Accountancy Part B-C3.pptx..pu karantaka ..PUE
- 1. II P U Accountancy PART B CHAPTER 03 FINANCIAL STATEMENTS OF A COMPANY
- 3. Financial statements are the basic and formal annual reports through which the corporate management communicates financial information to its owners and various other external parties which include investors, tax authorities, government, employees, etc. These refer to the balance sheet (position statement) as of the end of the accounting period, the statement of profit and loss of a company and the cash flow statement.
- 4. Features of Financial Statements Recorded Facts Accounting Conventions Postulates Personal Judgements
- 5. Recorded Facts Financial statements are prepared on the basis of facts in the form of cost data recorded in accounting books. The original cost or historical cost is the basis of recording transactions. These are not based on market prices. The financial statements do not show the current financial condition of the concern.
- 6. Accounting Conventions The convention of valuing inventory at cost or market price, whichever is lower, is followed. The stationery is valued at cost and not on the principle of cost or market price, whichever is less. The use of accounting conventions makes financial statements comparable, simple and realistic.
- 7. Postulates Financial statements are prepared on certain basic assumptions (pre- requisites) known as postulates. Such as the going concern postulate, money measurement postulate, realisation postulate, etc. Going concern postulate assumes that the enterprise is treated as a going concern and exists for a longer period of time.
- 8. Objectives of Financial Statements To provide information about the 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 the effectiveness of management Information about activities of business affecting the society Disclosing accounting policies
- 9. Types of 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. Balance sheet and Statement of profit and loss
- 10. Balance Sheet
- 11. Shareholders Fund a) Share Capital b) Reserves and Surplus c) Money received against Share Warrants
- 12. Reserve and Surplus Capital Reserve Capital Redemption Reserve Securities Premium Reserve Debenture Redemption Reserve Revaluation Reserve Share Options Outstanding Account Other Reserves (Specifying nature and purpose) Surplus: Balance in the statement of profit and loss; disclosing allocations and Appropriation such as dividend, bonus shares, transfer to/from the reserve, etc.
- 13. Money Received against share warrants It is the amount received by the company which are converted into shares at a specified date on a specified rate. The instrument issued against the amount so received as share warrants. Money received against share warrants to be disclosed as a separate line item under shareholders fund.