Financial Statement Analysis

Income Statement Part 2

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
WHY Income Statement is prepared?
Purpose of preparing Income Statement

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
Purpose of Income Statement or Profit
and Loss Account

To measure a firm’s financial performance of its activities over a period of

time in terms of profit earned or loss incurred.

To provide information about the profit that could be distributed among the
owners.

To provide some information for the preparation of Balance Sheet – Profit to

be carried to next year, outstanding expenses, prepaid expenses etc.

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
Format as per the Companies Act, 2013
Income Statement

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
 Schedule-III, the

Companies Act, 2013

Source: mca.gov.in
Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
 Statement of
Profit and Loss
of Britannia
Industries
Limited

Source: Annual Report of Britannia

Industries Limited, 2019-20
Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
Summary
➢ We understand Income Statement, its nature and its structure.
➢ Income Statement is also known as Profit and Loss Account or Statement of
Profit and Loss.
➢ Itis important as it provides information about the financial performance of a firm
for a particular period of time.
➢ Broadly speaking, a Profit and Loss Account has three main components –
Income/Revenue/Gains, Expenses/Losses and Profit/Loss as a Balance
between income and expenses.
➢ We discussed various terms related with Income Statement – EBITDA, Gross
Profit, Operating Profit (EBIT), PBT and PAT.
➢ The Schedule- III of the Companies Act 2013 prescribes Statement of Profit and
Loss format.
Finally, we discussed the real Statement of Profit and Loss of an Indian company.
➢
Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
Summary
➢ We understand Balance Sheet of a company, and its structure.

➢ Balance Sheet is important as it provides information about the financial position

of a firm on a particular date and also helps in carrying balances of assets and
liabilities from one accounting period to another.

➢ Broadly speaking, a Balance Sheet has three main components – Assets,

Owners' Equity and Outsiders' Liabilities.

➢ The Schedule- III of the Companies Act 2013 prescribes Balance Sheet format.

➢ Finally,we discussed the Balance Sheet of an Indian company to understand

what information can be inferred from a Balance Sheet.
Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited
 THANK YOU

Proprietary content. ©Great Learning. All Rights Reserved. Unauthorized use or distribution prohibited