ICAI’s Guidance Note for Non-Corporate Entities | 40+ FAQs & Key Insights

Non-Corporate Entities (NCEs) are entities other than companies incorporated under the Companies Act and Limited Liability Partnerships (LLPs). These typically include:

• Sole proprietorships
• Hindu Undivided Families (HUFs)
• Registered and unregistered partnership firms
• Associations of persons (AOPs), bodies of individuals (BOIs)
• Societies and trusts (registered or unregistered)
• Statutory corporations, autonomous bodies, and authorities
• Any other form of organisation engaged in business or professional activity

LLPs are excluded from the scope of the Guidance Note, as a separate note has been issued for them.

A complete set of financial statements under the Guidance Note generally includes:

• A Balance Sheet
• A Statement of Profit and Loss
• A Cash Flow Statement (if applicable)
• Notes to Accounts

Cash Flow Statements are mandatory for large NCEs, while optional but encouraged for MSMEs.

The ICAI issued this Guidance Note to enhance the overall quality and consistency of financial reporting by non-corporate entities. It prescribes standardised formats for the Balance Sheet and the Statement of Profit and Loss to ensure that such entities prepare financial statements that are understandable, relevant, reliable, and comparable. This is particularly important given the growing economic significance and financial complexity of many non-corporate entities in India.

This Guidance Note applies to all business or professional entities that are not structured as companies under the Companies Act or as Limited Liability Partnerships under the LLP Act. It includes a wide range of structures such as sole proprietorships, HUFs, partnership firms (registered or unregistered), trusts, societies, AOPs, BOIs, and statutory authorities, provided they engage in business or professional activities. However, it is not applicable where specific formats are prescribed by relevant laws, regulators, or ICAI guidance specific to certain types of entities (for example NPOs, educational institutions).

While the Guidance Note is technically recommendatory, its authority is equivalent to other ICAI Guidance Notes. Auditors are expected to examine adherence to its requirements and document any deviations along with justifications. Inappropriate non-compliance may lead the auditor to modify their opinion in accordance with the applicable Standards on Auditing.

The Guidance Note is effective for financial statements covering accounting periods beginning on or after April 1, 2024. For entities with a financial year from April to March, this means it applies to the FY 2024–25 onwards.

The Technical Guide on Financial Statements of NCEs issued in 2022 served as an interim tool to recommend formats. With the issuance of this more authoritative Guidance Note, the earlier Technical Guide stands superseded for all accounting periods beginning on or after April 1, 2024.

No. Schedule III is applicable only to companies governed by the Companies Act, 2013. It is not applicable to non-corporate entities. Instead, the Guidance Note provides a parallel structure for NCEs, tailored to their nature, to ensure uniformity in presentation.

While Schedule III is not mandatory or directly applicable to NCEs, the Guidance Note draws inspiration from its structure to provide similar presentation discipline and consistency. However, it adapts terminology and line items to suit the needs of NCEs (e.g., “Owners’ Fund” vs “Shareholders’ Fund”).

Not always. While trusts may fall under the NCE umbrella, ICAI has issued a separate Technical Guide on Accounting for Not-for-Profit Organisations (NPOs), which includes specific formats and principles tailored to such entities. In such cases, the NPO guidance takes precedence.