Schedule III Balance Sheet Format: Divisions I, II & III

Schedule III is the statutory format prescribed under the Companies Act, 2013 for preparing a company's balance sheet and statement of profit and loss. The Ministry of Corporate Affairs (MCA) governs this schedule. Schedule III applies to every company registered under the Companies Act, 2013, except companies permitted to use a different format under a special act.

Schedule III replaced the earlier Schedule VI format used under the Companies Act, 1956.

What Is the Format of a Schedule III Balance Sheet?

A Schedule III balance sheet follows a vertical format with 2 main headings: Equity and Liabilities, and Assets. Each heading is broken into sub-headings, and each sub-heading is broken into line items.

Equity and Liabilities includes 4 sub-headings:

• Shareholders' Funds
• Share Application Money Pending Allotment
• Non-Current Liabilities
• Current Liabilities

Assets include 2 sub-headings:

• Non-Current Assets
• Current Assets

Notes to Accounts shall contain information in addition to that presented in the Financial Statements and shall provide further details and disclosures wherever required. Each relevant line item must carry a note number that links to the notes to accounts section.

What Are the Divisions Under Schedule III?

Schedule III has 3 divisions. Each division applies to a different category of company.

• Division I applies to companies preparing financial statements under the accounting standards (AS) framework, not Ind AS.
• Division II applies to companies preparing financial statements under Indian Accounting Standards (Ind AS), excluding banking and insurance companies.
• Division III applies to non-banking financial companies (NBFCs) preparing financial statements under Ind AS.

Each division prescribes a distinct balance sheet format and distinct disclosure requirements matched to its accounting framework.

What Is the Difference Between Division I and Division II?

Division I and Division II differ in accounting framework, applicable companies, and disclosure depth.

Division II of Schedule III applies to companies required to comply with Ind AS, including listed companies and unlisted companies meeting the applicable net-worth threshold of ₹250 crore or more 

Is Schedule III Format Mandatory for All Companies?

Schedule III format is mandatory for all companies registered under the Companies Act, 2013. Banking companies, insurance companies, and companies governed by a separate act follow the format prescribed under that specific act instead.

A company cannot depart from the prescribed format unless a specific exemption applies to its sector.

Schedule III applies to all companies registered under the Companies Act, 2013, with a few exceptions. The following categories are exempt or follow a different framework:

• Insurance companies: Governed by the Insurance Act, 1938, and use formats prescribed by the Insurance Regulatory and Development Authority of India (IRDAI).
• Banking companies: Follow the Banking Regulation Act, 1949, and the formats prescribed by the Reserve Bank of India (RBI).
• Electricity companies: These are subject to the Electricity Act, 2003.
• Statutory companies: Any other category of company that is required to follow a prescribed financial statement format under the law specifically applicable to that entity. 

For all other companies, including private limited companies, public limited companies, one-person companies and producer companies, Schedule III applies.

What Are the General Instructions for Preparing a Schedule III Balance Sheet?

Schedule III prescribes 6 general instructions for preparation.

1. Present the balance sheet in vertical form only; horizontal form is not permitted.
2. Classify every asset and liability as current or non-current.
3. Round off figures based on total income: companies with turnover below ₹100 crore round to the nearest hundred, thousand, lakh, or crore, and companies with turnover of ₹100 crore or more round to the nearest lakh, crore, or million.
4. Disclose comparative figures for the previous financial year alongside current-year figures.
5. Disclose shareholding pattern for each class of shares, including the number of shares and percentage held by each shareholder holding 5% or more.
6. Disclose notes to accounts for every line item carrying a note reference.

What is the requirement of notes to accounts and disclosure

Notes to accounts are not supplementary; they are a mandatory part of the financial statements under Schedule III. Each note must:

• Correspond to a specific line item in the balance sheet or profit and loss statement.
• Provide a breakdown of the figures, such as the split between secured and unsecured borrowings or between freehold and leasehold assets.
• Include the accounting policies applied to that item.

Schedule III also mandates specific disclosures in the notes, including details of shares held by each shareholder holding more than 5% of the share capital, the movement in provisions, and the ageing analysis of trade receivables and payables (a requirement added through the 2021 amendments).

Failure to include required notes is treated as a non-compliance and may attract observations in the auditor’s report.

Conclusion

Schedule III gives financial statements in India a common language. Whether you are a first-time investor reviewing a balance sheet or a lender assessing credit risk, the standardised format means you know exactly where to look and what each section contains. 

For companies, particularly those preparing accounts manually or across multiple entities, keeping track of all Schedule III requirements adds to the compliance burden. TallyPrime is advanced accounting software that helps develop balance sheets and profit and loss statements, generating them directly to match the prescribed format, with the required note references and comparative figures populated automatically.