Financial Statements

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Financial statements are the end products of every accounting system in a business. This is the report card, which is generally prepared after closing all accounts yearly or half yearly basis.

There are two years which a company can follow for the preparation of financial statements. That is calender year[1Jan-31DEC] and financial year[1April-31march]. company can choose any one from the two. Well most of the companies used to follow financial year. But now some companies prepares their financial statements at the end of every 3rd year.

For preparing Financial statements all the accounts should be closed. There are two main parts of the Financial statements that is:-1]. Income statements:- profit and loss account

                               2].Position statement:- Balance sheet.

The income statement or profit and loss account of the business shows the profitability and profit earning condition of the business. The position statement shows the position of a company in the market.

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According to the schedule 6 of companies act 1956 it is compulsory for every company to prepare its financial statements and disclose their all assets and liabilities, their profitability, solvency, insolvency and their position to general public.  General public who wants financial information are:-

1].Top Management:- The top management wants the financial report from stewardship’s to check the overall performance and development of the business. They takes corrective decisions and measures after checking the performance through financial statements.

2]. Employees and workers:- They are concerned with the bonus and profit. So they want financial statement to check the profitability condition of the company for getting more bonus.

3]. Investors:- Investors are the persons who invested their money in the business. So they timely wants knowledge of financial statements to check whether their investment in the company is safe or not?

4].Lenders:- Lenders are loan providers of company. Company has to pay them money. So they check the long term solvency and liquidity ratios of the business through financial in formations to check that the company  will be able to pay their long term debts or not.

5].Creditors: They are the persons who sold their goods to the company. So company has to pay them some amount. SO they also checks the short term solvency and liquidity ratios of the business.

6].Government:-  Government charges tax according to the profit earned by the company. So government checks financial information of the companies to check how much tax should be charged on the companies.

7].Stock exchange and SEBI:- Security exchange board of India and stock exchange is the place where the shares of the companies are made available to the general public. So they check from financial information whether the company is original ir fraud. Because many fraud and fake companies are also sell their shares for getting money from general public.

8].Share and debenture holders:- They want to check the amount of interest or dividends so they want financial statements.

Financial statements are really very important.

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