Chapter 9: Accounts of Companies and CSR - Test 2: answer key

Question 1 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Scenario. Prism Castings Ltd., a listed manufacturer of industrial components, closed its financial year on 31 March 2026. At a Board meeting on 20 June 2026, the CFO circulated draft standalone financial statements showing revenue of ₹460 crore, total assets of ₹310 crore and profit after tax of ₹28 crore. The company is required to prepare its financial statements under the Companies (Indian Accounting Standards) Rules, 2015. However, the accounts team used the presentation format prescribed in Division I of Schedule III, which is intended for companies following the Companies (Accounting Standards) Rules, 2021. During audit, it was found that inventory had been carried at an amount ₹1.80 crore above the amount resulting from the applicable accounting treatment. Management proposes to retain the figure because it expects market prices to recover next quarter. The CFO suggests adding a note stating that the company has adopted a different accounting treatment, explaining the commercial reason and quantifying the estimated financial effect. He argues that this disclosure would make the statements compliant even if the treatment is not changed. The Board also proposes to circulate only a detailed investor presentation at the forthcoming AGM, on the ground that it contains more information than the statutory statements. One director says that the true-and-fair-view requirement allows companies to use any layout approved by the Board. The audit committee has asked the Company Secretary to advise whether the draft complies with Section 129, which Schedule III division applies, what disclosure is required where an Accounting Standard is not followed, and what must be placed before the AGM.

Considering the applicable provisions of the Companies Act, 2013, which statement correctly describes the statutory requirements applicable to Prism Castings Ltd.'s standalone financial statements for FY 2025-26?

1. The financial statements must give a fair view, but their format may be freely decided by the Board.
2. The financial statements must give a true and fair view, comply with applicable Accounting Standards and follow Schedule III. (correct answer)
3. The financial statements need only comply with Accounting Standards if the statutory auditor specifically demands compliance.
4. The financial statements may follow any recognised international format if shareholders approve it at the AGM.

Answer: B — The financial statements must give a true and fair view, comply with applicable Accounting Standards and follow Schedule III.

Explanation. Section 129(1) requires financial statements to give a true and fair view of the company's state of affairs, comply with the accounting standards notified under Section 133 and follow the applicable form prescribed in Schedule III. These requirements operate together. Board approval or shareholder approval cannot independently authorise departure from the prescribed statutory format. The investor presentation may supplement, but cannot replace, the financial statements required by the Act.

Where it goes wrong. Assuming that the true-and-fair-view requirement gives the Board unrestricted discretion to select the financial statement format.

Authority. Section 129(1), Companies Act, 2013; Schedule III, Companies Act, 2013

Question 2 · 2 marks · Chapter 9: Accounts of Companies and CSR · medium

Management refuses to correct the inventory valuation but proposes to disclose the deviation, its commercial justification and the estimated financial effect in an explanatory note. Which statement correctly describes the disclosure obligation under Section 129(5)?

1. Disclosure of the commercial justification alone is sufficient if the auditor accepts it.
2. Only the deviation and the financial effect need to be disclosed; reasons are optional.
3. The company must disclose the deviation, reasons and financial effects, if any, arising from it. (correct answer)
4. The company may omit disclosure where the deviation relates to inventory rather than revenue.

Answer: C — The company must disclose the deviation, reasons and financial effects, if any, arising from it.

Explanation. Section 129(5) requires disclosure in the financial statements where the company does not comply with the applicable Accounting Standards. The disclosure must identify the deviation, explain its reasons and state the financial effects, if any, arising from it. A commercial justification alone is insufficient. Importantly, this disclosure obligation does not mean that merely describing a departure automatically makes the financial statements compliant with Section 129(1).

Where it goes wrong. Treating the disclosure requirement as permission to disregard the applicable Accounting Standards.

Authority. Section 129(5), Companies Act, 2013

Question 3 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Prism Castings Ltd. follows the Companies (Indian Accounting Standards) Rules, 2015. Which division of Schedule III should the company apply while preparing its financial statements?

1. Division II, because it applies to financial statements prepared under the Indian Accounting Standards Rules. (correct answer)
2. Division I, because every company incorporated under the Companies Act must use the same division.
3. Division III, because listed companies automatically follow a separate Schedule III division.
4. Division I or Division II, depending on which presentation produces the higher reported profit.

Answer: A — Division II, because it applies to financial statements prepared under the Indian Accounting Standards Rules.

Explanation. Schedule III contains different divisions for different accounting frameworks. Division I applies to companies following the Companies (Accounting Standards) Rules, 2021, whereas Division II applies to companies following the Companies (Indian Accounting Standards) Rules, 2015. Prism follows the latter framework and must therefore use Division II. A listed company's preference for a particular presentation or profit figure does not determine the applicable division.

Where it goes wrong. Confusing Division I and Division II or assuming that listing status alone determines the applicable Schedule III division.

Authority. Section 129(1), Companies Act, 2013; Schedule III, Division II, Companies Act, 2013; Companies (Indian Accounting Standards) Rules, 2015

Question 4 · 2 marks · Chapter 9: Accounts of Companies and CSR · medium

The Board proposes to replace Prism's statutory financial statements with an investor presentation at its forthcoming AGM. The presentation contains more financial details than the statutory statements. Which course of action is legally appropriate?

