Financial Statements of a Company | CBSE Class 12 Accountancy Notes

This note covers the meaning, nature, objectives and uses of financial statements, the company balance sheet, share capital disclosures, reserves and surplus, current and non-current classification, the statement of profit and loss, worked calculations and limitations of financial reporting.

What do a company's financial statements communicate?

Definition: Financial statements are formal annual reports through which a company's management communicates financial information to owners and external users, including investors, tax authorities, government and employees.

Financial statements are the final products of the accounting process. Transactions are recorded, classified and summarised to show the financial results of a period and the financial position on a particular date. Their presentation helps users understand the information and make economic decisions.

Which statements serve different purposes?

The balance sheet is a position statement. The statement of profit and loss is a performance report covering the interval between two balance sheet dates. A cash flow statement supplies information about movements of funds and changes in financial position.

Preparation involves accounting concepts, conventions, consistently followed policies, applicable accounting standards and legal requirements. Financial statements are therefore structured summaries of accounting records, rather than a collection of unrelated account balances.

They serve both external reporting and internal management needs. Management uses them for planning, decision-making and control, while shareholders and other outside users examine profitability and financial position.

Why do financial statements combine facts, conventions and judgements?

Recorded facts and accounting conventions

Recorded facts supply the cost data found in the accounting books. Cash, bank balances, trade receivables and fixed assets enter the statements from these records. Assets bought at different dates and prices are brought together using their recorded costs.

Historical cost is the original cost of a transaction. Because historical amounts are not current market prices, the resulting statements do not present the concern's current market-based financial condition.

Accounting conventions influence the way recorded amounts are presented. Inventory is valued at cost or market price, whichever is lower. Fixed assets appear at cost less depreciation. Conventions help make financial statements comparable, simple and realistic.

The convention of materiality permits small items such as pencils, pens and postage stamps to be treated as expenditure in the year of purchase, even though they are assets in nature. Stationery is valued at cost.

Postulates and personal judgements

Postulates are the basic assumptions underlying preparation. The going concern assumption treats the enterprise as continuing for a longer period, supporting historical cost presentation. Money measurement assumes a common monetary measure despite changes in purchasing power.

The realisation postulate places revenue in the sales of the year in which the sale occurs, even when the sale price will be collected over several years. Revenue recognition and cash collection therefore need not occur together.

Personal judgements enter estimates of useful asset life, depreciation and doubtful debts. Inventory valuation also involves judgement when determining cost and market value. These estimates operate alongside recorded facts and accounting conventions.

The convention of conservatism guides estimates and judgements used in preparing the statements. The presence of a numerical amount does not mean that the amount is independent of assumptions or estimates. Understanding the basis of preparation is necessary when interpreting the result.

What are the objectives of financial statements?

The primary objective is to help users make decisions. Shareholders and other external parties need information about profitability, assets and liabilities, but may have limited authority, ability or resources to obtain it directly.

What information should the statements provide?

1. Resources and obligations: Provide adequate, reliable and periodic information about the firm's economic resources and obligations to investors and other external parties.
2. Earning capacity: Supply useful information for predicting, comparing and evaluating the ability of the business to earn income.
3. Potential cash flows: Help investors and creditors assess the amount, timing and uncertainties of future cash flows.
4. Management effectiveness: Support judgement about management's ability to use the resources of the business effectively.
5. Activities affecting society: Report business activities important in the social environment that can be determined and described or measured.
6. Accounting policies: Disclose significant policies and concepts, together with changes during the year, so users can understand the figures.

These objectives extend beyond finding the annual profit. A profitable result must be considered alongside the resources employed, the obligations outstanding and information useful for assessing cash flows. Different users bring different questions to the same financial statements.

Disclosure of policies is particularly important because figures reflect accounting choices and estimates. Users need the basis on which information has been prepared when they compare results or assess management's use of resources.

How is the company balance sheet presented?

The Companies Act, 2013 and Schedule III provide the presentation framework for the company statements covered here. The balance sheet uses a vertical format, with equity and liabilities followed by assets. Current and non-current classifications organise both sides.

What are the main heads and subheads?

The following table sets out the hierarchy of the balance sheet. The statement's columns are Particulars, Note No., figures at the end of the current reporting period and figures at the end of the previous reporting period.

Fixed assets are further divided into tangible assets, intangible assets, capital work-in-progress and intangible assets under development. Each of the two main parts ends with a total. Accompanying notes form part of the financial statements.

