Profit before tax (PBT) is calculated by taking the net profit of the company before accounting for the corporate tax expense. This involves adding back tax expenses to the net profit or loss from the income statement. Here’s how you can calculate it step by step:

### Steps to Calculate Profit Before Tax (PBT)

1. **Start with Net Profit (or Loss):** This is the bottom line of the income statement after all operating expenses, interest, and other incomes have been accounted for, but before tax.

2. **Add Back Corporate Tax Expense:** Add the tax expense for the year to the net profit.

### Formula:
\[ \text{Profit Before Tax (PBT)} = \text{Net Profit (or Loss)} + \text{Corporate Tax Expense} \]

Given the information in your financial statements, let’s calculate PBT for HMK Limited.

### Extracted Information:

- **Corporate tax for the year ended 31 December 2023:** Sh. 80,000
- **Net profit before tax adjustments:** This will be derived from the profit and loss adjustments.

To calculate Net Profit before tax adjustments:
- Start with changes in equity and liabilities
- Add back interest expense as it is deducted after operating profit

### Net Profit Before Tax Calculation:
1. **Corporate Tax Expense for 2023:** Sh. 80,000
2. **Net Profit Adjustment:**
   - Revenue reserves (Retained earnings) increased from Sh. 774,000 to Sh. 84,000.

Let’s calculate:

\[ \text{Profit Before Tax (PBT)} = \text{Revenue Reserves (current year)} - \text{Revenue Reserves (previous year)} + \text{Corporate Tax Expense} + \text{Interest Expense} \]

From the information:
- Previous Revenue Reserves are not given, but we can assume it's what has been retained after last year’s profit.

Let's use the key components:
- Revenue reserves increased by Sh. 774,000 to Sh. 84,000.

\[ \text{Net Increase in Revenue Reserves} = \text{Sh. 774,000} \]
\[ \text{Corporate Tax Expense} = \text{Sh. 80,000} \]
\[ \text{Interest Expense} = \text{Sh. 38,400} \]

So,

\[ \text{Profit Before Tax (PBT)} = \text{Sh. 774,000} + \text{Sh. 80,000} + \text{Sh. 38,400} \]
\[ \text{Profit Before Tax (PBT)} = \text{Sh. 892,400} \]

### Summary:
\[ \text{Profit Before Tax (PBT)} = \text{Sh. 892,400} \]

This calculation assumes all revenue reserves for the year were retained earnings.

Would you like to ask more details or have any other questions?

Here are some questions you might want to ask next:
1. What other items can affect the calculation of PBT?
2. How to prepare an income statement?
3. What are retained earnings and how are they calculated?
4. Why is the profit before tax important for financial analysis?
5. What are the tax implications on PBT?

**Tip:** Always ensure to verify the figures from the original documents for accuracy when performing financial calculations.

Learn how to calculate Profit Before Tax (PBT) step-by-step with a detailed explanation. This problem involves understanding financial statements and accounting principles, including the formula PBT = Net Profit + Corporate Tax Expense. Suitable for adults and professionals needing to understand financial analysis.

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