Study Material & Notes for the Chapter 8
I. FINANCIAL STATEMENTS
- Every company registered under The Companies Act 2013 shall prepare its Balance Sheet, Statement of Profit and Loss and Notes to account thereto in accordance with the manner prescribed in the revised Schedule III to the Companies Act, 2013 to harmonise the disclosure requirement with the accounting standards and to converge with new reforms.
- The financial statements i.e., Balance sheet and Statement of Profit and Loss are required for external reporting and also for internal needs of the management like planning, decision-making and control.
- Balance Sheet: The Balance sheet shows all the assets owned by the concern, all the obligations or liabilities payable to outsiders or creditors and claims of the owners on a particular date. It is one of the important statements depicting the financial position or status or strength of an undertaking.
- Statement of Profit and Loss: The Statement of profit and loss is prepared for a specific period to determine the operational results of an undertaking. It is a statement of revenue earned and the expenses incurred for earning the revenue. It is a performance report showing the changes in income, expenses, profits and losses as a result of business operations during the year between two balance sheet dates.