What disclosure principles govern presentation?

Accounting standards prevail over Schedule III. Required disclosures may appear on the face of the statements or in the notes. The presentation should balance sufficient important information against excessive detail that does not help users.

The framework excludes insurance and banking companies and companies for which another Act specifies a particular statement format. Terms used in Schedule III carry the meanings assigned by applicable accounting standards.

Trade receivables and trade payables replace the older terms sundry debtors and sundry creditors. Broad, significant items appear on the face of the balance sheet, while supporting detail is supplied through notes to accounts.

What must be disclosed about shareholders' funds and share capital?

Shareholders' funds contain share capital, reserves and surplus, and money received against share warrants. Share capital is presented as a broad figure on the face of the balance sheet, supported by detailed disclosures for each class of shares.

Which details belong in the share capital note?

• The number and amount of shares authorised; shares issued; shares subscribed and fully paid; and shares subscribed but not fully paid.
• The par value per share and reconciliation of the number outstanding at the beginning and end of the accounting period.
• Rights, preferences and restrictions attached to each class, including dividend distribution and capital repayment restrictions.
• Shares held by the holding company or ultimate holding company, including relevant subsidiary and associate holdings in aggregate.
• Each shareholder holding more than 5% of the shares, with the number held.
• Shares reserved for issue under options and contracts or commitments, with their terms and amounts.
• Terms of securities convertible into equity or preference shares, including conversion dates.
• Aggregate calls unpaid and the amount originally paid on forfeited shares.

The disclosures also cover the preceding five years' fully paid shares allotted without cash consideration, fully paid bonus shares and shares bought back. These details help explain the composition and changes in share capital.

How do share warrants and application money differ?

Share warrants relate to amounts received for conversion into shares at a specified date and rate. Money received against them is shown as a separate line within shareholders' funds.

Share application money pending allotment has separate presentation. Application money not exceeding issued capital and non-refundable to the relevant extent is classified as non-current and appears separately on the face of the balance sheet.

These distinctions prevent different stages of share-related receipts from being combined indiscriminately with share capital. The note and the face of the balance sheet must be read together.

How are calls in arrears and forfeited shares shown?

A share capital calculation must distinguish fully paid shares, shares still outstanding with unpaid calls and shares already forfeited. The amount received on forfeited shares is separately identified in the share capital note.

Worked example 1. Dinkar Ltd. has authorised capital of ₹50,00,000 in equity shares of ₹100 each. It invited applications for 40,000 shares and received applications for 36,000. All calls were made and received except a final call of ₹20 on 500 shares. Of these, 200 shares were forfeited. Calculate the share capital presented.

Answer: Fully paid capital is 35,500 × ₹100 = ₹35,50,000. The remaining 300 un-forfeited defaulting shares contribute ₹30,000 − ₹6,000 = ₹24,000. The amount paid on 200 forfeited shares is 200 × ₹80 = ₹16,000. Share capital presented is ₹35,50,000 + ₹24,000 + ₹16,000 = ₹35,90,000.

What does the share capital note show?

The balance sheet extract therefore places share capital of ₹35,90,000 under Equity and liabilities, Shareholders' funds, with a reference to the share capital note. Authorised and issued capital are disclosure amounts, not amounts added again to the presented capital.

Of the 500 defaulting shares, 200 have been forfeited, leaving 300 subscribed but not fully paid shares. Thus the calls in arrears deducted against the surviving subscribed capital are ₹6,000, not the unpaid final call on all 500 shares.

How are current and non-current items distinguished?

Current classification depends on the operating cycle, realisation or settlement period, trading purpose and the nature of cash balances. Other assets and liabilities are non-current. The classification must reflect the particular item, rather than its name alone.

Which criteria matter?

An item is current if it is involved in the entity's operating cycle, is expected to be realised or settled within twelve months, or is held primarily for trading. Cash and cash equivalents are current.

A liability is current if the entity lacks an unconditional right to defer settlement for at least twelve months after the reporting period. The operating cycle and the twelve-month criterion must both be considered where applicable.

How are trade balances treated?

Trade receivables relate to sales of goods or services in the normal course of business. Receivables realisable beyond the twelve-month or operating-cycle criterion are shown as other non-current assets, with notes. Other trade receivables appear within current assets.

