The financial statements of a company class 12 notes compile Part 2 Chapter 3 of NCERT Accountancy Part II into a single revision file built around Schedule III of the Companies Act, 2013. The chapter sets the legal format for the Balance Sheet and the Statement of Profit and Loss that every Indian company must publish, and the CBSE Board paper tests it as a near-certain 8-mark format question. These notes follow the 2026-27 NCERT reprint and walk you through every Schedule III heading the marking scheme expects on the answer sheet.
- CBSE Weightage: 8 marks (Part A, Accounting for Companies unit), compulsory format question every year
- Notes Length: 22-page revision PDF with one full Balance Sheet illustration and the Statement of Profit and Loss vertical format
These Notes are reviewed by Chartered Accountants and senior Commerce educators, mapped to the 2026-27 NCERT Accountancy Part II textbook (Reprint 2026-27), and verified against the last six years of CBSE Class 12 Board papers.
Also Check:
- Financial Statements of a Company Class 12 NCERT Solutions
- Issue and Redemption of Debentures Class 12 Accountancy Notes
- CBSE Class 12 Accountancy Syllabus 2026-27
Financial Statements of a Company Class 12: Why the Schedule III Format Is Tested Every Year
The Statement of Profit and Loss and the Balance Sheet are the two statutory documents every Indian company must publish under Section 129 of the Companies Act, 2013. The CBSE Board paper tests the Schedule III format almost mechanically: students are given a trial balance or a set of adjustments and asked to drop each item under the correct major head and sub-head. The 8-mark format question has appeared in every CBSE Class 12 Accountancy paper from 2018 to 2025 without exception. Most marks are lost not on calculation but on classification, when a candidate places Short-term Borrowings under Non-Current Liabilities or treats Trade Receivables as Other Current Assets.
Class 12 Accountancy Part 2 Chapter 3 Financial Statements Of A Company Notes
Source: Rajat Arora on YouTube
How will Collegedunia's NCERT Notes Help with Financial Statements of a Company?
- Every Schedule III major head and sub-head is presented in the exact stacking order the CBSE marking scheme rewards, so a student can reproduce the vertical Balance Sheet format from memory.
- The line between Non-Current and Current classification is explained for each contested item: provisions, deferred tax, current maturities of long-term debt, and prepaid expenses.
- The Statement of Profit and Loss is laid out by Roman numerals (I to XI) so the four exam-graded subtotals (Revenue, Total Expenses, Profit before Tax, Profit for the Period) appear in the correct sequence.
- Notes to Accounts formats for Share Capital, Reserves and Surplus, Long-term Borrowings, and Tangible Assets are given as ready-to-write templates.
- Every entry distinguishes between the IGAAP-style heading the older NCERT used and the Schedule III-style heading the current syllabus requires, so prior-year question banks do not mislead you.
Meaning of Financial Statements and the Companies Act, 2013 Framework
Financial Statements of a company are the structured records of its financial position and financial performance at the end of an accounting period. Under Section 2(40) of the Companies Act, 2013, financial statements include the Balance Sheet, the Statement of Profit and Loss, the Cash Flow Statement (mandatory except for One-Person Companies, small companies, and dormant companies), the Statement of Changes in Equity where applicable, and any explanatory notes annexed thereto.
The objectives the CBSE answer should list when a 3 to 4 mark theory question is asked are summarised in the table below.
| Objective | What it communicates to the user |
|---|---|
| Provide information about financial position | Assets, liabilities and equity at year-end (Balance Sheet) |
| Report financial performance | Revenue, expenses and profit for the year (Statement of Profit and Loss) |
| Disclose cash flows | Operating, investing and financing inflows and outflows (AS-3 statement) |
| Aid economic decision-making | Information used by investors, lenders, regulators and tax authorities |
| Show stewardship | How responsibly the management has used the resources entrusted to it |
Schedule III Format of the Balance Sheet: Major Heads and Sub-Heads
The Schedule III Balance Sheet is presented in vertical form only (the horizontal T-form was discontinued for companies from 1 April 2011). Items are first split into Equity and Liabilities on the upper block and Assets on the lower block, then classified as Current or Non-Current using the operating cycle test or the twelve-month test, whichever is longer.
| Section | Major Head | Sub-Heads |
|---|---|---|
| I. EQUITY AND LIABILITIES | 1. Shareholders' Funds | (a) Share Capital (b) Reserves and Surplus (c) Money received against Share Warrants |
| 2. Share Application Money Pending Allotment | Shown as a separate line item | |
| 3. Non-Current Liabilities | (a) Long-term Borrowings (b) Deferred Tax Liabilities (Net) (c) Other Long-term Liabilities (d) Long-term Provisions | |
| 4. Current Liabilities | (a) Short-term Borrowings (b) Trade Payables (c) Other Current Liabilities (d) Short-term Provisions | |
| II. ASSETS | 1. Non-Current Assets | (a) Fixed Assets (Tangible, Intangible, Capital WIP, Intangible Assets under Development) (b) Non-current Investments (c) Deferred Tax Assets (Net) (d) Long-term Loans and Advances (e) Other Non-current Assets |
| 2. Current Assets | (a) Current Investments (b) Inventories (c) Trade Receivables (d) Cash and Cash Equivalents (e) Short-term Loans and Advances (f) Other Current Assets |
The two totals (Equity and Liabilities; Assets) must be equal. A mismatch of even one rupee costs the entire 8 marks under the CBSE pattern of awarding step-marks only when the final total tallies.
