The Net income and Loss Account is a Financial Statement which summarizes a company ‘s gross and outgo for a specific period of clip, normally prepared yearly or quarterly. These statements provide information that shows the ability of a company to bring forth net incomes by increasing its grosss and cut downing costs. The Net income and Loss Account is besides known as a “ Statement of Profit and Loss ” , an “ Income Statement ” or an “ Income and Expense Statement ” .
IMPORTANCE OF PROFIT AND LOSS ACCOUNT:
Net income and Loss Account represents a company ‘s ability to bring forth income through their concern operations. Many times concerns will necessitate funding to assist make the installations for their operations. Smaller companies normally obtain bank loans that are based on the sum of income a company has earned from past operations. Solid Net income and Loss history is indispensable for acquiring the best loan footings. Net income and loss statements are of import besides because many companies are required by jurisprudence or association rank to finish them. Apart from this, a net income and loss statement will assist the company to understand their net income, which may be helpful in decision-making procedures. That is, it gives one the information needed to turn or spread out his concern.
Cardinal ITEMS OF THE PROFIT AND LOSS ACCOUNT:
Income from Gross saless
Cost Of Goods Sold
Gross Net income
Operating Expenses
Net Net income from Operationss
Other Income
Other Expenses
Net Net income
Standard STRUCTURE OF A CORPORATE PROFIT AND LOSS ACCOUNT:
Net income and Loss Account for the twelvemonth endedaˆ¦aˆ¦
Particulars
Rs.
Particulars
Rs.
To Gross Loss
aˆ¦aˆ¦aˆ¦ .
By Gross Net income
aˆ¦aˆ¦aˆ¦ .
To Wages
aˆ¦aˆ¦aˆ¦ .
By Interest Received
aˆ¦aˆ¦aˆ¦ .
To Rent
aˆ¦aˆ¦aˆ¦ .
By Commission Received
aˆ¦aˆ¦aˆ¦ .
To Rent and Ratess
aˆ¦aˆ¦aˆ¦ .
By Other Grosss
aˆ¦aˆ¦aˆ¦ .
To Discount Allowed
aˆ¦aˆ¦aˆ¦ .
By Etc. , Etc.
aˆ¦aˆ¦aˆ¦ .
To Commission Allowed
aˆ¦aˆ¦aˆ¦ .
By Net Loss ( Transferred to Capital Account of the Trader )
xxxx
To Insurance
aˆ¦aˆ¦aˆ¦ .
To Bank Charges
aˆ¦aˆ¦aˆ¦ .
To Legal Charges
aˆ¦aˆ¦aˆ¦ .
To Repair
aˆ¦aˆ¦aˆ¦ .
To Ad
aˆ¦aˆ¦aˆ¦ .
To Trade Expenses
aˆ¦aˆ¦aˆ¦ .
To Office Expenses
aˆ¦aˆ¦aˆ¦ .
To Bad Debts
aˆ¦aˆ¦aˆ¦ .
To Travelling Expenses
aˆ¦aˆ¦aˆ¦ .
To Etc. , Etc.
aˆ¦aˆ¦aˆ¦ .
To Net Net income ( Transferred to Capital Account of the Trader )
xxxx
Net income and Loss Account for the twelvemonth endedaˆ¦aˆ¦ ( Statement Form )
Particulars
Rs.
Rs.
Rs.
Income From Gross saless:
Gross saless
aˆ¦aˆ¦aˆ¦ .
Less: Gross saless Tax returns
aˆ¦aˆ¦aˆ¦ .
Gross saless Discount
aˆ¦aˆ¦aˆ¦ .
aˆ¦aˆ¦aˆ¦ .
Net Gross saless
aˆ¦aˆ¦aˆ¦ .
Cost Of Goods Sold:
Stock as on 1stJanuary
aˆ¦aˆ¦aˆ¦ .
Purchases
aˆ¦aˆ¦aˆ¦ .
Lupus erythematosus: Purchase Tax returns
aˆ¦aˆ¦aˆ¦ .
Net Purchase
aˆ¦aˆ¦aˆ¦ .
Cost Of Goods available for sale
aˆ¦aˆ¦aˆ¦ .
Less: Stock as on 31stDecember
aˆ¦aˆ¦aˆ¦ .
COGS ( Cost Of Goods Sold )
aˆ¦aˆ¦aˆ¦ .
Gross Net income
xxxxxx
Operating Expenses:
Selling Expenses: –
Gross saless Salary
aˆ¦aˆ¦aˆ¦ .
Ad Expenses
aˆ¦aˆ¦aˆ¦ .
Insurance Expenses – merchandising
aˆ¦aˆ¦aˆ¦..
Shop Supplies Expenses
aˆ¦aˆ¦aˆ¦ .
Sundry Selling Expenses
aˆ¦aˆ¦aˆ¦ .
Entire Selling Expenses
aˆ¦aˆ¦aˆ¦ .
