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- Understanding Examples of Statement of Profit & Loss (Income Statement)
Understanding Examples of Statement of Profit & Loss (Income Statement)
Learn about examples of statement of profit and loss, also known as income statement, for an Indian company for the years 2016-17 and 2015-16. Explore sources of income, different expenses, and their nature in this detailed finance tutorial.
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Video Transcript
This video friends is about taking some examples of statement of profit and loss also known as income statement
Which was introduced in video 14. So friends here is an example of an Indian company
Whose statement of profit and loss for the two comparative years
2016-17 and
2015-16 have been reported on this slide in India the unit used is crores, which is equivalent to 10 million and
And the financial year followed is 1st April to 31st March and therefore the title is 16-17
and not just 17 or not just 16.
And then we begin with the income.
There are two major sources as we can clearly see revenue from operations is out of the
core business of the company and then there is some other income.
Income which is not the core activity but certain incidental sources of income.
Then we
report different expenses here and those expenses are reported by their nature. That means raw
material consumption, employee benefit expenses, freight and handling, finance costs, depreciation
and amortization, power and fuel. We can clearly see that consumption of materials is a very
big expense and followed by power and fuel and then we have employee benefit expenses
and there are many other expenses which are clubbed together under a broad heading called
as other expenses. Now when we take total of these expenses and reduce from total income
we get a line called as profit before tax that you can see here and then from that we
reduce the corporate tax we get profit after tax. Friends profit after tax is also called
as bottom line because as you can see here that is indeed the last line to appear. Similarly
revenue from operations is called as top line because as you can see that is indeed the
first line to appear. So you may read in the press.
line growth, bottom line growth. So essentially it is being referred to growth in revenue from
operations and growth in profit after tax. Friends here is an example of an income statement of a US
company. So they have begun with net sales which are in the top line and then they have reported
various operating expenses like cost of sales, fulfillment, marketing, technology and content
etc. Here broadly we can see that the classification is not by nature but by function and the total
of all those is reported as total operating expenses. The sales minus total operating
expenses give us operating income and then there is non-operating income or expense which is a
result of either financial expenses, financial income such as interest, dividend, dividend
received I mean not dividend which is paid out but dividend from the shares that the company
has invested in. So these are all non-operating income and
and expenses and if income is heavy the number will be positive.
The expenses are heavier than income, the net number will be negative.
So that is reported there and then we get income before income taxes.
Here the tax line is not separately reported but income before income taxes minus net income
would should be the tax number actually.
The other way income before income taxes minus taxes should be the net income which is called
as net profit in countries like India. Now all these numbers are in USD million mind you.
Let us come to a Korean company now where they call it a statement of profit and loss.
There the top line is called as revenue. Again they have reported for two calendar years.
From that they have reduced cost of sales and they have very clearly reported gross profit.
You may remember in the earlier video I had mentioned the advantage of functional classification.
profit very easily which is what we see here. From that we reduce selling and
administrative expenses we get operating profit. Then like the US company they
also have reported non operating income expense which is the net number so here
the income seems to be heavier than expenses and therefore the net number is
positive. Operating profit plus this net number gives us profit before income
taxes then they have separately reported income taxes unlike the US company which masked that