1. The Board may replace the statements because the presentation provides additional disclosures.
2. The Board may replace them if the shareholders approve the investor presentation by an ordinary resolution.
3. The Board may omit the statements if the company's statutory auditor has independently reviewed the presentation.
4. The Board must lay the financial statements for the relevant financial year before the AGM. (correct answer)

Answer: D — The Board must lay the financial statements for the relevant financial year before the AGM.

Explanation. Section 129(2) requires the Board of Directors to lay the financial statements for the relevant financial year before the company at every AGM. An investor presentation may provide supplementary explanations, but cannot substitute the statutory financial statements. Neither an ordinary shareholder resolution nor an auditor's review of the presentation removes the obligation imposed under Section 129(2).

Where it goes wrong. Confusing supplementary financial information with the statutory financial statements that must be laid before the AGM.

Authority. Section 129(2), Companies Act, 2013

Question 5 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Scenario. Meridian Holdings Ltd., an Indian listed company, has the following interests at 31 March 2026: all of Delta Components Ltd.; 80% of Terra Logistics Pvt. Ltd.; 35% of Nova Chemicals Ltd.; and joint control with another investor over Axis Warehousing Ltd. The Board is preparing the financial statements for FY 2025-26. The finance team proposes to consolidate Delta and Terra but exclude Nova because Meridian cannot control its board, and Axis because operational decisions require unanimous consent. Terra itself is considering whether it can avoid preparing separate consolidated financial statements. It is an unlisted company and is not in the process of listing. Meridian, its intermediate holding company, has filed consolidated financial statements with the Registrar in compliance with the applicable Accounting Standards. Terra has informed all its other members in writing, including a member who does not have voting rights, that it proposes not to present CFS. Proof of delivery is retained and no member has objected. The group accountant believes Form AOC-1 can be filed instead of the holding company's consolidated financial statements because it presents the salient financial information of the investees. The statutory auditor disagrees and points out that AOC-1 and the consolidated financial statements serve different purposes. The Board seeks advice on the entities to be included in Meridian's CFS, the document to be filed for salient features of subsidiaries, associates and joint ventures, and whether Terra satisfies the statutory exemption conditions. The Board also wants confirmation that the consolidated statements must be presented to members with the holding company's own financial statements.

The finance team proposes excluding Nova Chemicals Ltd. and Axis Warehousing Ltd. from Meridian's consolidated financial statements because Meridian does not exercise majority control over either entity. Which statement correctly applies Section 129(3) to the group's financial reporting?

1. Only wholly owned subsidiaries must be consolidated; associates and joint ventures are always excluded.
2. Only subsidiaries with majority voting rights must be consolidated, irrespective of other investments.
3. The company must prepare CFS covering its subsidiaries, associates and joint ventures in accordance with applicable requirements. (correct answer)
4. Associates and joint ventures may be included only when they have the same financial year as the holding company.

Answer: C — The company must prepare CFS covering its subsidiaries, associates and joint ventures in accordance with applicable requirements.

Explanation. Section 129(3) requires a company having one or more subsidiaries or associate companies to prepare consolidated financial statements in addition to its own financial statements. The consolidated statements cover the subsidiaries, associates and joint ventures in accordance with the applicable Accounting Standards and Schedule III. Majority ownership is not a universal prerequisite for including associates and joint ventures. Meridian cannot exclude these investments merely because it lacks unilateral control.

Where it goes wrong. Applying the majority-control concept for subsidiaries as though it were the sole test for including associates and joint ventures.

Authority. Section 129(3), Companies Act, 2013; Rule 6, Companies (Accounts) Rules, 2014

Question 6 · 2 marks · Chapter 9: Accounts of Companies and CSR · medium

The group accountant argues that filing Form AOC-1 will eliminate Meridian's obligation to prepare consolidated financial statements. Which statement correctly distinguishes the two statutory requirements?

1. Form AOC-1 replaces the CFS whenever the holding company has more than one subsidiary.
2. Form AOC-1 contains salient features of subsidiary, associate and JV financial statements and does not replace the CFS. (correct answer)
3. Form AOC-1 is filed only by the subsidiaries and is unrelated to the holding company's financial reporting.
4. Form AOC-1 is necessary only when the associate company has incurred losses during the year.

Answer: B — Form AOC-1 contains salient features of subsidiary, associate and JV financial statements and does not replace the CFS.

Explanation. The first proviso to Section 129(3), read with Rule 5, requires the statement containing salient features of the financial statements of subsidiaries, associates and joint ventures to be furnished in e-Form AOC-1. This statement provides prescribed summary information. It does not replace the consolidated financial statements themselves, which remain a separate obligation under Section 129(3).

Where it goes wrong. Confusing the prescribed summary of investee financial information with the actual consolidated financial statements.

Authority. First proviso to Section 129(3), Companies Act, 2013; Rule 5, Companies (Accounts) Rules, 2014

Question 7 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Terra Logistics Pvt. Ltd. is a partially owned subsidiary. All its other members, including a non-voting member, have received written intimation and have not objected. Terra is unlisted and its intermediate holding company files compliant CFS with the Registrar. Which conclusion is correct?

