corporate profit & loss account

8/4/2019 Corporate Profit & Loss Account

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Corporate Profit and Loss

Account

Presented by:-

Sumit Gor (43) Anuj Jain (27)

Nirmit Shelat (42)


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Introduction

Purpose :-

Shows total income, expenditure, Net

profit earned, dividend paid to shareholders,

profit retained and ploughed back to company.


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Features of P/L Account

Prepared for the period. Normally yearly basis.

Period starting from 1st April to 31st March

(India).

Also drawn for each quarter (SEBI Request)

Vertical presentation, horizontal out of

fashion.

Comparative position of previous year.


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Feature(Cont.)

Surplus of profit before transaction is known

as PBT and after tax as PAT.

Grouping of Income components andExpenditure components. Reference to

schedules (J to Q).

Appropriation of Profit and transfer of Balance

to Balance Sheet.


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Features (Cont.)

In B/L two sides match, P/L two sides does not

match.

At the bottom, signatures of prepares andAuditors, Name of officers (CMD, Director

Finance and Control and VP Legal and

Company Secretary).


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Income

Base for recognition (AS-9)

Sale of goods

R

endering services Use by other enterprise resources yielding

interest, dividends, royalties, rentals

Other revenues associated with goods like export

incentives


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Income

Can also be grouped as,

Domestic Sales (Schedule J)

Exports (Schedule K) Others


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Expenditure

Material Consumed and purchase of goods (L)

Disclosure of Details

Quantitative details of different raw materialconsumed with Raw materials bifurcated in

Imported

Indigenous

CIF value of imports (Cost, Insurance, Freight) seller must pay marine insurance, costs and freight necessary to bring the

goods the named port of destination, but risks after delivery are transferred to

the buyer


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Expenditure

Manufacturing and other expenses (M)

Manufacturing Exp expense converting raw

materials into finished goods pertain to plants and

factories

Selling expenses relate to market research,

advertising, sales promotion, sales incentives

Admin Exp expense in day to day activities andgeneral management of the company


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Expenditure

Interest (N)

Cost of borrowed funds payable to lenders

Cost of both long term and as well as workingcapital borrowing

Excise Duty

If levied, payable to government. If recovered

from customers when finished goods are soldthen it is not expense


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Expenditure

Depreciation (E)

Impairment of loss on FA (E) as per AS -28

Adjustments due to (I

ncrease)/ Decrease instock of finished goods and WIP (O) An Increase adds to profit and vice versa. Since this

increase does not reflect an increase in sales, it is usuallyshown on expenditure side of P/L acct by way of (-) figure

and thus deducted from expense Decrease in inventory automatically becomes part of

expenditure


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Expenditure

Provision for Contingencies Net (P)

As per AS 4

Contingency: a condition or situation, theultimate outcome of which, gain or loss, will beknown or determined only on the occurrence, ornon-occurrance, of one or more uncertain futureevents

Estimates of the outcome and of the financialeffect of contingencies are determined by

judgment of mgmt


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Expenditure

Profit Before Tax

Excess of income over expenditure and before

paying IT to government.


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Expenditure

Provision for Income Tax

Accounting disclosures are governed by theCompanies Act

Income tax payable on PBT is governed by IncomeTax Act, 1961 to calculate and determine taxableincome.

Allows more than the amount incurred in certain

cases and provides rebates and reliefs in a numberof cases. So PBT arrived at as per P/L is not theprofit for tax purpose


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Expenditure

Provision for Income Tax

PBT for tax purpose may be higher or lower than

PBT as per fin statements

Even taxable profit is nil, companies are made to

pay the minimum alternate tax (MAT).

Every year the finance act prescribes rates of

income tax and surcharge. ICAI standards are AS -22


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Expenditure

Profit after Tax

PAT is what is available to the providers of share

capital as return on their investment

Providers of preference capital are entitled to a

fixed return only.


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Expenditure

Balance available for Appropriations

Partly to shareholders and partly retained forploughing back into business.

Provision for dividend to preference share holders

Payment of interim dividend to equityshareholders

Provision for final dividend to equity shareholders

Provision for corporate dividend tax

Transfer to various reserves such as generalreserves, debenture redemption reserve


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Expenditure

Earning Per Share

Crucial measure and indicator of the financial

performance of a company.

AS 20 prescribes the principles and norms of

treatment of EPS both basic and diluted


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corporate profit & loss account

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