STATEMENT OF

PROFIT AND LOSS

Basic Concepts
 Accounting Period
 Separate Entity
 Money Measurement
 Accrual
 Matching
 Conservatism
 Materiality
Statement of Profit and Loss
 Prepared for a period (Accounting Period Concept)
 Summary of income and expenses over a period of time
 Format prescribed by law (Schedule III, Part I of
Companies Act, 2013)
 Vertical Format
 Uses a reporting currency (Money Measurement
Concept)
 All transactions done in other currencies are translated into the
reporting currency using the then prevailing exchange rate
Statement of Profit & Loss
 Divided into two sections:
 Profit or loss for the period
 Other Comprehensive Income for the period
 Sum total called Total Comprehensive Income
Format of Statement of Profit and Loss for
the Year ended
Not Figures as at the Figures as at the
Particulars e end of current end of previous
No reporting period reporting period
I. Revenue from operations      
II. Other Income      
III. Total Income (I +II)      
IV. Expenses:      
Cost of materials consumed      
Purchase of Stock-in-Trade      
Changes in inventories of finished goods, work-in-progress and
     
Stock-in-Trade
Employee benefit expense      
Finance costs      
Depreciation and amortization expense      
Other expenses      
Total Expenses (IV)      
V. Profit/ (Loss) before exceptional items and tax (III-IV)      
VI. Exceptional Items      
VII Profit/(Loss) Before Tax (V – VI)      
VIII. Tax expense:      
(1) Current tax      
(2) Deferred tax      
IX. Profit /(Loss) from the period from continuing operations (VII -
Continued…
X. Profit/(Loss) from discontinued operations      
XI. Tax expense of discounted operations      
XII. Profit/(Loss) from Discontinued operations (X - XI)      
XIII. Profit/(Loss) for the period (IX + XII)      
XIV. Other Comprehensive Income      
A (i) Items that will not be reclassified to profit & loss      
(ii) Income tax relating to items that will not be reclassified to profit & loss      
B (i) Items that will be reclassified to profit & loss      
(ii) Income tax relating to items that will be reclassified to profit & loss      
XV. Total Comprehensive Income for the period (XIII + XIV) comprising Profit (Loss) and Other
Comprehensive Income      
for the period)
XVI. Earnings Per Equity Share (for continuing operations)      
(1) Basic      
(2) Diluted      
XVI. Earnings Per Equity Share (for discontinued operations)      
(1) Basic      
(2) Diluted      
XVI. Earnings Per Equity Share (for discontinued and continuing operations)      
(1) Basic      
(2) Diluted      
Revenue From Operations
 Revenue earned by the enterprise from the main revenue
generating activities
 In respect of a company other than a finance company
 Sale of products

