What are notes to accounts in the Financial statements?

What are notes to accounts in the Financial statements?

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Created By Admin Last Updated Sun, 16-Aug-2020

 

What are notes to accounts in the Financial statements?

The notes to accounts are additional document annexed with the Balance Sheet and Profit and loss statement of a company where further explanation is mentioned with regard the numbers included in the financial statements, as well as the accounting policies adopted by the company.

When conducting an audit of the financial statements, the auditor conducts a thorough investigation of all the information contained in the financial statements, including the footnotes. Auditors use the footnotes to determine how the adopted accounting policies impact the reported results and the actual position of the company.

The footnotes may also provide information on underlying issues relating to the overall financial health of the company. The auditor bases his audit opinion on the financial statement numbers, as well as the explanatory notes.

Below are some of the items mentioned in notes to accounts:

  • Accounting policies
  • Depreciation on assets
  • Inventory valuation
  • Contingent liabilities
  • Intangible assets
  • Employee benefits

Detailed required information on format of notes to accounts can be referred in Companies act 2013.