WELCOME
TOPIC
Prepration of Balance Sheet
By
PRAMOD KUMAR JAIN
CORE FACULTY
(COMMERCIAL)
RTI, JAIPUR
Transaction Types in
Business
Expenses
Assets
Income
Liabilities
Shelf life = Period
Shelf life > BS date
What Is a Profit and Loss Statement (P&L) &
BALANCE SHEET
PROFIT & LOSS
ACCOUNT
The profit and loss (P&L)
statement is a financial statement
that summarizes the revenues,
costs, and expenses incurred during
a specified period, usually a fiscal
quarter or year. The P&L statement
is synonymous with the Income
Statement. These records provide
information about a company's
ability or inability to generate
profit by increasing revenue,
reducing costs, or both.
BALANCE SHEET
In financial accounting, a balance
sheet
or
statement
of
financial
position or statement of financial
condition is a summary of the financial
balances of an individual or organization,
whether it be a sole proprietorship,
a business partnership, a corporation, private
limited company or other organization such
as
government
or
not-for-profit
entity. Assets, liabilities and ownership
equity are listed as of a specific date, such
as the end of its financial year. The balance
sheet is based on the fundamental
equation: Assets = Liabilities + Equity.
How an ordinary P&L a/c looks
like-T format
Particulars
Amount
(Rs)
Particulars
Amount
(Rs)
To opening stock
25000
By sales
80000
To purchases
30000
By closing stock
29000
To direct expenses
28000
To Gross Profit
26000
TOTAL
109000
TOTAL
109000
To Office &
Administration
expenses
5000
By Gross Profit
26000
To Financial Expenses
3000
By Other Income
1000
To Selling &
Distribution expenses
4000
To depreciation
2000
To Net Profit
13000
TOTAL
27000
TOTAL
27000
How an ordinary P&L a/c looks likeVertical format
PARTICULARS
Schedule
No
AMOUNT
(Rs)
INCOME
Sales
80000
Other Income
1000
TOTAL (A)
81000
EXPENSES
Schedule - 1
Particulars
Amoun
t
Opening Stock 25000
Consumption
1
26000
+Purchases
30000
Direct Expenses
28000
29000
Office & Administration expenses
5000
- Closing
Stock
26000
Financial Expenses
3000
CONSUMPTIO
N
Selling & Distribution expenses
4000
Depreciation & amortisation charges
2000
TOTAL (B)
68000
Profit Before Tax (A-B)
13000
How an ordinary Balance Sheet looks like-T-Format
LIABILITIES
Amount( ASSETS
Rs)
Amount(
Rs)
Capital
100000
Fixed Assets
55000
Reserves &
surplus
13000
Debtors
26000
Secured Loan
35000
Inventory
29000
Creditors
20000
Investment
23000
Bank
20000
Cash
15000
TOTAL
168000
TOTAL
168000
Balance Sheet -Vertical Format
Particulars
Schedule
Amount (Rs)
Company A
Company B
Company C
SOURCES OF FUNDS
1)Shareholder’s funds
a. Share Capital
1
100000
50000
20000
b. Reserves & Surplus
2
13000
10000
13000
3
35000
53000
75000
4
20000
55000
60000
168000
168000
168,000
2)Long Term Liability
a. Secured Loan
3)Short Term Liability
a. Creditors
TOTAL
APPLICATION OF FUNDS
1)Fixed Asset
5
55000
45000
40000
2) Long term Investment
6
23000
13000
48000
a. Inventory
7
29000
50000
40000
b. Debtor
8
26000
20000
20000
c. Cash & Bank balance
9
35000
40000
20000
168000
168000
168000
3) Current Assets
TOTAL
Notes to accounts :

There was no contingent liability as on 31/03/2017

Depreciation has been provided as per WDV method.

Fixed assets are stated at cost less depreciation.

Stock at year end has been valued at cost or net
realisable value whichever is lower.

Long term investments have been valued at cost.