 Sale of services

 Other operating revenues

 In respect of a finance company
 Interest

 Other financial services

 Amount collected, if any, on behalf of third parties to be

excluded from revenue
Other Income
 Revenue from sources incidental to main operations
 Interest Income (in case of a company other than a finance
company)
 Dividend Income
 Net gain/loss on sale of investments
 Fair value gain on investment
 Other non-operating income net of expenses directly attributable
to such income
Revenue
 Revenue received during the year is adjusted using
accrual principle
 Income Received during the year
 Add: Income earned during the year but not received
 Add: Income received in earlier years but pertains to the
current year
 Less: Income received in advance in the current year
 Less: Income earned in earlier years but received in the
current year
Tata Chemical Ltd. (AR 2017-18)
TCS Ltd. (AR 2018-19)
Expenses
 Only operating expenses or revenue expenses are
considered in the Statement of Profit & Loss
 Capital expenditure are not to be considered
 Expenses are recorded on accrual basis (Accrual
Concept) irrespective of when paid
 Revenue is matched (Matching Concept) against the
expenses incurred
Material Consumed
 Raw material and components to be used for production
something that would form part of the final product
 Material Consumed = Opening Stock of Raw Material +
Purchased during the year – Closing Stock of Raw
Material
 Usually large for manufacturing companies
Purchase of Stock in Trade
 Goods purchased for trading during the year
 Purchased for the purpose of resale without further processing
 Large item for trading companies
Future Retail Ltd. (AR 2017-18)
Change in Inventories
 Change in inventories of work in progress, finished goods
and stock in trade
 Closing Stock of (WIP, Finished Goods, Stock in Trade)
minus Opening Stock of ((WIP, Finished Goods, Stock in
Trade)
 If Closing > Opening, negative adjustment
 If Closing < Opening, positive adjustment
Employee Cost
 Employee Benefits Expense
 Salaries and wages
 Contribution to provident and other funds
 Expense on Employee Stock Option Scheme (ESOP) and
Employee Stock Purchase Plan (ESPP)
 Staff welfare expenses
Tech Mahindra Ltd. (AR 2017-18)
Interest and Finance Cost
 Using accrual basis of accounting
 Interest expense
 Other borrowing costs
 Applicable net gain/loss on foreign currency transactions and
translation
Depreciation and Amortization
 Most of the Fixed Assets have limited useful life  Cost of
a Fixed Assets needs to appropriated on a systematic
basis over its useful life
 Process of appropriation is called depreciation
 Based upon the `Matching Principle’
 Different Terms
 Depreciation – On real Assets with limited useful life
 Amortization – Intangible assets
 Depletion – Natural resources
Other Expenses
Include:
Consumption of stores Repairs and maintenance Information technology
and spare parts to buildings and machinery expenses
Power and fuel Security expenses Travel expense
Rent Electricity expenses Training and
recruitment
Allowance fro doubtful Net loss on foreign Printing, stationery and
debt and advances currency transaction communication
expenses
Freight and handling CSR expense Donations
charges
Rates and taxes, Adjustments to the Legal and professional
excluding income taxes carrying amount of expenses
investments
Other Expenses
 For analysis, you may break these expenses into
following heads:
 Manufacturing expenses
 General and Administration expenses
 Selling and Marketing expenses
 Expenditure which exceeds one per cent of the revenue
from operations or ₹10,00,000, whichever is higher needs
to be disclosed separately
Exceptional Items
 Disclose separately on the face of the Profit & Loss Statement
 Incomes and expenses which do not arise in the normal course of the
business activities of the enterprise and may be non-recurring in nature
 Such a disclosure enables the readers of the financial statements to
identify the impact of activities which are not likely to repeat in future
 Examples: Restructuring costs, discontinued operations, litigation
settlements, reversals of provisions, disposal of non-current assets
and long-term assets, write down of inventory to net realizable
value, unusually high level of bad debts to be written off etc.
Vedanta Ltd. (AR 2017-18)
Vedanta Ltd. (AR 2017-18)
Tax Expenses
 Current Tax – Tax expected to be paid on current years
income
 Deferred Tax – Net effect of recognizing deferred tax
liability / assets
 Deferred Tax Assets – Higher taxes paid in the current year will
result in lower taxes in future years
 Deferred Tax Liabilities – Tax saved in the current year will
reverse and result in higher taxes in future
Profit & Loss from Discontinued Operations

 To be disclosed separately on the face of the Statement

of Profit & Loss
 Discontinued operations include:
 Profit or loss of discontinued operations
 Gain or loss recognized on the measurement of fair value less
cost to sell or on the disposal of assets constituting the
discontinued operations
 Tata Chemical Ltd. (AR 2017-18)

Discounted and disposed their businesses such as urea and phosphatic fertilizers
Tata Chemical Ltd. (AR 2017-18)
Profit/Loss for the period
 Post-tax profit/loss from continuing operations plus post-
tax profit/loss from discontinued operations are added to
arrive at the profit/loss for the period.
Other Comprehensive Income
 Provides a more expansive view of net income
 Earlier, changes to a company's profits that were not
related to its core operations were adjusted
to shareholders' equity  OCI provides details of these
figures
 Incomes and expenses (including reclassification
adjustments) that are not recognized in profit or loss as
required or permitted by other IndASs
Other Comprehensive Income
 Classification of items between profit or loss and other
comprehensive income (OCI) is rule based rather than
principle based
 Whether an item of income or expense would be classified in
profit & loss or in OCI is provided in the relevant IndAS  If an
item is required to be recognized in OCI, it should be so
classified
 Generally, items in OCI arise out of revaluation or re-
measurement of various assets or liabilities especially
financial assets and liabilities
Other Comprehensive Income
 Other Comprehensive Income is classified into:
 Items that will not be reclassified to profit or loss and its
related income tax effects
 Items that will be reclassified to profit or loss and its
related income tax effects
 Classification is rules based rather that principles
based and is dictated by the relevant IndASs
Total Comprehensive Income
 Aggregate of the profit/loss for the period and other
comprehensive income is presented as the Total
Comprehensive Income for the period
Earnings per Share (EPS)
 Basic EPS
 Diluted EPS
Basic EPS
  

** Weighted average number of shares, in case new shares

are issued during the year
Diluted EPS
 Companies are required to report diluted EPS if they
have issued instruments which may get converted into
equity shares in futures
 Examples include
 ESOP
 Convertible preference shares
 Convertible debentures
Tech Mahindra Ltd. (AR 2017-18)
Various Measures of Profit
 Gross Profit
 Cash Operating Profit – Earnings before interest, tax,
depreciation and amortization (EBITDA)
 Operating Profit – Earnings before interest and tax
(EBIT)
 Pre-tax Profit – Profit before Tax (PBT)
 Net Profit – Profit after Tax (PAT)
Various Measures of Profit

PAT +Tax expense = PBT

PBT + Finance expense = EBIT
EBIT + Depreciation and Amortization = EBITDA
Appropriation of Profit
 Dividend
 Dividend Distribution Tax
 Transfer to Reserves
 Surplus
Thank You!