Question

From the following information, prepare a Common Size Statement of Profit and Loss of A Ltd. and B Ltd. for the year ended 31^st March, 2023: \[ \begin{array}{|l|c|c|} \hline \textbf{Particulars} & \textbf{A Ltd. (Rs.)} & \textbf{B Ltd. (Rs.)} \\ \hline \text{Revenue from Operations} & 20,00,000 & 10,00,000 \\ \text{Other Income} & 3,00,000 & 80,000 \\ \text{Expenses} & 10,40,000 & 4,80,000 \\ \text{Tax Rate} & 40\% & 40\% \\ \hline \end{array} \]

Hint:

For a Common Size Statement, express all figures as a percentage of Revenue from Operations to enable comparison across companies.

Answer 1

Common Size Statement of Profit and Loss: \[ \begin{array}{|l|c|c|} \hline \textbf{Particulars} & \textbf{A Ltd. (\%)} & \textbf{B Ltd. (\%)} \\ \hline \text{Revenue from Operations} & 100\% & 100\% \\ \text{Other Income} & 15\% & 8\% \\ \text{Expenses} & 52\% & 48\% \\ \text{Profit Before Tax} & 33\% & 44\% \\ \text{Tax Expense (40\%)} & 13.2\% & 17.6\% \\ \text{Profit After Tax} & 19.8\% & 26.4\% \\ \hline \end{array} \] 
Explanation: Common size percentages are calculated by expressing each item as a percentage of Revenue from Operations: 
1. Other Income: \[ \frac{\text{Other Income}}{\text{Revenue from Operations}} \times 100 \] For A Ltd: \[ \frac{3,00,000}{20,00,000} \times 100 = 15\% \] For B Ltd: \[ \frac{80,000}{10,00,000} \times 100 = 8\% \] 
2. Expenses: \[ \frac{\text{Expenses}}{\text{Revenue from Operations}} \times 100 \] For A Ltd: \[ \frac{10,40,000}{20,00,000} \times 100 = 52\% \] For B Ltd: \[ \frac{4,80,000}{10,00,000} \times 100 = 48\% \] 
3. Profit Before Tax: \[ \text{Revenue - Other Income - Expenses (as a \% of Revenue)} \]