Financial accounting for managers1)Understanding corporate Balance sheet 11)AS-17

2)Understanding corporate P/L account 12)AS-18

3)Notes to accounts 13)AS-21

4)AS-1 14)AS-28

5)AS-3 15)AS-29

6)Auditors report 16)Common size statements

7)Directors report 17)Comparative financial statements

8)Corporate governance report 18)Ratio analysis-profitability,turnover,liquidity,leverage,solvency,capital market ratios

9)AS-2 19)Du Pont analysis

10)AS-9 20)FFS

Topic number-15 : AS-29 (provisions for contingent liabilities)

Presented by

AmitDinesh kumar. J

Points to be noted for AS-29

Accounting standards 29 should be applied in accounting for provisions of contingent liabilities.

Meaning of liabilities : Liabilities may be defined as the obligations for which the company/organization has to pay for.

Meaning of contingent : The word contingent means doubtful happening.

Contd.,

Meaning of contingent liabilities : A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events which are not completely within the control of the company.

In normal terms contingent liabilities means liabilities for the amounts which may or may not happen and it is still under doubtfulness. These are to be mentioned in the footnotes.

Provisions

Provisions should be made when the company has a present obligation as a result of a past event.

When it is possible that the outcome of the obligation will be affecting the financial condition when it resurfaces.

A reliable estimate can be made of the amount of the obligation.

Provisions and contingent liabilities are to shown in the foot note on the balance sheet.

Disclosure

Provisions - The amount should be carried forward to the

next period. Additional provisions to be made in this period. Amount used during this period. Unused amount reversed during the period.

Disclosure

Contingent liabilities- An estimate of the financial effects is to be

made and disclosed. An indication of the uncertainties relating to any

possible outcome to be mentioned. The possibility of reimbursement.

Example

X ltd is getting a loan of Rs.10,00,000 from a bank and Y ltd gives the guarantee for the loan. At the stipulated time of payment, X ltd is not able to pay and so, bank issues a legal notice to Y ltd. Now, Y ltd makes a provision for Rs,10,00,000 as guarantee in the footnote of its balance sheet.

Balance sheet of Y ltd as on 31st march, 2011Liabilities Rs Assets Rs

Current liabilites: Current assets

Bank overdraft xxx Cash in hand xxx

B/P xxx Cash at bank xxx

Outstanding expenses xxx B/R xxx

Sundry creditors xxx Sundry debtors xxx

Income received in advance xxx Prepaid expenses xxx

Accrued income xxx

Closing stock xxx

Long term liabilities: Fixed assets:

loan xxx Furniture and fixture xxx

Capital: opening balance xxx Plant machinery xxx

Net profit xxx building xxx

Net loss land xxx

drawing xxx goodwill xxx

Foot note : contingent liabilities Rs.10,00,000 for bank loan for guarantee for X ltd.