1. Terra must prepare CFS because the exemption is available exclusively to wholly owned subsidiaries.
2. Terra may claim exemption without written intimation because minority members have no controlling interest.
3. Terra may claim exemption only when its ultimate holding company is incorporated outside India.
4. Terra satisfies the prescribed conditions for exemption from preparing its own CFS. (correct answer)

Answer: D — Terra satisfies the prescribed conditions for exemption from preparing its own CFS.

Explanation. Rule 6 provides an exemption where the subsidiary is wholly owned or partially owned with all other members, including non-voting members, informed in writing and not objecting; its securities are not listed or being listed; and its ultimate or intermediate holding company files CFS compliant with applicable Accounting Standards. Terra satisfies all three cumulative conditions. Accordingly, it can claim the exemption for its own consolidated statements.

Where it goes wrong. Assuming that a partially owned subsidiary can never obtain the exemption or ignoring the requirement to intimate non-voting members.

Authority. Section 129(3), Companies Act, 2013; Rule 6, Companies (Accounts) Rules, 2014

Question 8 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Meridian proposes excluding Axis Warehousing Ltd. because important operational decisions require unanimous consent of both investors. Axis is nevertheless a joint venture in which Meridian participates. Which treatment is appropriate under the consolidation provisions?

1. Axis must be considered in the CFS as a joint venture in accordance with the applicable consolidation requirements. (correct answer)
2. Axis must be excluded because unanimous decision-making automatically prevents consolidation.
3. Axis must be treated as a subsidiary because joint control is identical to complete control.
4. Axis may be excluded whenever Meridian holds less than fifty per cent of its voting power.

Answer: A — Axis must be considered in the CFS as a joint venture in accordance with the applicable consolidation requirements.

Explanation. Section 129(3) requires consolidated financial statements to cover the relevant subsidiaries, associate companies and joint ventures. Rule 6 requires consolidation in accordance with Schedule III and the applicable Accounting Standards. A joint venture is not automatically excluded merely because the investor shares decision-making with another party. The appropriate accounting treatment must be applied rather than simply omitting the entity from group reporting.

Where it goes wrong. Assuming that the absence of unilateral control makes a joint venture irrelevant for consolidated financial reporting.

Authority. Section 129(3), Companies Act, 2013; Rule 6, Companies (Accounts) Rules, 2014

Question 9 · 2 marks · Chapter 9: Accounts of Companies and CSR · medium

Scenario. Horizon Lifesciences Ltd. discovered during an internal review in September 2026 that its financial statements for FY 2016-17 may have been prepared fraudulently. Certain inventory balances were allegedly inflated through fictitious purchase entries, while the affairs of the company during FY 2017-18 may have been mismanaged in a manner casting doubt on the reliability of its accounts. A shareholder holding 6.5% of the equity has written to the company and SEBI seeking corrective action. SEBI is considering making an application before the competent forum. The company argues that it can reopen the accounts by a Board resolution because the accounting records are still available. The statutory auditor says a court of competent jurisdiction or the Tribunal must first make an order on an application by an eligible applicant, and that the grounds must relate to fraudulent preparation or relevant mismanagement. The company has been directed by the Central Government under Section 128(5), in connection with an investigation under Chapter XIV, to preserve specified accounting records for twelve years rather than the ordinary eight-year period. The current financial year is FY 2026-27. The directors are unsure whether the normal reopening window reaches FY 2016-17, whether the longer preservation direction changes that result, and whether the Tribunal may act without notifying the relevant authorities and persons. The Board has also asked whether accounts revised or recast pursuant to a valid order can later be reopened by the company simply because a new management team disagrees with the resulting figures. The Company Secretary has been instructed to prepare a note on Section 130 before any application is filed.

A shareholder concerned with Horizon's affairs seeks reopening of its accounts. Which additional legal requirement must be satisfied before the company can actually reopen and recast the relevant financial statements under Section 130?

1. The Board must pass a special resolution authorising reopening, irrespective of the alleged grounds.
2. An application by an eligible applicant and an order of the competent Court or Tribunal on the specified grounds are necessary. (correct answer)
3. The statutory auditor must issue a qualification, after which the CFO can reopen the accounts.
4. An ordinary resolution of shareholders is sufficient whenever original accounting records are available.

Answer: B — An application by an eligible applicant and an order of the competent Court or Tribunal on the specified grounds are necessary.

Explanation. Section 130(1) prohibits reopening books or recasting financial statements unless an application is made by an eligible applicant, such as the Central Government, Income-tax authorities, SEBI, another statutory regulatory body or authority, or a person concerned, and an order is made by a competent Court or Tribunal. The specified grounds are fraudulent preparation of earlier accounts or relevant mismanagement casting doubt on their reliability. A Board resolution alone is insufficient.

Where it goes wrong. Treating an allegation of fraud or an internal Board decision as equivalent to a judicial or Tribunal order.

Authority. Section 130(1), Companies Act, 2013

Question 10 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Horizon is presently in FY 2026-27. Assuming no special Central Government direction extending the ordinary book-retention period, which financial years fall within the normal eight-financial-year period for an order reopening accounts?

