Statement of Comprehensive

Income
Prepared by:
Van Hector Callanta
What is “Statement of Comprehensive
Income”?
• The Statement of Comprehensive Income is a financial statement
that presents the success or failure of business operations of a
company for a given period, in terms of profitability.
What are the elements of the
Statement of Comprehensive Income?
• The following are the elements of the Statement of Comprehensive
Income:
• Income
• Expenses
What is “Income”?
• Income are increases in economic benefits during the period in the
form of (1) inflows or enhancements of assets or (2) decreases of
liabilities that result in increases in equity, other than those
relating to investments by the business owners.
• Income includes both revenue and gains.
What is the difference between revenue
and gains?
• Revenue arises in the course of the ordinary activities of a business and is
referred to by a variety of different names including sales, fees, interest,
dividends, royalties, and rent.
• The revenue earned by a service business from rendering services is
commonly referred to as “Service Fees”.
• The revenue earned by a merchandising business from its sales of goods is
commonly referred to as “Sales”.
• Gains represent other items that meet the definition of income and may or may
not arise in the course of the ordinary activities of the entity
What is “Expenses”?
• Expenses are decreases in economic benefits during the period in
the form of (1) outflows or depletions of assets or (2) increases of
liabilities that result in decreases in equity, other than those
relating to distributions to the business owners.
• Expenses include both expenses and losses.
What is the difference between expenses
and losses?
• Expenses arise in the course of the ordinary activities of the business.
• Losses represents other items that meet the definition of expenses and may,
or may not, arise in the course of ordinary activities of the entity.
What is the formula of profit/loss?
• Income – Expenses = Profit/Loss
• If income is greater than expenses, the difference is profit.
• If income is less than expenses, the difference is loss.
Find the total amount of Income and
Expenses?
Service Fee P 870,000
Interest Income 60,000
Gains 20,000
Salaries Expense 300,000
Rent Expense 30,000
Utilities Expense 20,000
Supplies Expense 10,000
Depreciation Expense 40,000
Taxes and Licenses 70,000
Transportation Expense 5,000
Interest Expense 2,000
Miscellaneous Expense 1,000
Losses 15,000
What are the different methods of
presenting expenses in the statement of
comprehensive income?
• Expenses may be presented in the statement of comprehensive
income using either of the following methods:
• Nature of Expense method
• Function of Expense method (Cost of Sales method)
How are expenses presented using the
Nature of Expense method?
• Under this method, expenses are presented according to their
nature and are not reallocated among their functions within the
entity.
• A statement of comprehensive income that shows expenses by their
nature is referred to as prepared using a single-step approach.
How are expenses presented using the
Function of Expense method?
• Under this method, expenses are classified and presented according
to their function as part of cost of sales or, for example, the costs of
distribution or administrative activities.
• A statement of comprehensive income that shows expenses by their
function is referred to as prepared using a multi-step approach.
What are the major categories of expenses
under the function of expense method?
• The following are the major categories of expenses under the function of
expense method:
• Cost of Sales (Cost of Goods Sold)
• Distribution Costs (Selling Expenses)
• Administrative Expense (General and administrative expenses)
• Finance Cost (Interest expenses)
• Income Tax Expenses
What are Distribution Costs/Selling Expenses?
• Distribution Costs are costs attributable to selling activities.
• Examples:
• Freight-out
• Sales commission
• Advertising Expenses
• Salaries of sales personnel
• Depreciation on delivery equipment
• Rent pertaining to space occupied by sales department
What are Administrative Expenses?
• “Administrative expenses” is a residual category of expenses, meaning, an
expense that does not qualify under the other categories is included in
this category.
• Examples:
• Insurance Expense
• Taxes and licenses
• Salaries of non-sales personnel
• Depreciation of assets not used by the sales department
• Rent pertaining to office space
Find the total amount of distribution costs
and administrative expenses:
Cost of goods sold P 250,000
Insurance Expense 120,000
Advertising Expense 18,000
Freight-out 36,000
Loss on sale of equipment 4,000
Rent Expense (one-half pertains sales department) 120,000
Salaries Expense (1/4 pertains to non-sales personnel) 200,000
Sales commission expense 20,000
Interest Expense 1,000
Bad debt expense 6,000
The trial balance of ABC Co. on December 31, 2018 shows the following information:
Debit Credit
Sales P 900,000
Interest Income 60,000
Gains 20,000
Inventory, beg. P50,000
Purchases 200,000
Freight-In 10,000
Purchase Returns 5,000
Purchase Discounts 7,000
Freight out 25,000
Sales Commission 30,000
Advertising Expense 15,000
Salaries Expense 300,000
Rent Expense 30,000
 Debit Credit
Depreciation Expense 40,000
Utilities Expense 20,000
Supplies Expense 10,000
Transportation and travel Expense 5,000
Insurance Expense 12,000
Taxes and Licenses 70,000
Interest Expense 2,000
Miscellaneous Expense 1,000
Loss on the sale of equipment 15,000
Additional information:
a. Ending Inventory is 80,000.
b. One-half of the salaries, rent, and depreciation expenses pertain to the sales
department. The sales department does not share in the other expense.

REQUIRED:
Prepare the statement of comprehensive income