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MNE3701 Assignment 2 (COMPLETE ANSWERS) Semester 1 2024 - DUE 30 April 2024
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MNE3701Assignment 2
(COMPLETE
ANSWERS)
Semester 1 2024
- DUE 30 April
2024
, QUESTION 1 • Demonstrate how you would go about constructing financial
statements of your small business with reference to practical examples. (30)
Constructing financial statements for a small business involves compiling data from various
sources, organizing it, and presenting it in a standardized format. Here's a step-by-step guide
with practical examples:
1. Gather Financial Data:
Collect all relevant financial records such as bank statements, invoices, receipts,
and expense reports.
For example, if you're running a small retail business, gather sales records,
purchase receipts, and bank statements.
2. Organize Transactions:
Categorize transactions into relevant accounts such as assets, liabilities, equity,
revenue, and expenses.
Create a chart of accounts (COA) to systematically categorize transactions. For
instance:
Sales Revenue
Cost of Goods Sold (COGS)
Operating Expenses (rent, utilities, salaries, etc.)
Accounts Payable
Accounts Receivable
Cash on Hand
Loans Payable, etc.
3. Prepare the Income Statement (Profit and Loss Statement):
Summarize revenue and expenses over a specific period (usually monthly,
quarterly, or annually).
Calculate the net income by subtracting total expenses from total revenue.
For example:
Revenue:
Sales: $XX,XXX
Other Income: $X,XXX
Total Revenue: $XX,XXX
Expenses:
Cost of Goods Sold: $XX,XXX
Operating Expenses: $XX,XXX
Depreciation: $X,XXX
Interest Expense: $X,XXX
Total Expenses: $XX,XXX
Net Income: $X,XXX
4. Create the Balance Sheet:
List assets, liabilities, and equity as of a specific date (end of the reporting
period).
Assets = Liabilities + Equity
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