1. FY 2017-18 to FY 2024-25, counted backwards from the date of the application.
2. FY 2016-17 to FY 2023-24, counted from the year in which suspected fraud occurred.
3. FY 2019-20 to FY 2026-27, including the current financial year itself.
4. FY 2018-19 to FY 2025-26, being the eight financial years immediately preceding the current financial year. (correct answer)

Answer: D — FY 2018-19 to FY 2025-26, being the eight financial years immediately preceding the current financial year.

Explanation. Section 130(3) restricts an order reopening books to eight financial years immediately preceding the current financial year. Since the current financial year is FY 2026-27, the ordinary period runs from FY 2018-19 through FY 2025-26. The calculation is not made by counting eight years backwards from the date of application or from the date on which the alleged fraud was discovered.

Where it goes wrong. Calculating the eight-year limitation from the date of application instead of from the current financial year.

Authority. Section 130(3), Companies Act, 2013

Question 11 · 2 marks · Chapter 9: Accounts of Companies and CSR · medium

The Central Government had directed Horizon under Section 128(5) to preserve specified books for twelve years. The disputed FY 2016-17 records are still within that extended preservation period. Can the ordinary eight-year reopening restriction prevent the Tribunal from considering reopening those accounts?

1. No, the extended-period exception permits reopening within the longer period specified by the Central Government. (correct answer)
2. Yes, Section 130 imposes an absolute eight-year limit in every situation without exception.
3. Yes, because the longer preservation direction affects retention but can never affect reopening.
4. No, because any preservation direction automatically authorises the Board to reopen earlier accounts.

Answer: A — No, the extended-period exception permits reopening within the longer period specified by the Central Government.

Explanation. Section 130(3) ordinarily restricts reopening to eight financial years immediately preceding the current financial year. However, where the Central Government has issued a direction under the proviso to Section 128(5) requiring books to be preserved for a period longer than eight years, reopening may be ordered within that longer period. The direction does not itself authorise reopening; an eligible application and Court or Tribunal order remain necessary.

Where it goes wrong. Remembering the eight-year limit but overlooking the express exception for extended preservation directed by the Central Government.

Authority. Proviso to Section 128(5), Companies Act, 2013; Section 130(3), Companies Act, 2013

Question 12 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Before passing an order for reopening Horizon's accounts, which procedural requirement must the competent Court or Tribunal follow under Section 130?

1. It must obtain unanimous written consent from all shareholders and directors before considering the allegations.
2. It must issue notice exclusively to the company's existing statutory auditor and obtain his approval.
3. It must give notice to the specified authorities and concerned persons and consider their representations, if any. (correct answer)
4. It may pass an immediate order without notice because the matter involves suspected financial fraud.

Answer: C — It must give notice to the specified authorities and concerned persons and consider their representations, if any.

Explanation. The proviso to Section 130(1) requires the Court or Tribunal to give notice to the Central Government, Income-tax authorities, SEBI, any other statutory regulatory body or authority concerned, and any other person concerned. It must also take into consideration the representations, if any, made by them before passing an order. The provision does not require unanimous shareholder consent or permit an automatic order without the prescribed notice.

Where it goes wrong. Confusing the notice-and-representation requirement with obtaining approval from every shareholder or the auditor.

Authority. Proviso to Section 130(1), Companies Act, 2013

Question 13 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Scenario. Rudra Infrastructure Ltd. is finalising its accounts for FY 2026-27. At a Board meeting on 3 August 2026, the directors concluded that the financial statements for FY 2024-25 contained an inventory valuation treatment inconsistent with Section 129 and the applicable Accounting Standards. They also found that the Board's Report for FY 2025-26 omitted disclosures required by Section 134. Both sets of documents had already been sent to members and filed with the Registrar. The Board proposes to revise the affected financial statements and the Board's Report. The company has not previously undertaken a revision under Section 131 during FY 2026-27. A new statutory auditor was appointed four days before the Board's decision after the previous auditor resigned. The majority of directors, however, have not changed. Some directors suggest that the revision can be made internally and filed directly with the Registrar, while others believe that the Tribunal's approval is a condition precedent. The legal team has prepared an application in Form NCLT-1 and plans to submit it on 13 August 2026. It also proposes to add a new management forecast and change a previously reasonable estimate solely because market conditions have improved. The Company Secretary has been asked to determine the permissible financial years, the application deadline, the limits on what can be corrected, and the procedural safeguards before the Tribunal considers the request. The Board also wants to know whether the change of auditor must be disclosed and whether the original auditor is entitled to be heard.

Rudra Infrastructure Ltd. wishes to revise its FY 2024-25 financial statements and FY 2025-26 Board's Report during FY 2026-27. The Board believes both documents contain statutory non-compliance. Which statement correctly describes its entitlement under Section 131?

1. It may seek Tribunal approval to revise either or both documents in respect of any of the three preceding financial years. (correct answer)
2. It may revise only the immediately preceding financial year's statements, irrespective of the nature of non-compliance.
3. It may revise any financial year since incorporation without approaching the Tribunal for approval.
4. It may revise only the Board's Report, because financial statements cannot be voluntarily revised under Section 131.

