Written by Md Rakib Hassan — Income Tax Practitioner with 10+ years of tax compliance and audit experience across Bangladesh and the UK. Former accounts manager at a UK chartered accounting firm managing 1,000+ clients, with direct experience resolving multi-year tax audit disputes with HMRC and the NBR. Currently Finance Controller at a UK-based multinational tech group.
If you are an accountant, finance officer, or business owner operating in Bangladesh, you cannot afford to get your financial statements wrong. Under the Income Tax Act 2023, the Financial Reporting Act 2015, and the standards set by the Institute of Chartered Accountants of Bangladesh (ICAB), preparing compliant financial statements in Bangladesh is not just good practice — it is a legal obligation.
In this guide, I will walk you through every component of a full set of financial statements, using a real-world trial balance from LSF & Company (year ended 30 June 2025) as a working example. You can download the full template and trial balance here. (Link to your PDF)
Whether you are preparing financial statements for the first time or reviewing your current process, this guide gives you the structure, the compliance context, and the practical numbers to get it right.
Why Financial Statements Matter in Bangladesh Right Now
Bangladesh’s financial reporting landscape has changed significantly in recent years. Here is the compliance picture you need to understand as of 2025:
- Financial Reporting Act 2015 (FRA 2015): This law established the Financial Reporting Council (FRC) as the watchdog body responsible for monitoring auditors, accounting standards, and the quality of financial reporting across public interest entities (PIEs) in Bangladesh.
- ICAB and IFRS/BFRS Adoption: The ICAB has adopted International Financial Reporting Standards (IFRS), known locally as Bangladesh Financial Reporting Standards (BFRS). All companies listed on the Dhaka Stock Exchange (DSE) or Chittagong Stock Exchange (CSE) are required to follow these standards.
- Income Tax Act 2023: This landmark legislation replaced the Income Tax Ordinance of 1984. It introduces a simplified, transparent framework and critically requires companies to maintain audited financial statements to qualify for reduced corporate tax rates.
- Finance Ordinance 2025: Issued on 2 June 2025, this ordinance brought further amendments including revised corporate tax rates — non-listed companies now face a rate of 27.5%, while publicly traded companies are taxed at 20%.
- Revenue Administration Reform 2025: The traditional National Board of Revenue (NBR) has been restructured into two new bodies — the Revenue Policy Division (RPD) and the Revenue Management Division (RMD) — further tightening compliance expectations.
The message is clear: accurate financial statements in Bangladesh are the foundation of your tax position, your audit readiness, and your business credibility.
The Five Core Financial Statements You Must Prepare
A complete set of financial statements under BAS 1 (Bangladesh Accounting Standard 1, equivalent to IAS 1) includes:
- Statement of Comprehensive Income (Income Statement)
- Statement of Financial Position (Balance Sheet)
- Statement of Cash Flows
- Statement of Changes in Equity
- Notes to the Financial Statements
Let us work through each one using the LSF & Company trial balance.
Step 1: Start With the Trial Balance
Before preparing any financial statements, you must have a balanced trial balance. LSF & Company’s trial balance for the year ended 30 June 2025 shows:
| Total Debits | Total Credits |
|---|---|
| BDT 46,501,318 | BDT 46,501,318 |
This is your starting point. Every figure in your financial statements flows directly from here. Notice how the trial balance classifies each account — COGS, General & Admin (G&A), Fixed Assets, Current Assets, Liabilities, Equity, Revenue, and Finance Costs. That classification discipline is what makes the downstream statements accurate and audit-ready.
Step 2: Prepare the Statement of Comprehensive Income
This statement shows whether the business made a profit or loss during the year. Here is how to build it from the LSF & Company data:
Revenue
- Sales/Revenue: BDT 36,245,000
- Interest Income (SD Account): BDT 38,000
- Total Revenue: BDT 36,283,000
Cost of Goods Sold (COGS)
Taken directly from the Production Floor section of the trial balance:
| Item | Amount (BDT) |
|---|---|
| Raw Material Purchase | 21,600,000 |
| Accessories | 1,900,000 |
| Wages | 1,024,693 |
| Utilities & Factory Overhead | 740,000 |
| Total COGS | 25,264,693 |
Gross Profit = BDT 36,245,000 − BDT 25,264,693 = BDT 10,980,307
General, Administrative & Selling Expenses
Total G&A from Corporate Office = BDT 5,985,825 Depreciation = BDT 450,000 Total G&A including Depreciation = BDT 6,435,825
Income from Operations = BDT 10,980,307 − BDT 6,435,825 = BDT 4,544,482
Finance Costs
| Item | Amount (BDT) |
|---|---|
| Bank Charges | 26,000 |
| Commission | 36,000 |
| Finance Cost (Interest) | 125,000 |
| Total Finance Costs | 187,000 |
Income Before Tax = BDT 4,544,482 + BDT 38,000 (Interest Income) − BDT 187,000 = BDT 4,395,482
Income Tax
Under the Income Tax Act 2023, LSF & Company as a non-listed company is subject to 27.5% corporate tax (post Finance Ordinance 2025). However, the trial balance uses a 25% rate:
- Tax @ 25% = BDT 4,395,482 × 25% = BDT 1,098,870 (use 27.5% if applicable to your entity)
- Net Profit = BDT 4,395,482 − BDT 1,098,870 = BDT 3,296,612
Practitioner’s Note: Always confirm which tax rate applies to your entity type. The Finance Ordinance 2025 revised the non-listed company rate to 27.5%. To qualify, all receipts and expenses over BDT 500,000 individually (or BDT 3.6 million in aggregate annually) must pass through a formal bank transfer.
Step 3: Prepare the Statement of Financial Position (Balance Sheet)
This is the cornerstone of your financial statements. It shows the entity’s assets, liabilities, and equity at a single point in time — 30 June 2025 for LSF & Company.
Fixed Assets (Net of Accumulated Depreciation)
| Asset | Cost (BDT) | Acc. Dep. (BDT) | Net Book Value (BDT) |
|---|---|---|---|
| Machineries | 1,000,000 | 100,000 | 900,000 |
| Furniture & Fixture | 1,200,000 | 120,000 | 1,080,000 |
| Interior Decoration | 1,500,000 | 150,000 | 1,350,000 |
| Computer & Equipment | 400,000 | 80,000 | 320,000 |
| Total Fixed Assets | 4,100,000 | 450,000 | 3,650,000 |
Current Assets
| Item | Amount (BDT) |
|---|---|
| Advance & Prepayments | 110,000 |
| Accounts/Trade Receivables | 1,200,000 |
| Advance Tax/Tax on Interest | 3,800 |
| Inventory | 1,200,000 |
| Cash & Bank | 8,000,000 |
| Total Current Assets | 10,513,800 |
Total Assets = BDT 3,650,000 + BDT 10,513,800 = BDT 14,163,800
Equity
| Item | Amount (BDT) |
|---|---|
| Capital | 5,000,000 |
| Retained Earnings (Net Profit) | 3,296,612 |
| Total Equity | 8,296,612 |
Liabilities
| Item | Amount (BDT) |
|---|---|
| Bank Loan – Long Term | 1,000,000 |
| Bank Loan – Short Term | 300,000 |
| Accounts/Trade Payable | 2,300,000 |
| Salaries & Wages Payable | 688,318 |
| Utilities Payable | 30,000 |
| Tax Payable – TDS | 450,000 |
| Tax Payable (Income Tax) | 1,098,870 |
| Total Liabilities | 5,867,188 |
Total Equity & Liabilities = BDT 8,296,612 + BDT 5,867,188 = BDT 14,163,800 ✅
The Balance Sheet balances — which is exactly what your auditor will check first when reviewing your financial statements.
Step 4: Prepare the Statement of Cash Flows
The cash flow statement is often the most misunderstood of all financial statements — yet it is the one that reveals the real financial health of a business. There are two methods: the Direct Method and the Indirect Method. The LSF & Company template covers both.
Indirect Method — Operating Activities
Start with net profit and work backwards by adjusting for non-cash items and working capital changes.
| Item | Amount (BDT) |
|---|---|
| Net Profit | 3,296,612 |
| Add: Depreciation | 450,000 |
| Increase in Trade Payables | 2,300,000 |
| Increase in Salaries Payable | 688,318 |
| Increase in Utilities Payable | 30,000 |
| Increase in TDS Payable | 450,000 |
| Increase in Tax Payable | 1,098,870 |
| Less: Increase in Trade Receivables | (1,200,000) |
| Less: Increase in Inventory | (1,200,000) |
| Less: Increase in Advances | (110,000) |
| Less: Increase in Advance Tax | (3,800) |
| Cash from Operating Activities | 5,800,000 (approx.) |
Direct Method — Key Calculations
The direct method requires using the formula:
Cash Collected from Customers = Revenue − Increase in Trade Receivables = BDT 36,245,000 − BDT 1,200,000 = BDT 35,045,000
For materials paid to suppliers:
Purchase = COGS + Closing Inventory − Opening Inventory (Opening inventory is zero as this appears to be the first year) = BDT 25,264,693 + BDT 1,200,000 − BDT 0 = BDT 26,464,693 Cash Paid to Suppliers = Purchase − Increase in Trade Payable = BDT 26,464,693 − BDT 2,300,000 = BDT 24,164,693
Investing Activities
All fixed assets were purchased this year (opening balance was zero):
- Machineries: BDT (1,000,000)
- Furniture & Fixture: BDT (1,200,000)
- Interior Decoration: BDT (1,500,000)
- Computer & Equipment: BDT (400,000)
- Cash from Investing Activities: BDT (4,100,000)
Financing Activities
- Capital introduced: BDT 5,000,000
- Bank Loan – Long Term: BDT 1,000,000
- Bank Loan – Short Term: BDT 300,000
- Cash from Financing Activities: BDT 6,300,000
Closing Cash = Opening Cash (BDT 0) + Operating CF + Investing CF + Financing CF This should reconcile to the Cash & Bank balance of BDT 8,000,000 on the Balance Sheet.
