1.

Annual report
(1) Every statutory body shall cause to be prepared an annual report.
(2) The annual report under subsection (1) shall consist of
(a) in the case of a statutory body specified in Part I of the First Schedule, a
report highlighting a 3-year strategic plan in line with programme based
budgeting indicating the visions and goals of the statutory body with a view
to attaining its objects and appreciation of the state of its affairs;
(aa) in the case of a statutory body specified in Part II of the First Schedule,
a report highlighting a 3-year strategic plan indicating the visions and goals
of the statutory body with a view to attaining its objects and appreciation of
the state of its affairs;
(b) the annual estimates referred to in section 4A(a) or (b), as the case may
be;
(c) in the case of a statutory body specified in Part I of the First Schedule,
the financial statements and the report on outcome and outputs, duly
signed by the Chairperson and another member of the Board appointed by
the Board for that purpose or, in the absence of the Chairperson, by another
member of the Board appointed by the Board for that
purpose;
(ca) in the case of a statutory body specified in Part II of the First Schedule,
the financial statements duly signed by the Chairperson and another
member of the Board appointed by the Board for that purpose or, in the
absence of the Chairperson, by another member of the Board
appointed by the Board for that purpose;
(d) a corporate governance report in accordance with the National Code of
Corporate Governance.
Report to be Annexure
At the end of every accounting period each company comes out with
Financial Statement. The company comes out with Financial Statement. The
following reports are annexure with Financial Statement.

Report from director

Auditors Report
Corporate Governance Report

Financial Statistics
Major Accounting Policies

Directors Report - It is a report prepared by Directors of Company

regarding overall performance of company.. The contents of a Directors
reports are as below :

Highlights of Financial Result.

An overview of performance of the Companies during the year.
Future Projects in hand or expected.
Future expansion programme.
About appointment / reappointment of Auditors.
About retirement / appointment / reappointment of Directors
Auditors Report:-An Auditors Report is formal opinion whether the
auditee's financial statements have been prepared in accordance with
Generally Accepted Accounting Principles (GAAP), whether they are free of
material misstatement (e.g. free of free of material misstatement (e.g. free
of important and significant errors), and whether important and significant
errors), and whether they show a true and fair view of the operating results,
financial position and cash flows of theauditee
Type

of Auditors Report
Unmodified Opinion repor
Qualified Opinion report
Adverse Opinion report
Disclaimer of Opinion report

Corporate Governance Report-It is report prepared by Board of Directors

of Companies.It is represent that governance of company is how fair & good.
Usually CGcompany is how fair & good. Usually CGreport have following
contents:

Board of Directors
Audit Committee
Shareholder Committee
Managerial remuneration
Financial Statistics-It contents the past record such as annual contents the
past record such as annual turnover, profit , debts of company and total
wealth of the company and comparative time series analysis of these records
to show the growth trend of records of the company

Major Accounting Policies-Accounting policies refers to the specific

Accounting principal and methods for applying those principles adopted by
the Companies
Now, we explain which section tell you what.
1. Section 210
Section 210 of Indian Company Act 1956, explain the provisions for preparing
final accounts.
Schedule VI ( Part II)
a) Same provision applies for Income and expenditure account
Like Trading and profit and loss account, A Not-for Profit Organisation will
make income and expenditure account.
b) Result
Profit and loss account should result of the business operation. We will debit
all the operational expenses and we will credit all the operational incomes.
Result will be in the form of profit or loss.
c) Clarity
Every data in profit and loss account should be shown in very clear way. For
example, we take the sales. It is the part of income of company. Every item
and every product categories sales should be included in the company sales.
We also include the sales agents' sale in it.
d) Expenses paid or Accrues and Provisions
All the expenses whether these are paid or not should be included in the
debit side of profit and loss account. We should also adjust different
provisions in profit and loss account.
Main provisions are

