Question

From the following information of Narsimhan Company Limited, prepare a Comparative Income Statement for the years 2011-2012.
$\begin{array}{ccc}\text{Particulars}& \text{2011(Rs)}& \text{2012 (Rs)}\\ \text{Gross Sales}& 7,25,000& 8,15,000\\ \text{(-) Return}& \underset{–}{(25,000)}& \underset{–}{(15,000)}\\ \text{Net Sales}& 7,00,000& 8,00,000\\ \text{Cost of Goods Sold}& 5,95,000& 6,15,000\\ \text{Gross Profit}& \overline{\underset{–}{1,05,000}}& \overline{\underset{–}{1,85,000}}\\ \text{Other Expenses}& & \\ \text{Selling and Distribution Expenses}& 23,000& 24,000\\ \text{Administration Expenses}& 12,700& 12,500\\ \text{Total Expenses}& \overline{\underset{–}{35,700}}& \overline{\underset{–}{36,500}}\\ \text{Operating Income}& 69,300& 1,48,500\\ \text{Other Income}& 1,200& 8,050\\ & \overline{70,500}& \overline{1,56,550}\\ \text{Non-operating Expenses}& 1,750& 1,940\\ \text{Net Profit}& \underset{–}{\underset{–}{68,750}}& \underset{–}{\underset{–}{1,54,610}}\end{array}$

Answer 1

$\text{Comparative Income Statement}\begin{array}{ccccc}\text{Particulars}& 2011& 2012& \text{Absolute}& \text{Change in}\\ & & & \text{change}& \text{Percentage}\\ \text{Gross Sales}& 7,25,000& 8,15,000& 90,000& 12.41\\ \text{(-) Return}& \underset{–}{25,000}& \underset{–}{15,000}& \left(\underset{–}{10,000}\right)& \left(\underset{–}{40.00}\right)\\ \text{Net Sales}& 7,00,000& 8,00,000& 1,00,000& 14.29\\ \text{(-) Cost of Goods Sold}& \left(\underset{–}{5,95,000}\right)& \left(\underset{–}{6,15,000}\right)& \underset{–}{(20,000)}& \underset{–}{\left(3.36\right)}\\ \text{Gross Profit}& \underset{–}{1,05,000}& \underset{–}{1,85,000}& \underset{–}{80,000}& \underset{–}{76.19}\\ \text{(-) Operating Expenses}& & & & \\ \text{Administration Expenses}& (12,700)& (12,500)& \left(200\right)& \left(1.57\right)\\ \text{Selling and Distribution}& 23,000& 24,000& 1,000& 4.35\\ \text{Expenses}& \underset{–}{}& \underset{–}{}& \underset{–}{}& \underset{–}{}\\ \text{Total Expenses}& \underset{–}{35,700}& \underset{–}{36,500}& \underset{–}{800}& \underset{–}{2.24}\\ \text{Income from operations}& \underset{–}{69,300}& \underset{–}{1,48,500}& \underset{–}{79,200}& \underset{–}{114.29}\\ \text{(+)Non-operating Income}& \underset{–}{1,200}& \underset{–}{8,050}& \underset{–}{6,850}& \underset{–}{570.83}\\ \text{Total Income}& 70,500& 1,56,550& 86,050& 122.06\\ \text{(-) Non -operating Expenses}& \underset{–}{(1,750)}& \underset{–}{(1,940)}& \underset{–}{\left(190\right)}& \underset{–}{\left(10.86\right)}\\ \text{Net Profit}& 68,750& 1,54,610& 85,860& 124.89\end{array}$

Interpretation:
(i) The net profit of the company has increased.
(ii) Simultaneously the company has tried to reduce its costs to improve its profit margin.
(iii) Profitability of the company has improved over the year.

Working note:
Absolute Change = Current year – Previous year
$\text{Change in Percentage}=\frac{\text{Absolute change}}{\text{Previous year}}\times 100$