From the following information, prepare a Comparative Statement of Profit and Loss of AX Ltd. for the year ended 31st March, 2025 : | Particulars | 2024 – 25 (₹) | 2023 – 24 (₹) | | --- | --- | --- | | Revenue from Operations | 50,00,000 | 25,00,000 | | Cost of Revenue from Operations | 15,00,000 | 6,00,000 | | Other Expenses | 5,00,000 | 4,00,000 | Tax Rate 50%

> [!TLDR] > Net Profit After Tax increased from ₹7,50,000 (2023–24) to ₹15,00,000 (2024–25), an absolute increase of ₹7,50,000 (100%). ## Concept and Accounting Treatment A **Comparative Statement of Profit and Loss** presents the profit and loss account for two or more periods side by side, showing both the absolute change (increase/decrease in rupees) and the percentage change for each line item. This horizontal analysis helps stakeholders assess trends in revenue, expenses, and profitability over time. The statement follows the standard structure of the Statement of Profit and Loss: 1. **Revenue from Operations** (sales/turnover) 2. Less: **Cost of Revenue from Operations** (cost of goods sold) 3. Equals: **Gross Profit** 4. Less: **Other Expenses** (operating expenses) 5. Equals: **Profit Before Tax** 6. Less: **Tax** (at the given rate, here 50%) 7. Equals: **Profit After Tax** (Net Profit) For each item, we compute: - **Absolute Change** = Current Year figure − Previous Year figure - **Percentage Change** = $\frac{\text{Absolute Change}}{\text{Previous Year figure}} \times 100$ An increase is shown as a positive figure; a decrease may be shown in brackets or with a minus sign. --- ## Solution ### Comparative Statement of Profit and Loss of AX Ltd. ### for the year ended 31st March, 2025 | **Particulars** | **2024–25 (₹)** | **2023–24 (₹)** | **Absolute Change (₹)** | **% Change** | |---|---:|---:|---:|---:| | **Revenue from Operations** | 50,00,000 | 25,00,000 | 25,00,000 | 100 | | **Less:** Cost of Revenue from Operations | 15,00,000 | 6,00,000 | 9,00,000 | 150 | | **Gross Profit** | **35,00,000** | **19,00,000** | **16,00,000** | **84.21** | | **Less:** Other Expenses | 5,00,000 | 4,00,000 | 1,00,000 | 25 | | **Profit Before Tax** | **30,00,000** | **15,00,000** | **15,00,000** | **100** | | **Less:** Tax @ 50%** | 15,00,000 | 7,50,000 | 7,50,000 | 100 | | **Profit After Tax (Net Profit)** | **15,00,000** | **7,50,000** | **7,50,000** | **100** |

From the following information, prepare a Comparative Statement of Profit and Loss of AX Ltd. for the year end

Question

From the following information, prepare a Comparative Statement of Profit and Loss of AX Ltd. for the year ended 31st March, 2025 :

Particulars	2024 – 25 (₹)	2023 – 24 (₹)
Revenue from Operations	50,00,000	25,00,000
Cost of Revenue from Operations	15,00,000	6,00,000
Other Expenses	5,00,000	4,00,000

Tax Rate 50%

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Concept understanding — Profit Before Tax

Profit Before Tax (PBT) – A First Look

Think of a business like a small shop you run. At the end of the year, you add up all the money you earned from selling goods (revenue) and subtract all the money you spent on buying stock, paying rent, electricity, and salaries. What remains is your profit — the reward for your effort.

But here's the catch: before you can take that profit home, the government wants its share — income tax. So the profit you calculate before paying tax is called Profit Before Tax (PBT). After you pay tax, what's left is Profit After Tax (PAT) — the amount you can actually keep or reinvest.

Precise Meaning (as per NCERT Class 12 Accountancy)

In the context of a company's financial statements, Profit Before Tax is the net profit earned by the company from its operations and other activities before deducting the provision for income tax.

It appears in the Statement of Profit and Loss (the new name for the Profit & Loss Account under Companies Act, 2013). The format is:

Profit Before Tax = Revenue from Operations + Other Income - Total Expenses (excluding tax)

Where total expenses include:

Cost of materials consumed / purchases
Changes in inventories
Employee benefit expenses
Depreciation and amortisation
Finance costs (interest)
Other expenses (rent, repairs, etc.)

Why Does PBT Matter?

It shows operating efficiency – PBT tells you how well the business is doing before the taxman's cut. A company with high PBT but low PAT might be paying heavy taxes (or has deferred tax issues).
It's used for comparisons – Different companies may face different tax rates (e.g., new manufacturing units get tax holidays). Comparing PBT (instead of PAT) gives a fairer picture of their core performance.
It's the base for tax calculation – The company estimates its tax liability on PBT and creates a provision.

Accounting Treatment – Which Account is Debited/Credited?

In the Statement of Profit and Loss, the treatment is straightforward:

Debit side (expenses): All expenses are debited.
Credit side (incomes): All revenues and gains are credited.
The balancing figure after all items (except tax) is Profit Before Tax – shown on the credit side.
Then, Less: Provision for Tax is shown as a deduction from PBT to arrive at Profit After Tax.

