A format for Statement of Profit and Loss is prescribed for the first time, where revenue from Operations and Other Income is shown separately and Expenses on business operations are shown on the basis of nature and not function.
The Form specified in Part II of Schedule – III of the Companies Act, 2013 is as follows:
Modified for Board Examination
Name of the Company………………….
Statement of Profit and Loss for the year ended:………in `………………
|Particulars||Note No.||Current Year(`)||Previous Year(`)|
|1.Revenue from Operations|
|2. Other Income|
|3.Total revenue (1+2)|
1.Cost of Materials Consumed
2.Purchases of Stock-in-Trade
3.Changes in inventories of Finished Goods, Work-in-Progress and Stock-in-Trade
4.Employees Benefits Expenses
6.Depreciation and Amortization Expenses
|Profit before Tax(3 – 4)|
If provision for tax is given ,the format may be extended accordingly.
Subtract provision for tax then show Profit after Tax.
How to learn Items of Statement of Profit and Loss ?
The items of expenses in Statement of Profit and Loss can be learnt by taking the first alphabet of the first word of each item instead of learning by making acronyms to avoid ending up weaving the story only and get lost in that story.
Just focus on the first word of the expenses in Statement of Profit and Loss and write the alphabet:
CPC,EFDO (comma has been used to learn the code easily)
Revenue from Operations means revenue earned from its business operations.
For a manufacturing or trading company these are:
1. Sale of Products;
2. Sale of Services; and
3. Other Operating Revenues
For a finance company it is
3. Profit from sale of shares; and
4. Income from Other Financial Services.
Other Income means revenue that is not revenue from operations.
This is classified into:
1. Interest income (in case of a company other than finance company);
2. Dividend income;
3. Net gain/loss on sale of investments; and
4. Other non-operating income.
Expenses are shown under the following heads:
Cost of Materials Consumed: It relates to manufacturing companies.
Purchase of stock-in-trade: It relates to trading companies.
Changes in inventories: of finished goods, Work-in-progress and stock-in-trade.
The above three components of Statement of Profit and Loss determines the cost of goods sold, manufactured and traded.
Employees benefit expenses: Salary and Wages, Leave Encashment, Staff Welfare expenses, Retirement Benefits etc.
Finance Cost Interest expense whether on Long – term borrowings or short – term borrowings.
Depreciation and Amortization expenses
Debit Balance (Loss) in Statement of Profit and Loss
If there is loss in the Statement of Profit and Loss, it will be shown under Reserves and Surplus as a negative amount.
Preliminary Expenses (including Deferred Revenue Expenditure)
Preliminary expenses would be written off in the year in which they are incurred. The expenditure on preliminary expenses shall not be carried forward in the balance sheet to be written off in subsequent accounting periods.
Loss on issue of Debentures
In the absence of information, it is better to write off and not to amortise this in the same year.
Share issue expenses
There are two views to deal with writing off Share Issue expenses and other costs:
1.They should be written off in the same manner as preliminary expenses.
2. ICAI suggests that the companies can write it off in 3 to 5 years.
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