Study Of Vertical Revenue Statements
1. Sales (Net) :
Sales : Cash xxx
Credit xxx
xxx
- Sales Returns / Returns Inward (xxx) xxx
2. Cost of Goods Sold / Cost of Sales :
It includes all the items on the Dr. Side of Trading A/c
It includes followings :
Opening Stock
Purchases
(-) Purchases Returns / Returns Outward
All expenses incurred on purchase / Production of goods (Factory expenses)
Depreciation on “factory fixed assets” (From Profit & Loss A/c Dr. side)
Examples : Depreciation on factory building
Depreciation on Plant & Machinery
Depreciation on Loose Tools
Depreciation on Patents
Depreciation on Patterns
Less : Closing Stock
Outgoing of goods
3. Classification of “Gains / Incomes / Profits (from Profit & Loss A/c – Cr.Side)
These includes Incomes from Operating Incomes & Non – Operating Incomes
Operating Incomes :
These are the Incomes which are :
a) Recurring in nature
b) Trading in nature (main business incomes)
Examples : Discount received, Commission received, Bad debts recovered etc.
Non – Operating Incomes :
These are the Incomes which are either Non recurring in nature or Non trading in nature. Where Non recurring in nature means Rent received, Interest on Investment, Dividend on Shares & Non trading in nature means Profits on Sale of Fixed Asset/Investment, Royalties received, Share transfer fees.
4. Classification of Expenses / Losses (from Profit & Loss A/c – Dr. Side)
These includes Expenses from Non – Operating Expenses & Operating Expenses.
The examples of Non Operating Expenses are :
Loss on sale of Fixed assets & Investments
Abnormal Losses like loss by fire, theft etc.
All written off transactions like Goodwill written off, Preliminary expenses written off, Other fictitious assets written off etc.
Donations & Charities etc.
The Operating Expenses are recurring & Business expenses. These expenses are classified in as Office & Administration Expenses, Selling & Distribution Expenses, Financial Expenses.
5. Bad debts and Discounts Allowed
Bad debts and discount allowed should be taken as financial expenses. Alternatively, it can also be taken as selling & distribution expenses. So necessary note should be given.
6. Depreciation :
On Factory fixed assets Cost of Goods Sold
On Delivery van / Show room building Selling & Distribution Expenses
On Building / Furniture / Motor vehicle etc. Office & Administration Expenses
Power & fuel, Lighting, Royalties on production, Supervisor salary Factory Expenses
1. Sales (Net) :
Sales : Cash xxx
Credit xxx
xxx
- Sales Returns / Returns Inward (xxx) xxx
2. Cost of Goods Sold / Cost of Sales :
It includes all the items on the Dr. Side of Trading A/c
It includes followings :
Opening Stock
Purchases
(-) Purchases Returns / Returns Outward
All expenses incurred on purchase / Production of goods (Factory expenses)
Depreciation on “factory fixed assets” (From Profit & Loss A/c Dr. side)
Examples : Depreciation on factory building
Depreciation on Plant & Machinery
Depreciation on Loose Tools
Depreciation on Patents
Depreciation on Patterns
Less : Closing Stock
Outgoing of goods
3. Classification of “Gains / Incomes / Profits (from Profit & Loss A/c – Cr.Side)
These includes Incomes from Operating Incomes & Non – Operating Incomes
Operating Incomes :
These are the Incomes which are :
a) Recurring in nature
b) Trading in nature (main business incomes)
Examples : Discount received, Commission received, Bad debts recovered etc.
Non – Operating Incomes :
These are the Incomes which are either Non recurring in nature or Non trading in nature. Where Non recurring in nature means Rent received, Interest on Investment, Dividend on Shares & Non trading in nature means Profits on Sale of Fixed Asset/Investment, Royalties received, Share transfer fees.
4. Classification of Expenses / Losses (from Profit & Loss A/c – Dr. Side)
These includes Expenses from Non – Operating Expenses & Operating Expenses.
The examples of Non Operating Expenses are :
Loss on sale of Fixed assets & Investments
Abnormal Losses like loss by fire, theft etc.
All written off transactions like Goodwill written off, Preliminary expenses written off, Other fictitious assets written off etc.
Donations & Charities etc.
The Operating Expenses are recurring & Business expenses. These expenses are classified in as Office & Administration Expenses, Selling & Distribution Expenses, Financial Expenses.
5. Bad debts and Discounts Allowed
Bad debts and discount allowed should be taken as financial expenses. Alternatively, it can also be taken as selling & distribution expenses. So necessary note should be given.
6. Depreciation :
On Factory fixed assets Cost of Goods Sold
On Delivery van / Show room building Selling & Distribution Expenses
On Building / Furniture / Motor vehicle etc. Office & Administration Expenses
Power & fuel, Lighting, Royalties on production, Supervisor salary Factory Expenses