FINANCIAL STATEMENTS AND THEIR TYPES

Financial statement is a written report which describes the financial health of a company. It includes an income statement, a balance sheet, cash flow statement and retained earnings. Financial statements are usually compiled on a quarterly and annual basis. These statements are records that provide an indication of an individuals, organisations or business financial status. Financial statements are typical used in relation to business endeavour. These statements provide an overview of a business or persons financial conditions, not only in short term but also in long term. We can define financial statements as all the relevant Financial information of a business enterprise, presented in a structured manner and in a form which is easily understood by everyone. Nature of financial statements: The data exhibited in the financial statements are affected by recorded facts, accounting conventions and personal judgements. Recorded facts: The term recorded facts means facts which have been recorded in the accounting books. Facts which have not been recorded in the financial books are not depicted in the financial statements, however material they may be. For example, fixed assets are shown at cost irrespective of their market or replacement price since such price is not recorded in the books. Accounting conventions: accounting conventions imply certain fundamental accounting principles which have been sanctified by long usage. For example, on account of the convention of Conservatism, provision is made of expected losses but expected profits are ignored. This means that the real financial position of the business may be much better than what has been shown by the financial statements. Personal judgements: Personal judgements have also an important bearing on financial statements . For example: the choice of selecting a method of depreciation lies on the accountant. Similarly, the mode of amortization of fixed assests also depends on the personal judgement of the accountant.

TYPES OF FINANCIAL STATEMENTS

There four basic financial statements. 1. Balance Sheet: Balance sheet, also called statement of financial position, is the summary of organisations balances. A balance sheet is a statement of financial position at a given point of time. It is the snapshot of companys financial condition. A companys balance sheet has three parts: assets, liabilities and ownership equity or we can say that the balance sheet is based on the following accounting model: Assets = Liabilities + Equity

Particulars I) Shareholders Funds: a) Capital b) Reserves and Surplus II) Loans Funds: a) Secured Loans b) Unsecured Loans TOTAL II) Application of funds 1. Fixed Assets a) Gross block b) less depreciation c) Net block 2. Investments 3. Current Assets, Loans, and Advances a) Inventories b) Sundry Debtors c) Bills Receivable d) Cash and Bank Balance e) Loans and Advances a) Inventories b) Sundry Debtors c) Bills Receivable d) Cash and Bank balance e) Loans and advances Less : Current Liabilities and Provisions: Net Current Assets 4. Miscellaneous Expenses and Losses: a) To the extent not written off b) Profit and Loss(Debits)

Amt xxxx

Amt Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxx Xxxxx

XXXXX

INCOME STATEMENT
Income Statement, also called Profit and Loss Statement, indicates how the revenue is transformed into net income. The purpose of income statement is to show the managers and investors whether company has earned or lost money during the period reported.

Particulars Gross sales Less: Sales returns Sales tax/Excise Net Sales(or sales) for the year Less: Cost of sales: Raw Materials consumed Direct Wages Manufacturing Expenses Add: Opening stock of finished goods Less: Closing stock of finished goods Gross Profit Less: Operating Expenses: Administrative Expenses Selling and Distribution Expenses Net Operating Profit(OPBIT) Add: Non-trading Income(such as dividends, interest received) Less: Non-trading Expenses(such as discount on issue of Shares written off) Income or Earning before interest and tax(EBIT) Less: Interest on Debentures Net Income or Earning before Tax (EBT) Less : Tax Income or Profit After Tax (PAT)

Amt xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx

Amt

Xxxxx
Xxxxx

Xxxxx

Xxxxx

Xxxxx xxxxx xxxxx xxxxx xxxxx

Xxxxx Xxxxx xxxxx

STATEMENT OF RETAINED EARNINGS

Retained earnings appear on the balance sheet and most commonly are influenced by income dividend. Therefore, the statement of retained earnings uses information from income statement and provides information to retained earnings.