All applicable Accounting Standards have been
complied with.
Schedule-III Companies Act 2013
GENERAL INSTRUCTIONS FOR PREPARING
BALANCE SHEET & PROFIT & LOSS ACCOUNT
•Compliance
with the
requirements Acts and Ind.
Accounting Standards/Accounting Standards.
•The disclosure requirements specified in this Schedule are
in addition to and not in substitution of the disclosure
requirements specified in the Accounting Standards.
•Additional disclosures specified in the Accounting
Standards shall be made in the notes to accounts or by way
of additional statement unless required to be disclosed on
the face of the Financial Statements.
CONT-----
• Each item on the face of the Balance Sheet and Statement of
Profit and Loss shall be cross-referenced to any related
information in the notes to accounts.
• Depending upon the turnover of the company, the figures
appearing in the Financial Statements may be rounded off as
given below:—.
Turnover
Rounding off
a
Less than one hundred crore
rupees
To the nearest hundreds,
thousands, lakhs or millions,
or decimals thereof
b
One hundred crore rupees or
more
To the nearest lakhs, millions
or crores, or decimals thereof
• Once a unit of measurement is used, it shall be used uniformly
in the Financial Statements.
 Except in the case of the first Financial Statements laid
before the Company (after its incorporation) the
corresponding
amounts
(comparatives)
for
the
immediately preceding reporting period for all items
shown in the Financial Statements including notes shall
also be given
Assertions for balance sheet or items of Assets and
Liabilities
•Completeness
•Existence
•Valuation
•Ownership
•Disclosure
BALANCE SHEET
Name of the Company…………………….
Balance Sheet as at ………………………
(Rupees in…………)
Particulars
I.
EQUITY AND LIABILITIES
1) Shareholders’ funds
• Share capital
• Reserves and surplus
•Money received against share
warrants
Note
No.
Figures as
at the end
of current
reporting
period
Figures as at
the end of the
previous
reporting
period
(2) Share application money
pending allotment
(3) Non-current liabilities
a. Long-term borrowings
b. Deferred tax liabilities (Net)
c. Other Long-term liabilities
d. Long-term provisions
(4) Current liabilities
a. Short-term borrowings
b. Trade payables
c. Other current liabilities
d. Short-term provisions
TOTAL
Amendments after applicable of Ind AS
Following line items to be shown under equity on the face of the balance sheet:
i) Equity share capital, and
ii) other equity
II.
ASSETS
1.Non-current assets
a. Fixed assets
i. Tangible assets
ii. Intangible assets
iii.Capital work-inprogress
iv.Intangible assets under
development
b. Non-current investments
c. Deferred tax assets (net)
d. Long-term loans and
advances
e. Other non-current assets
Amendments after applicable of Ind AS
Word “Property, Plant and Equipment” to be used instead of “Tangible
Assets”.
II. ASSETS
(2) Current assets
a. Current investments
b. Inventories
c. Trade receivables
d. Cash and cash equivalents
e. Short-term loans and
advances
f. Other current assets
Total
General Instructions for Preparation of Balance Sheet
1.An asset shall be classified as current when it satisfies any of the
following criteria:—
• It is expected to be realized in, or is intended for sale or
consumption in, the company’s normal operating cycle;
• It is held primarily for the purpose of being traded;
• It is expected to be realized within twelve months after the
reporting date; or
• It is cash or cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least twelve months
after the reporting date.
• A receivable shall be classified as a “trade receivable” if it is in
respect of the amount due on account of goods sold or services
rendered in the normal course of business.
• All other assets shall be classified as non-current.
A liability shall be classified as current when it satisfies any of the
following criteria:—
• It is expected to be settled in the company’s normal operating
cycle;
• It is held primarily for the purpose of being traded;
• It is due to be settled within twelve months after the reporting date;
or
• The company does not have an unconditional right to defer
settlement of the liability for at least twelve months after the
reporting date.
• A payable shall be classified as a “trade payable” if it is in respect
of the amount due on account of goods purchased or services
received in the normal course of business.
All other liabilities shall be classified as non-current.
A company shall disclose the following in the notes to accounts.
