This article is written by Shivani Kumari. It discusses the various aspects of Section 137 of the Companies Act, 2013. It provides for the filing of copies of financial statements by the companies to the registrar of the companies. It also discusses the meaning of financial statements and their different types. This article deals with Section 137 of the Companies Act, 2013 and explains the forms of financial statements, mandatory attachments that need to be filed along with financial statements, statutory requirements that need to be complied with while preparing financial statements, and penalties for contravening the provisions.
Table of Contents
Introduction
A company’s financial statement is the document of the company of its financial performance at the end of every financial year. It shows the financial status of the company for a given period. Financial statement as defined in the Companies Act, 2013 consists of a balance sheet, a profit and loss account (income and expenditure account, in the case of a non-profit company), a cash flow statement, and a statement of change in equity. It also includes any explanatory note forming part of, or annexed to any document.
What does the financial statement of the company include
As per Section 2(40) of the Companies Act, 2013, under Chapter IX (Accounts of the Company), financial statements concerning a company include the following:
- A balance sheet at the end of the financial year,
- A profit and loss account, or in the case of a non-profit company an income and expenditure account for the financial year,
- Cash flow statement for the financial year,
- A statement of the change in the equity, if applicable, and
- Any explanatory note annexed to, or forming part of any document, referred to in sub-clause (i) of sub-clause (iv).
The section further clarifies that the financial statements for a one-person company, small company, or dormant company may not prepare the cash flow statement.
Balance sheet
A balance sheet shows the detailed information about the company’s shareholders’ equity and assets and liabilities of the company at a given point of time.
Asset means anything of value owned by the company. It can be either tangible (eg. plant and machinery) or intangible (goodwill and patents), either fixed (eg. long term investments) or current (investment for a period of less than one year).
Liability means anything that the company owes to others. It can be the amount of loan that the company takes from the outsiders to raise the funds for business operations or an outstanding salary of an employee that has not been paid by the company.
A company is an artificial person therefore it cannot have its own capital. Shareholders’ equity shows the amount of money brought in by the members of the company as part of the share capital of the company.
Statement of profit and loss
A statement of profit and loss reflects the revenues and expenses of a company for a particular period of time. The term revenue means the money generated from the normal business operations.
Ideally, a statement of profit and loss has two parts-
- trading account, and
- profit and loss account.
The direct income and expenses are mentioned in the trading account like purchases and sales made during the year, opening and closing stock of the year and other direct expenses like factory expenses, etc. The output of the trading account is either Gross Profit or Gross Loss.
Gross Profit = (Sales + Closing Stock) – (Purchases + Opening Stock +Factory or Other Direct Expenses)
Gross Loss = (Purchases + Opening Stock + Factory or Other Direct Expenses) – (Sales + Closing Stock)
Profit and Loss account includes the income generated and the expenses incurred by the company from the indirect activities (i.e. activities that are not directly connected to running of the business). Basically, it includes all the activities related to sales and marketing activities of the company.
Cash flow statement
Cash flow statement (CFS) is complementary to the Balance Sheet and Statement of Profit and Loss. It indicates how the company is managing its cash operations. Whether the cash generated is sufficient to meet the debt obligations of the company as well as to meet the operational expenditure of the company. The CFS is prepared under three headings:
- Cash flow from operating activities
- Cash flow from investing activities
- Cash flow from financing activities
Statutory requisites for financial statement
Section 129(1) of the Companies Act, 2013 makes it mandatory that the financial statement shall conform with the accounting standards notified under Section 133 of the Companies Act, 2013.
If the company has made some deviations from the prescribed accounting standards, the company shall disclose such deviations in the financial statements. Along with the deviations, the company has to disclose the reasons for such deviations and the financial effects that have ensued from the deviations. [Section 129(5) of the Companies Act, 2013].
Format of financial statement
Section 129(1) of the Companies Act 2013 makes it mandatory that the financial statement shall be in the format as provided in Schedule III of the Companies Act, 2013 for different classes of the company.