i) Provision for bad debts

ii) Provision for depreciation
iii) Provisions for Taxation
e) Divisible Profits
Profit Available or dividend to shareholders are known as divisible profits.
Proposed, interim and declared dividend should be adjusted from profit and
loss appropriation account.
2. As per Company Law, A Joint Stock Company has to prepare and
to present following final accounts
1. Manufacturing Account : This is the part of Final accounts of
joint stock companywhich is in manufacturing or construction industry. This
account is made for finding cost of production. Same cost of production is
transferred to the Debit Side of Trading Account
2. Trading Account : This Account is also part of the final accounts of joint
stock company. With the help of this account, we find the gross profit which
is transferred to Profit and Loss Account.
3. Profit and Loss Account : This Account is also part of final accounts of
joint stock company. This account is made for finding the net profit after
taxation. This net profit is transferred to Profit and Loss Appropriation
Account.
4. Profit and Loss Appropriation Account : This account is made for
all nonoperational adjustments. In this account, we adjust the amount of
general reserve and dividend. Balance of this account is surplus which is
transferred to the liability side ofbalance sheet. This surplus is included in
the surplus and reserve section under the liability side of balance sheet.
5. Balance Sheet : Balance sheet of joint stock company shows
the financial position. In this sheet, we show all the assets and liabilities.
This balance sheet provides lots of useful information to investors, Govt.,

employees and customers.

2.Guide lines regarding Final Accounts under Indian Company Act
1956
Section 210 of Indian Companies Act 1956 provides that at the Annual
General Meeting, the Board of Directors of the Companies have to present
Financial Statement such as Balance Sheet and Profit & Loss prepared as
per schedule VI to the Companies Act 1956
The schedule VI has four parts:
Trading Account : This Account is also part of the final accounts of joint
stock company. With the help of this account, we find the gross profit which
is transferred to Profit and Loss Account.
Profit and Loss Account : This Account is also part of final accounts of
joint stock company. This account is made for finding the net profit after
taxation. This net profit is transferred to Profit and Loss Appropriation
Account.
Profit and Loss Appropriation Account : This account is made for
all nonoperational adjustments. In this account, we adjust the amount of
general reserve and dividend. Balance of this account is surplus which is
transferred to the liability side ofbalance sheet. This surplus is included in
the surplus and reserve section under the liability side of balance sheet.
Balance Sheet : Balance sheet of joint stock company shows the financial
position. In this sheet, we show all the assets and liabilities. This balance
sheet provides lots of useful information to investors, Govt., employees and
customers.
Components of Final Account for Trading Firm
Final Account, Trading Account, Profit & Loss Account, Balance Sheet
Components of Final Account for manufacturing Firm
Final Account, Trading Account, Profit & LossAccount, Balance Sheet,
ManufacturingAccount

3. Assumptions underlying accounting measurement

Accounting Measurement

Accounting involves the measurement and communication activities of

economic
Accounting measures business transactions and other events that
effect the financial position of the enterprise

Assumptions Underlying Accounting Measurement

1.
2.
3.
4.

Accounting Entity
Going Concern
Periodicity
Money Measurement

Accounting Entity (Business is distinct from owner) :Business is

treated as an accounting entity which is seperate from its owners and from
other firms
Example- Mr. Rahul owns a medical store. The store should maintain
separate accounting records. Mr. Rahul may own a house, car etc., he may
also have availed housing loan, credit cards. But these assets and loans
cannot be apart of his store accounting books/records. He may also own a
departmental store. But he has to maintain a separate set of record. And
these two businesses cannot be mixed and should be kept separate.
Going Concern (Business is a continuing enterprise) It is assumed
that business is a continuing enterprise. Assumption states that business
will have indefinite life unless it is likely to be sold in the near future.
Assumption is also based on the fact that the majority of the business
enterprise do survive in spite of many business failures.
Periodicity (Business activities divided into periods) Suppose you
carry on a business. Main objective of business = profit When will you
ascertain profits? Divide the indefinite period(remember business is a
going concern) into small periods and at the end of this small period you
calculate business profits. How does the above exercise help you? You
can make decisions like a) Whether to continue in business; b)whether
business should be expanded; c)if profits are less what should be done to
increase them
Periodicity (Business activities divided into periods) Profit means income
earned at the end of the business. Periodical ascertainment of profit earned

