Unit 4: Company final accounts & computerised accounting
Basic Accounting notes · PTU syllabus (BBA 102-18)
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Unit summary
Companies follow legal formats when preparing their accounts. This unit covers the Companies Act provisions on company final accounts, how to read an annual report, the use of computers in accounting, and accounting software.
After this unit you can
- Explain the legal requirements for company final accounts under the Companies Act
- Describe the format of the statement of profit and loss and balance sheet (Schedule III)
- Read and interpret the main parts of a company's annual report
- Explain computerised accounting and popular accounting software
PTU syllabus topics
- Provisions of the Companies Act on preparation of company final accounts
- understanding a company's annual report
- computers in accounting
- accounting software packages
Directors' report
Performance and future plans
Balance sheet
Assets, equity and liabilities on a date
Statement of profit and loss
Income and expenses for the year
Cash flow statement
Operating, investing and financing flows
Notes and auditor's report
Policies, details and audit opinion
Topic 1
Company final accounts under the Companies Act, 2013
- Section 129 requires every company to prepare financial statements that give a true and fair view and comply with accounting standards, in the form given in Schedule III.
- Financial statements include the balance sheet, statement of profit and loss, cash flow statement, statement of changes in equity and notes.
- They are approved by the board, audited by a statutory auditor, and laid before the annual general meeting (AGM).
Topic 2
Schedule III format
| Balance sheet: Equity and liabilities | Balance sheet: Assets |
|---|---|
| Shareholders' funds: share capital, reserves and surplus | Non-current assets: property, plant and equipment, intangible assets, investments |
| Non-current liabilities: long-term borrowings | Current assets: inventories, trade receivables, cash and cash equivalents |
| Current liabilities: trade payables, short-term borrowings, provisions |
The statement of profit and loss shows revenue from operations, other income, expenses (materials, employee benefits, finance costs, depreciation, other expenses), profit before tax, tax and profit for the period, and earnings per share.
Topic 3
Understanding a company's annual report
Chairman's message
Vision and highlights
Directors' report
Performance, dividend, CSR, risks
Management discussion and analysis
Industry and outlook
Auditor's report
Opinion on true and fair view
Financial statements and notes
Balance sheet, P&L, cash flow
Corporate governance report
Board and compliance
Exam tip
When reading an annual report, start with the auditor's opinion, then revenue and profit trends, then debt and cash flow.
Topic 4
Computers in accounting and software
Computerised accounting records transactions once; the software automatically posts to ledgers and produces trial balances and final accounts.
Speed
Slow
Fast
Accuracy
Prone to arithmetic errors
Automatic calculations
Reports
Prepared by hand
Instant, many formats
Storage
Bulky books
Digital, with backups
Popular software: Tally Prime (widely used in India, GST-ready), Busy, Zoho Books, QuickBooks, SAP and Marg. Features: vouchers, ledgers, inventory, GST returns, payroll, bank reconciliation and MIS reports.
Key terms
- Schedule III
- The format for company financial statements under the Companies Act, 2013
- True and fair view
- Financial statements free from material misstatement
- Annual report
- A company's yearly report to shareholders
- Computerised accounting
- Recording and processing accounts with software
- Tally Prime
- A popular Indian accounting software
Quick revision
- Section 129 + Schedule III govern company accounts.
- Statements: balance sheet, P&L, cash flow, changes in equity, notes.
- Annual report: chairman, directors, MD&A, auditor, financials, governance.
- Software: Tally, Busy, Zoho Books, QuickBooks, SAP.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Which schedule of the Companies Act gives the format of financial statements?
- Q2.What does "true and fair view" mean?
- Q3.Name four parts of an annual report.
- Q4.List three advantages of computerised accounting.
- Q5.Name three accounting software packages.
Long-answer questions
- Q1.Explain the provisions of the Companies Act, 2013 on preparing company final accounts.
- Q2.Explain the Schedule III format of the balance sheet and statement of profit and loss.
- Q3.Compare manual and computerised accounting and describe the features of accounting software.
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