A simple company statement has three parts: an income statement that ends in profit for the year, a retained profit calculation, and a statement of financial position that balances. Work in that order, because each part feeds the next.
Whether limited-company statements are examined, and in what layout, depends on your exam year. Check the current Cambridge page linked below before you rely on the format here. This is a teaching layout with tax ignored.
In what order do you build it?
- Income statement: revenue less cost of sales gives gross profit. Deduct expenses to reach operating profit. Deduct loan interest to reach profit for the year.
- Retained profit: opening retained profit plus profit for the year, less dividends.
- Statement of financial position: assets on one side, equity and liabilities on the other. Retained profit from step 2 goes into equity.
Loan interest sits below operating profit as a finance cost. Dividends never appear in the income statement.
Worked example
Teratai Gadgets Ltd, year ended 31 December 2026. Share capital is RM 60,000.
There is a bank loan of RM 20,000 at 6% a year, with the year’s interest still unpaid. Opening retained profit RM 20,000. Dividends paid RM 8,000.
| Item | RM |
|---|---|
| Revenue | 240,000 |
| Cost of sales | 150,000 |
| Wages | 30,000 |
| Rent | 12,000 |
| Depreciation | 8,000 |
| Other expenses | 6,000 |
At 31 December: non-current assets at cost RM 130,000, accumulated depreciation RM 40,000, inventory RM 25,000, receivables RM 18,000, bank RM 12,000, payables RM 19,000.
Step 1, income statement.
| RM | |
|---|---|
| Revenue | 240,000 |
| Cost of sales | (150,000) |
| Gross profit | 90,000 |
| Wages, rent, depreciation, other (30,000 + 12,000 + 8,000 + 6,000) | (56,000) |
| Operating profit | 34,000 |
| Loan interest (20,000 × 6/100) | (1,200) |
| Profit for the year | 32,800 |
Step 2, retained profit. 20,000 + 32,800 − 8,000 = RM 44,800.
Step 3, statement of financial position.
| RM | |
|---|---|
| Non-current assets (130,000 − 40,000) | 90,000 |
| Inventory, receivables, bank (25,000 + 18,000 + 12,000) | 55,000 |
| Total assets | 145,000 |
| Share capital | 60,000 |
| Retained profit | 44,800 |
| Equity | 104,800 |
| Bank loan (non-current liability) | 20,000 |
| Current liabilities: payables 19,000 + interest owed 1,200 | 20,200 |
| Equity and liabilities | 145,000 |
Step 4, check twice. Assets 145,000. Equity and liabilities: 104,800 + 20,000 + 20,200 = 145,000. They agree without any balancing figure.
The mistake to watch for
A frequent mistake is to deduct the dividend before profit for the year.
Mistaken profit: 32,800 − 8,000 = RM 24,800 profit for the year, then retained profit 20,000 + 24,800 = RM 44,800.
The closing figure happens to match, which hides the error. Profit for the year is understated by RM 8,000 and the dividend is in the wrong statement.
The correction is to stop at RM 32,800 as profit for the year, and show the dividend only in the retained profit workings. Marks are given for each figure, so a right closing balance does not rescue a wrong profit line.
Check yourself
Try these, then open each answer.
1. Revenue RM 90,000, cost of sales RM 54,000, expenses RM 21,000, loan interest RM 800. Find profit for the year.
Show answer
Gross profit 90,000 − 54,000 = 36,000. Operating profit 36,000 − 21,000 = 15,000. Profit for the year 15,000 − 800 = RM 14,200.
2. Using answer 1, opening retained profit is RM 6,000 and dividends are RM 4,000. Find closing retained profit.
Show answer
6,000 + 14,200 − 4,000 = RM 16,200.
3. Total assets are RM 76,000, equity is RM 56,200 and the loan is RM 10,000. What are the current liabilities?
Show answer
76,000 − 56,200 − 10,000 = RM 9,800. This should be the sum of the items listed as current liabilities, so check it against the list.
Where this leads next
The sole-trader statements module uses the same income statement logic, and depreciation and asset disposal explains the depreciation line. Next, how to avoid presenting fictional records as investment advice covers what you should and should not conclude from a statement. The double-entry and ledger trainer and the percentage-base explorer support the entries and the interest calculation.
If your statements go wrong at one particular line, a teacher in online one-to-one Accounting tuition can watch you build one and stop you at that point.