during that period is important Hence the necessity to assess profit after
fixed time period arises Transactions are recorded in books of accounts on
the assumption that profit out of these transactions is to be ascertained for a
specified period. This is known as PERIODICAL ASSUMPTION OF
ACCOUNTING
Periodicity (Business activities divided into periods) In periodicity
assumption, indefinite life of business is divided into parts. These parts are
known as accounting periods. Normally one year is taken as a accounting
period In U.S accounting year is generally from Jan 1 Dec 31. (Calender
year) & In India it is April 1 Mar 31 (of the next year) (financial year)
Periodicity assumption assumes that expenses & revenues are identified
with a specific account period usually a year. The assumption of Account
Period is so important that even government charges tax on business once in
a year Even third parties dealing with business like banks like to know
profits of a business for a particular period.
Money Measurement (Money is a stable measurement unit) On a
particular day, a business concern purchases 1 office table, 1 fan & 10 liters
of diesel. How will the accountant record all these items? How will the
table, fan & diesel entered in the books? These items have been measured in
different units If these are brought to a common unit of measuring, their
recording and reporting will be easy. Such a common unit of measuring for
all business transactions in accounting is MONEY. That is why business
transactions are monetary in nature. Therefore only those transactions
which are expressed in terms of money are recorded in business. If a
transaction is not measurable in terms of money it will not be recorded in the
books of accounts. This is known as Money Measurement Assumption.
These assumptions help in solving the difficulties one faces while recording
business transactions. It helps in ascertaining true position of business. It
facilitates recording & reporting business transactions from business point of
view. It serves the basis for accounting concepts. Facilitates preparation of
financial statements. It is because of assumption that Business can be
judged for its capacity to earn profits. It ensures outsiders the continuity of
business activities over an indefinite period of time.
4.Importance of financial analysis using Excel
We have split this program in three broad categories: -

Data Manipulation & Navigation - By navigation we mean how you can

move around your workbook and worksheets more efficiently.
Formatting - tells you ways to make your data more presentable.
It tells you ways to change your background color, font size, color etc.
Formulas - how you can insert or delete rows or columns in excel, how you
can hide, unhide, group, ungroup your data etc.
You require all these things when you work in investment banks, equity
research and financial research. So it is very important that you have good
command over all the relevant shortcuts.
Formulas part focuses on calculations part.
In excel, there are many built-in functions available. We are going to study
the ones that are used most frequently in investment banking and
finance.topic refers to some features like Lookup functions, Pivot Tables,
Macros etc.These are some of the features that are also used frequently in
investment banking, finance and consulting.
5. elements of cost / Classification of cost
There are broadly three elements of cost - (1) material, (2) labour and (3)
expenses.:

Material: The substance from which the product is made is known as

material. It may be in a raw state-raw material, e.g., timber for furniture and
leather for shoe, etc. It may j also be in manufactured state-components,
e.g., battery for car, speaker for radio, etc, Materials can be direct and
indirect.

Direct Material: All materials which become an integral part of the finished
j product, the cost of which are directly and completely assigned to the
specific physical units and charged to the prime cost, are known as direct
material. The following are some of the materials that fall under this
category:

(a) Materials which are specifically purchased; acquired or produced for a

particular job, order or process.
(b) Primary packing material (e.g. carton, wrapping, cardboard, etc.)
(c) Materials passing from one process to another as inputs.
In order to calculate the cost of material, expenses such as import duties,
dock charges, transport cost of materials are added to theinvoice price.
Material considered direct at one time may be indirect on other occasion. Nail
used in manufacturing wooden box is treated as direct material, but treated
as indirect material when used to repair the factory building.

