Question

Statement of Profit or Loss for years 2016 to 2019 Year 2019		Year 2018		Year 2017		Year 2016
$		$		$		$
Sales revenue	1,095,910		1,060,900		1,030,000		1,000,000
Less: Cost of goods sold	(895,358)		(866,755)		(842,540)		(820,000)
Gross profit	200,552		194,145		187,460		180,000
Other operating expenses	(162,877)		(161,827)		(160,900)		(160,000)
Income before tax	37,675		32,318		26,560		20,000
Less: Income tax expense	(3,768)		(3,232)		(2,656)		(2,000)
Net income	33,907		29,086		23,904		18,000

Required:

1. Compute the index-number trend percentages for the accounts below in all years, using 2016 as the base period.

1. Sales revenue;
2. Gross profit;
3. Other operating expenses; and
4. Net income. .

2. For items (i) and (iv) in Part (a) above, analyze the trend, the observed results, and the likely reason(s) behind respectively.

Answer 1

	2019	2018	2017	2016
Sales revenue	10,95,910	10,60,900	10,30,000	10,00,000
Trend (Increasing)	109.59%	106.09%	103.00%	100.00%
	2019	2018	2017	2016
Gross profit	2,00,552	1,94,145	1,87,460	1,80,000
Trend (Increasing)	111.42%	107.86%	104.14%	100.00%
	2019	2018	2017	2016
Other operating expenses	1,62,877	1,61,827	1,60,900	1,60,000
Trend (Increasing)	101.80%	101.14%	100.56%	100.00%
	2019	2018	2017	2016
Net Income	33,907	29,086	23,904	18,000
Trend (Increasing)	188.37%	161.59%	132.80%	100.00%
b) Sales revenue is increasing trend it can be because of two reasons either the sale price has been increased or number of units sold has been increased.
Net income is increasing in an increasing trend because there is very less increment in other operating income in comparison of sales revenue. So the net income is increasing in increasing rate