Preparation of financial statements for companies including one-person company involves the presentation of the company’s financial position, performance, and cash flows. The financial statements must comply with the accounting standards prescribed by the Institute of Chartered Accountants of India (ICAI) and the Companies Act, 2013. The financial statements must be prepared in accordance with the Division I and II of Schedule III of the Companies Act, 2013.
The financial statements of the company include the following:
- Balance Sheet: A balance sheet is a statement of the company’s financial position at a specific date. It shows the assets, liabilities, and equity of the company. The balance sheet is prepared in the format prescribed in Schedule III of the Companies Act, 2013.
- Profit and Loss Account: The profit and loss account is a statement of the company’s financial performance for a specific period. It shows the revenue, expenses, and net profit or loss of the company. The profit and loss account is prepared in the format prescribed in Schedule III of the Companies Act, 2013.
- Cash Flow Statement: The cash flow statement is a statement of the company’s cash inflows and outflows during a specific period. It shows the sources and uses of cash of the company. The cash flow statement is prepared in the format prescribed in Schedule III of the Companies Act, 2013.
Preparation of Financial Statements as per Division I of Schedule III of the Companies Act, 2013:
Division I of Schedule III of the Companies Act, 2013 prescribes the general instructions for the preparation of financial statements. The following are the key points to be kept in mind while preparing the financial statements:
- The financial statements must give a true and fair view of the company’s financial position, performance, and cash flows.
- The financial statements must be prepared on an accrual basis of accounting.
- The financial statements must be prepared in the prescribed format.
- The financial statements must comply with the accounting standards prescribed by the Institute of Chartered Accountants of India.
- The financial statements must disclose all material facts and transactions.
Preparation of Financial Statements as per Division II of Schedule III of the Companies Act, 2013:
Division II of Schedule III of the Companies Act, 2013 prescribes the format for the preparation of financial statements for the following types of companies:
- Companies engaged in the production, processing, or manufacturing of goods.
- Companies engaged in the providing or rendering of services.
- Companies engaged in trading activities.
The following are the key points to be kept in mind while preparing the financial statements as per Division II of Schedule III of the Companies Act, 2013:
- The financial statements must give a true and fair view of the company’s financial position, performance, and cash flows.
- The financial statements must be prepared on an accrual basis of accounting.
- The financial statements must be prepared in the prescribed format.
- The financial statements must comply with the accounting standards prescribed by the Institute of Chartered Accountants of India.
- The financial statements must disclose all material facts and transactions.
- The financial statements must provide information about the company’s inventory, fixed assets, investments, loans and advances, trade payables, and trade receivables.
- The financial statements must provide information about the company’s revenue from operations, other income, expenses, and net profit or loss.
- The financial statements must provide information about the company’s cash inflows and outflows from operating, investing, and financing activities.