Companies prepare their financial statements in the format of Schedule III to the Companies Act, 2013.
Balance Sheet — main headings
| Equity and Liabilities | Assets |
|---|---|
| Shareholders' Funds: Share capital; Reserves and surplus | Non-current assets: Property, Plant and Equipment and Intangible assets; Non-current investments; Long-term loans and advances |
| Non-current liabilities: Long-term borrowings; Long-term provisions | Current assets: Current investments; Inventories; Trade receivables; Cash and cash equivalents; Short-term loans and advances; Other current assets |
| Current liabilities: Short-term borrowings; Trade payables; Other current liabilities; Short-term provisions |
Operating cycle
The time between buying materials and collecting cash from the sale of the products. An item is current if it is expected to be settled within the operating cycle or within 12 months.
Statement of Profit and Loss
Revenue from operations + Other income = Total income. Expenses: cost of materials consumed, purchases of stock-in-trade, change in inventories, employee benefits, finance costs, depreciation and amortisation, other expenses. Profit before tax − tax = Profit for the period.
Tools of analysis
- Comparative statements show two years side by side with the absolute change and the percentage change.
- Common-size statements show each item as a percentage of a base: revenue from operations for the Statement of Profit and Loss, and the total for the Balance Sheet.
Limitations: analysis uses historical figures, ignores price-level changes and qualitative factors, and depends on the accounting policies used.
Recorded lectures for this chapter
8 lectures (2 h 57 min) by Ronak Dugar in Class 12 Accountancy Book 3: Analysis of Financial Statements. Enrolled students watch them in the student portal.
- Class 1 - Format of Balance Sheet of a Company (Liabilities side)25 min
- Class 2 - Format of Balance Sheet of a Company (Liabilities side)25 min
- Class 3 - Format of Balance Sheet of a Company (Assets side)25 min
- Class 4 - Format of Statement of P&L of a Company, Concept of Operating Cycle26 min
- Class 5 - Theory part - Users, Uses, Objectives, Limitations etc. of Financial Statements25 min
- Class 6 - Contingent Liabilities, Commitments14 min
- Class 1 - Comparative Statements20 min
- Class 2 - Common Size Statements13 min
Learn this chapter with Ronak Sir
Classroom batches in Sector 9, Faridabad and recorded lectures online. Book a free demo class or call +91 83685 45620.