Balance Sheet Format (Companies Act, 2013 Guidelines) in Accounting

Introduction

The balance sheet is one of the key financial statements used by companies to present their financial position at a specific point in time. It provides a snapshot of the company's assets, liabilities, and equity. Under the Companies Act, 2013 of India, the format for the balance sheet is specified to ensure consistency and transparency in financial reporting. This tutorial explains the format of the balance sheet as per the guidelines of the Companies Act, 2013, with real-world examples.

Balance Sheet Format as per Companies Act, 2013

The balance sheet of a company, as per the Companies Act, 2013, is divided into two main sections:

• Part I: Balance Sheet (Form No. SH-1)
• Part II: Notes to Accounts

Part I contains the balance sheet format, while Part II provides detailed notes on various accounting policies and specific items listed in the balance sheet.

Structure of the Balance Sheet

The balance sheet format prescribed by the Companies Act, 2013 is divided into two sides:

• Assets – Listed on the left side of the balance sheet.
• Liabilities – Listed on the right side of the balance sheet.

1. Liabilities Section

The liabilities section is further classified into two main parts:

• Equity and Liabilities – This includes the equity capital and reserves of the company.
• Non-Current Liabilities – This includes long-term liabilities such as long-term borrowings, deferred tax liabilities, and other non-current liabilities.
• Current Liabilities – This includes short-term borrowings, trade payables, and other current liabilities that are due within a year.

2. Assets Section

The assets section is divided into two main categories:

• Non-Current Assets – These include fixed assets, intangible assets, and long-term investments.
• Current Assets – These include assets that are expected to be converted into cash or consumed within one year, such as inventories, trade receivables, and cash and cash equivalents.

Balance Sheet Format

The balance sheet format under the Companies Act, 2013 follows a structured layout. Below is the format:

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Balance Sheet as at [Date]
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Liabilities                                       | Assets
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(1) Shareholders' Funds                           | (1) Non-Current Assets
- Share Capital                                   | - Fixed Assets
- Reserves & Surplus                              | - Intangible Assets
- Money Received Against Share Capital            | - Non-Current Investments
--------------------------------------------------------------------------------------------------
(2) Non-Current Liabilities                       | (2) Current Assets
- Long-Term Borrowings                            | - Inventories
- Deferred Tax Liabilities                        | - Trade Receivables
- Other Non-Current Liabilities                   | - Cash and Cash Equivalents
--------------------------------------------------------------------------------------------------
(3) Current Liabilities                           | (3) Short-Term Loans and Advances
- Short-Term Borrowings                           | - Short-Term Trade Receivables
- Trade Payables                                  | - Other Current Assets
- Other Current Liabilities                       | -------------------------------------------------------------------------------------------------
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Total Liabilities                                 | Total Assets
--------------------------------------------------------------------------------------------------
      

Real-World Example of Balance Sheet Format

Let’s assume that a company, ABC Ltd., prepares its balance sheet as at March 31, 2024, following the Companies Act, 2013 format. Below is an example of how the balance sheet may look:

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Balance Sheet as at 31st March, 2024
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Liabilities                                       | Assets
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(1) Shareholders' Funds                           | (1) Non-Current Assets
- Share Capital: $500,000                         | - Fixed Assets: $1,000,000
- Reserves & Surplus: $200,000                    | - Intangible Assets: $100,000
- Money Received Against Share Capital: $50,000   | - Non-Current Investments: $300,000
--------------------------------------------------------------------------------------------------
(2) Non-Current Liabilities                       | (2) Current Assets
- Long-Term Borrowings: $400,000                  | - Inventories: $150,000
- Deferred Tax Liabilities: $50,000               | - Trade Receivables: $200,000
- Other Non-Current Liabilities: $30,000          | - Cash and Cash Equivalents: $100,000
--------------------------------------------------------------------------------------------------
(3) Current Liabilities                           | (3) Short-Term Loans and Advances
- Short-Term Borrowings: $150,000                 | - Short-Term Trade Receivables: $80,000
- Trade Payables: $100,000                        | - Other Current Assets: $60,000
- Other Current Liabilities: $20,000              | -------------------------------------------------------------------------------------------------
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Total Liabilities: $1,450,000                     | Total Assets: $2,090,000
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In this example, ABC Ltd. has total liabilities of $1,450,000 and total assets of $2,090,000. The balance sheet format follows the prescribed structure, with equity and liabilities listed on the right side and assets on the left. The total of liabilities matches the total of assets, ensuring that the accounting equation (Assets = Liabilities + Equity) holds true.

Notes to Accounts

Along with the balance sheet, the company also provides Notes to Accounts, which contain detailed explanations of specific items listed in the balance sheet, such as the breakdown of reserves, details on long-term borrowings, and any contingent liabilities. These notes provide transparency and help stakeholders understand the financial statements better.

Conclusion

The balance sheet format prescribed by the Companies Act, 2013 is a standardized structure that ensures consistency and transparency in financial reporting. It provides a clear view of a company’s financial position by classifying its assets, liabilities, and equity. Following the prescribed format helps businesses maintain compliance with regulations and ensures that investors and stakeholders can easily understand the financial health of the company.