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Chapter 5 Solution To Problems and Cases
Chapter 5 Solution To Problems and Cases
Chapter 5 Solution To Problems and Cases
The impact of the following transaction on the Statement of Profit & Loss for the
financial year 2016-17:
a. The interest for the period 1st July 2016 to 31st March 2017 will be accounted for
in the Statement of Profit & Loss. Accordingly interest amounting to `9 Crores
will be charged to the Statement of Profit & Loss using accrual basis of
accounting.
b. Stationary consumed = Opening Inventory + Stationary Purchased – Closing
Inventory. Accordingly `13.5 million will be debited to the Profit and Loss A/c as
stationary consumed. (`2.3 million + `13 million – `1.8 million).
c. Employee Cost = Paid during the year – advances + salary outstanding +
provision for retirement benefits; = `134.75 million - `2 million + `15.35 million
+ `2.35 million = `150.45 Million
2. a) Operating Income
b) Other Income
c) Other Operating Income
d) Other Operating Income
e) Other Income
f) Exceptional Income
g) Not an Income
h) Exceptional Income
i) Other Operating Income
j) Other Income
3. Classification of Expenses
a) Employees Cost
b) Finance Cost
c) Other Expenses
d) Purchase of Stock in Trade
e) Other Expenses
f) Depreciation and Amortisation
g) Finance Cost
h) Employees Cost
i) Material Consumed
j) Other Expenses
k) Provision for Income Tax
l) Other Expenses
5. Preparation of Profit & Loss Account: The Profit & Loss Account for the Jack
Paints Limited for the year 2016-17 is given below:
Other Income
Expenses
Basic Earnings Per Share = PAT / Number of Equity Shares = `754.64 Crore / `9.6 Crore
= `78.61
Diluted Earnings Per Share = PAT / Number of Existing Shares + Number of Dilutive
Shares = `754.64 Crore / (`9.6 + 0.58) Crore = `74.13
7.
Amortisation 12 343
Other Expenses
Freight Outwards 356
Handling Cost 130
Loss on Sales of Assets 12
Power & Fuel 462
Provisions and Write offs 17
Repair & Maintenance 168
Stores and Spares 518
2
Other Expenses 809 ,472
12
Total Expenses ,788
Profit Before Tax and Exceptional
Items 770
Exceptional Item 6
44
Total Comprehensive Income for the
year 550
Income
Operating Income
Sales 1,602.76
Less: Sales Returns 17.37 1,585.39
Other Income
Interest 8.56
Add: Accrued Interest 3.43 11.99
Total 1,597.38
Expenditure
Material Consumed
Opening Stock 255.4
Add: Purchases 983.95
Less : Purchase
13.49
Return
Less: Closing Stock 171.03 1,054.83
Employees Benefits
Wages 152.93
Salaries 26.13 179.06
Depreciation
Premises 5.48
Plant & Machinery 33.39
Furniture 0.93 39.8
Finance Cost
Interest on Bank Loan 6.17
Other Expenses
Freight 6.73
General Expenses 34.58
Auditors Fees 11.78
Directors Fees 35.96 89.05
Total Expenditure 1,368.91
Profit Before Tax 228.47
Provision for Tax 68.54
Profit After Tax 159.94
Cases
Case 5.1: Preparation of Statement of Profit & Loss for Asian Paints
Statement of Profit & Loss of Asian Paints for the year ended 31st March 2017
Case 5.2: Preparation of Statement of Profit & Loss for HCL Tech Limited
Statement of Profit & Loss of HCL Tech Limited for the year ended 31st March 2017
Notes to Accounts
Rs. Crores
1. Revenue from Operations
Sale of Service 19,150
Sale of Hardware and Software 168
19,318
2. Other Income
Interest Income 788
Investment Income 46
Dividend from Subsidiary Companies 26
Exchange Difference (Credit) 57
Profit on Sale of property 2
Miscellaneous Income 37
956
3. Change In Inventories of Stock
in Trade
Opening Stock of Stock in Trade 129
Closing Stock on Stock-in-Trade 90
39
4. Employee Benefits Expenses
Salaries, Wages & Bonus 6,545
Contribution to employee funds 245
Staff Welfare Expenses 53
6,843
5. Finance Cost
Interest expense on Loans 51
Bank Charges 5
56
6. Other Expenses
Communication Costs 131
Legal and Professional Fees 132
Power and Fuel 234
Rent Paid 217
Repair & Maintenance 261
Software Licence Fees incurred 224
Travel and Conveyance 740
Miscellaneous Expenses 300
2,239
Case 5.4 Statement of Profit & Loss for Hindustan Lever Limited
Case 5.5 Comparison between Hero MotoCorp Limited and Tech Mahindra Limited
Profit & Loss Account for the year ended 31st March
` Crores
Income 2010 2009
Income from software services and products 21140 20264
Interest Income 743 836
Dividend Income 101 2
Other income / (loss) 66 -334
Total Income 22050 20768
Expenses
Software development expenses 2317 2111
Selling expenses 215 247
Salaries, wages and other employee benefits 10340 9960
Managerial remuneration 16 15
Depreciation and amortization 807 694
Auditor's remuneration 1 1
Provision for doubtful debts -1 74
Provision for post-sales client support and warranties -2 39
