Prepare Comparative Statement of profit and loss from the following information:
| Particulars | 2015-16 (₹) | 2016-17 (₹) |
|---|---|---|
| Freight Outward | 20,000 | 10,000 |
| Wages (office) | 10,000 | 5,000 |
| Manufacturing Expenses | 50,000 | 20,000 |
| Stock adjustment | (60,000) | 30,000 |
| Cash purchases | 80,000 | 60,000 |
| Credit purchases | 60,000 | 20,000 |
| Return inward | 8,000 | 4,000 |
| Gross profit | (30,000) | 90,000 |
| Carriage outward | 20,000 | 10,000 |
| Machinery | 3,00,000 | 2,00,000 |
| 10% depreciation on machinery | 10,000 | 5,000 |
| Interest on short-term loans | 20,000 | 20,000 |
| 10% debentures | 20,000 | 10,000 |
| Profit on sale of furniture | 20,000 | 10,000 |
| Loss on sale of office car | 90,000 | 60,000 |
| Tax rate | 40% | 50% |
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Start your 14-day free trial to unlock the full solution →Both years end in a loss before tax, so no income tax is charged. Profit/(Loss) after Tax = ₹(2,00,000) for 2015-16 and ₹(20,000) for 2016-17; the loss narrowed by ₹1,80,000 (a 90% reduction).
Classification of items
A Comparative Statement of Profit & Loss lists Revenue from Operations, Other Income, Total Revenue, Expenses, Profit before Tax, Tax and Profit after Tax side by side for both years, with the absolute and percentage change.
- Revenue from Operations = Cost of Revenue from Operations + Gross Profit.
- Cost of Revenue from Operations = Cash purchases + Credit purchases + Manufacturing expenses +/- Stock adjustment (a decrease in stock is added, an increase is subtracted).
- Other Income = Profit on sale of furniture.
- Remaining expense heads: Employee Benefit (Wages - office), Selling & Distribution (Freight outward + Carriage outward), Depreciation, Finance Costs (Interest on short-term loans + Interest on 10% debentures) and Other Expenses (Loss on sale of office car).
- Machinery (₹3,00,000; ₹2,00,000) is a Balance-Sheet item, not a Profit & Loss item, so it is excluded. Figures shown in brackets are negative.
Working - Cost of Revenue from Operations and Revenue from Operations
2015-16: Purchases (80,000 + 60,000) + Manufacturing 50,000 + Stock decrease 60,000 = ₹2,50,000; Revenue = 2,50,000 + Gross Profit (-30,000) = ₹2,20,000.
2016-17: Purchases (60,000 + 20,000) + Manufacturing 20,000 - Stock increase 30,000 = ₹70,000; Revenue = 70,000 + Gross Profit 90,000 = ₹1,60,000.
(Return inward is already reflected in net Revenue from Operations. "10% debentures" is read as the interest on debentures using the amount stated against it, consistent with the other expense lines.)
Comparative Statement of Profit & Loss
| Particulars | 2015-16 (₹) | 2016-17 (₹) | Absolute Change (₹) | % Change |
|---|---|---|---|---|
| I. Revenue from Operations | 2,20,000 | 1,60,000 | (60,000) | (27.27) |
| II. Other Income | 20,000 | 10,000 | (10,000) | (50.00) |
| III. Total Revenue (I + II) | 2,40,000 | 1,70,000 | (70,000) | (29.17) |
| IV. Expenses: |
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