In Indian Economy where everyone is talking about demonetization and black money, we can’t ignore the importance of Accounting and Financial Statements to make this move successful. Everyone has got affected by this move, be it either the business community or the Investors. It is time to take your business to a different height by using this demonetization as a growth opportunity instead of as a curbing. Investors are looking for new business or new ideas that could generate revenue and growth for them. And for Creation of Value and worth for the Company, financial policies adopted plays crucial role in it.
Recently Indian Government has announced IndAS for Indian Corporates, viz the big size corporates, but are we ready for it or our Investors have knowledge to understand the transactions recorded with it? I think the answer will be No. As we know, IndAS has been applicable for big size companies & their subsidiaries and it will also cover rest of the business group in phase manner. Even employees from these companies are not able to understand it completely. So we just trying to bring some basic knowledge about it.
To have better understanding about the IndAS, first we must understand the basic structure of Financial Statements.
Components of Financial Statements are: –
However, we are already preparing above mentioned Statements except Statement of Changes in equity but there is a huge difference in Preparing financial statement using IndAS and Accounting Standards. Preparing Financial Statements using IndAS gives an edge to Indian Corporates as it helps users to compare over the periods presented and with companies outside India using IFRS.
Main Purpose of Financial Statements: –
Earlier we use to prepare Balance sheet using T-Shape Format or Vertical Format. However, there is no prescribed format in IndAS for Balance Sheet but as per Revised Schedule III of Companies Act 2013, companies are using format for preparing Balance Sheet. In this format, Assets and Liabilities are classified on the basis of Current or Non-Current.
# “The operating cycle of an entity is the time between the acquisition of assets for processing and their realisation in cash and cash equivalents”.
Profit or Loss:
Profit or loss is defined as “the total of income less expenses” or the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners”.
Income or Expense in Profit or Loss shall be presented by the nature of Income/Expense. However, we have already defined structure for this, issued by Ministry of Corporate Affairs.
Statement of Changes in Equity:
Notes to the financial statements:
The notes must:
This article is by Mr. Rahul Singla, who is a Chartered Accountant by Profession. Feedback and queries are welcome at [email protected]