CASH FLOW STATEMENT

The cash flow statement is used in evaluating a companys ability to pay its bills. A cash flow statement provides sources of cash, uses of cash and change in cash balance

Particulars

Amt Xxxx Xxxx Xxxx Xxxx xxxx

Amt

Net profit before tax and Non-operating items Add: Depreciation Profit before Working capital changes Add: Increase in Cash(Increase in Current Liabilities And Decrease in Current Assets, except cash) Less: Decrease in cash(Increase in Current Assets) And Decrease in Current Liabilities, except cash) Less: Tax paid Cash from Trading Operations

xxxxx

xxxxx

Particulars A) Cash from Trading operations B) Cash from Investing activities Purchase of Machinery Purchase of Land Purchase of building Sale of machinery Sale of Land Sale of building Advances Net cash inflow/outflow from investing activities A) Cash from Financing activities Raising of loan from company Dividend paid Issue of Share capital Bank loan Net cash inflow/outflow from financing activities Add : Opening balance of cash Closing balance of cash

Amt Xxx Xxx Xxx Xxx Xxx Xxx Xxx

Amt

Xxxx
Xxx Xxx Xxx Xxx Xxx Xxxx Xxxx xxxx xxxx

1)Cash from Trading Operations: The amount of cash flows arising from operating activities is the key indicator of the extent to which the company is able to generate sufficient cash to meet the required expenses and to maintain the operations of the company. 2)Cash from Investing activities: Cash flows from investing activities represents inflow of cash due to sale of assets and outflow of cash to purchase of assets. Dividend received due to investments made by the company.

3)Cash from financing activities: Cash flows from financing activities results due to the issue of shares and debentures and repayment of Preference shares and debentures. Dividend paid is also treated as a part of financing activity.

COMPANY FINAL ACCOUNTS

 The accounts prepared on the last day of the accounting period to know the results of the business are called final accounts. Trading account: It is an account prepared to know the result of trading, i.e., buying and selling of goods. It is a nominal account and the result is called as gross profit or gross loss. It includes manufacturing and factory expenses. Profit and loss account: It is a continuation of trading account prepared to find out the net result of the business i.e., Net Profit or Net Loss and it includes selling and distribution expenses and office and management expenses.

Particulars
To Opening stock To Purchases Less: Purchases returns To Wages Add: Outstanding To Freight charges To Water,Power,gas To Carriage inwards To Manufacturing expenses To Coal,gas,water,power,fuel To Other direct expenses To Gross profit c/d

Amt
xxxx xxxx xxxx xxxx Xxxx Xxxx Xxxx

Amt
Xxxx Xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxxx xxxxx Xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx XxxX Xxxx Xxxx Xxxx Xxxx Xxxx Xxxx Xxxx Xxxx Xxxx

Particulars
By Sales less: Sales returns By Closing stock By Gross loss c/d By Gross Profit b/d By Rent Received By Commission Received By Interest received By Discount received By Miscellaneous expenses By Transfer fees By Income from investments By Profit on sale of assets By Net Loss

Amt
Xxxx xxx

Amt
Xxxx xxxxx Xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx

To gross loss b/d To salaries To rent,rates and taxes To insurance To commission paid To printing and stationary To postage,telegram,telegraph To carriage outwards To travelling expenses To advertisements To repair expenses To directors fees To audit fees To debenture interest To preliminary expenses written off To Miscellaneous expenses To Bad Debts Add: New R.D.D Less: Old R.D.D To Depreciation To Discount on issue of shares and Debentures written off To Goodwill written off To Loss on sale of assets To Provision for Taxation To Net Profit

Xxxx Xxxx xxxx

Xxxx Xxxx Xxxx Xxxx Xxxx xxxx xxxxx xxxxx xxxxx xxxxx

Gross Profit The profit that is indicated as the Core/Basic Profit is what is called Gross Profit and that information is provided by the "Trading a/c". The "Trading a/c" is prepared to ascertain the Core (Gross) Profit relating to the business. It is debited with the Direct Expenses and Credited with Direct Incomes, i.e. the balances of all the nominal accounts representing Direct expenses and Direct Incomes are transferred to the Trading a/c. The profit/loss revealed by the "Trading a/c" is called "Gross" Profit/Loss. Net profit The profit that is indicated as the overall profit is what is called Net Profit and that information is provided by the "Profit and Loss a/c". The "Profit and Loss a/c" is prepared to ascertain the Overall (Net) Profit relating to the business. This account is created by transferring the Gross Profit/Loss from the "Trading a/c". It is also debited with the Indirect Expenses and losses and Credited with Indirect Incomes i.e. the balances of all the nominal accounts representing Indirect expenses, losses and Indirect Incomes are transferred to the "Profit and Loss a/c". Net Profit The profit/loss revealed by the "Profit and Loss a/c" is called "Net" Profit/Loss.

Balance sheet
it is a statement prepared on the last day of the financial year to know the financial position of the business. On any given day the total of the balance sheets should be equal, i.e., Assets should be equal to the Liabilities.