A. Share Capital
• For each class of share capital (different classes of preference shares to be treated
separately):
• The number and amount of shares authorised;
•The number of shares issued, subscribed and fully paid, and subscribed but not
fully paid
•Par value per share
•A reconciliation of the number of shares outstanding at the beginning and at the
end of the reporting period;
•Shares in respect of each class in the company held by its holding company or its
ultimate holding company including shares held by or by subsidiaries or associates
of the holding company or the ultimate holding company in aggregate;
•Shares in the company held by each share holder holding more than 5 per cent
shares specifying the number of shares held;
•Forfeited shares (amount originally paid-up).
Reserves and Surplus
Reserves and Surplus shall be classified as:
Capital Reserves, Capital Redemption Reserve, Securities
Premium Reserve, Debenture Redemption Reserve, Revaluation
Reserve, Share Options Outstanding Account;
• Other Reserves–(specify the nature and purpose of each reserve
and the amount in respect thereof);
• Surplus i.e., balance in Statement of Profit and Loss disclosing
allocations and appropriations such as dividend, bonus shares and
transfer to/ from reserves, etc.;
(Additions and deductions since last balance sheet to be shown
under each of the specified heads);
• Debit balance of statement of profit and loss shall be shown as a
negative figure under the head “Surplus”. Similarly, the balance of
“Reserves and Surplus”, after adjusting negative balance of
surplus, if any, shall be shown under the head “Reserves and
Surplus” even if the resulting figure is in the negative.
•
Long-term Borrowings
•
•
•
•
•
•
Long-term borrowings shall be classified as:
 Bonds/debentures;
 Term loans:
• From banks.
• From other parties.
 Deferred payment liabilities;
 Deposits;
 Loans and advances from related parties;
 Long-term maturities of finance lease obligations;
 Other loans and advances (specify nature).
Borrowings shall further be sub-classified as secured and unsecured. Nature of
security shall be specified separately in each case.
Where loans have been guaranteed by directors or others, the aggregate amount of
such loans under each head shall be disclosed.
Bonds/debentures (along with the rate of interest and particulars of redemption or
conversion, as the case may be) shall be stated in descending order of maturity or
conversion, starting from farthest redemption or conversion date, as the case may be.
Particulars of any redeemed bonds/debentures which the company has power to
reissue shall be disclosed.
Period and amount of continuing default as on the balance sheet date in repayment of
loans and interest, shall be specified separately in each case.
Other Long-term Liabilities
•
Other Long-term Liabilities shall be classified as:
 Trade payables;
 Others.
Long-term provisions
•
The long-term provisions be classified as:
Provision for employee retirement benefits;
Others (specify nature).
Short-term borrowings
•
•
•
•
Short-term borrowings shall be classified as:
Loans repayable on demand;
From banks.
From other parties.
Loans and advances from related parties;
Deposits
Other loans and advances (specify nature).
Borrowings shall further be sub-classified as secured and
unsecured. Nature of security shall be specified separately in
each case.
Where loans have been guaranteed by directors or others, the
aggregate amount of such loans under each head shall be
disclosed.
Period and amount of default as on the balance sheet date in
repayment of loans and interest, shall be specified separately
in each case.
Other current liabilities
•The other current liabilities shall be classified as:
Current maturities of long-term debt;
Current maturities of finance lease obligations;
Interest accrued but not due on borrowings;
Interest accrued and due on borrowings;
Income received in advance;
Unpaid dividends;
Application money received for allotment of securities and
due for refund and interest accrued thereon.
Contd----
NON-CURRENT ASSETS
FIXED ASSETS
•
•
•
Tangible assets
Tangible assets, also known as hard assets, are physical items with a clear
purchase value used by a business to produce goods and services.
Tangible assets shall be classified as under:Land;
Buildings;
Plant and Equipment;
Furniture and Fixtures;
Vehicles;
Office equipment;
Others (specify nature).
Assets under lease shall be separately specified under each class of asset.
