Question

Prepare Comparative Income Statement from the following information:

Particulars	2015-16 Rs.	2016-17 Rs.
Manufacturing expenses	35,000	80,000
Opening stock	30,000	60% of closing stock
Sales	9,60,000	4,50,000
Returns outward	4,000 (out of credit purchase)	6,000 (out of cash purchase)
Closing stock	150% of opening stock	1,00,000
Credit purchases	1,50,000	150% of cash purchase
Cash purchases	80% of credit purchases	40,000
Carriage outward	10,000	30,000
Building	1,00,000	2,00,000
Depreciation on building	20%	10%
Interest on bank overdraft	5,000	-
10% debentures	2,00,000	20,00,000*
Profit on sale of copyright	10,000	20,000
Loss on sale of personal car	10,000	20,000
Other operating expenses	20,000	10,000
Tax rate	50%	40%

*There is a misprint in the book, this should be 2,00,000

Answer 1

Comparative Income Statement
for the years ended March 31, 2016 and 2017 

Particulars	Note  No.	2015-16 (Rs)	2016-17 (Rs)	Absolute  Change (Rs)	Percentage Change
1. Revenue from Operations		9,60,000	4,50,000	(5,10,000)	(53.13)
2. Other Income		10,000	20,000	10,000	100
3. Total Revenue (1 + 2)		9,70,000	4,70,000	(5,00,000)	(51.55)
4. Expenses
a. Purchases of Stock-in-Trade		2,66,000	94,000	(1,72,000)	(64.7)
b. Change in Inventories		(15,000)	(40,000)	(55,000)	(366.7)
c. Finance Costs		25,000	20,000	(5,000)	(20)
d. Depreciation and Amortisation Expenses		20,000	20,000	-	-
e. Other Expenses		30,000	40,000	10,000	33.33
Total Expenses		3,26,000	1,34,000	(1,92,000)	58.90
5. Profit before Tax (3 – 4)		6,44,000	3,36,000	(3,08,000)	47.83
Less: Income Tax		3,22,000	1,34,400	(1,87,600)	58.26
6. Profit After Tax		3,22,000	2,01,600	1,20,400	37.39

Working Notes:

1. Calculation of Net Purchases and Change in Inventory 

Net Purchases of stock in Trade = Cash Purchases + Credit Purchases - Purchases Returns

2013 = 120000 + 150000 - 4000 = Rs 266000

2014 = 40000 + 60000 - 6000 = Rs 94000

Change in Inventory = Opening Stock - Closing Stock

2013 = 30000 - 45000 = Rs (15000)

2014 = 60000 - 100000 = Rs (40000)

2. Calculation of Finance Cost

Finance Cost = Interest on Bank Overdraft + Interest on Debentures

Finance Cost (2016) = 5,000 + 20,000 = Rs 25,000

Finance Cost (2017) = 0 + 20,000 = Rs 20,000

3. Calculation of Other Expenses

Other Expenses = Carriage outward + Other operating expenses

Other Expenses (2016) = 10,000 + 20,000 = Rs 30,000

Other Expenses (2017) = 30,000 + 10,000 = Rs 40,000