welcome to contacts in this lesson we are going to be looking at the statement of comprehensive income or the income statement we are going to go through an example of how to complete the income statement when we are given the pre adjustment trial balance and additional information so we'll go through it line by line and in great detail so the question is in PDF as you can see here and I'm going to do my solution in Excel so I've tried to enlarge it for you to be able to see it and to follow along so let's begin when you're doing the statement of comprehensive income obviously we know that from the player judgment trial balance or from the trial balance we have two sections we've got the balance sheet account section and the nominal accounts section the nominal account section Israel find all our incomes and expenses and that is what we need when we are completing the statement of comprehensive income and the balance sheet section is where we find everything that we need almost things that we'll need for the statement of financial position and we have done that lesson before so you'd like to check that or not we leave the link in the description below and here we have additional information and we have to pay careful attention to each of the line items that we have here so we're going to go through each one in great detail and I'll be highlighting here in PDF for every one that we have completed another thing to ensure that you pay careful attention to is the dates whatever date you are given is very important because that is going to influence the numbers that you use and how you do your calculation so we have to pay careful attention to it so we are asked here to prepare the statement of comprehensive income for the year ended 31 December 2018 so that is the date at which we are preparing the statement of comprehensive income and we know when you're doing the any of the financial statements we have to start by they by the heading statement of comprehensive income for the year ending 31 December 2018 and sure that you put your date over there because that's very and then once we have done that let's begin into a statement of comprehensive income when you knew you know the format of the statement of comprehensive income we start with our sales so let's first look at our sales over here now we'll be looking at the pre adjustment trial balance in conjunction with the additional information that we are given because additional information may change some of the numbers we have in our pre adjustment trial balance and may have new numbers that we need to take into account so let's look at our sales our sales nine hundred and ninety thousand grand and we go to our additional information and see if there's anything that is talking about sales over here so here we have physical stock taking we have noticed from the municipality reflected the rates assessment depreciation data was declared insolvent insurance and amount owed for debtors for directors fees provision for bad debts provide for interest company tax so here we are not told anything about sales so if there's nothing in the additional information that is spoken about any of the line items here then we'll just take that line item with its amount and put it in our statement of comprehensive income and that is how it works when you're doing your financial statement if nothing in the additional information is spoken about for instance now we just looked at sales it's nothing about sales in the additional information so we'll just say sales and that amount nine hundred and ninety thousand grand so let's begin you begin with our sales and I'm gonna put to nine hundred and ninety thousand here okay and then I'll put my final figures in column D over here but the reason I put that man hundred ninety thousand in column C is because if something else okay first let me highlight the sales cause we have just standard one okay so it's important for you to tick whenever you've done a line item or never even dressed something so that you don't miss it in the end and you also don't get confused as to which numbers you were initially working with then we have purchases we have sales returns now here's something here whenever we have sales returns we have to deduct it from our sales we sold something to customers and they returned it back to us so we put here sales return and put it in brackets whereas the amount was 50,000 grand so put it in brackets 50,000 okay and then we take our sales minus our sales returns to get our actual sales Villa because there's nothing here there are fact sales and if you have your pre adjustment trial balance maybe you're doing a similar question to this it's very important to note this that you see here we have carrying on purchases but we look at this just now so we have nothing else concerning sales down here so we take our now calculator off now we calculate our final figure for sales so we take this amount nine hundred and ninety thousand and we - the fifty thousand rent was already negative that's why I'm putting a plus sign over there let me put that in bold okay so we have that sales already now we go to cost of sales cost of sales then what is our cost of sales here well we know that if you are not given cost of sales directly you may have to calculate the cost of sales we are given the purchases here we're given the carriage on purchases and we have nothing else on purchases over here but if you know how to calculate your cost of sales remember we have opening inventory and that's why I said that they need a very important we are given inventory here as at the first of January 2018 and remember we have we are preparing the statement of comprehensive income as a 31st of December 2018 so this inventory here has at the 1st of January is our opening inventory so this is what we had installed at the beginning of the period so we have opening inventory