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
Note Figures as at the end of Figures as at the end of
Particulars
No current reporting period previous 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 - VIII)      
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 and Repairs and maintenance to Information technology
spare parts buildings and machinery expenses
Power and fuel Security expenses Travel expense
Rent Electricity expenses Training and recruitment
Allowance fro doubtful debt Net loss on foreign currency Printing, stationery and
and advances transaction communication expenses
Freight and handling charges CSR expense Donations
Rates and taxes, excluding Adjustments to the carrying Legal and professional
income taxes amount of investments expenses
Water charges Advertisement expenses Bad debt written off
Insurance Payments to the auditor Director’s sitting fee
Loss on sale of asset Loss on sale of investments Miscellaneous expenses
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!