Whether you are going to invest in Stock Markets or buying a company, you need to have the skills to value a company. To value a business you need to understand the financial statements of company. Financial statements are the face of company. They speak truth and one need to identify if any misstatement lies within.

Financial statements are set of records which displays the financial stand of any business along with profitability. Financial statements are the core source to value a business and are considered as prime documents to study the financial performance of company.

Before we jump into subject matter, How to study the financial statements of a company, let’s understand framework and structure of the financial statements.

  1. Indian companies present their financial statements as per the requirements of Companies Act 2013.
  2. Indian Companies follow the Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI).
  3. Financial Statements are audited by a Chartered Accountant.
  4. Financial statements comprises of
    • A Balance Sheet as at the end of the Financial Year.
    • A Profit and Loss Account or an Income and Expenditure Account (in the case of a Company carrying on any activity not for Profit) for the Financial Year.
    • Cash Flow Statement for the Financial Year.
    • A Statement of Changes in Equity.
    • Any Explanatory Note annexed to or forming part of any document referred to above.

Posted 3 years ago by CA Pulkit Sharma

Some browsers have the problem of image not opening. Images for formats of Balance sheet and Profit and Loss account are again re-inserted.


Posted 3 years ago by CA Pulkit Sharma

The basic formats of Balance Sheet and Profit and Loss account is explained in above posts.

Next posts will be ragarding How to analyze each and every line item of Balance sheet and Profit Loss account with examples.

If you have any doubts please ask it here itself.

Posted 3 years ago by CA Pulkit Sharma

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