Financial Statement of Company

Financial Statement: The term financial statement as used in accounting refers to two statements which
the accountant prepares at the end of a accounting period. These statements are including:

(1) Position Statement i.e. Balance Sheet, and

(2) Income Statement i.e. Profit and Loss A/c.

Position Statement: It shows the true position of the assets and liabilities of the business on a particular
date. It is a statement of assets and liabilities.

Position Statement prepares for:

(1) Calculating financial ratios.

(2) Understanding the short term and long term financial position of the business.

Income Statement: It shows the net result of the business in the form of profit or loss in an accounting
year. Profit and Loss A/c is also known as Income Statement. It also includes Trading A/c.

Income Statement prepares for:

(1) Calculating net profit or loss in an accounting year.

(2) Calculating cost of production, direct expenses, indirect expense and indirect income.
(3) Comparing the actual performance of the business with the desired performance.

Important Note:

1. All the balances of Nominal Account are transferred to Income Statement.

2. All the balances of Real Account and Personal Account are transferred to Position Statement.

Contingent Liabilities: This is not a actual liability but this is treated as hypothetical liability, which is
depend upon occurrence or not occurrence of future definite event. It is shown in foot note of the
balance sheet. Examples of contingent liabilities are:

1. Arrear of fixed cumulative dividend.

2. Claims against the company not acknowledge as debt.
3. Bills discounted with Bank.
4. Pending Courts cases against Company.
 Format of Balance Sheet
Balance Sheet of ………..Company
As on 31st ………….
Liabilities Amount Assets Amount
Share Capital: Fixed Assets:
Authorised: Goodwill XXX
Preference XXX Land XXX
Equity XXX Premises XXX
XXX Railway Sidings XXX
Issued: Plant and Machinery XXX
Preference XXX Furniture XXX
Equity XXX Patents and Trademarks XXX
Less: Calls unpaid (XXX) Live Stock XXX
Add: Forfeited Sh. XXX XXX Vehicles XXX
Reserve and Surplus: Investment:
Capital Reserve XXX Government Securities XXX
Capital Redemption Reserve XXX Investment in shares, Debenture
Securities Premium XXX or Bonds XXX
Profit and Loss A/c XXX Current Assets, Loans and
Secured Loans: Advances:
XXX Current Assets:
Debentures
XXX Interest Accrued XXX
Loans and Advances from
XXX Stores and Spares Parts XXX
Subsidiary Co.
XXX Loose Tools XXX
Other Loans and Advances
Stock in Trade XXX
Unsecured Loans:
XXX Work in Progress XXX
Fixed Deposit
XXX Sundry Debtors XXX
Loans and Advances from
XXX Cash and Bank Balance XXX
Subsidiary Co.
XXX Loans and Advances:
Short term Loan and Advances
XXX Advances and Loans to
Other term loans and Advances
Subsidiary Co. XXX
Current Liab. & Provision:
Bills Receivable XXX
Current Liabilities:
XXX Advance Payments XXX
Acceptances
XXX Miscellaneous Expenditure:
Sundry Creditors
XXX Preliminary Expenses XXX
Outstanding Expenses
Discount on Issue of Sh. and XXX
Provision:
XXX Debenture XXX
for Tax
XXX Other deferred exp. XXX
for Dividend
XXX Profit and Loss A/c
for Contingencies
XXX (Dr. Balance) XXX
for Provident fund
for insurance, pension and
XXX
other similar benefits
XXX XXX

Foot Note:
Contingent Liabilities
 Income Statements:
Particulars Amount
Gross Sales XXX
Less: Sales Returns (xxx)

Net Sales XXX

Less: Cost of Goods Sold (xxx)

Gross Profit XXX

Less: Operating Expenses (xxx)

Operating Profits XXX

Less: Non Operating Expenses (xxx)
Add: Indirect Incomes xxx

Net Profit before Int., Tax and Pre. Div. XXX

Less: Interest on Loan and Debenture (xxx)

Less: Provision for Tax (xxx)

Less: Preference Dividend (xxx)

Earnings available to Eq. Shareholder XXX

Less: Retained Earnings (xxx)

Dividend to Equity Shareholder XXX