AccountsISC Class 12 · Final Accounts of Companies

Equity and Liabilities Side of a Company Balance Sheet: ISC Class 12 Accounts

Updated 17 October 2026 · Draft, not yet fact-checked

The equity and liabilities side of a company Balance Sheet (Schedule III Part I) has four main heads: Shareholders' Funds, Share application money pending allotment, Non-Current Liabilities and Current Liabilities. Shareholders' Funds hold Share Capital and Reserves and Surplus. Current maturities of long-term borrowings go under Short-term Borrowings, and proposed dividend is only a note under Contingent Liabilities.

Understand Company Balance Sheet: Equity and Liabilities Side

Why the format is fixed. A company cannot arrange its Balance Sheet as it likes. Schedule III of the Companies Act, 2013 lays down a vertical format with fixed heads, sub-heads and a Note No. column, so that the accounts of any two companies can be compared. The ISC syllabus asks for the Balance Sheet (Part I of Schedule III) along with notes to accounts. The Statement of Profit and Loss (Part II) is not required for company final accounts.

I. Equity and Liabilities: the four main heads

Main head	Sub-heads and typical items
1. Shareholders' Funds	(a) Share Capital; (b) Reserves and Surplus
2. Share application money pending allotment	Money received on applications for shares not yet allotted
3. Non-Current Liabilities	(a) Long-term Borrowings (debentures, term loans); (b) Other Long-term Liabilities; (c) Long-term Provisions
4. Current Liabilities	(a) Short-term Borrowings; (b) Trade Payables; (c) Other Current Liabilities; (d) Short-term Provisions

1(a) Share Capital is shown as a note. The usual layout is Authorised, then Issued, then Subscribed and fully paid up, and Subscribed but not fully paid. Calls in arrears are deducted from the subscribed capital. Forfeited shares not yet re-issued are added back at the amount actually received on them. Preference and equity capital are shown separately.

1(b) Reserves and Surplus carries Capital Reserve, Securities Premium (the syllabus replaces the older wording "Securities Premium Reserve"), General Reserve and other reserves, and the Surplus, which is the balance in the Statement of Profit and Loss. A debit balance of profit and loss is shown as a negative figure within Surplus.

2. Share application money pending allotment is a main head of its own, not part of share capital, because the shares have not yet been allotted.

3. Non-Current Liabilities are payable after more than twelve months. Debentures and bank loans repayable later fall in Long-term Borrowings. Long-term Provisions hold provisions meant for obligations beyond one year.

4. Current Liabilities are payable within twelve months. The syllabus amendment says that current maturities of long-term borrowings (for example debentures that fall due for redemption within the next twelve months) are shown here, under Short-term Borrowings, along with bank overdraft and cash credit. Trade Payables are creditors and bills payable. Other Current Liabilities include outstanding expenses, unpaid dividend and calls received in advance. Short-term Provisions include provision for tax.

Proposed dividend. Under the amendment to Accounting Standard 4 named in the syllabus, a dividend proposed for the year is not a liability until the shareholders approve it. So it is not shown as a short-term provision. It is disclosed in the Notes to Accounts under Contingent Liabilities, and it is not added to the total of the Balance Sheet.

Capital losses. The syllabus limit says all capital losses are written off in the year they occur unless the question says otherwise, so no such loss appears on the assets side.

This page covers only the liabilities side. The assets side and full preparation with adjustments are on the next two topic pages of this chapter.

Company Balance Sheet: Equity and Liabilities Side: key facts

Four main heads of equity and liabilities: Shareholders' Funds
Share application money pending allotment
Non-Current Liabilities
Current Liabilities; Schedule III Part I order.
Shareholders' Funds: Share Capital | Reserves and Surplus; Securities Premium sits inside Reserves and Surplus.
Paid-up equity capital: Subscribed capital
less Calls in arrears
add Forfeited shares account (amount received); Used in the Share Capital note.
Current maturities: Long-term debt due within 12 months
shown under Short-term Borrowings
not under Non-Current Liabilities; Syllabus amendment.
Total of the side: Shareholders' Funds + Share application money + Non-Current Liabilities + Current Liabilities | equals Total Assets; Proposed dividend is excluded.

How to answer Company Balance Sheet: Equity and Liabilities Side questions

Classifying a liability correctly earns most of the marks. Ask two questions: who is owed (owners or outsiders), and when is it payable (beyond or within twelve months).

