PROFIT AND LOSS ACCOUNT
Companies Ordinance does not prescribe any particular
form in which the profit and loss account (or income and expenditure account)
of a company should be prepared. However, it has been laid down as to what it
shall contain and disclose.
According to
Section 234 (1) every profit and loss account shall give a true and fair view
of the profit or loss of the company for the financial year. In order to
disclose the true profit or loss of a company for the financial year, it is
necessary that the profit and loss account should be so drawn up, that the balance shown at some stage in the account can properly describe as the
profit or loss for the financial year and the item set out later in the account
can be seen to be:
·
Matters not relative to a fair ascertainment
of the profit or loss for the year.
·
Adjustments.
·
Appropriations of the profits including the
balance brought forward.
Contents of the Profit
and Loss Account
The profit and loss account of a non-listed company must
be prepared in accordance with the requirements of Part-Ill of Schedule Fifth
to the Companies' Ordinance. Detailed contents of the profit and loss account
of a listed company is prescribed in the Part-II of Schedule Fourth to the
Companies Ordinance. Both these schedules themselves are self. explanatory. The
former deals with the listed companies and the later provide details for all
the other companies. Most of the clauses in the former have been repeated in
the later except certain special information additionally required to be
disclosed by listed companies. According to Part-||| Schedule Fifth the
requirements as to profit and loss account of companies are summarized as
follows:
Income
a. Gross turnover and deduction therefrom:
1.
Commission paid to sole selling agents:
2.
Commission paid to other selling agents:
3.
Brokerage and discount on sales.
b- Income from investments, showing separately the income
from each associated undertaking and other investments.
c- Interest/profit accrued or received showing separately
against loans and advances.
d- Profit on sale of the investment.
e- Profit on sale of fixed assets.
f- Income arising from any unusual transaction.
G- Income arising against any prior year item: and
h- Other income stating each material item separately.
Material Consumption
& Stock Position:
The material consumption figures indicating the opening
and closing balance of raw material, work-in-progress and finished goods and
the purchase of material and stock during the year must be stated.
In case, however, by. the accounting method employed by
the company, the "cost of material consumed" or "cost of
purchased finished goods sold" can be worked out, then the disclosures of
opening and closing stocks (as discussed above) can be dispensed with.
Expenditure
Expenditure incurred under the following heads must be
stated separately:
a)
Store and spares consumed Fuel and power
b)
Salaries, wages, including bonus, provident
fund contribution and other staff welfare expenses
c)
Rent, rates, and taxes
d)
Insurance premium
e)
Repair and maintenance
f)
Patent, copyrights, trademarks, royalties
and technical assistance tee and expenses
g)
Donations
h)
Depreciation or other provisions in
diminution in value of assets and investment
i)
Interest showing separately on debentures,
long term loans, and short-term loans, on borrowing from associated
undertaking, directors and managing agents
j)
Loss on sale of investment and on sale of
fixed assets
k)
Bad debts are written off and provision for
doubtful debts distinguished between trade debts and other debts, and
l)
Provision for taxation indicating the
provision for deferred tax.
Cost of Goods Manufactured/Exported
The PLS Account shall be so drawn up as to disclose
separately the manufacturing trading and operating results.
In the case of a manufacturing concern, the cost of goods
manufactured must be shown in the accounts.
The value of items during the financial year shall also be
shown provided such value exceeds 20% of the total turnover of the company.
Other Disclosures
In the case of listed companies, the following information be
disclosed;
The aggregate amount of expenses in respect of salary, fees,
allowances, commission, and benefit allowed to:
a)
Directors
b)
Chief Executives
c)
Managing Agents
d)
Executives
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