Important Points in Guidance Note on preparation of Financial Statements of Non-Corporate Entities

Introduction

Guidance Note on Financial Statements of Non-Corporate Entities (August 2023 edition, issued by ICAI).

This comprehensive document provides standardized formats and guidance for preparing financial statements by non-corporate entities (such as proprietorships, partnerships, trusts, societies, etc.). It includes:

• Prescribed formats for Balance Sheet and Statement of Profit and Loss

• Disclosure requirements and classification criteria

• Notes and instructions on presenting financial statements

• Applicability of various Accounting Standards to different levels of non-corporate entities (Level I–IV)

• Criteria for classification based on turnover and borrowings

Applicability of Guidance Notes

The Guidance Note on Financial Statements of Non-Corporate Entities issued by ICAI is applicable for financial statements covering periods beginning on or after April 1, 2024.

This means non-corporate entities (like sole proprietorships, partnerships, trusts, etc., excluding LLPs) will need to follow the formats and principles prescribed in this Guidance Note starting from the financial year 2024–25 onwards.

Which type of Entities Covered (Non-Corporate Entities) as per Guidance Notes?

This Guidance Note applies to all business or professional entities other than companies and LLPs, including:

1. Sole Proprietorships

2. Hindu Undivided Families (HUFs)

3. Partnership Firms

   • Registered

   • Unregistered

4. Associations of Persons (AOPs)

   • Including Resident Welfare Associations (RWAs)

5. Trusts

   • Registered or unregistered, private or public

6. Societies

   • Registered under any relevant law

7. Statutory Corporations, Autonomous Bodies, and Authorities

8. Any entity engaged in commercial, industrial, or business activities that is not a company or LLP

Which type of Entity Excluded as per Guidance Note?

• Companies incorporated under the Companies Act, 2013

  • These follow Schedule III and other requirements under the Companies Act.

• Limited Liability Partnerships (LLPs)

  • ICAI has issued a separate Guidance Note for LLPs.

• Entities where specific formats are prescribed by regulators/statutes, for example:

  • Trusts under Maharashtra Public Trusts Rules, 1951

  • Autonomous bodies under Government of India

  • Entities for which ICAI has specific guidance, e.g.:

    • Educational Institutions

    • Political Parties

    • Non-Profit Organisations (NPOs)

Classification Levels for Non-Corporate Entities

The Guidance Note applies to all Non-Corporate Entities, but the extent of compliance with Accounting Standards depends on their classification level.

ICAI has classified non-corporate entities into four levels based on turnover, borrowings, and other criteria, which affects the applicability and exemptions under the Accounting Standards:

Applicability of Accounting Standards to Non-Corporate Entities (ICAI)

Final Thoughts

The ICAI Guidance Note is a significant step toward improving the financial reporting of non-corporate entities in India. Even though not mandatory for all, it is highly recommended for consistency, transparency, and professionalism—especially where third-party users (tax authorities, banks, investors) are involved.

Excel Format for financial reporting of non-corporate entities is in this link

If you want to download the complete Guidance Note Here is the Link