ACCOUNTS PROJECT REPORT

ON

FINANCIAL STATEMENTS

INTRODUCTION
Financial statement is a formal record of the financial activities of a business, person, or other entity. In English-a financial statement is often referred to as an account, although the term financial statement is also used, particularly by accountants. For a business enterprise, all the relevant financial information, presented in a structured manner and in a form easy to understand, are called the financial statements. "The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position.

Contd .
THE FINANCIAL STATEMENTS BEING: BALANCE SHEET: also referred to as statement of financial position or condition, reports on a company's assets, liabilities, and Ownership equity at a given point in time. PROFIT & LOSS A/c: also referred to as Profit and Loss statement (or a "P&L"), reports on a company's income, expenses, and profits over a period of time. Profit & Loss account provide information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state. TRADING ACCOUNT : is a part of the financial statement which determines the Gross Profit/Loss during an accounting year.Its main components are Sales, Purchases and all Direct Expenses STATEMENT OF RETAINED EARNINGS: explains the changes in a company's retained earnings over the reporting period. STATEMENT OF CASH FLOW: reports on a company's cash flow activities, particularly its operating, investing and financing activities.

Aid to Decision Making

Financial statements helps in decision making by showing where and when money has been spent, by evaluating performance, and by showing the implications of choosing one plan instead of another. Fundamental relationships in the decision-making process:
Event Accountant s analysis and recording Financial statements Users

SCOPE AND APPLICATION

The commonly used financial statements--balance sheet, income statement, and statement of changes in cash flows-- focus on a firm's financial structure and performance over a defined period of time. Although they may conform to generally accepted accounting standards they still fail to provide other information that is equally important to achieving true full disclosure. Accountants have proposed remedies for this neglect by taking a close look at other types of statements: the inflation, value added, employee, social performance, and human asset reports. all types of reports must be taken into consideration. They fail to disclose vital information on the measurement and impact of inflation; the measurement of total wealth generated by the production team, its return to stockholders; necessary information on employees, The measurement of social costs and the benefits attributable to the effects of organizational behavior on the environment, and the measurement of the value of human assets.

RELEVANCE TO BUSINESS
At regular period public companies must prepare documents called financial statements. Financial statements show the financial performance of an company. They are used for both internal-, and external purposes. When they are used internally, the management and sometimes the employees use it for their own information. Managers use it to plan ahead and set goals for upcoming periods. When they use the financial statements that were published, the management can compare them with their internally used financial statements. They can also use their own and other enterprises financial statements for comparison with macroeconomical datas and forecasts, as well as to the market and industry in which they operate in.

RELATION TO PROFIT

USER GROUPS
The International Accounting Standards Board (IASB)has an ambition to revolutionize financial reporting. Its framework will benefit users. It is critical that the general public, including prepares and users, understand the financial statements so that they can participate in the standard-setting process. No doubt, accounts in their current form represent a fine balancing act for all the different needs required of them. Many users, particularly analysts, wish to identify recurring components of performance. For example, operating revenue is a recurring item, while a gain on a sale of a subsidiary is often not. Increased use of fair values is put forward on the grounds that it produces more predictive information; it is argued that fair value represents the discounted value of future cash flows. The concept might work well in respect of certain balance sheet items. For example, a user might want to know what the securities held by an entity are worth today. But it raises issues about the performance statement: how changes in fair value (which are by their nature unpredictable and both positive and negative) should tie in with the users desire to have a better picture of recurring items. Should such gains be included in the performance statement and how?

Users of Financial Statements

Individuals

Government regulatory agencies Taxing authorities Nonprofit organizations

Businesses Investors and creditors

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The Balance Sheet

Summarizes the financial condition of the business at a point in time:
Remember - the snapshot idea!

Estimates net worth or owner equity. Most transactions affect the balance sheet, so it may change daily.

