Financial Statements and Analysis Test - 17

Proposed dividend is shown under the heading current liabilities and sub heading short term provision while preparing balance sheet.

Livestock and leasehold both are fixed assets. While preparing balance sheet these items will take place under fixed assets. They give economic benefit for more than one year and also enhance earning capacity of the business.

Accumulated depreciation is not part of Reserve and surplus. It is concerned with assets and will be shown as a deduction item from the concerned fixed asset while preparing Notes to Accounts.

Normally,long term debts are shown under the head non current liabilities.

As per schedule III of companies Act, 2013 liability shall be classified as current when it fulfills any of the following condition:

• If liability is expected to be settled in company's ;normal operating cycle
• If liability is held primarily for trading purpose
• If liability is due to be settled within 12 months from the Balance Sheet Date
• If there is condition to settle the liability within 12 months from the date of balance sheet.

But in this case the due date of repayment of such long term debt becomes due within one year,it will be shown under the head current liabilities.

Out of the given options,  following is not payable within one year therefore they appears under the head Non-Current Liabilities:
(a) Long-term borrowings
(b) long term provisions
(c) Deferred tax liabilities

Following liabilities becomes payable within one year therefore,  they are shown under the head Current Liabilities:
(a) short term borrowings
(b) Trade payables
(c) short term provisions

Preliminary expenses are those expenses which are incurred during the formation of the company. Benefits of such expenses extends for more than one year,therefore, such expenses are not fully debited to statement of profit and loss in any single year but a part of it is written off each year.

Discount on issue of debentures is a loss to the company. This loss is not be debited to the statement of profit and loss of a single year but this loss is written off in part every year over the life of the debentures. 

It is part of ‘Reserve and Surplus’ section of the balance sheet and shows the financial health. Having this account in balance sheet shows company has earned this much extra money while issuing shares and which can be utilized in future.

Goodwill is an intangible asset, but it cannot be called a fictitious asset because:.Even though these intangible assets (examples beside goodwill are patents and trademark) do not have a physical existence, these are resources owned and used in the normal operation of the business. Note that an asset can be tangible like  plant & machinery, land, and intangible goodwill but both assets are in fact necessary for the operation of a business

On the other hand, a fictitious asset is not an asset as no benefit is derived from these items whether at present or in the future. Examples of fictitious assets are (a) debit balance in Income Statement (b) discount of issue of shares & debentures (c) expenses incurred and are to be written off over a period of time.

The assets are shown in the order of permanence .The order is :

1)Fixed assets

2)Investments

3)Current assets