Page 338 - DCOM201_ACCOUNTING_FOR_COMPANIES_I

Unit 14: Preparation of Final Accounts

14.1.1 Treatment of Special Items Notes

1. Interest on debentures: If interest on debentures is not paid then provision of interest for
the full year should be made. This provision of interest is not only for that interest which
has become due but also for that interest which is not due but has been earned. Interest on
debentures is generally paid half yearly.

2. Deduction of tax from interest on debentures: As per Income Tax Rules, income tax is
deducted from such interest and deposited with the Central Government, if security is
Government. Tax free securities or where Income Tax Officer is informed that the income
of the assesse is not taxable, then income tax should not be deducted. How much tax is to
be deducted is decided as per Finance Act every year. At present, income tax is deducted at
source. During 2006-07, it was a 10% + Education cess 2% if listed/Govt., otherwise 20% +
2% education cess.

3. Discount on the issue of debentures to be shown in the balance sheet but a reasonable
amount is written off every year from the Profit & Loss a/c.
4. Transfer to Reserves [Statutory requirement before dividend is proposed]: According to
Section 205 of the Companies Act, Companies are required to transfer a certain percentage
of profits not exceeding 10% to Reserves before declaring any dividend. Following are the
rates:
(a) 2.5% if the dividend proposed exceeds 10% but not 12.5%

(b) 5% if the dividend proposed exceeds 12.5% but not 15%
(c) 7.5% if the dividend proposed exceeds 15% but not 20%
(d) 10% if it exceeds 20%.

Task Analyse the profit and loss account of HDFC bank for FY 2009-10.

Notes As per Income tax Rules, income tax is deducted from such interest and deposited
with the Central Government, if security is Government. Tax free securities or where
Income Tax Officer is informed that the income of the assesse is not taxable, then income
tax should not be deducted.

14.1.2 Requirements of Schedule VI Concerning Profit and Loss Accounts

A company shall disclose the following notes to their accounts :
1. Revenues from operations: Revenue from operations shall be classified as:

(a) Sale of products;
(b) Sale of Services;
(c) Other operating revenues (specify nature);
Less:

(d) Discounts, allowances, and returns;
(e) Excise duty/service tax.

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