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A company’s Income Statement for the year ended 31 March 2026 (all amounts in ₹ thousands) is based on the following information: Turnover ₹14,00,000; Cost of sales ₹9,20,000; Selling and administrative expenses ₹1,50,000; Depreciation ₹40,000; Interest expense ₹60,000; Dividend received ₹15,000; Tax rate 25%. Compute the Net profit after tax.

medium 3 marks Class 12 · Accountancy · Financial Statements of a Company
Answer
₹1,72,500

The correct answer is ₹1,72,500 — Subtract tax from PBT: ₹2,30,000 – ₹57,500 = ₹1,72,500 (Net profit after tax).

Step-by-step solution

  1. Compute Gross profit: ₹14,00,000 – ₹9,20,000 = ₹4,80,000.
  2. Compute Operating profit: ₹4,80,000 – ₹1,50,000 = ₹3,30,000.
  3. Subtract Depreciation: ₹3,30,000 – ₹40,000 = ₹2,90,000 (PBIT).
  4. Subtract Interest expense: ₹2,90,000 – ₹60,000 = ₹2,30,000 (PBT).
  5. Calculate tax: 25% of ₹2,30,000 = ₹57,500.
  6. Subtract tax from PBT: ₹2,30,000 – ₹57,500 = ₹1,72,500 (Net profit after tax).
Common mistake: Subtracting depreciation from operating profit instead of adding it back, or applying tax to the wrong figure

Concept tested: Preparing Income Statement and computing net profit after tax

Published · How this solution was prepared and checked

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