Meaning of Final Account.
It is mandatory for every company in India to prepare and keep books of account, other related books, forms and statements in its registered office. The company is required to prepare its books of account on accrual basis according to the double-entry system. Every company should prepare and publish the final accounts or financial statements on the basis of these accounting information at the end of the financial year in accordance with the format and provisions specified in the Companies Act. Thus every company is required to prepare and publish the final accounts every year to show its true true and true position. The final accounts of the company are mainly divided into two parts (1) balance sheet and (2) profit and loss statement.
The main purpose of preparing the final accounts is to provide financial information to the investors, information about assets and liabilities and to keep the company informed of the liquidity position. From the year ending 31st March 2015, companies have to prepare their final accounts in accordance with the Accounting Standards as per Schedule III. The vertical form of the balance sheet has been prescribed in Part I of Schedule III. Now the horizontal format of the balance sheet has been deleted. The format of the profit and loss statement is prescribed in Part II of Schedule III.
Rules Regarding the Preparation Presutation of Final Accounts
The method of preparing and presenting the final accounts of the company to the members is somewhat different from other business entities. It is mandatory for every company to follow certain sections of the Companies Act to protect the interests of the members of the company, to make the final accounts comprehensible and to keep the necessary controls. According to the Companies Act, the following rules are important in relation to the preparation and presentation of final accounts, profit and loss statement and balance sheet of a company-
(1) Books to be kept by the company- Every company is required to keep proper books of account at its registered office in respect of the following matters- (a) The amount received and paid by the company. (b) All purchase and sale of goods by the company (c) Details of the company’s assets and liabilities etc.
(2) Preparation of Annual Accounts- Every company in accordance with the provisions of Part II of Schedule III of the Statement of Profit and Loss in accordance with the provisions of Part II of Schedule III of the Balance Sheet of its financial year which will present a ‘true and fair’ picture of the company’s position and profit and loss for the year.
(3) Presentation of accounts before the annual general meeting- In every annual general meeting of the company, it is necessary to present the balance sheet and profit and loss account of the company to the Board of Directors and in the case of non-trading companies, the place of profit and loss account But ‘Income-Expenditure Account’ has to be submitted.
(4) Preparation of final accounts in the vertical form, at present, the balance sheet
(5) Classification of assets and liabilities – In the new format, the equity and liability side of the balance sheet has been divided into four parts and the asset side into two parts. of the shareholders in the first part of the equity and liability side
Fund in which the amount received under share capital accumulation and redundancy and share warrants will be shown. In the second part the application amount received during the pendency of the allotment, in the third part the non-current liabilities and in the fourth part the current liabilities will be shown. The amount of long-term borrowings, deferred tax liability, other long-term liabilities and long-term planning will be shown in non-current liabilities, and short-term borrowings, business dues, other
The amount of current liability and short term event will be shown. The properties will be divided into two parts. The first part will be non-current assets and the second part will be current assets. Non-current assets will include tangible and intangible fixed assets, current working capital, intangible assets under construction, non-current investment, deferred tax, long-term loans and advances, and current assets include current investments, inventories, trade receivables, cash and cash equivalents, and short-term loans and advances. I will attend
(6) Shareholders’ Fund – In the past, the shareholders’ fund was divided into two sub-sections – (a) capital and (b) accumulation and redundancy, but now it will be divided into three sub-sections – (a) share capital, (b) accumulation and Amount received under redundancy and (c) share warrants The debit balance (loss) and miscellaneous expenses (discount on shares, initial expenses etc.) of the profit and loss statement will no longer be mentioned in the asset side of the balance sheet. Now this amount will be shown in negative balance in accumulation and surplus and will be deducted while doing addition. Brackets () will be used on both sides of the amount to show the negative balance separately.
(7) Fixed Assets There will no longer be a separate title for fixed assets. these Tangible assets, intangible assets, current working capital and non-current assets in the form of intangible assets under construction will be shown. Depreciation of fixed assets will be shown in the profit and loss statement.
(8) Intangible Assets Formerly goodwill patents and trademarks in intangible assets was included. Now other assets like brand, computer software, publication title, copyright etc and the intangible assets under development will be shown under a separate head.
(9) Investment – In the past, investment was shown in a separate head on the property side of the balance sheet, but now business investment, investment in property, investment in equity shares, investment in preference shares, investment in government or trustee securities, debentures and Investment in brands, investment in partnership firm, recovery of which is possible after 12 months, investment in non-current assets, investment will be shown in the head but If the recovery of the above appropriations is made within 12 months, then it will be included in the current asset title.
(10) Separate mention of current assets and current liabilities – In the vertical form of the balance sheet, the amount of current liabilities will no longer be shown by deducting current assets. Current assets and current liabilities will now be shown separately.
(11) Miscellaneous Debtors and Creditors, Bills Receivable and Payable Mention in the new format Miscellaneous Debtors and Bills received in Trade Receivables and Miscellaneous Creditors and Bills Payable Trade Will be shown in the item ‘Trade Payable’.
(12) Statement of Profit and Loss – In the new format, profit and loss statement will be prepared in place of profit and loss account and profit and loss appropriation account will not be prepared separately. This appropriation will be in the form of an accounting note in the head of balance and surplus balance.
(13) Profit and Loss statement amount to the nearest hundred, thousand, lakh or ten lakh rupees or its decimal and if the turnover is 100 crores or more, the amount to the nearest one lakh, ten lakh or crore rupees or its decimal can be shown in
(14) The concept of schedule has been abolished – in the new format, the concept of schedule related to the balance sheet profit and loss statement has been abolished. In the new format, in place of the schedule number, the account note number will be mentioned.
(15) Amounts relating to the previous reporting period The amounts relating to the previous year shall also be shown for all items in all other financial statements after the first financial statement of the company.
(16) Explanation of interest in subsidiaries- If the company is a holding company, its The following forms relating to the subsidiary company shall be attached with the balance sheet – (a) a copy of the balance sheet of the subsidiary company, (b) a copy of the profit and loss account of the subsidiary company (c) a copy of the report of the board of directors, (d) A copy of the auditors’ reports of this company, (e) a statement of interest in the subsidiary company of the holding company.
(17) Authentication of accounts – Every balance sheet of the company and profit and loss account of the Board of Directors Must be signed on behalf of Final accounts so signed and reported before the auditors will be accepted by the Board of Directors before being submitted for
(18) Auditor’s report – The report (including special, interim or and separate) given by the auditors of the company shall be attached to the balance sheet.
(19) Report of the Directors A copy of the report presented by the Board of Directors before the Annual General Meeting shall be attached to each balance sheet, which shall explain the following things- (a) Details of the working of the company, (b) Transferred in accumulations The amount proposed to be paid, (c) the amount recommended as dividend (d) significant changes in the financial position of the company.
(20) Publication of final accounts – Balance sheet, profit and loss account, auditor’s account in the last account of the company Includes report, operator’s report and all the forms which are attached to them. In 21 days from the date of the Annual General Meeting by printing all the forms in the form of a mini-booklet.
The following persons have to be sent before- (a) every member of the company, (b) every registered
to the debenture holder, and (c) to other officers. (21) Sending copies of the final accounts of the registrar, three copies thereof are presented to the registrar within 30 days after the balance sheet and profit and loss account are placed in the annual meeting.