Contextualized Learning Material 12- FABM 2 - Quarter 1 - 004

Lesson 4
Preparation of the Statement of
Comprehensive Income (SCI) for a Service
Business using the Single-Step Approach

I. Introduction
What I Need to Know

This module was designed and written with you in mind. It is here to help you master the skills,
knowledge, and attitudes required to prepare the Statement of Comprehensive Income (SCI).

Most Essential Learning Competency (MELC)

The learners prepare an SCI for a service business using a single-step approach.

Learning Objectives
1. identify the parts of an SCI
2. solve exercises and problems that require preparation of SCI for a service
business
3. reflect on the importance of financial management

What ’s New

Activity 1: Compute the difference of the given amounts on the table by applying the formula. If the
difference resulted to a profit, put the amount on the profit column but if it resulted to a loss, put the
answer on the loss column.
Formula: Income – Expense = Profit/Loss

INCOME EXPENSE PROFIT LOSS

1. ₱ 7,216 ₱ 5,543
2. ₱ 69,703 ₱ 72,146
3. ₱ 21,290 ₱ 20,050
4. ₱ 36,058 ₱ 45,390
5. ₱ 7,975 ₱ 9,500
6. ₱11,625 ₱ 4,900
7. ₱ 34,000 ₱ 38,010
8. ₱ 113,333 ₱ 116,030
9. ₱ 537,109 ₱ 375,453
10. ₱ 861,818 ₱ 462,890

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 II. Development

What I Know

Activity 2: Diagnostic Test

Before the lesson starts, let’s check your initial knowledge about the topic. Read and analyze the
following items below.

I. Multiple Choice. Choose the letter of the best answer.

1. Learning Is Fun Company generated revenues amounting to P 100,000. Expenses for the year
totaled P 76,000. How much is the company’s net income for the year?
A. ₱ 24,000 B. ₱ 67,000
C. ₱ 100,000 D. ₱ 176,000
2. The company incurred the following expenses: Rent expense, P 12,000; Advertising expense, P
21,000 and Utilities expense, P 10,000. How much is the total expenses?
A. ₱ 22,000 B. ₱ 31,000 C. ₱
33,000 D. ₱ 43,000
3. Accounts Company rendered service to its customers and earned the following amounts:
P 13,276, P 16,750, P 20,030 and P 8,938. How much is the total income?
A. ₱ 58,499 B. ₱ 58,949
C. ₱ 58,994 D. ₱ 59,894
4. ABC Repairs earned a total income of P 123,355. Expenses for the month reached P
154,900. How is the total net loss?
A. (₱ 31,455) B. (₱ 31,545)
C. ₱ 31,455 D. ₱ 31,545
5. If the company has a net income of P 13,687 and total expenses of P 7,781, how much is the total
revenue?
A. ₱ 5,906 B. ₱ 7,781
C. ₱ 13,678 D. ₱ 21,468

III. Fill in the missing amount.

6. Income
Week 1 ₱ 11,504
Week 2 8,267
Week 3 8,910
Week 4 13,820
Total Income ₱ _______

7. Expenses
Transportation expense ₱ 1,500
Communication expense 2,000
Utilities expense 4,067
Rent expense 8,000
Total Expenses ₱ ______

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8. Income ₱ _______
Expense 108,300
Net Income ₱ 47,328

9. Income ₱ 83,147
Expense ________
Net Income ₱ 17,002

10. Expenses
Advertising expense ₱ 25,645
Utilities expense 9,999
Permits and Licenses expense ________
Total expenses ₱ 45,894

III. True or False. Write INCOME if the statement is correct and EXPENSE if it is incorrect.
11. Revenue includes both income and gains.
12. If expenses are greater than income, the difference is net loss.
13. Expenses encompass both expenses and losses.
14. The statement of Comprehensive Income shows information on an entity’s cashflows during the
period.
15. A Statement of Comprehensive Income that shows expenses by its function is referred to as
prepared using a Single-step approach.

