Balance Sheet and Schedule III Explained

A balance sheet is a statement of what a company owns (assets) and owes (liabilities and equity) on a particular date. Schedule III of the Companies Act 2013 sets the format that companies must follow when they prepare it, so accounts look alike and can be compared.

Why it matters

Banks, investors, the ROC and tax authorities all read the balance sheet. A properly formatted one is also needed for filing. If you are starting from raw books, financial statement preparation turns them into a Schedule III balance sheet and profit and loss account.

How Schedule III is organised

• Division I applies to companies following Accounting Standards.
• Division II applies to companies following Indian Accounting Standards (Ind AS).
• Division III applies to NBFCs that follow Ind AS.
• The balance sheet splits items into current and non-current.
• Equity and liabilities come first: share capital, reserves, borrowings, trade payables, provisions.
• Assets follow: property, plant and equipment, investments, inventories, trade receivables, cash and bank balances.

Key points

Section 129 requires financial statements to give a true and fair view and to follow Schedule III. The amendments that applied from 1 April 2021 added disclosures such as ageing of trade payables and receivables, promoter shareholding and details of title deeds not held in the company’s name. Notes to accounts carry these details.

Once ready, the statements go for statutory audit, are adopted at the AGM and are filed with the ROC. Companies covered by XBRL rules need the data in that format too, which is where XBRL filing comes in.

Common mistakes

• Mixing current and non-current items, such as showing a long-term loan as current.
• Skipping the ageing schedules and other disclosures in notes.
• Totals that do not agree between the balance sheet and the notes.
• Not showing the previous year’s figures for comparison.
• Using the wrong Division for the company’s accounting standards.

Related guides: AOC-4 and MGT-7, AGM, Authorised vs paid-up capital

FAQs

Is Schedule III mandatory?

Yes for companies governed by the Companies Act 2013, subject to the exceptions the Act allows for certain regulated entities.

What is the difference between Division I and Division II?

Division I is for companies following Accounting Standards. Division II is for those following Ind AS.

Does the balance sheet need an auditor’s sign-off?

Company accounts are generally audited, and the audit report goes with the statements.

Want accounts prepared the right way? Talk to a Taxhint expert.