Schedule vi
This query is : Resolved
Radhe Agrawal
(Querist)
12 March 2010
Why show "Estimated amount of contracts remaining to be excuted on capital account & not Provided for" in the head of Contingent Liability in Schedule vi of company Act 1956.
CA Shishir
(Expert)
12 March 2010
because the Act says so. We cannot detain from the format. If we are not following, a note in the notes to account or qualification by the auditor will do. Ultimately, its matter of compliance
Madhusudan Bohra
(Expert)
14 March 2010
????????
23 July 2025
The reason **"Estimated amount of contracts remaining to be executed on capital account & not provided for"** is shown under **Contingent Liabilities** in **Schedule VI (Companies Act, 1956)** is purely because the law mandates it.
### Explanation:
* **Legal Requirement:** Schedule VI prescribes a specific format for financial statements, including what must be disclosed under Contingent Liabilities.
* This item represents **commitments** that the company has made for capital expenditures, but which have not yet been recognized as liabilities because the services or goods have not been received.
* Since the company **is committed to spend but the liability has not crystallized**, it is considered a **contingent liability**.
* **Disclosure ensures transparency** so that users of financial statements know about the company's future obligations related to capital projects.
### If you don’t disclose:
* It is **non-compliance** with Schedule VI.
* The **auditor may qualify** the audit report.
* You may be asked to **add a note in the financial statements** explaining the omission.
### In short:
It is a **mandatory disclosure** under Schedule VI to inform stakeholders about pending capital commitments that could affect the company’s future cash flows.
If you want, I can help you with **how to present this in the notes to accounts** or give sample wording!
### Explanation:
* **Legal Requirement:** Schedule VI prescribes a specific format for financial statements, including what must be disclosed under Contingent Liabilities.
* This item represents **commitments** that the company has made for capital expenditures, but which have not yet been recognized as liabilities because the services or goods have not been received.
* Since the company **is committed to spend but the liability has not crystallized**, it is considered a **contingent liability**.
* **Disclosure ensures transparency** so that users of financial statements know about the company's future obligations related to capital projects.
### If you don’t disclose:
* It is **non-compliance** with Schedule VI.
* The **auditor may qualify** the audit report.
* You may be asked to **add a note in the financial statements** explaining the omission.
### In short:
It is a **mandatory disclosure** under Schedule VI to inform stakeholders about pending capital commitments that could affect the company’s future cash flows.
If you want, I can help you with **how to present this in the notes to accounts** or give sample wording!
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