of hundred thousand Rand so we are trying to get to our final figure what is how much did we sell during this period so we have so let me do the calculation down here opening inventory how much was that we were given opening inventory of hundred thousand grams so I'm gonna put hundred thousand as a positive and then let me highlight that one because I've just done it and then whatever what were our purchases we have purchases of 400,000 Wren so we add that as well remember you had opening inventory at the beginning and then you purchased more so we had more inventory in stock so put purchases of how much four hundred thousand grand four hundred thousand as a positive and then so let me highlight that one then now that I've done purchases here we are given carriage on purchases now very important with this one here you know that everything that everything that we include as part of our inventory or as part of our purchases comes from the fact that whatever we need whatever cost we incur in order to bring our inventory into a position where we are able to sell it we'll have to include it as part of our inventory cost so let me repeat that again whatever cost we incurred in all of us to bring our inventory to a point where we are able to sell it we include it as part of our inventory cost so you see here we have carry-on purchases well if we didn't have carriage and purchases wouldn't be able to bring our inventory to a place so we could send it so that's why we include it as part of our inventory so we highlight carriage on purchases and I'm gonna write that down you know I excel here kerogen purchases you put it as a positive because it forms part of the cost of our inventory create on purchases and you put the amount de 28,000 gram 28,000 and remember what I mentioned earlier on anything that pertains to sales let's say we've it was written K th on sales what are going to do it we'll what are we going to do with that we're going to include it as part of our sales no we were not because selling expenses are expensed going to put it and operating expenses so anything else that pertains to sell the sales apart from the sales and the sales returns we don't include it as part of sales we put it under operating expenses but anything else that pertains to inventory or the carriage on stop or the carriage or invent or the carriage and purchases wing move it as part of our inventory because it's bringing it into a position away to sell that inventory I hope there has made sense so we have carried on purchases and we have nothing else here pertaining to cost of sales or or inventory and remember I've done this question before I went through it just quickly to complete the question so that I can do this lesson so you have to go through every line item so that's because I'm rushing it here does not mean that you just have to rush through if you have to go through it in detail and the reason I'm going a bit quick here is for the sake of the video element make it very long so the next thing that we look for is our closing inventory remember we are our opening inventory and we had one two bought during the period which is all purchases and we had our carriage on purchases we added all that together now on to see what is my closing inventory because when I have my closing inventory I'll be able to know how much inventory is sold so we go to our additional information we're told that physical stop taking on 31 December 2018 which is the date at which we are preparing this statement of comprehensive income it revealed the following inventories on hand so what does it mean on him these are inventories which are left in stock so we still have them in our in our storehouse so this is our closing inventory trading inventory 80,000 grand so we have trading inventory of 80,000 and then remember put this now as a negative because one to see how much we sold so put 80,000 put it as a negative because we want to see what is the difference between our opening inventory our purchases our carriage and passages and our our closing inventory so they are supposed to put this as closing inventory closing inventory and it's 80,000 ran so what is the difference between all of that well that will be our cost of sales so I will go equals some obviously take that so I'm adding all three minus the 80,000 rent and I get an answer 448 thousand and there is our cost of sale so remember we have to put our cost of sale as a negative now that we have that be able to calculate our gross profit gross profit and I put that limp that in bold and then it's our sales minus our cost of sales remember I'm using an excel formula here so if I put class doesn't mean I'm adding it because cost of sales already so already a negative so we have our gross profit of 492 thousand grand and then what is next we do other income other income and then we write down all the other income that we have here now if you look through the question here maintenance and expense means while rates expand wages and salaries expense stationery expense bad debts sundry expense insurance telephone what's an electricity directors fees or it has fees so these are all expenses so we're going to expense them so we have no income over they and we look at our additional information okay let me highlight this one here I forgot to I highlight this one cause we completed it is there anything that I didn't highlight No so we are still good so we have no other income over here remember like I said I've gone through it in detail just before this lesson so if you can see for yourself also we have no income here that is detailed if we're given an income you haven't read it over there so you go through every line item to ensure that you don't miss anything so since we have no income who put 0 over here there's no income of a day and then we go down now we detail our operating expenses so I'm gonna dribble that operating