Final Accounts of Companies: ISC Class 12 Accounts, Schedule III Balance Sheet

What Final Accounts of Companies is about

Weightage: Final Accounts of Companies is part of the syllabus unit that carries 7 of the 80 theory marks. It is in the compulsory Section A (60 marks).Source: CISCE ISC Accountancy (Accounts) syllabus, examination year 2027, distribution of marks

Key concepts

The Schedule III vertical format

I. Equity and Liabilities

1. Shareholders' Funds: (a) Share Capital; (b) Reserves and Surplus; (c) Money received against share warrants.
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.

II. Assets

1. Non-Current Assets: (a) Property, Plant and Equipment and Intangible Assets: (i) Property, Plant and Equipment; (ii) Intangible Assets; (iii) Capital work-in-progress; (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.
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.

A current item is expected to be settled or realised within twelve months (or the operating cycle).

Worked example

Suppose a company's accountant asks where to show (i) loose tools, (ii) a 3-year bank loan, (iii) bills receivable, (iv) capital work-in-progress. Give the head and sub-head for each. [2 marks]

Try it first, then show the solutionSolution

1. (i) Current Assets → Inventories.
2. (ii) Non-Current Liabilities → Long-term Borrowings.
3. (iii) Current Assets → Trade Receivables.
4. (iv) Non-Current Assets → Property, Plant and Equipment and Intangible Assets → Capital work-in-progress.

Answer: As listed; each answer needs both the head and the sub-head.

Shareholders' funds: Share Capital and Reserves and Surplus

Share Capital note (syllabus format): Authorised; Issued; Subscribed (subscribed and fully paid up; subscribed but not fully paid up, less calls in arrears); add Shares Forfeited A/c. Show equity and preference capital separately; if authorised or issued capital is not given, write the heading with no figure.

Reserves and Surplus: Capital Reserve; Securities Premium; Debenture Redemption Reserve; General Reserve; Surplus, i.e. balance in the Statement of Profit and Loss. A debit balance of the Statement of Profit and Loss is shown as a negative figure under Surplus (it may make Reserves and Surplus negative).

Not here: Calls in advance (Other Current Liabilities); Share application money pending allotment (its own head).

Worked example

Suppose a company has General Reserve ₹80,000, Securities Premium ₹50,000 and a debit balance of Statement of Profit and Loss ₹1,70,000. Show Reserves and Surplus. [2 marks]

Try it first, then show the solutionSolution

1. Particulars	₹
   Securities Premium	50,000
   General Reserve	80,000
   Surplus, i.e. balance in Statement of Profit and Loss (Dr)	(1,70,000)
   Total	(40,000)

Answer: Reserves and Surplus = (₹40,000), shown as a negative figure.

Non-current and current liabilities

Item	Head → Sub-head
Debentures, long-term bank loans, public deposits (beyond 12 months)	Non-Current Liabilities → Long-term Borrowings
Premium on redemption of debentures	Non-Current Liabilities → Other Long-term Liabilities
Provision for employee benefits (gratuity, leave encashment)	Non-Current Liabilities → Long-term Provisions
Bank overdraft, cash credit, loans repayable on demand	Current Liabilities → Short-term Borrowings
Current maturities of long-term debt (instalments due within 12 months)	Current Liabilities → Short-term Borrowings (amendment)
Creditors, bills payable	Current Liabilities → Trade Payables
Interest accrued on borrowings, unpaid dividend, calls in advance, outstanding expenses, income received in advance	Current Liabilities → Other Current Liabilities
Provision for tax	Current Liabilities → Short-term Provisions

Proposed dividend is not a liability until approved by shareholders: disclose it under Contingent Liabilities and Commitments in the notes.

Worked example

Suppose a company has 9% debentures of ₹5,00,000, of which ₹1,00,000 are redeemable within the next twelve months, and a bank overdraft of ₹45,000. Show the amounts of Long-term and Short-term Borrowings. [2 marks]

Try it first, then show the solutionSolution

1. Long-term Borrowings = 5,00,000 − 1,00,000 = ₹4,00,000.
2. Short-term Borrowings = 45,000 (overdraft) + 1,00,000 (current maturities) = ₹1,45,000.

Answer: Long-term ₹4,00,000; Short-term ₹1,45,000.

Non-current and current assets

Item	Head → Sub-head
Land, building, plant, furniture, vehicles (net of accumulated depreciation)	Non-Current Assets → PPE and Intangible Assets → Property, Plant and Equipment
Goodwill, patents, trademarks, copyrights, software	→ Intangible Assets
Building under construction	→ Capital work-in-progress
Long-term investments (shares, debentures of other companies held long term)	Non-current Investments
Security deposits, long-term loans to others	Long-term Loans and Advances
Short-term investments, marketable securities	Current Investments
Raw materials, work-in-progress, finished goods, stock-in-trade, stores, loose tools	Inventories
Debtors (less provision), bills receivable	Trade Receivables
Cash in hand, bank balances, cheques in hand	Cash and Cash Equivalents
Short-term loans and advances (including to employees), advance tax	Short-term Loans and Advances
Prepaid expenses, accrued income	Other Current Assets

Show PPE at gross value less accumulated depreciation in the note.

