Companies registered in India must prepare their financial statements every year as per the Companies Act 2013 and other applicable laws. These financial statements show the company’s financial health — where the money came from, where it went, and what the company owns and owes.
For beginners, this topic often feels legal and complicated but in reality, the Companies Act, 2013 clearly explains what is financial statements, what to prepare, how to prepare it, who is responsible for the preparation and compliance of financial statements, and when it must be shared.
In this guide, we will understand financial statements as per Companies Act, 2013.
Key Takeaways
- Financial statements show a company’s financial position for one full financial year.
- The Companies Act, 2013 requires statements to give a true and fair view.
- Schedule III defines the standard format for most companies in India.
- Companies with subsidiaries usually must prepare consolidated statements.
- Directors and senior officers are legally responsible for compliance.
What Are Financial Statements under the Companies Act, 2013?
In simple terms, financial statements are official financial records of a company for one financial year. They must show a true and fair view of the company’s financial position at the end of the year.
Under the Companies Act, 2013, financial statements include:
- Balance Sheet
- Profit and Loss Statement
- Notes attached to these statements
- Cash Flow Statement (where applicable)
- Consolidated Financial Statements (if the company has subsidiaries)
Shareholders, banks, tax authorities, and regulators rely on these financial statements to understand how the company is actually performing.
True and Fair View – What It Really Means
The law repeatedly uses the phrase “true and fair view”.
In practice, true and fair view means:
- Figures should not be misleading
- Income, expenses, assets, and liabilities should be shown honestly
- Rules notified under the law must be followed
To ensure this, the Act says:
- Financial statements must follow Accounting Standards notified under Section 133 (These are standard rules on how income, expenses, assets, etc. are recorded.)
- Statements must be prepared in the format given in Schedule III (This ensures uniform structure across companies.)
Many people think “true and fair” means “perfect”. It does not. It means reasonable accuracy based on accepted accounting rules.
Insurance, Banking and other special companies – Different Formats Allowed
Not all companies follow the same format.
The following companies can prepare financial statements as per their own governing laws:
- Insurance companies
- Banking companies
- Companies engaged in electricity generation or supply
- Other companies governed by special Acts
For example:
- Banks follow the Banking Regulation Act, 1949
- Insurance companies follow the Insurance Act, 1938
Even if their format looks different, it is still treated as giving a true and fair view if it complies with their governing law.
Financial Statements Must Be Placed in AGM
Every company must place its financial statements before shareholders in the Annual General Meeting (AGM).
This applies:
- Every financial year
- Even if the company is small or unlisted
AGM is where owners (shareholders) get visibility into company finances.
Notes to Accounts Are to be part of Financial Statements
Any reference to “financial statements” includes notes attached to them.
Notes explain:
- Accounting methods used
- Break-up of major figures
- Important disclosures
In real life, many important details appear only in notes, not in the main statements.
What If Accounting Standards Are Not Followed?
Sometimes, companies may not fully comply with accounting standards.
In such cases, the company must clearly disclose:
- What standard was not followed
- Why it was not followed
- Financial impact, if any
This disclosure must appear inside the financial statements.
Who Is Responsible for Compliance?
The law clearly fixes responsibility.
Persons responsible include:
- Managing Director
- Whole-Time Director (Finance)
- Chief Financial Officer (CFO)
- Any person assigned by the Board
If none of these exist, all directors become responsible.
Responsibility cannot be avoided by saying “the accounts team made the mistake”.
Penalties for Non-Compliance (Section 129)
If Section 129 is violated:
- Imprisonment up to 1 year, or
- Fine from ₹50,000 to ₹5,00,000, or
- Both
Form of Financial Statements – Schedule III
Schedule III of the Companies Act:
- Prescribes format of Balance Sheet
- Prescribes format of Profit & Loss Statement
- Gives instructions for presentation
This ensures consistency across companies.
Consolidated Financial Statements (CFS)
If a company has subsidiaries, or associates, or joint ventures, it must prepare consolidated financial statements.
This applies to:
- Listed companies
- Unlisted companies
- Private companies
Example: A parent company earns ₹50 lakh, but its subsidiaries earn ₹5 crore. Showing only parent figures gives a wrong picture. Consolidated Financial Statement shows the group as one economic unit.
Form AOC-1 – Summary of Subsidiaries
Along with financial statements, the company must attach:
Form AOC-1, showing key financial details of subsidiaries, associates, and JVs.
When Consolidated Statements Are Not Required
A company may avoid preparing CFS if:
- It is a wholly-owned or partially-owned subsidiary
- All other members do not object in writing
- Its securities are not listed
- Its holding company files compliant CFS
These conditions must all be satisfied.
Re-opening of Accounts – Section 130
A company cannot re-open accounts on its own.
Re-opening is allowed only:
- By Court or Tribunal order
- On application by authorities like Income Tax, SEBI, or Central Government
Valid reasons include:
- Fraudulent accounts
- Mismanagement affecting reliability
Maximum look-back period is 8 financial years (unless extended by law).
Once revised, such accounts become final.
Voluntary Revision – Section 131
Directors may voluntarily revise:
- Financial statements, or
- Board’s Report
Conditions:
- Only for last 3 financial years
- Tribunal approval required
- Only once per financial year
- Reasons must be disclosed
Revisions must be limited to correcting non-compliance.
Signing of Financial Statements – Section 134
Financial statements must be approved by the Board and signed by:
- Chairperson (if authorised), or
- Two directors (one must be MD, if any)
Additionally, where appointed:
- CEO
- CFO
- Whole-Time Company Secretary
Is Company Secretary’s Signature Mandatory?
Yes.
If the company has a Whole-Time Company Secretary, signing is mandatory.
