Financial statements are one of the most important written records which give a true and fair view of the state of affairs of the company and which shows the financial performance of the company.
Before proceeding further, let’s first understand, what Financial Statements are:
The term Financial Statement is defined under CA, 2013 under Section 2(40), which says:
“financial statement” in relation to a company, includes—
(i) a balance sheet as at the end of the financial year;
(ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;
(iii) cash flow statement for the financial year;
(iv) a statement of changes in equity, if applicable; and
(v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv):
Provided that the financial statement, with respect to One Person Company, small company and dormant company, may not include the cash flow statement.
Instructions to be followed for preparing Balance sheet and statement of P&L of a company
Must be complied with AS, if applicable- Where compliance with the requirements of the Act including Accounting Standards as applicable to the companies require any change in treatment or disclosure including addition, amendment, substitution or deletion in the head or sub-head or any changes, inter se, in the financial statements or statements forming part thereof, the same shall be made and the requirements of this Schedule shall stand modified accordingly.
Disclosures requirement– The disclosure requirements specified in this Schedule are in addition to and not in substitution of the disclosure requirements specified in the Accounting Standards prescribed under the Companies Act, 2013. Additional disclosures specified in the Accounting Standards shall be made in the notes to accounts or by way of additional statement unless required to be disclosed on the face of the Financial Statements. Similarly, all other disclosures as required by the Companies Act shall be made in the notes to accounts in addition to the requirements set out in this Schedule.
Information to be included in notes to accounts- Notes to accounts shall contain information in addition to that presented in the Financial Statements and shall provide where required (a) narrative descriptions or disaggregation of items recognized in those statements; and (b) information about items that do not qualify for recognition in those statements.
Rounding off of the figures– Depending upon the turnover of the company, the figures appearing in the Financial Statements may be rounded off as given below: —
| Turnover | Rounding off |
| less than 100 crore rupees | To the nearest hundreds, thousands, lakhs or millions, or decimals thereof. |
| 100 crore rupees or more | To the nearest lakhs, millions or crores, or decimals thereof. |
Uniformity in unit of measurement– Once a unit of measurement is used, it should be used uniformly in the Financial Statements.
Figures together with notes of previous year shall also be given- Except in the case of the first Financial Statements laid before the Company (after its incorporation) the corresponding amounts (comparatives) for the immediately preceding reporting period for all items shown in the Financial Statements including notes shall also be given.
| Cash flow statement shall be prepared, where applicable, in accordance with the requirements of the relevant Indian Accounting Standard. |
Consolidated Financial Statement shall be prepared in case company has one or more subsidiaries or associate companies
Where a company has one or more subsidiaries or associate companies, it shall also prepare a consolidated financial statement of the company and of all the subsidiaries and associate companies in the same form and manner as that of its own and in accordance with applicable accounting standards, which shall also be laid before the AGM of the company along with the laying of its financial statement.
| The company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiary or subsidiaries and associate company or companies. |
Disclosing the reason of deviation from the accounting standards
where the financial statements of a company do not comply with the accounting standards, the company shall disclose in its financial statements, the deviation from the accounting standards, the reasons for such deviation and the financial effects, if any, arising out of such deviation.
Penal Provision
If a company contravenes the provisions of this section, the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person charged by the Board with the duty of complying with the requirements of this section and in the absence of any of the officers mentioned above, all the directors shall be punishable with imprisonment for a term up to one year or with a fine from 50,000 – 5,00,000 rupees, or with both.
Approval and Signing of the financial statement, including consolidated financial statement, if any, (section 134 of CA, 2013)
The financial statement, including consolidated financial statement, if any, shall be approved by the Board of Directors before they are signed on behalf of the Board by the chairperson of the company where he is authorised by the Board or by two directors out of which one shall be managing director, if any, and the Chief Executive Officer, the Chief Financial Officer and the company secretary of the company, wherever they are appointed, or in the case of One Person Company, only by one director, for submission to the auditor for his report thereon.
Copies of Audited Financial statements shall also be sent to every member of the company at least 21 days before the date of General Meeting
A copy of the financial statements, including consolidated financial statements, if any, auditor’s report and every other document required by law to be annexed or attached to the financial statements, which are to be laid before a company in its general meeting, shall be sent to every member of the company, to every trustee for the debenture-holder of any debentures issued by the company, and to all persons other than such member or trustee, being the person so entitled, at least 21days before the date of the meeting.
Copy of Financial Statement to be Filed with Registrar
A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting.
A company shall, along with its financial statements to be filed with the Registrar, attach the accounts of its subsidiary or subsidiaries which have been incorporated outside India and which have not established their place of business in India.
| Every company shall file the financial statements with Registrar together with Form AOC-4 and the consolidated financial statements, if any, with form AOC-4 CFS. |
Penal provisions for not filing the copy of Financial statement with Registrar
On Company- Rs 1,000 for every day during which the failure continues but which shall not be more than ten lakh rupees,
The managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be liable to a penalty of one lakh rupees and in case of continuing failure, with further penalty of 100 rupees for each day after the first during which such failure continues, subject to a maximum of five lakh rupees.
Re-opening of Accounts (Section 130 of CA, 2013)
Prior to CA, 2013 there was no such provision of re-opening of accounts in CA, 1956. Companies Act, 2013 inserted another new provision w.r.t. re-opening of Accounts or recasting its financial statements.
If the affairs of the company were mismanaged during the relevant period, casting a doubt on the reliability of financial statements or the relevant earlier accounts were prepared in a fraudulent manner, an application shall be made by the following authorities:
- the Central Government,
- the Income-tax authorities,
- the SEBI,
- any other statutory regulatory body or authority or
- any person concerned.
Notice shall be given the court or the Tribunal before passing an order
Before passing an order, the court or the Tribunal shall give notice to the Central Government, the Income-tax authorities, the Securities and Exchange Board or any other statutory regulatory body or authority concerned or any other person concerned and shall take into their consideration the representations, if any.
Voluntary Revision of Financial Statement or the report of the Board:
If it appears to the Directors of the company that financial statement or the report of the Board of the company are not as per the required provisions, they may prepare revised financial statement or a revised report in respect of any of the three preceding financial years.
But before that an application has to be made by the company to the Tribunal and a copy of the order passed by the Tribunal shall be filed with the Registrar. The Tribunal shall give notice to the Central Government and the Income tax authorities and shall take into consideration the representations, if any, made by that Government or the authorities before passing any order.
| Revised financial statement or report shall not be prepared or filed more than once in a financial year. |
For detailed procedure for Voluntary Revision of Financial Statement or the report of the Board, go through my below article:
https://taxguru.in/company-law/checklist-for-voluntary-revision-of-financial-statement.html
| References: |
| Sections- 129, 130, 131, 134, 136, 137 of CA, 2013 |
| Rules- 5, 10, 12 of Companies (Accounts) Rules, 2014 |
| SCHEDULE III |
Disclaimer: The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation. The author has undertaken utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.
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