transfer from the Profit & Loss Statement 400 1700.2
     
     
Balance in Profit & Loss    
Balance as per Trial Balance 446.96  
Add: Profit for the year 693.27  
Less: Proposed Dividend 84.78  
Less: Tax on Dividend 12.72  
Less: Transferred to General Reserves 400  
Balance Carried to Balance Sheet   642.73
    2342.93
     
Deferred Tax Liability    
     
Deferred Tax Liability 91.34  
Less: Deferred Tax Assets 23.89  
    67.45
Long Term Provisions    
Provisions for Warranties (Long Term) 5.33  
Provisions for Employees Benefits (Long Term) 10.96  
    16.29
Short Term Borrowings    
Working Capital Loans from Banks 1723.5  
Other Short term borrowings 421.25  
    2144.75
Other Current Liabilities    
Liabilities towards Expenses 48.37  
Other Current Liabilities 176.14  
    224.51
Short Term Provisions    
Provisions for Taxation 34.84  
Proposed Dividend 84.78  
Tax on Dividend 12.72  
    132.34
     
Tangible Assets    
Land & Building (At Cost) 435.01  
less : Accumulated Depreciation 102.45 332.56
Plant & Machinery (At Cost) 819.78  
less : Accumulated Depreciation 445.35 374.43
Other Tangible Assets (At Cost) 158.87  
less : Accumulated Depreciation 58.76 100.11
    807.1
     
Inventories    
Raw Material 345.56  
Work in Progress 243.78  
Finished Goods 1266.27  
    1855.61
Other Current Assets    
Prepaid Expenses 7.8  
Other Current Assets 4.8  
    12.6
     
Case 6.1: Preparation of the Balance Sheet of Asian Paints Limited

Balance Sheet of Asian Paints Limited as on 31st March 2017

Particulars Note No. ` Crores

1 2 3
ASSETS    
Non-current assets    
Property, Plant and Equipment 1 2,512
Capital work-in-progress   220
Goodwill   36
Intangible assets 2 57
Financial Assets    
(i) Investments   1,455
(ii) Loans   70
(iii) Other Financial Assets   198
Current Tax Assets   37
Other non-current assets   200
Total Non-Current Assets   4,785
Current assets    
Inventories   2,194
Financial Assets    
(i) Investments   1,315
(ii) Trade receivables 3 995
(iii) Cash and cash equivalents   61
(iv) Bank balances other than(iii) above   144
(v) Loans   14
(v) Others (to be specified)   474
Current Tax Assets    
Other current assets   232
Total Current Assets   5,429
Total Assets      10,214
EQUITY AND LIABILITIES    
Equity    
Equity Share capital   96
Other Equity 4 6,856
    6,952
LIABILITIES    
Non-current liabilities    
Financial Liabilities    
(i) Borrowings   10
(ii)Other financial liabilities   2
Provisions 5 110
Deferred tax liabilities (Net)   261
Other non-current liabilities   4
Total Non-Current Liabilities   387
Current liabilities    
Financial Liabilities    
(i) Borrowings   27
(ii) Trade payables   1,671
(iii) Other financial liabilities   880
Other current liabilities   206
Provisions 6 36
Current Tax Liabilities (Net)   55
Total Current Liabilities   2,875
Total Equity and Liabilities   10,214

Notes to Accounts

Particulars ` Crores ` Crores

Property, Plant and Equipment (Gross) 2,991  

Accumulated Depreciation (479) 2,512
     
Intangible assets    
Other Intangible Assets - Gross 107  
Accumulated amortisation (50) 57
     
Trade Receivables    
Current trade receivables 1,007  
Provision for doubtful trade receivables (12) 995
     
Other Equity    
Capital Redemption Reserve 1  
Debt Instruments through OCI 4  
Equity Instruments through OCI 111  
General Reserve 4167  
Retained Earnings 2573 6856
     
Non-current Provisions    
Provision for other post-retirement benefits 4  
Provision for Pension 2  
Provision for compensated absence 104 110
     
Current Provisions    
Provision for Pension 1  
Provision for compensated absence 13  
Provision for sales tax and excise 22 36
     

Case 6.2: Preparation of Balance Sheet of HCL Technology Limited

Balance Sheet of HCL Technology Limited as on 31st March 2017

Particulars Note No. ` Crores

1 2 3
ASSETS    
Non-current assets    
Property, Plant and Equipment 1 3,126
Capital work-in-progress   411
Goodwill   553
lnvestment Property   0
Intangible assets 2 4,310
Financial Assets    
(i) Investments   3,810
(ii) Loans    
(iii) Other Financial Assets   187
Income Tax Assets    
Deferred tax assets (net)   1,211
Other non-current assets   647
Total Non-Current Assets   14,255
Current assets    
Inventories   90
Financial Assets    
(i) Investments   914
(ii) Trade receivables 3 4,418
(iii) Cash and cash equivalents   352
(iv) Bank balances other than(iii) above   7,610
(v) Loans   2,543
(v) Others (to be specified)   1,518
Other cufrent assets   671
Total Current Assets   18,116
Total Assets      32,371
EQUITY AND LIABILITIES    
Equity    
Equity Share capital   285
Other Equity 4 25,687
    25,972
LIABILITIES    
Non-current liabilities    
Financial Liabilities    
(i) Borrowings   31
(iii)Other financial liabilities   7
Provisions 5 411
Deferred tax liabilities (Net)   0
Other non-current liabilities   35
Total Non-Current Liabilities   484
Current liabilities    
Financial Liabilities    
(i) Borrowings   0
(ii) Trade payables   485
(iii) Other financial liabilities   4,004
Other current liabilities 6 885
Provisions 7 111
Current Tax Liabilities (Net)   430
Total Current Liabilities   5,915
Total Equity and Liabilities   32,371