1Owners' money first: share capital, reserves, surplus go under Shareholders' Funds.
2Money received for shares not yet allotted goes under its own head.
3Outsiders' money payable after twelve months goes under Non-Current Liabilities.
4Anything payable within twelve months, including current maturities of long-term loans, goes under Current Liabilities.
5Move proposed dividend out of the totals and into Notes (Contingent Liabilities).

Company Balance Sheet: Equity and Liabilities Side in real life

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

Money due soon is a current liability

Suppose a company took a ₹5,00,000 loan from a bank that is repayable in five yearly instalments of ₹1,00,000. At the end of year 4 only one instalment remains, and it falls due within the next twelve months.

How much of the loan is shown under Long-term Borrowings and how much under Short-term Borrowings at the end of year 4?

Try it first, then show the solutionSolution

After 4 instalments, the balance is 5,00,000 − 4,00,000 = ₹1,00,000.
The whole balance falls due within twelve months, so it is a current maturity.
Long-term Borrowings = ₹0; Short-term Borrowings = ₹1,00,000.

Answer: Nil under Long-term Borrowings and ₹1,00,000 under Short-term Borrowings.

Memory hook: If the date is within a year, the debt moves to current.

Tricks to remember Company Balance Sheet: Equity and Liabilities Side

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

S-S-N-C
Shareholders' funds, Share application money, Non-current, Current: the order of the four heads.
Use it when: Writing the format.
Twelve-month test
Payable within 12 months is current; after 12 months is non-current.
Use it when: Classifying loans and provisions.
Proposed is not owed
Proposed dividend is a promise, not a debt, until the AGM approves it.
Use it when: Contingent liability note.

Company Balance Sheet: Equity and Liabilities Side: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Where does proposed dividend go? · 1 mark · MCQBoard level

The directors of a company have recommended a dividend for the year, but the general meeting has not yet voted on it. When the Balance Sheet is drawn up, this amount will be:
(a) added to the provisions that are payable within a year
(b) deducted from the surplus
(c) mentioned only in the notes, as a contingent liability
(d) included in trade payables

Try it first, then show the solutionSolution

Until the shareholders approve it, the dividend is not an obligation of the company.
So it is not provided for; it is only disclosed in the notes.

Answer: (c) mentioned only in the notes, as a contingent liability

Example 2: Classify the liabilities · 3 marks · Short answerBoard level

State the main head and sub-head under which each item appears in the Balance Sheet of a company: (i) Securities Premium; (ii) 9% Debentures repayable after 6 years; (iii) Bank overdraft; (iv) Provision for tax; (v) Unpaid dividend; (vi) Share application money pending allotment. (3 marks)

Try it first, then show the solutionSolution

(i) Shareholders' Funds, Reserves and Surplus.
(ii) Non-Current Liabilities, Long-term Borrowings.
(iii) Current Liabilities, Short-term Borrowings.
(iv) Current Liabilities, Short-term Provisions.
(v) Current Liabilities, Other Current Liabilities.
(vi) A separate main head: Share application money pending allotment.

Answer: (i) SF: Reserves and Surplus; (ii) NCL: Long-term Borrowings; (iii) CL: Short-term Borrowings; (iv) CL: Short-term Provisions; (v) CL: Other Current Liabilities; (vi) its own head.

Example 3: Share Capital note with arrears and forfeiture · 3 marks · Short answerHarder board level

Moonlight Ltd. issued 80,000 equity shares of ₹10 each, all called up. 2,000 of these shares were forfeited, ₹7 per share having been received, and have not been re-issued. Calls in arrears on the remaining shares are ₹15,000. Show the Note on Share Capital with the amount to be shown. (3 marks)

Try it first, then show the solutionSolution

Shares outstanding = 80,000 − 2,000 = 78,000; subscribed capital = 78,000 × 10 = ₹7,80,000.
Less calls in arrears: 7,80,000 − 15,000 = ₹7,65,000.
Add forfeited shares account (amount received): 2,000 × 7 = ₹14,000.
Paid-up capital = 7,65,000 + 14,000 = ₹7,79,000.

