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Illustrations · Illustration 8
Q.

From the following particulars, prepare Statement of profit and loss for the year ending March 2017, showing profit before tax as per schedule III of the companies Act – 2013.

ParticularsAmount (₹)
Plant and Machinery1,60,000
Land6,74,000
Depreciation on Plant and Machinery16,000
Purchases (Adjusted)4,00,000
Closing stock1,50,000
Wages1,20,000
Sales (Net)10,00,000
Salaries80,000
Bank overdraft2,00,000
10% debentures (issued on 1st April, 2016)1,00,000
Equity share capital – shares of ₹100 each (fully paid)2,00,000
Preference share capital – 1,000; 6% shares of ₹100 each (fully paid)1,00,000
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Pick only the revenue/expense items: Sales ₹10,00,000 as Revenue from operations; adjusted purchases ₹4,00,000 as cost of materials consumed; wages + salaries ₹2,00,000 as employee benefits expense; interest on 10% debentures ₹10,000 as finance cost; and ₹16,000 depreciation — giving Profit before tax of ₹3,74,000.

Concept

A company's Statement of Profit and Loss under Schedule III lists income and expense items only; balance-sheet items in the trial balance (plant and machinery, land, share capital, bank overdraft, closing stock) are excluded. Wages and salaries together form Employee benefits expense. Finance cost is only the interest on borrowings — here 10% of the ₹1,00,000 debentures = ₹10,000. 'Purchases (Adjusted)' already reflects the opening/closing-stock adjustment, so it is taken directly as cost of materials consumed.

Working Notes

  • Revenue from operations = Sales (Net) = ₹10,00,000.
  • Cost of materials consumed = Purchases (Adjusted) = ₹4,00,000.
  • Employee benefits expense = Wages ₹1,20,000 + Salaries ₹80,000 = ₹2,00,000.
  • Finance cost = interest on 10% debentures = 10% × ₹1,00,000 = ₹10,000.
  • Depreciation and amortisation = ₹16,000.

Solution — Statement of Profit and Loss for the year ending 31st March, 2017

ParticularsNote No.Amount (₹)
I. Income
Revenue from operations (Sales)10,00,000
Total10,00,000
II. Expenses
Cost of materials consumed (Adjusted purchase)4,00,000
Employees benefit expenses12,00,000
Finance cost10,000
Depreciation and amortisation16,000

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