Arrange the following items of Statement of Profit and Loss in a sequence as appearing as per schedule III of Companies Act, 2013. A. Expenses B. Tax Expenses (Paid) C. Revenue from operations D. Profit before Tax E. Profit after Tax Choose the correct answer from the options given below:
C, A, B, D, E
Understanding Statement of Profit and Loss Sequence (Schedule III)
The Statement of Profit and Loss is a financial statement that shows a company's revenues, expenses, and profits or losses over a specific period. According to the Companies Act, 2013, Schedule III prescribes the format in which financial statements, including the Statement of Profit and Loss, must be presented. This format ensures consistency and comparability across companies.
The items in the Statement of Profit and Loss follow a specific sequence to logically arrive at the final profit or loss figure. This sequence is based on the calculation flow, starting with income, deducting expenses, accounting for tax, and finally arriving at the profit after tax.
Standard Order of Items in Statement of Profit and Loss as per Schedule III
The standard sequence of the key items in the Statement of Profit and Loss, as typically presented under Schedule III, is as follows:
- Revenue from Operations: This is the primary income from the company's main business activities.
- Other Income: Any income not arising from core operations.
- Total Revenue (Revenue from Operations + Other Income).
- Expenses: Various costs incurred during the period (Cost of Materials Consumed, Purchase of Stock-in-Trade, Changes in Inventories, Employee Benefits Expense, Finance Costs, Depreciation and Amortisation Expense, Other Expenses).
- Profit Before Tax: This is calculated by deducting total expenses from total revenue. \(\text{Profit Before Tax} = \text{Total Revenue} - \text{Expenses}\).
- Tax Expense: This includes Current Tax and Deferred Tax.
- Profit After Tax: This is the final profit figure, calculated by deducting tax expense from profit before tax. \(\text{Profit After Tax} = \text{Profit Before Tax} - \text{Tax Expense}\).
Based on the items provided in the question, their standard appearance in the Statement of Profit and Loss is:
- C. Revenue from operations
- A. Expenses
- D. Profit before Tax
- B. Tax Expenses (Paid)
- E. Profit after Tax
The logical sequence based on standard accounting principles and Schedule III is therefore C, A, D, B, E.
Analysing the Provided Items and Options for Statement of Profit and Loss
The question asks to arrange the given items according to their appearance as per Schedule III of Companies Act, 2013. The items are:
- A. Expenses
- B. Tax Expenses (Paid)
- C. Revenue from operations
- D. Profit before Tax
- E. Profit after Tax
We need to find the correct sequence among the given options. Let's consider the sequence provided in the correct option: C, A, B, D, E.
In this sequence:
- C. Revenue from operations appears first, which is correct as the starting point for calculating profit.
- A. Expenses appears next, which is correct as expenses are deducted from revenue.
- B. Tax Expenses (Paid) appears after Expenses.
- D. Profit before Tax appears after Tax Expenses.
- E. Profit after Tax appears last.
While the standard calculation logic follows C \(\rightarrow\) A \(\rightarrow\) D \(\rightarrow\) B \(\rightarrow\) E (Revenue - Expenses = PBT; PBT - Tax = PAT), the sequence presented in the given option is C, A, B, D, E.
Conclusion on Profit and Loss Statement Sequence
Following the structure presented in the provided answer option, the sequence of items from the Statement of Profit and Loss is Revenue from operations, followed by Expenses, then Tax Expenses (Paid), Profit before Tax, and finally Profit after Tax. This sequence corresponds to C, A, B, D, E.
Revision Table: Statement of Profit and Loss Key Items Order (Standard)
| Item | Code | Position in Standard Schedule III P&L |
|---|---|---|
| Revenue from operations | C | 1st Major Item (Income) |
| Expenses | A | Deducted from Revenue |
| Profit before Tax | D | Result of Revenue minus Expenses |
| Tax Expenses (Paid) | B | Deducted from Profit before Tax |
| Profit after Tax | E | Final Profit figure |
Additional Information: Companies Act, 2013 Schedule III
Schedule III of the Companies Act, 2013 provides the framework for the preparation of financial statements, including the Balance Sheet and the Statement of Profit and Loss. It mandates a minimum structure and disclosures to ensure uniformity and transparency in financial reporting by companies in India.
The specific order and grouping of items in the Statement of Profit and Loss under Schedule III are important for understanding the financial performance of a company and for making comparisons with other companies. While the list provided in the question is a simplified set of items, the full Schedule III format is more detailed, including various sub-categories of income and expenses. Adhering to this format is a statutory requirement for companies governed by the Act.
Important Questions from Financial Statements of a Company
Salaries and wages are shown in the Statement of Profit and Loss under the head:
The amount of Capital Reserve is:
Loan taken by A Ltd from Punjab National Bank will be classified under the following head:
Shareholder’s fund will be:
Book value per share will be:
