Budget 2021 update :Taxpayers need to pay advance tax on dividend income only after the declaration or payment of dividend.

Every business wants to know the incomes earned and expenses incurred during a particular period, usually at the end of the year. Profit & Loss Statement/Account shows the profits/losses earned/incurred by a business for a month or a year. Companies use Profit & Loss Statement and others use “T Account” for these below mentioned reasons. Profit & Loss Statement/Account is prepared for two main reasons.

i. To know the profits/losses earned/incurred by a business,

ii. Statutory requirements (Companies Act, Partnership Act or any other law)

Traditionally, there were two steps to know the profit/loss. It meant, the preparation of :

a. Trading Account

b. Profit & Loss Account

Trading account reflects the gross profit or loss of the business. Profit & Loss Account shows the net profit or loss earned by the company.

1. Format for Sole Traders & Partnership Firms

No specific format of Profit & Loss Account is given for the sole traders and partnership firms. They can prepare the P&L Account in any form. However, it should reflect the gross profit & net profit separately. Usually, these entities prefer “T shaped form” for preparing P&L account. T-shape Form T-shape form P&L account has two sides – Debit & Credit. Trading account is prepared first followed by Profit & Loss Statement. Trading and Profit & Loss Account

Particulars	Amount	Particulars	Amount
To Opening Stock	xxx	By Sales	xxx
To Purchases	xxx	By Closing Stock	xxx
To Direct Expenses	xxx
To Gross Profit	xxx
	xxx		xxx
To Operating Expenses	xxx	By Gross Profit	xxx
To Operating Profit	xxx
	xxx		xxx
To Non-operating expenses	xxx	By Operating Profit	xxx
To Exceptional Items	xxx	By Other Income	xxx
To Finance Cost	xxx
To Depreciation	xxx
To Net Profit Before Tax	xxx
	xxx		xxx

2. Format of P&L Account for Companies

Companies have to prepare the Profit & Loss Account as per Schedule III of Companies Act, 2013. Following is the format mentioned in Schedule III – STATEMENT OF PROFIT & LOSS Name of the Company……………………. Statement of Profit and Loss for the period ended…………….  

	Note No.	Figures for the Current reporting period	Figures for the previous reporting period
INCOME
a) Revenue From operations
b) Other Income
Total Income
EXPENSES
a) Cost of materials consumed
b) Purchases of Stock-in-Trade
c)   Changes in inventories of finished goods, Stock-in -Trade and work-in-progress
d) Employee benefits expense
e) Finance costs
f)    Depreciation and amortisation expenses
g) Other expenses
Total Expenses
Profit/(loss) before exceptional items and tax
Exceptional Items
Profit/ (loss) before tax
Tax Expense:
Current tax
Deferred tax
Profit (Loss) for the period from continuing operations
Profit/(loss) from discontinued operations
Tax expenses of discontinued operations
Profit/(loss) from Discontinued operations (after tax)
Profit/(loss) for the period
Other Comprehensive Income
A. (i) Items that will not be reclassified to profit or loss
(ii) Income tax relating to items that will not be reclassified  to profit or loss
B. (i) Items that will be reclassified to profit or loss
(ii)  income tax relating to items that will be reclassified to profit or loss
Total Comprehensive Income for the period Comprising Profit (Loss) and   other comprehensive Income for the period )
Earnings per equity share (for continuing operation):
(1) Basic
(2) Diluted
Earnings per equity share (for discontinued operation):
(1) Basic
(2) Diluted
Earning per equity share (for discontinued & continuing operation)
(1)Basic
(2) Diluted

Details to be disclosed in the notes a. Amount of “Revenue from operations” will be divided in –

i. Sale of products (including excise duty)

ii. Sale of services

iii. Other operating revenues

b. Finance cost will be distributed in –

i. Interest

ii. Dividend on redeemable preference shares

iii. Exchange Differences regarded as an adjustment to borrowing costs, and

iv. Other borrowing costs (if any)

c. Other Income will be distributed in –

i. Interest Income,

ii. Dividend Income, and

iii. Other non-operating income

d. Other Comprehensive Income shall be classified into –

i. Items that will  not be reclassified to profit or loss

1. Changes in revaluation surplus

2. Remeasurements of the defined benefit plans

3. Equity Instruments through Other Comprehensive Income

4. Fair value changes relating to own credit risk of financial liabilities designated at fair value through profit or loss

5.Share of Other Comprehensive Income in Associates and Joint Ventures, to the extent not to be classified into profit or loss, and

6. Others

ii. Items that will be reclassified to profit or loss

1. Exchange differences in translating the financial statements of a foreign operation;

2. Debt instruments through Other Comprehensive Income;

3. The effective portion of gains and loss on hedging instruments in a cash flow hedge;

4. Share of other comprehensive income in Associates and Joint Ventures, to the extent to be classified into profit or loss; and

5. Others

e. Employees benefit expense

i. Salaries and wages,

ii. Contribution to provident and other funds,

iii. Share-based payments to employees

iv.staff welfare expenses

f. Depreciation and amortisation expense, g. Interest Income, h. Interest Expense, i. Dividend Income, j. Net gain or loss on sale of investments, k. Net gain or loss on foreign currency transaction and translation (other than considered as finance cost), l. Payment to the auditor as

i. Auditor

ii. For taxation matters

iii. For company law matters

iv. For other services

v. For reimbursement of expenses

m. Amount of expenses incurred on corporate social responsibility activities, n. Details of items of exceptional nature   o. Any other expense or income which exceeds higher of Rs. 10,00,000 or 1% of revenue from operations

Form 23ACA – E-Form for submitting Profit & Loss Account with Registrar

For submitting Profit & Loss Account with the Registrar, a company has to file e-Form 23ACA. With the form, it has to attach an audited copy of Profit & Loss Account. The e-form has to be digitally signed by a CA or CMA or CS, who is in whole time practice, certifying that the information entered in 23ACA is correct and audited Profit & Loss Account is attached with the form.