expenses remember the format might be slightly different if you are doing it or if you've seen it in your book or elsewhere but you never play penalized for for the format being slightly different but this is exactly how it will look more or less so want to label all our operating expenses here now we'll begin with our without operating expenses so let's look at maintenance we were given maintenance of 17,000 grand so let me begin by writing me main maintenance then question again over here is is there anything and the additional information that speaks about maintenance Municipality stationery depreciation that I was declared insolvent insurance directors fees provision for bed that's probably provide for interest company tax and that's it so there's nothing on maintenance so remember if there's nothing in additional information I just take maintenance of 17,000 and I record it down over here so I'm gonna record all my expenses over here add them together and then put the total and operating expenses so my maintenance was 17,000 so I put down 17,000 then I highlight it over here and then municipal rates so let me write municipal rates over here in this slip off rates municipal rates what is the amount 15,000 so let's go and see if there's anything in additional information that speaks about municipal rates we have here we go number two notices from the municipality reflected the rates assessment for the year ended that is June 2018 and 30 June 2019 to be 1250 rent per month and 1,500 rent per month respectively so what is it saying here which we are told that the notice for the municipal rate reflective assessments for the year ending 30 June 2018 so if they are saying they are handing to 30 June 2018 must have started on the 1st of July 2017 so the municipality rates way from the first of July 2018 2020 18 and 30 June 2019 to be 1250 per month and 1,500 grand per month are expecting it's very important to note what period we are dealing it here we are told that who must do the statement of comprehensive income as at 31 December 2018 so we are looking we're only concerned with what happened between the 1st of January 2018 to the 31st of December 2018 so let's look at the amounts from municipal rates for those specific dates we are told that until 30 June 2018 the raids were 1259 per month so from the first of January 2018 to the 30th of June 2018 or 28 1250 so you can count the months from January 2018 to June the end of June 2018 that gives you a total of six months because you're counting January February March April May as well as June because it tells you until 30th of June they told us until the 1st of June you would not count you but if it until that age of June we also count June so those are six months and then from the first of July 2018 until the 30th of June 2019 and that is what this statement means the raids became 1510 per month so we are concerned with between the raids from the first of January 2018 to the 31st of December 2018 so what do we do we know that for the first six months is 1,250 grand and then for the next six months to 1500 so let's calculate our municipal rates and see how much it should be so I'm using an excel formula here so you can just punch it in your calculator so it's 1,250 times 6 that's for the first six months because it started from 1st of July last year but we're only concerned about this sickness for six months and then we add that to the answer of 1500 which is for the next six months times six months and we get an answer of sixteen five hundred rent so that means our municipal rate is supposed to be 16 thousand five hundred rent now let's go back to our stay add to our pre adjustment I'll balance on municipality is fifteen thousand ten that means it's understated by 1500 rent so if we're asked to do the statement of financial position obviously we know there is accrued expense there is expense that you still also it's a liability and if you'd like to check out the lessons on accruals and it's very important when we are given the create judgment trial balance and additional information to know what they accrue else i would like to check those ones out and how you can account for them in the statement in the various financial statements you can click on the link on the top right of the screen otherwise you'll find the links to those lessons in the description below but anyway we know that the municipal rates for this year is supposed to be sixteen thousand five hundred and as we have calculated here because we are concerned with this period that we are dealing with and want to know what the rates are for that so this fifteen thousand rand is understated so you put the correct one over here because it's the actual amount for this period and then we move on to the next one wages and salaries 80,000 rent so let's right pay wages and salaries like that eighty thousand REM and I'm sure you can see from additional information you do not see anything concerning wages and salaries so if there's nothing in additional information and there's nothing over here in additional information concerning wages and salaries we're just going to put the amount which we are given eighty thousand grand so we write down 80 thousand then we move on to the next one stationary we are told that our stationary is 11,000 grand and we know that an S stationary is expense now let's go through additional information here point number one where twelve physical stock taking on the 31st of December revealed the following inventories on hand and we are given stationaries of two thousand grams now here's how you deal with stationary when you are given stationary in your pre adjustment trial balance when whenever you buy stationery you record it as an expense because it's an expense item however if you are left to stationary at the end of the period if you are say if they tell you that you have stationary on