VERTICAL FORMAT

Financial statements should be rearranged for proper analysis and interpretations of these
statements. It enables to measure the performance of operational efficiency and profitability
of a concern during particular period. The items of operating revenues, non-operating
revenues, operating expenses and nonoperating expenses are rearranged into different heads
and sub-heads are given below:

FORMAT OF INCOME STATEMENT

PARTICULARS Amt. (Rs.) Amt. (Rs.) Amt. (Rs.)

Gross Sales X

Less : Returns & Allowances / Sales Tax / Excise X XX

Duty

Less: Cost of Goods Sold

Opening stock of goods X

Add: Purchases X

Less: Purchases Returns X X

Add: Freight and Carriage X

Less:Closing Stock of Raw Materials X

Direct wages (Factory) X

Other Factory Exp

Factory Rent and Rates X

Power and Coal X

Depreciation of Plant and Machinery X

Depreciation of Factory Building X

Work Manager's Salary X

Other Factory Expenses X XX XXX

Gross Profit XXX

Less: Operating Expense

(a) General & Administrative Expense X

 (b) Selling Expense X

X X

Operating Profit XX

Add: Non Operating Income

Discount Received X

Dividend Received X

Income from Investment X XX

Less: Non Operating Expenses

Loss on Sale of Fixed Assets X

Loss by fire / Earthquake X XX

Net Profit before Interest and Tax XXX

Less: Interest on Long term loan X

Net Profit before Tax X

Less: Provision for Income taxes X

a) Current Tax

b) Deferred tax asset / liability

Net Profit after Tax X

Less: Appropriations X

Closing balance ( to be transferred to balance XXX

sheet )

Income Statement Equations

From the above rearrangement of operating statements, the following accounting equations
may be given:
(1) Net sales = Gross sales - (Returns and Allowances)

(2) Gross Profit = Net Sales - Cost of Goods Sold

(3) Operating Expenses = Office and Administrative Expenses + Selling and Distribution
Expenses + Finance Expenses
(4) Net Profit Before Interest and Tax = Operating Profit + Non-Operating Income - Non-
Operating Expenses

Format of the Balance Sheet in vertical form

Balance Sheet of ..... as on .....

Particulars

I. Source of Funds:
1. Shareholder’s Funds:
(a) Share capital
Equity
Preference

(b) Reserves and Surplus

2. Loan Funds:
(a) Secured loans
Debentures
Loans and Advance from Banks
Loans from subsidiary Companies

(b) Unsecured loans

Public Deposits
Total (Capital Employed)

II. Application of Funds

1. Non Current Assets:
Tangible Assets
Land
Building
Leasehold Premises
Railway Sidings
Plant and Machinery
Furniture
Vehicles
Less: Provision for Depreciation

Intangible Assets
Goodwill
Patents and Trademarks
Less: Amortisation

2. Investments:
Government or Trust Securities, Shares,
 Debentures, Bonds

3. Current Assets, Loans and Advances:

Quick
Sundry Debtors
Cash and Bank balances
Bills Receivable
Interest Accrued on investments
Other Current Assets
Short term Loans and Advances
Non Quick
Loose Tools / Stock in Trade, Inventories
Prepaid Expenses

Less: Current Liabilities and Provisions:

Quick liabilities & Provisions
Sundry Creditors
Outstanding Expenses
Provisions for Taxation
Proposed Dividends
Non Quick
Bank Overdraft / Cash Credit
Pre received Income
TOTAL

Note: A footnote to the Balance Sheet may be added to show the contingent liabilities.