'Financial Statement' in relation to a company, includes:
1. A Balance Sheet as at the end of the financial year;
2. A Profit and Loss Account (or, in the case of a company carrying on any activity not for profit, an Income and Expenditure Account) for the financial year;
3. Cash Flow Statement for the financial year;
4. A Statement of Changes in Equity, if applicable; and
5. Any explanatory note annexed to, or forming part of, any document referred to above.
### Important Exemption — Cash Flow Statement
The financial statement, with respect to the following classes of companies, need NOT include a Cash Flow Statement:
1. One Person Company (OPC)
2. Small Company
3. Dormant Company
4. Private Company (Start-up)
### Memory Aid — 'OSDS' Companies
OPC, Small, Dormant, Start-up Private Companies are exempt from preparing Cash Flow Statements.
Worked example
### Example 1
Q. Is ABC OPC required to prepare and file a Cash Flow Statement as part of its financial statements?
A. No. A One Person Company is specifically exempted from including a Cash Flow Statement in its financial statements as per the proviso to Section 2(40).
⚠️ Common exam mistakes
Limiting 'Financial Statement' to only the Balance Sheet and P&L.
Forgetting the Statement of Changes in Equity for Ind-AS-compliant companies.
Failing to recall the four-company exemption from Cash Flow Statement requirements.
Overlooking that explanatory notes form part of the financial statement.
Bare-Act text Section 2(40) · Companies Act, 2013 · click to expand
'Financial statement' in relation to a company, includes — (i) a balance sheet as at the end of the financial year; (ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year; (iii) cash flow statement for the financial year; (iv) a statement of changes in equity, if applicable; and (v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv): Provided that the financial statement, with respect to One Person Company, small company, dormant company and private company (if such private company is a start-up) may not include the cash flow statement.