Balance Sheet and the Companies Act

Article-67

Balance sheet means a statement prepared from the books of a concern debit and credit balances after the Trading and Profit and Loss Account have been prepared.

It is a classified summary of the debit and credit balances existing in the ledger after Profit and Loss Account has been constructed.

Left side			Right side
Liabilities & Credit balances		Assets and Debit balances

Legal Remembrance v. Aktul Bandhu Gupta (1937)

A Balance sheet is a pictorial representation of the trading position of a company, easily appreciated not by ignorant people, but persons who are reasonably able to understand commercial expressions and commercial conditions.

CIT v. National Industrial Corporation (1983)

The Balance sheet and accounts of the company are finalized only after the seal of approval of the shareholders is obtained.

Jones v. Belle groves properties Limited (1949)

The approval of Balance sheet in Board Meeting and signing of it by two Directors is sufficient for the purpose of acknowledgement of Debt (for the purpose of limitation Act).

As per provisions of Sections 205, 215, 216 and 220(2) the Balance sheet and accounts are finally accepted when placed before and considered by the general body of share holders.

211	Balance sheet of a company shall give a true and fair view of the state of affairs of the company at the end of the financial year and shall be in the form set out in part I of schedule VI or near thereto.

Balance sheet may either in vertical form or horizontal form. From 23 December, 1978, Government has allowed Companies to prepare their Balance sheet in either form.

This is not applicable to those Companies for which a form of Balance sheet has been prescribed in the separate Acts governing such Companies.

Company’s Balance sheet is generally prepared in order of performance. Assets of fixed nature are given first and liability to be discharged at the end will have to be shown first.

211(6)

For the purpose of this Section Balance sheet and Profit and Loss Account include any attachment annexed thereto including notes.

Ø    Every Balance sheet and Profit and Loss Account shall comply with the accounting standards specified by the Institute of Chartered Accountants of India and by the Central Government.

Ø    Any deviation from accounting standards should be together with reasons for such deviation.

Ø    Central Government has the power to grant exemption to any class of Companies from compliances with the requirements of schedule VI.

Ø    Default regarding compliance with schedule VI shall be punishable with imprisonment up to six months or fine Rs. 10000 or with both.

Ø    MCA through notification No GSR 545(E) dtd 1-08-2002, allows Companies o round of the figures of their balance as prescribed.

Ø    Through notification no: GSR 762(E) dtd 13-11-2000, make it mandatory for the Companies to credit the following assets to the investor education and protection fund

                                                                                     i.        Unpaid dividend

                                                                                   ii.        Unpaid application money

                                                                                  iii.        Unpaid matured deposits

                                                                                  iv.        Unpaid matured debentures and Interest accrued on any of the above

215	(1)	Every Balance sheet and Profit and Loss Account of a company shall be signed by the Manager, Secretary, if any and by not less than two Directors of the company, one of whom shall be the Managing Director, if any.
	(2)	If only one Director is in India for the time being in India, the Balance sheet and Profit and Loss Account shall be signed by such Director and attach a statement by the Director explaining the reasons for non-compliance of Section 215(1).
	(3)	Before signing the Balance sheet and Profit and Loss Account and before submitted to auditors for report, it should be approved by the Board of Directors.

 v.        .

216	Profit and Loss Account and auditor’s report should be attached with the Balance sheet.

Section 218 provides for penalty for improper issue, circulation or publication of Balance sheet or Profit and Loss Account or without attachment like directors report, auditors report, every Officer in Default shall be punishable with fine [5000].

MCA letter dated 27-10-1976

In the absence of any specific provision in Section 215, the power of Directors to approve annual accounts cannot be delegated to some of the Directors or committee of Directors.

Placing of accounts before share holders is not a routine work.

219	Every Balance sheet and Profit and Loss Account together with annexure must be sent before 21 days before Annual General Meeting to Every member Every debenture trustee and All other persons who are entitled to have notice of Annual General Meeting.
219(3)	Its default is punishable with a fine [5000].
219(4)	Default in giving a copy of these accounts on demand may attract a fine [5000].

As far as listed company is concerned, the above mentioned documents may keep at the Registered Office for inspection during working hours for the 21 days before the  Annual General Meeting.

220

:

Within 30 days of adoption of accounts by Annual General Meeting, it should be filed with Registrar of Companies. [forms 23AC & ACA]

Proviso to this Section provides that Balance sheet and Profit and Loss Account of a private company should be filed separately.

Accounts can be adopted only by Annual General Meeting. If accounts are not ready, Annual General Meeting may adjourn.

MCA:4/47 dated 22-02-1974

MCA: No 2/85 dated 25-03-1985

The adjourned Annual General Meeting should interalia be held within the time frame laid down in Section 166 and 210.

NBFCs receiving deposits (borrowings)

RBI Circular ·         DNBC/1&2/ED(s)-66 both 29th October 66 ·         DNBC21/DG/(s)-73, 23rd August, 1973

An audited Balance sheet as on last date of each financial year and Profit and Loss Account as passed by the company in General Meeting, within 15 days of such meeting should be furnished with RBI’s NBFC department.

Certain clarifications given by MCA .

    I.        Balance sheet and Profit and Loss Account, which are not laid before Annual General Meeting, but submitted to Registrar of Companies under section 220 would not be taken on record and may initiated prosecution in such case.

  II.        Company can reopen and revive its accounts even after their adoption and filing with Registrar of Companies in order to comply with technical requirements of any other law to achieve the object of exhibiting true and fair view. The revised annual accounts would be required to be adopted either in EGM or subsequent Annual General Meeting (1/2003 dated 13 Jan 2003).

A non-member but a depositor has the right to obtain a copy of Balance sheet together with attachments.