Right of Members to Receive Financial Statements – Section 136
Copies of financial statements must be sent at least 21 days before the Annual General Meeting.
Early sending is allowed if 95% members consent.
Special cases:
- Section 8 companies: 14 days
- Nidhi companies: Newspaper notice allowed for small shareholders
Obligations of Listed Companies
Listed companies must:
- Keep documents available for inspection
- Send summary in Form AOC-3 / AOC-3A
- Upload financial statements on company website
Foreign subsidiary accounts must also be placed on the website, audited or unaudited as per local laws.
Filing with Registrar of Companies – Section 137
Companies must file:
- AOC-4 (standalone)
- AOC-4 CFS (consolidated)
Timeline: Within 30 days of AGM
Special cases:
- OPC: 180 days from end of financial year
- AGM not held: file with reasons
Certain companies must file in XBRL format.
XBRL Filing – Who Must File?
XBRL applies to:
- Listed companies
- Companies with paid-up capital ≥ ₹5 crore
- Companies with turnover ≥ ₹100 crore
- Companies following Ind AS
Banks, NBFCs, insurance companies are exempt.
Once XBRL filing starts, it must continue in future years.
Penalty for Non-Filing with RoC
For company:
- ₹10,000
- ₹100 per day (max ₹2 lakh)
For responsible officers:
- ₹10,000
- ₹100 per day (max ₹50,000)
Conclusion
Financial statements under the Companies Act, 2013 are not just paperwork. They are the official financial story of a company for a year.
For beginners, the key points to remember are:
- Statements must give a true and fair view
- Proper format and standards must be followed
- Responsibility is clearly fixed on directors and officers
- Consolidation is mandatory where applicable
- Filing timelines and penalties are strict
Once this foundation is clear, understanding audits, board reports, and compliance becomes much easier.
We hope this article helped you understand Financial Statements as per Companies Act, 2013 in a clear and practical way. To continue learning, you may also find our guides on Consolidated Financial Statements and ROC compliance basics useful.
Frequently Asked Questions About Financial Statements Under Companies Act, 2013
If you are learning company law or corporate finance for the first time, financial statements can feel confusing and legal-heavy.
In these FAQs, I will cover both basic doubts and deeper, real-life questions that many beginners commonly ask when trying to understand financial statements under the Companies Act, 2013.
What are financial statements as per Companies Act, 2013?
Financial statements are official records that show a company’s financial position for a year. They include the balance sheet, profit and loss statement, notes, and sometimes consolidated statements.
Under the Companies Act, they must follow a fixed format and accounting rules so that everyone reads the same financial picture.
Why does the law insist on a “true and fair view”?
“True and fair view” means the financial statements should honestly show the company’s condition without hiding or twisting facts.
In practice, this protects shareholders, lenders, and regulators from misleading numbers. It does not mean perfection, but reasonable accuracy as per accounting standards.
Are notes to accounts really part of financial statements?
Yes. Notes are a compulsory part of financial statements. Many important details—like loan terms, accounting methods, or pending cases—are explained only in the notes. Beginners often miss this and focus only on the main figures.
Do all companies follow the same financial statement format?
No. Most companies follow Schedule III of the Companies Act. However, banks, insurance companies, and electricity companies follow formats given in their own governing laws, such as the Banking Regulation Act or Insurance Act.
What happens if a company does not follow accounting standards?
If accounting standards are not followed, the company must clearly disclose the deviation, the reason, and its financial impact.
This explanation must appear in the financial statements themselves. Simply ignoring the standards is not allowed.
What are consolidated financial statements, in simple words?
Consolidated financial statements combine the financials of a parent company and its subsidiaries into one report. This shows the true size of the entire group, not just the parent company.
For example, a small parent company may control very large subsidiaries.
Are private and unlisted companies also required to prepare consolidated statements?
Yes, in many cases. The Companies Act makes consolidated financial statements mandatory even for private and unlisted companies if they have subsidiaries, associates, or joint ventures.
Some limited exemptions exist, but conditions are strict.
Who is legally responsible for financial statement compliance?
The Managing Director, CFO, Whole-Time Director (Finance), or any person assigned by the Board is responsible. If none of them exist, all directors become responsible. Responsibility cannot be shifted entirely to accountants or auditors.
Is the Company Secretary’s signature mandatory on financial statements?
If the company has a Whole-Time Company Secretary, then yes, the signature is mandatory. If there is no Company Secretary appointed, then this requirement does not apply.
The same rule applies to CFO and CEO, if appointed.
Can a company change or revise its financial statements later?
Yes, but only in limited situations. Financial statements can be revised voluntarily with Tribunal approval or re-opened by court or tribunal order in cases like fraud or serious mismanagement.
Companies cannot revise accounts casually.
What is the difference between re-opening and voluntary revision of accounts?
Re-opening (Section 130) happens due to court or tribunal orders, usually for fraud or mismanagement.
Voluntary revision (Section 131) is initiated by directors to correct non-compliance, but only for the last three financial years and with approval.
Why must financial statements be sent to members before the AGM?
Members need time to read and understand the company’s performance before voting in the AGM. The law generally requires sending statements at least 21 days in advance. This supports transparency and informed decision-making.
What happens if a company does not file financial statements with the ROC on time?
The company and responsible officers face monetary penalties that increase with delay. Continuous failure leads to daily penalties, subject to maximum limits. Filing with the Registrar of Companies is a legal obligation, not a formality.
Once you understand financial statements, it becomes much easier to learn related topics like Board’s Report, audits, ROC filings, and corporate compliance. Exploring concepts like book value, standalone vs consolidated accounts, and accounting standards is a natural next step.
