Financial Accounting Given the following information of ABC Ltd. as of March 31st. Prepare the Income Statement and calculate the Net Profit after Tax. Additionally, evaluate how the inclusion of non-cash items like depreciation Financial Accounting Q1. Given the following information of ABC Ltd. as of March 31st: 1. Revenue Rs. 5,00,000 2. Cost of Goods Sold Rs. 3,00,000 3. Operating Expense Rs. 80,000 4. Depreciation Rs. 30,000 5. Tax Rate 30% Prepare the Income Statement and calculate the Net Profit after Tax. Additionally, evaluate how the inclusion of non-cash items like depreciation affects the financial position of the company, and discuss its significance in decision-making for stakeholders.
Ans :
Introduction
The income statement (or profit and loss statement) is a type of financial report that summarizes the income, expenditures, and net profit or loss for a certain accounting period. Because it shows how profitable and efficient the business is running, it is an essential part of financial analysis. The income statement is a vital tool for stakeholders, such as creditors, owners, and management, to evaluate the viability and performance of the company.
Concept & Application
To prepare the income statement for ABC Ltd. with the provided data, we calculate each component in sequence:
- Revenue: Rs. 5,00,000
- Cost of Goods Sold (COGS): Rs. 3,00,000
Gross Profit: Revenue−COGS
Gross Profit = Rs. 5, 00,000 – Rs. 3, 00,000 = Rs. 2, 00,000
Conclusion
ABC Ltd.’s income statement as of March 31st reveals a net profit after tax of Rs. 63,000. This statement not only provides a snapshot of profitability but also highlights the impact of non-cash items, such as depreciation, on cash flow and tax liability.
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