Question

From the following information of NK Ltd., prepare a Common Size Statement of Profit and Loss for the years ended 31^st March, 2022 and 31^st March, 2023: \[ \begin{array}{|l|r|r|} \hline \text{Particulars} & \text{31.3.2023 (₹)} & \text{31.3.2022 (₹)} \\ \hline \text{Revenue from Operations} & 25,00,000 & 20,00,000 \\ \text{Cost of Materials Consumed} & 8,00,000 & 6,00,000 \\ \text{Employee Benefit Expenses} & 4,00,000 & 4,00,000 \\ \text{Income Tax Rate (\%)} & 20 & 30 \\ \hline \end{array} \]

Hint:

In a Common Size Statement, express all items as a percentage of Revenue from Operations to analyze trends over time.

Answer 1

Common Size Statement of Profit and Loss for the fiscal years ending March 31, 2023, and March 31, 2022: \[ \begin{array}{|l|r|r|} \hline \textbf{Particulars} & \textbf{31.3.2023 (\%)} & \textbf{31.3.2022 (\%)} \\ \hline \textbf{Revenue from Operations (Base)} & 100.00 & 100.00 \\ \hline \text{Cost of Materials Consumed} & 32.00 & 30.00 \\ \text{Employee Benefit Expenses} & 16.00 & 20.00 \\ \text{Profit Before Tax (PBT)} & 52.00 & 50.00 \\ \hline \text{Less: Income Tax (20\% for 2023, 30\% for 2022)} & 10.40 & 15.00 \\ \hline \textbf{Profit After Tax (PAT)} & 41.60 & 35.00 \\ \hline \end{array} \] Procedure for Preparing Common Size Statement:

• Establishing the Base: Revenue from Operations is designated as 100%.
• Calculation of Ratios:
  • \( \text{Cost of Materials Consumed\%} = \frac{\text{Cost of Materials Consumed}}{\text{Revenue from Operations}} \times 100 \)
  • All other line items are similarly computed as a percentage of Revenue from Operations.
• Determining Income Tax and PAT:
  • \( \text{PBT\%} = 100 - (\text{Cost of Materials\%} + \text{Employee Expenses\%}) \)
  • \( \text{Income Tax} = \text{PBT\%} \times \text{Tax Rate} \)
  • \( \text{PAT} = \text{PBT} - \text{Income Tax} \)