Answer: A — It may seek Tribunal approval to revise either or both documents in respect of any of the three preceding financial years.

Explanation. Section 131(1) permits the directors, where they believe the financial statements do not comply with Section 129 or the Board's Report does not comply with Section 134, to prepare revised financial statements or a revised Board's Report for any of the three preceding financial years. Tribunal approval must first be obtained on an application made by the company. FY 2024-25 and FY 2025-26 both fall within the permitted period when the current year is FY 2026-27.

Where it goes wrong. Confusing the three-year revision window with an immediately-preceding-year-only restriction.

Authority. Section 131(1), Companies Act, 2013

Question 14 · 2 marks · Chapter 9: Accounts of Companies and CSR · medium

The Board passed its decision to seek revision on 3 August 2026. The company intends to submit Form NCLT-1 on 13 August 2026. Is the application within the prescribed period under Section 131?

1. No, because the application must be submitted within seven days from the Board's decision.
2. No, because the application must be filed within ten days from the Board's decision.
3. No, because the application must be submitted within thirty days from the Board's decision.
4. Yes, because the company must apply in Form NCLT-1 within fourteen days of the Board's decision. (correct answer)

Answer: D — Yes, because the company must apply in Form NCLT-1 within fourteen days of the Board's decision.

Explanation. Section 131(1), read with Rule 77 of the National Company Law Tribunal Rules, 2016, provides that the company must make its application in Form NCLT-1 within fourteen days of the decision taken by the Board. The Board's decision was made on 3 August 2026 and the proposed application date is 13 August 2026. It is therefore within the prescribed fourteen-day period.

Where it goes wrong. Substituting the fourteen-day application period with another familiar Companies Act filing deadline.

Authority. Section 131(1), Companies Act, 2013; Rule 77, National Company Law Tribunal Rules, 2016

Question 15 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

The company also proposes to change a previously reasonable accounting estimate and introduce a revised management forecast merely because market conditions have improved. Which statement correctly defines the permissible scope of voluntary revision under Section 131(2)?

1. Any commercial improvement may be introduced if the revised figures increase the company's reported profitability.
2. Revision must be confined to correcting Section 129 or Section 134 non-compliance and necessary consequential alterations. (correct answer)
3. The company may revise all accounting estimates whenever the directors believe a different presentation is preferable.
4. The company may introduce any correction approved by the statutory auditor, even if it is unrelated to Sections 129 and 134.

Answer: B — Revision must be confined to correcting Section 129 or Section 134 non-compliance and necessary consequential alterations.

Explanation. Section 131(2) restricts revisions, where previous statements have already been circulated, filed or laid before the company in general meeting, to corrections relating to non-compliance with Section 129 in financial statements, non-compliance with Section 134 in the Board's Report and necessary consequential alterations. A change merely to reflect improved market conditions or to present a more favourable forecast does not fall within this statutory scope.

Where it goes wrong. Treating voluntary revision as a general opportunity to update financial information for commercial convenience.

Authority. Section 131(2), Companies Act, 2013

Question 16 · 2 marks · Chapter 9: Accounts of Companies and CSR · medium

The previous statutory auditor resigned and a new auditor was appointed four days before the Board decided to seek revision. Which procedural approach is required in connection with the Section 131 application and Tribunal hearing?

1. The auditor's replacement need not be disclosed and the original auditor has no right to be heard.
2. The company must obtain the former auditor's written consent before submitting Form NCLT-1.
3. The application must disclose the auditor change, and the Tribunal must notify and hear the original auditor. (correct answer)
4. Only the newly appointed auditor must be notified, and the application need not be advertised before hearing.

Answer: C — The application must disclose the auditor change, and the Tribunal must notify and hear the original auditor.

Explanation. Rule 77 requires disclosure in the application where the auditor has been changed immediately before the decision to apply under Section 131. The Tribunal must issue notice to the auditor of the original financial statements and hear him. The company must also advertise the application at least fourteen days before the hearing. The Central Government and Income-tax authorities must receive notice under the first proviso to Section 131(1).

Where it goes wrong. Assuming that appointing a new auditor removes the procedural rights of the auditor responsible for the original statements.

Authority. Section 131(1), Companies Act, 2013; Rule 77, National Company Law Tribunal Rules, 2016

Question 17 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Scenario. Raghav Retail Ltd. prepares a balance sheet, statement of profit and loss and cash flow statement for FY 2025-26. An annexed note contains significant accounting policies and an explanation of a contingent item. The CFO proposes treating the note as merely an internal attachment, arguing that it is not part of the statutory financial statements because it is not one of the primary statements. The auditor says the company's obligations cannot be assessed by looking only at the face of the balance sheet and profit and loss statement. Which position is correct under Section 129?

Raghav Retail Ltd. prepares a balance sheet, statement of profit and loss and cash flow statement for FY 2025-26. An annexed note contains significant accounting policies and an explanation of a contingent item. The CFO proposes treating the note as merely an internal attachment, arguing that it is not part of the statutory financial statements because it is not one of the primary statements. The auditor says the company's obligations cannot be assessed by looking only at the face of the balance sheet and profit and loss statement. Which position is correct under Section 129?

