Walk through Key elements from FS- Part-1 BS

Key elements from Financial statements

The key elements in a balance sheet are given below:

I. EQUITY AND EXTERNAL LIABILITIES

1) Shareholder's fund

a) Share Capital

(Money that company raises from the market or by Private placement or from promoters)

b) Reserves and Surplus

(retained-year-on year profits aka profit after appropriations)

c) Money received against share warrants                                                           

(money received on issue of warrants, which are rights given to SHs to purchase certain number of shares, at predetermined price within specified time period)

2) Share application money pending allotment

(securities to be alloted within 60 days from date of receiving application money & if not allotted within 60 days time,money to be refunded within next 15 days)

3)Non-Current liabilities (owed to third party and not to owners)

a) Long term Borrowing                                                                                                                    

(borrowings that have repayment period of more than 12 months. represents funds that can be raised through bonds or debentures from market or long term loans from FI or inter-company borrowings)

b) Other long term liabilities

(dues other than borrowings that have repayment tenure more than 12 months eg Future payment obligation under lease, pension liabilities,payables wrt capital assets purchased)

c) Deferred tax liabilities (net liability is reported here)

d) Long term provision (Provision is an amount that is earmarked and kept aside to meet future liability, the exact liability of which is difficult to ascertain with certainty now but can be reasonably estimated. To call it LT provision, these liabilities shall be ones that shall fall due after 12 months from the BS date.

4) Current Liabilities:

a) Short term Borrowings:

(borrowings that are repayable within 12 months. financing through Bank overdraft, cash credit etc that are for working capital needs)

b) Trade Payables

(money that a business owes to the vendors that supply materials or render services, on credit basis, repayable mostly within credit period of 30-90 days)

c) Other current liabilities

(dues other than short term borrowings, that are repayable within 12 months from B/S date. eg current o/s of long term debt, rent matured portion, wages outstanding, trade advances from customer, dividend payable, prepaid income , interest accrued on borrowings, matured deposits/debt unpaid wit interest etc)

d) Short term provision

 (Provision is an amount that is earmarked and kept aside to meet probable future expense or obligation shall fall due within next 12 month , exact amount of which cant be ascertained)

II. ASSETS

1) Non-current Assets

a) Fixed assets

    i) Property plant and equipment (net of their accumulated depreciation)

    ii) Intangible assets (net of their total amortization value)

    iii) Capital work in progress

    iv) Intangible assets under development

b) Non-current Investments 

(investments held by the business in related parties or investments with third parties, that are intended to be held for extended period of more than a year, investments that carry maturity period of greater than 12 months)

c) Deferred Tax Assets

d) Long term Loans and Advances

(represents the amount lent by the company as loan or as advance or held as deposits including security deposits and are expected to be repaid by them over an extended period exceeding one year. eg loans to other institutions, loans to related parties, Capital goods advances, security deposit, etc )

e) Other non-current assets

(represents amounts that are not expected to be realisable, consumed/used up by the company within 12 months from B/S date, but do not fall under specific categories above. eg Long term trade receivables)

2) Current Assets

a)Current Investments 

(investments held by the business in shares, debts issued by other companies, invest in govt securities, investment in firms and all other investments that are intended to be held for less than a year ie 12 months)

b) Inventories

(captures the cost of raw materials, materials in the process of production and finished product available for sale, all these being held as stock)

c) Trade receivables (money that is receivable from the customers on account of materials supplied or services rendered on credit basis, recoverable in cash within the credit period of 30-90 days.)

d) Cash and bank balances

(balances with banks, cheques in hand, earmarked funds with banks, balances held as margin money for contracts, short term deposits

e) Short term loans and advances

(captures the funds lent as loan or advances or held as deposits including security deposits, the repayment on which is recoverable within a maximum period of 1 year. eg vendor advance (imp/local), travel advance to 'ees, IOU cash adv, earnest money deposit which is purely short term. )

f) Other current assets

(represents dues to the company, other than the ones already mentioned above, that are expected to be used/ replaced or convertible to cash within 12 months from B/S date eg. prepaid expenses, claims recoverable(duty drawback,tax credits)

Note: For Investments and other Assets : where holding or maturity period is not specified, the intent of holding by the investor will be considered to determine the current & non-current nature of the investment or asset.