Class 12 Accountancy Part 2 Chapter 3 NCERT Solutions: Financial Statements of a Company

Financial Statements of a Company is less about journal entries and more about presentation — knowing which items are Shareholders' Funds versus Non-Current Liabilities, which fall under Current Assets versus Non-Current Assets, and how the Statement of Profit and Loss separates revenue from expenses. A single item like "calls in arrears" or "proposed dividend" can trip students up simply because its placement isn't obvious without knowing the format.

The Part 2 Chapter 3 Accountancy Solutions explain how individual items and complete sets of balances are classified and presented under Schedule III, helping you understand the format through practical application instead of relying on memorisation.

Important Numericals: Financial Statements of a Company Class 12 NCERT Solutions

The following solutions cover important numerical and classification-based questions from Chapter 3. Attempt each one on your own before checking the answer below.

Question 1

Classify the following items under the major heads and sub-heads (as per Schedule III of the Companies Act, 2013) in the Balance Sheet of a company: Goodwill, Loose Tools, Bank Overdraft, Provision for Tax.

Solution:

• Goodwill is classified under Non-Current Assets, sub-head Fixed Assets — Intangible Assets.

• Loose Tools fall under Current Assets, sub-head Inventories.

• Bank Overdraft is shown under Current Liabilities, sub-head Short-term Borrowings.

• Provision for Tax is placed under Current Liabilities, sub-head Short-term Provisions.

Question 2

Under which major heads and sub-heads will the following items be shown: Debentures, Loan repayable on demand, Vehicles, Interest accrued on investments?

Solution:

• Debentures are shown under Non-Current Liabilities, sub-head Long-term Borrowings.

• Loan repayable on demand is classified under Current Liabilities, sub-head Short-term Borrowings, since it is payable immediately on demand rather than over a fixed term.

• Vehicles come under Non-Current Assets, sub-head Fixed Assets — Tangible Assets.

• Interest accrued on investments is shown under Current Assets, sub-head Other Current Assets.

Question 3

A company's trial balance shows Preliminary Expenses of Rs. 40,000 not yet written off. State how this item is dealt with in the financial statements and pass the necessary entry if the company decides to write off Rs. 10,000 during the year.

Solution:

Preliminary Expenses are not written off entirely in a single year unless the company chooses to. The unamortised balance is disclosed under Other Current Assets or Other Non-Current Assets depending on when it is expected to be written off, and the portion written off during the year is charged to the Statement of Profit and Loss.

Amount written off during the year = Rs. 10,000

Journal Entry:

Answer: Balance of Preliminary Expenses carried forward = Rs. 30,000.

Question 4

A company had a Statement of Profit and Loss balance (credit) of Rs. 5,00,000 brought forward from the previous year. During the year, it earned a net profit of Rs. 3,20,000 and proposed a dividend of Rs. 1,50,000. Prepare the relevant extract showing the balance carried forward.

Solution:

Opening balance brought forward = Rs. 5,00,000

Add: Net profit for the year = Rs. 3,20,000

Total available = Rs. 8,20,000

Less: Proposed dividend, which under the current Schedule III treatment is disclosed only as a note rather than deducted directly in the statement, so the balance actually carried forward in the Reserves and Surplus figure remains Rs. 8,20,000, with the proposed dividend shown separately as a contingent item pending shareholder approval.

Answer: Balance in Statement of Profit and Loss carried forward = Rs. 8,20,000; proposed dividend of Rs. 1,50,000 disclosed separately.

Question 5

Where would the following be shown in a company's Balance Sheet: Calls in Arrears, Calls in Advance, Forfeited Shares Account balance?

Solution:

• Calls in Arrears is deducted from the Subscribed Capital under Shareholders' Funds, since it represents capital called up but not yet received.

• Calls in Advance is shown under Current Liabilities, sub-head Other Current Liabilities, as it is money received ahead of a call actually being made.

• The balance in the Forfeited Shares Account is added to the Subscribed Capital figure under Shareholders' Funds until the shares are re-issued, after which any surplus is transferred to Capital Reserve.

Question 6

A company's Statement of Profit and Loss shows Revenue from Operations of Rs. 25,00,000, Other Income of Rs. 1,20,000, Cost of Materials Consumed of Rs. 12,00,000, Employee Benefit Expenses of Rs. 4,50,000, and Other Expenses of Rs. 2,30,000. Calculate the Profit before Tax.