Answer:

Particulars	₹
78,000 equity shares of ₹10 each, fully called up	7,80,000
Less: Calls in arrears	(15,000)
	7,65,000
Add: Forfeited shares (2,000 × ₹7)	14,000
Total	7,79,000

Example 4: Equity and liabilities side from balances · 6 marks · Long answerHarder board level

From the following balances of Pinecone Ltd. as at 31st March 2026, prepare the Equity and Liabilities side of the Balance Sheet and find its total: Equity share capital (fully paid) ₹10,00,000; 10% Preference share capital ₹4,00,000; Securities Premium ₹1,50,000; General Reserve ₹2,00,000; Surplus (credit balance of profit and loss) ₹90,000; 9% Debentures ₹5,00,000 (of which ₹1,00,000 is redeemable within 12 months); Bank loan (repayable after 3 years) ₹3,00,000; Trade payables ₹1,70,000; Bank overdraft ₹60,000; Provision for tax ₹80,000; Unpaid dividend ₹12,000. Proposed dividend ₹1,00,000. (6 marks)

Try it first, then show the solutionSolution

Share Capital = 10,00,000 + 4,00,000 = ₹14,00,000. Reserves and Surplus = 1,50,000 + 2,00,000 + 90,000 = ₹4,40,000. Shareholders' Funds = ₹18,40,000.
Long-term Borrowings = debentures 4,00,000 + bank loan 3,00,000 = ₹7,00,000 (current maturity of ₹1,00,000 removed).
Short-term Borrowings = overdraft 60,000 + current maturity 1,00,000 = ₹1,60,000.
Current Liabilities = 1,60,000 + 1,70,000 + 12,000 + 80,000 = ₹4,22,000.
Total = 18,40,000 + 7,00,000 + 4,22,000 = ₹29,62,000. Proposed dividend ₹1,00,000 appears only in the notes.

Answer:

Particulars	Note	₹
I. Equity and Liabilities
1. Shareholders' Funds
(a) Share Capital	1	14,00,000
(b) Reserves and Surplus	2	4,40,000
2. Non-Current Liabilities
Long-term Borrowings	3	7,00,000
3. Current Liabilities
(a) Short-term Borrowings	4	1,60,000
(b) Trade Payables		1,70,000
(c) Other Current Liabilities		12,000
(d) Short-term Provisions		80,000
Total		29,62,000

Contingent liability (Notes): proposed dividend ₹1,00,000.

Example 5: Treating proposed dividend as a liability · 3 marks · Short answerHOTS / competency

The accountant of Quartz Ltd. wants to show a proposed dividend of ₹2,00,000 under Short-term Provisions "to be prudent". Current Assets are ₹10,00,000 and Current Liabilities, before this item, are ₹5,00,000. Comment on the proposal and show its effect on the Current Ratio. (3 marks)

Try it first, then show the solutionSolution

Under the amendment in the syllabus, a proposed dividend is not a liability until the shareholders approve it, so it belongs in Notes under Contingent Liabilities.
Correct Current Ratio = 10,00,000 ÷ 5,00,000 = 2 : 1.
If wrongly shown, Current Liabilities = 7,00,000 and the ratio = 10,00,000 ÷ 7,00,000 = 1.43 : 1 (rounded), which understates liquidity.

Answer: The proposal is wrong; show the dividend as a contingent liability in the notes. Wrongly including it lowers the Current Ratio from 2 : 1 to about 1.43 : 1.

Where students lose marks in Company Balance Sheet: Equity and Liabilities Side

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

Mistake: Showing proposed dividend as a short-term provision
Following an older format.
Wrong working
Short-term Provisions = tax 80,000 + proposed dividend 1,00,000 = 1,80,000
Right working
Short-term Provisions = tax 80,000; dividend in Notes as a contingent liability
Do this: Remember the AS 4 amendment named in the syllabus.
Usually costs: 1-2 marks.
Mistake: Leaving a current maturity in Long-term Borrowings
Reading debentures as one block.
Wrong working
Long-term Borrowings = 4,00,000 + 3,00,000 + 1,00,000 = 8,00,000
Right working
Long-term Borrowings = 7,00,000; Short-term Borrowings include the 1,00,000
Do this: Split any loan that falls due within 12 months.
Usually costs: 1-2 marks.
Mistake: Adding calls in arrears to share capital
Confusing arrears with advance.
Wrong working
7,80,000 + 15,000 = 7,95,000
Right working
7,80,000 − 15,000 = 7,65,000
Do this: Arrears are unpaid money: deduct. Advance is received money: a liability.
Usually costs: 1 mark.
Mistake: Writing "Securities Premium Reserve"
Older textbook wording.
Wrong working
Reserves and Surplus: Securities Premium Reserve
Right working
Reserves and Surplus: Securities Premium
Do this: Use the name given in the syllabus amendment.
Usually costs: Possible half mark.