1. Only the balance sheet and profit and loss statement form the financial statements for statutory purposes.
2. Notes form part of the financial statements only when separately approved by the shareholders.
3. The notes are supplementary disclosures and need not comply with the applicable statutory requirements.
4. Notes annexed to or forming part of the financial statements are included within the statutory financial statements. (correct answer)

Answer: D — Notes annexed to or forming part of the financial statements are included within the statutory financial statements.

Explanation. For the purposes of Section 129, references to financial statements include notes annexed to or forming part of those statements, containing information required or permitted to be given in the form of such notes under the Act. Consequently, accounting policies and explanatory notes cannot be treated as irrelevant internal attachments. They form part of the statutory financial reporting package and must comply with the applicable requirements.

Where it goes wrong. Limiting the meaning of financial statements to the primary statements and excluding their annexed notes.

Authority. Section 129(1), Companies Act, 2013; Section 129(1), explanation relating to financial statements

Question 18 · 2 marks · Chapter 9: Accounts of Companies and CSR · medium

Scenario. Suryodaya Textiles Ltd. is a partially owned subsidiary of an Indian holding company. Its securities are not listed and are not proposed to be listed. The holding company files compliant CFS with the Registrar, and all other members except one non-voting member have received written intimation regarding non-preparation of CFS. The company has no proof that the non-voting member received the intimation. Can Suryodaya claim the exemption under Rule 6?

Suryodaya Textiles Ltd. is a partially owned subsidiary of an Indian holding company. Its securities are not listed and are not proposed to be listed. The holding company files compliant CFS with the Registrar, and all other members except one non-voting member have received written intimation regarding non-preparation of CFS. The company has no proof that the non-voting member received the intimation. Can Suryodaya claim the exemption under Rule 6?

1. Yes, because written intimation to members holding voting rights is sufficient for exemption.
2. No, because the conditions require intimation to all other members, including non-voting members, with proof of delivery. (correct answer)
3. Yes, because a non-voting member cannot object to the decision not to prepare CFS.
4. No, because the exemption is available only to a wholly owned subsidiary and not a partially owned subsidiary.

Answer: B — No, because the conditions require intimation to all other members, including non-voting members, with proof of delivery.

Explanation. Rule 6 requires that, for a partially owned subsidiary seeking the exemption, all other members, including those not otherwise entitled to vote, must be intimated in writing and the company must retain proof of delivery. The other conditions concerning listing status and filing of compliant CFS by the ultimate or intermediate holding company must also be satisfied. Missing proof relating to the non-voting member means the stated conditions are not fully established.

Where it goes wrong. Ignoring non-voting members when applying the CFS exemption or assuming that sending a notice automatically proves its delivery.

Authority. Rule 6, Companies (Accounts) Rules, 2014; Section 129(3), Companies Act, 2013

Question 19 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Scenario. Kaveri Foods Ltd. has prepared CFS covering its subsidiary, associate and joint venture. The Company Secretary is separately preparing the prescribed statement containing salient features of the investees' financial statements. The CFO argues that the statement should be prepared only for subsidiaries and that no separate document is needed for associates or joint ventures. Which filing approach correctly follows Section 129(3) and Rule 5?

Kaveri Foods Ltd. has prepared CFS covering its subsidiary, associate and joint venture. The Company Secretary is separately preparing the prescribed statement containing salient features of the investees' financial statements. The CFO argues that the statement should be prepared only for subsidiaries and that no separate document is needed for associates or joint ventures. Which filing approach correctly follows Section 129(3) and Rule 5?

1. Prepare e-Form AOC-1 containing salient features of subsidiary, associate and joint venture financial statements. (correct answer)
2. Prepare e-Form AOC-4 only, because the filing of consolidated statements automatically replaces AOC-1.
3. Prepare e-Form AOC-5 for each investee because AOC-1 is intended for a change in registered office.
4. Prepare e-Form AOC-2 only for subsidiaries and exclude the financial information of associates and joint ventures.

Answer: A — Prepare e-Form AOC-1 containing salient features of subsidiary, associate and joint venture financial statements.

Explanation. The first proviso to Section 129(3), read with Rule 5 of the Companies (Accounts) Rules, 2014, prescribes e-Form AOC-1 for the statement containing salient features of financial statements of subsidiaries, associates and joint ventures. The requirement is not limited to subsidiaries. This statement is separate from the company's CFS and does not replace the obligation to prepare consolidated financial statements.

Where it goes wrong. Confusing AOC-1 with other AOC forms or restricting its coverage to subsidiary companies.

Authority. First proviso to Section 129(3), Companies Act, 2013; Rule 5, Companies (Accounts) Rules, 2014

Question 20 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Scenario. Dhanush Manufacturing Ltd. prepares consolidated financial statements in addition to its standalone financial statements. Its CFO argues that the audit and adoption requirements applicable to standalone statements cannot automatically extend to CFS because the consolidated statements include information relating to separate legal entities. Which provision determines the applicability of preparation, adoption and audit requirements to the consolidated statements?

