MNE3701
Assignment 2 Semester 2 2024
Unique #:
Due Date:12 September 2024
Detailed solutions, explanations, workings
and references.
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, 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.
1. STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE
INCOME
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.
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.
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, 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.
R220,000 (Gross Profit) - R120,000 (Operating Expenses) = R100,000 (Operating
Profit).
Step 7: Account for Financing Costs and Taxes
Include any interest expenses from loans and calculate the tax obligations.
If financing costs were R10,000 and corporate taxes (assuming a 25% tax rate on
the operating profit) amounted to R25,000, the total deductions would be R35,000.
Step 8: Calculate Net Income
Subtract financing costs and taxes from the operating profit to get your net income.
R100,000 (Operating Profit) - R35,000 (Financing Costs and Taxes) = R65,000 (Net
Income).
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