IMPORTANCE OF
INCOME ACCOUNT IN ANALYZING STOCK INCOME ACCOUNT
When we invest in share market,
we invest for future income of the company. In order to estimate future income
we look at its past income. We need to analyze statement of profit and loss, to
gain knowledge whether income is generated from regular operation or through
other sources like capital gain , interest, etc.
The EPS is used to value shares
in stock market by multiplying it appropriate coefficients. In order to calculate
future profit it is important to have knowledge of income account as income is
subject to arbitrary nature.
Under division II Profit and
loss is classified in two parts first is normal profit and loss and second is
other comprehensive income.
NOW TAKE A LOOK AT RELIANCE
PROFIT AND LOSS
Profit and Loss as per
Division II
Statement of Profit and Loss
For the year ended 31st March, 2018
(` in crore)
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Notes
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2017-18
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2016-17
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INCOME
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Value of Sales
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24
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3,14,917
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2,64,909
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Income from Services
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440
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132
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Value of Sales & Services (Revenue)
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3,15,357
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2,65,041
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Less: GST Recovered
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10,022
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-
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Revenue from Operations
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3,05,335
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2,65,041
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Other Income
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25
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8,220
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8,709
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Total Income
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3,13,555
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2,73,750
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EXPENSES
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Cost of Material Consumed
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1,98,029
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1,64,250
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Purchase of Stock-in-Trade
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7,268
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5,161
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Changes in Inventories of Finished Goods, Work-in-Progress and
Stock-in-Trade
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26
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(3,232)
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(4,839)
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Excise Duty and Service Tax
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15,293
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23,016
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Employee Benefits Expense
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27
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4,740
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4,434
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Finance Costs
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28
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4,656
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2,723
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Depreciation / Amortisation and Depletion Expense
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1
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9,580
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8,465
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Other Expenses
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29
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31,496
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29,763
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Total Expenses
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2,67,830
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2,32,973
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Profit Before Tax
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45,725
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40,777
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Tax Expenses
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Current Tax
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11
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8,953
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8,333
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Deferred Tax
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17
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3,160
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1,019
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Profit for the Year
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33,612
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31,425
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Other comprehensive Income:
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i. Items that will not be reclassified to Profit or Loss
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(66)
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35
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ii. Income tax relating to items that will not be
reclassified to Profit or Loss
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14
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(7)
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iii.Items that will be reclassified to Profit or Loss
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25.1
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(4,388)
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2,752
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iv.Income tax relating to items that will be reclassified to
Profit or Loss
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937
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(588)
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Total Other Comprehensive Income for the Year (Net of Tax)
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(3,503)
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2,192
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Total Comprehensive Income for the Year
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30,109
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33,617
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Earnings per equity share of face value of ` 10 each
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Basic (in `)
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30
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53.08
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49.77*
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Diluted (in `)
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30
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53.04
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49.68*
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Significant Accounting Policies
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See accompanying Notes to the Financial Statements
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1 to 41
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Now let us explain new part
other comprehensive income
Other Comprehensive Income refers to items of income and
expenses that are not recognized as a part of the profit and loss account
This Income appears as a line item below the income statement.
In simple words it is gain or loss that has not been realized. For
example, gain or loss on an investment can be realized when it is sold.
Hence for investments classified as ‘Available for Sale’, the unrealized
income or loss will be reported under Other Comprehensive income.
Examples of Other Comprehensive income are:
- Unrealized gain or loss on bonds
- Unrealized gain or loss on investments that are available for sale
- Foreign currency translation gains or loss
- Pension plans gain or losses
Other comprehensive income can be reported either net of related
tax effects or before related tax effects with a single aggregate income tax
expense.
WE will learn to interpret each part of income account later on.
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