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A profit‑and‑loss account of ABC Enterprises for the year shows: - Sales: Rs. 8,00,000 - Cost of Goods Sold: Rs. 5,20,000 - Administrative Expenses: Rs. 80,000 - Selling Expenses: Rs. 60,000 - Net Profit: Rs. 80,000 Prepare a common‑size (percentage) statement of profit and loss, expressing each item as a percentage of sales.

easy 2 marks Class 12 · Accountancy · Analysis of Financial Statements
Answer
Cost of Goods Sold = 65%; Administrative Expenses = 10%; Selling Expenses = 7.5%; Net Profit = 10%

The correct answer is Cost of Goods Sold = 65%; Administrative Expenses = 10%; Selling Expenses = 7.5%; Net Profit = 10% — List the percentages alongside the respective items.

Step-by-step solution

  1. Identify the base figure for a common‑size P&L statement: total Sales = Rs. 8,00,000.
  2. Calculate each item's percentage:
  3. - Cost of Goods Sold: (5,20,000 ÷ 8,00,000) × 100 = 65%.
  4. - Administrative Expenses: (80,000 ÷ 8,00,000) × 100 = 10%.
  5. - Selling Expenses: (60,000 ÷ 8,00,000) × 100 = 7.5%.
  6. - Net Profit: (80,000 ÷ 8,00,000) × 100 = 10%.
  7. List the percentages alongside the respective items.
Common mistake: Dividing each item by total expenses instead of by total sales.

Concept tested: Common‑size profit‑and‑loss statement

Published · How this solution was prepared and checked

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