Vertical Balance Sheet Format

The Final Accounts of a company refer to the annual financial statements consisting of (1) Profit and Loss Account which discloses the results of operation, either profit or loss, for a financial year, and (2) Balance Sheet which depicts the financial position of the company as on the closing day of the year. The Profit and Loss Account is also known as Income Statement for the year.

The Balance Sheet may be described as a statement of assets and liabilities of the company. In the Companies Act, 2013, there is no Proforma prescribed for preparation of the Profit and Loss Account of a Company. However, the particulars and information to be given in the Profit and Loss Account laid down in Schedule VI, Part II, of the Act. The Profit and Loss Account must set out the various items relating to income and expenditure of the company arranged under properly classified heads.

Since the Companies Act is silent as regards (he form of presentation, the Profit and Loss Account may be prepared by adopting either (a) the vertical form, or (h) the horizontal or left right form. The special features of the company Profit and Loss Account are: (1) It is not necessary to prepare a separate Trading Account; (ii) There is no separate heading required to be given for the appropriation of profits. The distribution or appropriation of profits is shown in the second pan of the Profit and Loss Account, which is also described as ‘Below the line’.

The Companies Act requires that the figures of the previous year must be shown in a separate column along side the figures of the current year. As regards the preparation of Balance Sheet, the nature of details to be shown with respect to the liabilities and assets and the order of arrangement of the items are prescribed in Schedule VI, Part I of the Companies Act. There are two alternate Proforma given in Schedule VI for the preparation of company Balance Sheets: (i) horizontal, and (ii) vertical. Any of these forms may be adopted for the Balance Sheet of a company. In the horizontal form, liabilities are presented on the Left-hand side and assets on the right-hand side. In the vertical form, the liabilities are first listed under the heading ‘Sources of Funds’. This is followed by the assets shown under the heading ‘Application of Funds’. Both the Prescribed forms require that figures of the previous year should be shown in a separate column alongside the figures of the current year with respect to each of the sub-headings under liabilities (Sources of funds) and assets (Application of Funds).