The Statement of Profit and Loss, Part II of Schedule III
Chapter Forty-Eight
Syllabus topic 5, "Preparation of Profit and Loss Statement Part II of Schedule III"
Pages 150 to 153 of 168
In one line
The Schedule III statement of profit and loss is a single vertical statement running from revenue to earnings per share, in which total income less total expenses gives profit, adjusted for exceptional and extraordinary items and tax.
The prescribed form
Name of the Company Profit and loss statement for the year ended .... (Rupees in ....)
Four columns again: Particulars, Note No., current reporting period, previous reporting period.
| Line | Particulars | How it is arrived at |
|---|---|---|
| I | Revenue from operations | |
| II | Other income | |
| III | Total income | I plus II |
| IV | Expenses: cost of materials consumed; purchases of stock-in-trade; changes in inventories of finished goods, work-in-progress and stock-in-trade; employee benefits expense; finance costs; depreciation and amortisation expense; other expenses | |
| Total expenses | The sum of the above | |
| V | Profit before exceptional and extraordinary items and tax | III minus IV |
| VI | Exceptional items | |
| VII | Profit before extraordinary items and tax | V minus VI |
| VIII | Extraordinary items | |
| IX | Profit before tax | VII minus VIII |
| X | Tax expense: (1) current tax; (2) deferred tax | |
| XI | Profit or loss for the period from continuing operations | |
| XII | Profit or loss from discontinuing operations | |
| XIII | Tax expense of discontinuing operations | |
| XIV | Profit or loss from discontinuing operations after tax | XII minus XIII |
| XV | Profit or loss for the period | XI plus XIV |
| XVI | Earnings per equity share: (1) basic; (2) diluted |
And below it: See accompanying notes to the financial statements.
The Schedule prints the arithmetic in brackets against each line. Copy that habit. A statement whose lines say where they came from is self-checking, and the examiner can see the method even where a figure is wrong.
What goes in each head
Revenue from operations. For a company other than a finance company, the notes shall disclose revenue separately from sale of products, sale of services, grants or donations received in the case of a section 8 company, and other operating revenues, less excise duty.
For a finance company, revenue from operations includes revenue from interest and other financial services.
The distinction between operating and other income is the one to get right. Revenue from operations is what the company is in business to earn. Everything else is other income.
Other income. Classified as interest income in the case of a company other than a finance company, dividend income, net gain or loss on sale of investments, and other non-operating income net of expenses directly attributable to it.
Finance costs. Classified as interest expense, other borrowing costs, and the applicable net gain or loss on foreign currency transactions and translation.
Notice where interest sits. Interest paid is a finance cost inside expenses; interest received is other income, unless the company is a finance company, in which case it is revenue from operations. Three different places for one word, and examiners set the trap.
The rest of this chapter
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The rest of this subject
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