Company Financial Statements in India: Schedule III Format and What to Include

Every Indian company prepares a set of financial statements each year, in a format the Companies Act prescribes. They're audited, approved by the board, adopted by shareholders and filed with the ROC, where anyone can see them. This guide explains what goes into them.

What 'Financial Statements' Means

Under Section 2(40) of the Companies Act, 2013, financial statements include:

• A balance sheet as at the end of the financial year.
• A statement of profit and loss for the year.
• A cash flow statement for the year.
• A statement of changes in equity, where applicable.
• Explanatory notes.

One Person Companies, small companies and dormant companies don't need to include a cash flow statement.

Schedule III

Schedule III to the Act sets the format for company financial statements. Division I applies to companies following the Accounting Standards — most private companies — and Divisions II and III to companies following Ind AS. It prescribes the headings, the order in which items appear, and many of the notes.

Key Disclosures

• Share capital, including shareholding of promoters and changes during the year.
• Borrowings, split between secured and unsecured, with terms.
• Ageing of trade receivables and trade payables, including dues to micro and small enterprises.
• Related party transactions and balances.
• Contingent liabilities and commitments.
• Key financial ratios, with explanations of significant changes.
• Additional regulatory information, such as details of immovable property not held in the company's name and benami property proceedings, where relevant.

Accounting Standards or Ind AS?

Most private companies prepare their statements under the Accounting Standards notified under the Companies (Accounting Standards) Rules. Listed companies and larger unlisted companies with net worth of ₹250 crore or more, and their group companies, follow Ind AS instead.

Who Approves Them

The board approves the financial statements and they're signed on its behalf, along with the auditor's report. They're then laid before the shareholders at the AGM and filed with the ROC in AOC-4 within 30 days.

Common Mistakes

• Using an old format, or a format from accounting software without Schedule III headings.
• Missing disclosures for MSME dues and related parties.
• Not showing ageing schedules for receivables and payables.
• Comparatives that don't match last year's audited figures.

Getting Help

Think Filing prepares Schedule III financial statements for companies, with full disclosures and support through the audit.