Exam tips

Draw the format with the Note No. column; examiners look for the heads in order.
Show working notes for Share Capital and Reserves and Surplus separately.
Check that the liabilities side total equals the assets side total.
If the question says "unless otherwise stated", treat investments as non-trade and write capital losses off.

Practice questions on Company Balance Sheet: Equity and Liabilities Side

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

Q1 · 1 mark · MCQBoard level
Securities Premium is shown in the Balance Sheet under:
(a) Share Capital
(b) Reserves and Surplus
(c) Long-term Borrowings
(d) Trade Payables
Hint
It is part of owners' funds but not capital.
Answer
(b) Reserves and Surplus
Q2 · 3 marks · Short answerBoard level
State where each appears in a company Balance Sheet: (i) Calls received in advance; (ii) Debentures redeemable after 5 years; (iii) Provision for tax; (iv) Outstanding salary; (v) Surplus in the Statement of Profit and Loss. (3 marks)
Hint
Owners or outsiders? Within 12 months or not?
Answer
(i) Current Liabilities, Other Current Liabilities; (ii) Non-Current Liabilities, Long-term Borrowings; (iii) Current Liabilities, Short-term Provisions; (iv) Current Liabilities, Other Current Liabilities; (v) Shareholders' Funds, Reserves and Surplus.
Q3 · 3 marks · Short answerHarder board level
A company has 6,000, 8% preference shares of ₹100 each fully paid, and 40,000 equity shares of ₹10 each on which ₹8 per share has been called and received except for calls in arrears of ₹9,000. Show the amount of Share Capital in the Balance Sheet. (3 marks)
Hint
Equity called = 40,000 × 8.
Answer
Preference 6,00,000; equity 3,20,000 − 9,000 = 3,11,000; total Share Capital = ₹9,11,000.
Q4 · 6 marks · Long answerHarder board level
Shareholders' Funds of Harbour Ltd. are ₹12,50,000. It has 10% Debentures ₹8,00,000 (of which ₹2,00,000 fall due within 12 months), Long-term Provisions ₹40,000, Trade payables ₹2,10,000, Bank overdraft ₹90,000, Outstanding expenses ₹35,000 and Provision for tax ₹55,000. Find the totals of Non-Current Liabilities and Current Liabilities and the total of the equity and liabilities side. (6 marks)
Hint
Move the current maturity first.
Answer
Non-Current = 6,00,000 + 40,000 = 6,40,000. Current = (2,00,000 + 90,000) + 2,10,000 + 35,000 + 55,000 = 5,90,000. Total = 12,50,000 + 6,40,000 + 5,90,000 = ₹24,80,000.
Q5 · 3 marks · Short answerHOTS / competency
Ember Ltd. has Current Assets of ₹9,00,000 and Current Liabilities of ₹4,00,000. It also has ₹3,00,000 of debentures, all payable within 6 months, shown as Long-term Borrowings. Explain the error and recalculate the Current Ratio before and after correction. (3 marks)
Hint
Which head does a current maturity belong to?
Answer
The debentures are a current maturity and belong under Short-term Borrowings. Before: 9,00,000 ÷ 4,00,000 = 2.25 : 1. After: Current Liabilities = 7,00,000, ratio = 9,00,000 ÷ 7,00,000 = 1.29 : 1 (rounded).

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.Which Schedule III part gives the Balance Sheet?Show answer
Part I.
2.Four main heads of the liabilities side?Show answer
Shareholders' Funds; Share application money pending allotment; Non-Current Liabilities; Current Liabilities.
3.Where do current maturities of long-term borrowings go?Show answer
Current Liabilities, Short-term Borrowings.
4.Where is proposed dividend disclosed?Show answer
Notes to Accounts, Contingent Liabilities.
5.Calls in arrears: add or deduct?Show answer
Deduct from subscribed capital.

Company Balance Sheet: Equity and Liabilities Side: frequently asked questions

Is the Statement of Profit and Loss part of company final accounts in ISC?

No. The syllabus requires the Balance Sheet under Schedule III Part I with notes; Part II is not required for company final accounts.

Why is share application money shown separately?

The shares have not been allotted yet, so the money is not share capital.

Is surplus a reserve?

It is the balance of the Statement of Profit and Loss and is shown inside Reserves and Surplus.

Do I write the Note No. column?

Yes. Number the notes and give each a short working under the Balance Sheet.