From the following information, prepare Common size statement of profit and loss for the year ended March 31, 2016 and March 31, 2017:
| Particulars | 2015-16 (₹) | 2016-17 (₹) |
|---|---|---|
| Revenue from operations | 25,00,000 | 20,00,000 |
| Other income | 3,25,000 | 2,50,000 |
| Employee benefit expenses | 8,25,000 | 4,50,000 |
| Other expenses | 2,00,000 | 1,00,000 |
| Income tax (% of the profit before tax) | 30% | 20% |
You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.
Start your 14-day free trial to unlock the full solution →Revenue from operations = 100%. Total Revenue = Revenue + Other income (so it exceeds 100%). Profit before tax = Total Revenue − expenses; tax is charged at the stated rate on profit before tax. The profit-after-tax margin rises from 50.4% to 68%.
Concept
In a common size statement of profit and loss (vertical analysis), the base is revenue from operations (100%). A subtlety here: other income is added, so total revenue is above 100% (113% and 112.5%). Income tax is a percentage of profit before tax, but on the statement its rupee amount is re-expressed as a percentage of revenue.
Working Notes
- Total Revenue = Revenue from operations + Other income → ₹28,25,000 and ₹22,50,000.
- Profit before tax = Total Revenue − (Employee benefit expenses + Other expenses) → ₹18,00,000 and ₹17,00,000.
- Tax: 30% of ₹18,00,000 = ₹5,40,000 (2015-16); 20% of ₹17,00,000 = ₹3,40,000 (2016-17).
Solution
Common Size Statement of Profit and Loss for the years ended March 31, 2016 and March 31, 2017
| Particulars | 2015-16 (₹) | 2016-17 (₹) | 2015-16 (% of Revenue) | 2016-17 (% of Revenue) |
|---|---|---|---|---|
| Revenue from operations | 25,00,000 | 20,00,000 | 100 | 100 |
| Add: Other income | 3,25,000 | 2,50,000 | 13 | 12.5 |
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