This document provides an overview of financial statements that companies are required to prepare under the Companies Act. It discusses the key components of the income statement and balance sheet, including revenues, expenses, assets, liabilities, and equity. Sample income statements and balance sheets are presented with explanatory notes. Key terms related to revenues, expenses, assets, liabilities, equity, and other items are also defined.

2. INTRODUCTION
• EVERY COMPANY, LIKE OTHER BUSINESS ENTITIES, MUST PREPARE
FINAL ACCOUNTS OR FINANCIAL STATEMENTS PERIODICALLY.
HOWEVER, THE UNIQUENESS IN CASE OF COMPANIES IS THAT, THE
PREPARATION OF FINAL ACCOUNTS OR FINANCIAL STATEMENTS IS
GOVERNED BY LEGISLATIONS. COMPANIES MUST PREPARE
FINANCIAL STATEMENTS IN THE FORMATS PRESCRIBED IN THE
COMPANIES ACT.
• FINANCIAL STATEMENTS OF A COMPANY INCLUDES:
1.INCOME STATEMENT
2.BALANCE SHEET

3. INCOME STATEMENT
AN INCOME STATEMENT IS PREPARED TO
ASCERTAIN THE RESULTS OF THE BUSINESS
(PROFITS MADE OR LOSS INCURRED) FOR A GIVEN
ACCOUNTING PERIOD.

4. Particulars Note ₹
Net Sales Revenues XXX
Less: Cost of goods sold 1 XXX
Gross profit XXX
Less: Operating expenses 2 XXX
EBITDA XXX
Less: Depreciation and Amortization XXX
EBIT XXX
Less: Interest on Borrowings 3 XXX
Add: Non-Operating Incomes & Gains XXX
Less: Non-Operating expenses & losses XXX
EBT XXX
Less: Taxes XXX
EAT XXX
Less: Dividends and Appropriations 4 XXX
Retained Earnings XXX
Add: Opening balance of P&L A/C XXX
Closing balance of P&L A/C XXX
INCOME STATEMENT FOR THE YEAR ENDING…….

5. Particulars ₹ ₹
Opening stock XXX
Add: Purchases XXX
Less: Closing stock XXX
Raw material consumed during the year XXX
Add: conversion expenses (wages, factory overheads, etc.) XXX
Add: opening stock of work in progress XXX
Less: closing stock of work in progress XXX
Cost of production XXX
Add: opening stock of finished goods XXX
Less: closing stock of finished goods XXX
Cost of goods sold XXX
Note 1: Cost of goods sold

6. Particulars ₹ ₹
Administration Expenses XXX
Rents, rates, taxes, etc XXX
Salaries XXX
General expenses XXX
Audit fees XXX
Directors fees XXX XXX
XXX
Selling and distribution expenses
Travelling expenses XXX
Carriage outwards XXX
Advertisements XXX
Discounts allowed XXX
Warehouse charges XXX
Sales commission XXX
Bad debts XXX
Add: new reserve for doubtful debts XXX
Less: old reserve for doubtful debts XXX
Other expenses XXX
Less: operating incomes and gains XXX XXX
Cash operating expenses and loss (Net) XXX
Note 2:
Operating
Expenses

7. Particulars ₹ ₹
Interest on Mortgage Loans XXX
Interest on Debentures Paid XXX
Add: Outstanding Interest on Debentures XXX XXX
Total XXX
Note 3: Interest on Borrowings

8. Particulars ₹ ₹
Dividend Paid XXX
Interim dividend paid XXX
Proposed dividend XXX
Corporate Dividend Tax XXX
Transfer to General reserve XXX
Transfer to reserve fund XXX
Transfer to Sinking fund XXX
Transfer to other reserves XXX
Total XXX
Note 4: Dividends and Appropriations

9. TERMS OF INCOME STATEMENT
1.REVENUES
REVENUES = SALES FOR THE YEAR – SALES RETURNS – EXCISE DUTY
2.COST OF GOODS SOLD
a. IN CASE OF TRADING ENTITIES:
COST OF GOODS SOLD = OPENING STOCK OF FINISHED GOODS +
PURCHASES DURING THE YEAR – CLOSING STOCK OF FINISHED GOODS
b. IN CASE OF MANUFACTURING ENTITIES:
COST OF GOODS SOLD = RAW MATERIAL CONSUMED + CONVERSION COST