A reconciliation of the gross and net carrying amounts of each class of assets
at the beginning and end of the reporting period showing additions, disposals,
acquisitions through business combinations and other adjustments and the
related depreciation and impairment losses/reversals shall be disclosed
separately.
Where sums have been written-off on a reduction of capital or
revaluation of assets or where sums have been added on
revaluation of assets, every balance sheet subsequent to date of
such write-off, or addition shall show the reduced or increased
figures as applicable and shall by way of a note.
Intangible assets
An intangible asset is a resource that has no physical presence and has long-term
value for a business. An intangible assets shall be classified as under:-
•
Goodwill; Brands/trademarks; Computer software; Mastheads and
publishing titles; Mining rights; Copyrights, and patents and other
intellectual property rights, services and operating rights; Recipes,
formulae, models, designs and prototypes; Licences and franchise;
• Others (specify nature).
• A reconciliation of the gross and net carrying amounts of each class of assets at
the beginning and end of the reporting period showing additions, disposals,
acquisitions through business combinations and other adjustments and the
related amortization and impairment losses/reversals shall be disclosed
separately.
• Where sums have been written-off on a reduction of capital or revaluation of
assets or where sums have been added on revaluation of assets, every balance
sheet subsequent to date of such write-off, or addition shall show the reduced
or increased figures as applicable and shall by way of a note also show the
amount of the reduction or increase as applicable together with the date thereof
for the first five years subsequent to the date of such reduction or increase
Non-current investments
Non-current investments shall be classified as trade investments and other
investments and further classified as:
Investment property;
Investments in Equity Instruments;
Investments in preference shares;
Investments in Government or trust securities;
Investments in debentures or bonds;
Investments in Mutual Funds;
Investments in partnership firms;
Other non-current investments (specify nature).
Under each classification, details shall be given of names of the bodies
corporate indicating separately whether such bodies are (i) subsidiaries, (ii)
associates, (iii) joint ventures, or (iv) controlled special purpose entities in
whom investments have been made and the nature and extent of the investment
so made in each such body corporate (showing separately investments which
are partly paid). In regard to investments in the capital of partnership firms, the
names of the firms (with the names of all their partners, total capital and the
shares of each partner) shall be given.
Contd…
Contd….
Important:
Investments carried at other than at cost should be separately
stated specifying the basis for valuation thereof;
The following shall also be disclosed:
Aggregate amount of quoted investments and market value
thereof;
Aggregate amount of unquoted investments;
Aggregate provision for diminution in value of investments
Long-term loans and advances
Long-term loans and advances shall be classified as:
Capital Advances;
Security Deposits;
Loans and advances to related parties (giving details thereof);
Other loans and advances (specify nature).
The above shall also be separately sub-classified as:
Secured, considered good;
Unsecured, considered good;
Doubtful.
•
Allowance for bad and doubtful loans and advances shall be disclosed under
the relevant heads separately.
•
Loans and advances due by directors or other officers of the company or any
of them either severally or jointly with any other persons or amounts due by
firms or private companies respectively in which any director is a partner or a
director or a member should be separately stated.
Other non-current assets
Other non-current assets shall be classified as:
•
•
Long-term Trade Receivables (including trade receivables on deferred credit
terms);
Others (specify nature);
Long-term Trade Receivables, shall be sub-classified as:
• Secured, considered good;
•Unsecured, considered good;
Doubtful.
Bad and doubtful debts shall be disclosed under the relevant heads
separately.
 Debts due by directors or other officers of the company or any of
them either severally or jointly with any other person or debts due by
firms or private companies respectively in which any director is a