Notes to Accounts

Particulars ` Crores ` Crores

     
Property, Plant and Equipment    
Property, Plant and Equipment (Gross) 5,786  
Accumulated Depreciation (2,660) 3,126
     
Intangible assets    
Other Intangible Assets - Gross 4,943  
Accumulated amortisation (633) 4,310
     
Trade Receivables    
Current trade receivables 4,538  
Provision for doubtful trade receivables (120) 4,418
     
Other Equity    
Capital Reserve 120  
Cash Flow Hedging Reserve 445  
Foreign Currency Translation Reserve (49)  
General Reserve 2,639  
Securities Premium Reserves 3,244  
Share based payment reserve 20  
Retained Earnings 19,268 25,687
     
Non-current Provisions    
Provision for gratuity 277  
Provision for leave benefits 134 411
     
Other Current Liabilities    
Advances received from customers 23  
Reveneue received in advance 697  
Withholding and other tax taxes payable 165 885
     
Current Provisions    
Provision for gratuity 50  
Provision for leave benefits 61 111
     

a.
Case 6.3: Preparation of Balance Sheet of CIPLA Limited based upon the

Trial Balance

Balance Sheet of Siemens Limited as at 31st March 2017 30th September

Particulars Note No. Rs. Crores Rs. Crores

ASSETS      
Non-current assets      
(a) Property, Plant and Equipment 1   4,095
(b) Capital work-in-progress     540
(c) lnvestment Property      
(d) Goodwill      
(e) Other Intangible assets 2   140
(f) Intangible assets under development     15
(g) Biological Assets other than bearer plants      
(h) Financial Assets      
(i) Investments   3,648  
(ii) Trade receivables      
(iii) Loans   216  
(iv) Other   57 3,921
(i) Deferred tax assets (net) 3   60
(j) Other non-current assets     298
Current assets      
(a) Inventories 4   2653
(b) Financial Assets      
(i) Investments   638  
(ii) Trade receivables 5 1,939  
(iii) Cash and cash equivalents   45  
(iv) Bank balances other than(iii) above   14  
(v) Loans   10  
(vi) Others (to be specified)   207 2,853
(c) Current Tax Assets (Net)     192
(d) Other current assets     840
       
Total Assets        15,607
EQUITY AND LIABILITIES      
Equity      
(a) Equity Share capital     161
(b) Other Equity 6   12,639
LIABILITIES      
Non-current liabilities      
(a) Financial Liabilities      
(i) Borrowings      
(ii) Trade payables      
(iii)Other financial liabilities (other than those
specified in item (b), to be specified)   45 45
(b) Provisions     126
(c) Deferred tax liabilities (Net)      
(d) Other non-current liabilities     80
Current liabilities      
(a) Financial Liabilities      
(i) Borrowings   324  
(ii) Trade payables   1,298  
(iii) Other financial liabilities (other than those
specified in item (c)   456 2,078
(b) Other current liabilities     230
(c) Provisions     248
(d) Current Tax Liabilities (Net)      
Total Equity and Liabilities     15,607
       

Notes to Accounts

Particulars Rs. Crores Rs. Crores

1. Property Plant & Equipment    
Property, Plant and Equipment 4,949  
Less: Accumulated Depreciation 389  
Les: Depreciation for the year 465 4,095
     
2. Other Intangible Assets    
Intangible Assets 202  
Less: Accumulated Amortisation 27  
Les: Amortisation for the year 35 140
     
3. Inventories    
Raw Material and Packing Material 1,112  
Work-in- Progress 545  
Finished Goods 680  
Stock-in-trade 282  
Consumable Stores 34 2,653
     
4. Trade Receivables    
Trade Receivables 2,069  
Less: Provisions for doubtful debts 97  
Less: Additional Provisions 33 1,939
     
5. Other Equity    
Employee Stock Option Outstanding 59  
General Reserve 3,142  
Securities Premium 1,505  
Retained Earnings 6,951  
Profit for the year 975  
OCI for the year 7 12,639
     