Dhanush Manufacturing Ltd. prepares consolidated financial statements in addition to its standalone financial statements. Its CFO argues that the audit and adoption requirements applicable to standalone statements cannot automatically extend to CFS because the consolidated statements include information relating to separate legal entities. Which provision determines the applicability of preparation, adoption and audit requirements to the consolidated statements?

1. Section 130(2), because consolidated statements become final once approved by the Tribunal.
2. Section 131(1), because consolidated statements require voluntary revision before they can be examined under statutory audit.
3. Section 129(4), because the requirements applicable to preparation, adoption and audit of holding-company financial statements apply mutatis mutandis to CFS. (correct answer)
4. Section 128(5), because eight-year retention automatically determines the audit procedure for CFS.

Answer: C — Section 129(4), because the requirements applicable to preparation, adoption and audit of holding-company financial statements apply mutatis mutandis to CFS.

Explanation. Section 129(4) expressly provides that the provisions of the Act applicable to the preparation, adoption and audit of the financial statements of a holding company shall, mutatis mutandis, also apply to consolidated financial statements. Thus, CFS cannot be excluded from the applicable statutory preparation, adoption and audit framework merely because they include the financial information of separate investee entities.

Where it goes wrong. Assuming that consolidated financial statements are governed by an entirely independent statutory adoption and audit framework.

Authority. Section 129(4), Companies Act, 2013

Question 21 · 2 marks · Chapter 9: Accounts of Companies and CSR · medium

Scenario. Vardhan Metals Ltd. has received a complaint from a person concerned with its financial affairs alleging fraudulent preparation of its earlier accounts. The person requests the Board to reopen the books immediately. The Board believes the allegation may be serious, but no Court or Tribunal order has been passed. Which statement correctly distinguishes an eligible application from the authority to reopen the accounts under Section 130?

Vardhan Metals Ltd. has received a complaint from a person concerned with its financial affairs alleging fraudulent preparation of its earlier accounts. The person requests the Board to reopen the books immediately. The Board believes the allegation may be serious, but no Court or Tribunal order has been passed. Which statement correctly distinguishes an eligible application from the authority to reopen the accounts under Section 130?

1. The Board may reopen accounts immediately if the complainant provides supporting documents.
2. An auditor's report alone authorises reopening once the allegation appears credible.
3. A person concerned may issue an enforceable reopening direction directly to the company.
4. A person concerned may apply, but reopening requires an order of a competent Court or Tribunal. (correct answer)

Answer: D — A person concerned may apply, but reopening requires an order of a competent Court or Tribunal.

Explanation. Section 130(1) includes any person concerned among the eligible applicants who may seek reopening of accounts. However, the company cannot reopen the books merely on receipt of such an application or complaint. An order of a Court of competent jurisdiction or Tribunal is necessary, and the statutory grounds must be established. The power to reopen is therefore distinct from the right to make an application.

Where it goes wrong. Confusing the right to apply under Section 130 with the legal authority to direct reopening.

Authority. Section 130(1), Companies Act, 2013

Question 22 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Scenario. A company is currently in FY 2026-27. In connection with an investigation under Chapter XIV, the Central Government had directed it under the proviso to Section 128(5) to preserve certain books for twelve years. A statutory regulator now seeks reopening of accounts relating to FY 2016-17. The company argues that all accounts older than eight years are permanently outside the reopening jurisdiction. Which statement correctly applies the exception under Section 130(3)?

A company is currently in FY 2026-27. In connection with an investigation under Chapter XIV, the Central Government had directed it under the proviso to Section 128(5) to preserve certain books for twelve years. A statutory regulator now seeks reopening of accounts relating to FY 2016-17. The company argues that all accounts older than eight years are permanently outside the reopening jurisdiction. Which statement correctly applies the exception under Section 130(3)?

1. The longer preservation direction allows reopening within the extended period, subject to the required Court or Tribunal order. (correct answer)
2. The eight-year limitation is absolute and cannot be affected by any Central Government direction.
3. The extended preservation period automatically authorises the company to reopen its accounts without an order.
4. The twelve-year period applies only to retention of vouchers and never affects the reopening period.

Answer: A — The longer preservation direction allows reopening within the extended period, subject to the required Court or Tribunal order.

Explanation. Section 130(3) ordinarily limits reopening to eight financial years immediately preceding the current financial year. Its proviso recognises the situation where the Central Government has directed preservation of books for a period longer than eight years under Section 128(5). In that situation, reopening may be ordered within the extended period. The direction does not itself authorise reopening; the statutory application and Court or Tribunal order remain necessary.

Where it goes wrong. Treating the ordinary eight-year period as absolute despite the specific exception for extended preservation under Section 128(5).

Authority. Proviso to Section 128(5), Companies Act, 2013; Section 130(3), Companies Act, 2013

Question 23 · 2 marks · Chapter 9: Accounts of Companies and CSR · medium

Scenario. Aster Mobility Ltd. has already revised its financial statements once under Section 131 during FY 2026-27. In February 2027, the newly appointed directors identify another alleged non-compliance in the same financial year's previously revised statements and wish to initiate another voluntary revision. The CFO says a second application is permissible because it concerns a different accounting error. Which statement correctly applies the statutory frequency restriction?