Trade payables relate to purchases of goods and services in the normal course of business. Amounts settling beyond the relevant twelve-month or operating-cycle criterion are included under other long-term liabilities, with supporting notes. The remaining trade payables appear as current liabilities.

These distinctions show why a trade balance cannot be classified solely by the words receivable or payable. The expected realisation or settlement must also be examined.

How are reserves, surplus and debit balances presented?

Reserves and surplus includes capital reserve, capital redemption reserve, securities premium reserve, debenture redemption reserve, revaluation reserve, share options outstanding account, other reserves and surplus. The nature and purpose of other reserves should be specified.

Surplus is the balance in the statement of profit and loss. Allocations and appropriations, such as dividends, bonus shares and transfers to or from reserves, are disclosed. A reserve backed by specifically earmarked investments is termed a fund.

What happens when the statement of profit and loss has a debit balance?

A debit balance is shown as a negative amount under surplus. It reduces the total reserves and surplus. Even when the resulting total is negative, it remains under reserves and surplus within shareholders' funds.

Worked example 2. Sunfill Ltd. has a general reserve of ₹5,00,000 and a debit balance of ₹3,00,000 in its statement of profit and loss for 2016 to 2017. Find reserves and surplus at 31 March 2017.

Answer: Reserves and surplus = ₹5,00,000 − ₹3,00,000 = ₹2,00,000. The note shows the general reserve and deducts the debit balance; the balance sheet presents ₹2,00,000 under shareholders' funds.

Worked example 3. Avalon Ltd. has a general reserve of ₹5 lakh and a debit balance of ₹8 lakh in its statement of profit and loss for 2016 to 2017. Show reserves and surplus at 31 March 2017.

Answer: Reserves and surplus = ₹5,00,000 − ₹8,00,000 = −₹3,00,000. Present (₹3,00,000) under reserves and surplus within shareholders' funds. The negative amount does not become an asset.

Note: Parentheses in these extracts indicate negative amounts. Preserve the sign when carrying the total from the note to the balance sheet.

The two examples use the same presentation rule. In Sunfill Ltd., the reserve exceeds the loss. In Avalon Ltd., the loss exceeds the reserve, but the location of the net figure remains unchanged.

How are borrowings, provisions and proposed dividends treated?

How do different obligations appear?

Long-term borrowings are loans repayable beyond twelve months or the operating cycle. Loans repayable on demand or with an original tenure within that period are short-term borrowings. Current maturities of long-term debt are presented under other current liabilities, with notes.

Short-term provisions are expected to be settled within twelve months from the balance sheet date or within the operating-cycle period from recognition. Other provisions are long-term provisions under non-current liabilities.

Proposed dividend is proposed by directors after preparation of the annual accounts and requires shareholders' approval at the annual general meeting. Shareholders may reduce the proposed amount but cannot increase it.

A proposed dividend awaiting approval is disclosed in notes as a contingent liability. Once shareholders declare it, it becomes a liability and is accounted for. Consequently, the previous year's proposed dividend is accounted for in the current year after approval.

How does a debenture redemption premium affect presentation?

Worked example 4. Arushi Ltd. issues 5,000, 10% debentures of ₹100 each at par, redeemable at a premium of 5% after five years. Show the effects of this issue.

Answer: Debentures and cash received each equal 5,000 × ₹100 = ₹5,00,000. Redemption premium = ₹5,00,000 × 5% = ₹25,000. Show ₹5,00,000 as long-term borrowings, ₹25,000 as other long-term liabilities and (₹25,000) as reserves and surplus. Cash at bank is ₹5,00,000.

The redemption premium is distinct from the 10% debenture interest rate. The issue extract records the premium obligation and corresponding negative surplus, with the two effects offsetting in the total equity and liabilities.

How is the statement of profit and loss organised?

The statement of profit and loss reports revenue and expenses for a specified period. Its columns identify particulars, note numbers, current-period figures and previous-period figures. Revenue from operations and other income are separated before calculating total revenue.

How are revenues and expenses classified?

Revenue from operations includes sales of products, sales of services and other operating revenues. For a finance company, it includes interest, dividends and income from other financial services. Applicable components are separately disclosed in notes.

Other income includes interest income for a company other than a finance company, dividend income, net gains or losses on investment sales, and other non-operating income after directly attributable expenses.

Total revenue = Revenue from operations + Other income.

Changes in inventories = Opening inventories − Closing inventories.

What is the sequence from revenue to final profit?