hand it becomes an asset it is an asset because you still have it in stock and you can use it in the next period so you have to take it out of any of the expense so in the expense over here you have stationary of 11,000 Ram so you have to do that mm grain because the 2,000 ran is no longer an expense it's still left in in in in our offices or in our store you know in in in our in our storehouse so it will be for the next period it will be an asset for the next period so if you are doing the statement of financial position with record state stationery and that current assets of 2010 but we have to take out the stationery from this 11000 rank so bright stationery over here stationery and we take eleven thousand minus the one which is remaining at the end of the period stationery on the hand of two thousand ran by the way if anything is written stationery on hand or consumable stores for instance consumable stores when you bite it's an expense but when they tell you that you have consumable stores remaining at the end of the period it's also an asset so yesterday black the amount which is remaining and then put the remaining day the answer after you deducted it over here so like just like we've done for stationery consumables those who do the exact same thing so I'm gonna highlight these eleven thousand because it relates stationery and then we move on to the next one bad debts so let me first write bad debts we have bad debts of twelve thousand Rand let's go back to our additional information so in fact let me highlight the stationery and the notice from the municipality forgot to highlight them again then we go to number four here we are told and data was declared insolvent and her account must be written of one thousand Rand so here we have a debtor who is declared insolvent now count need still need to be written off so we have bed beds of twelve thousand REM and then we add the one that we are told is insolvent we add this one thousand Rand so it's 12,000 plus one thousand ran so we take twelve thousand plus one thousand and then you usually don't stop there you also look for on the provision for bed nets or on the allowance for doubtful debts or allowance for credit losses those are the same things it's just that the new name that they are using allowance for credit losses so we are told that the provision for bad debts must be increased by 1,000 class now we have done quite a number of videos on bad debts and provision for bad debts or allowance for credit losses so if you like to choke this one's out for a thorough explanation you can find the links in the description below or the link in the top right of the screen you can click on that one but whenever our provision for bad debt increases we take the bad debts that we are given in our pH adjustment trial balance of 12,000 and then we add the 1,000 the new bad debt that we are told here at number 4 and we have just done that in Excel just now let me highlight this and then if our provision for bad debt has increased we add that increase of 100 can so we are told that the provision for bad debts must be increased by 1000 read so again it's the 12,000 grand over here so let me highlight this 12,000 plus they they the one which are told that that I was insolvent 1000 dream so 12,000 plus 1000 plus the provision for credits which is increased by 100 rent so we take 12,000 plus 1,000 plus the 100 rent which is the increase in the provision for bad debts 13100 rent there is our new friend debt so let's go back up over here sundry expenses of we are told 31,000 rent and from my additional information we have nothing on sundry expenses so we do not record anything so we do not our we have nothing an additional information so we record it exactly as it is here in the create judgment trial balance so we write down here sundry expenses and we take the amount 31,000 R and then we highlight that one over they then we move to the next one insurance 11,000 REM so let's go and look if this anything on insurance yes number 5 here we are told that the insurance total includes an insurance premium of 3,000 rain that was paid for the period first of May 2018 that is our period 238 238 of April 2019 so that has gone on to the next period remember we only concerned with what is happening during our period so the insurance total which is this total here the 11 thousand Rand we're told it includes an insurance premium of three thousand Rand that was paid for the period first of May 2018 to 30th of April 2019 now we can see from the 1st of May 2018 to 30th of April 2019 was at 12 months so we have an insurance premium which was paid for those 12 months now want to take out the insurance which belongs to the next period which belongs outside the period when dealing with we are dealing with 1st of January 2018 to 31st of December 2018 because we are told to do the statement of comprehensive income as a 30th of December 31st of December 2018 so how many months outside our year or our period well we've got 1st of January 2019 February 20 19 March 2019 and April 2019 remember account in April because it goes until the end of April it was until the 1st of April wouldn't count every so we have four months the whole of 2019 which are four months from the first of January 2019 to 30th of April 2019 so we have paid for four months for the next period and what do we call that we call that prepaid expense and like I said you can check the lessons on those in the discreet in the links in the description below prepaid expense goes to our statement of financial position were not asked to do that so we have to calculate how much does not belong to this period so we calculate the one for those four months so we take our so first let's write insurance remember we are given insurance figure here of 11,000 time and were told inside that 11,000 grand it includes an insurance premium of 3,000 grand that was paid