Schedule III provides the general instructions for the preparation of the Balance Sheet and the Statement of Profit and Loss of a Company. It also provides general instructions for the preparation of the consolidated financial statements.
The form of financial statement of a banking company, an insurance company or a company engaged in the generation and supply of electricity shall be per the format provided in the specific acts governing these companies.
Format of Balance Sheet as per Schedule III of Companies Act, 2013
Name of the Company ………………………
Balance Sheet as at …………………………
(Rupees in…….)
| Particulars | Note No. | Figures at the end of current reporting period | Figures at the end of previous reporting period |
| 1 | 2 | 3 | 4 |
| Equity and Liabilities Shareholders’ funds (a) Share capital (b) Reserves and surplus (c) Money received against share warrants Share application money pending allotment Non-current liabilities (a) Long-term borrowings (b) Deferred tax liabilities (Net) (c) Other Long term liabilities (d) Long-term provisions Current liabilities (a) short-term borrowings (b) Trade payables:- (A) total outstanding dues of micro enterprises and small enterprises; and (B) total outstanding dues of creditors other than micro enterprises and small enterprises. (c) Other current liabilities (d) Short-term provisions Total II. Assets Non-current assets (1) (a) Property, Plant and Equipment and Intangible assets (i) Property, Plant and Equipment (ii) Intangible assets (iii) Capital work-in-progress (iv) Intangible asset under development (b) Non-current investments (c) Deferred tax assets (net) (d) Long-term loans and advances (e) Other non-current assets (2) Current assets (a) Current investments (b) Inventories (c) Trade receivables (d) Cash and cash equivalents (e) Short-term loans and advances (f) Other current assets Total |
Format of Statement of Profit and Loss as per Schedule III of Companies Act, 2013
Name of the Company ………………
Profit and Loss statement for the year ended …………….
(Rupees in ……………..)
| Particulars | Note No | Figures as at the end of current reporting period | Figures as at the end of the previous reporting |
| 1 | 2 | 3 | 4 |
| Revenue from operation (I) | xxx | xxx | |
| Other Incomes (II) | xxx | xxx | |
| Total Income (I+II) | xxx | xxx | |
| Expenses: (IV) | |||
| Cost of materials consumed | |||
| Purchase of Stock-in-trade | |||
| Changes in inventories of | xxx | xxx | |
| Finished goods | |||
| work-in-progress and | xxx | xxx | |
| stock-in-trade | xxx | xxx | |
| Employee benefits expense | xxx | xxx | |
| Finance costs | |||
| Depreciation and amortisation expense | |||
| Others expenses | |||
| Total expenses | xxx | xxx | |
| Profit before exceptional and extraordinary items and tax (V) | xxx | xxx | |
| Exceptional items (VI) | xxx | xxx | |
| Profit before extraordinary items and tax (VII) = (V-VI) | xxx | xxx | |
| Extraordinary Item (VIII) | xxx | xxx | |
| Profit before tax (IX)= (VII-VIII) | xxx | xxx | |
| Tax expense: (X) | |||
| Profit (Loss) for the period from the continuing operation (XI) = (VII-VIII) | xxx | xxx | |
| Profit/(loss) from discontinuing operations (XII) | xxx | xxx | |
| Tax expense of discontinuing operations (XIII) | xxx | xxx | |
| Profit/ (loss) from discontinuing operations (after tax) (XIV)= (XII-XIII) | xxx | xxx | |
| Profit / loss for period (XV) = (XI+XIV) | |||
| Earning per equity share (XVI): | |||
| Basic | xxx | xxx | |
| Diluted | xxx | xxx |
Presentation of financial statements
Presentation of financial statements by the board of directors
Section 129(2) of the Companies Act 2013 provides that the Board of Directors (BOD) shall present the financial statement for the year at every AGM of the company.
Consolidated financial statement
Section 129(3) further provides that the company has to prepare and present the consolidated financial statements of the company if the company has any subsidiary company (ies), associate company (ies), or joint-venture company (ies).
Along with the consolidated financial statement, the company has to attach the Statement containing salient features of the financial statement of all the subsidiary, associate, or joint-venture company(ies).