1. Combine revenue from operations and other income to obtain total revenue.
2. Deduct the total of the listed expense heads to obtain the subtotal before exceptional items, extraordinary items and tax.
3. Adjust exceptional items and then extraordinary items to reach profit before tax.
4. Deduct current and deferred tax expense to obtain profit or loss from continuing operations.
5. Calculate profit or loss from discontinuing operations after its tax expense.
6. Add the continuing and after-tax discontinuing results to obtain profit or loss for the period; disclose basic and diluted earnings per equity share.

Profit from continuing operations = Profit before tax − Tax expense.

Profit for the period = Profit from continuing operations + After-tax profit from discontinuing operations.

Note: Interest on borrowings belongs to finance costs. Bank charges belong to other expenses. A similar financial connection does not place the two expenses under the same heading.

How is profit before tax calculated from classified balances?

A profit calculation uses revenue and expenses for the period. Asset balances, borrowings and share capital belong to the balance sheet. The expense classification must preserve the distinction between materials consumed, employee benefits, finance costs and depreciation.

Worked example 5. For the year ended 31 March 2017, net sales are ₹10,00,000, adjusted purchases ₹4,00,000, wages ₹1,20,000, salaries ₹80,000 and depreciation on plant and machinery ₹16,000. The 10% debentures of ₹1,00,000 were issued on 1 April 2016. Using these income and expense data, calculate profit before tax.

Answer: Employee benefits = ₹1,20,000 + ₹80,000 = ₹2,00,000. Debenture interest for the full year = ₹1,00,000 × 10% = ₹10,000. Total expenses = ₹4,00,000 + ₹2,00,000 + ₹10,000 + ₹16,000 = ₹6,26,000. Profit before tax = ₹10,00,000 − ₹6,26,000 = ₹3,74,000.

What does the resulting statement show?

Statement of profit and loss for the year ended 31 March 2017: extract to profit before tax

Profit before tax = Total revenue − Total expenses for this example, which has no intervening exceptional or extraordinary item. The employee benefits note separately lists wages of ₹1,20,000 and salaries of ₹80,000.

The purchases figure is already adjusted and is used as materials consumed in this calculation. It is not reduced again by closing stock. The debenture issue date establishes a full year of interest, so no part-year adjustment is needed.

This example illustrates both classification and arithmetic. Combining wages with salaries and identifying debenture interest under finance costs makes the statement's expense categories clear without altering the resulting profit.

How useful are financial statements, and what are their limitations?

Who uses financial statements?

Stewardship reporting allows shareholders to assess management performance against ownership expectations. Shareholders also use the information to consider the status, safety and return on existing investments and whether to continue holding them.

Prospective investors examine security, liquidity, solvency and reasonable profitability. Banks and other lending institutions use financial performance when deciding whether to grant credit. Government uses the statements as inputs into taxation, industrial and other economic policies.

Trade associations analyse statements to serve and protect members, develop standard ratios and design uniform accounting systems. Stock exchanges assess reporting transparency and seek information to protect investors. Stockbrokers use financial position information when considering prices to quote.

The statements form part of the annual report, alongside directors' and auditors' reports, the corporate governance report, and management discussion and analysis. They provide financial information to management, employees, creditors and the wider public as well as investors.

What limits the conclusions users can draw?

1. Historical costs: Changing purchasing power means recorded asset and liability amounts do not necessarily reflect the current market situation.
2. Uncertain realisation: Assets may not realise their stated values in forced liquidation. Their balances represent unexpired or unamortised costs.
3. Possible bias: Personal judgements, estimates and accounting conventions may influence the reported results and position.
4. Aggregate information: Summarised figures may not provide all the detail a particular user needs for a decision.
5. Missing vital information: The balance sheet does not disclose matters such as loss of markets or cessation of agreements that may strongly affect the enterprise.
6. Missing qualitative information: Monetary statements do not describe industrial relations, labour relations, industrial climate or quality of work.
7. Interim reporting: Profit relates to a specified period, while the balance sheet describes one date. Neither directly depicts future changes or earning capacity over time.

Financial statements therefore need careful analysis before use. Their value lies in organised financial information, but a monetary summary cannot provide a complete account of every condition affecting a business.