Indirect Material: All materials, which cannot be conveniently assigned to

specific physical units, are termed as 'indirect material'. Suchcommodities do
not form part of the finished products. Consumable stores, lubrication oil,
stationery and spare parts for the machinery are termed as indirect
materials.

Labour - Human efforts used for conversion of materials into finished

products or doing various jobs in the business are known as
labour. Paymentmade towards the labour is called labour cost. It can also be
direct and indirect.

Direct Labour: Direct labour is all labour expended and directly involved in
altering the condition, composition or construction of the product. The wages
paid to skilled and unskilled workers for manual work or mechanical work for
operating machinery, which can be specifically allocated to a particular unit
of production, is known as direct wages or direct labour cost. Hence, 'direct
wage' may be defined as the measure of direct labour in terms of money. It is
specifically and conveniently traceable to the specific products Wages paid
to the goldsmith for making gold ornament is an example of direct labour.
Indirect Labour: Labour employed to perform work incidental to production
of goods or those engaged for office work, selling and distribution activities

are known as 'indirect labour'. The wages paid to such workers are known as
'indirect wages' or indirect labour cost.
Example: Salary paid to the driver of the delivery van used for distribution of
the product.

Expenses - All expenditures other than material and labour incurred for
manufacturing a product or rendering service are termed as 'expenses'.
Expenses may be direct or indirect.

Direct Expenses: Expenses which are specifically incurred and can be

directly and wholly allocated to a particular product, job or service are
termed as 'direct expenses'. Examples of such expense are: hire charges of
special machinery hired for the fob, carriage inward, royalty, cost of special
and specific drawings, etc. These are also known as 'chargeable expenses'.
Indirect Expenses: All expenses excluding indirect material and indirect
labour, which cannot be directly and wholly attributed to a particular
product, job or service, are termed as 'indirect expenses'. Some examples of
such expenses are: repairs to machinery, insurance, lighting and rent of the
buildings.
The elements of cost may be shown by means of a chart as follows:
6. Cash Flow Analysis
External Uses To assess the ability of a firm to manage cash flows To
assess the ability of a firm to generate cash through its operations To
assess the companys ability to meet its obligations and its dividend policy
To provide information about the effectiveness of the firm to convert its
revenues to cash To provide information to estimate or anticipate the
companys need for additional financing
Internal uses Along side with cash budget Cash Flow Statement is used:
To assess liquidity Determine if short-term financing is necessary To
determine dividend policy Decide to distribute; or increase or decrease
To evaluate the investment and financing decisions

Limitation- Non-Cash Transactions are ignored. Not a Substitute for Income

Statementt. Not a test of Total Financial Position. Historical in Nature.
7. Utility: Cash flow statement is useful for short-term analysis.
Statement of changes in Working Capital: Nosuch statement is prepared
separately in cash flow statement. Cash Balances: Opening and closing
balances of cash are shown in cash flow statement. Effect of a transaction on
net working capital is considered.
Fund flow statement is useful for long-term analysis.A separate statement for
changes in working capital is prepared in fund flow statement or analysis.
Such balances of cash are shown in statement of changes in working capital.

figure used by real estate investment trusts (REITs) to define the cash flow
from their operations. It is calculated by adding depreciation and amortization
expenses to earnings, and sometimes quoted on a per share basis.

Thus, the calculation of funds from operations is:

Net income - Interest income + Interest expense + Depreciation
- Gains on asset sales + Losses on asset sales

Funds from Operations (FFO) is a measure of cash generated by a real estate investment trust
(REIT). It is important to note that FFO is not the same as Cash from Operations, which is a key
component of the indirect-method cash flow statement.
How it works/Example:
The formula for FFO is:
Funds from Operations = Net Income + Depreciation + Amortization - Gains on Sales of