Page 33 - Business Studies

Business Studies for Secondary Schools

Loss
Steps to determine profit or loss:
Loss occurs when a business spends
Calculate total income: Add all the more money than it earns. This means the
money earned from selling petroleum expenditures are higher than the income.
jellies, shampoos, perfumes, and If the business makes a profit, the owner
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lipsticks. may retain part of the profit to keep it
Calculate total expenses: Add up growing. This is called reinvesting. To
all the costs, including purchasing decide if one should reinvest, one needs
stock of cosmetics (petroleum jellies, to look at the business records and see
shampoos, perfumes and lipsticks), if the business made a profit. Moreover,
rent, utility bills (electricity and water) one needs to look at whether there is an
increase in demand for the product and
and own salary expenses. the level of competition surrounding the
Calculate profit or loss: Subtract the business. This is why knowing about
total expenses from the total income. profit and loss is helpful.
If the result is positive, your business Remember: Regular profit and loss
will make a profit. If the result is calculations help small businesses, such
negative, your business makes a loss. as school business clubs, decide which
projects to continue, improve, or stop.
Remember this as you consider starting
Preparing an income statement new businesses in your community or

A small business must prepare an income managing existing ones. Always aim to
statement to understand whether it is making find ways for the business to increase
a profit or a loss. This financial statement profits and minimise losses.
shows a business’s income, expenditures, and
overall profit or loss over a specific period. Exercise 3.2
It involves comparing a business’s income 1. Your school business club started
and expenditures. An income statement can a small project selling homemade
also be a simple report showing how much snacks. After five months, the club
money a business earned (profit) or lost (loss) earned TShs 770,000 from sales
over a specific time. It helps in assessing and spent TShs 490,000 to run
the business’s financial performance. the project. Calculate the school
business club’s profit or loss.
Profit 2. Ms Johari plans to establish a small
Profit happens when a business makes business, with projected operating
more money from selling its products than expenses of TShs 700,000 for the
it spends on running it. In other words, the year and revenues from sales of
income is higher than the expenditures. TShs 1,000,000 for one year.

27 Student’s Book Form Two

03/10/2024 16:07
Business Studies Form 2.indd 27
Business Studies Form 2.indd 27 03/10/2024 16:07