Worked example

Suppose plant and machinery cost ₹8,00,000 with accumulated depreciation of ₹2,00,000, and the company also holds patents of ₹80,000. What is shown under Property, Plant and Equipment? [1 mark]

Try it first, then show the solutionSolution

1. Net PPE = 8,00,000 − 2,00,000 = ₹6,00,000. Patents are Intangible Assets, not PPE.

Answer: ₹6,00,000 under PPE; patents ₹80,000 under Intangible Assets.

Contingent liabilities and the syllabus amendments

Contingent liabilities are possible obligations that depend on a future event: claims against the company not acknowledged as debts, guarantees given, uncalled liability on partly paid shares held, disputed tax demands. They are not added to the Balance Sheet totals; they are shown in the notes under Contingent Liabilities and Commitments.

The four amendments in the ISC 2027 syllabus:

1. Proposed dividend is not a provision; it is disclosed under Contingent Liabilities (AS-4 amendment).
2. Sub-head Fixed Assets → Property, Plant and Equipment and Intangible Assets; Tangible Assets → Property, Plant and Equipment.
3. Current maturities of long-term borrowings → Current Liabilities → Short-term Borrowings.
4. Securities Premium Reserve → Securities Premium.

Worked example

Suppose a company's annual report shows "claims against the company not acknowledged as debts ₹12.5 crore". Give the heading and sub-heading under which it is shown in the Notes to Accounts. [1 mark]

Try it first, then show the solutionSolution

1. It is a possible obligation, not a recognised liability.

Answer: Heading: Contingent Liabilities and Commitments; sub-heading: Contingent Liabilities (claims against the company not acknowledged as debts).

Final Accounts of Companies in real life

Each concept, met in an everyday situation. Read the situation, answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Topics in this chapter

• Company Balance Sheet: Assets Side and Notes to Accounts
• Company Balance Sheet: Equity and Liabilities Side
• Preparing a Company Balance Sheet with Adjustments

Final Accounts of Companies: key facts

Share Capital (note)

Subscribed and fully paid + (subscribed not fully paid − calls in arrears) + Shares Forfeited

Long-term Borrowings

Long-term loans and debentures − current maturities

Short-term Borrowings

Bank overdraft + cash credit + loans repayable on demand + current maturities of long-term debt

Property, Plant and Equipment

Gross block − accumulated depreciation

Trade Receivables

Debtors − provision for doubtful debts + bills receivable

Balance Sheet check

Total Equity and Liabilities = Total Assets (contingent liabilities excluded)

How the board asks Final Accounts of Companies

The question patterns to expect, and the method that works for each.

Tricks to remember Final Accounts of Companies

Short memory aids. Say each one aloud once, then use it on a question the same day.

• Twelve-month rule

  Within 12 months = current; beyond = non-current. Instalments due within 12 months move to current.

  Use it when: Every classification.

• OCL basket

  Interest accrued, Unpaid dividend, Calls in advance, Outstanding expenses, Advance income: "I U C O A" go to Other Current Liabilities.

  Use it when: Current liabilities.

• Note first, face later

  Face of the Balance Sheet: sub-head and note number; details only in the notes.

  Use it when: Presentation marks.

Final Accounts of Companies: board-level solved questions

Ordered from board level to HOTS. Cover the solution, write your own, then compare step by step.

Case-study practice (Section A style)

Read the situation, then answer every part. In the board paper this is a 6-mark question split into 1 + 2 + 2 + 1 marks.

Where the marks are

How a typical answer is split into step marks. Show every step: a right final answer alone rarely earns full marks.

Where students lose marks in Final Accounts of Companies

The slips examiners see most often, and what to write instead.

• ✗Mistake: Writing only the sub-head, or the wrong heading

  CISCE examiners' comments, 2025: "Some wrote only the sub-head and failed to write the heading."; CISCE examiners' comments, 2024: "Could not give the correct heading and sub-heading for the item".

  ✓Do this: Always write: Head → Sub-head (for example Non-Current Assets → Property, Plant and Equipment and Intangible Assets → Intangible Assets).

  Usually costs: ½-1 mark.

• ✗Mistake: Incomplete Share Capital note

  CISCE examiners' comments, 2024: "Share capital note lacked Authorised and Issued Capital details; could not calculate calls-in-arrears"; "Wrong balance of Share Forfeited A/c; showed it as part of Subscribed Capital rather than separately".

