MEANING OF FINANCIAL STATEMENTS
Financial Statements, the final product of accounting process, are prepared following the accounting principles, practices and the accounting standards. Section 129 of the Companies Act, 2013 prescribes that Balance Sheet and Profit and Loss Account (Statement of Profit and Loss) are prepared in form prescribed in Schedule III of the Companies Act, 2013.
1)Balance Sheet- It is a statement of Assets, Liabilities and Equity (i.e., Shareholders’ Funds) of the company at a given date. It shows the financial position of a business by listing its Assets, Equity and Liabilities. It is also known as Position Statement.
2)Profit and Loss Account –It shows the financial performance, i.e., result of business operations during an accounting period. It is described as Statement of Profit and Loss in Part II of Schedule III of the Companies Act, 2013 and is also known as Income Statement.
3)Notes to Accounts -Balance Sheet and Statement of Profit and Loss are supported by the notes giving details of items in the Balance Sheet and Statement of Profit and Loss.
4)Cash Flow Statement -It is a statement prepared in the manner prescribed in AS-3, Cash Flow Statement, and shows inflows and outflows of Cash and Cash Equivalents.