Current versus Non-Current Classification: The Twelve-Month Test
An item is classified as Current when any one of the following applies: it is expected to be settled or realised in the company's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be settled or realised within twelve months after the reporting date; or it is cash or a cash equivalent.
Items that trip students up in the exam are listed below with their correct classification.
| Item | Classification | Sub-head |
|---|---|---|
| Bank overdraft | Current Liability | Short-term Borrowings |
| Public deposits payable after 3 years | Non-Current Liability | Long-term Borrowings |
| Current maturities of long-term debt | Current Liability | Other Current Liabilities |
| Calls in arrears | Subtracted from Subscribed Capital | Share Capital (Notes) |
| Calls in advance | Current Liability | Other Current Liabilities |
| Provision for tax | Current Liability | Short-term Provisions |
| Proposed dividend | Contingent Liability, disclosed in Notes (post 2016) | Not on Balance Sheet face |
| Securities Premium Reserve | Part of Reserves and Surplus | Reserves and Surplus |
| Loose tools, stores and spare parts | Current Asset | Inventories |
| Goodwill purchased | Non-Current Asset | Fixed Assets (Intangible) |
Schedule III Format of the Statement of Profit and Loss
The Statement of Profit and Loss replaces the older Profit and Loss Account heading. It is also a strictly vertical format, structured by Roman numerals so each subtotal is graded as a separate step under the CBSE marking scheme.
| Roman Numeral | Line Item | Description |
|---|---|---|
| I | Revenue from Operations | Sale of goods or services, the company's main business income |
| II | Other Income | Interest, dividend, profit on sale of fixed assets, rent received |
| III | Total Revenue (I + II) | First graded subtotal |
| IV | Expenses | (a) Cost of Materials Consumed (b) Purchases of Stock-in-Trade (c) Changes in Inventories (d) Employee Benefit Expenses (e) Finance Costs (f) Depreciation and Amortisation (g) Other Expenses |
| V | Profit before Tax (III - IV) | Second graded subtotal |
| VI | Tax Expense | Current Tax plus Deferred Tax |
| VII | Profit for the Period (V - VI) | Third graded subtotal, transferred to Reserves and Surplus |
| VIII to XI | EPS disclosures | Basic and Diluted Earnings Per Share, computed from VII |
Note that Finance Costs is a separate sub-head of Expenses and must not be netted against Other Income. Interest paid on debentures and on long-term borrowings sits here; interest received on investments sits under Other Income.
Notes to Accounts: The Four Templates the Board Paper Asks For
The Balance Sheet face shows only the major-head totals. The breakdowns sit in Notes to Accounts, and the four most frequently asked are Share Capital, Reserves and Surplus, Long-term Borrowings, and Tangible Assets. The Share Capital Note pattern is reproduced below as the most-tested template.
| Note 1: Share Capital | Amount (Rs.) |
|---|---|
| Authorised Capital X,XX,XXX Equity Shares of Rs. 10 each | XX,XX,XXX |
| Issued Capital X,XX,XXX Equity Shares of Rs. 10 each | XX,XX,XXX |
| Subscribed Capital (a) Subscribed and Fully Paid (b) Subscribed but Not Fully Paid Less: Calls in Arrears | XX,XX,XXX XX,XX,XXX (XX,XXX) |
| Total | XX,XX,XXX |
The same hierarchy is repeated in Reserves and Surplus (separate lines for Capital Reserve, Securities Premium Reserve, General Reserve, and Surplus i.e. balance in Statement of Profit and Loss) and in Long-term Borrowings (separated by secured and unsecured).
Common Mistakes in Financial Statements of a Company Numericals
- Treating Proposed Dividend as a Current Liability. From the 2016 amendment, proposed dividend is a contingent liability disclosed in Notes only.
- Placing Bank Overdraft under Cash and Cash Equivalents instead of Short-term Borrowings.
- Classifying Calls in Arrears as a Current Asset. They are deducted from Subscribed Capital inside the Share Capital Note.
- Showing Securities Premium as a separate major head. It belongs inside Reserves and Surplus.
- Recording Forfeited Shares Account outside the Subscribed Capital block. It is added to Subscribed Capital, not shown separately.
- Netting Finance Costs against Other Income in the Statement of Profit and Loss.
- Forgetting the Capital Work-in-Progress line under Fixed Assets when factory construction is in progress at year-end.