Glossary

• Financial statements — Formal reports communicating a company's financial results and position to owners and other interested users.
• Balance sheet — A statement showing assets, liabilities and owners' claims at a particular reporting date.
• Statement of profit and loss — A report of revenue, expenses and the resulting financial performance for a specified accounting period.
• Historical cost — The original cost recorded for a transaction, rather than its current market value.
• Going concern — The assumption that an enterprise continues in existence for a longer period of time.
• Materiality — A convention under which small items may be treated as expenditure in their purchase year.
• Shareholders' funds — The balance sheet category containing share capital, reserves and surplus, and money received against share warrants.
• Surplus — The balance in the statement of profit and loss, with allocations and appropriations separately disclosed.
• Fund — A reserve specifically represented by investments earmarked for that reserve's purpose.
• Trade receivables — Amounts arising from sales of goods or services in the normal course of business.
• Trade payables — Amounts arising from purchases of goods or services in the normal course of business.
• Finance costs — Interest charges incurred during the year on the borrowings of the business.
• Amortisation — Writing off the amount relating to intangible assets through the accounting process.
• Proposed dividend — A dividend recommended by directors that requires shareholders' approval before becoming an accounted liability.

Common errors and misconceptions

• Misconception: A balance sheet measures profit for the year. Correct: It shows financial position at a date; the statement of profit and loss reports performance over a period.
• Misconception: Every trade receivable is current. Correct: Receivables beyond the relevant twelve-month or operating-cycle criterion are other non-current assets.
• Misconception: A debit profit and loss balance is an asset. Correct: It is negative surplus within reserves and surplus, even if the resulting total is negative.
• Misconception: All amounts connected with borrowing are finance costs. Correct: Interest charges are finance costs; bank charges appear under other expenses.
• Misconception: A proposed dividend is immediately an accounted liability. Correct: It is disclosed in notes pending shareholder approval and accounted for after declaration.
• Misconception: Authorised, issued and paid-up capital are added together. Correct: They describe different capital categories; authorised and issued amounts are not extra additions to paid-up capital.
• Misconception: The balance sheet guarantees an asset's selling price. Correct: Historical carrying amounts may differ from current prices and forced-liquidation realisations.
• Misconception: Current maturities of long-term debt remain under long-term borrowings. Correct: They appear under other current liabilities with supporting notes.

Exam-style questions with model answers

Q1. Distinguish the balance sheet from the statement of profit and loss by their purpose and time reference. [2 marks]

1. The balance sheet shows assets, liabilities and owners' claims at a particular date, presenting financial position.
2. The statement of profit and loss reports revenue, expenses and profit or loss for a specified period, presenting financial performance.

Q2. Explain any three objectives of financial statements. [3 marks]

1. They provide adequate, reliable and periodic information about economic resources and obligations to external users who have limited access to information.
2. They supply information useful for predicting, comparing and evaluating the earning capacity of the business, supporting users' economic decisions.
3. They help investors and creditors evaluate potential cash flows, including their amounts, timing and uncertainties, rather than relying solely on the reported profit.

Q3. Explain four elements that determine the nature of financial statements. [4 marks]

1. Recorded facts provide historical cost data from accounting books, including cash, trade receivables and fixed assets acquired at different times.
2. Accounting conventions influence treatment, such as inventory valuation at cost or market price, whichever is lower, and materiality for small items.
3. Postulates provide basic assumptions, including going concern, money measurement and realisation, on which the preparation of statements rests.
4. Personal judgements affect useful-life estimates, depreciation, doubtful-debt provisions and inventory valuation. The reported figures therefore combine recorded information with estimates.

Q4. Dinkar Ltd. has authorised capital of ₹50,00,000 in ₹100 equity shares. It invited applications for 40,000 shares and received applications for 36,000. All calls were made and received except the final ₹20 call on 500 shares; 200 of these shares were forfeited. Calculate the five components needed to show its share capital and the final presented amount. [5 marks]

1. Authorised capital is 50,000 equity shares of ₹100 each, totalling ₹50,00,000. This amount is disclosed in the share capital note.
2. Issued capital is 40,000 equity shares of ₹100 each, totalling ₹40,00,000. It is distinct from the amount actually subscribed and paid.
3. Subscribed and fully paid capital is based on 36,000 − 500 = 35,500 shares. Multiplying by ₹100 gives ₹35,50,000.
4. There are 500 − 200 = 300 subscribed but not fully paid shares. Their ₹30,000 called-up amount less ₹6,000 calls in arrears gives ₹24,000.
5. The forfeited amount is 200 × ₹80 = ₹16,000. Thus share capital presented under shareholders' funds is ₹35,50,000 + ₹24,000 + ₹16,000 = ₹35,90,000.

