Anyone who undertakes a new venture invests a lot of money with an objective of earning more. The business cannot be set up without money which means money helps the person to multiply the amount with the invested amount. Thus, to find out how much profit has been gained or how more can be earned, the financial statements are prepared with utmost care. The financial statements are considered to be the most important document which is required and prepared by the finance department of the company. After compiling intricate details of the transactions, it is being published to be presented at ACRA or in the Annual General Meeting of the company.
Process of preparing financial statements
The financial statements cannot be prepared in a weeks’ time neither it is a job of a single person. The entire team of the finance department prepares the report from the first day of the financial year. This is the record which comprises everyday calculation. Later on, it is being calculated weekly, monthly, quarterly, half yearly and annually. The financial statements are the efforts of the entire team building it day after day. The filing of financial statementscan only be done after presenting it to the chairman of the company. The report includes financial statements, disclosure of the transactions, board of directors’ report and auditor’s report. The financial reports are the company’s progress report and it also highlights its strengths and weaknesses. It is also considered to be the means of communication between the Board of Directors and Shareholders.
Financial statement includes:
- Balance sheet
- Profit and loss account/income
- Credit and debit
- Expenditure account
- Cash flow statements
- statements of shareholder equity
It is significant to exhibit or enter a true account of the statements so that the exact current situation of the company can be analysed. It should comply with the accounting standards. The discrepancy found in the financial statements can bring a blot on the name of the company leading to loss of trust and confidence of the shareholders and investors. The company may have to pay a hefty fine and penalty for hiding the truth from the investors. Thus, it is good to be honest and fair in the presentation of the financial statements.
When to submit and present
The financial record of the company is presented after filing the return as per Company Act Law. Later, in the annual general meeting it is presented in detailed explanation in front of all the significant members of the company. It is such an important document that the board of directors sign it to prove its authenticity and exactness.
Consequences of not filing the return
There is a heavy penalty for the companies that do not care to return their file on time. According to the Company act law they may suffer severe punishment for the breach of law. Their registration may be cancelled or hefty fine may be levied for the renewal of registration. Thus, it is important to abide by the rules and regulation of the Company Act.