Enforcement Officer / Accounts Officer (EO/AO) 2017 recruitment test. Transcribed from the Commission's own booklet (series A, GRS-A-TNS); answer as per the official UPSC final answer key. This question is in Part B. Answer last reviewed 24 August 2026.

Under which Schedule of the Companies Act, 2013, the formats of financial statements are prescribed?

(a)Schedule I
(b)Schedule II
(c)Schedule III
(d)Schedule IV

Answer

Why

Correct — C, (c) Schedule III. The authority is section 129(1) of the Companies Act, 2013, which requires that the financial statements give a true and fair view of the state of affairs of the company, comply with the accounting standards notified under section 133, and 'be in the form or forms as may be provided for different class or classes of companies in Schedule III'. So the Schedule does not merely suggest a presentation; the section makes conformity with it a statutory requirement, and the words 'different class or classes of companies' are the reason the Schedule is divided the way it is.

Schedule III is in three Divisions, and naming the right one is the second half of the answer. Division I carries the format for companies whose financial statements are drawn up under the Companies (Accounting Standards) Rules — the older Indian standards. Division II carries the format for companies that apply the Indian Accounting Standards, the Ind AS converged with IFRS, other than non-banking financial companies. Division III was added by a Ministry of Corporate Affairs notification of 11 October 2018 for non-banking financial companies applying Ind AS, and it reflects the different shape of a financial business — assets and liabilities classified as financial and non-financial, and a balance sheet that may be presented in order of liquidity. Each Division sets out general instructions, the minimum line items to appear on the face of the balance sheet and the statement of profit and loss, and the notes that must accompany them.

What changed from the 1956 Act is worth holding, because it is the standard follow-up question. Under the old Act the formats lived in Schedule VI, whose Part I prescribed the balance sheet and Part II the information to be given in the profit and loss account. The Revised Schedule VI, notified in 2011 and applicable from the financial year 2011-12, was the real break: it dropped the horizontal presentation in favour of a single vertical format, introduced the classification of assets and liabilities into current and non-current, removed the old line for miscellaneous expenditure not written off, and — most importantly — made the Schedule subordinate to the accounting standards, so that where the two conflict the standard prevails. Schedule III of the 2013 Act carried that revised format forward, and has itself been amended since, with a substantial set of new disclosures applying from 1 April 2021 covering matters such as rounding off, promoter shareholding, ageing schedules for trade receivables and payables, and a list of specified financial ratios.

Why the others are wrong

(a)Schedule I — Schedule I contains the model forms of the constitutional documents of a company — Tables A to J. Section 4(6) requires the memorandum of association to be in the respective forms specified in Tables A, B, C, D and E of Schedule I according to the kind of company, and section 5(6) does the same for the articles of association through Tables F to J, of which Table F, for a company limited by shares, is the one most often adopted. It governs how a company is constituted, not how it reports.
(b)Schedule II — Schedule II prescribes the useful lives of assets for the purpose of computing depreciation, and it is a genuine change of approach from the 1956 Act, whose Schedule XIV prescribed rates of depreciation instead. Under the 2013 Act a company works from the useful life of the asset, and may adopt a different useful life or residual value only with disclosure and justification. This is the Schedule a candidate is likeliest to confuse with the right one, because both bear on the preparation of the accounts — but one fixes the measurement of a single item and the other fixes the form of the statements as a whole.
(d)Schedule IV — Schedule IV is the Code for Independent Directors, given effect by section 149 — it sets out the guidelines of professional conduct, the role and functions and the duties of an independent director, the manner of his appointment and re-appointment, the grounds of resignation or removal, and the requirement that the independent directors meet separately at least once a year and review the performance of the chairperson and the board. It belongs to the governance provisions of the Act rather than to its accounts provisions.

Concept

The Companies Act, 2013 places the accounts of a company under three linked provisions. Section 128 requires every company to keep proper books of account at its registered office on the accrual basis and under the double-entry system, and to preserve them for eight financial years. Section 129 requires the financial statements to give a true and fair view, to comply with the accounting standards notified under section 133, and to be in the form provided in Schedule III, and it requires the board to lay them before the annual general meeting together with a consolidated statement where the company has subsidiaries, associates or joint ventures. Section 133 empowers the Central Government to prescribe the accounting standards recommended by the Institute of Chartered Accountants of India in consultation with the National Financial Reporting Authority. A financial statement under section 2(40) comprises a balance sheet, a statement of profit and loss, a cash flow statement, a statement of changes in equity where applicable, and any explanatory note — with small companies, one-person companies and dormant companies excused the cash flow statement. Schedule III is the form in which all of that is presented, and its Divisions match the accounting framework the company is on.

Company law and accounting standards questions on EPFO papers are usually citation questions: name the section, name the Schedule, name the standard. They are unguessable and they are cheap to prepare, because the list of Schedules to the Companies Act, 2013 is short and each Schedule does one recognisable thing. The Enforcement Officer and Accounts Officer role makes this more than a memory exercise — an officer who examines an establishment's accounts needs to know which statutory form those accounts were required to take before he can say whether a disclosure is missing. The efficient revision here is a single sheet listing each Schedule and the section that gives it effect.

