From the following Trial Balance and other additional information furnished by AGN Ltd., prepare the Balance Sheet as at 31st March, 2025 as required by Schedule-III Division-I of the Companies Act, 2013 and show the Notes to Accounts below the Balan

Question

From the following Trial Balance and other additional information furnished by AGN Ltd., prepare the Balance Sheet as at 31st March, 2025 as required by Schedule-III Division-I of the Companies Act, 2013 and show the Notes to Accounts below the Balance Sheet:

Trial Balance

| Particulars | Debit (₹) | Credit (₹) |
|-------------|-----------|------------|
| Equity Capital (Face Value of ₹ 100) | | 20,00,000 |
| Calls-in-Arrears | 2,000 | |
| General Reserve | | 4,60,000 |
| Loan from SBI (Long-term) | | 3,00,000 |
| Land | 4,00,000 | |
| Building | 8,00,000 | |
| Plant & Machinery | 11,00,000 | |
| Furniture | 1,20,000 | |
| Raw Materials | 1,00,000 | |
| Finished Goods | 4,00,000 | |
| Trade Receivables | 3,80,000 | |
| Advances (Short-term) | 90,000 | |
| Provision for Taxation | | 1,38,000 |
| Dividend Payable | | 1,20,000 |
| Profit & Loss A/c | | 1,80,000 |
| Loans (Unsecured) | | 2,50,000 |
| Trade Payables | | 4,00,000 |
| Cash at Bank | 3,86,000 | |
| Cash in Hand | 70,000 | |
| | 38,48,000 | 38,48,000 |

Additional Information:

(i) 6000 Equity Shares were issued for consideration other than cash

(ii) Loan from SBI includes ₹ 8,000 for interest accrued but not due. The loan is secured by hypothecation of building

(iii) The cost of assets:

| | ₹ |
|-------------|-------------|
| Building | 9,60,000 |
| Plant & Machinery | 14,00,000 |
| Furniture | 1,80,000 |

(iv) Trade Receivables of ₹ 1,80,000 are due for 8 months

(10+10=20 marks)

(b) It is observed that at a monthly sale of ₹ 1,20,000, a firm suffers an operating loss of ₹ 30,000. The management apprehends that any increase in sale will further rise the loss. However, the Accountant of the firm analyzed the situation based on cost, volume and profit, and showed that the firm may earn ₹ 30,000 operating profit by doubling the sale.

Based on the above information, you are required to measure—

(i) P/V ratio;

(ii) monthly fixed costs;

(iii) BEP;

(iv) MOS for profit of ₹ 40,000;

(v) profit for monthly sale of ₹ 3,00,000. (5+3+3+2+2=15 marks)

(c) (i) Explain in brief the principles of inventory valuation based on AS 2.

(ii) Describe in brief the permissible methods of depreciation based on the relevant Accounting Standard. (6+9=15 marks)

UPSC Answer Check · Accepted Answer

The directive 'solve' demands precise numerical working with clear presentation. Allocate approximately 40% time to part (a) Balance Sheet preparation (20 marks), 30% to CVP calculations in part (b) (15 marks), and 30% to theoretical explanations in part (c) (15 marks). Begin with structured working notes for (a), show all CVP formulas and derivations for (b), and use AS 2 and AS 10/Ind AS 16 citations for (c). Conclude with brief synthesis on how accounting standards ensure financial statement reliability.
- Part (a): Correct classification under Schedule III Division I—Equity Share Capital with ₹6,00,000 shares issued for non-cash consideration disclosed in notes; Calls-in-Arrears deducted from subscribed capital; SBI loan split between Non-current Borrowings (₹2,92,000) and Other Current Liabilities (₹8,000 interest accrued); Accumulated Depreciation computed and deducted from respective assets (Building ₹1,60,000; P&M ₹3,00,000; Furniture ₹60,000); Trade Receivables bifurcated into Current (₹2,00,000) and Non-current/Other (₹1,80,000) based on 8-month overdue criterion
- Part (a): Complete Notes to Accounts covering: Share Capital details with reconciliation; Reserves & Surplus movement; Secured loan nature disclosure; Tangible Assets schedule with gross block, depreciation, net block; Trade Receivables ageing; Other Current Assets classification
- Part (b): Derivation of P/V ratio using simultaneous equations or contribution approach—establishing that when sales double from ₹1,20,000 to ₹2,40,000, loss of ₹30,000 converts to profit of ₹30,000, implying contribution of ₹60,000 on additional ₹1,20,000 sales, yielding P/V ratio of 50%
- Part (b): Computation of monthly fixed costs (₹90,000), BEP sales (₹1,80,000), MOS for ₹40,000 profit (₹2,60,000 sales or ₹80,000 in value/MOS ratio 33.33%), and profit at ₹3,00,000 sales (₹60,000)
- Part (c)(i): AS 2 principles—valuation at lower of cost and net realisable value; cost includes purchase cost, conversion cost, and other costs to bring to present location/condition; exclusion of abnormal costs; FIFO or Weighted Average as cost formulas; consistency requirement
- Part (c)(ii): AS 6/AS 10/Ind AS 16 permissible depreciation methods—Straight Line, Written Down Value, Units of Production; component accounting for significant parts; depreciation charge even if market value exceeds carrying amount; systematic allocation over useful life; residual value and review of useful life
- Integration: Demonstration of how Schedule III, Companies Act 2013 provisions, and Accounting Standards interconnect in financial reporting framework

