Manvers Ltd includes with its financial statements each year a statement of value added. The draft value added statement for the year ended 31 May \(19 \mathrm{X} 6\) is as follows:

Discussion among the board of directors on the draft figures has revealed a wide variation of opinion on the usefulness of the value added statement to the readers of the accounts.
Some board members say that the added value statement is confusing as it is only a redrafting of the results which are shown in the profit and loss account which gives all the information necessary. Another view is that the statement of changes in financial position is far more important and this should be given in place of the value added statement.
Required

(a) A report to the directors showing the advantages of the value added statement comparing it with the profit and loss account and the cash flow statement. Your report should deal specifically with the points raised in discussion by the directors.

(b) Construct a profit and loss account from the information given.

(c) Calculate the operating profit for use in a statement of changes in financial position.

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Revenue from sales Bought in materials and services Value added by the company 204,052 146,928 57,124 Applied to: The benefit of employees Salaries 16,468 Deductions for income tax and national insurance 3,352 13,116 Pension schemes 2,810 Employees' profit sharing schemes 525 Welfare and staff amenities 806 17,257 Central and local government Value added tax 30,608 Corporation tax 985 Local rates 325 Tax etc. deducted from salaries and loan interest 3,832 35,750 The providers of capital Interest on loan capital 1,600 Income tax deducted 480 1,120 Interest on bank overdrafts 250 Dividends to shareholders of the company 500