Q5. Avalon Ltd. has a general reserve of ₹5 lakh and a debit balance of ₹8 lakh in its statement of profit and loss for 2016 to 2017. Calculate reserves and surplus at 31 March 2017 and state its presentation. [2 marks]

1. Reserves and surplus is ₹5,00,000 − ₹8,00,000 = −₹3,00,000.
2. Show (₹3,00,000) under reserves and surplus within shareholders' funds. The debit balance does not become an asset.

Q6. For the year ended 31 March 2017, net sales are ₹10,00,000; adjusted purchases used as materials consumed are ₹4,00,000; wages ₹1,20,000; salaries ₹80,000; and depreciation ₹16,000. The 10% debentures of ₹1,00,000 were issued on 1 April 2016. Using these data, calculate revenue, employee benefits, finance costs, total expenses and profit before tax. [5 marks]

1. Revenue from operations is the given net sales of ₹10,00,000. This is the revenue figure used for the calculation in the question.
2. Employee benefits combine wages and salaries. The amount is ₹1,20,000 + ₹80,000 = ₹2,00,000, with the two components shown separately in the supporting note.
3. The debentures were outstanding for the full year. Finance costs are therefore ₹1,00,000 × 10% = ₹10,000, representing the annual debenture interest.
4. Total expenses include adjusted materials consumed, employee benefits, interest and depreciation: ₹4,00,000 + ₹2,00,000 + ₹10,000 + ₹16,000 = ₹6,26,000.
5. Profit before tax is revenue less these expenses: ₹10,00,000 − ₹6,26,000 = ₹3,74,000. No income tax deduction is made when reporting profit before tax.

Q7. Explain six limitations of financial statements. [6 marks]

1. Historical costs do not necessarily reflect the current market situation because purchasing power changes and recorded asset values relate to past transactions.
2. Assets may fail to realise their stated values in forced liquidation. Their balance sheet amounts represent unexpired or unamortised costs.
3. Personal judgements and estimates can introduce bias into reported results and financial position, alongside the effects of accounting concepts and conventions.
4. Statements provide aggregate information, so they may lack the detailed information needed by a particular user for a specific decision.
5. Vital matters such as loss of markets or cessation of agreements are absent from the balance sheet, despite their importance to the enterprise.
6. Qualitative information, including labour relations, industrial climate and quality of work, is not conveyed by statements containing monetary information.

Key takeaways

• Financial statements summarise accounting records to communicate financial position and performance to management, owners and other interested users.
• The balance sheet reports a position at a date, while the statement of profit and loss covers a period.
• Current and non-current classification depends on the operating cycle, settlement or realisation timing and the nature of the item.
• Share capital disclosures distinguish authorised, issued, subscribed and paid-up amounts, with separate treatment of calls unpaid and forfeited amounts.
• A debit profit and loss balance reduces reserves and surplus, even when the resulting total becomes negative.
• Revenue and expenses require correct classification before calculation; finance costs include interest, while bank charges are other expenses.
• Proposed dividends await shareholder approval, with disclosure in notes before they become accounted liabilities after declaration.
• Historical costs, estimates, aggregation and missing qualitative information limit the conclusions that users can draw from financial statements.

Test yourself

What are the three components of shareholders' funds?

Share capital, reserves and surplus, and money received against share warrants are the three components.

Where are current maturities of long-term loans shown?

They appear under other current liabilities, with supporting disclosure in notes to accounts.

When is a reserve described as a fund?

A reserve is termed a fund when it is specifically represented by earmarked investments.

Where does a negative total of reserves and surplus appear?

It remains under reserves and surplus within shareholders' funds, presented as a negative amount.

How do bank charges differ from borrowing interest in expense classification?

Borrowing interest is included in finance costs, while bank charges are classified as other expenses.

Can shareholders increase the dividend proposed by directors?

Shareholders may reduce the proposed dividend, but they cannot increase the amount proposed by directors.

Which expense head combines wages and salaries?

Wages and salaries are combined under employee benefits expense, with supporting detail in the notes.

Why is a fixed asset's carrying amount not a guaranteed liquidation value?

Its carrying amount reflects unexpired or unamortised cost, and forced liquidation may produce a different realisation.