Dimension	Weight	Max marks	Excellent	Average	Poor
Demand-directive understanding	15%	7.5	Recognizes 'solve' requires complete numerical working with Schedule III format for (a), formula-based derivations for (b), and precise standard citations for (c); distinguishes between preparation, calculation, and explanation demands across sub-parts; presents working notes before final statements	Attempts all parts but mixes formats—may present Balance Sheet without proper Schedule III classification or gives CVP answers without showing formulas; generic theoretical answers for (c) without standard numbers	Misinterprets directive—writes descriptive essay instead of solving; omits working notes; fails to recognize distinct requirements of each sub-part
Content depth & accuracy	30%	15	Mathematically accurate: Equity Capital ₹20,00,000 with proper note on ₹6,00,000 non-cash issue; correct depreciation calculations; accurate CVP derivations (P/V 50%, FC ₹90,000, BEP ₹1,80,000); precise AS 2 and AS 6/10/Ind AS 16 provisions with section references; no classification errors in Schedule III	Minor calculation errors in depreciation or CVP; correct final answers but missing steps; partial AS coverage—mentions NRV but omits cost formulas, or lists SLM/WDV without explaining component accounting	Major computational errors (wrong depreciation base, incorrect P/V ratio derivation); fundamental AS misconceptions; misclassifies assets/liabilities under Schedule III; omits key adjustments like calls-in-arrears or interest accrued
Structure & flow	20%	10	Clear three-part structure with visible sub-part markers; (a) shows Working Notes → Balance Sheet → Notes to Accounts; (b) lists given data, shows formulas, step-by-step calculations for all five requirements; (c) uses headings with standard numbers and bullet points for principles/methods	All parts present but poorly sequenced—working notes scattered, Balance Sheet without supporting notes, CVP answers without given data restatement; AS answers as continuous prose without standard-wise separation	Disorganized presentation—no part separation, illegible working, missing Notes to Accounts, jumps between calculations without logical flow; no use of schedules or tabular formats where required
Examples / case-law / data	20%	10	Uses question data precisely: cites ₹6,000 shares for non-cash consideration, ₹8,000 interest split, 8-month receivables for classification, specific asset costs for depreciation; references Companies Act 2013 Schedule III Division I explicitly; names AS 2, AS 6, AS 10 or Ind AS 2, Ind AS 16 correctly with recent amendments if any	Uses data but without explicit citation—computes correctly but doesn't quote figures; mentions 'Companies Act' without Schedule III specificity; refers to 'Accounting Standards' generically without numbers	Ignores provided data—makes assumptions contrary to question; no standard citations; invents figures not in trial balance; fails to use cost figures given in Additional Information (iii)
Conclusion & analytical edge	15%	7.5	Brief synthesis connecting parts: notes how conservative inventory valuation (AS 2) and systematic depreciation (AS 6/10) affect Balance Sheet figures in (a); explains CVP insight that doubling sales converts loss to profit due to fixed cost leverage; comments on Schedule III's improved transparency over earlier formats	Mechanical ending—restates answers without integration; generic conclusion on 'importance of accounting standards' without question-specific linkage	No conclusion; or irrelevant philosophical statement on accounting; fails to recognize interconnection between cost concepts in (b) and inventory valuation in (c)(i)

From the following Trial Balance and other additional information furnished by AGN Ltd., prepare the Balance Sheet as at 31st…

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