 Bismillahir Rahmanir Rahim. Today we are going to talk about financial statements and the reporting entity. Financial statements are basically four or five but we are adding many more nowadays. But let me tell you first of all what is reporting entity. Reporting entity can be a single company and it can be a group of company. The difference is a single company is producing the accounts of its own but when we are talking about the group of companies it means one single statement we are preparing for two three companies together but depending how whether those companies are related or not. For example a parent company, a subsidiary company, a sub subsidiary company when we are how we and we are going to discuss in more detail about this parent company, a subsidiary and a subsidiary. But the entity reporting should be at least one company and then if there are group of companies then they are produced group accounts also. Now the number of statements we are coming on by one. Statement of financial position. Previously we used to call it balance sheet. Although the word balance sheet is quite simple but now the standard says it should be called statement of financial position. It is always prepared on a particular date. Normally 31st December or maybe 30th September for example textile industries their accounting year is 30th September. Government has fixed some dates also banks are let's say 30th of June. So that's the thing the date is a fixed about the financial position. Now in this financial position we have assets, we have liabilities and we have equity. There are three main items but they are subdivision of these items. Assets may be long term assets and then current assets. Similarly liabilities we may have long term liabilities we may have current liabilities. So far equity is concerned. Equity is basically the amount invested by the shareholders. Now those shareholders they put their money into business and whatever profit they earn they redeploy in the business and if they take out something like dividends so that will be minus out of it but always remember balance sheet is always equal. It's balance, debit or assets is equal to liabilities plus equity. Then the statement of profit and loss account previously we used to call it simply profit and loss account but now they have added something to it and other comprehensive income. So for profit and loss is concerned our income statement is concerned we have the revenues, we have the cost of sales, we have the operating expenses, we have the interest paid, we have the tax paid and so on. All these are income statements things we have. Then so far other comprehensive income is concerned other than these regular business. For example you invested money somewhere and you are getting profit on that investment. So that will be your other income not your routine income. So profit and loss account is basically what is your routine income, your usual business activity. The other thing is this will be prepared for a particular period not for a day but for a month or for a quarter or for a half year or for the year. Law require at least company should produce in one year one statement of income statement or balance sheet in one year. Then the statement of changes of equity. Again we used to call it a training statement previously but now it is known as statement of change in change of equity. Equity again I said it's the amount available to the shareholders. Now it is not only share capital sometimes we issue shares more than power value so there should be a share premium. Then the profit which you are not distributing retaining that is retained earnings that is also part of equity. Similarly sometime we revalue of our assets and whatever surplus is that is also your part of equity. Sometimes you add more money to the business that goes to equity again so that statement will show the movement in the equity however it is going up or down. Then statement of cash flow for the period. This is also a very very important statement. People says quality of income rather than quantity of income. Quantity of income means that your profit is increasing but so for cash flow is concerned it shows the quality if you are increasing your business whether your cash is also increasing or not. Your cash flow is going to be improved or not. So the cash is basically the important thing now because cash is known as oxygen for a business. So if your company is doing good business rather making profits and everything but you are not collecting cash in time then you have a problem. So now this statement is more important compared to the other statements. Now in this statement we show that how much money we are collecting from customer? How much we are paying to our creditors? How much we are paying to our expenses? How much we are paying to the government? All this we have to show in the cash flow statement. And if we are let's say buying more assets to improve our capabilities so that is also shown in the cash flow statement. And this is for the period the whole year during the whole year. Then notes and comparative. Now these notes are integral part of these statements. Integral in the sense that without these notes people may not accept your statements because statements are brief. Statements are just numbers but how those numbers are compiled what policies behind them so they give notes to the account. In fact statements maybe in three pages only but so far notes are concerned you believe it or not I have seen a report about 20-30 pages notes. So they explain each and every assets liability and income expense all details are there behind because you know we are saying operating expense. So what include in operating expense? It's administrative expense, it's selling distribution expense, it's the search and development expense and further again so detail is there. Similarly in assets we have non-correct assets property, plant and equipment. In this case we have plant, we have vehicles, we have furniture, we have obviously equipment, all these things. So the details is in the notes and they are part of these statements. Then the main accounting policies. In the notes the important thing is the main accounting policies. We will discuss this thing in more detail. Accounting policies are various methods you opt to record transactions. Like depreciation we may have a state line method in equal definition every year or may have a reducing balance method or we may have some other methods too. Now similarly valuation of stocks we may have simple average method or we may have a first in first out method. Again there is a limitation which method we are supposed to use. So the important thing is whichever policy you opt you have to follow consistently. Mean year by year you should keep following the same policy. But let me tell you here in case you go wrong let's say first hand to select a policy so it does not mean you keep doing the same mistake again and again you can change but in the year of change you have to mention that you made a mistake earlier now we have to change because this gives you more better picture about the business. So change is acceptable provided you justify it. Other financial reports other reports there are many actually now. If you look into published reports of any company it's the volume 50-60 pages report and respect more even sometime more. Now management commentary it is required by the chairman to give a message. It's give a director reports also. It gives the auditor reports also. These are the reports which are part of the financial reports. Environmental reporting nowadays is getting importance also sustainability report whether the company can sustain can continue or not. Then social and ethical environments then corporate social responsibility report human resource accounting. Another new statement which is now companies are producing which is called value added statement. Here they say how much value added by the company in the goods and services they bought from outside. Let's say if you sale is say 100,000 and the goods and services you bought is let's say 30,000. So it means you add value 70,000. So question arise how this 70,000 is going to be utilized? How much you paid to the workers? How much you paid to the government? How much you paid to the shareholders? How much you paid to the lenders if you borrowed the money also? And how much you retained for the expansion? So that statement is much more important and many companies are being produced here. These statements are being produced. So these are the few statements which you are supposed to prepare of each and every entity and in a year or sometime in quarter wise also because we require in Pakistan quarterly information is supposed to be produced and circulated. So this is also important the time that how these statements are going to be produced. Thank you very much.