Here is the complete solution to
Worksheet 27: Income statements (profit and loss) for Vacsac Ltd.
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✔ Task 1: Prepare the Income Statement (Profit and Loss Account) for the year ending 31 March
We are given:
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Sales revenue = $438,000
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Opening inventory = $50,000
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Purchases = $200,000
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Closing inventory = $60,000
Step 1: Calculate Cost of Sales
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Cost of Sales = Opening Inventory + Purchases – Closing Inventory
= $50,000 + $200,000 – $60,000
=
$190,000
Step 2: Calculate Gross Profit
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Gross Profit = Sales Revenue – Cost of Sales
= $438,000 – $190,000
=
$248,000
Step 3: List All Expenses
From the memorandum:
- Wages = $150,000
- Rent and rates = $15,000
- Heat and light = $5,000
- Insurance = $5,000
- Depreciation = $10,000
- Office expenses = $5,000
- Advertising = $8,000
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Total Expenses = Sum of all above
= $150,000 + $15,000 + $5,000 + $5,000 + $10,000 + $5,000 + $8,000
=
$198,000
Step 4: Calculate Net Profit
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Net Profit = Gross Profit – Total Expenses
= $248,000 – $198,000
=
$50,000
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📄 Final Income Statement (Profit and Loss Account):
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Income statement (Profit and loss account) for the year ending 31 March for Vacsac Ltd
Sales revenue $438,000
Opening inventory $50,000
Purchases $200,000
Closing inventory ($60,000)
Cost of sales $190,000
Gross profit $248,000
Expenses:
Wages $150,000
Rent/rates $15,000
Heat and light $5,000
Insurance $5,000
Office expenses $5,000
Depreciation $10,000
Advertising $8,000
Total expenses $198,000
Net profit $50,000
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✔ Task 2: State two other uses of net profit
Net profit is not always retained by the business. It can be used in several ways, including:
1.
Distributing dividends to shareholders — The company may pay out part or all of the net profit to its owners/shareholders as a return on their investment.
2.
Reinvesting in the business — The company may use net profit to fund expansion, buy new equipment, develop new products, or improve operations to grow the business further.
*(Optional additional use: Paying off debts or loans to reduce liabilities.)*
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✔ Summary:
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Gross Profit = $248,000
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Net Profit = $50,000
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Two other uses of net profit: Dividends to shareholders, reinvestment in the business.
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Parent Tip: Review the logic above to help your child master the concept of income statement worksheet.
