You are on page 1of 40


Presented by:Heli Modi Juhi Agrawal Krishna Iyer Sagar Parmar

An important feature -maximum information is given in annual accounts and statements. These statements are also known as annual accounts or financial statements.

Financial Statements
Financial statements provide information about the financial activities and position of a firm. Important financial statements are: Balance sheet Profit & Loss statement Funds flow statement Cash flow statement

In India the ICAI every year presents shields, prizes and certificates of merit for best presentation of accounts. These practice started from 1959. e.g. Silver Shield: 1. Indian oil company, New Delhi. 2. Infosys Technologies Ltd.,Bangalore 3. Kamneor Drugs Ltd., Hyderabad.

Purpose And Status

Assist prepares of financial statements in applying accounting standards, Assist the accounting standards Board in the development of future accounting standards,

Assist auditors in forming an opinion

Assist the accounting Standards Board in promoting in harmonisation of regulations, accounting standards and procedures, Assist the users in interpreting the information contained in financial statements.

To provide information about the financial position, performance & cash flow of the enterprise. However these statements do not provide all the information that users may need since a) They portray the financial effects of past events and b) Do not necessarily provide non-financial information.

To show the results of the stewardship or the accountability of management for the resources entrusted into it.

Format , arrangement and get up

Annual repot is an important tool of a Advertisement. Reports are of size of a magazine. Number of pages vary from company to company.

Main matter is printed in Black ink, but coloured ink are also used by many companies.
Typography is applied most carefully, many titles of balance sheet and profit n loss a/c are given in bold types. Many companies use Logos on top of every page.

Title Page
Many companies prepare title page most carefully. Companies also put their symbols or monograms. Most companies give names of the company, accounting year and figure of years for which it is being published.




Index or contents
Most of companies at start give index of index of details inside the reports. E.g., Tata Iron and Steel company Ltd., I.T.C. Ltd., Bata India Ltd., Hindustan Lever Ltd., on first page give only an index.

Reliance Industries Ltd., Indian Aluminum Co. Ltd. & Tata Press Ltd. give no index. Raymond Ltd., Ashok Leyland ltd. & others In half a page give an index & in the other half give names of directors, auditors & address of its registered office.

Name of Directors or Management Team

Companies mostly on the first and second inside page givenames of directors, solicitors, names of bankers, details of head office, registered office, transfer agents and others. Many companies give names and coloured photographs of management team or directors.

Financial Highlights or Facts at a glance

In order to draw the attention of shareholders and public , highlights of years working or financial review are given.

Some companies present financial review or progress under following headings: 1) Facts at a Glance 2) The Year in Review 3) Facts in Nutshell 4) Digests of Results. E.g. Raymond Ltd.

Notice of Annual General Meeting

Companys annual report is to be presented in this meeting. Every company adopt different methods. E.g :Century Textile and Industries Ltd., Bata India Ltd., etc, printed their notice along with their annual report itself.

Britannia India Ltd., ITC Ltd., Spic Ltd., Tata Iron and Steel Company Ltd., Steel Authority of India, have printed notice separately.

Chairmans Statement
Statements or speech is included by most companies in their annual reports. They also print it as a part of the report. Various activities of a company are described in details in these speech.

Directors Report
According to Section 217 of companys act director should include details Some of them are:i. Financial Results, ii.Appropriation of profit to Reserves, iii.Recommendation of Dividend, iv.Production and Sales v. Troubles encountered ,etc

Acc. to Sec. (22A) Boards report shall include Directors Responsibility Statement indicating:I. Proper explanation relating to material departures. Selecting such accounting policies and apply them so that to give true and fair view of the state of affairs


III. Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this act for the safeguard of the assets of the company. IV. Prepare the annual accounts on a going concern basis.

Auditors Report
Acc. sec 227(2) of Companies Act, the auditor of a company has to make a report on balance sheet and p&l a/c.,for shareholders. It should be stated that has obtained all the information and explanations.

Under powers obtained from companies act, the central govt.promulgated manufacturing and other companies(auditors report) order in 1988.
The order should state that certain matters should be mentioned in it manufacturing and other specified companies.

Balance sheet
According to law:A company has to present previous years figures in it. Many companies print current years figure in bold letters or vertical light coloured screen stripe and some in different coloured ink.