10. 3. GROSS PROFIT
THE PROFITS GENERATED FROM THE MAIN ACTIVITY OF TRADING OR
MANUFACTURING, BY THE COMPANY.
4. OPERATING EXPENSES
INCLUDES ALL EXPENSES INCURRED FOR OPERATING THE BUSINESS.
5. EBITDA
REFERS TO EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION.
6. DEPRECIATION
REFERS TO PROVISION FOR REPLACEMENT OF FIXED ASSETS.
7. AMORTIZATION
REFERS TO WRITING OFF OF SUNK COSTS, DEFERRED REVENUE EXPENSES AND
INTANGIBLE ASSETS WHICH NEED NOT BE REPLACED.
8. EBIT
REFERS TO EARNINGS BEFORE INTEREST AND TAX.
9. INTEREST ON BORROWINGS
REFERS TO INTEREST ON LOANS BORROWED BY THE COMPANY.

11. 10.NON-OPERATING INCOMES
INCLUDE INCOME FROM INVESTMENTS, BANK INTEREST ETC., WHICH ARE
NOT GENERATED FROM THE OPERATING ACTIVITIES OF THE COMPANY.
11.EBT
REFERS TO EARNINGS BEFORE TAX.
12.TAXES
REFERS TO THE INCOME TAX.
13.EAT
REFERS TO EARNINGS AFTER TAX.
14.DIVIDENDS
REFERS TO SHARE OF PROFITS DISTRIBUTED BY THE COMPANY TO ITS
SHAREHOLDERS.
15.RETAINED EARNINGS
REFERS TO THE PROFITS OF THE YEAR RETAINED IN THE BUSINESS.

12. BALANCE SHEET
A BALANCE SHEET IS A STATEMENT OF SOURCES
AND APPLICATION OF FUNDS. THE BALANCE
SHEET PRESENTS THE ‘SOURCES’ FROM WHICH
THE COMPANY HAS MOBILIZED FUNDS
REQUIRED FOR THE BUSINESS, AND THE
‘UTILIZATION’ OF THE FUNDS.

13. Particulars Note ₹
Equities & Liabilities
Share capital 5 XXX
Reserve and surplus 6 XXX
Non-current liabilities
Secured loans 7 XXX
Unsecured loans 8 XXX
Current liabilities 9 XXX
Total XXX
Assets
Non-current assets
Fixed assets 10 XXX
Investments 11 XXX
Other non-current assets 12
Current assets, loans and advances 13 XXX
Total XXX
Balance Sheet as on……….

14. Particulars ₹ ₹
Authorised capital XXX
Issued capital XXX
Subscribed capital XXX
Call-up capital XXX
Less: Call-in arrears XXX
Add: Share for future XXX XXX
Paid up capital XXX
Calls-in advance XXX
Total XXX
Note 5: Share Capital

15. Particular ₹ ₹
Capital reserve XXX
General reserve XXX
Reserve fund XXX
Shrinking fund XXX
Securities premium XXX
Other reserve XXX
Profit and loss account (surplus) XXX
Total XXX
Note 6: Reserve & Surplus

16. Particulars ₹ ₹
Mortgage loans XXX
Debentures XXX
Add: Outstanding Interest on Debentures XXX XXX
Total XXX
Note 7: Secured loans
Particulars ₹ ₹
Bank loan XXX
Loans from Subsidiary Companies XXX
Fixed Deposits from public XXX
Total XXX
Note 8: Unsecured loans

17. Particulars ₹ ₹
Sundry Creditors XXX
Bills Payable XXX
Bank Overdraft XXX
Unclaimed Dividend XXX
Outstanding Expenses XXX
Incomes Received in Advance XXX
Provisions for Tax XXX
Proposed Dividend XXX
Corporate Dividend Tax XXX
Total XXX
Note 9: Current Liabilities and Provisions

18. Particulars Land Buildings Plant Furniture Vehicles Other assets Total
Initial Value XXX XXX XXX XXX XXX XXX XXX
Depreciation charge XXX XXX XXX XXX XXX XXX XXX
Net Block XXX XXX XXX XXX XXX XXX XXX
Particulars ₹ ₹
Investments in Government Securities XXX
Investments in Approved Securities XXX
Investments in Shares XXX
Investments in Debentures XXX
Others XXX
Total XXX
Note 10: Fixed Assets
Note 11: Investments

