Prepare a Common size statement of profit and loss of Shefali Ltd. with the help of following information:
COMMON SIZE STATEMENT OF PROFIT AND LOSS for the years ended March 31, 2016 and March 31, 2017
| Particulars | Absolute Amounts (Rs.) | Percentage of Revenue from Operations |
|---|---|---|
| 2015-16 | 2016-17 | |
| Revenue from Operations | 6,00,000 | 8,00,000 |
| Less: Cost of Revenue from Operations | 4,28,000 | 7,28,000 |
| Gross Profit | 1,72,000 | 72,000 |
| Add: Other Incomes | 10,000 | 12,000 |
| Total Revenue (GP + OI) | 1,82,000 | 84,000 |
| Less: Indirect Expenses | 43,000 | 18,000 |
| Profit Before Tax | 1,39,000 | 66,000 |
| Less: Income Tax (30%) | 41,700 | 19,800 |
| Profit After Tax | 97,300 | 46,200 |
Note: Percentages are calculated based on Revenue from Operations (Base = 100).
Explanation
To prepare a Common Size Statement of Profit and Loss, each line item is expressed as a percentage of 'Revenue from Operations', which is taken as the base (100%). First, Gross Profit is calculated by deducting the cost of revenue from operations from total revenue. Then, indirect expenses (calculated as 25% of Gross Profit) are deducted along with adding other incomes to find the Profit Before Tax. Finally, tax (30%) is deducted to arrive at the Profit After Tax.
Solution Steps
Step 1: Calculate Gross Profit. 2015-16: Rs. 6,00,000 - Rs. 4,28,000 = Rs. 1,72,000. 2016-17: Rs. 8,00,000 - Rs. 7,28,000 = Rs. 72,000.
Step 2: Calculate Indirect Expenses (25% of Gross Profit). 2015-16: 25% of Rs. 1,72,000 = Rs. 43,000. 2016-17: 25% of Rs. 72,000 = Rs. 18,000.
Step 3: Calculate Profit Before Tax. 2015-16: Rs. 1,72,000 (GP) + Rs. 10,000 (OI) - Rs. 43,000 (Exp) = Rs. 1,39,000. 2016-17: Rs. 72,000 (GP) + Rs. 12,000 (OI) - Rs. 18,000 (Exp) = Rs. 66,000.
Step 4: Calculate Income Tax (30% of PBT). 2015-16: 30% of Rs. 1,39,000 = Rs. 41,700. 2016-17: 30% of Rs. 66,000 = Rs. 19,800.
Step 5: Calculate Profit After Tax. 2015-16: Rs. 1,39,000 - Rs. 41,700 = Rs. 97,300. 2016-17: Rs. 66,000 - Rs. 19,800 = Rs. 46,200.
Step 6: Compute percentages for all items relative to Revenue from Operations (Base = 100%). For example, Gross Profit % for 2015-16 = (1,72,000 / 6,00,000) * 100 = 28.67%.