Q.From the following Trading and Profit & Loss Account figures for the year ended 31st March 2026, prepare a Common-Size Income Statement, expressing every item as a percentage of Net Sales:

• Net Sales: ₹10,00,000
• Cost of Goods Sold: ₹7,00,000
• Office & Administration Expenses: ₹80,000
• Selling & Distribution Expenses: ₹70,000
• Non-operating Income: ₹20,000
• Non-operating Expenses: ₹10,000

Net Sales is fixed at 100% and every other line is simply divided by Net Sales and multiplied by 100.

Gross Profit = 10,00,000 − 7,00,000 = 3,00,000 → 30%. Operating Expenses = 80,000+70,000 = 1,50,000 → 15%. Operating Profit = 3,00,000 − 1,50,000 = 1,50,000 → 15%. Net Profit = 1,50,000+20,000−10,000 = 1,60,000 → 16%.

Step 1 — work out the missing rupee totals first:

Gross Profit = Net Sales − Cost of Goods Sold = 10,00,000 − 7,00,000 = ₹3,00,000.

Total Operating Expenses = Office & Administration Expenses + Selling & Distribution Expenses = 80,000 + 70,000 = ₹1,50,000.

Operating Profit = Gross Profit − Operating Expenses = 3,00,000 − 1,50,000 = ₹1,50,000.

Net Profit = Operating Profit + Non-operating Income − Non-operating Expenses = 1,50,000 + 20,000 − 10,000 = ₹1,60,000.

Step 2 — Common-Size Income Statement (every rupee figure ÷ Net Sales × 100; Net Sales itself = 100%):

Working: 7,00,000÷10,00,000×100=70%. 3,00,000÷10,00,000×100=30%. 80,000÷10,00,000×100=8%. 70,000÷10,00,000×100=7%. 1,50,000÷10,00,000×100=15%. 20,000÷10,00,000×100=2%. 10,000÷10,00,000×100=1%. 1,60,000÷10,00,000×100=16%. Cross-check: 30% − 15% (operating expenses) = 15% (Operating Profit); 15% + 2% − 1% = 16% (Net Profit) — matches, confirming internal consistency.

A common error is expressing each item as a percentage of Gross Profit or Cost of Goods Sold instead of NET SALES — Net Sales is always the fixed 100% base for a Common-Size Income Statement, every single line without exception is divided by Net Sales.