Question

Classify the following items under major heads and sub-heads (if any) in the balance sheet of the company as per Schedule III, Part I of the Companies Act, 2013:

(i) Unpaid dividend

(ii) Raw materials

(iii) Building under construction

Hint:

Decide for each item whether it is due or used within 12 months. Then pick the major head and the matching sub-head from Schedule III, Part I.

Answer 1

Step 1: Understanding the Question:
Schedule III, Part I of the Companies Act, 2013 gives the format of the Balance Sheet of a company.
Every item is placed under a major head, and then under a sub-head where the Schedule gives one.
Here we place three items one by one.

Step 2: Key Rule:
The major heads are Shareholders Funds, Non-Current Liabilities, Current Liabilities, Non-Current Assets and Current Assets.
An item is current if it is due, or will turn into cash or be used, within 12 months or the operating cycle.
Otherwise it is non-current.

Step 3: Classify Unpaid dividend.
Dividend that the company has declared but not yet paid is money owed to shareholders. The company must pay it within a short time, so it is a current liability. It is not a borrowing, a trade payable or a provision, so the sub-head is Other Current Liabilities.
So the major head is Current Liabilities and the sub-head is Other Current Liabilities.

Step 4: Classify Raw materials.
Raw materials are goods bought to be used in making finished goods. The company will use them within its normal operating cycle, so they are a current asset. Stock held for production is shown under Inventories.
So the major head is Current Assets and the sub-head is Inventories.

Step 5: Classify Building under construction.
A building that is still being constructed is meant to be used in the business for many years. It is a long-term asset and is not held for sale, so it is a non-current asset. Under Schedule III it is capital work in progress, which is part of Property, Plant and Equipment and Intangible Assets.
So the major head is Non-Current Assets and the sub-head is Property, Plant and Equipment and Intangible Assets.

Step 6: Present the answer in a table.

Item	Major head	Sub-head
Unpaid dividend	Current Liabilities	Other Current Liabilities
Raw materials	Current Assets	Inventories
Building under construction	Non-Current Assets	Property, Plant and Equipment and Intangible Assets

Each correct major head and sub-head earns half a mark, so the six parts carry 3 marks.

Final Answer:
Unpaid dividend: Current Liabilities, Other Current Liabilities; Raw materials: Current Assets, Inventories; Building under construction: Non-Current Assets, Property, Plant and Equipment and Intangible Assets.