Department of Education

National Capital Region

S CH OOLS DIV IS ION OFFICE
MA RIKINA CITY

Fundamentals of Accountancy, Business

and Management - II
Statement of Comprehensive Income
Quarter 1 – Module 2

Writer: Omo A. Estrada, MBA

Cover Illustrator: Sheila Mae A. Malesido, MBA, LPT

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 What I Need to Know

At the end of this module you will be able to:

1. identify the elements of the SCI and describe each of these items for a service
business and a merchandising business;
2. prepare an SCI for a service business using the single-step approach; and
3. prepare an SCI for a merchandising business using the multiple-step approach.

What I Know

Classification of accounts. Mark check (/) if the account belongs to the Sales, Cost of
Sales, or Operating expenses. Write your answer on a sheet of paper or notebook.
Operating
Account Titles Sales Cost of Sales
Expenses
Net sales
Supplies used
Mdse. Inventory Beg.
Depreciation Expense
Purchases
Freight out
Delivery expense
Purchase return and Allowance
Freight In
Sales Discount
Gross Sales
Insurance expense
Advertising expense
Sales return and Allowance
Net Purchases

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 What’s In

Activity 1. Prepare a statement of financial position according to account form using

the following account titles. Write your answer on a sheet of paper.
Account Title
Computer Cash on hand Long-Term Debts
Account receivable Bonds payable Accrued salaries expense
Interest payable Supplies on hand Unearned Income
Withdrawal Prepaid Insurance Interest receivable
Notes payable Petty Cash Fund Tools
Inventories Advanced to Employees Wages payable
Mortgage payable Advanced from
Customers

Lesson
Statement of Comprehensive Income

1 ( Income Statement )

INTRODUCTION:
Statement of Comprehensive Income – is a summary of the revenues earned and the
expenses incurred by the business for a certain period of time.

What is It

Elements of Comprehensive Income

The diagram below shows that if a revenue has a bigger amount than expenses the
result of the operation is Net Income, if the revenue is smaller amount to expenses the
result of the operation will be Net Loss.

Net
Revenue Expenses Income

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KEY FEATURES OF A STATEMENT OF COMPREHENSIVE INCOME (INCOME
STATEMENT)

A statement of comprehensive income is conventionally compared to a running

video because it presents an entity’s business activities from the start to the end of the
period. Below are the key features of a statement of comprehensive income.

The Title - The Statement of Comprehensive Income is a financial report. As a financial

report, it must be properly identified and dated. The appropriate title of the statement
will enable the users to differentiate the statement of comprehensive income from the
other financial reports issued by the entity.
An appropriate title or heading includes the name of the entity, the title of the report
(i.e., statement of comprehensive income), and the period it covers.

Revenue as defined by The Conceptual Frameworks for Financial Reporting

(International Accounting Standard Board 2010).
… arises in the course of the ordinary activities of an entity and is referred to by a variety
of different names including sales, fees, interests, dividend, royalties, and rent.”
Revenue are the first line item in the statement of comprehensive income. Revenues
earned by the business vary according to the nature of the entity. A small retail store
will have sales as its main revenue. A small law firm, on the other hand, will have
professional fees as its main revenue. Also, revenue, may come from interest and
dividends that are earned on financial instruments such as time deposits and equity
shares, respectively.

Expenses is defined by The Conceptual Framework for Financial Reporting (IASB 2010).
Arising in the course of the ordinary activities of the entity include, for example, cost of
sales, wages and depreciation. They usually take the form of an outflows or depletion of
assets such as cash and cash equivalents, inventory, property, plant and equipment.
Classifying expenses for merchandising concern is more complex than that for a service
concern. For a merchandising concern, the expenses are classified as either cost of
sales, selling expenses, or administrative (operating) expenses.

The cost of sales is the amount paid or payable by the business entity to its supplies for
the merchandise sold to the business entity’s customers.

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Cost of sales will take a general formula as seen below:

Table 2-1
Sample format of Computation of Cost of Sales

Computation of Cost of Sales

(Applicable for Records following Periodic Inventory System)

Beginning Inventory ………………… P 10,000

Add: Purchases ……………………….. 90,000
Freight In………………………… 10,000
Total Purchases………………………. P100,000
Less: Purchases Return & Allowance 2,000
Purchase discount 1,000 3,000 97,000
Total Goods Available for Sale P 107,000
Less: Ending Inventory…………………………………….. 12,000
Cost of Sales…………………………………………………. P 95,000

Income as defined by The Conceptual Framework for Financial Reporting (IASB,

2010);
“Represent other items that meet the definition of income and may, or may not, arise in
the course of the ordinary activities of an entity.”
To reiterate, gains are incidental to the operations of a business. For example, if a law
firm sells its office printer for P5, 000 when the carrying amount of the printer is
P4, 000, a gain amounting to P1, 000 must be recorded.

