Financial statements are most sensitive and important documents which contains the annual financial data in a systematic manner so that these can be comprehended by the reader or users. Financial statements show the picture of company financial status. This is like a health report of your business.
Financial statements comprise of balance sheet, profit & loss accounts and cash flow. The balance sheet shows the basic accounting equation: Assets= Liabilities + owner’s fund. Balance sheet is a document which presents you up-to-date. Profit & Loss statement shows the financial progress for the particular year. Cash Flows depicts the how much comes in and how much goes out of the business in a given year. With the help of cash flow statement, you can calculate the liquidity position so as to plan your future cash outflows.
Financial statements are very well defined under the Companies Act, 2013, which in addition to above mentioned documents further describes more documents statements of change in equity and explanatory note.
Reporting of financial statements is a mandatory requirement under the companies Act, 2013. Under the Act, there are only two forms, namely, AOC-4 and MGT-7 which are prescribed for annual filing in Delhi. Both forms are filed online to ROC.
E-form AOC-4: This form mainly contains financial statements which include Profit & Loss Account, Balance Sheet and Cash Flow statements. All these statements reveal all financial information of the company.
Preparation of financial statements itself a very long and crucial process, and it becomes more complicated when your company is holding company because holding company is required to consolidate the financial statements of their subsidiary as well. Consolidation basically means combine effect of financial statements of holding company as well as subsidiary company.
Consolidation of the books of accounts is done as per the accounting standard as well as applicable provision of the companies act.
This is quick view about the financial statements under the companies act. Filing of financial statements is an annual compliance which must be done within the prescribed time to avoid any penal provisions.