Topic: General Instructions For Preparation Of Statement Of Profit And Loss
1. The provisions of this Part shall apply to the income and expenditure account
referred to in sub-clause (ii) of clause (40) of section 2 in like manner as they apply to a
statement of profit and loss.
2. (A) In respect of a company other than a finance company revenue from operations
shall disclose separately in the notes revenue from—
(a) Sale of products;
(b) Sale of services;
(c) Other operating revenues;
(d) Excise duty.
(B) In respect of a finance company, revenue from operations shall include revenue
(a) Interest; and
(b) Other financial services.
Revenue under each of the above heads shall be disclosed separately by way of notes
to accounts to the extent applicable.
3. Finance Costs
Finance costs shall be classified as:
(a) Interest expense;
(b) Other borrowing costs;
(c) Applicable net gain/loss on foreign currency transactions and translation.
4. Other income
Other income shall be classified as:
(a) Interest Income (in case of a company other than a finance company);
(b) Dividend Income;
(c) Net gain/loss on sale of investments;
(d) Other non-operating income (net of expenses directly attributable
to such income).
5. Additional Information
A Company shall disclose by way of notes additional information regarding aggregate
expenditure and income on the following items:—
(i) (a) Employee Benefits Expense [showing separately (i) salaries and wages,
(ii) contribution to provident and other funds, (iii) expense on Employee Stock Option
Scheme (ESOP) and Employee Stock Purchase Plan (ESPP), (iv) staff welfare expenses].
(b) Depreciation and amortisation expense;
(c) Any item of income or expenditure which exceeds one per cent. of the revenue
from operations or Rs.1,00,000, whichever is higher;
(d) Interest Income;
(e) Interest expense;
(f) Dividend income;
(g) Net gain/loss on sale of investments;
(h) Adjustments to the carrying amount of investments;
(i) Net gain or loss on foreign currency transaction and translation (other than
considered as finance cost);
(j) Payments to the auditor as (a) auditor; (b) for taxation matters; (c) for company
law matters; (d) for management services; (e) for other services; and (f) for reimbursement of expenses;
(k) In case of Companies covered under section 135, amount of expenditure incurred on corporate social responsibility activities;
(l) Details of items of exceptional and extraordinary nature;
(m) Prior period items;
(ii) (a) In the case of manufacturing companies,—
(1) Raw materials under broad heads.
(2) goods purchased under broad heads.
(b) In the case of trading companies, purchases in respect of goods traded in by
the company under broad heads.
(c) In the case of companies rendering or supplying services, gross income
derived from services rendered or supplied under broad heads.
(d) In the case of a company, which falls under more than one of the categories
mentioned in (a), (b) and (c) above, it shall be sufficient compliance with the requirements
herein if purchases, sales and consumption of raw material and the gross income from
services rendered is shown under broad heads.
(e) In the case of other companies, gross income derived under broad heads.
(iii) In the case of all concerns having works in progress, works-in-progress
under broad heads.
(iv) (a) The aggregate, if material, of any amounts set aside or proposed to be set
aside, to reserve, but not including provisions made to meet any specific liability,
contingency or commitment known to exist at the date as to which the balance sheet is
(b) The aggregate, if material, of any amounts withdrawn from such reserves.
(v) (a) The aggregate, if material, of the amounts set aside to provisions made for
meeting specific liabilities, contingencies or commitments.
(b) The aggregate, if material, of the amounts withdrawn from such provisions,
as no longer required.
(vi) Expenditure incurred on each of the following items, separately for each
(a) Consumption of stores and spare parts;
(b) Power and fuel;
(d) Repairs to buildings;
(e) Repairs to machinery;
(g) Rates and taxes, excluding, taxes on income;
(h) Miscellaneous expenses,
(vii) (a) Dividends from subsidiary companies.
(b) Provisions for losses of subsidiary companies.
(viii) The profit and loss account shall also contain by way of a note the following
(a) Value of imports calculated on C.I.F basis by the company during the
financial year in respect of—
I. Raw materials;
II. Components and spare parts;
III. Capital goods;
(b) Expenditure in foreign currency during the financial year on account of
royalty, know-how, professional and consultation fees, interest, and other matters;
(c) Total value if all imported raw materials, spare parts and components
consumed during the financial year and the total value of all indigenous raw
materials, spare parts and components similarly consumed and the percentage
of each to the total consumption;
(d) The amount remitted during the year in foreign currencies on account
of dividends with a specific mention of the total number of non-resident
shareholders, the total number of shares held by them on which the dividends
were due and the year to which the dividends related;
(e) Earnings in foreign exchange classified under the following heads,
I. Export of goods calculated on F.O.B. basis;
II. Royalty, know-how, professional and consultation fees;
III. Interest and dividend;
IV. Other income, indicating the nature thereof.
Note:— Broad heads shall be decided taking into account the concept of materiality and
presentation of true and fair view of financial statements.