PRESENTATION OF FINANCIAL STATEMENTS OF COMPANY: Want to know about how a company should present its financial statements. Here we will talk about Financial Statements in Companies (private & public) except Banking, Insurance, and Non Banking Financial Corporation (NBFC).
Ind AS-1 describes the framework for the presentation of the financial statements. In many ways, it is an accounting guideline written with the intent of paving way for the harmonization of the accounting standards and the schedule III of the Companies act, 2013.
First of all, a simple definition of Financial Statements is as follow: –
Financial statements (or financial report) are a formal record of the financial activities and position of a business, person, or other entity.
Relevant financial information is presented in a structured manner and in a form easy to understand.
Complete Set of Financial Statement includes : –
Balance Sheet including Notes to Accounts-
1. Statement of Profit and Loss including its related Notes to Accounts.
2. Statement of Changes in Equity.
3. Statement of Cash Flows.
The MCA on 6 April 2016 amended Schedule III to include general instructions for preparation of financial statements of a company whose financial statements are required to comply with Ind AS. The amendment divides Schedule III into two parts i.e. Division I and II
1. Division I is applicable to a company whose financial statements are required to comply with the current accounting standards
2. Division II is applicable to a company whose financial statements are drawn up in compliance with Ind AS.
In recent era, Globalization is on utmost priority So compliance of Ind AS becomes more mandatory. Hence Division II is more considered in preparation of Financial Statements of the company.
In real life, we can see the audit reports of Infosys, Good Group FTA India Limited, Reliance Jio and there are many examples of limited companies that follow Guidance note given by Indian Institute of Chartered Accountants of India on this Schedule III, Division II of Companies Act 2013.
Formats of Financial Statements at a glance: –
1. Balance Sheet:
2. Statements of Profit & Loss A/c
3. Statement of Changes in Equity: –
4. Statement of Cash Flows :-
Our Accounting Standard 3 guides us about how to prepare Cash flow statements.
For more knowledge regarding each and every terms of above financial statements, please refer our other blogs.