for the p1 made to 2018 to 38 April 2019 so first let's calculate what we do not need during this period we will take so let me do that just outside all right here so I'll take three thousand can find this in your calculator times or you can divide it by twelve to see what their monthly premium should be 250 and we know for four months we paid for four extra month so let's isolate how many others so we take 250 times the four months we have 1000 grand so we know this insurance premium of 1000 brand has not belonged to this period it belongs to the next period who paid an extra 1000 gram which does not belong to this period and you know a statement of comprehensive income deals with amounts that belong to this period alone so we know that inside this 11,000 gram 1000 is for the next period so it's not an expense yet it's prepaid expense but prepaid expenses a current asset so we're not concerned about it here so we take our 11,000 ran 11,000 rain- the 1,000 run which you've just activated over here and it gives us an insurance of 10,000 grand which belongs to this period which belongs to this current period I hope that has made sense I hope the calculation has made sense over here if you want a different way of calculating it you have said 3,000 times four months divided by 12 months to see the one which does not belong to this period and you'll get an answer of 1,000 ran and then you deduct the 1,000 grand from the one in your from the amount the full amount given in your pre adjustment trial balance it's very important to pay attention to detail because it could have told us that that insurance of three thousand ran was not included or is an insurance premium which were which was not included in our insurance amount so that means to be a different figure which we need to add all together party at all the total include insurance premium so it's very important to pay attention to those so I'm going to highlight this one and then let's move on to the next one telephone we are told that the telephone was twenty three thousand rand and if you look at our additional information there is nothing on telephone over here so we're just going to take telephone and put the amount of 23,000 rims so let me write down telephone 23,000 because there's nothing in the additional information we take it as it is from our pay adjustment trial balance the next one is water and electricity and from additional information you can see here there is nothing on water and electricity as well so we're just going to take it as it is now create Testament child belong so you can see how easy it is when this to not address the additional information we just take it as it is water and electricity how much was that it was 18,000 grand so put 18,000 then I move on to the next one directors fees 50,000 grand so if we can see over here we are told that an amount of 10,000 grand was owed for directors fees and was due to be paid on the 2nd of January 2019 so this was due to be paid in the following period on the 1st of January 2019 but this is the beginning of the next period so in amount of 10,000 grand was still old for directors fees and was due to be paid on the 2nd of January 2019 so we still owed an extra 10,000 grand for directors fees so he inoa readjustment trial balance we have directors fees of 50,000 Ren so we have to add that 10,000 and that we still owe so what do we do right here directors fees directors fees in our pre adjustment trial balance we are given 50,000 Ren and over here we are told that 10,000 Ren was still all for directors fees which was due to paid at the beginning of the next period remember the beginning of the next period means it was odd for this current period if it was say that it belonged to January or it alone to the next period then we didn't as included it but it's at the beginning of the next period so it belongs to this period so we take the 50000 ran in the pre-assessment trial balance plus the 10,000 given in additional information there is our directors fees so we highlight directors fees and then move on to the next one so let's I like this one then we are given auditors fees over here and we can see from additional information there is nothing on auditors fees so we're just going to write auditors fees and record that amount what was the amount 16000 range so we write down 16000 then I'm going to take out the board from that one and then I highlight but it has fees okay now we can see I've gone through all my income and expenses in the nominal accounts section with in that we need to record in our statement of comprehensive income and from our additional information but it has fees or there was nothing I want it has refused over here so from our additional information you can see that we still have some items who still need to take into account the first one over here is depreciation you know that depreciation is an expense so we need to record it as part of our operating expenses so I write down depreciation and we can see here from our nominal account section depreciation would have appeared here but there's nothing here so we have to calculate it here so we are told that the depreciation must be provided for as follows on equipment 10% per annum on cost so if you do not know the true depreciation method its own cost and diminishing balance method I'm not gonna go in detail in this one but we have done lessons specifically on those ones you can click on the link at the top right of the screen you'll find the links in the description below so I'm quickly going to do the calculation equipment at 10% on costs or anoint so since we know it's on cost we know what to do we take the cost price of oil equipment here in our balance sheet section of the pre adjustment trial balance 90,000 times the percentage how much was the percentage 10% so let me do the calculation we do it over here appreciation equals to ninety