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    Financial Statements of A Company

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    tanvi zodape
    Financial statements include a balance sheet, statement of profit and loss, and cash flow statement. The balance sheet provides a snapshot of a company's financial position at a point in time by listing assets, liabilities, and shareholder equity. The statement of profit and loss reports a company's revenues, expenses, and profits over a period of time. Together, these financial statements are used by managers, investors, lenders and other stakeholders to understand a company's performance and financial strength.

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    Financial Statements of A Company

    Uploaded by

    tanvi zodape
    241 views3 pages
    Financial statements include a balance sheet, statement of profit and loss, and cash flow statement. The balance sheet provides a snapshot of a company's financial position at a point in time by listing assets, liabilities, and shareholder equity. The statement of profit and loss reports a company's revenues, expenses, and profits over a period of time. Together, these financial statements are used by managers, investors, lenders and other stakeholders to understand a company's performance and financial strength.

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    CBSE Class 12th

    Original Title

    Financial Statements of a Company

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    Financial statements include a balance sheet, statement of profit and loss, and cash flow statement. The balance sheet provides a snapshot of a company's financial position at a point in time by listing assets, liabilities, and shareholder equity. The statement of profit and loss reports a company's revenues, expenses, and profits over a period of time. Together, these financial statements are used by managers, investors, lenders and other stakeholders to understand a company's performance and financial strength.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    241 views3 pages

    Financial Statements of A Company

    Uploaded by

    tanvi zodape
    Financial statements include a balance sheet, statement of profit and loss, and cash flow statement. The balance sheet provides a snapshot of a company's financial position at a point in time by listing assets, liabilities, and shareholder equity. The statement of profit and loss reports a company's revenues, expenses, and profits over a period of time. Together, these financial statements are used by managers, investors, lenders and other stakeholders to understand a company's performance and financial strength.

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    of 3

    Financial Statements of a Company

    Meaning
    (i) An accounting process initiates with journalising of the transactions and ends with
    the preparation of Trial Balance which comprises of all the debit and credit account
    balances.
    (ii) A summary of accounting data which is prepared by an enterprise at the end of an
    accounting process with the help of such Trial Balance is known as Financial
    Statements.
    (iii) As per Section 2(40) of the Companies Act, 2013, a set of Financial Statements
    prepared in accordance with Schedule III of this Act comprises of a Balance Sheet,
    Notes to Accounts, Statement of Profit and Loss and Cash Flow Statement.

    Objectives of financial statements


    1) To provide information about economic resources and obligations of business
    2) To provide information about the earning capacity of the business
    3) To provide information about cash flows
    4) To Judge effectiveness of management (abilities to utilise the resources)
    5) Information about activities of business affecting the society
    6) Disclosing accounting policies

    Uses and importance


    1)Report on stewardship function (reports the performance of manager)
    2) Basis for fiscal policies (in particular, taxation policies)
    3) Basis for granting credit
    4) Basis for prospective investors
    5) Guide to the value of investment already made
    6) Aids trade associations in helping their members
    7) Helps stock exchanges

    Limitations of financial statements


    1) Do not reflect current situation
    2) Assets may not realise
    3) Bias
    4) Aggregate information (but not detailed)
    5) Vital information missing
    6) No qualitative information
    7) They are only interim reports
    Balance Sheet:

    Meaning: Balance Sheet or the Position Statement shows the financial position of a
    business by providing complete details of its Assets, Liabilities and Equity at a
    particular date.

    Format: As prescribed in Part I of Schedule III of the Companies Act, 2013, Balance
    Sheet is prepared as follows:
    Particulars Note Figures at Figures at
    no. the end of the end of
    the the
    Current Previous
    Reporting Reporting
    Period 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 … …
    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) Deferred Tax Assets (Net) … …
    d) Long-term Loans and Advances … …
    e) 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 … …
    Statement of Profit and Loss:

    Meaning: It is known as an Income Statement as it takes into consideration all the


    incomes and expenses for a particular period in order to determine whether the entity
    is a profit-making entity or is running into losses. It shows the profitability of the
    business entity for a given period of time.

    Format: As prescribed in Part II of Schedule III of the Companies Act, 2013, statement
    of profit and loss is prepared as follows:
    Particulars Note Figures at Figures at
    no. the end of the end of
    the the
    Current Previous
    Reporting Reporting
    Period 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 (Finished goods, Work in- … …
    Progress and Stock-in-Trade)
    Employee Expenses … …
    Finance Costs … …
    Depreciation Expenses … …
    Amortisation Expenses … …
    Other Expenses … …
    Total Expenses … …
    V. Profit before Tax (III-IV) … …
    VI. Less: Tax … …
    VII. Profit or Loss for the period (V-VI) … …

     Preliminary expenses are to be written-off completely in the year in which such


    expenses are incurred. They should be written-off first from securities premium and
    the balance if any, from statement of profit & loss.
     Borrowing costs such as discount on issue of debentures could be written off over loan
    period.

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