MEANING OF FINANCIAL STATEMENTS 

Financial statements are the final outcome of the accounting process. They are created according to accounting principles, practices, and standards. According to Section 129 of the Companies Act, 2013, the Balance Sheet and Profit and Loss Account (also known as the Statement of Profit and Loss) must be prepared in the format specified in Schedule III of the Companies Act, 2013. A complete set of financial statements, as defined in Section 2(40) of the Companies Act, 2013, includes the following:

1. Balance sheet: 

This statement presents the company's assets, liabilities, and equity (shareholders' funds) at a specific date. It provides a snapshot of the financial position of the business by listing its assets, equity, and liabilities. It is also known as a position statement.

2. Profit and Loss Account: 

This statement reflects the financial performance of the business over a specific accounting period. It is referred to as the Statement of Profit and Loss in Part II of Schedule III of the Companies Act, 2013, and it is also known as an Income Statement.

3. Notes to Accounts: 

The Balance Sheet and Profit and Loss Account are supported by accompanying notes that provide detailed information about the items presented in these statements.

4. Cash Flow Statement: 

This statement, prepared following the guidelines outlined in AS-3, Cash Flow Statement, shows the inflow and outflow of cash and cash equivalents.

In simple terms, financial statements are a summary of a business's accounts. The Balance Sheet displays the company's assets, liabilities, and capital as of a specific date, while the income statement shows the profit or loss for a given period.