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Final Accounts of Companies—Application of Schedule III, Part I... 9.5

• Provision: Provision is the amount set aside to meet future liability, the amount of which cannot be
determined with reasonable accuracy. Provisions are accounted in the books of account making the
best estimate.
• Reserve means amount set aside out of profit and other surpluses to meet future uncertainties.

Loss on Issue of Debentures, Discount on Issue of Debentures, Underwriting Commission and Preliminary Ex-
penses are written off in the year they are incurred from Securities Premium Reserve (if exists), or from
Surplus, i.e., Balance in Statement of Profit and Loss.

Solved Questions

Illustration 1.
Sharp Ltd. was formed on 1st December, 2013, with a capital of ` 5,00,000 divided into shares
of ` 10 each. It offered 80% of the shares to the public.
The issue price was payable as follows:

30% of the face value per share was payable with application.
20% of the face value per share was payable with allotment.
The balance as and when required. The company did not call for the balance during the year.

All the shares offered by the company were subscribed for. The company did not receive the
allotment money on 3,000 shares.
You are required to:
(i) Show the Share Capital in the Balance Sheet of the Company prepared as per Sched-
ule III of the Companies Act, 2013 at the end of the financial year.

(ii) Prepare Notes to Accounts. (ISC 2014, Modified as per Companies Act, 2013)

Solution: Sharp Ltd.
BALANCE SHEET as at 31st March, 2014
Particulars Note `
No.
I. EQUITY AND LIABILITIES
Shareholders’ Funds
Share Capital 1 1,94,000
Total 1,94,000

II. ASSETS
Current Assets
Cash and Bank Balances 2 1,94,000
Total 1,94,000