RTI, Jaipur

Financial Audit of Annual Accounts of Government Companies

• Profit and Loss Account

• According to the Section 211 of the Companies Act, 1956 every profit and loss account of a Company should give a ‘true and fair’ view of the Net Profit or Net Loss of the Company

RTI, Jaipur

Profit and Loss Account

• Format of the Profit and Loss Account should satisfy the requirements of Part II of Schedule VI.

• Requirement of AS-5 on Net Profit or Loss for the period, prior period items, and changes in accounting policies.

• It should present a true and fair view of the state of affairs of the Company.

RTI, Jaipur

Profit and Loss Account

• Profit and Loss Account may be prepared either in horizontal or vertical form.

• Most of the Companies prepare the Profit and Loss Account in vertical form as it is easy to understand

RTI, Jaipur

Profit and Loss Account• Except in the case of the first profit and

loss account, every other profit and loss account must show the corresponding amounts for the immediately preceding financial year for all items shown in the profit and loss account.

RTI, Jaipur

Profit and Loss Account

• Profit and Loss Account must be prepare so as to clearly disclose the results of the working of the Company during the period covered by the account and must disclosed every material feature, including credits or receipts and debits or expenses in respect of non-referring transactions or transactions of exceptional nature.

RTI, Jaipur

Vertical Format of Profit ad Loss Account

• In view of the requirements of the Accounting Standards and the Companies Act, a summarised profit and loss account in Vertical Format is suggested. However, each item in Profit and Loss Account should be accompanies by the supporting schedule which will give more detail.

RTI, Jaipur

Vertical Format of Profit ad Loss Account

Particulars Sche-dule

Current Year Previous year

Income

Sales 1

Other Income 2

Increase/Decrease in Work-in-Progress/Finished Stocks

3

Total

RTI, Jaipur

ExpenditureParticulars Schedule Current Year Previous year

Cost of Raw material and Spars

Excise Duty 4

Employees’ Remuneration & Benefits

5

Other Expenses 6

Interest 6

Depreciation 8

Total

RTI, Jaipur

Profit Before Taxation & Extra Ordinary Items

Particulars Schedule Current Year Previous year

Extraordinary Item 9

Profit for the Current yearPrior Period Adjustments

10

RTI, Jaipur

Profit before Taxation

Particulars Schedule Current Year Previous year

Provision for Taxation

RTI, Jaipur

Profit after TaxParticulars Schedule Current Year Previous year

Balance B/F from the Previous year

Total available for Appropriations

RTI, Jaipur

Appropriations

Particulars Schedule Current Year Previous year

Proposed Dividend

Corporate Dividend on Taxes (CDT)

Debenture Redemption Reserve