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Final Accounts

Submitted in partial fulfillment of the requirements


For the award of the degree B.Com., LL.B. (Hons)
Submitted by
M.VISHAL ANAND
Registration No.Bc0150033
Submitted to

Prof. P. Kumaresan

TAMIL NADU NATIONAL LAW SCHOOL

SEPTEMBER 2016
TIRUCHIRAPPALLI 620 009
Declaration

I,M.VISHAL ANAND do hereby declare that the project entitled


Final accounts submitted to Tamil Nadu National law school in partial
fulfillment of requirement of award of degree in undergraduate in law is
a record of original work done by me under the supervision and
guidance of Professor P. Kumaresan department of Corporate
Accounting, Tamil Nadu National law school and has not formed basis
for award of any degree or diploma or fellowship or any other title to
any other candidate of any university.

INDEX
1. INTRODUCTION
2. OBJECTIVE
3. METHODOLOGY
4. DEFINITION OF FINAL ACCOUNTS
5. GENERAL AND LEGAL REQUIEMENTS
6. PREPARATION AND PRESENTATION OF FINAL ACCOUNTS
7. BALANCE SHEET
8. PROFIT AND LOSS A/C
9. CONCLUSION

Introduction:

Final accounts give a concise idea about the profitability and financial position of a
business to its management, owners, and other interested parties. All business transactions are
first recorded in a journal. They are then transferred to a ledger and balanced. These final
tallies are prepared for a specific period. The preparation of a final accounting is the last stage
of the accounting cycle. It determines the financial position of the business. Under this it's
compulsory to make trading account, profit and loss account and balance sheet.

Objective:
To know the concept of final accounts
To know the profitability and financial position of HDFC for five years (2012
2016) with the help of their final accounts.

Methodology:

This report is fully based on secondary data. Secondary data relating to final accounts
is collected from various internet sources and books. One telecom company i.e. HDFC has
been takes as sample for study, with the help of five years of their final accounts the
researcher had concluded the profitability and financial position of that bank..

FINAL ACCOUNTS

INTRODUCTION

The process of preparation of financial statements of companies is similar to that of non-


corporate entities for certain peculiar items and legal requirements. The corporate reporting
has assumed great importance in recent years. The company law board, the institute of
chartered accountants of India and whole corporate world are trying to bring about a total
transparency in the matter of reporting. The fundamental objective of corporate reporting is to
communicate economic information about the resources and performance of the reporting
entity to the users of financial statements. The professional bodies have aslo developed
several (till date -32) accounting standards for the purpose of preparing and disclosing
accounting information in order :

1) To serve the varied needs of users of accounting practices.

2) To harmonise the diverse accounting practices.

3) To ensure transparency consistency, comparability, adequacy, and reliability of


information contents .

4) To make accounting information more meaningful and useful.

5) And to improve overall quality of presentation and reporting.

Since every interested party has a right to information which is merely not the outcome of
statue but is based on the principle of public accountability. The financial statements which
are prepared on the basis of various accounting postulates ,concepts and conventions are
supposed to be endowed with many qualitative characteristics viz understandability,
relevance, materiality, reliability, faithful representation , substance-over-form, neutrality,
prudence , completeness, and comparability.

DEFENITION

Final accounts give a concise idea about the profitability and financial position of
a business to its management, owners, and other interested parties. All business transactions
are first recorded in a journal. They are then transferred to a ledger and balanced. These final
tallies are prepared for a specific period. The preparation of a final accounting is the last stage
of the accounting cycle .It determines the financial position of the business. Under this it's
compulsory to make trading account, profit and loss account and balance sheet.

The term "final accounts" includes the trading account, the profit and loss account, and
the balance sheet. Section 209 of the Companies Act 1956 makes it compulsory for
companies to keep certain books of accounts.

1. GENERAL AND LEGAL REQUIREMENTS


Sections 209 to 203 of the companies act 1956 deal with provisions governing maintanence
and preparation of financial statements.
Section 209 deals with the maintenance of proper books of accounts in respect of
1. receipts and disbursements of money .
2. sales and purchases of raw-materials or goods.
3. Description pertaining to usage of raw-materials and labour etc, and
4. All assets and liabilities.

Section 209 also requires that books of accounts must show the true and fair view
of state of affairs of the company. section 211 requires that the balance sheet must
give true and fair view of the state of affairs and profit and loss account must give
true and fair view of the results of operations . It simply implies that financial
statements should disclose every material information without any concealment of
facts and figures and in such a manner that working results and financial position of
the reporting enterprise, may correctly, be interpreted in true sprits. It should be free
from personal biases and mis-statements. It will be possible only if financial
statements are prepared in accordance with generally with generally accepted
accounting principles and in conformity with the various accounting standards as
applicable to the reporting enterprise, may correctly be interpreted in true sprits. It
should be free from personal biases and mis-statements. It will be possible only if
financial statements are prepared in accordance with generally accepted accounting
standards set by ICAI. In case company fails to comply with any of generally
accepted accounting assumptions or standards, the fact should be disclosed.

Section 210 requires that financial statements should be presented to shareholders


at every annual general meeting along with the auditors and directors reports. Every
balance sheet and profit and loss account must be duly authenticated these
statements must be signed by manager or secretary and by two directors at least one
of whom must be managing director. (section 215)

2. PREPARATION AND PRESENTATION OF CORPORATE


FINANCIAL STATEMENTS

2.1 CONVENTIONAL FORM

As already stated, the board of directors of the company shall present the following at
the annual general meeting:

1. a balance as at the end of the period ;


2. a profit and loss account for that period ; and also
3. a statement of changes in financial position (SCFP or CASH flow statement)

In case of a company not carrying on business for profit, an income and


expenditure account shall be laid at the annual general meeting instead of profit
and loss account.
Every profit and loss account shall also give a true and fair view of profit or loss
of the company for the financial year and shall comply with the requirements of
schedule 6 . every insurance or banking company or any company engaged in the
generation of electricity or any other class of company for which the profit and
loss account has been specified under the act governing such class of company
need not follow the form given in schedule 6 to this act .

Similarly every balance sheet shall give a true and fair view of the
state of affairs of the company as per schedule 6 any insurance or banking
company engaged in generation or supply of electricity or any other class of
company need not to follow such form.

Recently, the companies (amendment) act 1999 has made the


compliance of accounting standards mandatory. Accordingly every profit and loss
account and balance sheet of the company shall comply with the accounting
standards. However in case of non-compliance the company must disclose the
deviation from the accounting standards, reasons for such deviation; and
financial effect if any due to such deviation.

If the company does not disclose any change in policy, the fundamental
assumptions such as going concern, consistency and prudence have been adhered
to.

On the basis of requirements of schedule 6 and accounting following is the


proforma of profit and loss account of a company.

The final accounts are primarily prepared for ascertaining the operational result and the

financial position of the business. These are prepared with the help of Trial Balance.

The final accounts consist of the following two accounts:


1. Profit and Loss Account, and

2. Balance Sheet.

1. Profit and Loss Account:

The Profit and Loss Account is prepared for ascertaining whether the business earned profit

or incurred loss during a particular period of time called accounting period. All nominal

accounts are entered into Profit and Loss Account. As a rule, all expenses and losses are

shown on the debit side and all incomes and gains are shown on the credit side of the Profit
and Loss Account. Then, the totals of debit side and credit side are compared for ascertaining

profit or loss of the business during the accounting period. If the total of credit side exceeds

the total of debit side, the excess will be profit earned during the period.

On the contrary, if the total of debit side exceeds the total of credit side, the excess will be

loss incurred during the period. The net result, whether profit or loss, is transferred to the

Balance Sheet also called Position Statement.

Taking our previous Illustration 1 here again, let us study how the Profit and Loss Account is

prepared. Remember, the first part of the Profit and Loss Account contains the Trading

Account which contains information on opening stock, purchases, direct expenses and sales.

There is a common practice to prepare a combined Trading and Profit &c


Loss Account as shown below:

2. BALANCE SHEET:
Having ascertained the operational results, i.e., profit or loss by preparing the Profit & Loss

Account, one final account still remains to be prepared is the Balance Sheet. The Balance

Sheet is primarily prepared to know the financial position of the business.


Hence, the Balance Sheet is also called Position Statement. In other words, the Balance

Sheet shows what the business owns and what it owes to others, or say, how much assets and

how much liabilities it has.

As already mentioned, all nominal accounts i.e., accounts relating to expenses, losses, profits,

incomes, gains, etc. are shown in the Profit and Loss Account. All remaining accounts

representing personal and real accounts are shown in the Balance Sheet. The accounts

showing debit balances represent assets and the accounts showing credit balances represent

liabilities.