Solution:

Total Revenue:
= 25,00,000 + 1,20,000 = Rs. 26,20,000

Total Expenses:
= 12,00,000 + 4,50,000 + 2,30,000 = Rs. 18,80,000

Profit before Tax:
= 26,20,000 − 18,80,000 = Rs. 7,40,000

Answer: Profit before Tax = Rs. 7,40,000.

Question 7

State whether the following statement is true or false, giving a reason: "A company's Balance Sheet must be prepared strictly in the vertical format prescribed under Schedule III of the Companies Act, 2013."

Solution:

True. Schedule III of the Companies Act, 2013 requires every company to prepare its Balance Sheet in the vertical format only, showing figures for both the current and the previous reporting period side by side, rather than in the traditional horizontal T-shape format used earlier.

Question 8

Classify the following under the appropriate heads: Public Deposits, Mining Rights, Cheques in Hand, Provision for Employee Benefits (long-term).

Solution:

• Public Deposits are classified under Non-Current Liabilities, sub-head Long-term Borrowings, unless repayable within twelve months, in which case they move to Current Liabilities.

• Mining Rights fall under Non-Current Assets, sub-head Fixed Assets — Intangible Assets.

• Cheques in Hand are shown under Current Assets, sub-head Cash and Cash Equivalents.

• Provision for Employee Benefits expected to be settled after twelve months is placed under Non-Current Liabilities, sub-head Long-term Provisions.

Question 9

A company issued 10,000 Equity Shares of Rs. 10 each at a premium of Rs. 2 per share, fully subscribed and called up. State how the Share Capital and Securities Premium will appear in the Balance Sheet.

Solution:

Share Capital raised:
= 10,000 × Rs. 10 = Rs. 1,00,000

Securities Premium collected:
= 10,000 × Rs. 2 = Rs. 20,000

The Share Capital of Rs. 1,00,000 is shown under Shareholders' Funds, sub-head Share Capital, and the Securities Premium of Rs. 20,000 is shown under Shareholders' Funds, sub-head Reserves and Surplus, since it does not form part of the Share Capital figure itself even though it arises from the share issue.

Question 10

From the following balances, calculate the amount to be shown under "Trade Payables" and "Trade Receivables" in the Balance Sheet: Sundry Creditors Rs. 80,000, Bills Payable Rs. 20,000, Sundry Debtors Rs. 1,10,000, Bills Receivable Rs. 15,000, Provision for Doubtful Debts Rs. 5,000.

Solution:

Trade Payables:
= Sundry Creditors + Bills Payable
= 80,000 + 20,000 = Rs. 1,00,000

Trade Receivables (before deducting provision):
= Sundry Debtors + Bills Receivable
= 1,10,000 + 15,000 = Rs. 1,25,000

Net Trade Receivables shown in the Balance Sheet, after deducting the Provision for Doubtful Debts:
= 1,25,000 − 5,000 = Rs. 1,20,000

Answer: Trade Payables = Rs. 1,00,000; Trade Receivables (net) = Rs. 1,20,000.

Financial Statements of a Company Class 12 NCERT Solutions PDF

If you want to revise all the selected solutions together, you can use the Class 12 Accountancy Part 2 Chapter 3 NCERT Solutions PDF. Download the PDF and refer to the detailed solutions while practising the chapter.

How to Use Chapter 2 Accountancy NCERT Solutions for Revision?

Solving the questions yourself before checking the solutions can make your revision more useful.

• Attempt Before Checking: Try each numerical on your own before referring to the solution.

• Check the Adjustments: Pay attention to how goodwill, revaluation, reserves, and other adjustments are treated.

• Understand the Working Notes: Do not skip the calculations used to arrive at the final amount.

• Review Your Mistakes: Compare your working with the solution and identify where your approach differed.

• Practise Similar Questions: After understanding a solution, attempt another question based on the same concept.

Practising important numericals can help you understand how DRR, premium, and conversion are combined in Redemption of Debentures questions.

Use the Chapter 2 Redemption of Debentures Solutions to check your calculations, understand the working steps, and revise the chapter before your exams.