Losses, on the other hand, is defined as follows (IASB, 2010);

“Represent other items that meet the definition of expenses and may, or may not,
arise in the course of the ordinary activities of the entity.”

One can say that a loss is to an expense as a gain is to a revenue. Generally, a

loss is not expected to be incurred periodically by business organizations. For example,
if a law firm sells for P1,000 an office printer with a carrying value of P3,500, there is a
loss of P2,500. The said amount cannot be categorized as an expense (specific) since
such is not expected to occur routinely and normally.
Other terms
Other items included in the computation of the total comprehensive are income
taxes and items of other comprehensive income. Income tax is the sum of money payable
to the government. Items of other comprehensive income are increase or decrease in
economic benefit for a period.

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Table 2-3
Sample of form Statement of Comprehensive Income for a Service business.
(single-step approach)

Company
Statement of Comprehensive Income
For the year ended, Dec. 31, 2019

Service Income P 132,000

Less: Operating Expenses
Salaries P 24,000
Rent expense 5,000
Office supplies expense 4,000
Depreciation expense 4,000 37,000
Net Income P 95,000

Table 2-4
Sample of form Statement of Comprehensive Income for a Merchandising business.
(multiple-step approach)

BANDOLINO SHOE Company

Statement of Comprehensive Income
For the year ended, Dec. 31, 2019

Sales P 135,000
Less: Sales return and allowance P 2,000
Sales discount 1,000 3,000
Net Sales P 132,000
Less: Cost of Sales (See Figure 2:2) 95,000
Gross Profit P 37,000
Less: Operating expenses 23,000
Net Income/Loss P 14,000

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 What’s New

ACTIVITY

Prepare a Statement of Comprehensive Income (single-step approach using service

business), write in the separate sheet of paper or notebook.
Case 1
Below are the accounts of Super Mall Company for the year ended, December 31, 2019.
Service Fees 156,000
Salaries expense 12,000
Supplies expense 11,000
Depreciation Expense 9,000
Bad debts 7,000
Rent expense 13,000
Misc. expense 23,000

Computation of Cost of sales. Compute the missing amounts.

Case 1 Case 2
Beginning inventory ? 25,000
Purchases 145,000 115,000
Freight In 12,000 10,000
Total Purchases ? ?
Purchase Return and 4,000 3,000
Allowance
Purchase Discount 1,000 2,000
Total Goods Available for 170,000 ?
sales
Ending inventory ? ?
Cost of sales 145,000 115,000

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 What’s More
ACTIVITY
Prepare a statement of Comprehensive Income and label its parts. Then answer the
questions below:

Case 1
Below are the accounts of National Services for the year ended, December 31, 2019:
Sales 145,000
Sales return and allowance 4,000
Sales discount 2,000
Beginning Inventory 12,000
Ending inventory 14,000
Purchases 87,000
Purchase return and allowance 2,000
Purchase discount 1,000
Freight In 3,000
Freight Out 5,000
Salaries expense 6,000
Advertising expense 4,000
Misc. expense 3,000

1. How much is the Net sales of the entity?

2. How much is the total Cost of sales of the entity?
3. How much is the total Gross profit of the entity?
4. How much is the total operating expense of the entity?
5. How much is the Net Income or Loss of the entity?

What I Have Learned

The following are lists of accounts appearing in the books of Luneta Suspension
and Specialist. The firm is in its second year of operation ending December 31, 2019.
Identify the financial statement and the section where they should appear by using the
lettered- choices below. Write your answer on a separate sheet of paper or notebook.

a. Statement of Comprehensive Income – Net Sales

b. Statement of Comprehensive Income – Cost of Sales
c. Statement of Comprehensive Income – Operating Expenses
d. Statement of Comprehensive Income – Other Income
e. Statement of Comprehensive Income – Other Expenses

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1. Sales return and allowance 9. Purchase Discount
2. Interest Income 10. Loss on Sales
3. Freight Out 11. Gain on Sales
4. Freight In 12. Inventory Beginning
5. Interest Expense 13. Insurance Expense
6. Net Purchases 14. Sales Discount
7. Total Goods Available for Sales 15. Purchases
8. Rent Expenses

What I Can Do
ACTIVITY 4
Supply the missing formula or terms. Write your answer on a separate sheet of paper
or notebook.
1. Sales – Sales return and allowance and sales discount = ________________
2. Purchases – purchase return and allowance and purchase discount = ___________
3. Net Sales – Cost of Sales = ________________
4. Total Goods Available for sales – Inventory Ending = ________________
5. Gross Profit – Operating Expenses = ________________
6. Inventory Beginning + Net Purchases = _________________________
7. Gross Sales same as ________________
8. Gross Profit – Operating Expenses (Bigger Amount to Gross Profit) = ___________
9. Add all Operating Expenses - ___________________
10. Inventory Ending is part of Financial Position, Write Yes or No

Additional Activities
ACTIVITY 5
Compute for the amounts being asked for. Write your final answers on a sheet of paper
or notebook.

