Q.Using the same figures as Question 4, prepare a Common-Size Statement of Profit and Loss for both years, expressing each item as a percentage of Revenue from Operations.

Instead of comparing rupee amounts across years, every item is first converted into a percentage of that same year's Revenue from Operations, making the two years' internal cost structures directly comparable.

Step 1 — Take Revenue from Operations as the common base (100%) for each year separately.

Step 2 — Express every other item as a percentage of that year's own Revenue from Operations.

2023: Cost of Materials Consumed % = (6,00,000 ÷ 10,00,000) × 100 = 60.00%. Other Expenses % = (1,00,000 ÷ 10,00,000) × 100 = 10.00%. Total Expenses % = (7,00,000 ÷ 10,00,000) × 100 = 70.00%. Profit before Tax % = (3,00,000 ÷ 10,00,000) × 100 = 30.00%.

2024: Cost of Materials Consumed % = (6,60,000 ÷ 12,00,000) × 100 = 55.00%. Other Expenses % = (1,20,000 ÷ 12,00,000) × 100 = 10.00%. Total Expenses % = (7,80,000 ÷ 12,00,000) × 100 = 65.00%. Profit before Tax % = (4,20,000 ÷ 12,00,000) × 100 = 35.00%.

Common-Size Statement of Profit and Loss

Always double check that each year's own items sum correctly to that year's own 100% base — e.g. 60% + 10% + 30% = 100% for 2023, and 55% + 10% …

A common mistake is computing every year's percentage using the SAME (e.g. base year's) revenue figure as the denominator for both years, instead of each year's OWN revenue — in a common-size statement, each year is expressed as a percentag …