FUNDAMENTALS OF ABM 2

Chapter 2
Statement of Comprehensive Income

Lesson 1 Elements of theSCI

Lesson 2 Presentation of SCI

At the end of the session the learners will be able to:

a. Identify the elements of the SCI.

b. Prepare a Single statement approach/ single-step SCI
for a service company.
c. Prepare a Two Statement approach/ multi-step SCI for
a merchandising company
Income Statement ( Profit or Loss Statement)
Like a video (measurement across set of time/ accounting period of a organizations
Financial Performance
Ex. An income statement from 1-Jan-19 to 31-Dec-19

List of INCOME accounts, their respective totals and an overall summed total
Followed by EXPENSE accounts, their respective totals and an overall summed total
And end with NET INCOME result ( which INCOME minus EXPENSE)

Revenue - Expenses = Net Income

Statement of Comprehensive Income
Statement that reports the results of operations of the
business for one accounting period. This statement
contains the following information:

a. Revenue generated by operating the

business
b. Cost spent to generate the revenue
c. Income, which is the excess of revenue over
costs.
ABC Company
Statement of Comprehensive Income
For the year ended December 31,2016
“For the Period”
The SCI is described as a “for the period” report.
REVENUES P1,290,000
This means that the amounts presented on the
Less: EXPENSES 890,000
report include only those that occurred within the
given period. Net Income 400,000
Profit or Loss

Profit or Loss is the total of income minus the expenses of the

company excluding other comprehensive income. The
resulting amount is net profit or net income if the total income
of the company exceeds its total expenses. On the other
hand, the resulting amount is a net loss if the total expenses
exceeds the total income.
Other Comprehensive Income
Another Comprehensive Income is composed of income and
expenses that are not presented as profit or loss.
These are special accounts such as:

- Unrealized gain or loss on investment in equity instrument measured

at fair value through other comprehensive income.
- Gain or loss from translating the financial statements of a foreign
operation
- Change in revaluation surplus
- Unrealized gain or loss from derivative contracts designated as cash
flow hedge
- Actuarial gain or loss on defined benefits plan by the full recognition
approach
Components of SCI
What are the actions reported on SCI?

Income
It refers to a transaction that increases assets
and /or decreases liabilities leading to increase
in equity resulting from the operations of the
business and not from the owner’s contribution.
Expenses
These are transactions that decrease assets and
/ or liabilities leading to decrease in equity
resulting from the operations of the business and
not because of distributions toowners.

Revenues Expenses
Income generated from the primary Expenses related to the primary operations
operations of the business. of the business.

Gains Losses
Income derived from other activities of the Losses from other activities of the
business. business.

CLASSIFICATION OF INCOME as to revenue and

gains is dependent on the nature of the business.
 Elements of SCI
REVENUE
Service Income
Account generally used to describe revenue
derived from rendering services.
RENTAL INCOME
PROFESSIONAL FEE
TUITION FEE REVENUE

Sales
Revenue account generally used to describe
revenue derived from selling of goods.

OFFICE SUPPLIES SALES

BOOK SALES
FOODSALES

Revenue from sales of goods is recognized when

goods have been delivered.
 Elements of SCI
EXPENSES
Selling Expense
Pertains to expenses related to selling the products of the company. And other selling related expenditures.

PRICE OF INVENTORY
BROKERAGE
SHIPMENT COST / FREIGHT-IN
ADVERTISING EXPENSE
COMMISSION EXPENSE

Administrative Expenses
Refers to all other expense related to the operation of
the business, other than cost of sales. Or expense related to office and administration work/ other office
related expenditures.

SALARIES OF EMPLOYEES
SUPPLIES
UTILITIES OF THE HEAD OFFICE
RENT OF OFFICE
Lets try Worksheet
I. Classify the following weather they are classified as Other Comprehensive
Income (OCI) or as part of Profit or Loss (PL)

1. Sales
2. Rent income
3. Unrealized gain or loss on investment in equity instrument measured as fair value
through other comprehensive income
4. Salaries expense
5. Utilities expense
6. Gain or loss from translating the financial statements of a foreign operation
7. Administrative expense
8. Rent expense
9. Selling expenses
10. Selling expense
Net Sales
Only NET SALES is reported on the face of the SCI.

Gross Sales
Less: Sales Returns and Allowances
Sales Discount

NET SALES
SALES P 450.00
Less: Sales Returns andAllowances 75.00
Sales Discount 7.50
NET SALES p 367.50
Cost of Goods Sold / Cost of Sales
Part of inventory accounting.

Beginning Inventory Purchases

Add: Net Purchases Add: Freight-In
Cost of Goods Available for Sale Less: Purchase Returns
Less: Ending Inventory Purchase Discounts

COST OF GOODS SOLD NET PURCHASES

Beginning Inventory P 0.00

Purchases P 55,344.00
Add: Freight-In 430.00
Less: Purchase Returns 760.00
Net Purchases 55,014.00
Cost of Goods Available for Sale 55,014.00
Less: Ending Inventory 2,320.00
COST OF GOODS SOLD p 52,694.00
Presentation of SCI
There are two formats for the SCI, namely the
single – step and the multi-step.
ABC Company
Statement of Comprehensive Income
Single-Step SCI For the year ended December 31,20X1
Closely related to the nature of expense format.
It lists down the expenses based on the source
of expenses such as salaries, purchases, Service Revenue xxx
supplies, utilities, fuel and depreciation Rental Income xxx
Interest Income xxx
Groups all revenue items together and all the Increase in Inventory* xxx
expense items together. TOTAL REVENUES AND INCOME XXX

So called because net income is computed using Net Purchases yy

only one step, deducting total expenses from Depreciation Expense y
total revenues. Utilities Expense yy
Salaries Expense y
Generally used by small businesses and service Interest Expense yy
businesses because of its simplicity. Insurance Expense y
Supplies Expense yy
TOTAL EXPENSES y YYY
yy
y
yy
y
yy
Presentation of SCI cont.
There are two formats for the SCI, namely the
single – step and the multi-step.
ABC Company
Statement of Comprehensive Income
Multi-Step SCI For the year ended December 31,20X1
Associated with the function ofexpense.

Characterized by the presentation of several Gross Sales A

subtotals until net income is determined. It is Sales Returns andAllowances (B)
popularly used in business, Sales Discounts (C)
Net Sales D=A-B-C
The subtotals are additional information that give Cost of GoodSold E
the readers more understanding of the Gross Profit F=D-E
operations of the business.
Operating Expenses:
First subtotal is GROSSPROFIT General and administrative expenses G
Next subtotal is INCOME FROM OPERATIONS Selling Expense H I=G+H
Last is the bottom line which is the NET INCOME Income from Operations J=F-I

Interest Income K
Interest Expense L

NET INCOME J+K-L

Class Activity
Preparation of SCI
Divide the class into 2groups.
1 group will prepare Single-
step SCI and another group
will prepare Multi-step SCI
using the provided accounting
worksheet.

(15 minutes)
Thank You!

Reference(s):
D. R. C. Salazar, CPA, 2017. Fundamentals of Accountancy Business and Management 2. Rex
Bookstore First Edition. Pages 33 -56

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Presentation madeby:

GIAN PAULO M. RABANAL, LPT, MBA©