Will section 2(57) of companies act,2013 i.e. calculation of net worth includes cr. balance in profit and loss account ? also explain whether it includes balance in capital subsidy ?

The Companies Act,2013 Section 2 (57) says  “net worth” means the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation.

Therefore reserves includes profit and loss a/c (cr) balance  and Yes, Capital Reserve formed out of Govt. Subsity includes in Reserves (Condition:Reserves does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation.)

In section 2 (57), specifically mentionined that only those Reserves Created Out of Profits will considered.So,

1. In my opinion,Capital subsidy received from Govt. which is in capital nature is outside the preview of this Section,But i need a documentery proof for this.

2. Secondly,it is mentioned that only "Reserves created out of Profits"...... Its not Reseve and Surplus ( both are Different actually ).

Please Clearify .

There is difference betwen 'reserves' and 'surplus'.  Balance in P&L Statement denotes surplus whereas amount transferred for  general or specific purposes is reserves.  In the heading in Balance Sheet also the term "Reserves & Surplus" is used to indicate that they are different.  Hence balance in  P&L statement is  not included in present definition of "net worth".  However, this does not match with the normal meaningof the term hitherto folowed by professionals.  Realising the mistake, Govt proposes to amend the defintion as per Companies (Amendment) Bill 2016 to include balance of P&L A/c in the definition  of net worth.

Capital subsidy is also  not created out of P&L statement and hence not included in the defintion of net worth.