partner or a director or a member should be separately stated.
Current Investments
Current investments shall be classified as:
•
Investments in Equity Instruments;
•
Investment in Preference Shares;
•
Investments in Government or trust securities;
•
Investments in debentures or bonds;
•
Investments in Mutual Funds;
•
Investments in partnership firms;
•
Other investments (specify nature)
Under each classification, details shall be given of names of the bodies
corporate [indicating separately whether such bodies are: (i)
subsidiaries, (ii) associates, (iii) joint ventures, or (iv) controlled
special purpose entities] in whom investments have been made and the
nature and extent of the investment so made in each such body
corporate (showing separately investments which are partly paid)..
Contd…..
In regard to investments in the capital of partnership firms, the names of
the firms (with the names of all their partners, total capital and the shares
of each partner) shall be given.
The following shall also be disclosed:
• The basis of valuation of individual investments;
• Aggregate amount of quoted investments and market value thereof;
• Aggregate amount of unquoted investments;
• Aggregate provision made for diminution in value of investments.
Inventories
Inventories shall be classified as:
•
•
.
• Raw materials;
• Work-in-progress;
• Finished goods;
• Stock-in-trade (in respect of goods acquired for trading);
• Stores and spares;
• Loose tools;
• Others (specify nature).
Goods-in-transit shall be disclosed under the relevant sub-head of inventories.
Mode of valuation shall be stated. (FIFO, LIFO, Average etc)
•
.
Cash and cash equivalents
Cash and cash equivalents shall be classified as:
•
•
•
•
•
•
•
•
Balances with banks;
Cheques, drafts on hand;
Cash on hand;
Others (specify nature).
Earmarked balances with banks (for example, for unpaid
dividend) shall be separately stated.
Balances with banks to the extent held as margin money or
security against the borrowings, guarantees, other
commitments shall be disclosed separately.
Repatriation restrictions, if any, in respect of cash and bank
balances shall be separately stated.
Bank deposits with more than twelve months maturity shall be
disclosed separately.
Short-term loans and advances
Short-term loans and advances shall be classified as:
• Loans and advances to related parties (giving details thereof);
• Others (specify nature).
The above shall also be sub-classified as:
•
Secured, considered good;
•
Unsecured, considered good;
•
Doubtful.
• Bad and doubtful loans and advances shall be disclosed under
the relevant heads separately.
• Loans and advances due by directors or other officers of the
company or any of them either severally or jointly with any
other person or amounts due by firms or private companies
respectively in which any director is a partner or a director or a
member shall be separately stated.
Other current assets (specify nature)
This is an all-inclusive heading, which incorporates current assets
that do not fit into any other asset categories.
Contingent liabilities and commitments (to the extent not
provided for)
(i) Contingent liabilities shall be classified as:
(a) Claims against the company not acknowledged as debt;
(b) Guarantees;
(c) Other money for which the company is contingently liable.
(ii) Commitments shall be classified as:
(a) Estimated amount of contracts remaining to be executed on capital
account and not provided for;
(b) Uncalled liability on shares and other investments partly paid;
(c) Other commitments (specify nature).
PART II – STATEMENT OF PROFIT AND LOSS
Name of the Company…ABC………………….
Profit and loss statement for the year ended ………………………
(Rupees in…………)
Particulars
1
Figures as at the
Figures as at the
end of the
Note No. end of current
previous
2
reporting period
reporting period
3
4
Revenue
I. Revenue from operations/direct income
xxx
xxx
II. Other income/indirect income
III. Total Revenue (I + II)
xxx
xxx
xxx
xxx
xxx
xxx
EXPENSES
Cost of Goods Sold/Cost of materials
consumed/cost of services provided
Salary & Wages and Employee benefits
expense
Finance costs
Depreciation and amortisation
expense
Other expenses
Total expenses
Profit before exceptional
and extraordinary items and
tax (III-IV)
Exceptional items
Profit before extraordinary
items and tax (V-VI)
VIII. Extraordinary items
IX. Profit before tax (VIIVIII)
X. Tax expense
XI. Profit (Loss) for the
period after tax.
General Instructions for Preparation of Statement of Profit and Loss
I.
REVENUE
 Operating/Direct Revenue