  ✓Do this: Follow the syllabus note format line by line; Shares Forfeited is added after subscribed capital.

  Usually costs: 1-2 marks.

• ✗Mistake: Leaving current maturities in Long-term Borrowings

  CISCE examiners' comments, 2024: "Short-term borrowings excluded current maturities of long-term debt".

  ✓Do this: Move any instalment due within 12 months to Short-term Borrowings.

  Usually costs: 1 mark.

• ✗Mistake: Gross PPE or patents inside PPE

  CISCE examiners' comments, 2024: "Did not deduct accumulated depreciation from Plant gross value or included Patents in PPE".

  ✓Do this: Net off accumulated depreciation; put patents, goodwill and trademarks under Intangible Assets.

  Usually costs: 1 mark.

Practice questions on Final Accounts of Companies

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

1. Q1 · 1 mark · MCQBoard level

   Interest accrued but not due on debentures is shown under:
   (a) Long-term Borrowings
   (b) Short-term Provisions
   (c) Other Current Liabilities
   (d) Trade Payables

   Hint

   It is an outstanding obligation.

   Answer

   (c)

2. Q2 · 1 mark · Very short answerBoard level

   Under which head and sub-head is "advances to employees" shown?

   Hint

   Recovered within a year.

   Answer

   Current Assets → Short-term Loans and Advances.

3. Q3 · 2 marks · Short answerBoard level

   Plant ₹8,00,000, accumulated depreciation ₹2,00,000, patents ₹80,000, goodwill ₹50,000. Find PPE and Intangible Assets.

   Hint

   Net PPE.

   Answer

   PPE ₹6,00,000; Intangible Assets ₹1,30,000.

4. Q4 · 2 marks · Short answerHarder board level

   Debtors ₹90,000; provision for doubtful debts ₹10,000; bills receivable ₹20,000; inventories ₹60,000; cash ₹15,000; prepaid rent ₹5,000. Calculate total Current Assets.

   Hint

   Net debtors.

   Answer

   Trade Receivables 1,00,000 + Inventories 60,000 + Cash 15,000 + Other Current Assets 5,000 = ₹1,80,000.

5. Q5 · 2 marks · Short answerHarder board level

   Show Reserves and Surplus: Capital Reserve ₹1,20,000; DRR ₹50,000; Statement of P&L (Dr) ₹1,70,000.

   Hint

   Debit balance is negative.

   Answer

   Capital Reserve 1,20,000 + DRR 50,000 − 1,70,000 = Nil.

6. Q6 · 2 marks · Short answerBoard level

   Give three examples of contingent liabilities and state why they are not added to the Balance Sheet total.

   Hint

   Possible, not certain.

   Answer

   Claims not acknowledged as debts; guarantees given for others; proposed dividend (also disputed tax demands). They depend on future events, so they are not present obligations.

7. Q7 · 2 marks · Short answerHOTS / competency

   A company has public deposits of ₹2,00,000 repayable in equal instalments over four years beginning next year. Show the split.

   Hint

   One instalment is current.

   Answer

   Long-term Borrowings ₹1,50,000; Short-term Borrowings (current maturities) ₹50,000.

8. Q8 · 2 marks · Short answerHOTS / competency

   Explain why calls in advance are a current liability while calls in arrears are deducted from share capital.

   Hint

   Who owes whom?

   Answer

   Calls in advance are money received before it is due; the company owes interest and must adjust or refund it, so it is a liability. Calls in arrears are capital called but not received; they reduce the capital actually paid up, so they are deducted in the Share Capital note.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1. 1.Where is a bank overdraft shown?Show answer

   Current Liabilities → Short-term Borrowings.

2. 2.Where is proposed dividend disclosed?Show answer

   Contingent Liabilities in Notes to Accounts.

3. 3.New name for "Fixed Assets"?Show answer

   Property, Plant and Equipment and Intangible Assets.

4. 4.Where are loose tools shown?Show answer

   Current Assets → Inventories.

5. 5.Is the Statement of Profit and Loss (Schedule III Part II) required?Show answer

   No, not for the ISC syllabus.

Quick revision checklist

The night before the exam: can you do each of these without looking?

• ☐Equity and Liabilities: Shareholders' Funds, Share application money pending allotment, Non-Current Liabilities, Current Liabilities.
• ☐Assets: Non-Current (PPE and Intangible Assets, investments, loans) and Current (inventories, receivables, cash, advances, other).
• ☐Current maturities → Short-term Borrowings.
• ☐Unpaid dividend, calls in advance, interest accrued → Other Current Liabilities.
• ☐Proposed dividend → Contingent Liabilities.
• ☐P&L debit balance → negative in Reserves and Surplus.

Final Accounts of Companies: frequently asked questions