Prepare Comparative Statement of Profit and Loss from the following information:
| Particulars | 2015-16 | 2016-17 |
|---|---|---|
| Manufacturing expenses | 35,000 | 80,000 |
| Opening stock | 30,000 | 60% of closing stock |
| Sales | 9,60,000 | 4,50,000 |
| Returns outward | 4,000 (out of credit purchase) | 6,000 (out of cash purchase) |
| Closing stock | 150% of opening stock | 1,00,000 |
| Credit purchases | 1,50,000 | 150% of cash purchase |
| Cash purchases | 80% of credit purchases | 40,000 |
| Carriage outward | 10,000 | 30,000 |
| Building | 1,00,000 | 2,00,000 |
| Depreciation on building | 20% | 10% |
| Interest on bank overdraft | 5,000 | - |
| 10% debentures | 2,00,000 | 20,00,000 |
| Profit on sale of copyright | 10,000 | 20,000 |
| Loss on sale of personal car | 10,000 | 20,000 |
| Other operating expenses | 20,000 | 10,000 |
| Tax rate | 50% | 40% |
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Start your 14-day free trial to unlock the full solution →The Comparative Statement of Profit and Loss for 2015-16 and 2016-17 gives a Profit before Tax of ₹6,09,000 and ₹76,000 and, after tax at 50% and 40%, a Profit after Tax of ₹3,04,500 and ₹45,600 respectively. Profit collapsed mainly because sales fell from ₹9,60,000 to ₹4,50,000 while interest on debentures jumped from ₹20,000 to ₹2,00,000.
Concept and Accounting Treatment
A Comparative Statement of Profit and Loss presents financial performance across two periods side by side, so trends can be analysed. Revenue from Operations (Sales) less Cost of Revenue from Operations gives Gross Profit; from this we deduct operating expenses (carriage outward, depreciation, other operating expenses), add non-operating income (profit on sale of copyright) and deduct non-operating expenses (interest on bank overdraft and on debentures) to reach Profit before Tax, on which tax is charged.
Loss on sale of a personal car is NOT a business item. A personal car does not belong to the enterprise, so its sale (and any loss on it) never enters the company's Statement of Profit and Loss at all. It is ignored completely — it is neither an expense of the business nor deducted from profit. Also note that Building is a Balance-Sheet asset (only the depreciation on it is charged to profit), and Returns Outward is deducted from purchases, not from sales.
Working Notes
- Opening / Closing Stock
- 2015-16: Opening Stock ₹30,000; Closing Stock = 150% of ₹30,000 = ₹45,000.
- 2016-17: Closing Stock ₹1,00,000; Opening Stock = 60% of ₹1,00,000 = ₹60,000.
- Purchases (net of returns outward)
- 2015-16: Credit ₹1,50,000 + Cash (80% of ₹1,50,000 = ₹1,20,000) = ₹2,70,000, less Returns Outward ₹4,000 = ₹2,66,000.
- 2016-17: Cash ₹40,000 + Credit (150% of ₹40,000 = ₹60,000) = ₹1,00,000, less Returns Outward ₹6,000 = ₹94,000.
- Cost of Revenue from Operations = Opening Stock + Net Purchases + Manufacturing Expenses — Closing Stock
- 2015-16: 30,000 + 2,66,000 + 35,000 — 45,000 = ₹2,86,000.
- 2016-17: 60,000 + 94,000 + 80,000 — 1,00,000 = ₹1,34,000.
- Depreciation on Building: 20% of ₹1,00,000 = ₹20,000 (2015-16); 10% of ₹2,00,000 = ₹20,000 (2016-17).
- Finance Costs = Interest on bank overdraft + Interest on 10% debentures.
- 2015-16: 5,000 + (10% of ₹2,00,000 = 20,000) = ₹25,000.
- 2016-17: 0 (bank overdraft interest given as "—") + (10% of ₹20,00,000 = 2,00,000) = ₹2,00,000.
- Other Income = Profit on sale of copyright = ₹10,000 (2015-16); ₹20,000 (2016-17).
Comparative Statement of Profit and Loss
Comparative Statement of Profit and Loss for the years ended 31st March, 2016 and 2017
| Particulars | Note No. | 2015-16 (₹) | 2016-17 (₹) | Absolute Change (₹) | Percentage Change (%) |
|---|---|---|---|---|---|
| I. Revenue from Operations (Sales) | 9,60,000 | 4,50,000 | (5,10,000) | (53.13) | |
| II. Other Income (Profit on sale of copyright) | 10,000 | 20,000 | 10,000 | 100.00 | |
| III. Total Revenue (I + II) | 9,70,000 | 4,70,000 | (5,00,000) | (51.55) |
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