Particulars
I)Share capital Authorised capital Issued capital Subscribed capital Less:Calls-in arrears Add: Forfeited shares Paid up capital II) Reserves and Surplus a)General reserve b)Capital reserves c)Sinking fund III)Secured loans a)Debentures b) Loans and advances from subsidiaries c)other loans IV)Unsecured Loans 1.Fixed deposits accepted 2.Loans and Advances from Subsidiaries 3.Short-term loans and advances i) From banks ii)From others 4.Other loans and advances a)From banks b)From others V)Current liabilities and Provisions a)Sundry Creditors b)Bills Payable c)Bank Overdraft d)Unpaid Dividend e)Advances and loans from subsidiary companies f)Outstanding wages g)Outstanding salaries Provisions a)Provision for taxation b)Proposed dividend c)For Provident fund scheme d)other provisions

Amt

Amt

Particulars
I)Fixed Assets a)Plant and Machinery b)Land and Building c)Furniture and Fixtures d)Goodwill e)Patents, Trademarks II)Investments a)In government securities b)Investments in shares, debentures etc III)Current assets, loans and Advances 1)Current Assets a) Interest accrued on Investments b)Stock c)Loose tools d)Stores and spare parts e)Sundry Debtors f)Cash-in-hand g)Cash-@-bank h)Closing stock i)Bills Payable 2)Loans and Advances a)Advances and loans to subsidiaries b)Prepaid expenses IV)Miscellaneous expenses a)Preliminary expenses b)Discount allowed on the issue of shares and debentures

Amt

Amt
xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx Xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx Xxxxx Xxxx Xxxx Xxxx

xxxx xxxx xxxx xxxx

xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxxx Xxxxx Xxxx Xxxx Xxxx Xxxx xxxxx

xxxxxx

TYPES OF PRESENTATION OF DATA

Balance sheet can be presented either in vertical or horizontal form

Format of Vertical form of Balance Sheet

Particulars Gross sales Less: Sales returns Sales tax/Excise Net Sales(or sales) for the year Less: Cost of sales: Raw Materials consumed Direct Wages Manufacturing Expenses Add: Opening stock of finished goods Less: Closing stock of finished goods Gross Profit Less: Operating Expenses: Administrative Expenses Selling and Distribution Expenses Net Operating Profit(OPBIT) Add: Non-trading Income(such as dividends, interest received) Less: Non-trading Expenses(such as discount on issue of Shares written off) Income or Earning before interest and tax(EBIT) Less: Interest on Debentures Net Income or Earning before Tax (EBT) Less : Tax Income or Profit After Tax (PAT)

Amt xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx xxxxx

Amt

Xxxxx
Xxxxx

Xxxxx

Xxxxx

Xxxxx xxxxx xxxxx xxxxx xxxxx

Xxxxx Xxxxx xxxxx

FORMAT OF HORIZONTAL FORM OF BALANCE SHEET

Particulars
I)Share capital Authorised capital Issued capital Subscribed capital Less:Calls-in arrears Add: Forfeited shares Paid up capital II) Reserves and Surplus a)General reserve b)Capital reserves c)Sinking fund III)Secured loans a)Debentures b) Loans and advances from subsidiaries c)other loans IV)Unsecured Loans 1.Fixed deposits accepted 2.Loans and Advances from Subsidiaries 3.Short-term loans and advances i) From banks ii)From others 4.Other loans and advances a)From banks b)From others V)Current liabilities and Provisions a)Sundry Creditors b)Bills Payable c)Bank Overdraft d)Unpaid Dividend e)Advances and loans from subsidiary companies f)Outstanding wages g)Outstanding salaries Provisions a)Provision for taxation b)Proposed dividend c)For Provident fund scheme d)other provisions

Amt

Amt

Particulars
I)Fixed Assets a)Plant and Machinery b)Land and Building c)Furniture and Fixtures d)Goodwill e)Patents, Trademarks II)Investments a)In government securities b)Investments in shares, debentures etc III)Current assets, loans and Advances 1)Current Assets a) Interest accrued on Investments b)Stock c)Loose tools d)Stores and spare parts e)Sundry Debtors f)Cash-in-hand g)Cash-@-bank h)Closing stock i)Bills Payable 2)Loans and Advances a)Advances and loans to subsidiaries b)Prepaid expenses IV)Miscellaneous expenses a)Preliminary expenses b)Discount allowed on the issue of shares and debentures

Amt

Amt
xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx Xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx Xxxxx Xxxx Xxxx Xxxx

xxxx xxxx xxxx xxxx

xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxxx Xxxxx Xxxx Xxxx Xxxx Xxxx xxxxx

xxxxxx

THANK YOU