What is consolidated financial statement
A consolidated financial statement is a document reflecting the financial transaction and status of a business group. The assets, liabilities, revenue, expenses and capital of subsidiaries and joint ventures are to be clubbed with those of the parent or holding company.
Penalty
In case of contravention of the provisions of Section 129 of the Companies Act, 2013, the managing director (MD), whole-time director (WTD) in charge of finance, and the chief financial officer (CFO) shall be punished with imprisonment for one year or a fine of fifty thousand which may extend to one lakh rupees or both.
Approval of financial statements
Section 134(1) of the Companies Act, 2013 requires the approval of financial statements by the following persons
- at least by one chairperson of the company where he is authorised by the board for that purpose, or
- at least by two directors out of which one shall be the managing director and the chief executive officer (CEO) (if he is a director of the company), the CFO, and the company secretary (CS).
One person company
In the case of one person company, the approval is needed by only one director for its submission to the auditor for his reports thereon.
Filing of the copy of financial statements with the registrar of the company
Section 137 of the Companies Act, 2013 outlines the rules for filing a copy of financial statements with the Registrar. Sub-Section 1 of Section 137 empowers the Central Government to file the financial statements with the Registrar within thirty days of the date of the company’s annual meeting and the fee. Section 137(2) of the Companies Act, 2013 empowers the Central Government to prescribe the manner when the AGM had not been held, along with the reasons for not holding the AGM.
Time-limit for filing of the financial statement
A company shall file the statement within 30 days of the AGM of the company to the registrar of the company. If the statements are not filed within 30 days they can be filed in a further 270 days as per Section 403(1) of the Companies Act, 2013 with an additional fee. The fee structure is provided in Rule 12 read with the Table of Fees annexed to the Companies (Registration Offices and Fee Rules), 2014.
Unadopted financial statement
When the company has not adopted the financial statement in the AGM, in that case, the company shall file the unadopted financial statements along with the required documents within 30 days of the date of the AGM with the Registrars of the Companies.
The unadopted financial statement shall be deemed by the registrar as provisional till the financial statements are filed after their adoption.
Filing of financial statements adopted in the adjourned AGM
If the company has adopted the financial statements in the adjourned AGM, they should be filed with the registrar within 30 of such adjourned AGM.
Filing of financial statement when no AGM has been conducted
The company shall file the financial statements along with the registrar within 30 days of the last date before which the AGM shall have been conducted. The company shall also file a statement stating the facts and the reasons for not holding the AGM.
Filing of financial statements of OPC
The members of the OPC shall approve the financial statements and such statements should be filed with the Registrar within 180 days from the closure of the Financial Year. Section 96 of the Company Act, 2013 gives exemption to an OPC to hold an AGM.
Accounts of subsidiaries outside India (foreign subsidiary)
As per Fourth Proviso to Section 137(1), the company shall file the accounts of its subsidiary (ies) along with its financial statements which are incorporated outside India and which have no place of business in India.
The Section through Fifth Proviso further provides that if the financial statements of the foreign subsidiary are not required to be audited under any law, the requirement under the fourth proviso shall be accepted if the Indian holding company files such unaudited financial statements with such declaration. The Indian holding company should also file the financial statements of its foreign subsidiaries in English translation if the original is in any other language.
Penalty for the contravention of Section 137 of the Companies Act, 2013
Penalty for the company
When a company fails to file a copy of the financial statements with the Registrar under subsection (1) before the expiry of the period specified in Section 403 of the Companies Act 2013, the company shall be punishable with an amount of one thousand rupees per day during which the failure continues, but which shall not exceed ten lakh rupees. The period specified in the proviso to Section 403(1) of the Companies Act, 2013 is 270 days from the date on which the company should have filed the financial statements along with the additional fee.
Penalty for the company’s officer
The punishment for non filing of financial statements is provided in Section 137(3) of the Companies Act, 2013. The company’s officials are also punishable along with the company for non-filing the financial statement
- with an imprisonment of up to six months, or
- with a fine which shall not be less than one lakh rupee but which may extend to five lakh rupees, or
- with both
Company officials liable for the punishment
The following officers are liable for penalty under Section 137(3) of the Companies Act, 2013.
