The income statement discloses the financial performance of an entity over an accounting period. It measures the net income generated by measuring revenues earned and expenses incurred. The income statement includes elements such as income, expenses, gross profit, and net profit. It can be presented in short format showing key line items or in a detailed format as prescribed by accounting standards.

1. Financial Statements Income Statement
Financial Statements
Income Statement/
Profit and Loss Account
1
Dr. Varadraj Bapat
Indian Institute of Technology,
Bombay

2. Financial Statements Income Statement 2
 Profit and Loss Account
 Elements of P & L A/c
Financial Statements

3. Financial Statements Income Statement 3
Profit and loss account discloses the result of the working
of an entity during the period/ accounting year.
Profit and loss account measures the net income
generated by the entity.
Profit and Loss Account

4. Financial Statements Income Statement
Elements of Profit and Loss Account
4
Income Expenses

5. Financial Statements Income Statement 5
Profit & Loss A/c (Short Format)
Particulars Amount
Sales XX
Cost of Goods Sold (XX)
Gross Profit XX
Other Expenses (XX)
Tax (XX)
Net Profit XX

6. Financial Statements Income Statement 6
Profit & Loss A/c (Format)
Particulars
(format as per revised schedule III )
Year Ended
31st Mar
2011
Year Ended
31st Mar
2010
I. Revenue from Operations - -
II. Other Incomes - -
III. Total Revenue (I + II) - -

7. Financial Statements Income Statement 7
Profit & Loss A/c (Format)
IV. Expenses:
Cost of Materials Consumed - -
Purchases of Stock-in-Trade - -
Changes in Inventories of Finished Goods, Work-in-Progress
and Stock-in-Trade
- -
Employee Benefit Expenses - -
Finance Costs - -
Depreciation and Amortization Expense - -
Total Expenses - -

8. Financial Statements Income Statement 8
Profit & Loss A/c (Format)
V.
Profit before Exceptional and Extraordinary
Items and Tax (III - IV)
- -
VI. Exceptional Items - -
VII. Profit before Extraordinary Items and Tax (V - VI) - -
VIII. Extra Ordinary Items - -
IX. Profit before Tax (VII - VIII) - -

9. Financial Statements Income Statement 9
Profit & Loss A/c (Format)
X. Tax Expense :
 Current tax - -
 Deferred Tax - -
XI. Profit/ (Loss) for the period from Continuing - -
Operations (IX - X)
XII. Profit/Loss from Discontinuing Operations - -

10. Financial Statements Income Statement 10
Profit & Loss A/c (Format)
XIII. Tax Expense of Discontinuing Operations - -
XIV.
Profit/(Loss) from Discontinuing Operations (after Tax)
(XII - XIII)
- -
XV. Profit/ (Loss) for the Period (XI + XIV) - -

11. Financial Statements Income Statement 11
Income is the increase in economic benefits during the accounting
period in the form of inflows or enhancement of asset or decreases of
the liability.
The definition of income encompasses revenue and gains.
 Revenue is an income that arises in the ordinary course of activities.
e.g. sales
 Gains are income, which may or may not arises in the ordinary
course of activities.
e.g. profit on sale of fixed asset
Income

12. Financial Statements Income Statement 12
Expense is the decrease in economic benefits during the accounting
period in the form of outflows or depletion of asset or incurrence of
the liability.
 Expense arises in the ordinary course of activities.
e.g. wages
 Losses may or may not arises in the ordinary course of activities.
e.g. loss on sale of fixed asset
Expenses

13. Financial Statements Income Statement 13
The matching concept is an accounting practice whereby expenses are
recognized in the same accounting period when the related revenues
are recognized.
The matching concept thus helps avoid misstating earnings for a
period. Reporting revenues for a period without reporting the costs of
producing those revenues would result in overstated profits.
Matching Concept

14. Financial Statements Income Statement
Thank you
14
varadraj@som.iitb.ac.in
9892413119