All assets and liabilities are, then, shown on their respective sides in the Balance Sheet. Like

Trial Balance, the total of asset side should be equal to the total of liability side. The reason

being the double entry passed for every transaction.

For every debit entry, there is an equal and corresponding credit entry and vice versa.

However, if the two totals do not tally, it implies that some errors have been committed in the

books of accounts. These errors need to be traced out and, then, rectified.

The preparation of the Balance Sheet is illustrated with the help of our imaginary Trial

Balance given earlier.

Now, you have noticed that each account appearing in the Trial Balance is shown either in the

Profit and Loss Account or in the Balance Sheet. As a rule, all nominal accounts appeared in
the Trial Balance are shown in the Profit and Loss Account and all personal and real accounts

are shown in the Balance Sheet.

Study of financial position for last five years of HDFC with help of their
final accounts for last five years

HDFC

HDFC Bank is an Indian banking and financial services company headquartered


in Mumbai, Maharashtra. It has about 76,286 employees including 12,680 women and has a
presence in Bahrain, Hong Kong and Dubai. HDFC Bank is the second largest private bank in
India as measured by assets. It is the largest bank in India by market capitalization as of
February 2016. It was ranked 69th in 2016 Brandz Top 100 Most Valuable Global Brands.

HDFC BANK

Type Public

Traded as BSE: 500180


NSE: HDFCBANK
NYSE: HDB
BSE SENSEX Constituent
CNX Nifty Constituent

Industry Banking, Financial services

Founded August 1994


Headquarters Mumbai, Maharashtra, India

Area served India

Key people Aditya Puri (MD)

Products Investment Banking


Investment Management
Wealth Management
Private Banking
Corporate Banking
Private Equity
Finance and Insurance
Consumer Banking
Mortgages
Credit Cards

Revenue 10,588.1 crore(US$1.6 billion) (2016)

Profit 3,238.9 crore(US$480 million) (2016)

Total assets 755,100 crore(US$110 billion)(2016)

Total equity 507.1 crore (US$75 million)

Number of employees 87,555 (April 2016)

Website HDFCBank.com
History
In 1995 HDFC Bank was incorporated, with its registered office in Mumbai, India. Its first
corporate office and a full service branch at Sandoz House, Worli was inaugurated by the then
Union Finance Minister, Dr. Manmohan Singh.

As of June 30, 2016, the Banks distribution network was at 4,541 branches and 12,013 ATMs.

Products and services


HDFC Bank provides a number of products and services which includes Wholesale banking,
Retail banking, Treasury, Auto (car) Loans, Two Wheeler Loans, Personal loans, Loan Against
Property and Credit Cards.

Acquisitions
HDFC Bank merged with Times Bank in February, 2000. This was the first merger of two private
banks in the New Generation Private Sector Banks category. In 2008, Centurion Bank was
acquired by HDFC Bank. HDFC Bank Board approved the acquisition of CBoP for Rs. 9,510
crore in one of the largest mergers in the financial sector in India.

Listings and shareholding

The equity shares of HDFC Bank are listed on Bombay Stock Exchange and
the National Stock Exchange of India. Its American Depository Shares are listed
on NYSE and the Global depository receipt are listed on the Luxembourg Stock
Exchange where two GDRs represent one equity share of HDFC Bank.