General Format of a Balance Sheet

Assets
Current assets Noncurrent assets Total assets $XXX XXX $XXX

Liabilities
Current liabilities $XXX Noncurrent liabilities XXX Total liabilities $XXX

Owner s equity
Total liabilities and owner s equity

XXX $XXX

 What Does Trading Account Mean? An account held at a financial institution and administered by an investment dealer that the account holder uses to employ a trading strategy rather than a buy-and-hold investment strategy. Though trading accounts are traditionally thought to hold only stocks, a trading account can hold cash, foreign cash, securities and a number of other types of investments. Investors who use a number of trading strategies or have a number of brokerage accounts may separate their accounts in order to avoid confusion. One account may be a registered account for their retirement savings; another account may be a buy-and-hold account for their long-term stocks; another may be a margin account; and another may be a trading account used for conducting day-trading activities.

What Does Profit and Loss Statement - P&L Mean?

A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time - usually a fiscal quarter or year. These records provide information that shows the ability of a company to generate profit by increasing revenue and reducing costs. The P&L statement is also known as a "statement of profit and loss", an "income statement" or an "income and expense statement".

It begins with an entry for revenue and subtracts from revenue the costs of running the business, including cost of goods sold, operating expenses, tax expense and interest expense. The bottom line is net income (profit).

The balance sheet, income statement and statement of cash flows are the most important financial statements produced by a company. While each is important in its own right, they are meant to be analyzed together.

PROFIT & LOSS ACCOUNT for the year ending 31 March .

Particulars
To All Indirect Expenses

Amount Particulars
xxxx xxxx By Gross Profit By Indirect Incomes

Amount
xxxx

xxxx

To Net Profit -transferred to Capital Account

xxxx

xxxx Xxxx xxxx

 What Does Statement Of Retained Earnings Mean?

A financial statement outlining the changes in retained earnings for a specified period. The statement of retained earnings is prepared in accordance with generally accepted accounting principles (GAAP). The statement of retained earnings reconciles the beginning and ending retained earnings for the period, using information such as net income from the other financial statements.

This statement can appear as a separate statement or as an inclusion on either a balance sheet or an income statement. Also, the statement of retained earnings can be known as a statement of owner's equity, equity statement or statement of shareholders' equity.

What Does Cash Flow Statement Mean?

One of the quarterly financial reports any publicly traded company is required to disclose to the SEC and the public. The document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter. Even profitable companies can fail to adequately manage their cash flow, which is why the cash flow statement is important: it helps investors see if a company is having trouble with cash.

Statement of Cash Flows

Statement of Cash Flows separates firm activities into three parts: 1. Operating Activities 2. Investing Activities 3. Financing Activities

Cash Flows from Operations: Typically these are Net income, depreciation, changes in accounts receivable, inventories, accounts payable, notes payable, other current liabilities Cash Flows from Investing :Typically these are change in fixed assets like change in plant and equipment (investment in these assets or sale of these assets) Cash Flows from Financing : Typically these are, Dividends paid to shareholders, and change in debt, stock value.

Capital Expenditure Vs. Revenue Expenditure

Capital expenditure: Incurred for acquisition of FA Its benefits extend to more than one year Its a real account It is shown in the Balance Sheet

Revenue expenditure: Incurred to conduct business Its benefits extend to only one year It s a nominal account It s a part of the Trading or Profit & Loss Account

Capital Receipts Vs. Revenue Receipts

Capital Receipts: Capital Revenue Receipts: receipts are the These are the amounts amounts received in the received in the normal & form of additional regular course of the capital , loans received business mainly through and sale proceeds of sale of goods/services. fixed assets. Capital These are shown in the receipts are shown in credit side of the Profit & the Balance Sheets only. Loss Accounts.

Direct Expenses Vs. Indirect Expenses

Direct Expenses: These are the expenses which are incurred on the goods purchased till they are brought to the place of business for sale. These are debited to the Trading Account.

Indirect Expenses: These are the expenses which are incurred for the sales and distributions of the goods, office administration and financial charges. These expenses are debited to Profit & Loss Account.

CONCLUSION

We are heartily thankful to Professor Ayangar ., whose encouragement and support from the initial to the final level enabled us to develop an understanding of the subject. Lastly, We offer our regards to all of those who supported us in any respect during the completion of the project.

PROJECT BY
NAME KUMAIL MUKADAM HARSHAN NIDHARAK SHIVAL RAMWANI MITUL VARUN PRATIK VASWANI ROLL NO 65 72 78 102 103