ISPAT INDUSTRIES LIMITED BALANCE SHEET AS AT 31ST MARCH, 2001 SOURCES OF FUNDS 1. Shareholders' Funds Share Capital Advances against Share Capital Reserves & Surplus 2. Loan Funds Secured Loans Unsecured Loans TOTAL APPLICATION OF FUNDS 1. Fixed Assets Gross Block Less: Depreciation Net Block Capital Work -in-Progress Pre-operative exp. etc. 2. Investments 3. Current Assets, Loans & Advances Inventories Sundry Debtors Cash & Bank Balances Loans, Advances & Deposits Less: Current Liabilities & Provisions Liabilities Provisions Net Current Assets 4. Miscellaneous Expenditure (To the extent not written off or adjusted) 5. Profit and Loss Account Debit balance TOTAL Rs crore 2001


978.07 244.3 746.77 1969.14 4989.26 630.09 5619.35 7588.49

901.55 96.46 874.08 1872.09 3582.6 1088.29 4670.89 6542.98

3470.36 704.01 2766.35 2093.31 1715.74 6575.4 130.87 257.37 389.69 53.9 1018.31 1719.27 1150.7 18.86 1169.56 549.71 134.37 198.14 7588.49

1640.28 498.14 1142.14 2740.66 2231.85 6114.65 135.79 259.48 250.4 77.7 907.61 1495.19 1185.39 18.61 1204 291.19 1.35 _ 6542.98

Profit and loss account

A for of balance sheet is given in schedule VI of companies act 1956,but not of a profit and loss a\c.
It has been made compulsory to present certain details which the companies can present in their own way.

ISPAT INDUSTRIES LIMITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH (Rs. crores) 2001 2000 INCOME Sales & Job Work (Net) Other Income TOTAL (A) EXPENDITURE Decrease in stocks Raw Materials Consumed Purchases of Finished Goods Payments to & Provisions for Employees Excise Duty Mfg., Dist., Sell. & Admin. Expenses Interest & Finance Charges Depreciation Less: Transfer from Revaluation Reserve TOTAL (B) Profit/(Loss) before Taxation (A+B) Less: Provision for Taxation Add: Provision for Taxation written back Profit/(Loss) after taxation Less: Balance brought forward from Previous Year Transfer from Debenture Redemption Reserve Transfer from Taxation Reserve Transfer from General Reserve Profit/(Loss) available for appropriation APPROPRIATIONS: Transfer to Debenture Redemption Reserve Balance carried to Balance Sheet TOTAL 2238.89 25.18 2264.07 3.95 3.95 823.04 7.77 43.99 269.94 890.84 345.96 206.33 15.32 2576.5 312.43 0.03 312.46 100.52 0.73 13.07 -198.14 _ -198.14 -198.14 1425.48 11.65 1437.13 33.7 33.7 778.15 9.32 21.79 118.83 306.72 100.13 79.89 15.32 1433.21 3.92 0.32 0.07 3.67 106.59 8.09 _ 118.35 17.83 100.52 118.35

Fund flow statement

A statement is prepared showing the sources as well as the application of funds. Most companies attach such statements with annual reports

This statement is prepared to show fund changes between two reports.

NOTE :According to revised standar-3 every Indian every company has to present its cash flow statement in place of fund flow statement .

Cash flow statement

This is a statement showing cash received & cash spent during an year. Generally most companies present cash flow statement with financial statements. Indian C.A institute by modifying Accounting standard 3 has made it compulsory to present this statement with B/S & P & L a/c

NOTE:Only changes in cash that has taken place during the year are considered.

Following are the companies which have presented Cash Flow Statement in their annual a/c Hindustan lever ltd Reliance industries ltd Raymond ltd Tata engineering & Locomotive Co. ltd Tata Chemicals ltd Philips India ltd I.F.C.I LTD

Sources and Uses of Funds and Cash Flows

Sources of funds or cash flows: funds from operations sale of fixed assets issue of share capital borrowings

Uses of funds: losses purchase of fixed assets repayment of borrowings payment of dividends

Accounting Ratios
Companies gives information on important accounting ratios in annual reports. Useful to prospective investors, shareholders, creditors, govt. & others.

Companies profitabilty, liquidity, efficiency can be known.

These includes :1.Return on equity capital 2.Earning per share 3.Dividend coverage 4.% of dividend 5.Book value of equity share 6.Profitability 7.Capital turnover 8.Stock turnover 9.Turnover of working capital 10.Current ratio

Inflation Accounting
It is desirable that changes should be made according to the changes in price level. Fixed assets are shown at their original cost lesss depreciation Current assets like stock are shown at market or cost whichever is less All transactions which have taken place during the year are shown at their price at that time.

While preparing a.c changes in the prices are to be considered to show a stable condition. Depreciation is calculated on original cost of an asset. To show changes in price level, a separate statement is prepared. According to modern trends many companies attach inflation accounts with financial statement. E.g:- Bhel ltd

Human resource accounting

Employees of the company being valuable assets its is needed that their value should be presented in accounts. Following companies presented human resource accounting with their annual reports A.C.C ltd H.M.T ltd The mineral & metal trading corporations Project & equipment corp of India etc