What are Financial Statements?
Financial statements are written documents that transmits the financial pursuits and conditions of a trading concern or entity and comprise of 4 major elements. Financial statements are usually meant to furnish the financial data of the enterprise in question as precisely and concisely as feasible for both the enterprise and for the readers. Financial statements for trading concern normally comprise balance sheets, statements of retained earnings, cash flows and income statements but might need further elucidated acknowledgements relying upon the appropriate accounting groundwork. Financial statements are audited by government firms, accountants, agencies, etc. to make sure the certainty and for tax, financing or investing intentions.
Types of Financial Statements
The financial statements normally comprises of 2 statements. Namely:
- Balance sheet
- Statement of profit and loss
These are needed for external reporting and for internal requirements of the management like decision-making, control, and planning. Apart from these factors, we must be aware about movements of changes in the financial position of the enterprise and funds. For this intention, a statement of changes in financial position of the enterprise or a cash flow statement is outlined.
Every enterprise that is registered under The Companies Act 2013 would outline its statement of profit and loss, notes to account and balance sheet hereto in accordance with the way recommended in the revised Schedule III to the Companies Act, 2013 to agree with the disclosure requisite with the accounting standards and to gather with novice amendments. With regard to this, the Ministry of Corporate Affairs (MCA) had recommended a (Revised) Schedule VI to the Companies Act, 1956 (vide Notification dated 28.02.2011). It is pertinent to the financial statements outline for all financial periods beginning on or after April 01, 2011 by the Indian Companies.
The above mentioned is the concept, that is elucidated in detail about the Types of Financial Statements for the class 12 Commerce students. To know more, stay tuned to BYJU’S.