From Tally trial balance to draft Schedule III statements: a step-by-step workflow for small firms

In most small firms the financial statements of a private company are still built the same way: the client sends a Tally trial balance, someone pastes it into last year's Excel file, overwrites the figures line by line, and fixes whatever does not balance at the end. This article sets out a repeatable workflow — from the trial balance to a draft set of Schedule III (Division I) statements ready for review — and the inputs you have to collect because a trial balance cannot give them to you.

1. Get both trial balances — and the right ones

You need two ledger-wise trial balances: this year's (after the last adjustment) and last year's. How to export them properly from TallyPrime or ERP 9 — full-year period, detailed view, opening balances and transactions — is covered in our Tally export guide; this article starts where that one ends.

• Agree last year's TB to last year's signed accounts. The comparatives in this year's statements must match the signed statements (Schedule III requires corresponding amounts for the preceding period). If last year's accounts were finalised with entries that were never passed in Tally, you will find the difference here — not on signing day.
• Check this year's opening balances against last year's closing. A difference means an entry was passed in the closed year after the accounts were signed, or the books were not carried forward cleanly.
• Note the version. Record the date of the TB the draft is built from. When the client sends a revised TB, you need to know what changed.

2. Map every ledger to a Schedule III line item

Mapping is the step that decides where each ledger appears in the statements. Division I prescribes the face headings — for the balance sheet, Shareholders' funds, Share application money pending allotment, Non-current liabilities, Current liabilities, Non-current assets and Current assets, each with its line items; for the Statement of Profit and Loss, Revenue from operations, Other income and the expense heads from Cost of materials consumed to Other expenses, then exceptional and extraordinary items and tax expense.

Map through the client's Tally groups where you can, but check the ledgers placed by default and every ledger that moved to a different group since last year — a regrouped ledger moves the comparative too, and the statements should say that previous-year figures have been regrouped. Keep the mapping: next year should start mapped.

3. Collect what the trial balance does not give you

A trial balance gives you balances. A Schedule III set needs more, and these are the items that most often hold up a draft. Ask for them with the year-end query list.

• Closing stock — if the client does not maintain inventory in Tally, the TB shows only opening stock. Take closing stock from the stock statement or the Tally balance sheet, split into raw materials, work-in-progress, finished goods and stock-in-trade for a manufacturer, with the valuation basis (AS 2).
• Ageing of trade receivables (less than 6 months, 6 months–1 year, 1–2, 2–3, more than 3 years) and trade payables (less than 1 year, 1–2, 2–3, more than 3 years), from the due date of payment, with disputed dues separately and unbilled dues separately.
• MSME status of creditors — which suppliers are micro or small enterprises, the principal and interest due and unpaid, and the interest disclosures Schedule III requires under the MSMED Act. For FY 2025-26 the tax effect is under section 43B(h) of the Income-tax Act, 1961.
• Share capital details — authorised, issued and subscribed capital, the reconciliation of the number of shares, shareholders holding more than 5%, and promoters' shareholding with the percentage change during the year.
• Contingent liabilities and commitments — claims not acknowledged as debts, guarantees (AS 29), and capital and other commitments (Schedule III). None of these is in the books.
• Related parties — the list of parties and the relationship, so the transactions in the ledgers can be identified (AS 18).
• The fixed asset schedule — opening gross block, additions with dates, disposals, depreciation over the useful lives adopted (Schedule II, or a different life disclosed and supported by technical advice) and the closing net block, by class of asset. Schedule III requires a reconciliation of gross and net carrying amounts for each class. Keep the income-tax depreciation by block alongside: you need it for the tax computation and the deferred tax working.
• Tax provision and deferred tax — current tax from the tax computation (for FY 2025-26, under the Income-tax Act, 1961), and deferred tax on timing differences under AS 22, the usual one being book versus tax depreciation.
• Facts for the additional regulatory information — title deeds, revaluation, loans to promoters and directors, CWIP ageing, bank stock statements, struck-off company transactions, unregistered charges — and, under the profit and loss instructions, CSR, crypto and undisclosed income.

4. Build the notes before the face

Schedule III requires each face item to be cross-referenced to its note, and the notes carry most of the detail. Build them first and let the face pick up their totals — not the other way round.

