HANDOUT #02:

FI
NANCI
AL&ACCOUNTI
NG
MANAGEMENT

KASHI
FNOOR(
ASSI
ST.PROFESSOR)

MECHANI
CALENGI
NEERI
NG

Incomestatement/St
atementofear
ning/Expense&Rev
enuesummar
y/I
ncomeand
expendi
tureaccount/
Profi
t&LossAccount

Thefi
nanci
alst
atementt
hatrepor
tsanamountofneti
ncomeearnedbyacompanydur
ing
aper
iod.I
ncomest at
ementi
scompr i
seoft
hefol
lowi
ngtwoelements:

 Income:  
Whatthebusinesshasearnedov eraper
iod(
e.g.salesrevenue,di
vi
dendi
ncome,
et c)
 E xpense:
 Thecostincurr
edbythebusinessoveraper
iod(e.g.salar
iesand
wages,  
depreci
ati
on,rent
alchar
ges,et
c)

Mer
chandi
singCompani
es

Merchandi
singcompaniesaret
hosecompani
es,whi
chearnthei
rrev
enuebysel
l
inggoods.
Thegoodsthattheysel
larecal
l
edasmerchandi
seorinv
entori
es

Exampl
es:

1.Thei
nvent
oryofagr
ocer
yst
ore

2.Thei
nvent
oryofanaut
omobi
l
edeal
er

Oper
ati
ngcy
cleofamer
chandi
singcompany

1.Pur
chaseofMer
chandi
se.

2.Sal
esofmer
chandi
se

3.Col
l
ect
ionofA/
crecei
vabl
esf
rom cust
omer
s

Page1of1
Page2of2
 XYZCor por
ati
onLt
d
Incomestat
ement
Fortheperi
odendedMay31st,
2014
    Rupees Rupees
SalesRevenue XXXX
Less:Salesret
urnandAll
owances XXXX
Sal
esDiscount XXXX
NetSales XXXX

Less:CostofGoodSol ds
MerchandiseInventor
y(Openi
ng01-
06-
2013) XXXX
Add: Purchases XXXX
Add: Carriagein XXXX
XXXX
Less:Pur
chasediscount (XXXX)
Less:
Purchaser
eturns (XXXX)

NetPur
chases XXXX

Mer
chandi
seav
ail
abl
eforSal
e XXXX

Less:
Mer
chandi
sei
nvent
ory(
31-
5-1994) XXXXX

CostofGoodSol
d XXXX

Gr
ossPr
ofi
t XXXXX

Less:Oper atingExpenses
Adv erti
singexpense XXXX
Deliverexpense XXXX
Salariesexpense XXX
Insur anceexpense XXXX
Baddebtexpense XXX
Depr eciati
onexpense XXX
Total
oper atingexpense XXX

Tot
alNetPr
ofi
t     XXXX

Page3of3
Constructanincomest
atementf orXYZcor por
ationfortheperiodendedMay1st ,
2014.
SalesRevenuesRs85000, Salesretur
n3,000,Salesdiscount2,000.I
ft heMerchandise
beginni
nginventor
yon1stMay2013i sofRs11,000whi lecl
osinginventoryonMay31st
,2014isofRs16000.Tot alpurchasesduri
ngtheper i
odwer eofRs44, 400andcarriagei
n
wereofRs5, 300.Pur
chasediscountwasRs4, 000andpur chasereturnswereRs3, 000.

Oper
ati
ngexpensesi
ncur
reddur
ingt
heper
iodwer
e:

adv
ert
isi
ngexpenseRs7,
500

del
i
verexpenseRs2,
300

Sal
ari
esex
penseRs12,
500

I
nsur
anceexpenseRs1800,

BaddebtexpenseRs1200,

depr
eci
ati
onexpenseRs5000

Page4of4
 XYZCor por
ati
onLt
d
Incomestat
ement
Fort
heperi
odendedMay31st,
2014
Rupee Rupee
    s s
85,
00
SalesRevenue 0
Less:Salesret
urnandAl
l
owances 3,
000
Sal
esDiscount 2,
000
80,
00
NetSal
es 0

Less:
CostofGoodSol
ds
11,
00
Mer
chandi
seI
nvent
ory(
Openi
ng01-
06-
2013) 0
44,
40
Add:Pur
chases 0
Add:
Carr
iagein 5,
300
49,
70
0
Less:Pur
chasediscount 4,
000
Less:
Purchaser
eturns 3,
000

42,
70
NetPur
chases 0

53,
70
Mer
chandi
seav
ail
abl
eforSal
e 0

16,
00
Less:
Mer
chandi
sei
nvent
ory(
31-
5-1994) 0

37,
70
CostofGoodSol
d 0

42,
30
Gr
ossPr
ofi
t 0

Less:Operati
ngExpenses
Advert
isi
ngexpense 7,
500
Del
iverexpense 2,
300
12,
50
Salar
iesexpense 0
Insuranceexpense 1,
800
Baddebtexpense 1,
200
Depreciat
ionexpense 5,
000
30,
30
Tot
aloper
ati
ngexpense 0

12,
00
Tot
alNetPr
ofi
t     0

Page5of5
Page6of6
I
NCOMESTATEMENTFORAMANUFACTURI
NGCOMPANY:

XYZCor porat
ionLtd
Incomestatement
Fort
heperiodyearended--
--
--
Rupee Rupee
    s  s
SalesRevenue XXX
Less:Salesretur
nandAll
owances (xxx)
Salestax/Exci
seduty (xxx)
Sal
esDiscount (xxx)
NetSales XXX

Less:CostofGoodSolds
Openingfi
nishedgoodi
nvent
ory XXX

Pl
us:Costofgoodsmanuf act
ured
Materi
alconsumed xxx
Dir
ectLabour xxx
Manufactur
ingExpense/ Factor
yover
heads xxx
Tot
alcostputint
opr oduction xxx
Pl
usworki
nprocessinventoryatthebeginni
ngofper
iod xxx
(xxx
Less:workinpr
ocessinvent
oryatt
heendofper
iod )
Costofgoodsmanufact
ured XXXX

Less:
Closi
ngf
ini
shedgoodi
nvent
ory (
XXX)

(
XXXX
Costofgoodssol
d )

Gr
ossPr
ofi
t XXXX

Less:Operat
ingExpenses
Sell
ing&dist
ribut
ionexpense xxx
Rent xxx
General
,of
fi
ceandadmi nist
rat
iveexpense xxx
XXXX
Depr
eci
ati
on xxx X

XXXX
NetOper
ati
ngI
ncome(
NOI
) X

Less:Int
erestExpense XXXX
Plusnon-
operat
ingIncome XXXX

NetPr
ofi
tbef
oret
axes(
NPBT) XXXX

Less:
Incomet
ax XXXX
Page7of7
 XXXX
NetI
ncome X
        

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