Financial statement

Financial statements of a Company

All the business transactions of a company are recorded in the account books on accrual basis by all the companies. This is as per the Company Act. The records are maintained according to the Double Entry System.

              The entire recorded information is analyzed and presented systematically in the form of Income Statement and Position Statement at the end of each financial year. The Income Statement discloses the net profit earned of losses suffered during the year. The Position Statement discloses the financial position of the firm in terms of reserves, capital, borrowed funds and assets. These are mandatory statements as per the Law. As per the requirements of AS-3, every company also prepares a Cash Flow Statement. The following are the financial statements to be prepared every year:

ü  A Balance Sheet (Position statement)

ü  A Profit and Loss account (Income statement)

ü  A Cash Flow statement

All these financial statements are presented in the Annual Report by the management before the Shareholders in the AGM. In addition to the above statements, the annual report is also required to contain the following reports from the management of the company:

v  The Board of Directors Report

v  Auditors Report

v  Segment Report

Board of Directors Report

              Section 134 of Company Act 2013 wants the directors to report the following matters in the annual report presented to the shareholders in the AGM:

Ø  Financial state of affairs of the company

Ø  The amount, if any, which the board proposes to carry to the reserves

Ø  The amount, if any, which the board recommends to pay as dividends

Ø  Any material changes, which may effect the financial position of the company and have occurred between the date of report and the end of the period for which the Balance sheet was prepared.

Ø  Any additional information relating to conservation of energy, technology absorption and foreign exchange earnings in the prescribed manner.

Ø  A statement showing the detailed particulars of the employees who were in receipt of any remuneration, giving their names, addresses and qualifications.

Auditors Report

              It is essential that an auditor should certify the financial statements. Auditor owes his duty to the shareholders to ensure that the accounts prepared by the company are accurate. He has to certify that the financial statements show true and fair view of the profitability and the financial position of the company. He expresses his opinion in his report issued to the shareholders of the company under section 143 of company act 2013. He has to inform the shareholders in the AGM whether:

Ø  He obtained all the explanations and information from the company and its branches

Ø  Proper books of accounts have been maintained

Ø  The Income statement and the Position statement are in agreement with the account books

Ø  The financial statements are complying with the accounting standards

Ø  Any director is disqualified from being appointed as director. Etc

Segment Report

              By segments we mean various products and services rendered by the company. For instance Maruti Udyog Ltd.’s segments are Maruti Small car (Alto-800), Sedan cars (Dezire) etc. Sometimes good performance of one segment overshadows the bad performance of the other segment and this bad performance is hidden.

              Now it is mandatory for the companies to publish segment performance information so that the shareholders are able to make a better assessment about the performance of the company as a whole. The segment report highlights the following factors in each segment:

Segment revenue: It is the revenue earned by the segment in the period under review. This does not include income from interest and dividend or gain on sale of assets

Segment expenses: They include all expenses on operating activities of the segment. These expenses do not include financial expenses and non-operating expenses, general administrative expenses and head office expenses including income tax etc.

Segment results: This is equal to profit and loss for the segment

Segment assets: This indicates the total amount invested in assets used in a particular segment in operating activities.

Segment liabilities: These are the liabilities which result from the operating activities of the segment.

Segment capital employed: This is the amount of capital employed in maintaining the production of the segment

Balance sheet of the company

As per Revised Schedule III part I of Company’s Act

Particulars	Note No.	Amount at the end of current reporting period	Amount at the end of previous reporting period
I. Equity and Liabilities 1. Shareholder’s Fund Share Capital Reserves and Surplus Money received against share warrants 2. Share Application money pending Allotment 3. Non – Current Liabilities Long Term Borrowings Deferred Tax Liabilities (net) Other long term liabilities Long term provisions 4. Current liabilities Short – term borrowings Trade payables Other current liabilities Short term provisions TOTAL	1 2
II.    ASSETS 1.       Non Current Assets (a) Fixed Assets:          Tangible assets         Intangible assets         Capital work in progress         Intangible assets under development (b) Non – current investments Deferred tax Assets (net) Long term loans and advances Other non - current assets 2.       Current Assets Current investments Inventories Trade receivables Cash and cash equivalents Short term loans and advances Other Current Assets TOTAL

Presentation of different classes of shares in balance sheet

Notes to Accounts:

Note no.1

Share Capital

1.        Authorized Capital

-----------shares of Rs.-------each

2.       Issued Capital

----------shares of Rs.-------each

3.       Subscribed Capital

a)      Subscribed and Fully paid up

b)      Subscribed but not Fully paid up

-------shares of Rs.------each-------called up

Less: calls in arrear

Add: shares forfeited a/c

Contingent liabilities and Commitments:

Contingent liabilities are those liabilities which may or may not arise as they are dependent on happening of an event in future. For e.g. bill of exchange discounted with bank and a claim filed against the firm in court by a customer etc.

Commitments mean financial commitments due to activities agreed to by the company to be undertaken by it in future. They can be classified as:

Estimated amounts of contracts remaining to be executed on capital account and not provided for.

Uncalled liability on shares and other investments partly paid

Other commitments like unpaid dividends on cumulative preference shares etc.

Statement of Profit and Loss (as per schedule III part II)

Particulars	Note no.	Figures of current reporting period	Figures of previous reporting period
Revenue from operations (always net)
Other income
Total revenue (1 + 2)
Expenses: Cost of materials consumed Purchase of stock in trade Changes in inventories of finished goods, work in progress and stock in trade Employee Benefit expenses Finance costs Depreciation and Amortization expenses Other expenses Total expenses:
Profit before Exceptional and extraordinary items and tax (3 – 4)
Exceptional items
Profit before extraordinary items and tax (5 – 6)
Extraordinary items
Profit before Tax (7 – 8)
Tax expenses:            Current tax            Deferred tax
Profit or loss of the continuing period
Profit or loss from discontinuing operations
Tax expenses of discontinuing operations
Profit or loss from discontinuing operations (after tax) (12 – 13)
Profit or loss for the period (11 – 14)
Earning per Share: Basic Diluted

Balance sheet Important subhead & main head

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