Companies Act 2013 · Schedule III

Schedule III balance sheet format, applied correctly.

The classification logic behind the vertical balance sheet every Indian company files — current vs non-current, what goes under each head, and a fully worked example that ties out. Written for practising CAs, articled assistants and CA-Final students.

Reviewed July 2026
8 min read
CA Anil Agarwal & the TatvaBooks team

What is the Schedule III balance sheet format?

Schedule III to the Companies Act, 2013 prescribes the format in which every company covered by Section 129 must present its financial statements — including the balance sheet, statement of profit and loss, and the general instructions for preparation. Unlike the older Schedule VI "T-format" (horizontal, liabilities on one side and assets on the other), Schedule III mandates a vertical format: equity and liabilities listed first, followed by assets, each broken into prescribed heads and sub-heads.

It comes in two divisions. Division I applies to companies preparing financial statements under the (non-Ind AS) Accounting Standards. Division II applies to companies applying Ind AS, and layers on Ind AS-specific requirements (such as a Statement of Changes in Equity and other comprehensive income). This page works through Division I's balance sheet — the format most non-listed, non-Ind AS companies actually file.

The prescribed heads — what goes where

Schedule III fixes the major heads and their order. You cannot rename or reshuffle these; you can only add a line under a head if a material item genuinely doesn't fit an existing sub-head.

Head	Typically includes
Equity	Share capital, Reserves & surplus (including securities premium, retained earnings, other reserves)
Non-current liabilities	Long-term borrowings, deferred tax liabilities (net), other long-term liabilities, long-term provisions
Current liabilities	Short-term borrowings, trade payables (split MSME / others per the amended format), other current liabilities, short-term provisions
Non-current assets	Property, plant & equipment, capital work-in-progress, intangible assets, intangible assets under development, non-current investments, long-term loans & advances, other non-current assets
Current assets	Current investments, inventories, trade receivables, cash & cash equivalents, short-term loans & advances, other current assets

The order on the page is fixed: Equity and Liabilities (shareholders' funds, then non-current liabilities, then current liabilities) followed by Assets (non-current, then current) — the mirror image of the old T-format, and the reason many people preparing their first Schedule III balance sheet initially reach for the wrong side.

Current vs non-current — the classification test

Every asset and liability has to be classified as current or non-current before it can go on the face of the balance sheet. Schedule III uses the same test as Ind AS 1 / AS-based practice: the operating cycle comes first, and the 12-month rule is the fallback, not the primary test.

If the item is…	Classify as
Expected to be realised / settled within the normal operating cycle	Current — regardless of the 12-month rule below, if it falls within the operating cycle it is current.
Held primarily for the purpose of trading	Current.
Expected to be realised / due for settlement within 12 months of the reporting date	Current, when the operating cycle test above doesn't already decide it.
Cash or cash equivalent, unless restricted from exchange or use for at least 12 months	Current asset.
Everything else	Non-current.

The operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. Where it isn't clearly identifiable, Schedule III's general instructions permit assuming it as twelve months — but for manufacturing or project-based businesses with a genuinely longer cycle (say, real estate or shipbuilding), using twelve months by default when the actual cycle is longer will misclassify working-capital items.

Worked example: Vriddhi Manufacturing Pvt Ltd

Vriddhi Manufacturing Pvt Ltd closes its books for the year ended 31 March 2026. Below is its balance sheet in the Schedule III, Division I vertical format — figures are illustrative but internally consistent, and both sides tie out to ₹1,25,00,000.

Vriddhi Manufacturing Pvt Ltd — Balance Sheet as at 31 March 2026, Equity and Liabilities
Note	Particulars	Amount ₹
I	EQUITY AND LIABILITIES
1	Shareholders' funds
	(a) Share capital	50,00,000
	(b) Reserves and surplus	32,50,000
	Total shareholders' funds	82,50,000
2	Non-current liabilities
	(a) Long-term borrowings	20,00,000
	Total non-current liabilities	20,00,000
3	Current liabilities
	(a) Short-term borrowings	5,00,000
	(b) Trade payables	12,00,000
	(c) Other current liabilities (current maturities of long-term debt)	3,00,000
	(d) Short-term provisions	2,50,000
	Total current liabilities	22,50,000
	TOTAL EQUITY AND LIABILITIES	1,25,00,000

Vriddhi Manufacturing Pvt Ltd — Balance Sheet as at 31 March 2026, Assets
Note	Particulars	Amount ₹
II	ASSETS
1	Non-current assets
	(a) Property, plant and equipment	55,00,000
	(b) Capital work-in-progress	5,00,000
	(c) Intangible assets	3,00,000
	(d) Non-current investments	8,00,000
	Total non-current assets	71,00,000
2	Current assets
	(a) Inventories	20,00,000
	(b) Trade receivables	18,00,000
	(c) Cash and cash equivalents	12,00,000
	(d) Short-term loans and advances	4,00,000
	Total current assets	54,00,000
	TOTAL ASSETS	1,25,00,000

