Schedule III of the Companies Act, 2013
If you’re running a company or advising one, understanding Schedule III of the Companies Act, 2013 is crucial for ensuring accurate and compliant financial reporting. In this guide, we break down the structure, purpose, divisions, and importance of Schedule III in a simple and practical manner.
What is Schedule III?
Schedule III is a standardized format for preparing the financial statements of companies registered under the Companies Act, 2013. It sets out how companies should present their Balance Sheet, Profit & Loss Account, Cash Flow Statement, and Notes to Accounts.
Whether you’re a startup, private limited company, or listed entity, Schedule III ensures your financials are comparable, transparent, and reliable for all stakeholders—investors, regulators, and lenders.
Objective of Schedule III
The primary goals of Schedule III include:
- Providing a uniform presentation of financial statements across all companies
- Ensuring compliance with Indian Accounting Standards (AS or Ind AS)
- Enhancing disclosures to bring clarity and avoid misrepresentation
- Supporting audit, tax, and regulatory compliance in a structured manner
Divisions of Schedule III
Schedule III is divided into three major divisions, based on the accounting standards followed by the company:
Division I – For Companies Following Accounting Standards (AS)
- Applicable to: Companies following Indian GAAP (AS) as per Companies (Accounting Standards) Rules, 2006
- Typically includes private limited companies and small-sized firms
- Format: Traditional format of Balance Sheet & P&L, with disclosures aligned to AS
Division II – For Companies Following Indian Accounting Standards (Ind AS)
- Applicable to: Companies required to comply with Ind AS as per Companies (Ind AS) Rules, 2015
- Generally includes listed companies, large unlisted companies, and subsidiaries of foreign companies
- Format: Aligns with Ind AS structure, focusing on fair valuation, detailed disclosures, and revised terminology (e.g., “Equity” instead of “Shareholders’ Funds”)
Division III – For NBFCs Complying with Ind AS
- Applicable to: Non-Banking Financial Companies (NBFCs) that follow Ind AS
- Format: Customized to reflect the specific nature of NBFC business
- Includes specific headings like financial assets, financial liabilities, ECL (Expected Credit Loss), etc.
Key Features of Schedule III
- Mandatory classification of assets and liabilities into current and non-current
- Clear reporting of contingent liabilities and commitments
- Disclosure of related party transactions
- Mandatory comparative figures for the previous year
- Focus on transparency and investor protection
Important Disclosures Under Schedule III
Companies must make several key disclosures, such as:
- Shareholding pattern and changes in equity
- Loans and advances to directors or related parties
- Details of pending litigations
- CSR (Corporate Social Responsibility) activities
- Ageing of trade receivables and payables
- Title deeds of immovable properties
Schedule III vs Schedule VI – What’s the Difference?
| Basis | Schedule VI (Old) | Schedule III (New) |
|---|---|---|
| Act Applicable | Companies Act, 1956 | Companies Act, 2013 |
| Divisions | None | 3 Divisions |
| Classification | Optional | Mandatory (Current/Non-current) |
| Ind AS Alignment | Not applicable | Fully aligned |
| Disclosure Requirements | Basic | Detailed & comprehensive |
Applicability of Schedule III
| Type of Company | Applicable Division |
|---|---|
| Private Limited Company (AS) | Division I |
| Listed Company (Ind AS) | Division II |
| NBFC (Ind AS) | Division III |
| Small Company (AS) | Division I |
Why Schedule III Matters
Ignoring Schedule III formatting can lead to:
- Non-compliance notices from ROC or MCA
- Issues during tax assessments or audits
- Difficulties in getting loans or investments
- Penalties under Companies Act, 2013
Properly aligned financials build trust and credibility with:
- Investors & shareholders
- Banks & financial institutions
- Tax & audit authorities
Schedule III of the Companies Act, 2013 brings much-needed clarity and uniformity to financial reporting in India. Whether you’re a growing business or a seasoned corporate, complying with Schedule III ensures your books are not just legally compliant but also professionally presentable.
It’s not just about following a format—it’s about enhancing trust in your financial reporting.
FAQs on Schedule III
Q.1. Is Schedule III applicable to LLPs?
A. No, Schedule III applies only to companies registered under the Companies Act.
Q.2. Is the Cash Flow Statement mandatory under Schedule III?
A. Yes, for companies other than small and dormant ones.
Q.3. Can a company choose any division of Schedule III?
A. No. The applicable division depends on whether the company follows AS or Ind AS, and whether it’s an NBFC.
Need Help with Schedule III Compliant Financial Statements?
If you’re looking for professional support in preparing Schedule III compliant financials, get in touch with our expert team of Chartered Accountants. We simplify compliance so you can focus on growth.