Schedule VI of the Companies Act prescribed the form and contents of the Profit and Loss Account and Balance Sheet of a company. It was applicable before the introduction of Schedule III. As per Schedule VI, companies were required to present financial statements in a prescribed vertical or horizontal format to ensure uniformity and clarity. It applied to all companies except banking, insurance, and electricity companies which followed separate formats. Understanding Schedule VI is important for academic purpose, especially for comparison with Schedule III.
Profit and Loss Account as per Schedule VI:
The Profit and Loss Account shows the operating results of the company for an accounting period. It shows how profit or loss is arrived at after considering all incomes and expenses.
Main Items of Profit and Loss Account
Income Side
Sales or Turnover
Less Sales returns
Other income like interest, commission, discount
Expenditure Side
Cost of raw materials consumed
Purchases
Direct expenses
Employee remuneration
Directors fees
Rent rates and taxes
Depreciation
Interest on loans and debentures
Administrative and selling expenses
After deducting total expenses from total income, net profit or net loss is calculated.
Format of Profit and Loss Account
(Vertical Form as per Schedule VI)
| Particulars | Amount ₹ |
|---|---|
| Sales | xxxx |
| Less Excise duty | xxxx |
| Net Sales | xxxx |
| Other Income | xxxx |
| Total Income | xxxx |
| Cost of materials consumed | xxxx |
| Employee benefits expenses | xxxx |
| Other expenses | xxxx |
| Depreciation | xxxx |
| Interest | xxxx |
| Profit before tax | xxxx |
| Provision for tax | xxxx |
| Profit after tax | xxxx |
Balance Sheet as per Schedule VI
Balance Sheet shows the financial position of the company on a particular date. As per Schedule VI, balance sheet could be prepared in horizontal or vertical form. Vertical form was more commonly used.
Liabilities Side of Balance Sheet:
Share Capital
Equity share capital
Preference share capital
Reserves and Surplus
Capital reserve
General reserve
Profit and Loss balance
Secured Loans
Debentures
Term loans from banks
Unsecured Loans
Loans from directors
Public deposits
Current Liabilities and Provisions
Sundry creditors
Bills payable
Outstanding expenses
Provision for tax
Assets Side of Balance Sheet:
Fixed Assets
Land and building
Plant and machinery
Furniture and fixtures
Less depreciation
Investments
Government securities
Shares and debentures
Current Assets
Inventories
Sundry debtors
Cash and bank balance
Loans and advances
Miscellaneous Expenditure
Preliminary expenses
Discount on issue of shares
Format of Balance Sheet
(Vertical Form as per Schedule VI)
| Liabilities | Amount ₹ | Assets | Amount ₹ |
|---|---|---|---|
| Share Capital | xxxx | Fixed Assets | xxxx |
| Reserves and Surplus | xxxx | Investments | xxxx |
| Secured Loans | xxxx | Current Assets | xxxx |
| Unsecured Loans | xxxx | Miscellaneous Expenditure | xxxx |
| Current Liabilities | xxxx | – | – |
| Total | xxxx | Total | xxxx |
Important Journal Entries before Final Accounts
Depreciation
| Particulars | Debit ₹ | Credit ₹ |
|---|---|---|
| Depreciation A/c Dr | Amount | – |
| To Asset A/c | – | Amount |
Outstanding Expenses
| Particulars | Debit ₹ | Credit ₹ |
|---|---|---|
| Expense A/c Dr | Amount | – |
| To Outstanding Expenses A/c | – | Amount |
Provision for Tax
| Particulars | Debit ₹ | Credit ₹ |
|---|---|---|
| Profit and Loss A/c Dr | Amount | – |
| To Provision for Tax A/c | – | Amount |
Important Points of Schedule VI
Uniform format was compulsory
Clear classification of assets and liabilities
Previous year figures were required
Notes to accounts were mandatory
Disclosure of managerial remuneration was compulsory
Difference between Schedule VI and Schedule III
Schedule VI was old format
Schedule III introduced current and non current classification
Schedule III is more detailed and modern
Schedule VI is mainly for academic study now
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