6.4 Preparation of Balance Sheet of HUL Limited

Balance Sheet of HUL Limited as on 31st March 2017

Rs.
Particulars Note No. Rs. Crores Crores
ASSETS      
Non-current assets      
(a) Property, Plant and Equipment 1   3,654
(b) Capital work-in-progress     203
(c) lnvestment Property      
(d) Goodwill      
(e) Other Intangible assets 2   370
(f) Intangible assets under development      
(g) Biological Assets other than bearer plants      
(h) Financial Assets      
(i) Investments 3 260  
(ii) Trade receivables      
(iii) Loans   198  
(iv) Other   114 572
(i) Non-current tax assets     311
(j) Deferred tax assets (net)     160
(k) Other non-current assets     70
Current assets      
(a) Inventories 4   2362
(b) Financial Assets      
(i) Investments   3,519  
(ii) Trade receivables 5 928  
(iii) Cash and cash equivalents   572  
(iv) Bank balances other than(iii) above   1,099  
(v) Loans      
(vi) Others (to be specified)   306 6,424
(c) Current Tax Assets (Net)      
(d) Other current assets     553
(e) Assets held for Sale     72
Total Assets        14,751
EQUITY AND LIABILITIES      
Equity      
(a) Equity Share capital     216
(b) Other Equity 6   6,274
LIABILITIES      
Non-current liabilities      
(a) Financial Liabilities      
(i) Borrowings      
(ii) Trade payables      
(iii)Other financial liabilities (other than those specified
in item (b), to be specified)   71 71
(b) Provisions     485
(c) Deferred tax liabilities (Net)      
(d) Non-current tax liability     296
(e) Other non-current liabilities     207
Current liabilities      
(a) Financial Liabilities      
(i) Borrowings      
(ii) Trade payables   6,006  
(iii) Other financial liabilities (other than those specified
in item (c)   181 6,187
(b) Other current liabilities     628
(c) Provisions     387
(d) Current Tax Liabilities (Net)      
Total Equity and Liabilities     14,751
       

Particulars Rs. Crores Rs. Crores

1. Property Plant & Equipment    
Property, Plant and Equipment 4,319  
Less: Accumulated Depreciation 281  
 3,6
Les: Depreciation for the year 384 54
     
2. Other Intangible Assets    
Intangible Assets 393  
Less: Accumulated Amortisation 11  
Les: Amortisation for the year 12 370
     
3. Investments    
Investments in subsidiaries, associates and joint ventures 254  
Non-current Investments 6 260
4. Inventories    
Raw Material and Packing Material 879  
Stores and Spares 64  
Work in Progress 205  
Finished Goods and Stock in Trade 1,214  
    2,362
     
5. Trade Receivables    
Trade Receivables 959  
Less: Provisions for doubtful debts 31  
    928
     
6. Other Equity    
Employee Stock Options Outstanding 30  
Capital Redemption Reserve 6  
Capital Reserve 4  
General Reserve 2,187  
Retained Earnings 3,716  
Securities Premium 116  
Other Reserves 9  
Profit for the year 4,490  
OCI for the year (20)  
Less: Dividend Paid 3,571  
Less: Dividend Distribution Tax Paid 693 6,274
     
Case 6.5: Comparison of the Balance Sheets of Hero Motocop Limited and

Tech Mahindra Limited as at 31st March 2017

The students should be able to identify and justify:

1. Size of the Balance Sheets, composition of assets and liabilities

2. Current investments and cash and bank balance
3. Level of PPE
4. Current Investments are for parking short-term cash surplus (Hero). Non-current
investments are strategic in nature – in subsidiaries, JV etc. (Tech Mahindra)
5. Tech Mahindra higher receivables, Hero Higher Inventories

Case 6.6: Engineers India Limited: Impact of bonus shares and stock split on
the shareholders’ funds in the Balance Sheet1

As on 31-03-2011
  ` in Lakhs
Share Capital  
   
Authorized  

600,000,000 Equity Shares of `5each 30,000.00

Issued  

337,017,600 Equity Shares of `5 each 16,850.88

Subscribed and Paid up  

336,936,600 Equity Shares of `5 each 16,846.83

Add: Forfeited Shares :  

Amount originally paid up on 2600 Equity Shares of `5 each 0.01

  16,846.84
Reserves & Surplus  
A. General Reserve 127,157.13
B. Share Premium Account 0
C. Capital Reserve  

1
Annual Reports of Engineers India Limited for the year 2009-10 and 2010-11
 Capital Grant received from Oil Industry Development Board for R&D Centre 200
  127,357.13
   

Note: General Reserves    

Balance As per last Balance Sheet 104,724.86
   
Profit for the year 52251.94  
Less: Interim dividend 3367.37  
Less: Proposed dividend 13477.46  
Less: Tax on Dividend 2663.72  
Transferred from Profit & Loss Account 32743.39
   
Less: Used for Bonus Shares  
Bonus Shares Issued (224,624,400 Equity Shares of `5 each) 11231.22  
Less: Securities Premium A/c used 920.1  
General Reserve Used 10311.12
   
    127,157.13

ii) Bonus Issue – increase in share capital with equal reduction in reserves and surplus as a result

no change in shareholders’ funds. Promoters’ stake also remains unaffected. Stock Split – No

change except the number of equity shares (of lower denomination) goes up.

iii) No impact on the assets side.