Bu120 Tma03

B120 TMA03

Part 1.

1.A   Income Statement

An income statement which is also known as a Profit and Loss account is intended to show businesses incomes and expenditures.   With this you can then calculate the businesses profit or loss based upon the differences between them.   It must be mentioned that this is a period of time being measured and it doesn’t show monthly fluctuations. A profit and loss account is useful to use when looking back at past performances as you can use these figures to predict the performance of a business in the future.   A business could also use these figures to help improve on its profit by making changes on the largest of its expenditures you can also use the figures for setting targets for the business to strive towards.


From looking at Joseph’s statement I can see that Joseph is making a profit clearly what a business needs to do, however you can clearly see he is making less of a profit in 2012 compared to 2011.   The drop in profit is very dramatic and very concerning as if the rate of fall was to carry on into 2013 then he will definitely be making a loss.   The other area of concern is the increase in wages that Joseph is paying out to keep his staff from leaving but there is not a greater return in gross profit.   Another concern is that the closing stock has risen in 2011 and 2012 and that purchases has also risen in 2011 and 2012 if this was managed more closely a greater gross profit would be made.   It could also mean his gamble of entering into the European market is not paying of just yet or the deep recession in Europe is actually affecting his sales as previously warned.   Modern Furniture also need to start looking at other suppliers of its raw materials as these have risen at an alarming rate if he can manage to re-negotiate better rates or find an alternative supplier then this will also help Modern Furniture increase its Profit.

2.A   Balance Sheet

A balance sheet is a statement of the liabilities,...