Previous Year Question Trend: Financial Statements of a Company CBSE Class 12
A short look at how the Schedule III format has surfaced in the CBSE Board paper across recent years.
| Year | Question Type | Marks |
|---|---|---|
| 2025 | Classification of 8 items under Schedule III heads | 4 |
| 2025 | Full Balance Sheet preparation from trial balance | 8 |
| 2024 | Short-head identification of 6 items | 3 |
| 2024 | Statement of Profit and Loss with Notes to Accounts | 6 |
| 2023 | Balance Sheet from given particulars | 8 |
| 2022 | Term-2 paper: Notes to Accounts on Share Capital | 3 |
| 2021 | Major head and sub-head pairs (objective) | 2 |
The pattern is stable: one short classification question (3 to 4 marks) plus one full-format preparation question (6 to 8 marks). Together they yield 10 to 12 marks every paper, which is roughly one-eighth of the whole Accountancy weightage.
Full PYQ Map for Class 12 Accountancy
A 7-year cross-chapter table covering every Part A and Part B chapter (with marks split by topic) sits on the NCERT Solutions page for this chapter, where Solutions is the canonical owner of the PYQ asset. Full year-wise PYQ map: Financial Statements of a Company Class 12 NCERT Solutions.
Related Resources
- Financial Statements of a Company Class 12 NCERT Solutions
- Financial Statements of a Company Class 12 NCERT Book PDF
- CBSE Class 12 Accountancy Syllabus 2026-27
NCERT Notes for Class 12 Accountancy: All Chapters
| Chapter | Notes Link |
|---|---|
| Chapter 1 | Accounting for Partnership Basic Concepts Notes |
| Chapter 2 | Admission of a Partner Notes |
| Chapter 3 | Retirement and Death of a Partner Notes |
| Chapter 4 | Dissolution of Partnership Firm Notes |
| Part 2 Chapter 1 | Accounting for Share Capital Notes |
| Part 2 Chapter 2 | Issue and Redemption of Debentures Notes |
| Part 2 Chapter 4 | Analysis of Financial Statements Notes |
| Part 2 Chapter 5 | Accounting Ratios Notes |
| Part 2 Chapter 6 | Cash Flow Statement Notes |
FAQs on Financial Statements of a Company Class 12 Notes
Ques. What are financial statements of a company under the Companies Act, 2013?
Ans.
Under Section 2(40) of the Companies Act, 2013, financial statements include the Balance Sheet, the Statement of Profit and Loss, the Cash Flow Statement, the Statement of Changes in Equity where applicable, and any notes annexed thereto. One-Person Companies, small companies, and dormant companies are exempted from preparing the Cash Flow Statement.
Ques. What is Schedule III of the Companies Act, 2013?
Ans.
Schedule III prescribes the format in which every Indian company must present its Balance Sheet and Statement of Profit and Loss. The format is strictly vertical and groups items under Equity and Liabilities and Assets, each further split into Current and Non-Current using the operating cycle test or a twelve-month threshold.
Ques. Under which head is Bank Overdraft shown in the Balance Sheet of a company?
Ans.
Bank Overdraft is shown under Current Liabilities, in the sub-head Short-term Borrowings. It is never combined with Cash and Cash Equivalents on the asset side because it represents a credit balance with the bank and is repayable on demand.
Ques. How is Proposed Dividend treated in the financial statements of a company?
Ans.
From the Companies (Accounting Standards) Amendment Rules, 2016, Proposed Dividend is treated as a contingent liability and is no longer shown on the face of the Balance Sheet. It is disclosed in Notes to Accounts and recognised as a liability only after the shareholders approve it at the Annual General Meeting.
Ques. What is the difference between Authorised, Issued, Subscribed, and Paid-up Capital?
Ans.
Authorised Capital is the maximum capital the company can issue as per its Memorandum. Issued Capital is the portion actually offered to investors. Subscribed Capital is the portion taken up by applicants. Paid-up Capital is the portion of Subscribed Capital on which the called-up money has been received, after deducting Calls in Arrears.
Ques. Where is Calls in Arrears shown in the Balance Sheet?
Ans.
Calls in Arrears is deducted from Subscribed but Not Fully Paid Capital inside Note 1 to Share Capital. It is never shown as a Current Asset, even though it represents money receivable from shareholders.
Ques. How many marks does Financial Statements of a Company carry in the CBSE Class 12 Board exam?
Ans.
Part 2 Chapter 3 typically carries 8 marks in the CBSE Class 12 Accountancy Board paper, split between one short classification question (3 to 4 marks) and one full-format Balance Sheet or Statement of Profit and Loss preparation (6 to 8 marks). The chapter has appeared in every Board paper from 2018 to 2025.
Ques. Are the Financial Statements of a Company Class 12 notes aligned to the 2026-27 NCERT?
Ans.
Yes, these notes follow the 2026-27 NCERT Accountancy Part II reprint, which retains the Schedule III format introduced after the Companies Act, 2013 came into force. The chapter content has not been trimmed in the current edition.
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