Meaning Of Financial Statements
Financial statements are written records that convey the business activities and the financial performance of a company.
Nature Of Financial Statements
The financial statements are not absolute facts because they are affected by recorded facts, accounting conventions and personal judgements.
- Recorded Facts: The term recorded facts means that the data used for preparing financial statements are drawn from accounting records.
- Accounting Conventions: Accounting conventions imply certain fundamental accounting principles which have gained wide acceptance and which are followed while preparing financial statements.
- Personal Judgements: Even though certain accounting conventions are followed while preparing the financial statement, still personal judgement of the accountant plays a decisive role in accounting.
Uses of Financial Statements
- Determine the financial
- position of the business
- To obtain credit
- Helps in decision making
- Helps in policy making
- Useful for stock traders
Importance of Financial Statements
- Importance of the Balance Sheet
- Importance of the Income Statement
- Importance of the Cash Flow Statement
- Importance of the Statement of Equity
- To the management
- To the shareholders
- To the creditors and the lenders
- To the employees
- To the government
- To the company
Financial Statements Of A Company
A set of Financial statements as per section 2(40) of the Companies Act, 2013 includes:
Balance Sheet
The Balance Sheet provides an overview of assets, liabilities, and stockholders' equity as a snapshot in time. It is also known as Position Statement.
Statement of Profit and Loss
The Statement of Profit and Loss primarily focuses on a company’s revenues and expenses during a particular period. Once expenses are subtracted from revenues, the statement produces a company's profit figure called net income. It is also known as Income Statement.
Notes to Accounts
Balance Sheet and Statement of Profit and Loss are supported by the notes giving details of items int the Balance Sheet and Statement of Profit and Loss.
Cash Flow Statement
The Cash Flow Statement measures how well a company generates cash to pay its debt obligations, fund its operating expenses, and fund investments.
Format of Balance Sheet
Balance Sheet of............Company Limited as on 31st March..............
Particulars | Note No. | Figures at the end of the Current Reporting Period (₹) | Figures at the end of the Previous Reporting Period (₹) |
I. EQUITY AND LIABILITIES | |||
1. Shareholders’ Funds: | |||
(a) Share Capital | ... | ... | |
(b) Reserves and Surplus | ... | ... | |
(c) Money Received Against Share Warrants | ... | ... | |
2. Share Application Money pending allotment: | ... | ... | |
3. Non-Current Liabilities: | |||
(a) Long-term Borrowings | ... | ... | |
(b) Deferred Tax Liabilities (Net) | ... | ... | |
(c) Other Long Term Liabilities | ... | ... | |
(d) Long-term Provisions | ... | ... | |
4. Current Liabilities: | |||
(a) Short-term Borrowings | .. | .. | |
(b) Trade Payables | .. | .. | |
(c) Other Current Liabilities | .. | .. | |
(d) Short-term Provisions | .. | .. | |
Total [1 + 2 + 3 + 4] | .. | .. | |
II. ASSETS | |||
1. Non-Current Assets | |||
(a) Fixed Assets | |||
(i) Tangible Assets | .. | .. | |
(ii) Intangible Assets | ... | ... | |
(iii) Capital Work-in-Progress | ... | ... | |
(iv) Intangible Assets under Development | ... | ... | |
(b) Non-Current Investments | ... | ... | |
(c) Long-term Loans & Advances | ... | ... | |
(d) Other Non-Current Assets | ... | ... | |
2. Current Assets: | |||
(a) Current Investments | ... | ... | |
(b) Inventories | ... | ... | |
(c) Trade Receivables | ... | ... | |
(d) Cash and Cash Equivalents | ... | ... | |
(e) Short-term loans and Advances | ... | ... | |
(f) Other Current Assets | ... | ... | |
Total [1 + 2] | ... | ... |
Statement of Profit and Loss for the years ended...
Particulars | Note No. | Figures at the end of the Current Reporting Period (₹) | Figures at the end of the Previous Reporting Period (₹) |
I. Revenue from Operations | |||
II. Other Income | |||
III. Total Revenue (I + II) | ... | ... | |
IV. Expenses | ... | ... | |
Cost of Materials Consumed | ... | ... | |
Purchases of Stock-in-Trade | ... | ... | |
Changes in Inventories of Finished Goods, | |||
Work-in-Progress and Stock-in-Trade | ... | ... | |
Employees Benefit Expenses | ... | ... | |
Finance Costs | ... | ... | |
Depriciation and Amortisation Expenses | ... | ... | |
Other Expenses | |||
Total Expenses | .. | .. | |
V. Profit before Tax (III - IV) | .. | .. | |
VI. Less: Tax | .. | .. | |
VII. Profit or Loss for the Period (V - VI) | .. | .. |