CA Final audit paper!! caro and schedule vi!!!

Questions are somewhat easy..if questions are easy we have to give the best appropriate answer.. so  there is no point whether paper is easy or tough.. but we can expect good marks..!!!!

 

Yes Easy Paper

caro is not applicable to private companies during the year whose
paid up capital +reserve not more than Rs. 50 lakh and
loan not exceeding 25 lakh and
and total turnover not more than Rs.5 crore

and note that if  private company crossed any 1 limit mentioned as above , then caro is applicable to it since the word "and" means in totality...

Proposed dividend tratment: As per revised schedule-vi, proposed dividend is not required to disclose in revised schedule-vi. For this purpose ICAI is also revising AS-4.

 

As per revised schedule VI proposed dividend should be disclosed in notes and not to be adjusted in accounts... Also AS-4 does not mandate provisioning of proposed dividend as it is nowhere written in the statement that proposed dividend should be treated as liability ..it only needs it to be adjusted... Internationally proposed dividend is a part of reserve and is disclosed in reserves and surplus separately as it doesn't qualify the definition of liability(as it doesn't arise due to any past event and its just an appropriation of profit)... However ICAI has issued a guidance note which requires proposed dividend to be treated as liability. Since the guidance notes are not mandatory in nature we can either classify it under reserves or liability until IND-AS not becomes applicable...

actuly this tough for manage it .

guys

In RTP for solving the problem on revised schedule VI provision for proposed dividend is made.. ..so provision is required

as schedule vi (R) proposed dividend is not Curent Liabilities.

 

Provision for Proposed Dividend is required as per Guidance Note, AS-4 and latest balance sheets of Tata and Reliance. Provision to be shown in Short term provisions.

 

And yes, foreign holding company does not affect private company status. CARO not applicable to Pvt. Company!

 

Definition of Relative for Ethics changed to AS - 18 as per recent amendment, also mentioned in RTP.

Spouse's sister's husband is NOT a relative. Whether as per the old definition of relative or even under new one according to AS-18.

Caro is applicable by virtue of section  3(1)(iv) and 4(7)of companies ACt 1956 because the private  company is deemed to be a subsidiary of a public company .

@ ds82_2000 : any accounting treatment made in financial statements of tata and reliance cannot be taken as statutory requirement for our accounting... There are some listed aviation cos which doesn't follow AS-19 properly that doesn't mean that we will also not follow as-19... The only source which requires us to make provision for proposed dividend is the guidance note issued by the ICAI...

@ rahul: Very true! I just meant that added statement as an external source confirmation.

Not really relevant from exam point of view, but just provides a little bit of extra assurance.

So yes, from exam point of view... The core reason is Guidance Note Only!!

 

1. It shall apply to every company including a foreign company as defined in section 591 of the Act, except the following :—

1. a Banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

2. an insurance company as defined in clause (21) of section 2 of the Act;

3. a company licensed to operate under section 25 of the Act; and

4. a private limited company with a paid-up capital and reserves not more than fifty lakh rupees and does not have loan outstanding exceeding Rupees Twenty Fivelakhs from any bank or financial institution and does not have a turnover exceeding five crores rupees at any point of time during the financial year.

As AS overide Sch 6 proposed dividend is to be shown under Short term provisions under Current liabilities