Key facts

Section 129(1) of the Companies Act, 2013 requires financial statements to be in the form provided for different classes of companies in Schedule III.
Division I of Schedule III applies to companies following the Companies (Accounting Standards) Rules; Division II to companies following Ind AS other than NBFCs; Division III to NBFCs following Ind AS.
Division III was inserted by a Ministry of Corporate Affairs notification dated 11 October 2018.
Under the Companies Act, 1956 the formats were in Schedule VI; the Revised Schedule VI, applicable from the financial year 2011-12, introduced the vertical format and the current/non-current classification and made the Schedule subordinate to the accounting standards.
Schedule I contains Tables A to J, the model forms of memorandum (section 4(6)) and articles (section 5(6)).
Schedule II prescribes useful lives for computing depreciation, replacing the depreciation rates of Schedule XIV to the 1956 Act.
Schedule IV is the Code for Independent Directors, given effect by section 149.
Schedule V governs the appointment and remuneration of managerial personnel and Schedule VII lists the activities that may be included in a company's corporate social responsibility policy.
Section 2(40) defines financial statement to include the balance sheet, the statement of profit and loss, the cash flow statement, the statement of changes in equity where applicable, and explanatory notes.

The Schedules to the Companies Act, 2013, each doing one recognisable thing

Schedule I→Tables A to J, the model forms of the constitutional documents. Section 4(6) requires the memorandum of association to be in the form specified in Tables A to E according to the kind of company, and section 5(6) does the same for the articles through Tables F to J, of which Table F, for a company limited by shares, is most often adopted.

Schedule II→The useful lives of assets for computing depreciation — a change of approach from the 1956 Act, whose Schedule XIV prescribed rates instead. This is the Schedule likeliest to be confused with the right one, since both bear on the accounts; but one fixes the measurement of a single item and the other the form of the statements as a whole.

Schedule III — the answer→Section 129(1) requires the financial statements to give a true and fair view, to comply with the accounting standards notified under section 133, and to be in the form provided for different class or classes of companies in Schedule III. The section makes conformity a statutory requirement rather than a suggestion.

Its three Divisions→Division I for companies following the Companies (Accounting Standards) Rules; Division II for companies applying Ind AS other than non-banking financial companies; and Division III, inserted by a Ministry of Corporate Affairs notification of 11 October 2018, for NBFCs applying Ind AS, whose balance sheet may be presented in order of liquidity.

Schedule IV→The Code for Independent Directors, given effect by section 149 — professional conduct, role and functions, duties, appointment and re-appointment, resignation or removal, and the requirement that the independent directors meet separately at least once a year. Governance, not accounts.

What changed from the 1956 Act→The formats used to live in Schedule VI. The Revised Schedule VI, applicable from the financial year 2011-12, was the real break: a single vertical format, assets and liabilities classified as current and non-current, the old line for miscellaneous expenditure removed, and the Schedule made subordinate to the accounting standards where the two conflict. Schedule III carried that forward.

Study next

Section 129 in full, including consolidated financial statements and the position of subsidiaries, associates and joint venturesInd AS — the roadmap of applicability by net worth and by class of company, and how they differ from the earlier Accounting StandardsSchedule II and the useful-life approach to depreciation, including the component approachSection 133 and the role of the National Financial Reporting AuthoritySections 134 and 135 — the board's report, the directors' responsibility statement and corporate social responsibility

Common traps

Answering Schedule VI, which is correct for the Companies Act, 1956 and wrong for the 2013 Act.
Confusing Schedule II, which fixes the measurement of depreciation, with Schedule III, which fixes the form of the statements.
Naming Schedule III without naming the Division; the Division is what a follow-up question will ask for.
Assuming Schedule III overrides the accounting standards. Since the revision of 2011 the standards prevail where the two conflict.
Treating the Schedule as unchanging; it has been amended repeatedly, with a substantial set of new disclosures applying from 1 April 2021.

Statutory-citation items are a fixture of EPFO papers across company law, labour law and social security alike, and they take three shapes: which Schedule or section governs a stated subject, what a named Schedule or section contains, and which authority a matter is referred to. All three reward the same preparation — a one-line index of the Schedules and the principal sections of each Act on the syllabus. In accounting the neighbouring favourites are the accounting standard governing a stated transaction, the definition of a financial statement, and the classes of company exempted from a particular requirement.

Related PYQs

EPFO_EOAO_2017_Q60Open & attempt →

In the context of accounting, the term IFRS stands for

(a) International Financial Reporting Standards
(b) Indian Financial Reporting Standards
(c) Indian Financial Reporting System
(d) International Financial Reporting System

Answer(a) International Financial Reporting Standards

The item earlier in this block on what IFRS stands for; the Ind AS that Division II of this Schedule serves are the Indian standards converged with those very reporting standards.

Practice

practice — not a real PYQ
Under the Companies Act, 2013, the useful lives of assets for computing depreciation are prescribed in
- (a)Schedule II
- (b)Schedule III
- (c)Schedule IV
- (d)Schedule XIV
Answer(a) Schedule II
practice — not a real PYQ
A company, other than a non-banking financial company, which prepares its financial statements under the Indian Accounting Standards must follow which Division of Schedule III to the Companies Act, 2013?
- (a)Division I
- (b)Division II
- (c)Division III
- (d)Division IV
Answer(b) Division II

Why