MNE3701 Assignment 2
(COMPLETE ANSWERS)
Semester 1 2024 - DUE 30
April 2024 ;100% TRUSTED
workings, explanations and
solutions.
ADMIN
[COMPANY NAME]
, 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 is a crucial aspect of financial
management and decision-making. These statements provide insights into the financial health
and performance of the business, aiding in strategic planning, attracting investors, and complying
with regulatory requirements. In this comprehensive guide, we'll discuss the practical steps
involved in creating financial statements for a small business, using examples to illustrate each
stage.
1. Introduction to Financial Statements: Financial statements typically include the Income
Statement, Balance Sheet, and Cash Flow Statement. Each serves a unique purpose:
• Income Statement: It showcases the revenue earned and expenses incurred over a
specific period, resulting in net income or loss.
• Balance Sheet: It presents the financial position of the business at a particular point in
time, detailing assets, liabilities, and equity.
• Cash Flow Statement: It tracks the cash inflows and outflows, depicting how cash
moves within the business.
2. Gathering Financial Data: To start, gather relevant financial data from various sources,
including:
• Sales records
• Purchase invoices
• Bank statements
• Payroll records
• Loan agreements
• Tax documents
3. Creating the Income Statement: Begin by calculating the net income for the period. Here's a
simplified example:
Revenue $50,000
Cost of Goods Sold (COGS) $20,000
Gross Profit $30,000
Operating Expenses $15,000
Net Income $15,000
