Chapter 1 FINANCIAL STATEMENTS OF A COMPANY

1. Meaning of Financial Statements.

2. Characteristics and Nature of Financial Statements.
3. Content of Annual Report: -
A. Report by the Board of Directors.
B. Auditors Report to the Shareholders.
C. Financial Statements: -
a. Balance Sheet
b. Statement of Profit and Loss
c. Note to Accounts
d. Cash Flow Statement
4. Objectives of Financial Statements.
5. Essentials of Financial Statements.
6. Parties Interested in Financial Statements or Users of Financial Statements.
7. Limitations of Financial Statements.
Balance Sheet of.................
as at....................
Particular Note Previous Year Current Year
No. (Rs.) (Rs.)
A B
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) Property, Plant and Equipment and
Intangible Assets
(i) Property, Plant and Equipment
(ii) Intangible Assets
(iii) Capital Work – in – Progress
(iv) Other Non – current Assets
 (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

EQUITY AND LIABILITIES

HEAD SUB-HEAD ITEM
1. SHAREHOLDER’S {a} Share Capital: - As per note to account
FUNDS {b} Reserves and Surplus: - [i] Capital Reserve
[ii] Capital Redemption Reserve
[iii] Securities Premium Reserve
[iv] Debenture Redemption Reserve
[v] Revaluation Reserve
[vi] Share Option Outstanding Reserve
[vii] Other Reserves
[viii] Surplus i.e. Balance in Statement of Profit and
Loss
{c} Money Received Against Nil
Share Warrants: -
2. SHARE Nil Nil
APPLICATION
MONEY PENDING
ALLOTMENT
3. NON-CURRENT {a} Long Term Borrowings: - [i] Debentures
LIABILITIES [ii] Bonds
[iii] Term Loans (From Banks/Others)
[iv] Public Deposits
[v] Other Loans and Advances
{b} Deferred Tax Liabilities Nil
(Net)
{c} Other Long-Term [i] Trade Payables (Sundry Creditors and Bills
Liabilities Payables)
[ii] Others (if they are payable after 12 months)
{d} Long- Term Provisions [i] Provision for Retirement Benefits
[ii] Provisions for Warranty Claims
[iii] Provisions for Gratuity
[iv] Provisions for Earned Leave
4. CURRENT {a} Short-Term Borrowings [i] Loan repayable on demand
LIABILITIES [ii] Bank Overdraft or Cash Credit from Bank
[iii] Current Maturities of Long – term Debts
[iv] Loans from other parties
[v] Deposits
[vi] Other Loans and Advances
{b} Trade Payables [i] Sundry Creditors
[ii] Bills payables
 {c} Other Current Liabilities
{d} Short-Term Provisions
ASSETS
1. NON-CURRENT {a} Property, Plant and
ASSETS Equipment and Intangible
Assets:
{b} Non-current Investments:
{c} Deferred Tax Assets (Net):
-
{d} Long-term Loans and
Advances:
{e} Other Non-current Assets:
2. CURRENT ASSET {a} Current Investments: -
{b} Inventories: -
{c} Trade Receivables: -
{d} Cash and Cash
equivalents: -
[i] Interest Accrued but not Due on Borrowings
[ii] Interest Accrued and Due on Borrowings
[iii] Income Received in Advance
[iv] Unpaid Dividend
[v] Excess application money (due for refund and
interest thereon)
[vi] Unpaid matured deposits and interest accrued
thereon
[vii] Unpaid matured Debentures and interest
accrued thereon
[viii] Calls in Advance
[ix] Other Payables (Due for payment within 12
month i.e. O/S expenses, any output GST,
Provident fund payable.)
[i] Provision for Employees Benefits
[ii] Provision for Expenses
[iii] Provision for Tax
[iv] Other Provisions
[i] Property, Plant and Equipment
[ii] Intangible Assets
[iii] Capital Work in Progress
[iv] Intangible Assets under Development
[i] Investment in Property
[ii] Investment in Equity Instruments
[iii] Investment in Preference Shares
[iv] Investment in Government or Trust Securities
[v] Investment in Debentures or Bonds
[vi] Investment in Mutual Funds
[vii] Investment in Partnership Firms
[viii] Other non-current Investments
Nil
[i] Capital Advances
[ii] Other Loans and Advances
[i] Security Deposits
[ii] Long-term Trade Receivables
[iii] Others
[iv] Insurance claim receivable
[i] Investment in Equity Instruments
[ii] Investment in Preference Shares
[iii] Investment in Government or Trust Securities
[iv] Investment in Debentures or Bonds
[v] Investment in Mutual Funds
[vi] Investment in Partnership Firms
[vii] Other non-current Investments
[i] Raw Materials
[ii] Work in Progress
[iii] Finished Goods
[iv] Stock in Trade
[v] Stores and Spares
[vi] Loose Tools
[i] Debtors
[ii] Bills Receivables
[i] Cash in hand
[ii] Balances with Banks
[iii] Cheques, Drafts in hand

