(a) The Balance Sheets of A Limited and B Limited as on 31st March, 2021 are as follows:

A Limited (₹) | B Limited (₹)
---|---
I – Equity and Liabilities : | |
1. Shareholders' Funds | |
(a) Share Capital | |
Authorised Capital | |
₹ 100 per share |

Question

(a) The Balance Sheets of A Limited and B Limited as on 31st March, 2021 are as follows:

A Limited (₹) | B Limited (₹)
---|---
I – Equity and Liabilities : | |
1. Shareholders' Funds | |
(a) Share Capital | |
Authorised Capital | |
₹ 100 per share | 5,00,000 | —
₹ 10 per share | — | 10,00,000
Subscribed and Issued Capital | 5,00,000 | 4,00,000
(b) Reserves and Surplus | |
Capital Reserve | 1,00,000 | —
General Reserve | 35,000 | 4,00,000
2. Non-current Liabilities | |
Secured Loan | — | 2,50,000
Unsecured Loan | 1,00,000 | —

UPSC Answer Check · Accepted Answer

The directive 'compare' requires systematic juxtaposition of both companies' financial positions rather than isolated description. Spend approximately 55% of effort on part (a) analyzing the complete balance sheet structures of A Limited and B Limited, and 45% on part (b) comparing their reserves, surplus and loan positions. Structure as: brief introduction stating comparison framework → side-by-side analysis of capital structures → comparison of reserves and debt patterns → concluding inference on financial health and risk profiles.
- Part (a): Comparison of share capital structures—A Limited has ₹100 face value shares with full subscription vs B Limited's ₹10 face value with partial subscription (40% utilization of authorized capital)
- Part (a): Analysis of capital reserve presence in A Limited (₹1,00,000) versus absence in B Limited, indicating different historical transactions (acquisitions/asset sales)
- Part (b): Contrast in general reserves—B Limited (₹4,00,000) maintains 11.4x higher reserves than A Limited (₹35,000), showing divergent retention policies
- Part (b): Debt structure comparison—A Limited relies on unsecured loans (₹1,00,000) while B Limited uses secured loans (₹2,50,000), affecting risk and cost of capital
- Synthesis: Computation and comparison of key ratios—debt-equity, proprietary, and fixed assets coverage (if asset data completed)—to assess relative financial stability
- Inference: Assessment of which company demonstrates stronger long-term solvency and better gearing position based on the comparative analysis

Dimension	Weight	Max marks	Excellent	Average	Poor
Demand-directive understanding	20%	2	Demonstrates clear grasp that 'compare' requires parallel analysis of both companies throughout; establishes explicit comparison criteria (capital structure, reserve adequacy, debt composition) upfront; avoids treating companies in isolation	Mentions both companies but analysis remains largely descriptive; comparison is implicit rather than structured; some understanding of directive but execution weak	Describes one company then the other without systematic comparison; treats as two separate questions; misunderstands directive as 'describe' or 'state'
Content depth & accuracy	20%	2	Accurately interprets all balance sheet items; correctly identifies ₹100 vs ₹10 face value significance; computes relevant ratios (proprietary ratio, debt-equity); explains capital reserve origin; notes B Limited's under-capitalization relative to authorization	Most figures correctly stated with minor computational errors; basic understanding of reserve types but limited ratio analysis; misses significance of face value differences	Major errors in figure transcription; confuses capital reserve with general reserve; fails to distinguish secured vs unsecured loan implications; no ratio computation
Structure & flow	20%	2	Uses tabular or clear sectional format for side-by-side presentation; logical progression from equity to reserves to debt; effective signposting between part (a) and part (b); integrated conclusion drawing from both parts	Some organizational structure present but comparison not consistently maintained; parts (a) and (b) treated somewhat separately; adequate but not crisp flow	Disorganized presentation; jumps between companies randomly; no clear separation of parts; missing introduction or conclusion; difficult to follow
Examples / case-law / data	20%	2	Cites Schedule III of Companies Act 2013 for balance sheet format compliance; references SEBI LODR regulations on disclosure; applies ICAI guidance note on reserve classification; uses Indian corporate examples (e.g., Tata vs Reliance capital structures) for illustration	Mentions Companies Act provisions generally without specific sections; limited external referencing; relies primarily on question data	No external references; ignores regulatory framework; fails to contextualize within Indian company law; no attempt to relate to real-world practices
Conclusion & analytical edge	20%	2	Draws reasoned inference on relative financial strength—B Limited's higher reserves but lower capital utilization suggests conservative growth vs A Limited's full subscription indicating market confidence; evaluates trade-off between secured debt (lower cost, asset risk) and unsecured debt (higher cost, flexibility); suggests which company better positioned for expansion	Brief conclusion summarizing findings without deeper insight; some attempt at inference but superficial; no clear stance on relative position	No conclusion or merely restates data; no analytical judgment; fails to synthesize part (a) and part (b) findings; ends abruptly

(a) The Balance Sheets of A Limited and B Limited as on 31st March, 2021 are as follows: A Limited (₹) | B Limited (₹) ---|--- I…

Directive word: Compare

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