How to Calculate the Net Worth of a Pvt Ltd Company

Paid-up capital plus reserves minus accumulated losses

Section 2(57) of the Companies Act, 2013 defines net worth, and the definition names every input.

Reading the figures off your audited balance sheet

Every input sits in one block of one page: the equity section at the top of the balance sheet. You are not reading the whole set of accounts.

The Companies Act prescribes how that block is presented, in Schedule III, and it has two versions:

Ind AS became mandatory for unlisted companies with a net worth of ₹250 crore or more from 1 April 2017. Most private companies fall below that and still report under Division I.

The face of the balance sheet gives one total. The note behind it breaks the total down into general reserve, securities premium, retained earnings, revaluation surplus and anything else the company has created. That note is where the work is done, because the format does not label any line as "qualifying" or "excluded". Deciding which balances are reserves available for distribution, and which are reserves created out of profits, is the judgement the format leaves to you.

Items section 2(57) tells you to leave out

The definition names three reserves that stay outside the figure:

1. A reserve created out of revaluation of assetsRestating what was already there.
2. A reserve created out of write-back of depreciationReversing a charge already made.
3. A reserve created on amalgamationCombining what was already there.

None of them is money the company earned and kept. Each is the bookkeeping result of restating or combining what was already there.

Two items are deducted rather than left out: deferred expenditure and miscellaneous expenditure not written off. Both are money already spent that the books still carry forward. In current accounts the balance is often nil, because modern accounting practice charges most such costs when they are incurred. Check the notes anyway.

The exclusions are short to state and awkward to apply, because a balance sheet rarely labels a reserve by its origin. A capital reserve can arise from several unrelated events. A general reserve can quietly absorb a transfer that began life as a revaluation. The definition settles the categories; each reserve judged on its origin settles the individual lines.

Handling share application money and securities premium

1. Share application moneyNot paid-up capital

   Money received for shares that have not yet been allotted is not paid-up capital.

2. Securities premiumInside the base

   Premium collected above face value goes to its own account, and the definition names that account, so the balance is inside the base. What it is not is spendable profit. Company law limits what the premium can be used for and otherwise treats the account much like paid-up capital. Its presence lifts net worth without creating anything that can be paid out as dividend. The account that holds the premium collected on issue has its own glossary entry.

   Where the law says itSection 52 of the Companies Act 2013 requires the premium to be held in a securities premium account and limits its use to issuing fully paid bonus shares, writing off preliminary expenses and the expenses, commission or discount on an issue of shares or debentures, providing for the premium payable on redeeming preference shares or debentures, and buying back the company's own shares under section 68; section 2(57) counts the account in net worth.
3. Partly paid sharesAt the amount paid

   These count only at the amount actually called and received. Calls in arrears are deducted from the called-up amount to reach paid-up capital, which is the figure the definition uses. A company with 10,00,000 shares of ₹10 each does not automatically have ₹1 crore of paid-up capital. It has whatever the members have actually paid in, and the register, not the memorandum, decides that.

Treating deferred expenditure and intangibles

1. Deferred expenditureDeducted

   Deferred expenditure is deducted by name, so the only real question is whether any remains on the books. Where a company still carries unamortised share issue costs or similar balances, those come out at their carrying amount.

2. Intangible assetsStay in

   Intangible assets are a different matter: the definition does not touch them. Capitalised development cost and goodwill acquired in a business combination remain assets, so the statutory figure includes them. Lenders often do not. That is why a facility letter asking for a tangible net worth gets back a smaller number than the attested statutory figure.

3. Deferred taxEnters the totals

   Deferred tax appears as a single net figure, either a non-current asset or a non-current liability. It enters the totals like any other line, and the definition carves out neither. What varies is the reader. A large deferred tax asset depends on the company earning taxable profits in future, and a statement that says nothing about it invites the obvious question.

A worked example on a small private company

A private company closes its books on 31 March 2026 under Division I. Its balance sheet shows:

• Paid-up equity capital₹50 lakh
• Securities premium₹30 lakh
• General reserve (created out of profits)₹12 lakh
• Revaluation reserve₹40 lakh
• Surplus in the profit and loss account: a debit balance₹18 lakh
• Unamortised share issue expenses (in other non-current assets)₹2 lakh

The revaluation reserve of ₹40 lakh is never added, so it is never deducted. It stays outside the arithmetic from the first line.

Shareholders' funds on the face of the same balance sheet total ₹1.14 crore. The gap of ₹42 lakh is the revaluation reserve plus the deferred expenditure. A statement showing ₹72 lakh needs a note saying exactly that: the reserve left out, its amount, and 31 March 2026 as the date the figure speaks to. A reader who cannot rebuild the total from that note will ask for one.

Try the company net worth calculator with your own figures

The arithmetic is short enough to do by hand and easy to get wrong under pressure. A blank sheet invites the same three mistakes every time:

• The revaluation reserve added in.
• The profit and loss debit balance deducted twice, or treated as an asset.
• Share application money counted as capital.

Enter your own equity figures and the exclusions are applied in order.

Whatever comes back, check it against the audited equity block it came from. Capital plus qualifying reserves, less the named deductions, should tie to a note someone can point at. If it does not tie, the input is wrong, not the arithmetic.

A computed number is not yet evidence. What a bank, tender authority or regulator tests is the same number under a CA's signature, with a membership number and a UDIN against it, drawn from records the CA has examined. That is a separate step, and having the computed figure attested is where it goes next.