Q.From the following information, prepare a Comparative Statement of Profit and Loss for the years ended 31 March 2023 and 31 March 2024:
Revenue from operations: 2022-23 ₹6,00,000; 2023-24 ₹8,00,000.
Cost of materials consumed: 2022-23 ₹3,00,000; 2023-24 ₹4,20,000.
Other (operating) expenses: 2022-23 ₹1,00,000; 2023-24 ₹1,30,000.
Tax rate: 40% in both years.

A comparative statement of profit and loss sets the two years side by side and shows the absolute change and the percentage change (on the earlier-year base) for each line.

Revenue rises 33.33% but total expenses rise faster (37.50%), so profit before and after tax each rise only 25%.

Step 1 — Set up the two years and compute the sub-totals.

Total expenses = cost of materials consumed + other expenses.

• 2022-23: 3,00,000 + 1,00,000 = 4,00,000; 2023-24: 4,20,000 + 1,30,000 = 5,50,000. Profit before tax = Revenue − Total expenses.
• 2022-23: 6,00,000 − 4,00,000 = 2,00,000; 2023-24: 8,00,000 − 5,50,000 = 2,50,000. Tax @ 40%: 2022-23 = 0.40 × 2,00,000 = 80,000; 2023-24 = 0.40 × 2,50,000 = 1,00,000. Profit after tax: 2022-23 = 2,00,000 − 80,000 = 1,20,000; 2023-24 = 2,50,000 − 1,00,000 = 1,50,000.

Step 2 — For each line compute absolute change and % change on the 2022-23 base.

Sample computations: Revenue % = 2,00,000 ÷ 6,00,000 × 100 = 33.33%; Cost of materials % = 1,20,000 ÷ 3,00,000 × 100 = 40%; Total expenses % = 1,50,000 ÷ 4,00,000 × 100 = 37.50%; Profit before tax % = 50,000 ÷ 2,00,000 × 100 = 25%.

Dual-solve check. Independently, profit after tax = revenue × (1 − expense ratio) × (1 − 0.40). For 2023-24, expenses are 5,50,000/8,00,000 = 68.75% of revenue, so PBT = 8,00,000 × 31.25% = 2,50,000 and PAT = 2,50,000 × 60% = 1,50,000 — matching the table. The change of 30,000 on a base of 1,20,000 is 25%, confirming the profit-after-tax percentage.

Interpretation. Revenue grew 33.33%, but total expenses grew faster (37.50%) because material cost climbed 40%. Consequently profit grew only 25% — more slowly than sales — a warning the raw statements alone would not make obvious.

Alternative check via ratios: express each year's total expenses as a fraction of revenue (2022-23: 4,00,000/6,00,000 = 66.67%; 2023-24: 5,50,000/8,00,000 = 68.75%). The rising expense ratio confirms that expenses grew faster than revenue, which is exactly why the profit percentage change (25%) is below the revenue percentage change (33.33%).

The most common error is computing the percentage change on the current year instead of the previous (base) year — the base for % change is always the earlier year. Another is forgetting to strike the sub-totals (total expenses, profit before tax, profit after tax) and computing changes only for the given line items. A third is applying tax to revenue rather than to profit before tax.