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MNE3701 Assignment 2 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED R50,00
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MNE3701 Assignment 2 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED

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MNE3701 Assignment 2 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED Answers, guidelines, workings and references .................... QUESTION 1 • Demonstrate how you would go about constructing financial statements of your small business with reference to practical examples. (30) ...

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  • April 26, 2024
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  • 2023/2024
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MNE3701
Assignment 2 Semester 1 2024
Unique #:
Due Date: 30 April 2024



Detailed solutions, explanations, workings
and references.

+27 81 278 3372

, QUESTION 1

Three important financial statements can be used for decision making:

• a statement of profit and loss and other comprehensive income,
• a statement of financial position and
• a statement of cash flows.




STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME

The income statement shows the profit or loss of a business over time. The
statement of profit and loss and other comprehensive income provides information
on the following broad topics:

• revenue
• cost of goods sold
• operating expenses
• financing costs
• payment of taxes




Example

Creating a Statement of Profit and Loss and Other Comprehensive Income for your
small business, MNE3701 Pvt Ltd, involves several steps as illustrated below.




Step 1: Determine the Reporting Period

Decide on the timeframe for which you're reporting. This is usually done annually,
semi-annually, quarterly, or monthly. For this example, let's assume we're preparing
an annual statement for the fiscal year ending December 31, 2023.




Varsity Cube 2024 +27 81 278 3372

, Step 2: Calculate Revenue

Sum up all the income your business has generated from its operations. This
includes sales of goods or services, online sales, and other income streams.

If MNE3701 Pvt Ltd sold 10,000 units of its product at R50 each, the total sales
revenue would be R500,000. Additionally, if the company made R20,000 from
consulting services, the total operational revenue would be R520,000.




Step 3: Calculate Cost of Goods Sold (COGS)

This includes all the direct costs related to the production of goods or services sold
by your business.

If the cost to produce one unit of product is R30, and you sold 10,000 units, the
COGS would be R300,000.




Step 4: Calculate Gross Profit

Subtract the COGS from your total revenue.

R520,000 (Revenue) - R300,000 (COGS) = R220,000 (Gross Profit).




Step 5: List Operating Expenses

This includes rent, salaries, marketing expenses, utilities, and other costs involved
in running your business.

Total operating expenses for MNE3701 Pvt Ltd are R120,000.




Step 6: Calculate Operating Profit

Subtract your total operating expenses from your gross profit.


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