• Revenue earned from routine activities of the business such as
the revenue generated from the sale proceeds of goods and rendering
services to customers is called direct revenue;
Non operating/Indirect Revenue:
• Any revenue arising from sources other than normal business activities
are known as indirect revenue. Examples of indirect revenue are interest
received, commission received and dividend income etc.
II
Expenses
 Cost of materials consumed/cost of services provided
cost of sales, cost of revenue, or cost of services are referred to all the direct
costs associated with services rendered to the customer for the business
provides companies. It includes all the direct costs involved in running or
performing services. The typical expenses included in the category of direct
costs are the cost of material, cost of labor or cost of salaries in a service
industry, and all other costs which can be linked directly in the manufacturing of
products or rendering of services
II
Expenses
 Cost of materials consumed/cost of services provided
• This is invariably the cost of raw material that the company requires to
manufacture finished goods.
• cost of sales, cost of revenue, or cost of services are referred to all the direct
costs associated with services rendered to the customer for the business
provides companies. It includes all the direct costs involved in running or
performing services. The typical expenses included in the category of direct
costs are the cost of material, cost of labor or cost of salaries in a service
industry, and all other costs which can be linked directly in the manufacturing
of products or rendering of services
Finance cost
Financing cost (FC), also known as the cost of finances (COF),
is the cost, interest, and other charges involved in the borrowing
of money to build or purchase assets.
The total expenses associated with securing funds for a project or
business arrangement may include interest payments, financing
fees charged by intermediary financial institution, and fees or
salaries of any personnel required to complete the financing
process. This cost includes interest on loans, overdraft charges,
etc.
Salary Wages & Employees Benefits:
Employees Prefer Compensation and Benefits are:Salary & Wages
•Health Insurance. Disability Insurance. ...
•Tuition Reimbursement. ...
•Corporate Discounts. ...
•Paid Vacation. ...
•Retirement Benefits. ...
•Paid Sick Leaves. ...
•Performance Bonus. Etc.
Depreciation & Amortization Expenses:
Amortization and depreciation are non-cash expenses on a
company's income statement. Depreciation represents the
cost of capital assets on the balance sheet being used over
time, and amortization is the similar cost of using intangible
assets like goodwill over time.
Other & Misc. Expenses:
•
Expenditure incurred on each of the following items, separately for each
item:—
•
Consumption of stores and spare parts;
•
Power and fuel;
•
Rent;
•
Repairs to buildings;
•
Repairs to machinery;
•
Insurance;
•
Rates and taxes, excluding, taxes on income;
•
Miscellaneous expenses, etc.
•
Telephone
•
Light etc.
Amendments in
Schedule III
In accordance with Ind AS
Amendment brought to include the format and general
instructions for preparation of balance sheet by a
Company to which Ind AS applies
Balance Sheet - Amendments

