Financial Accounting for Managers, 2/e, 2nd Edition

4

Statement of Profit & Loss

CHAPTER OBJECTIVES

This chapter will help the readers to:

• Understand the contents of profit and loss statement in depth.
• Appreciate the issues involved with the accrual of expenses.
• Understand the impact of extraordinary items, prior period items and change in the accounting policies on the reported profits.
• Differentiate various measures of profits—gross profit, operating profit, pre-tax profit and net profit.
• Calculate and interpret the basic earnings per share and the diluted earnings per share.
• Appreciate the requirements of applicable accounting standards—AS 5 (prior period adjustments), AS 15 (employees benefits), AS 16 (borrowing costs), AS 20 (earnings per share) and AS 24 (discontinuing operations).