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Question
The objective of the common size statement of profit and loss is not to ______.
Options
Present changes in various items of incomes and expenses
Judge the cost items
Establish relationship between revenue from operations and other items of statement of profit & loss
Judge the relative financial soundness for different enterprises
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Solution
The objective of the common size statement of profit and loss is not to judge the relative financial soundness for different enterprises.
Explanation:
The objective of a common size Statement of Profit and Loss is to analyse and evaluate the relationship of various things to net revenue from operations, rather than to assess overall financial soundness, which is normally accomplished through ratio or balance sheet analysis.
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RELATED QUESTIONS
What is meant by a 'Common Size Statement'?
Following is the Income statements, prepare a Common Size Income Statements of Jayant
Ltd. For the year ended 31-3-2011:
Income Statement of Jayant Ltd.
for the year ended 31.3.2011
| Particulars |
Amount Rs |
| Income: | |
| Sales | 25,38,000 |
| Other Incomes | 38,000 |
| Total Income | 25,76,000 |
| Expenses: | |
| Cost of goods sold | 14,00,000 |
| Operating expenses | 5,00,000 |
| Total Expenses | 19,00,000 |
| Tax | 3,38,000 |
Prepare a common size Income Statements of Raj Ltd. for the year ended 31-3-2011.
From the following information, prepare a Common Size Statement of Profit and Loss of Prudence Ltd. for the
year ending 31st March, 2017:
Particulars 31.03.2017
Revenue from Operations 20,00,000
Purchases 15,00,000
Changes in inventories 1,00,000
Other Income (Dividend received) 40,000
Depreciation and Amortization expenses 60,000
Tax Rate @ 40%
Give one word/term/ phrase for the following statement
The tool for analysis of financial statement where, individual figures of balance sheet is converted into percentage.
Explain the following :
Common size balance sheet.
Prepare Common-size Statement of Profit and Loss from the following Statement of Profit and Loss:
|
Particulars |
Note No. |
Year I (₹) |
Year II (₹) |
| I. Income | |||
|
Revenue from Operations (Net Sales) |
14,00,000 |
16,00,000 |
|
| II. Expenses | |||
|
Purchases of Stock-in-Trade |
9,00,000 |
10,00,000 |
|
|
Change in Inventories of Stock-in-Trade |
1,00,000 |
1,80,000 |
|
|
Finance Costs |
80,000 |
80,000 |
|
|
Other Expenses |
90,000 |
1,30,000 |
|
|
Total |
11,70,000 |
13,90,000 |
|
| III. Profit before Tax (I-II) |
2,30,000 |
2,10,000 |
|
| IV. Tax |
40,000 |
36,000 |
|
| V. Profit After Tax (III-IV) |
1,90,000 |
1,74,000 |
Prepare Common-size Balance Sheet and comment on the financial position of Sun Ltd. and Star Ltd. The Balance Sheet of Sun Ltd. and Star Ltd. as at 31st March, 2019 are:
|
Particulars |
Sun Ltd. (₹) |
Star Ltd. (₹) |
| I. EQUITY AND LIABILITIES | ||
|
1. Shareholders' Funds |
||
|
(a) Share Capital |
9,00,000 |
12,00,000 |
|
(b) Reserves and Surplus |
4,00,000 |
3,50,000 |
|
2. Current Liabilities |
|
|
|
Trade Payables (Creditors) |
2,00,000 |
2,50,000 |
|
Total |
15,00,000 |
18,00,000 |
| II. ASSETS | ||
|
1. Non-Current Assets |
||
|
Fixed Assets (Tangible) |
10,00,000 |
16,00,000 |
|
2. Current Assets |
|
|
|
Trade Receivables (Debtors) |
5,00,000 |
2,00,000 |
|
Total |
15,00,000 |
18,00,000 |
Prepare common size statement of profit and loss from the following information:
| Particulars | Note No. | 2017-18 | 2016-17 |
| Revenue from operations | ₹ 16,00,000 | ₹ 8,00,000 | |
| Cost of material consumed | |||
| (% of revenue from operations) | 60% | 50% | |
| Operating expenses | ₹ 80,000 | ₹ 40,000 | |
| Income tax rate | 40% | 30% |
Prabhu wants to know the main objective of Common Size Statement, help him to choose one:
From the following information, prepare a 'Common Size Statement of Profit and Loss' of GG Ltd. for the year ended 31.3.2021 and 31.3.2022:
| 31.3.2022 | 31.3.2021 | |
| Revenue from operations | 20,00,000 | 10,00,000 |
| Other Income | 2,00,000 | 1,00,000 |
| Expenses | 15,00,000 | 8,00,000 |
| Tax @ 50% |
