Notes to accounts
This query is : Resolved
20 March 2012
Generally, in the Notes to Accounts, there tends to be a statement as to the effect that "Previous year’s figures have been rearranged and regrouped wherever necessary so as to make them comparable with those of the current year."
Can anybody please explain me its significance? Why even these adjustments need to be done?
Can anybody please explain me its significance? Why even these adjustments need to be done?
21 March 2012
Dear Prathamesh,
Let me tel you that this statement is not stereo type it has very significant meaning. Suppose in last year the auditor has taken the Fixed Deposit with Bank under the head INVESTMENT and now the Article like you have argued that how bank deposit can be an investment and the CA is convinced of this then what is the way out if this note is not given? In case this note is not given and you are the shareholder of the company. As per the balance sheet last year there was an investment and this year the investment has become Zero then you will think where the profit from sale of investment is shown? So there are so many other things like re-groping of expenses, assets etc. etc. therefore this not is very much essential and significant although for a lay man it does not have any meaning
Let me tel you that this statement is not stereo type it has very significant meaning. Suppose in last year the auditor has taken the Fixed Deposit with Bank under the head INVESTMENT and now the Article like you have argued that how bank deposit can be an investment and the CA is convinced of this then what is the way out if this note is not given? In case this note is not given and you are the shareholder of the company. As per the balance sheet last year there was an investment and this year the investment has become Zero then you will think where the profit from sale of investment is shown? So there are so many other things like re-groping of expenses, assets etc. etc. therefore this not is very much essential and significant although for a lay man it does not have any meaning
21 March 2012
Okay. But I have a query regarding this. For instance, if "Income from sales" as per last year's B/S is shown reduced in the current year's B/S (previous year figures) by a significant amount (say 70-75 lacs) as to make the figures comparable (by regrouping/ adjusting/ adding to expenses), then what does it suggest? Is it that some expenses were wrongly shown as income and thus the income side got inflated?
And yes, sincere thanks sir for answering my previous query in a very precise manner and more importantly, with an example. Easy it was for me to understand because of an example.
And yes, sincere thanks sir for answering my previous query in a very precise manner and more importantly, with an example. Easy it was for me to understand because of an example.
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