thousand which was the cost price of the equipment even times the ten percent and so that is the depreciation for equipment then what next do I need to do so of done for equipment ten percent on vehicles at 20 percent PanAm on the diminishing balance method so let's calculate for vehicle so this one's only machine with diminishing balance method so you can check out those lessons if you do not to know how to do so but to the diminishing balance who take the cost of the vehicle two hundred and thirty thousand equals to two thirty thousand okay I should have open brackets first and then minus the accumulated depreciation on vehicle at the beginning which is the fifty thousand so minus fifty thousand Ren and then we get our carrying value and then noon and then we multiply that by the percentage and we're told that the percentage on the vehicle is twenty percent per annum on the diminishing balance method so time was 20 percent and gives us thirty six thousand then we add depreciation for all our assets so we add the nine thousand for a treatment plus that of vehicles if we had other asset to depreciation we'd have to add all the depreciation for this period and put them in our operating expenses of the statement of comprehensive income and just and depreciation okay and then we move on what else are we missing so we are only missing interest over here and company tax so since we our interest is not part of operating expenses we do it separately at the bottom so let's end up all our operating expenses or operating expenses it works through the sum of everything over here okay and then I make sure I put it as a negative plus our operating expenses i expenses and then move on over here hold it operating profit per rating profit or profit before interest and tax so you can call it either of those and then we know operating profit is our gross profit plus our plus other income we have no other income so that's our the income minus minus operating expenses remember curious as opposed to those operating expenses in negative and this is an excel formula so you punch it in your calculator then now that you have operating expectation profit we have to not take into account interest let's also provide for interest on the vengers that is yet to be paid now if you can see here we have the benches yours might not be dependent maybe long-term loan and you can see we're given the percentage and we're given the amount of the debenture at the amount of the long-term loan between all two hundred and sixty thousand grand so for you to know how much is for this period and how much you need to pay and how much you need to include in your statement of comprehensive income so let me just write that interest expense you take your percentage that you're given in brackets here times this amount 260,000 rent because that's how much you paid back panel so it's 12% times the two hundred and sixty thousand rain to sixty thousand three one thousand two hundred Solem put that as a negative one thousand two hundred and then we have our profit before tax and then our profit before taxes your operating profit - your operating expense that your profit before tax and then we calculate our Tech's our taxation without taxation let me highlight provide interest with updated the interest so our taxation here we are not given a tax percentage if you are given your tax percentage obviously it's so easy you will take your so let me write here Tex obviously if you are given a percentage let's say for instance like me in South Africa it's 28% you will take our profit before tax times 28% to get your tax expense but it has a negative but here I was just told that the company tax for the year is estimated to be thirty six thousand red so the company tax for the years has emitted to be thirty six thousand results given the company text so I'm just not good 36,000 reignover they then are a good share profit after tax or net profit so you can name it on of those two and it will be fine then that's profit before tax minus tax expense gives us our profit after tax so once we have our profit after text we had done with our statement of comprehensive income so let me just total let me put in the lines okay there we go so we are done with our line last line item so you can see how simple it is to calculate the statement of to do the statement of comprehensive income Anya given the pre adjustment trial balance and additional information very important tips when you asked to do the statement of comprehensive income or the statement of profit and loss another comprehensive income or the income statement they will use those names remember you look at the nominal account section because that's where your incomes and expenses are and then you may need to go up to your statement the balance sheet account section because you need to calculate your depreciation using your vehicle cost and equipment cost and the accumulated depreciation depending on the method you are asked to use and also your long term loan interest or your dependents interest remember you will find them on the balance sheet section and if there is nothing that is mentioned here on additional information with regard to a revised in the in the pre adjustment trial balance you just take the amount in the pre adjustment trial balance with their with the account and you just put it into your statement of comprehensive income but if additional information addresses it pay careful attention to that pay careful attention to your dates and then you'll be able to do your come statement of comprehensive income correctly I hope that has made sense and you've learned something over here if you have any questions or queries leave them in the comment section below otherwise if you have gained value from this lesson if you have learned something new we subscribe to our channel like this video and share it if you can till next time Church