General Expenses:
Office Wages
aˆ¦aˆ¦aˆ¦ .
Taxs
aˆ¦aˆ¦aˆ¦ .
Insurance Expenses – general
aˆ¦aˆ¦aˆ¦ .
Office Supplies Expenses
aˆ¦aˆ¦aˆ¦ .
Sundry General Expenses
aˆ¦aˆ¦aˆ¦ .
Entire General Expenses
aˆ¦aˆ¦aˆ¦ .
Entire Operating Expenses
aˆ¦aˆ¦aˆ¦ .
Net Net income from Operationss
xxxxxx
Other Income:
Rent Income
aˆ¦aˆ¦aˆ¦ .
Other Expenses:
Interest Expenses
aˆ¦aˆ¦aˆ¦ .
aˆ¦aˆ¦aˆ¦ .
Net Net income
xxxxxx
GIVEN BELOW IS THE Net income AND LOSS ACCOUNT OF TATA STEEL LIMITED: –
( This will assist us understand the intent of a Net income and Loss Account and besides enable us to understand how a Net income and Loss statement is made. )
Net income & A ; Loss – Tata Steel Ltd
Mar’12
Mar’11
Mar’10
Mar’09
12 Calendar months
12 Calendar months
12 Calendar months
12 Calendar months
Income:
Gross saless Employee turnover
37,005.71
31,901.94
26,757.60
26,843.53
Excise Duty
3,167.20
2,594.59
1,816.95
2,495.21
Net Gross saless
33,838.51
29,307.35
24,940.65
24,348.32
Other Income
0.00
0.00
0.00
0.00
Entire INCOME
34,389.27
29,635.26
25,272.24
24,653.68
Outgo:
Fabrication Expenses
5,608.38
4,463.65
3,803.33
3,349.96
Material Consumed
9,696.65
9,222.27
8,491.42
8,279.44
Personal Expenses
3,047.26
2,618.27
2,361.48
2,305.81
Selling Expenses
1,832.40
109.36
82.17
61.49
Administrative Expenses
2,119.56
1,922.33
1,622.77
1,518.83
Expenses Capitalised
-478.23
-198.78
-326.11
-343.65
Commissariats Made
0.00
0.00
0.00
0.00
Entire EXPENDITURE
21,826.02
18,137.10
16,035.06
15,171.88
Operating Net income
12,012.49
11,170.25
8,905.59
9,176.44
Earnings before interest taxes depreciation and amortization
12,563.25
11,498.16
9,237.18
9,481.80
Depreciation
1,151.44
1,146.19
1,083.18
973.40
Other Write-offs
0.00
0.00
0.00
0.00
Exabit
11,411.81
10,351.97
8,154.00
8,508.40
Interest
1,925.42
1,686.27
1,848.19
1,489.50
EBT
9,486.39
8,665.70
6,305.81
7,018.90
Taxs
3,162.63
2,912.44
2,168.50
2,114.87
Net income and Loss for the Year
6,323.76
5,753.26
4,137.31
4,904.03
Non Recurring Items
372.66
1,107.89
909.49
297.71
Other Non Cash Adjustments
0.00
0.00
0.00
0.00
Other Adjustments
0.00
4.54
0.00
0.00
REPORTED PAT
6,696.42
6,865.69
5,046.80
5,201.74
Cardinal ITEMS
Preference Dividend
0.00
0.00
45.88
109.45
Equity Dividend
1,165.46
1,151.06
709.77
1,168.95
Equity Dividend ( % )
119.97
119.97
79.98
159.95
Shares in Issue ( Lakhs )
9,712.14
9,592.14
8,872.14
7,305.92
EPS – Annualised ( Rs )
68.95
71.58
56.88
71.20
[ The part highlighted by a black box shows the Net income earned by Tata Steel Limited from 2008 -2012 ]
HOW THE PROFIT AND LOSS ACCOUNT HELPS THE CORPORATE DECISION –
Makers TO SHAPE THEIR DECISIONS?
A Net income and Loss history provides a aggregation of operating informations that can be used by corporate determination shapers to better corporate operations. Regular reappraisal of this statement can assist the enterpriser to set the strategic waies of the company based on the prevalent economic conditions. A Net income and Loss statement besides helps outside investors to mensurate a house ‘s economic viability in the long tally. Besides ;
Analyzing a statement of net income and loss gives corporate leaders the tools necessary to mensurate rivals ‘ advancement in the market, therefore better their market portion.
The Net income and Loss history gives a clear position of all the disbursals and incomes of the house, therefore a regular analysis of these statements help houses cut down their disbursals.
Making a forum through which concern unit leaders discuss and help top leaders set executing sections apart from activities that generate less than mediocre gross. By reexamining the house ‘s grosss and disbursals, direction can make up one’s mind which section to sell.
A profit-and-loss study indicates to the remainder of the universe the corporate sections that are booming, stressing merchandises that positively affect the corporate underside line.
