Types of Financial Statements

The financial statements of a company are the final output of the accounting process. They communicate the financial health, performance, and cash movements of the business to external users (investors, creditors, government) and to internal management (for planning and control).

Under the Companies Act, 2013 [Section 2(40)], the financial statements of a company comprise:

1. Balance Sheet — the statement of financial position (assets, equity and liabilities) as at the end of the reporting period.
2. Statement of Profit and Loss — the statement of financial performance (income and expenses) for the reporting period.
3. Cash Flow Statement — the statement of inflows and outflows of cash and cash equivalents during the period (studied in a later chapter).
4. Statement of changes in equity, if applicable, and
5. Notes — the explanatory notes and significant accounting policies that accompany the above.

All of these must be prepared in the format prescribed by Schedule III of the Companies Act, 2013. Schedule III was framed to bring uniformity, to align Indian practice with the accounting standards, and to ensure full, transparent disclosure through the classification of every item into current and non-current categories. …