Step 5: Prepare the Statement of Changes in Equity
This statement bridges the opening and closing equity balances and is a required component of financial statements under BAS 1.
| Item | Amount (BDT) |
|---|---|
| Opening Capital | 5,000,000 |
| Add: Net Profit for the Year | 3,296,612 |
| Less: Dividend | Nil |
| Closing Equity | 8,296,612 |
This matches the equity section of the Balance Sheet — as it must.
Step 6: Common Compliance Mistakes to Avoid
Based on my experience working with NBR and reviewing hundreds of sets of financial statements in Bangladesh, here are the most common errors I see:
- Wrong depreciation classification. Depreciation must appear in both G&A expenses and as accumulated depreciation reducing fixed assets. Many preparers only do one side.
- Missing tax payable line. Income tax for the year must be accrued as a current liability in the Balance Sheet and deducted in the Income Statement. The TDS payable and income tax payable are separate items.
- Cash flow not reconciling. The closing cash balance on the cash flow statement must exactly match the Cash & Bank figure on the Balance Sheet. If it does not, there is an error upstream in your financial statements.
- Using the wrong tax rate. The Finance Ordinance 2025 changed the non-listed company rate to 27.5%. Using the old 25% rate is a compliance risk for financial years after July 2025.
- Not following BAS 1 presentation rules. Under BAS 1 (IAS 1), financial statements must present information fairly, use consistent classification, and show comparative figures. The FRC can flag non-compliant financial statements during audits of public interest entities.
- Failing the banking channel condition. Under the Income Tax Act 2023, transactions over BDT 500,000 must go through bank transfer. Cash transactions above this threshold can disqualify you from the reduced tax rate — a costly error.
Who Regulates Financial Statements in Bangladesh?
Understanding the regulatory ecosystem helps you prepare financial statements that satisfy every stakeholder:
| Regulator | Role |
|---|---|
| ICAB | Sets BFRS/BAS standards; regulates chartered accountants |
| FRC | Monitors audit quality and financial reporting of PIEs under FRA 2015 |
| BSEC | Requires listed companies to file BFRS-compliant statements |
| NBR / RMD | Reviews financial statements for income tax compliance |
| Bangladesh Bank | Governs banks and NBFIs with sector-specific modifications to IFRS |
For private limited companies like LSF & Company, the NBR/RMD and ICAB standards are the primary compliance obligations. For listed entities, BSEC and FRC oversight applies too.
Key Takeaways for Finance Professionals
Preparing compliant financial statements in Bangladesh in 2025 requires you to:
- Start with a clean, balanced trial balance with correct account classifications
- Apply the correct depreciation rates (Fixed Assets 10%, Computer & Equipment 20% in this example)
- Use the right corporate tax rate — 27.5% for non-listed companies under the Finance Ordinance 2025
- Ensure your cash flow statement reconciles to the Cash & Bank balance on your Balance Sheet
- Follow BAS 1 / IAS 1 for presentation, including the requirement for notes to the financial statements
- Maintain all supporting records for audit and NBR/RMD review
You can download the full LSF & Company trial balance and blank financial statements templates here (link to your PDF).
Frequently Asked Questions
Q: Are financial statements mandatory for all businesses in Bangladesh? Yes, for companies registered under the Companies Act 1994, preparing and filing financial statements is a legal requirement. Under the Income Tax Act 2023, audited accounts are also necessary to qualify for the reduced corporate tax rate.
Q: What is the corporate tax rate in Bangladesh in 2025? As of the Finance Ordinance 2025, non-listed companies pay 27.5%, while publicly listed companies pay 20%. One Person Companies (OPCs) pay 22.5%. Banks and financial institutions (non-listed) pay 42.5%.
Q: Do small businesses need to follow IFRS in Bangladesh? IFRS for SMEs (adopted as BFRS for SMEs by ICAB) applies to eligible smaller entities. The FRC has issued five levels of financial reporting frameworks under FRA 2015 to accommodate entities of different sizes and types.
Q: Who can sign off financial statements in Bangladesh? Statutory audits of public interest entities must be conducted by auditors registered with the FRC. All auditors must also hold ICAB membership.
This article is for general guidance only and does not constitute professional tax or accounting advice. Always consult a qualified ICAB-registered practitioner for advice specific to your situation. Tax rates and regulations are subject to change — verify against the latest NBR and FRC notifications.
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