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As such, correct understanding of the structure of financial statements and also of the tools available for the interpretation of financial statements is a must before one talks of any of the further discussions on financial management.
Any organization doing the business, whatever it is manufacturing activity or trading activity or service activity, is interested in knowing basically two
Cont
b.
Second financial statement is profitability statement. In technical language. It is referred to as Profit & Loss Account. This is the answer to the second question. What is the result of operation of the business during the specific period i.e. whether the operations have resulted into a profit or loss and by what amount. Technically, profitability statement is a period statement in the sense it refers to a particular period. This may be a month, a quarter, a half year
Schedule VI
Schedule VI of the Companies Act, 1956 is subdivided into four parts: Part-I Deals with the format of the Balance sheet. Part-II Deals with the Profit and Loss Account. Part-III Deals with notes forming part of the P&L A/C. and the balance sheet. The last reporting requirement to Part VI was interested recently with the effect from 15th May 1995 which deals with Balance Sheet abstract and the companys general business profile.
As stated above, Part-I of Schedule VI deals with balance sheet, though in normal circumstances we come across vertical form of Balance Sheet.
Liabilities a. Share Capital b. Reserves & Surplus c. Secured Loans d. Unsecured Loans e. Current Liabilities and Provisions
Assets a. Fixed Assets b. Investments c. Current Assts, Loans& Advancesns d. Misc. Expenditure e. Profit & Loss a/c debit Balance
Reserves 1) Subsidy Received From The Govt 2) Development Rebate reserve 3) Revaluation of fixed assets 4) Issue of Shares at Premium 5) General Reserves Surplus The credit balance in profit and loss account
a. b. c. d.
Debentures Loans and Advances From Banks. Loans and advances From subsidiaries. Other Loans and advances.
a. Fixed Deposits. b. Loans and Advances From subsidies. c. Short Term Loans and Advances i) From Subsidiaries ii) From Others d. Other Loans and Advances i) From Subsidiaries ii) From Others
a. b. c. d. e. f. g. h.
Goodwill Land Buildings Plant & Machinery Furniture fittings Patents, Trade Marks and Designs Vehicles etc.
a. Investments in Govt. or Trust securities. b. Investments in shares, debentures or bonds. c. Investment in Capital of Partnership firm
Raw materials, work-in-progress, finished goods, spares and consumables Sundry debtors and receivables < 6 mths Advances paid to suppliers of raw materials Cash and bank balances Interest receivables Other current assets such as Government securities, Bank deposits ..etc
Tax disputes Legal litigations Bills and cheques discounted with banks Claims against the company not acknowledged
Ratio analysis is one of the powerful tools of financial analysis. It indicates a quantitative relationship between the figures and group of figures which are used for
In assessing the financial stability of a firm, a management should, apart from profitability, be interested in relative figures rather than in absolute figures.