consolidated financial statements

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this project is about the financial statements and financial information of a comapny


Index Consolidation Financial Statements1. Types & Features of financial statements2. Objectives & Importance of financial statements Consolidated Financial Statement1. Definitions2. Objectives of CFS3. Scope of CFS4. Advantages of CFS5. Disadvantages of CFS6. Contents of CFS7. Steps Of CFS 8. Principals of CFS Individual financial Statements1. Difference between CFS & IFS


Introduction of Infosys History of Infosys Vision & Mission Statement Policies for preparation of consolidated financial statments Statement of balance sheet , profit & loss , cash flow statement of Infosys

Conclusion / Summary.

What is consolidation? The combining of assets, liabilities and other financial items of two or more entities into one. In the context of financial accounting, the term consolidate often refers to the consolidation of financial statements, where all subsidiaries report under the umbrella of a parent company. Consolidation also refers to the merger and acquisition of smaller companies into larger companies. A consolidation, however, differs from a merger in that the consolidated companies could also result in a new entity, whereas in a merger one company absorbs the other and remains in existence while the other is dissolved.What are financial statements?Financial Statements represent a formal record of the financial activities of an entity. These are written reports that quantify the financial strength, performance and liquidity of a company. Financial Statements reflect the financial effects of business transactions and events on the entity.The four main financial statements for a small business include the income statement, the balance sheet, the statement of cash flow and the statement of owner's equity. Private companies and small businesses don't need to prepare financial statements. However, if they want to go public or need financing, a set of financial statements will come in handy. The statements help small business owners to compile their financial records, and compare the performance of the current period against prior periods and the industry average.

What Are the Types of financial Statements?Income StatementThe basic components of an income statement are revenues, expenses and profits. The top line usually shows the revenue and the bottom line displays the net income or loss. Companies incur losses if expenses exceed revenues. The size and complexity of a company determines the number of items on the income statement, but the key categories include sales, operating expenses and non-operating expenses. Gross profit equals sales minus cost of goods sold. Operating expenses include advertising, administrative and selling costs. Cost of goods sold equals the cost of acquiring, assembling or manufacturing products. Net income equals sales minus the sum of the cost of goods sold, operating expenses, interest and taxes. The income statement of a small company may have just two headings: "sales" and "expenses," with a list of the major items.

Balance SheetThe balance sheet components include assets, liabilities and owner's equity. Assets are displayed on the left side while the other two components are shown on the right side. The basic accounting equation states that assets must equal the sum of liabilities and owner's equity. Assets include current assets, such as cash and inventory, plus fixed assets, such as the plant and other property. Liabilities include short-term liabilities, including accounts payable, and long-term liabilities, such as bonds. A small business may not have any long-term debt. The owners' equity section of the balance sheet may contain just the ending balance of the period because the statement of owner's equity shows the calculation of the ending balance.

Statement of Cash FlowThe statement of cash flow for a large company usually groups the cash flow into the operating, investing and financing activities sections. However, this statement for a small business may contain just two sections: "cash inflows" and "cash outflows." Cash inflows include cash sales, collected receivables, investment income and fee income. Cash outflows include salaries, interest, rent, inventory purchases, utilities and line-of-credit balance repayments. Net cash flow is the difference between cash inflows and cash outflows.

Statement of Owner's EquityThe statement of owner's equity reports changes in owner's or partners' equity between accounting periods. The key components are the beginning equity balance, additions and subtractions during the period, plus an ending balance. Additions include the net income and additional owner investments, while subtractions include dividend payments and owner withdrawals. The ending balance equals the beginning balance plus additions minus subtractions.

Features of Financial Statements:

1. The Financial Statements should be relevant for the purpose for which they are prepared. Unnecessary and confusing disclosures should be avoided and all those that are relevant and material should be reported to the public.

2. They should convey full and accurate information about the performance, position, progress and prospects of an enterprise. It is also important that those who prepare and present the financial statements should not allow their personal prejudices to distort the facts.

3. They should be easily comparable with previous statements or with those of similar concerns or industry. Comparability increases the utility of financial statements.

4. They should be prepared in a classified form so that a better and meaningful analysis could be made.

5. The financial statements should be prepared and presented at the right time. Undue delay in their preparation would reduce the significance and utility of these statements.

6. The financial statements must have general acceptability and understanding. This can be achieved only by applying certain generally accepted accounting principles in their preparation.

7. The financial statements should not be affected by inconsistencies arising out of personal judgment and procedural choices exercised by the accountant.

8. Financial Statements should comply with the legal requirements if any, as regards form, contents, and disclosures and methods. In India, companies are required to present their financial statements according to the Companies Act, 1956.

Objectives of Financial Statement :

To know about business activities whether running at a profit or loss.To ascertain the financial position of the business.To provide meaningful information about the financial activities of a business to different persons or parties.To provide information about the capacity of the business for paying loan and interest thereon.To provide information about economic resources and obligations and their changing pattern.Importance of Financial Statements:The importance of financial statements lies in their utility to satisfy the varied interest of different categories of parties such as management, creditors, public, etc. 1.Importance to Management:The management team requires up to date, accurate and systematic financial information for the purposes. Financial statements help the management to understand the position, progress and prospects of business vis-a-vis the industry.

By providing the management with the causes of business results, they enable them to formulate appropriate policies and courses of action for the future. The management communicates only through these financial statements, their performance to various parties and justify their activities and thereby their existence.

A comparative analysis of financial statements reveals the trend in the progress and position of enterprise and enables the management to make suitable changes in the policies to avert unfavorable situations.

2. Importance to the Shareholders:

Management is separated from ownership in the case of companies. Shareholders cannot, directly, take part in the day-to-day activities of business. However, the results of these activities should be reported to shareholders at the annual general body meeting in the form of financial statements.

These statements enable the shareholders to know about the efficiency and effectiveness of the management and also the earning capacity and financial strength of the company.

By analyzing the financial statements, the prospective shareholders could ascertain the profit earning capacity, present position and future prospects of the company and decide about making their investments in this company.

3. Importance to Lenders/Creditors:

The financial statements serve as a useful guide for the present and future suppliers and probable lenders of a company.

It is through a critical examination of the financial statements that these groups can come to know about the liquidity, profitability and long-term solvency position of a company. This would help them to decide about their future course of action.

4. Importance to Labour:

Workers are entitled to bonus depending upon the size of profit as disclosed by audited profit and loss account. Thus, P & L a/c becomes greatly important to the workers. In wages negotiations also, the size of profits and profitability achieved are greatly relevant.

5. Importance to the Public:

Business is a social entity. Various groups of society, though directly not connected with business, are interested in knowing the position, progress and prospects of a business enterprise.

They are financial analysts, lawyers, trade associations, trade unions, financial press, research scholars and teachers, etc. It is only through these published financial statements these people can analyze, judge and comment upon business e


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