Income and expenditure information lists what a business earned and what it spent in a period. The difference is the surplus if income is larger, or the deficit if expenditure is larger.
This lesson begins financial statements and interpretation in SPM Business. Later lessons use these figures in ratios and decisions.
A fictional month for a home-food business
Dapur Sari sells kuih boxes to offices and runs a small baking class. Here is one month, in RM.
| Income | RM | Expenditure | RM |
|---|---|---|---|
| Sales of kuih boxes | 9 600 | Ingredients | 4 200 |
| Baking class fees | 400 | Packaging | 800 |
| Delivery | 1 100 | ||
| Stall rent | 1 500 | ||
| Electricity and gas | 350 | ||
| Part-time wages | 1 200 | ||
| Total income | 10 000 | Total expenditure | 9 150 |
Surplus = 10 000 − 9 150 = RM850.
What does each figure tell the owner?
Ingredients are the biggest line at RM4 200, so a price rise from suppliers would hit the surplus quickly. Wages and rent together are RM2 700, which stays the same even if sales fall.
The baking class is only 4% of income (400 ÷ 10 000), so the business depends mainly on box sales. A quiet month for office orders would matter more than a quiet month for classes.
The mistake that costs marks
The common slip is treating total income as if it were profit. A student writes, “Dapur Sari made RM10 000 this month”, which ignores RM9 150 of spending.
A second slip is leaving out a line. If the wages of RM1 200 are missed, expenditure looks like RM7 950 and the surplus appears as RM2 050, which is too high.
| Step | Wrong | Right |
|---|---|---|
| Profit or surplus | RM10 000 | RM850 |
| Expenditure total | RM7 950 (wages missing) | RM9 150 |
| Conclusion | Very profitable | A small surplus, with thin margin |
How to explain the surplus in a case answer
Give the figure, the direction and a link. For example: “Dapur Sari had a surplus of RM850, which is 8.5% of its income. Ingredients take 42% of income, so the owner’s surplus depends strongly on ingredient prices.”
The surplus also has limits. It tells you about one month, and it does not show savings, loans or equipment that the owner may need to replace.
Check yourself
A stall had sales of RM7 500. It spent RM4 000 on stock, RM600 on transport, RM1 800 on wages and RM900 on rent. Find the surplus or deficit and write one sentence about it.
Answer
Expenditure = 4 000 + 600 + 1 800 + 900 = RM7 300. Surplus = 7 500 − 7 300 = RM200.
Sentence: “The stall made a small surplus of RM200, so a rise in stock cost of more than RM200 would turn it into a deficit.”
What to study next
Go on to interpreting financial ratios and test this skill in the practice set.
For a teacher to read your explanations beside the figures, see online one-to-one Business tuition.