Total Equity and Liabilities (₹82,50,000 shareholders' funds + ₹20,00,000 non-current liabilities + ₹22,50,000 current liabilities) equals Total Assets (₹71,00,000 non-current + ₹54,00,000 current) — both at ₹1,25,00,000. Each amount above would carry a note number in the actual financial statements (share capital reconciliation, ageing schedule for trade receivables/payables, breakup of reserves and surplus, and so on) — omitted here for readability, but mandatory in a real filing.

Practical notes and common pitfalls

Pitfall	Fix
Reordering line items to taste	Schedule III prescribes both the headings/sub-headings and their sequence for a company's balance sheet. You can add a line if an item doesn't fit an existing head and is material, but you can't rename, reorder or drop the prescribed heads themselves.
Netting current and non-current portions of the same loan	The portion of a long-term loan payable within 12 months moves to current liabilities every year as 'current maturities of long-term debt' — shown separately, not netted against the non-current borrowing balance.
Classifying by contractual maturity alone, ignoring the operating cycle	For working-capital items (inventory, trade receivables/payables), the operating cycle — not a flat 12-month rule — decides current vs non-current. A construction or manufacturing business with an operating cycle longer than 12 months still classifies related receivables/payables as current if they fall within that cycle.
Treating rounding-off and units-of-measurement rules loosely	Schedule III prescribes the unit of measurement (rupees, or rupees in lakhs/crores) based on the company's turnover, and requires figures to be rounded off consistently across the statements — mixing units between the balance sheet and notes is a common review comment.
Forgetting the notes are part of the financial statements	Every line item above needs a supporting note (share capital reconciliation, ageing schedules for receivables/payables, breakup of reserves, related-party disclosures). A balance sheet that ties out numerically but has no supporting notes is not Schedule III compliant.

Schedule III is amended periodically by MCA notification — most recently on points like trade payables/receivables ageing schedules, CSR disclosures, and rounding-off thresholds. Always verify the current text and any recent amendments on the MCA portal before finalising a set of financial statements or an exam answer, rather than relying on a prior year's format as-is.

Where TatvaBooks fits

TatvaBooks classifies balances as current or non-current at the chart-of-accounts level, so the trial balance rolls up directly into a Schedule III-ready vertical balance sheet — GST-correct books feeding a format your audit team can start testing from immediately, instead of a year-end remapping exercise. It doesn't replace the judgement calls above (operating cycle length, related-party identification, note disclosures) — that's exactly the work a CA still owns.

Frequently asked questions

Is Schedule III mandatory for all companies, or only listed ones?

Schedule III to the Companies Act, 2013 applies to every company required to prepare financial statements under Section 129 of the Act — not just listed companies. Division I applies to companies following the (non-Ind AS) Accounting Standards, and Division II applies to companies that follow Ind AS. LLPs and other non-corporate entities are outside Schedule III and follow their own applicable format.

What's the real difference between Schedule III Division I and Division II?

Division I is for companies applying regular Accounting Standards (AS); Division II is for companies applying Ind AS and additionally requires a Statement of Changes in Equity, different terminology in places (e.g. 'other comprehensive income'), and disclosures aligned to Ind AS measurement (like fair-value-based classifications for financial instruments). The core current/non-current classification logic is the same in both.

How do I decide if a loan or provision is current or non-current?

Apply the operating-cycle test first — if the item is expected to be realised or settled within the normal operating cycle of the business, it's current even if that cycle runs longer than 12 months. If the operating cycle doesn't decide it, fall back to the 12-months-from-reporting-date rule. The classification table above walks through this in order.

Do the exact rounding-off thresholds (turnover slabs for lakhs/crores) ever change?

The general rule is that companies below a certain turnover round off to the nearest hundreds/thousands/lakhs, and larger companies to lakhs or crores with decimals — but the exact turnover slabs are set out in Schedule III itself and can be amended by MCA notification. Verify the current thresholds on the MCA portal before finalising a client's format, rather than relying on last year's slab.

Does using accounting software make Schedule III compliance automatic?

Software can automate the classification (current vs non-current) and generate the vertical layout correctly if your chart of accounts is mapped properly at the outset — that removes most manual formatting error. It does not replace professional judgement on operating-cycle calls, related-party identification, contingent liability disclosure, or the notes that accompany each line — those still need a CA's sign-off.

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