Question

Unclaimed Dividend

Answer 1

Unclaimed Dividend: It refers to the amount declared by a company as dividend but not collected or encashed by shareholders within the specified time. The company holds this amount in trust for the shareholders until it is claimed or transferred to the Investor Education and Protection Fund (IEPF) after 7 years.

Legal Requirement: As per Section 124 of the Companies Act, 2013, any unpaid dividend should be transferred to an Unpaid Dividend Account within 7 days from the expiry of 30 days after declaration. If it remains unpaid for 7 years, it must be moved to IEPF.

Presentation in Financial Statements:

• Major Head: Current Liabilities
• Sub-head: Other Current Liabilities

Why Liability? The company owes this amount to shareholders, so it is shown as a current liability. It is non-trade in nature and should be disclosed separately if material.

Example in Balance Sheet:

    Current Liabilities
       Other Current Liabilities
          - Unclaimed Dividend      ₹ XX,XXX
    

Answer 2

Public Deposits: Public deposits refer to the money borrowed by a company from the public in accordance with the Acceptance of Deposits Rules under the Companies Act, 2013. These deposits are a source of finance for companies and are subject to specific legal compliance and disclosure requirements.

Legal Basis: Companies can accept deposits only as per the conditions laid down in the Companies Act and relevant rules. The deposits may be repayable either after a specified period or on demand, depending on the terms agreed upon with the depositor.

Presentation in Financial Statements:

• If maturity exceeds 12 months: Reported under Non-Current Liabilities → Long-Term Borrowings.
• If maturity is within 12 months from the reporting date: Reported under Current Liabilities → Short-Term Borrowings.

Reason for Classification: The classification is based on the time frame of repayment. Long-term deposits are treated as non-current, while deposits due within a year are treated as current liabilities.

Example in Balance Sheet:

    Non-Current Liabilities
       Long-Term Borrowings
          - Public Deposits          ₹ XX,XXX
    
    OR
    
    Current Liabilities
       Short-Term Borrowings
          - Public Deposits          ₹ XX,XXX
    

Note: Proper disclosure is mandatory as per Schedule III of the Companies Act, 2013, to maintain transparency and compliance.

Answer 3

Patents: Patents are considered intangible assets because they represent legal rights granted for an invention, which are non-physical in nature. These rights allow the patent holder to use, produce, and sell the invention exclusively for a specified period.

Accounting Treatment: Patents are initially recorded at their acquisition or development cost. Over time, the cost is reduced by amortisation (systematic allocation over its useful life) and adjusted for any impairment losses if the recoverable value is less than the carrying amount.

Presentation as per Schedule III of the Companies Act, 2013:

• Major Head: Non-Current Assets
• Sub-head: Fixed Assets → Intangible Assets

Key Points:

• Patents are non-monetary and lack physical substance but provide future economic benefits.
• They must be shown separately under the intangible asset class for better disclosure.

Example in Balance Sheet:

    Non-Current Assets
       Fixed Assets
          Intangible Assets
             - Patents          ₹ XX,XXX
    

Note: Adequate disclosure of useful life, amortisation method, and impairment, if any, is mandatory in the Notes to Accounts.