Aster Mobility Ltd. has already revised its financial statements once under Section 131 during FY 2026-27. In February 2027, the newly appointed directors identify another alleged non-compliance in the same financial year's previously revised statements and wish to initiate another voluntary revision. The CFO says a second application is permissible because it concerns a different accounting error. Which statement correctly applies the statutory frequency restriction?

1. The company may revise twice in a year if the errors relate to separate accounting standards.
2. Revised financial statements or the revised Board's Report cannot be prepared or filed more than once in a financial year. (correct answer)
3. The company may revise any number of times if the shareholders approve each revised statement.
4. The restriction applies only to Board's Reports and does not apply to financial statements.

Answer: B — Revised financial statements or the revised Board's Report cannot be prepared or filed more than once in a financial year.

Explanation. Section 131 provides that revised financial statements or a revised Board's Report shall not be prepared or filed more than once in a financial year. The restriction is not limited to a particular type of accounting error or only to Board's Reports. Accordingly, Aster cannot undertake a second voluntary revision under Section 131 during FY 2026-27 merely because the directors have identified a different alleged non-compliance.

Where it goes wrong. Assuming that a different correction or new management team creates an exception to the once-in-a-financial-year restriction.

Authority. Section 131(1), Companies Act, 2013

Question 24 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Scenario. Sagar Infrastructure Ltd. passed a Board resolution on 6 October 2026 to seek voluntary revision under Section 131. It submitted Form NCLT-1 on 18 October 2026, and the Tribunal subsequently granted approval. The company received a certified copy of the Tribunal's order on 12 December 2026. The Company Secretary is preparing the Registrar filing calendar and must distinguish the deadline for the original application from the deadline for filing the certified order. Which statement is correct?

Sagar Infrastructure Ltd. passed a Board resolution on 6 October 2026 to seek voluntary revision under Section 131. It submitted Form NCLT-1 on 18 October 2026, and the Tribunal subsequently granted approval. The company received a certified copy of the Tribunal's order on 12 December 2026. The Company Secretary is preparing the Registrar filing calendar and must distinguish the deadline for the original application from the deadline for filing the certified order. Which statement is correct?

1. Form NCLT-1 is due within thirty days, and the certified order is due within fourteen days.
2. Both the application and certified order must be filed within fourteen days of the Board's decision.
3. The application is due within fourteen days of the Board's decision, while the certified order is due within thirty days of receipt. (correct answer)
4. The application is due within seven days, while the certified order may be filed within sixty days.

Answer: C — The application is due within fourteen days of the Board's decision, while the certified order is due within thirty days of receipt.

Explanation. Under Section 131(1), read with Rule 77 of the NCLT Rules, the company must apply in Form NCLT-1 within fourteen days of the Board's decision. A certified copy of the Tribunal's order must separately be filed with the Registrar within thirty days from the date of receipt of the certified copy. The two deadlines arise from different events and cannot be interchanged. The company's proposed application on 18 October is within the fourteen-day period after 6 October.

Where it goes wrong. Interchanging the fourteen-day period for the NCLT application and the thirty-day period for filing the certified order.

Authority. Section 131(1), Companies Act, 2013; Rule 77, National Company Law Tribunal Rules, 2016

Question 25 · 2 marks · Chapter 9: Accounts of Companies and CSR · hard

Scenario. The Tribunal has approved Rudra Infrastructure Ltd.'s application under Section 131. After receiving approval, the company calls a general meeting and members approve the revised financial statements on 15 May 2027. The revised statements are accompanied by the statement of auditors, and the Board has disclosed detailed reasons for revision in its report for the relevant financial year. The CFO proposes filing the revised statements with the Registrar after 45 days because the Tribunal order was already filed earlier. What is the correct filing deadline following the general meeting's approval?

The Tribunal has approved Rudra Infrastructure Ltd.'s application under Section 131. After receiving approval, the company calls a general meeting and members approve the revised financial statements on 15 May 2027. The revised statements are accompanied by the statement of auditors, and the Board has disclosed detailed reasons for revision in its report for the relevant financial year. The CFO proposes filing the revised statements with the Registrar after 45 days because the Tribunal order was already filed earlier. What is the correct filing deadline following the general meeting's approval?

1. The revised financial statements must be filed within fourteen days of the Tribunal's original approval.
2. The revised financial statements must be filed within sixty days of the general meeting's approval.
3. The revised financial statements need not be filed again if the certified Tribunal order has already been registered.
4. The revised statements and accompanying auditor's statement or revised Board's Report must be filed within thirty days of general meeting approval. (correct answer)

Answer: D — The revised statements and accompanying auditor's statement or revised Board's Report must be filed within thirty days of general meeting approval.

Explanation. Section 131(1) provides that after Tribunal approval and approval in the general meeting, the revised financial statements together with the statement of auditors, or the revised Board's Report as applicable, must be filed with the Registrar within thirty days of the date of approval by the general meeting. Filing the certified Tribunal order is a separate procedural requirement and does not replace the subsequent filing of the approved revised documents.

Where it goes wrong. Confusing the filing of the Tribunal's certified order with the separate filing of revised documents after general meeting approval.

Authority. Section 131(1), Companies Act, 2013