Q.From the following, prepare a Common-Size Statement of Profit and Loss for the two years:
Revenue from operations: 2022-23 ₹8,00,000; 2023-24 ₹10,00,000.
Cost of materials consumed: 2022-23 ₹4,80,000; 2023-24 ₹5,50,000.
Other (operating) expenses: 2022-23 ₹1,60,000; 2023-24 ₹2,00,000.

A common-size statement of profit and loss expresses every item as a percentage of that year's revenue from operations (taken as 100).

Step 1 — Fix the base. In a common-size income statement the base is revenue from operations = 100 for each year. Every other item is expressed as a percentage of that year's revenue.

Step 2 — Compute the sub-totals in rupees first.

Total expenses = cost of materials + other expenses.

• 2022-23: 4,80,000 + 1,60,000 = 6,40,000; 2023-24: 5,50,000 + 2,00,000 = 7,50,000. Profit before tax = Revenue − Total expenses.
• 2022-23: 8,00,000 − 6,40,000 = 1,60,000; 2023-24: 10,00,000 − 7,50,000 = 2,50,000.

Step 3 — Express each item as a percentage of revenue.

Sample computations: Cost of materials 2022-23 = 4,80,000 ÷ 8,00,000 × 100 = 60%; 2023-24 = 5,50,000 ÷ 10,00,000 × 100 = 55%. Other expenses 2023-24 = 2,00,000 ÷ 10,00,000 × 100 = 20%. Profit before tax 2023-24 = 2,50,000 ÷ 10,00,000 × 100 = 25%. …

Cross-check by the complement: since revenue is 100%, profit before tax as a percentage must equal 100% minus total-expense percentage. 2022-23: 100% − 80% = 20%; 2023-24: 100% …

A frequent error is using total assets or the previous year's revenue as the base for a common-size income statement — the base must be the same year's revenue from operations. Students also sometimes carry forward wrong sub-totals; always compute total expenses and profit before tax in rupees first, then convert. Fi …