Following line items to be shown under equity
on the face of the balance sheet:
i) Equity share capital, and
ii) other equity

Word “Property, Plant and Equipment” to be
used instead of “Tangible Assets”.

Provision word to be used . However the Short
Term Provisions/ Long Term Provisions will still
be shown in Current/ Non Current Liabilities.
Balance Sheet - Amendments

Following to be shown separately on the face of the
balance sheet :

Goodwill

Investment Property

Intangible assets under development

Biological Assets other than bearer plants

Financial Assets( Bifurcated into (i) Investments, (ii)
Trade receivables, (iii) Loans, (iv) Others )

Financial Liabilities ( Bifurcated into (i) Borrowings,
(ii) Trade payable, (iii) Other financial liabilities ).
STATEMENT OF CHANGES IN
EQUITY
The following needs to be provided in the statement of
changes in equity as a schedule:
a)
Equity share capital (with the balance at the beginning
of the reporting period, changes in equity share
capital during the period and the closing balance)
b)
Other Equity
• Share application money pending allotment
• Equity component of compound financial
instruments
• Reserves and surplus segregating
• Capital reserve,
Continue….
STATEMENT OF CHANGES IN EQUITY Amendments
Other Equity Contd.
• Securities premium reserve,
• Other reserves, and
• Retained earnings
• Components of other comprehensive income (OCI)
• Debt instruments through other comprehensive income
• Equity instruments through other comprehensive income
• Effective portion of cash flow hedges
• Revaluation surplus
• Exchange differences on foreign operations translation
• Other OCI items
• Money received against share warrants
Notes to Accounts - Amendments
•
Classification of PPE in the notes:
 Land
 Buildings
 Plant
and Equipment
 Furniture
and Fixtures
 Vehicles
 Office
equipment
 Others
(specify nature)
AUDITOR’S VIEW OF FIANCIAL STATEMENT/
ANNUAL ACCOUNTS
Types of view on Financial Statements/Annual Accounts
(i) True & Faire View
(ii) Note True & Fair View
(iii) Disclaimer
General Meaning of True & Fare View
•
True and fair view in auditing means that the financial statements are free from
material misstatements and faithfully represent the financial performance and
position of the entity.
True implies that the financial statements are factually correct and have been
prepared according to applicable Rules & Standards and they do not contain any
material misstatements that may mislead the users. Misstatements may result from
material errors or omissions of transactions & balances in the financial statements.
Fair implies that the financial statements present the information faithfully
without any element of bias and they reflect the economic substance of
transactions rather than just their legal form.
Companies Act 2013 provisions in regard of Opinion of Financial
Statements of Companies.
• Section 129 (1): The financial statements shall give a true and fair view of the
state of affairs of the company or companies, comply with the accounting
standards notified under Section 133 and shall be in the form or forms as may be
provided for different class or classes of companies in Schedule-III .
• Provided that the items contained in such financial statements shall be in
accordance with the accounting standards:
• Section 143(2): The auditor shall make a report to the members of the
company on the accounts examined by him and on every financial statements
which are required by or under this Act to be laid before the company in
general meeting and the report shall after taking into account the provisions of
this Act, the accounting and auditing standards and matters which are required to
be included in the audit report under the provisions of this Act or any rules made
thereunder or under any order made under sub-section (11) and to the best of his
information and knowledge, the said accounts, financial statements give a true
and fair view of the state of the company’s affairs as at the end of its financial
year and profit or loss and cash flow for the year and such other matters as may
be prescribed.”
Standard on Auditing (SA) 700 (Revised).
Forming an unmodified/True & Fare view Opinion on the Financial
Statements
For giving the Unmodified/True & Fare view the some followings
points should be satisfied by the Auditor’s:
• whether the financial statements are prepared, in all material respects,
in accordance with the applicable financial reporting framework.
• whether the auditor has obtained reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, fraud or error.
• whether sufficient appropriate audit evidence has been obtained;
• whether uncorrected misstatements are immaterial, individually or in
aggregate;
Audit Certificate Fiancé Accounts and Appropriation Accounts of
the Government
The exact format of audit certificate will be governed by the instructions issued
from the Headquarters Office. Separate audit certificates are required to be given
for the Finance Accounts and the Appropriation Accounts. We will discuss here
Unqualified/True & Fare view on Government Accounts.
Unqualified opinion
• An unqualified opinion is given when, in the judgement of the Principal
Auditor,
For Finance Accounts:
The financial statements and accompanying notes give a true and fair view of the
financial position, and the receipts and disbursements of the audited entity for the
year under audit
•
For Appropriation Account:
A true and fair view of the accounts of the sums expended in the relevant year
compared with the sums specified in the schedules appended to the Appropriation
Acts passed.
Contd….
•An unmodified/unqualified opinion is given when, in the judgment
of Principal Auditor, the financial statements fairly present/give a
true and fair view and have been prepared in accordance with
relevant accounting requirements. In forming this judgement, the
Principal Auditor should be satisfied in all material respects that:
•the financial statements have been prepared in accordance with
relevant legislation, regulations,
instructions
of
Finance
Department, Government Accounting and applicable accounting
standards (and that any departures are justified and adequately
explained in the financial statements);
•there is adequate disclosure of all information relevant to a proper
understanding of the financial statements;
•appropriate accounting policies have been consistently applied in the
preparation of financial statements; and
•the financial statements are free from material irregularity.
Contd…
In forming the judgment about absence of material irregularity, the Accountant
General must be satisfied that in all material respects:
(i)transactions comply
with the legislation (both primary and secondary)
governing them;
(ii)transactions comply with any regulations relating to them issued by a body with
the power to do so under the governing legislation;
(iii)approval of Finance Department or any sponsoring Department has been sought
and obtained as required;
(iv)the financial transactions fall within the ambit of the Vote of the Parliament or
Legislature.
Unqualified Opinion with Emphasis of Matter
An auditor may express an unqualified opinion and also include explanatory
paragraphs, known as ‘Emphasis of Matter’ in the report. Emphasis of matter may
be required in circumstances where the Principal Auditor is of the view that
Financial Statements do present a true and fair view, but there are certain issues or
concerns which must be brought to the notice of stakeholders as part of the audit
opinion. The emphasis of matter may relate to appropriateness of accounting
policies, adequacy of disclosures, internal control management issues or significant
transactions to name a few. Normally, the emphasis of matter would feature issues
of higher significance or materiality than audit findings that appear in Report on
State Finances.
THE END