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What are Financial Statements?

The financial statements are the end products of accounting process. They are prepared following accounting policies consistently, accounting standards, Companies Act, 2013 and accounting concepts, principles, procedures and also the legal environment in which the business organisations operate.

These refer to:

  • Balance sheet (position statement) as at the end of accounting period
  • The statement of profit and loss (Income statement) of a company
  • Notes to Accounts (supporting information for items in the Balance Sheet and statement of profit and loss)
  • The cash flow statement Accounting Standard 3)

Objectives of Financial Statements

To provide information about economic resources and obligations of a business,

To provide information about the earning capacity of the business,

To provide information about cash flows

To judge effectiveness of management

To provide Information about activities of business affecting the society

Disclosing accounting policies

Users of Financial Statements

There are various users of the financial statement analysis. They include:

  • Shareholders
  • Management and Employees
  • Banks and financial institutions
  • Investors and potential investors
  • Creditors
  • Government and its authorities
  • SEBI

Uses and Importance of Financial Statements

Financial Statements are useful for the following reasons:

  • Financial statements report the performance of the management to the shareholders,
  • To use as basis for prospective investors, Basis for granting of credit, Basis for prospective investors,
  • Guide to the value of the investment already made, Aids trade associations in helping their members, Helps stock exchanges.

Balance Sheet

The balance sheet shows an entity's assets, liabilities, and stockholders' equity as of the report date. In this report, the total of all assets must match the combined total of all liabilities and equity.

The format of Balance Sheet (also known as Position Statement) as per Part I of Schedule III of Companies Act, 2013 is as follows:


 Name of the Company….

BALANCE SHEET as at 31st March 20XX… 


Note No.

Figure as at the end of Current reporting period

Figure as at the end of Previous reporting period



1) Shareholder’s 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







1) Non-Current Assets


(a) Property, Plant and Equipment

(i) Tangible assets

(ii) Intangible assets

(iii) Capital work-in-progress

(iv) Intangible assets under development


(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







See accompanying notes to the financial statements






Statement of Profit and Loss

Statement of Profit and loss is a statement that shows the financial performance of a company, i.e., profit earned or loss incurred during the accounting period. The format of Statement of Profit and loss (also known as Income Statement) as per Part II of Schedule III of Companies Act, 2013 is as follows


Statement of Profit and loss for the year ended 31st March 20XX…..


financial statements

Contingent asset

The assets are contingent because they arise from unexpected events. Contingent assets will not be recognised in financial statements until they are certain....

Onerous Contracts - Ind AS 37

If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision. Click to know more....

Reserve and Surplus in Balance Sheet

Reserve and surplus are created from undistributed profits for specific purposes. Reserves will be shown under the heading of Shareholders Fund in the balance sheet....

Securities Premium Account

if the share issue price is higher than face value, the excess amount shall be transferred to a securities premium account. Know more about security premium...