Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world’s largest manufacturer of two­wheelers, based in India. In 2001, the company had achieved the coveted position of being the largest two­wheeler manufacturing company in India and also, the ‘World No.1’ two­wheeler company in terms of unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position till date.It derives its income from manufacturing and sale of motorcycles. Tech Mahindra Limited is engaged in the IT solutions and services, business process services and IT platforms. The company is present in 90 countries with over 115,000 associates. 

The statements of profit and loss of two companies for the year ended 31st March 2017 are reproduced below:

Questions for Discussion 

1. Comment upon the key differences in the composition of expenses for the two companies. 

2. Hero Motocop has reported excise duty as a separate line item. Likewise, Tech Mahindra reported subcontracting expense as a separate line item rather than clubbing them with other expenses. What accounting principle in involved?  

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Particulars I. Revenue from operations II. Other income III. Total income (I+II) IV. Expenses: Cost of materials consumed Purchase of stock-in-trade Changes in inventories of finished goods, work-in-progress Excise duty on sales of goods Employee benefit expense Subcontracting expenses Finance costs Depreciation and amortization expense Other expenses Total expenses (IV) V. Profit/(loss) before exceptional items and tax (III-IV) VI. Exceptional items VII Profit/(loss) before tax (V-VI) VIII. Tax expense: (1) Current tax (2) Deferred tax IX. Profit/(loss) from the period from continuing operations (VII-VIII) X. Profit/(loss) from discontinued operations XI. Tax expense of discounted operations XII. Profit/(loss) from discontinued operations (X-XD) XIII. Profit/(loss) for the period (IX + XII) XIV. Other comprehensive income A (i) Items that will not be reclassified to profit and loss (ii) Income tax relating to items that will not be reclassified to profit and loss B (i) Items that will be reclassified to profit and loss (ii) Income tax relating to items that will be reclassified to profit and loss XV. Total comprehensive income for the period (XIII + XIV) comprising profit (loss) and other comprehensive income for the period) Hero Motocop 30,847 522 31,369 18,949 0 63 2,371 1,396 0 6 493 3,432 26,710 4,659 0 4,659 1,082 199 3,378 0 0 0 3,378 -22 7 0 0 3,363 Tech Mahindra 23,165 893 24,058 0 0 0 0 7,745 8,757 64 622 2,992 20,180 3,878 0 3,878 723 108 3,047 0 0 0 3,047 -6 0 531 -252 3,320