The financial statements are formal annual reports through which firm disseminates its financial information to various stakeholders like owners, investors, tax authorities, employees etc. it is the basis to understand the profitability and financial position of any firm. It is the basis for taking decisions.
It represents recorded facts expressed in monetary terms for defined period of time.
Financial statements are prepared following accounting policies consistently accounting standards prescribed in the Companies Act and accounting concepts, principles, procedures and also the legal environment in which the business organizations operate.
The objectives of financial statements are:
There are three types of financial statements:
Every company registered under The Companies Act 2013 have to prepare these statements to harmonise the disclosure requirement with the accounting standards
The functions of financial statements are:
The following concepts and principles are central to the preparation of financial accounts and statements are:
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