CASE – 1

Sales ₱ 125,000
Sales Returns and Allowances ₱ 3,000
Sales Discounts ₱ 2,000
Net Sales ?

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CASE – 2

Purchases P110,000
Purchase Return & allowance P5,000
Purchase Discount P3,000
Net Purchases ?

Assessment

Choose the letter that corresponds to the correct answer. Write your
answer on a sheet of paper or notebook.
1. Which of the following is an element of the statement of comprehensive
Income?
a. Cash
b. Receivables
c. Revenues
d. Interest receivables
2. Which of the following is an element of a statement of financial position?
a. Supplies Used
b. Prepaid rent
c. Revenues
d. Advertising Expense
3. Which of the following is an element of a statement of comprehensive
income?
a. Cash equivalents
b. Mr. Cruz, Capital
c. Ms. Santos, Drawing
d. Professional fees
4. Which of the following is an element of statement of comprehensive income?
a. Notes payable
b. Notes Receivable
c. Interest Receivables
d. Interest Income
5. Which of the following is not on the statement of comprehensive income using
the part of expense format?
a. Gross Profit
b. Depreciation expense
c. Salaries expense
d. Rent expense

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Classification of Accounts: Write SFP if the item is reflected on the Statement of
Financial Position and SCI if the item is on the Statement of Comprehensive Income.
Write your answer on a separate sheet of paper or notebook. (There might be two (2)
possible answers)

1. Net sales
2. Total current assets
3. Gross profit
4. Total Equity
5. Net Purchases
6. Ms. Solis, Drawing
7. Mr. Trinidad, Capital
8. Net income/Loss
9. Inventory Beginning
10. Inventory Ending
11. Freight In
12. Petty Cash Fund

Case – 1
Solve the case and compute. Then, answer the question below.

The following are the accounts of Gab Medical Clinic for December 31, 2019:
Sales 1,500,000
Sales return and allowance 12,000
Sales discount 11,000
Inventory Beginning 121,000
Inventory Ending 109,000
Net Purchases 720,000
Salaries Expense 125,000
Supplies Expense 112,000
Depreciation Expense 38,000
Utilities Expense 42,000
Insurance Expense 54,000
Rent Expense 55,000
Bad Debts Expense 22,000

You are employed by the entity as bookkeeper in its first year of operation. Prepare the
necessary financial statements for the year 2019.
1. Compute the Net Sales
2. Compute the Cost of Sales
3. Compute the Gross profit
4. Prepare a statement of comprehensive Income (Merchandising Business)

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Case – 2

The following are the accounts of Marimar Clinic for December 31, 2019.
Read the given questions below and compute.

Cash 126,000
Account receivable 224,000
Allowance for Bad debts 14,000
Inventory Ending 123,000
Supplies 23,000
Prepaid rent 34,000
Tools 35,000
Computer 78,000
Accumulated Depreciation – Com. 12,000
Account payable 34,000
Notes payable 45,000
Accrued salaries 16,000
Bonds payable 78,000
Mortgage payable 34,000
Marimar, Capital Beginning ?
Marimar, Drawing 22,000
Net Income 78,000

1. How much is Marimar’s beginning capital?

2. Determine the total current assets of the company.
3. Determine the total assets of the company.
4. Determine the total current liabilities of the company.
5. How much is Marimar’s ending capital?

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 References

1. Fundamentals of Accountancy, Business and Management 1 and 2

Author – Florenz C. Tugas, Herminigilda E. Salendres, and Joy S. Rabo
Copyright 2016 by Vibal Group, Inc.

2. Introductory Accounting
Author – D.S. PASION, W.T. PASION, and E.T. PASION
Phoenix Publishing House, INC. 927 Quezon Avenue, Quezon City

3. Theory of Accounts CPA Examination

Author – Conrado T. Valix, BSC, LLB, CPA, CPA Review Director, and CPA Reviewer
2005 Edition

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 Development Team of the Module

Writer: Omo A. Estrada, MBA (SEHS)

Editors: Lourdes B. Guyong (NHS)
Internal Reviewer: Emily G. Santos, Sylvette Sabaupan,
Dunhill Jan Elmido, Eva Montana
External Reviewer: Kervin Rey G. Torente, (ADMU)
Cover Illustrator: Sheila Mae A. Malesido, MBA, LPT (SEHS)
Management Team:
Sheryll T. Gayola
Assistant Schools Division Superintendent
OIC, Office of the Schools Division Superintendent

Elisa O. Cerveza
Chief, Curriculum Implementation Division
OIC, Office of the Assistant Schools Division Superintendent

Emily G. Santos
Public Schools District Supervisor

Ivy Coney A. Gamatero

EPS– Learning Resource Management and Development System

For inquiries or feedback, please write or call:

Schools Division Office- Marikina City

Email Address: [email protected]

191 Shoe Ave., Sta. Elena, Marikina City, 1800, Philippines

Telefax: (02) 682-2472 / 682-3989

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