Every private limited company registered in India is required to prepare and file certain financial statements with the ministry of corporate affairs in order to be compliant with the rules and regulations and avoid the levy of hefty fines and punishments. Moreover, the accurate financial statements help you in determining the exact position of the company. With the introduction of Companies Act 2013 significant changes were made in the provision related to the financial statements related to the private limited company. With the changes made in the rules and regulations more accountability were set on the high officials and independent directors to ensure the compliances. Through this article we will understand various aspects related to the financial statements of the private limited company.
First of all it is important to analyze the meaning of the financial year and the financial statement in the beginning only.
Every company shall consider the following things while determining the financial year-
- The financial year of every company shall end its financial year on 31st March every year.
- In case the new company is started on 1 January or any day before the 1st April the financial year can end on the 31st March of the following year.
- If any company is not following or unable to follow the standard financial year it can do so within the period of 2 years from the act.
- The holding and subsidiary companies are required to follow the consistent financial year.
After the private limited company registration in India it is mandatory to prepare and submit the financial statements at the end of each financial year. According to the Companies Act the financial statements of the company must include the following-
- Balance sheet as at the end of financial year.
- Profit and Loss account of the year.
- Cash flow statements for the year.
- Changes in Equity.
- The explanatory notes and documents attached to it.
Also the proper books of accounts must be prepared by company to be taken as the base of preparing the financial statements. These books can be prepared in either the electronic form or in physical form. In the books of account shall consist of the details of the following-
- Sales and purchases of goods and services by company.
- Assets and liabilities of company.
- All the receipts and expenditure of the company.
Compliance with standards
All the financial statements for the company shall be prepared in the prescribed form and shall give a true and fair value of company’s position. Moreover, they must abide by the accounting standards and in case of any deviation relevant reason must be given.
Authentication of Financial Statements
- All the statements prepared shall be first examined by the board of directors and they give their approval if the statements prepared are correct.
- Further, the statements prepared shall be forwarded to the auditors for their report. The audit will be conducted by the auditors to ensure the correctness of the statements filed.
- After the audit of the financial statements the statements must be filed with ministry of corporate affairs as the part of the private limited company compliances.
It is important to file the correct and true financial statement on due dates in order to avoid the levy of hefty penalties.