Journal entry for creating tax provision:

Particulars	Debit (₹)	Credit (₹)
Profit & Loss A/c (or Statement of P&L) Dr.	XXX
To Provision for Tax A/c		XXX
(Being provision for income tax created)

Debit: Profit & Loss (Statement of P&L) – reduces the profit.
Credit: Provision for Tax – a current liability shown in the Balance Sheet.

When tax is actually paid later:

Particulars	Debit (₹)	Credit (₹)
Provision for Tax A/c Dr.	XXX
To Bank A/c		XXX
(Being tax paid)

Format of Statement of Profit and Loss (as per NCERT – Part I of Schedule III)

Below is the relevant portion showing how PBT appears. Note: This is a simplified extract.

Particulars	Note No.	Amount (₹)
I. Revenue from Operations		10,00,000
II. Other Income		50,000
III. Total Revenue (I + II)		10,50,000
IV. Expenses:

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The Comparative Statement of Profit and Loss shows both absolute changes and percentage changes between two periods. Here we compute Profit Before Tax first, then apply the 50% tax rate to arrive at Profit After Tax.

Working:

For 2024–25:

Gross Profit = Revenue from Operations − Cost of Revenue from Operations = ₹50,00,000 − ₹15,00,000 = ₹35,00,000
Profit Before Tax = Gross Profit − Other Expenses = ₹35,00,000 − ₹5,00,000 = ₹30,00,000
Tax @ 50% = ₹15,00,000
Profit After Tax = ₹15,00,000

For 2023–24:

Gross Profit = ₹25,00,000 − ₹6,00,000 = ₹19,00,000
Profit Before Tax = ₹19,00,000 − ₹4,00,000 = ₹15,00,000
Tax @ 50% = ₹7,50,000
Profit After Tax = ₹7,50,000

Comparative Statement of Profit and Loss

for the year ended 31st March, 2025

Particulars	2024–25 (₹)	2023–24 (₹)	Absolute Change (₹)	% Change
Revenue from Operations	50,00,000	25,00,000	25,00,000	100
Less: Cost of Revenue from Operations	15,00,000	6,00,000	9,00,000	150

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Net Profit After Tax increased from ₹7,50,000 (2023–24) to ₹15,00,000 (2024–25), an absolute increase of ₹7,50,000 (100%).

Concept and Accounting Treatment

A Comparative Statement of Profit and Loss presents the profit and loss account for two or more periods side by side, showing both the absolute change (increase/decrease in rupees) and the percentage change for each line item. This horizontal analysis helps stakeholders assess trends in revenue, expenses, and profitability over time.

The statement follows the standard structure of the Statement of Profit and Loss:

Revenue from Operations (sales/turnover)
Less: Cost of Revenue from Operations (cost of goods sold)
Equals: Gross Profit
Less: Other Expenses (operating expenses)
Equals: Profit Before Tax
Less: Tax (at the given rate, here 50%)
Equals: Profit After Tax (Net Profit)

For each item, we compute:

Absolute Change = Current Year figure − Previous Year figure
Percentage Change = $\frac{\text{Absolute Change}}{\text{Previous Year figure}} \times 100$

An increase is shown as a positive figure; a decrease may be shown in brackets or with a minus sign.

Solution

Comparative Statement of Profit and Loss of AX Ltd.

for the year ended 31st March, 2025

Particulars	2024–25 (₹)	2023–24 (₹)	Absolute Change (₹)	% Change
Revenue from Operations	50,00,000	25,00,000	25,00,000	100
Less: Cost of Revenue from Operations	15,00,000	6,00,000	9,00,000	150
Gross Profit	35,00,000	19,00,000	16,00,000	84.21
Less: Other Expenses	5,00,000	4,00,000	1,00,000	25
Profit Before Tax	30,00,000	15,00,000	15,00,000	100
Less: Tax @ 50%**	15,00,000	7,50,000	7,50,000	100
Profit After Tax (Net Profit)	15,00,000	7,50,000	7,50,000	100

Working Notes

W.N. 1: Gross Profit

For 2024–25:

Gross Profit = Revenue from Operations − Cost of Revenue from Operations

= ₹50,00,000 − ₹15,00,000 = ₹35,00,000

For 2023–24:

= ₹25,00,000 − ₹6,00,000 = ₹19,00,000

Absolute Change = ₹35,00,000 − ₹19,00,000 = ₹16,00,000

Percentage Change = $\frac{16,00,000}{19,00,000} \times 100$ = 84.21%

W.N. 2: Profit Before Tax

For 2024–25:

Profit Before Tax = Gross Profit − Other Expenses

= ₹35,00,000 − ₹5,00,000 = ₹30,00,000

For 2023–24:

= ₹19,00,000 − ₹4,00,000 = ₹15,00,000

Absolute Change = ₹30,00,000 − ₹15,00,000 = ₹15,00,000

Percentage Change = $\frac{15,00,000}{15,00,000} \times 100$ = 100%

W.N. 3: Tax

For 2024–25:

Tax = 50% of Profit Before Tax = 50% of ₹30,00,000 = ₹15,00,000

For 2023–24:

= 50% of ₹15,00,000 = ₹7,50,000

Absolute Change = ₹15,00,000 − ₹7,50,000 = ₹7,50,000 …

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Concept and Accounting Treatment

Solution

Comparative Statement of Profit and Loss of AX Ltd.

for the year ended 31st March, 2025

Working Notes

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