{e} Short-term Loans and
Advances: -
[iv] Earmarked balances with Banks
[v] Balance with Banks held as Margin Money
[vi] Bank Deposits with less than 12 months
maturity
[vii] Others
[to be realised within 12 months]

{f} Other Current Assets: - [i] Prepaid expenses

[ii] Accrued Income
[iii] Dividend receivables
[iv]Advance Taxes

Note to Accounts
Particular Rs. Current year Rs. Previous Year
Share Capital: -
Authorised Capital
--------- Equity Shares of Rs. ----- each
--------- Preference Share of Rs. ----- each
Issued Capital
--------- Equity Shares of Rs. ----- each
--------- Preference Share of Rs. ----- each
Subscribed Capital
Subscribed and fully paid-up
--------- Equity Shares of Rs. ----- each
--------- Preference Share of Rs. ----- each
Subscribed but not fully paid-up
--------- Equity Shares of Rs. ----- each
Less – Calls in arrear
--------- Preference Share of Rs. ----- each
Lass – Calls in arrear
Balance of Forfeited Share Account

Note – Contingent Liabilities and Commitments are not recorded in the books of accounts: -
Contingent Liabilities is not recorded in the books of accounts but is disclosed in the Notes to accounts for the
information of the users. It is to be classified into: -
[1] Claim against the company not acknowledged as debts.
[2] Bills Receivables discounted from Bank not yet due for payment.
[3] Proposed Dividend (Current Year)
[4] Other Claims for which the company is contingently liable.
Commitments mean financial commitments due to activities agreed to by the company to be undertaken by it in
future. They are classified into: -
[1] Estimated amounts of contracts remaining to be executed on Capital Account and not provided for.
[2] Uncalled liability on shares and other investments partly paid.
[3] Other commitments.

STATEMENT OF PROFIT AND LOSS

1. REVENUE: -
 [A] Revenue from operations
[B] Other incomes
2. EXPENSES: -
[A] Cost of material consumed
[B] Purchases of Stock-in-Trade
[C] Changes of inventories of Finished Goods, Work-in-Progress and Stock-in-Trade
[D] Employees Benefit Expenses
[E] Finance Cost
[F] Depreciation and Amortisation Expenses
[G] Other Expenses
Statement of Profit and Loss of.................
for the year ended..................
Particular Note Previous Current Absolute Percentage
No. Year Year Change Change
(Rs.) (Rs.) (Rs.) (%)
A B C = A – B D= C ×
A
100
1. Revenue from Operations
2. Other Incomes
3.Total (1 + 2)
4. Expenses: -
(a) Cost of Material Consumed
(b) Purchases of Stock-in-Trade
(c) Changes in Inventories
(d) Employees Benefit Expenses
(e) Finance Cost
(f) Depreciation and Amortisation
(g) Other Expenses
5.Total Expenses
6.Profit before Tax (3 – 5)
7. Income Tax [% on PBT]
8. Profit after Tax (6 – 7)
Formulas: -
1. Cost of Material Consumed =
Opening Inventory of Materials + Purchases of Material – Closing Inventory of Materials
2. Chang in Inventory = Opening Inventory – Closing Inventory