- The MD of the Company
- The CFO of the Company
In the absence of the MD and the CFO,
- Any other director who is charged with the responsibility of filing a copy of the financial statements of the company with the registrar and complying with the provisions of Section 137, and
In the absence of the MD, the CFO and any director entrusted with the responsibility,
- all the directors of the company.
Companies (Filing of Documents and Forms in Extensible Business Reporting Languages) Rules, 2015
The Central Government has specified the classes of the companies that have to file the financial statement in the (XBRL) format in Rule 3 of the Companies (Filing of Documents and Forms in Extensible Business Reporting Languages) Rules, 2015.
Filing of the financial statements with the Registrar
The following classes of the companies shall file their financial statements and other documents under Section 137 of the Act, with the Registrar of the companies in e-form AOC-4 XBRL (Extensible business reporting language) which shall be digitally signed by the director of the company who is specially authorized by the Board of Directors in this behalf, or manager of the company or the CEO, or the CFO, or secretary of the company along with the DIN (i.e., Director Identification number) or PAN (i.e., Permanent account number) of the manager, CEO or CFO, as the case may be for the financial year commencing on or after 1st April 2014 using the XBRL taxonomy:
- All companies listed with any stock exchanges in India and their Indian subsidiaries; or
- All companies having paid-up capital of rupees five crore or above; or
- All companies having turnover of rupees hundred crore or above; or
- All companies hitherto covered under Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2011.
However, companies in banking, insurance, power sector, non-banking financial companies (NBFC), and housing finance companies need not file financial statements in XBRL format under this rule.
Every NBFC defined in Companies (Indian Accounting Standards) (Amendment) Rules, 2016 to which Indian Accounting Standard (Ind AS) applies shall file the financial statements along with mandatory attachment as per e-Form AOC-4 NBFC within 30 days of the AGM.
Filing of the financial statements and the fees to be paid thereon
Every company shall file the financial statements with the Registrar together with Form AOC-4 and the consolidated financial statement, if any with Form AOC-4 CFS as per Companies (Accounts) Rules, 2014.
The company shall file the document in the XBRL format. XBRL is a standardized language for communication in the electronic form to report, express, or file financial information by the company. It ensures better and easier collection and better utilization of the data provided by the company.
Additional compliance for listed companies
As per Regulation 34 of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015, the listed company shall submit a copy of its annual report to the stock exchange on which it is listed, and shall also publish the same on its website. The date of submission and publication on its website shall not be later than the date of dispatch of the annual report to its shareholders.
Clause 2(a) of Regulation 34 states that an annual report consists of audited financial statements along with other documents.
Mandatory attachments under AOC-4
The company shall attach the following documents mandatorily along with the financial statement with the Registrar of the Companies:
- Statement of subsidiaries in the format of Form AOC 1 given in Companies (Accounts) Rules, 2014,
- Statement of fact and reason for not adopting the financial statements in the company’s AGM, in case the company is filing the unadopted financial statements,
- Approval letter for extension of the financial year or an AGM, if any extension is granted,
- Supplementary or test audit report under Section 143, if the Comptroller Account General of India (CAG) has conducted such test audit under Section 143,
- Details of comment of CAG, if the CAG has conducted the test audit under Section 143,
- Secretariat audit report, if applicable,
- The Corporate Social Responsibility (CSR) policy of the company as prepared under Section 135 (4)
- Details of other entity/entities (the implementing agencies), in case the company has not spent any amount of CSR directly,
- Details of remaining CSR activities not mentioned in the e-form in a separate Excel sheet,
- Details of salient features of the reasons and justification for entering into a transaction, contract, or arrangement with related parties under Section 188 (2) in the format given in Form AOC 2,
- Director’s report as per sub-section (3) of Section 134 – if mentioned in Segment VI of the e-form.
