Meaning of financial statement
- The accounting output of the bank or organization is called a financial statement.
- It is reporting part of account cycle which is used to provide information to the concern authorities.
- It is prepared by using unique techniques.
- It is also called the final account.
Main elements of the final account
- Balance sheet
- Income statement/PL Account
- Cash flow Account
तर B&FIs in Nepal prepare a financial statement as per the unified directory no. 4 (एकिकृत निर्देशिका नं. ४) of Nepal Rastra Bank including change in equity ( equity मा भएको परिवर्तन) and Notes to account (लेखाको टिप्पणी).
Cash Flow Statement (नगद प्रवाह विवरण)
- It is a financial statement which shows the present cash inflow and outflow of the organization in a given period of time.
- It shows the change in financial position (it takes two balance sheets while preparing CFS). [balance sheets only shows financial position].
- It is prepared on a cash basis transaction.
- It is accounting the output of accounting cycle. It involves three activities they are operating activities, investing activities and financing activities.
Operating Activities
जुन उदेश्यले सस्था दर्ता गरिएको हो सोहि काम गर्ने क्रममा आएको र गएको रकमलाई Operating Activities भनिन्छ। जस्तै एउटा Institute को उदेश्य विद्यार्थी बोलाउनु र पैसा लिनु, शिक्षक बोलाउनु र तलब दिनु हो। Operating Activities सधै positive भएको राम्रो मानिन्छ।
- Sell/purchase of assets
- Tax/Interest Paid.
Investing Activities
सस्थाको मुख्य उदेश्यको काम नभई सम्पति जोड्ने क्रममा भएको Financial activities लाई Investing Activities भनिन्छ। Investing Activities सधै positive भएको राम्रो मानिन्छ। किनकि भविष्यमा लगानीले नाफा दिन्छ।
- Dividend/Interest received
- Purchase sell of Fixed assets
Financing Activities
यसले Operating Activities and Investing Activities लाई balance गरि दिन्छ। Less the operating income less the investment. More the operating income, more the investment. It is the activities of managing the source of fund.
- Issue of share/ debenture
- Redemption of share/ debenture
Method of preparing Cash Flow Statement
- Cash flow statement is prepared after two balance sheet of two points of time and one income statement of a single period of time.
- If there is a provision of a regulator then it is mandatory to use the format provided by NRB otherwise follow the accounting standard.
- It can be prepared by direct and indirect. In the direct method, CFS starts from sales, and in indirect method, CFS starts from the net profit of the year. Direct and Indirect method only affect on operating activities.
- It always follows a vertical format.
- Both capital and revenue nature of transaction but credit and non-cash transactions are not included.
- B&FIs follow the unified directive no. 4 by NRB by using the vertical format with the direct method.
Balance sheet
- A balance sheet is a financial statement which able to present the assets, capital, and liabilities of the organization of any point of time.
- It is not a ledger but statement only.
- It shows the financial position/status of the firm. So, it is also known as a financial indicator of the firm.
- It shows the information about capital nature transaction.
Methods of Making Balance Sheet
- We have to prepare an income statement in order to find out the net profit and loss or surplus or deficit before preparing a balance sheet.
- If there is a provision of a regulator then it is mandatory to use the format provided by NRB otherwise follow the accounting standard.
- All the capital nature transactions should be classified as per liquidity base for the preparation of the balance sheet.
- The organization can use a traditional “T” format or modern vertical format.
- Capital nature transactions are included.
- B&FIs follow the unified directive no. 4 by NRB by using vertical format with liquidity marshaling.
Example of Balance Sheet [Normal]
| Capital & Liabilities | A.N. | Amount | Assets | A.N | Amount |
|---|---|---|---|---|---|
| Share capital | 5,00,000 | Fixed Assets | 12,00,000 | ||
| Reserve & Surplus | 7,00,000 | Investment | 2,00,000 | ||
| Long term debt | 8,00,000 | Current Assets | 8,00,000 | ||
| Current Liabilities | 4,00,000 | Fictitious Assets | 2,00,000 |
Share capital = Amount invested by promotors
Reserve and Surplus = Not distributed profit
Current liabilities = Debt to be paid within 1 year period
Long term debt = Debt to be paid after 1 year of time
Current Assets = Assets which can be converted into money within 1 year period
Fictitious Assets = Heavy loss
Example of Balance Sheet [Bank Format]
| Particulars | ||
|---|---|---|
| Assets | Note No | Amount |
| Cash and Cash Equivalent | ****** | |
| Due from NRB | ****** | |
| Placement with B&FIs | ****** | |
| Derivative financial instrument | ****** | |
| Other trading assets | ****** | |
| Lean and Advance to B&FIs | ****** | |
| Investment securities | ****** | |
| Current tax assets | ****** | |
| Investment in subsidiries | ****** | |
| Investment in associates | ****** | |
| Investment in properties | ****** | |
| Property and equipment | ****** | |
| Goodwill & intangible assets | ****** | |
| Differed tax assets | ****** | |
| Other assets | ****** | |
| Total assets | ****** |