Lecture Notes: Income and Expenditure Statement Analysis

Overview

• Focus on income and expenditure statement for Bazingo Private School.
• Comparison of budgeted vs. actual values for the year 2020.

Key Objectives

1. Calculate the total actual income for the school in 2020.
2. Interpret the negative net income.
3. Identify the main cause for negative income.

Calculating Total Actual Income 2020

• Method: Total income - Total expenses = Total profit/loss.
• Example provided:
  • Income: 650,000
  • Expenses: 561,000
  • Profit = Income - Expenses
• Summary row provides overall performance insights.
• Key Task: Calculate actual income for 2020 using the formula:
  • Let actual income be x.
  • x - 487,776.5 = -26,500
  • Solve for x: Transfer expense to other side adds:
    • x = 487,776.5 + 26,500
  • Calculated Actual Income: 374,775
• Observations:
  • 2020 income is significantly lower than other years, likely due to reduced school fees.

Understanding the Negative Net Income

• Negative Value Meaning: Represents a loss.
• 2020 was challenging, possibly due to COVID-19 impacts.

Identifying Main Cause of Loss

• Main Income Item Affected:
  • School fees saw a significant drop:
    • Budgeted: 500,000
    • Actual: 300,000
  • This shortfall is the primary contributor to the negative net income.
• Other minor losses:
  • Less income from Tuck Shop and national government.
  • However, loss in school fees is substantial and the main driver of overall loss.