NEW FORMATS of Financial Statements of Non-Corporate Entities | Proprietors| Firm | HUF | FY 2024-25

Summary

This video explains the essential elements of preparing financial statements for partnerships or associations of persons (AOPs). It emphasizes using 'Cash and Cash Equivalents' for deposits, how to properly classify revenue, costs, and interest expenses, and the importance of separating specific expenditures. The speaker outlines how to handle auditor fees, provide necessary disclosures (such as contingent liabilities and capital commitments), and follow prescribed financial statement formats under the Companies Act. Practical advice is given for accurate financial reporting and compliance with relevant standards.

Takeaways

• 😀 Cash and Cash Equivalents: Fixed Deposits with a maturity of less than 3 months should be classified under 'Cash and Cash Equivalents,' not under bank balances.
• 😀 Revenue and Expenses: The financial statement structure should align with Division I of the Companies Act, showing operational income and material consumption as per standard accounting practices.
• 😀 Finance Costs: Interest paid on partners' capital should be included in the 'Finance Costs' section of the financial statements.
• 😀 Partner Remuneration: Partner remuneration should be displayed below the profit line as 'Profit Before Partner Remuneration and Tax.' Interest on partners' capital should be shown separately under finance costs.
• 😀 Other Expenses: Any expense greater than 1% of revenue or ₹1,00,000 must be disclosed separately in the financial statements.
• 😀 Auditors' Remuneration: Separate disclosures are required for various types of auditor fees, including audit fees, tax audit fees, certification fees, and out-of-pocket expenses.
• 😀 Contingent Liabilities: Disclosure of contingent liabilities is mandatory, in accordance with the Companies Act and accounting standards.
• 😀 Capital Commitments: Capital commitments should be disclosed separately in the financial statements.
• 😀 Accounting Standards Compliance: Companies must follow prescribed accounting standards, as set by the Companies Act and relevant regulations, when preparing financial statements.
• 😀 Transparency in Financial Statements: Detailed and transparent disclosures are necessary for maintaining regulatory compliance and providing clear financial information.

Q & A

What is the correct nomenclature to use for cash and bank balances in the financial statement?

The correct nomenclature to use is 'Cash and Cash Equivalents' rather than just 'bank balances' or 'deposits'.

How should a Fixed Deposit (FD) with a maturity of 3 months be classified in financial statements?

A Fixed Deposit (FD) with an original maturity of 3 months should be classified under 'Cash and Cash Equivalents', not under 'Bank Balances'.

How should interest on partners' capital be classified in financial statements?

Interest on partners' capital should be classified under 'Finance Costs' in the financial statement.

Where should partner remuneration be displayed in the Profit and Loss account?

Partner remuneration should be displayed below the line item 'Profit Before Partner Remuneration and Tax'.

How should the other expenses exceeding 1% of revenue or 1 lakh be disclosed?

Other expenses that exceed 1% of revenue or 1 lakh should be disclosed separately in the financial statements.

If other expenses are less than 1% of revenue or 1 lakh, how should they be shown?

If other expenses are less than 1% of revenue or 1 lakh, they can be grouped under the 'Others' column in the financial statements.

What specific disclosures are required for auditors' remuneration?

Auditors' remuneration must be disclosed separately in the notes to the accounts, breaking it down into audit fees, tax audit fees, certification fees, and out-of-pocket expenses.

What additional disclosures must be made regarding contingent liabilities and capital commitments?

Disclosures regarding contingent liabilities and capital commitments must be made in the financial statements, as required under the Companies Act and accounting standards.

What is the importance of showing expenses separately if they exceed the specified thresholds?

Showing expenses separately if they exceed 1% of revenue or 1 lakh provides clarity and transparency in the financial statements, ensuring that significant expenses are appropriately highlighted.

What kind of updates can viewers expect from the channel based on the video content?

Viewers can expect regular updates on accounting practices, financial statement preparation, and compliance with relevant laws and standards, as indicated in the video's closing remarks.