1. Share capital and reserves and surplus — with the surplus in the Statement of Profit and Loss rolled forward: opening balance, profit for the year, appropriations, closing balance.
2. Borrowings — secured and unsecured, nature of security, terms of repayment, and current maturities moved to short-term borrowings.
3. Trade payables — MSME and others on the face, with the ageing table and the MSME disclosures in the note.
4. Property, plant and equipment and intangible assets — the reconciliation from the fixed asset schedule, plus CWIP with its ageing table if there is any.
5. Inventories, trade receivables, cash and cash equivalents, loans and advances — receivables with the ageing table and the split between secured, unsecured and doubtful.
6. Revenue, other income, the expense notes — employee benefits split as Schedule III requires, finance costs, payments to the auditor, and the 1%/₹1 lakh items.
7. The narrative notes — significant accounting policies, contingent liabilities and commitments, related party disclosures, earnings per share and the additional regulatory information.

Rounding is no longer a choice: since the 2021 amendment, figures shall be rounded according to total income — for total income below ₹100 crore, to the nearest hundreds, thousands, lakhs or millions, or decimals thereof — and the same unit must be used throughout.

5. The face statements and the cash flow statement

With the notes built, the balance sheet and the Statement of Profit and Loss are mostly links. Check that the profit for the year on the face is the figure carried to the surplus note, and that tax expense is split into current tax and deferred tax.

Decide whether a cash flow statement is needed at all. Under the proviso to section 2(40), the financial statements of a one person company, a small company, a dormant company and a start-up private company may exclude the cash flow statement. Small company status depends on paid-up capital and on turnover as per the profit and loss account of the immediately preceding financial year, against the limits in force (₹10 crore and ₹100 crore since 1 December 2025). Only a private company can qualify, and a holding or subsidiary company or a section 8 company is never a small company — see the small company limits.

Where a cash flow statement is needed, AS 3 allows operating cash flows under either the direct or the indirect method. From a trial balance, the indirect method is the practical choice: start from profit before tax, add back depreciation and other non-cash items, take out investing and financing items such as interest and profit on sale of assets, and adjust for working capital movements. Investing and financing flows need the gross figures — fixed assets bought and sold, loans taken and repaid — which is why a TB with opening balances and the year's debits and credits helps. The closing cash and cash equivalents must agree to the balance sheet.

6. Ratios and additional regulatory information

Schedule III (Division I) requires eleven ratios — current, debt-equity, debt service coverage, return on equity, inventory turnover, trade receivables turnover, trade payables turnover, net capital turnover, net profit, return on capital employed and return on investment — with what is included in each numerator and denominator, and an explanation for any ratio that changed by more than 25% compared with the preceding year. Compute them from the final face figures, with the same definitions as last year. The explanations are the hard part; see our guide to the ratios and the 25% explanation.

For the rest of the additional regulatory information, answer every item that can apply — even where the answer is "nil" — on the strength of a management confirmation, not an assumption. The quarterly statements filed with the bank, in particular, must be compared with the books where borrowings are secured on current assets.

7. Tie-outs before the draft goes for review

Do them on the finished workbook; the checks before signing are in seven checks before you sign.

8. The review, and non-corporate clients

A draft that ties out can still be wrong. The reviewer's job is the judgements: ledgers mapped by default, current and non-current splits, the closing stock figure and its basis, the tax provision, the deferred tax working, contingent liabilities, related parties, and every additional disclosure answered "nil". A legal statement that the trial balance cannot prove should not appear in the draft as "No" until someone has confirmed it. Then run the CY vs PY review on the final figures — SA 520's analytical procedures near the end of the audit — so that every material movement has an explanation before the draft goes to the client.

For firms, proprietors, HUFs, trusts and other non-corporate entities, Schedule III does not apply. ICAI's Guidance Note on Financial Statements of Non-Corporate Entities (2023, superseding the June 2022 Technical Guide) sets out recommended formats and is effective for periods beginning on or after 1 April 2024, unless a law or regulator prescribes another format; LLPs are scoped out of it. The workflow is the same — two TBs, mapping, inputs, notes, face, tie-outs, review — with the partners' capital accounts in place of share capital, and no cash flow statement needed for a non-company MSME as classified by ICAI (AS 3 does not apply to it).

Frequently asked questions

Sources

• Companies Act, 2013 — Schedule III, Division I, as amended (India Code)
• Schedule III amendment — G.S.R. 207(E), 24 March 2021 (Gazette)
• ICAI — Guidance Note on Division I – Non Ind AS Schedule III (Revised January 2022)
• ICAI — Guidance Note on Financial Statements of Non-Corporate Entities
• ICAI — AS 3 Cash Flow Statements
• ICAI — Accounting Standards (AS 2, AS 18, AS 22, AS 29)
• Companies Act, 2013 — sections 2(40), 2(85) and Schedule II (India Code)
• Small company limits — G.S.R. 880(E), 1 December 2025 (Gazette)

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