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C H A P T E R
Financial Statements of a Company
MEANING OF KEY TERMS USED IN THIS CHAPTER
BALANCE SHEET
EQUITY AND LIABILITIES
1. Shareholders’ Funds Shareholders’ Funds are the funds that are of the shareholders
of the company. They consist of Share Capital (both Equity and
Preference Shares), Reserves and Surplus and Money received
against Share Warrants.
(a) Share Capital It is the amount received by the company as capital. It includes
both Equity Share Capital and Preference Share Capital.
(b) Reserves and Surplus:
Reserves It is the amount set aside out of Surplus, i.e., Balance in Statement
of Profit & Loss or amount received as Securities Premium. A reserve
may be free reserve or committed reserve.
Surplus It is the amount of accumulated profit which may be appropriated
towards reserve or for payment of dividend.
(c) Money Received against It is the amount received against Share Warrants. Share
Share Warrants Warrants are the financial instruments which give the holder right
to receive Equity Shares in the company on a specified date and
at a specified rate.
2. Share Application Money It is the amount received as share application and against
Pending Allotment which the company will make allotment.
3. Non-Current Liabilities Non-current Liabilities are defined in Schedule III of the Companies
Act, 2013 as those liabilities which are not current liabilities. These
are sub-classified into: Long-term Borrowings; Deferred Tax Liabilities
(Net); Other Long-term Liabilities; and Long-term Provisions.
(a) Long-term Borrowings Long-term borrowings are the borrowings which as on the
date of borrowing are repayable after more than 12 months
or after the period of Operating Cycle from the date of
Balance Sheet.
(b) Deferred Tax Liabilities It is the amount of tax on the temporary difference between
(Net) the accounting income and taxable income. It is only a book entry
and not an actual liability. It arises when accounting income is
more than the taxable income. It is determined for each difference
in accounting and taxable income and totalled and shown in the
Balance Sheet at net amount.
(c) Other Long-term Liabilities They are the Long-term Liabilities other than Long-term Borrowings
of the company.
(d) Long-term Provisions These are the provisions for estimated liabilities that will be payable
after 12 months or after the period of Operating Cycle from the
date of Balance Sheet.