For decades, the financial statements of partnership firms, LLPs and proprietorships have looked however the preparer wanted them to look — a horizontal T-form balance sheet here, a vertical statement there, capital accounts shown in five different ways across five clients. That era is ending. ICAI has prescribed a uniform format for non-corporate financial statements, and it is becoming mandatory in phases starting FY 2025-26. Here is what changed, who must follow it and from when, and what the new statements actually look like.
What has changed
In 2023, ICAI issued two Guidance Notes — one on Financial Statements of Non-Corporate Entities and a companion on Financial Statements of Limited Liability Partnerships. Together they prescribe, for the first time, a standard vertical presentation for entities outside the Companies Act: a Balance Sheet led by Owners’ Fund, a Statement of Profit and Loss that shows partners’ remuneration as an appropriation below operating profit, a prescribed partner-wise capital account reconciliation, and a standard structure for notes and accounting policies. The layout will feel familiar to anyone who prepares Schedule III company financials — that is deliberate. The formats bring non-corporate reporting in line with corporate practice while staying lighter on disclosures.
Initially the Guidance Notes were recommendatory. The ICAI Council has since decided to make them mandatory in a phased manner, and the first mandatory year is here.
Who must follow it, and from when
| Financial year | Who must present financial statements in the ICAI format |
|---|---|
| FY 2025-26 | Non-corporate entities with turnover above ₹5 crore in the current or immediately preceding financial year |
| FY 2026-27 onwards | All non-corporate entities, irrespective of size |
In practical terms: if you audit or prepare accounts for a firm that crossed ₹5 crore of turnover, its FY 2025-26 financial statements — the ones being finalised this year — should already be in the new format. For everyone else, next year’s statements will be.
The four levels — how much disclosure applies
Alongside the format, ICAI classifies non-corporate entities into four levels that determine how fully the Accounting Standards apply:
| Level | Criteria (broadly, by turnover) | AS applicability |
|---|---|---|
| Level I | Above ₹250 crore (or borrowings above the prescribed threshold; includes listed-type entities) | Accounting Standards apply in full |
| Level II | ₹50 crore to ₹250 crore | Graded exemptions and relaxations |
| Level III | ₹10 crore to ₹50 crore | Further exemptions |
| Level IV | All remaining entities | Widest exemptions — the simplest reporting tier |
Most small firms and proprietorships will sit in Level III or IV, which keeps the compliance burden light — the format is standard, but the disclosure load scales with size. A cash flow statement, for instance, is encouraged rather than compulsory for smaller entities.
What the statements look like now
Balance Sheet — Owners’ Fund replaces the T-form
The vertical Balance Sheet opens with Owners’ Fund (the capital account and reserves), followed by non-current and current liabilities — including a separate line for loans from partners — and then non-current and current assets, exactly parallel to Schedule III. Trade payables split between MSME and other dues.
Profit & Loss — partners’ remuneration as an appropriation
The Statement of Profit and Loss arrives at profit before partners’ interest, remuneration and tax, then deducts interest on capital and partners’ remuneration as appropriations, then tax — and the final line reads profit for the year, transferred to partners’ capital accounts. The section 40(b) limits on allowable remuneration (raised by the Finance (No. 2) Act 2024 — ₹3,00,000 or 90% on the first ₹6,00,000 of book profit, 60% on the balance) remain a tax computation matter, but the presentation now makes the appropriations visible on the face.
The capital account note — a prescribed grid
The most useful standardisation is the partner-wise capital account reconciliation: one row per partner showing profit-sharing ratio, opening balance, capital introduced, remuneration, interest, withdrawals, share of profit and closing balance. Every firm’s capital note now reads the same way — and it must tie to the capital shown on the Balance Sheet.
Prepare the new format in minutes, not evenings
CalcGuru’s free tools already follow the ICAI non-corporate format — pick your route:
Open the free Balance Sheet AppPrefer Excel? Download the free Non-Corporate FS workbook — entity-type switch, partner capital accounts and Income-tax WDV depreciation built in. Companies: the Schedule III workbook is here.
Frequently asked questions
Is the ICAI format legally binding like Schedule III?
Schedule III flows from the Companies Act; the non-corporate format flows from ICAI’s Guidance Notes, which bind members of the ICAI. Once mandatory, a chartered accountant preparing or reporting on non-corporate financial statements is expected to follow the format, and departures need to be justified. For the entities themselves it rapidly becomes the market standard — banks and lenders will see the same layout everywhere.
My client’s firm has ₹2 crore turnover. Does anything change for FY 2025-26?
The format becomes mandatory for that firm from FY 2026-27. Adopting it a year early is permitted and sensible — the comparatives will already be in the right layout when the mandate lands.
Does a proprietorship really need this?
From FY 2026-27, yes — the Guidance Note covers proprietary concerns. The format is lighter in their case: a single capital account instead of the partner grid, no appropriations, and Level IV disclosure relief for small entities.
Is a cash flow statement compulsory?
For most non-corporate entities it is encouraged, not compulsory — larger Level I/II entities should include one. The complete set is the Balance Sheet, the Statement of Profit and Loss, and the notes including significant accounting policies.
Where do I get the format ready-made?
Two free CalcGuru tools follow it out of the box: the Balance Sheet App (import a Tally trial balance, pick the entity type, and the full set builds itself — firms, LLPs, proprietorships and companies) and the Non-Corporate Financial Statements Excel workbook.