Optional attachments for the companies
A consolidated financial statement of the company along with its subsidiaries/associates/joint ventures, in case the company has one or more subsidiaries/associates/joint ventures in Form AOC – 4 CFS.
Conclusion
The financial statements are crucial documents of a company. It enables the government and other stakeholders to keep a tap on the financial performance of the company. The financial statement comprises the Statement of Profit and Loss Account, the Balance Sheet, the Cash Flow Statement, and the notes supplementing the information provided in the above statements.
Frequently Asked Questions (FAQs)
What is the provision for filing the financial statement?
Section 137 of the Companies Act, 2013 provides for the mandatory filing of the financial statements with the Registrar of the companies.
What is the format for filing the financial statements?
The company has to file the document in the Extensible Business Reporting Language (XBRL) format. XBRL is a standardised language for communication in electronic form to report, express, or file financial information by the company.
What is the form for filing the financial statements?
The financial statements shall be filled as per Schedule III provided in the Companies Act, 2013.
What is the auditor’s report?
As per Section 134(2) of the Companies Act, 2013, it is mandatory to adduce the auditor’s report with the financial statements being filed with the registrar of the companies.
What is One Person Company?
One person company as defined in Section 2(62) of the Companies Act, 2013 is a company having only one member. It is a form of private company. The concept of one person company was introduced through the Companies Act, 2013. It gives the advantage of running a business by a single person along with enjoying the benefits of a company as an incorporated entity.
What is a dormant company?
As per Section 455 of the Companies Act, 2013, a dormant company is a company which is made for a future project or to hold an asset or intellectual property and has no significant accounting transaction or is an inactive company. An inactive company is a company which is not carrying any business or operations, or which has not many made any significant accounting transactions during the last two financial years or which has not filed a financial statement or annual report during the last two financial years. To acquire the status of a dormant company or inactive company, the respective company has to apply before the registrar of the companies in the prescribed format i.e. Form No. MSC 1.
What is a small company?
A small company as per Section 2(85) of the Companies Act, 2013 is a company whose total paid up share capital does not exceed 50 lakhs and whose turnover of the immediately preceding financial year does not exceed two crore rupees but which shall not exceed four crores and whose turnover does not exceed 10 lakhs, but which may extend to forty crores as prescribed by the Companies (Specification of definition details) Rules, 2014.
What is the accounting standard?
Accounting standard sets the standardized principles guiding the practices and policies of financial accounting. It provides uniformity in the financial statements and makes them more transparent. At the international level, Generally Accepted Accounting Principles (GAAP) were accepted by the Securities and Exchange Commission (SEC), United States of America to provide general guidelines for accounting and preparation of financial statements by the companies.
In India, the companies have to adhere to The Indian Accounting Standards ( Ind AS) made under Section 133 of the Companies Act, 2013. The copyright of Ind AS is vested in the Government of India.
References
- https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf&ved=2ahUKEwirltDdpaOEAxUsR2wGHddwAZ8QFnoECBAQAQ&usg=AOvVaw0gT0arPjCTG3CrZBD8LC6A
- https://www.google.com/url?sa=t&source=web&rct=j&opi=89978449&url=https://www.investopedia.com/terms/f/financial-statements.asp%23:~:text%3DFinancial%2520statements%2520are%2520written%2520records,%252C%2520financing%252C%2520or%2520investing%2520purposes.&ved=2ahUKEwibrPvtpaOEAxViXWwGHa2RBhkQFnoECD8QBQ&usg=AOvVaw36i3x2-wlOD200GfjDdkiq
- https://corporatefinanceinstitute.com/resources/accounting/statement-of-cash-flows/#:~:text=The%20three%20sections%20of%20the,investing%20activities%20and%20financing%20activities.
- https://www.google.com/url?q=https://www.icsi.edu/media/portals/86/Geeta_Saar_98_Copy_of_Fin%2520_Statement_to_be_Filed_with_ROC.do.pdf&sa=D&source=docs&ust=1715456810316457&usg=AOvVaw3XBo8rtFcVZZQnejk-VqQ2
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