Page 14 - 32. ANALYSIS OF FS

Opening balance 550
Additions 950 1,500
Reserve for foreseeable loss 400
Total 2,400

Note 2: Long-term borrowings

Term loan from bank 5,700
Total 5,700
Note 3: Deferred tax
Deferred tax asset 700
Deferred tax liability 400
Total 300
Note 4: Other current liabilities
Unclaimed dividends 10
Billing in advance 150
Other current liabilities 40
Total 200
Note 5: Trade Receivables
Considered good (outstanding within 6 months) 1,065
Considered doubtful (due from past 1 year) 40
Provision for doubtful debts (5)
Total 1,100

Additional information:
(i) Share capital comprises of 100 lakh shares of Rs 10each.
(ii) Term Loan from bank for Rs 5,700 lakh also includes interest accrued and due of Rs 700 lakh as on the
reporting date.
(iii) Reserve for foreseeable loss is created against a service contract due within 6months.

(iv) Inventory should be valued at cost Rs 1,500 lakh, NRV as on date is Rs1,200 lakh.
(v) Adividendof10%wasdeclaredbytheBoardofdirectorsofthecompany.
(vi) Accrued Interest income of Rs 300 lakh is not booked in the books of the company.
(vii) Deferred taxes related to taxes on income are levied by the same governing tax laws.
Identify and report the errors and misstatements in the above extracts and prepare corrected Balance Sheet
and Statement of Profit & Loss and where required the relevant notes to the accounts with explanations

thereof.
SOLUTION

Following adjustments / rectifications are required to be done
1. Reserve for foreseeable loss for Rs 400 lakh, due within 6 months, should be a part of provisions. Hence
it needs to be regrouped. If it was also part of previous year’s comparatives, a note should be added in
the notes to account on the regrouping done this year.
2. Interest accrued and due of Rs 700 lakh on term loan will be a part of current liabilities.

Thus, it should be shown under the heading “Other Current Liabilities”.
3. As per Ind AS 2, inventories are measured at the lower of cost and net real is able value. The amount of
any write down of inventories to net realisable value is recognised as an expense in the period the write-

32.13