19. Particulars ₹ ₹
Preliminary Expenses XXX
Less: Written Off XXX XXX
Underwriting Commission XXX
Discount on Issue of Shares and Debentures XXX
Profit & Loss Account Debit balance XXX
Total XXX
Note 12: Other Non-Current Assets (Miscellaneous Expenditure)

20. Particulars ₹ ₹
Cash in hand XXX
Cash at bank XXX
Sundry debtors XXX
Bills receivable XXX
Inventory XXX
Outstanding incomes XXX
Pre-paid expenses XXX
Tax deducted at source XXX
Loose tools XXX
Advances XXX
Total XXX
Note 13: Current Assets, Loans and Advances

21. TERMS OF BALANCE SHEET
1. SHARE CAPITAL
A. AUTHORIZED CAPITAL
B. ISSUED CAPITAL
C. SUBSCRIBED CAPITAL
D. CALLED UP CAPITAL
E. PAID-UP CAPITAL
2. RESERVE AND SURPLUS
REFERS TO THE PROFITS SET-ASIDE FOR MEETING SPECIFIC FUTURE
REQUIREMENTS OR ANY FUTURE CONTINGENCIES.

22. 3. SECURED LOANS
REFERS TO THE LOANS BORROWED BY THE COMPANY FROM FINANCIAL
INSTITUTIONS AND BANKS; OR BY ISSUE OF DEBENTURES.
4. UNSECURED LOANS
REFERS TO LOANS BORROWED BY THE COMPANY ON PERSONAL GUARANTEE
OR WITHOUT ANY SECURITY.
5. FIXED ASSETS
REFERS TO ASSETS WHICH ARE MEANT FOR LONG-TERM USE AND THE
VOLUME OF WHICH DO NOT CHANGE FREQUENTLY.
6. INVESTMENTS
REFER TO SURPLUS FUNDS WITH THE COMPANY INVESTED OUTSIDE THE
BUSINESS.
7. CURRENT ASSETS
REFER TO THE ASSETS WHICH ARE MEANT FOR SHORT-TERM USE AND THE
VOLUME OF WHICH CHANGES VERY FREQUENTLY.

23. 8. LOANS AND ADVANCES
REFER TO LOANS EXTENDED BY THE COMPANY TO ITS EMPLOYEES AND
OTHERS.
9. CURRENT LIABILITIES
REFER TO SHORT-TERM SOURCE OF FUNDS.
10.PROVISIONS
REFERS TO PROFITS SET ASIDE FOR MEETING SHORT-TERM OBLIGATIONS.
11.MISCELLANEOUS EXPENSES
REFER TO ANY DEFERRED REVENUES EXPENSES, LIKE PRELIMINARY EXPENSES,
DISCOUNT ON ISSUE OF SHARES OR DEBENTURES ETC., TO THE EXTENT NOT
YET WRITTEN OFF TO THE INCOME STATEMENT.
12.LOSSES
REFER TO EXCESS OF EXPENSES OVER INCOMES, ACCUMULATED OVER THE
YEARS.

24. ITEMS WHILE PREPARING FINAL ACCOUNTS
OF JOINT STOCK COMPANIES
1. GOODS DISTRIBUTED AS FREE SAMPLES
2. GOODS DESTROYED BY FIRE ACCIDENT
3. DEBENTURE INTEREST
4. TRANSFER FEE ON SHARES
5. CALLS IN ARREARS
6. CALLS IN ADVANCE

25. 7. FORFEITED SHARES
8. CONTINGENT LIABILITIES
9. PRELIMINARY EXPENSES
10.UNDERWRITING COMMISSION
11.DISCOUNT ON ISSUE OF SHARES AND DEBENTURES
12.INTERIM DIVIDEND
13.PROPOSED DIVIDEND
14.UNCLAIMED DIVIDEND
15.INCOME TAX
16.PROVISION FOR TAX
17.ADVANCE TAX
18.TAX DEDUCTED AT SOURCE (TDS)
19.CORPORATE DIVIDEND TAX OR DIVIDEND DISTRIBUTION TAX