Shareholders (as of 31 December-2015) Shareholding

Promoter Group (HDFC) 21.57%

Foreign Institutional Investors (FII) 32.40%

Individual shareholders 8.5%

Bodies Corporate 07.50%

Insurance companies 05.38%

Mutual Funds/UTI 8.65%


NRI/OCB/Others 00.29%

Financial Institutions/Banks 2.75%

ADS/GDRs 18.78%

Balance sheet:
MARCH 31ST 2012

LIABILITIES Rs( in ASSETS Rs( in


crores) crores)
SHARE WARRANTS & 0.30 CASH AND BALANCE WITH 14,991.09
OUTSTANDINGS RESERVE BANK OF INDIA

SHARE CAPITAL 469.34 BALANCES WITH BANKS AND 5,946.63


MONEY AT CALL AND SHORT
NOTICE

TOTAL RESERVE 29,455.04 INVESTMENTS 97,482.91

DEPOSITS 2,46,706.45 ADVANCES 1,95,420.03

BOROWWINGS 23,846.51 GROSS BLOCK 5,930.24

SHAREHOLDERS FUNDS 29,924.68 LESS : ACCUMULATED 3,538.80


DEPRECIATION

OTHER LIABILITIES & 37,431.87 NET BLOCK 2,391.44


PROVISIONS
TOTAL LIABILITIES 3,37,909.50 LEASE ADJUSTMENT -44.25

CAPITAL WORK IN PROGRESS 0.00

OTHER ASSETS 21,721.64

TOTAL ASSETS 3,37,909.50


MARCH 31ST 2013

LIABILITIES Rs( in ASSETS Rs( in


crores) crores)
SHARE WARRANTS & 0.00 CASH AND BALANCE WITH 14,627.40
OUTSTANDINGS RESERVE BANK OF INDIA

SHARE CAPITAL 475.88 BALANCES WITH BANKS AND 12,652.77


MONEY AT CALL AND SHORT
NOTICE

TOTAL RESERVE 35,738.26 INVESTMENTS 1,11,613.60

DEPOSITS 2,96,246.98 ADVANCES 2,39,720.64

BOROWWINGS 33,006.60 GROSS BLOCK 6,865.45

SHAREHOLDERS FUNDS 36,214.15 LESS : ACCUMULATED 4,118.13


DEPRECIATION

OTHER LIABILITIES & 34,864.17 NET BLOCK 2,747.33


PROVISIONS
TOTAL LIABILITIES 4,00,331.90 LEASE ADJUSTMENT -44.25

CAPITAL WORK IN PROGRESS 0.00

OTHER ASSETS 19,014.41

TOTAL ASSETS 4,00,331.90

MARCH 31ST 2014


LIABILITIES Rs( in ASSETS Rs( in
crores) crores)
SHARE WARRANTS & 0.00 CASH AND BALANCE WITH 25,345.63
OUTSTANDINGS RESERVE BANK OF INDIA

SHARE CAPITAL 479.81 BALANCES WITH BANKS AND 14,238.01


MONEY AT CALL AND SHORT
NOTICE

TOTAL RESERVE 42,998.82 INVESTMENTS 1,20,951.07

DEPOSITS 3,67,337.48 ADVANCES 3,03,000.27

BOROWWINGS 39,438.99 GROSS BLOCK 7,705.82

SHAREHOLDERS FUNDS 43,478.63 LESS : ACCUMULATED 4,721.65


DEPRECIATION

OTHER LIABILITIES & 41,344.40 NET BLOCK 2,984.16


PROVISIONS
TOTAL LIABILITIES 4,91,599.50 LEASE ADJUSTMENT -44.25

CAPITAL WORK IN PROGRESS 0.00

OTHER ASSETS 25,124.60

TOTAL ASSETS 4,91,599.50

MARCH 31ST 2015

LIABILITIES Rs( in ASSETS Rs( in


crores) crores)
SHARE WARRANTS & 0.00 CASH AND BALANCE WITH 27,510.45
OUTSTANDINGS RESERVE BANK OF INDIA

SHARE CAPITAL 501.30 BALANCES WITH BANKS AND 8,821.00


MONEY AT CALL AND SHORT
NOTICE

TOTAL RESERVE 61,508.12 INVESTMENTS 1,51,641.75

DEPOSITS 4,50,795.64 ADVANCES 3,65,495.03

BOROWWINGS 45,213.56 GROSS BLOCK 8,463.30

SHAREHOLDERS FUNDS 62,009.42 LESS : ACCUMULATED 8,463.30


DEPRECIATION

OTHER LIABILITIES & 32,484.46 NET BLOCK 3,165.98


PROVISIONS
TOTAL LIABILITIES 5,90,503.07 LEASE ADJUSTMENT -44.25

CAPITAL WORK IN PROGRESS 0.00

OTHER ASSETS 33,913.10

TOTAL ASSETS 5,90,503.07

MARCH 31ST 2016

LIABILITIES Rs( in ASSETS Rs( in


crores) crores)
SHARE WARRANTS & 0.00 CASH AND BALANCE WITH 30,058.31
OUTSTANDINGS RESERVE BANK OF INDIA

SHARE CAPITAL 505.64 BALANCES WITH BANKS AND 8,860.53


MONEY AT CALL AND SHORT
NOTICE

TOTAL RESERVE 72,172.13 INVESTMENTS 1,63,885.77

DEPOSITS 5,46,424.19 ADVANCES 4,64,593.96


BOROWWINGS 53,018.47 GROSS BLOCK 9,252.62

SHAREHOLDERS FUNDS 72,677.76 LESS : ACCUMULATED 5,865.22


DEPRECIATION

OTHER LIABILITIES & 36,725.13 NET BLOCK 3,387.40


PROVISIONS
TOTAL LIABILITIES 7,08,845.57 LEASE ADJUSTMENT -44.25

CAPITAL WORK IN PROGRESS 0.00

OTHER ASSETS 38,103.84

TOTAL ASSETS 7,08,845.57

Profit and loss account:

MARCH 31ST 2012

INCOME Rs( in EXPENSES Rs( in


crores) crores)
27,874.19 INTEREST EXPENDED 14,989.58
INTEREST EARNED
5,783.63 OPERATING EXPENSES 9,277.64
OTHER INCOME
PBIDT 9,390.60
PROVISIONS AND 1,876.89
CONTINGENCIES
PROFIT BEFORE TAX 7,513.71
TAXES 2,346.62
TOTAL INCOME 33,657.82 TOTAL 28,490.73
MARCH 31ST 2013

INCOME Rs( in EXPENSES Rs( in


crores) crores)
35,064.87 INTEREST EXPENDED 19,253.75
INTEREST EARNED
6,852.62 OPERATING EXPENSES 11,236.12
OTHER INCOME
PBIDT 11,427.63
PROVISIONS AND 1,676.40
CONTINGENCIES
PROFIT BEFORE TAX 9,751.23
TAXES 3,024.94
TOTAL INCOME 41,917.50 TOTAL 35,191.21

MARCH 31ST 2014

INCOME Rs( in EXPENSES Rs( in


crores) crores)
41,135.53 INTEREST EXPENDED 22,652.90
INTEREST EARNED
7,919.64 OPERATING EXPENSES 12,042.20
OTHER INCOME
PBIDT 14,360.08
PROVISIONS AND 1,587.27
CONTINGENCIES
PROFIT BEFORE TAX 12,772.81
TAXES 4,294.43
TOTAL INCOME 49,055.17 TOTAL 40,576.80

MARCH 31ST 2015

INCOME Rs( in EXPENSES Rs( in


crores) crores)
48,469.90 INTEREST EXPENDED 26,074.24
INTEREST EARNED
8,996.35 OPERATING EXPENSES 13,987.54
OTHER INCOME
PBIDT 17,404.48
PROVISIONS AND 2,075.01
CONTINGENCIES
PROFIT BEFORE TAX 15,329.47
TAXES 5,113.55
TOTAL INCOME 57,466.26 TOTAL 47,250.34

MARCH 31ST 2016

INCOME Rs( in EXPENSES Rs( in


crores) crores)
60,221.45 INTEREST EXPENDED 32,629.93
INTEREST EARNED
10,751.72 OPERATING EXPENSES 16,979.70
OTHER INCOME
PBIDT 21,363.54
PROVISIONS AND 2,725.61
CONTINGENCIES
PROFIT BEFORE TAX 18,637.93
TAXES 6,341.71
TOTAL INCOME 70,973.17 TOTAL 58,676.95

Conclusion:

In the above data we have seen the five years of final accounts
of HDFC BANK, lets see the comparison between them

1. Balance sheet:

On comparing 2012 2013, there was an huge increase as in 2012 the total
was 400,331.90 but in 2013 it was 62,422.4 (million)

Likewise there was an increase only

2013 62,422.40(millions)

2014 91,267.60 (millions)

2015 98,903.57 (millions)

2016- 118,342.50 (millions)

2. Profit and loss account:

The collected data were as follows,

Income

2013 2,237.52 (millions)

2014 3,021.88 (millions)

2015 2,556.66 (millions)


2016 3,308.46 (millions)

Expenses

2013 6700.48 (millions)

2014 5385.59 (millions)

2015 6673.54 (millions)

2016 11426.61 (millions)

Results:

HDFC has earned profits for all the five years. The company has earned profits at a healthy
rate for the time period between 2012 to 2016. In accordance with the increasing profits and
the increasing scale of operations, the expenses have also increased manifold.

References

https://en.wikipedia.org/wiki/Final_accounts

http://www.yourarticlelibrary.com/accounting/final-accounts/final-accounts-profit-
and-loss-account-and-balance-sheet/41172/