Other expenses 885 913
Total Expenses 14578 14054
Profit Before Tax and Extra-Ordinary Items 7472 6714
Provision for Taxation 1717 895
Profit Before Extra-Ordinary Items 5755 5819
Extra-ordinary Income, net of taxes 48 0
Profit After Tax 5803 5819
Appropriations
Interim Dividend on Equity Shares 573 572
Final Dividend on Equity Shares 861 774
Tax on dividend 240 228
Total Appropriations 1674 1574
Balance Carried to Balance Sheet 4129 4245
Case 4.2: Preparation of Profit & Loss Account for Cipla Limited based upon the Trial
Balance and additional information
Profit & Loss Account of Cipla Limited for the year ended 31st March 2010
` Crores ` Crores
Gross Sales 5411.68
Less : Excise Duty 52.16 5359.52
Other Income 353.72
Total Income 5713.24
Expenses
Material Consumed
Opening Stock 1398.32
+ Purchases 2567.24
- Closing Stock 1512.58 2452.98
Employee Cost 263.01
+ Salary Outstanding 26.74
+ Provisions for Retirement Benefits 29.12 318.87
Provision for doubtful debts 83.61
Manufacturing Expenses 231.05
Other Expenses 957.85
Research & Development Expenses 250.69
Provision for Depreciation 165.25
Interest Cost 22.95
Total Expenses 4483.25
Profit Before Tax and Extra-Ordinary Income 1229.99
Extra Ordinary Income 95.00
Profit Before Tax 1324.99
Less : Provision for Tax 243.5
Profit After Tax 1081.49
Less : Appropriations
Proposed Dividends 160.58
Dividend Distribution Tax 26.67
Balance Carried to the Balance Sheet 894.24
Note: Colored entries depict adjustment entries.
Case 4.3: Preparation of Profit & Loss Account for Siemens Limited based upon the Trial
Balance and additional information
The Profit & Loss Account of Siemens Limited for the year ended 30 th September 2009 is given
below:
Profit & Loss Account of Siemens Limited for the year ended 30 th September 2009
Particulars ` '000
Income
Gross Sales & Services Income 85,554,114
Less : Excise Duty 2,186,779 83,367,335
Other Income
Commission Income 520,410
Other Operating Income 697,219
Interest Earned 523,002
Profit on Sale of Investment in Subsidiaries 2,059,459
Other Income 2,341,188 6,141,278
Total Income 89,508,613
Expenses
Raw Material, Stores and Components Purchased 20,200,725
Add: Opening Stock - Raw Material, Stores & Components 1,526,726
Less: Closing Stock - Raw Material, Stores & Components 2,531,516 19,195,935
Traded Goods Purchased 11,335,326
Personnel Cost 5,445,792
Add: Provisions for Employees Benefits 53,197 5,498,989
Other Cost of Sales & Services 28,535,474
Provisions for Warranties and Contingencies 5,237,014
Provisions for doubtful debts 769,201
Other Costs 4,877,553
Depreciation 777,794
Interest Expense 58,772
Add: Opening Stock - WIP & Finished Goods 6,094,417
Less: Closing Stock - WIP & Finished Goods 7,190,455 (1,096,038)
Profit Before Tax 14,318,593
Tax
Current 4,007,464
Deferred (208,879)
Fringe Benefit Tax 71,500 3,870,085
Profit After Tax 10,448,508
Appropriations
Proposed Dividend 1,685,801
Tax on Dividend 286,502 1,972,303
Balance carried to Balance Sheet 8,476,205
Case 4.4
Profit & Loss Statement of TCS Limited for the year ended 31st
March 2012
` Crores
Income
Revenue from Operations 38,858.54
Other Income
Dividend 2,428.00
Interest 658.57
Other Income 31.43 3,118.00
Total Income 41,976.54
Expenditure
Employee Benefit Expenses 14100.41
Other Expenses 13372.41
Exchange Loss 432.82
Finance Cost 16.4
Depreciation 681.23
Amortisation 6.94
Total Expenditure 28610.21
Profit Before Tax 13,366.33
Provision for Tax 2390.35
Profit After Tax 10,975.98
Case 4.5: Comparison of Profit & Loss Account of Hero Honda Motors Limited and Tech
Mahindra Limited for the year 2009-101
1
Annual Reports of Hero Honda Motors Limited and Tech Mahindra Limited for the year 2009-10
3. Compare the composition of expenses for the two companies.
Hero Honda is a manufacturing company whereas Tech Mahindra is in services.
Accordingly the main differences in the cost structure are as follows:
f) Tech Mahindra has comparatively higher personnel cost
g) For Hero Honda material cost is the major element of cost which is missing in case of
Tech Mahindra
h) Proportionately Operating and Other Expenses are higher in case of Tech Mahindra
i) Tech Mahindra has higher Finance Charges signifying higher reliance on borrowed
funds.
4. Hero Honda Motors Limited has negative finance charges. What does it indicate?
The interest earned is netted from interest paid and finance charges. Hero Honda being a
cash rich company might have kept surplus funds in bank deposits etc. on which it is
earning interest. The negative finance charges indicate that the interest earned in higher
than interest paid.
Case 4.6
Identify the key differences: