Worksheet: Statement of Comprehensive Income (Level 3)
Worksheet: Statement of Comprehensive Income (Level 3)
Learning Objective
To understand the structure, purpose, and preparation of a Statement of Comprehensive Income (SCI), including calculating gross profit, operating profit, and profit for the year.
1. Key Terms (Fill in the blanks)
Revenue is the total income generated from the sale of goods or services before any costs or expenses are deducted.
Cost of Sales refers to the direct costs attributable to the production of the goods sold in a company. This includes costs such as materials and labor directly used in the commission of the product.
Gross Profit is calculated as Revenue - Cost of Sales. It represents the profit a company makes after deducting the costs associated with making and selling its products.
Operating Expenses are the costs required to run a company that are not directly tied to producing a product or service, such as rent, utilities, and salaries.
Profit for the Year is the final profit after all expenses, including operating expenses, interest, and taxes, have been deducted from total revenue. It is an indicator of a company's overall profitability.
2. Multiple Choice Questions
The Statement of Comprehensive Income shows:
a) Assets and liabilities
b) Income and expenses over a period
c) Cash inflows and outflows
d) Owner's equity only
Gross profit is calculated by:
a) Revenue - Operating Expenses
b) Revenue - Cost of Sales
c) Operating Profit - Expenses
d) Profit for the year + Tax
Operating profit is:
a) Gross Profit - Operating Expenses
b) Revenue - Expenses
c) Profit after interest
d) Profit before revenue
3. Short Calculation Questions
Question 1
A business has the following information:
Revenue: £85,000
Cost of Sales: £52,000
Calculate the Gross Profit:
Gross Profit = Revenue - Cost of Sales
Gross Profit = £85,000 - £52,000 = £33,000
Question 2
Given:
Gross Profit: £33,000
Operating Expenses: £18,000
Calculate Operating Profit:
Operating Profit = Gross Profit - Operating Expenses
Operating Profit = £33,000 - £18,000 = £15,000
Question 3
Given:
Operating Profit: £15,000
Interest Payable: £1,200
Tax Expense: £2,500
Calculate Profit for the Year:
Profit for the Year = Operating Profit - Interest Payable - Tax Expense
Profit for the Year = £15,000 - £1,200 - £2,500 = £11,300
4. Structured Question: Prepare a Statement of Comprehensive Income
Use the following information for Jade Ltd for the year ended 31 December 2024:
Revenue: £120,000
Cost of Sales: £72,000
Distribution Costs: £8,000
Administrative Expenses: £14,500
Finance Costs (interest): £1,000
Tax Expense: £4,500
Required: Prepare a Statement of Comprehensive Income for Jade Ltd.
Revenue: £120,000
Cost of Sales: £72,000
Gross Profit: £120,000 - £72,000 = £48,000
Distribution Costs: £8,000
Administrative Expenses: £14,500
Operating Profit: £48,000 - £8,000 - £14,500 = £25,500
Finance Costs: £1,000
Profit Before Tax: £25,500 - £1,000 = £24,500
Tax Expense: £4,500
Profit for the Year: £24,500 - £4,500 = £20,000
5. Extension Task (Challenge)
Explain two reasons why the Statement of Comprehensive Income is useful to:
a) Managers:
Managers use the Statement of Comprehensive Income to assess the company's financial performance over a specific period. It allows them to identify areas of profitability and those requiring cost management or improvement.
This statement also enables managers to make informed decisions about budgeting, resource allocation, and strategic planning based on revenue trends and operating expenses.
b) Investors:
Investors utilize the Statement of Comprehensive Income to evaluate the company's ability to generate profit and assess the sustainability of earnings. This helps them determine the potential return on their investment.
Additionally, this statement provides insights into future growth potential and the overall financial health of the company, which influences investment decisions and share price evaluations.