How to Make Financial Statements in Schedule III Format: A Complete Guide
The Schedule III format of financial statements, mandated by the Companies Act, 2013, provides a standardized structure for companies to present their financials clearly and comparably. For businesses and professionals, understanding how to prepare financial statements in Schedule III format is essential to ensure regulatory compliance and transparency.
In this blog, we’ll break down the components, structure, and steps involved in preparing financial statements as per Schedule III (Division I, II & III) and explain how you can apply them efficiently.
📘 What is Schedule III?
Schedule III of the Companies Act, 2013 prescribes the format for financial statements to be adopted by:
- Division I – For companies following Accounting Standards (AS)
- Division II – For companies following Ind AS (Indian Accounting Standards)
- Division III – For NBFCs and companies in the financial sector using Ind AS
Schedule III ensures uniform presentation, enhancing comparability across different entities and industries.
📄 Components of Financial Statements Under Schedule III
A complete set includes:
- Balance Sheet
- Profit & Loss Account (Statement of Profit & Loss)
- Cash Flow Statement (for companies other than OPCs and small companies)
- Statement of Changes in Equity (Division II and III)
- Notes to Accounts
🧾 Step-by-Step Process to Prepare Financial Statements in Schedule III Format
✅ Step 1: Determine Applicable Division
| Type of Entity | Applicable Division |
|---|---|
| Non-NBFC using Accounting Standards (AS) | Division I |
| Non-NBFC using Ind AS | Division II |
| NBFC using Ind AS | Division III |
This decision determines the format and disclosure requirements.
✅ Step 2: Collect Financial Data
Ensure your books of account are updated with:
- Trial Balance
- General ledger
- Inventory records
- Bank statements
- Fixed asset details
- Payroll & tax computations
✅ Step 3: Prepare the Balance Sheet
In Schedule III format, the Balance Sheet is divided into:
A. Equity and Liabilities
- Shareholders’ Funds
- Non-Current Liabilities
- Current Liabilities
B. Assets
- Non-Current Assets
- Current Assets
Each main head includes specific sub-classifications, like:
- Trade Receivables
- Loans & Advances
- Inventories
- Other Financial Assets
💡 Disclosure of ageing of trade receivables, payables, and detailed break-up of current/non-current assets and liabilities is mandatory.
✅ Step 4: Prepare the Profit & Loss Statement
The Schedule III P&L format includes:
- Revenue from Operations
- Other Income
- Total Income
- Expenses (employee benefits, finance costs, depreciation, etc.)
- Profit Before Tax (PBT)
- Tax Expense
- Profit After Tax (PAT)
- Other Comprehensive Income (in Division II and III)
📝 Detailed breakup and explanatory notes must accompany each head.
✅ Step 5: Prepare the Cash Flow Statement
Applicable for companies other than OPCs and small companies. It is divided into:
- Operating Activities
- Investing Activities
- Financing Activities
Choose either Direct or Indirect method (mostly indirect is used).
✅ Step 6: Statement of Changes in Equity (Division II and III only)
This reflects:
- Movements in share capital
- Other equity like reserves, retained earnings
- Adjustments from OCI
✅ Step 7: Notes to Accounts and Disclosures
This section is crucial for compliance. It includes:
- Accounting policies followed
- Related party transactions
- Contingent liabilities
- CSR spend
- Auditors’ remuneration
- Ratio analysis (for Division II and III as per recent MCA amendment)
🛑 Companies must disclose reclassification adjustments, exceptional items, and material prior-period errors.
📌 Recent Updates You Must Know (FY 2024–25)
- Enhanced Disclosure Requirements: Aging schedules for trade payables/receivables, usage of borrowings, and capital work-in-progress reporting are now mandatory.
- Audit Trail Mandate: From April 1, 2023, companies must maintain audit trails in their accounting software.
- Round-off Guidance: As per the MCA, figures must be rounded off based on turnover thresholds.
🔍 Importance of Schedule III Format
- ✅ Ensures transparency and standardization
- ✅ Improves investor and stakeholder confidence
- ✅ Complies with statutory audit requirements
- ✅ Reduces chances of errors and misreporting
- ✅ Makes financial comparisons easier across companies
🧠 Tips for Accuracy and Compliance
- ✔️ Always cross-verify with MCA notifications and ICAI guidance notes
- ✔️ Use updated accounting software configured with Schedule III templates
- ✔️ Keep proper documentation for all balances and adjustments
- ✔️ Consult a professional for Division II/III preparation
📞 How Verotus Can Help
At Verotus Finlegal Solutions LLP,
we assist companies in:
- Preparing compliant financial statements in Schedule III format
- End-to-end bookkeeping, tax, and ROC filing
- Audit-ready documentation and advisory support
We specialize in small to mid-size enterprises and help you avoid penalties due to non-compliance.
✅ Final Words
Preparing financial statements as per Schedule III might seem complex, but with the right structure, tools, and expert help, it becomes systematic and reliable. Whether you follow AS or Ind AS, aligning your statements with Schedule III is crucial for legal and financial hygiene.
Let Verotus be your partner in financial excellence.
