The preparation of final accounts, specifically the Profit and Loss Account (Income Statement) and Balance Sheet, in vertical format according to the Companies Act 2013 involves presenting the financial information in a specific structure. Here is an outline of the vertical format for the final accounts:

Profit and Loss Account (Income Statement):

1. Gross Revenue/Sales:
   • Sales revenue or gross revenue from the sale of goods or services is presented at the top.
   • Any sales returns, discounts, or allowances are deducted to arrive at Net Sales.
2. Other Income:
   • Other sources of income that are not directly related to the core operations are listed separately.
   • Examples include rent income, interest income, dividend income, etc.
3. Total Revenue:
   • Net Sales and Other Income are summed up to determine the total revenue.
4. Cost of Goods Sold (COGS) or Cost of Services Provided:
   • The direct costs associated with producing goods or providing services are deducted from the total revenue.
   • This includes the cost of raw materials, direct labor, manufacturing overhead, etc.
5. Gross Profit:
   • Gross Profit is derived by subtracting the Cost of Goods Sold from the Total Revenue.
6. Operating Expenses:
   • Operating expenses include selling and distribution expenses, administrative expenses, research and development expenses, etc.
   • These expenses are listed separately.
7. Operating Profit:
   • Operating Profit is obtained by subtracting the total Operating Expenses from the Gross Profit.
8. Non-operating Income and Expenses:
   • Non-operating income, such as interest income, dividend income, or gains from the sale of assets, is listed separately.
   • Non-operating expenses, such as interest expenses or losses from the sale of assets, are also listed separately.
9. Profit Before Tax:
   • Profit Before Tax is calculated by adding the Operating Profit and Non-operating Income and subtracting Non-operating Expenses.
10. Income Tax Expense:
    • The tax liability is calculated based on the applicable tax rates and tax laws.
    • The Income Tax Expense is deducted from the Profit Before Tax to determine the Profit After Tax.
11. Net Profit:
    • Net Profit is obtained by subtracting the Income Tax Expense from the Profit Before Tax.

Balance Sheet:

1. Assets:
   • Fixed Assets: Present the value of tangible and intangible fixed assets such as property, plant, and equipment, patents, copyrights, etc.
   • Non-Current Investments: Include long-term investments such as shares, debentures, or bonds.
   • Current Assets: Present short-term assets like cash, accounts receivable, inventory, etc.
   • Other Assets: Include any other assets not classified under the above categories.
2. Liabilities:
   • Shareholders’ Equity: Present the capital and reserves of the company, including share capital, retained earnings, and other reserves.
   • Non-Current Liabilities: Include long-term loans, debentures, or other long-term liabilities.
   • Current Liabilities: Present short-term liabilities like accounts payable, short-term loans, accrued expenses, etc.
   • Other Liabilities: Include any other liabilities not classified under the above categories.
3. Total Assets:
   • Sum up the values of all the asset categories to calculate the Total Assets.
4. Total Liabilities:
   • Sum up the values of all the liability categories to calculate the Total Liabilities.
5. Shareholders’ Equity:
   • Present the total shareholders’ equity, which is the residual interest in the assets of the company after deducting liabilities from assets.
   • It is the difference between Total Assets and Total Liabilities.