What’s In

Activity 3: Analyze the given Statement of Comprehensive Income (SCI) for a Service business.
Afterwards, answer the given questions below.

MARIWASA COMPANY
Statement of Comprehensive Income
For the Month Ended July 31, 2020

Revenues ₱ 20,000.00
Expenses:
Rent Expense ₱ 3,000.00
Salaries Expense 4,000.00
Utilities Expense 2,000.00 (9,000.00)
Net Income ₱ 11,000.00

1. What is the heading of the given financial statement?

2. What do you think is the difference on the date indicated on the Statement of Financial Position
(SFP) from the date used in the Statement of Comprehensive Income (SCI)?
Explain your answer.
3. What are the components of the SCI of a service business?
4. How do we get the total income?
5. When does a company incurred a net loss?

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 What is It

For you to fully master the knowledge, skills and attitudes required in the preparation of Statement of
Comprehensive Income, let us recall the important concepts discussed on the previous lesson that will
help us better understand the preparation of the Statement of Comprehensive Income (SCI) for a
Service Business using Single-step Approach.

✓ The Statement of Comprehensive Income (SCI) or the Statement of Profit or Loss and Other
Comprehensive Income shows information on an entity’s financial performance during the
period.
✓ A service business is an enterprise composed of a professional or team of experts that deliver
work or aid in completing a task for the benefit of its customers. It delivers a product that is
primarily composed of personal labor and expertise to deliver the desired work.

Examples of Service businesses

1. House moving services
2. Computer repair services
3. Renovation and Interior Design services
4. Grocery delivery services
5. House cleaning services
6. Printing services
7. Shipping services (LBC, To Go, Fedex, DHL, UPS)
8. Transport Services (Airlines, Uber)
9. Hair dressing services
10. Car wash

✓ The Statement of Comprehensive Income for a Service Business is composed of the following:
Income – includes both revenue and gains.
Expenses – include both expenses and losses.

The difference between income and expense represents profit or loss.

- If income is greater than expenses, the difference is profit. - If income is
less than expenses, the difference is loss.

✓ The presentation of expenses for a service business will use the Nature of expense method.
Under this method, expenses are presented according to their nature (for example, depreciation,
purchase of materials, transport costs, employee benefits and advertising costs) and are not
reallocated among their functions within the entity. This method is simple to apply because no
reallocations of expenses are necessary. A Statement of Comprehensive Income that shows
expenses by their nature is referred to as prepared using a Single-step approach.

How to prepare a Statement of Comprehensive Income for a Service business using the Single-step
approach?
1. Prepare the heading that includes name of the company, name of the statement and date of
preparation (emphasis on the wording “for the month or year ended”). Please see example below.

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 MARIWASA COMPANY
Statement of Comprehensive Income
For the Month Ended July 31, 2020

2. Get the total revenue/income.

Revenues ₱ 20,000.00

3. Get the total expenses.

Expenses:
Rent Expense ₱ 3,000.00
Salaries Expense 4,000.00
Utilities Expense 2,000.00 9,000.00

4. Get the net income/loss by subtracting the total expenses from the total revenue/income.

Revenues ₱ 20,000.00
Expenses:
Rent Expense ₱ 3,000.00
Salaries Expense 4,000.00
Utilities Expense 2,000.00 (9,000.00)
Profit ₱ 11,000.00

5. If there is other comprehensive income, add it.

Revenues ₱ 20,000.00
Expenses:
Rent Expense ₱ 3,000.00
Salaries Expense 4,000.00
Utilities Expense 2,000.00 (9,000.00)
Profit ₱ 11,000.00
Other Comprehensive Income 5,000.00

6. Get the total comprehensive income.

Revenues ₱ 20,000.00
Expenses:
Rent Expense ₱ 3,000.00
Salaries Expense 4,000.00
Utilities Expense 2,000.00 (9,000.00)
Profit ₱ 11,000.00
Other Comprehensive Income 5,000.00
Comprehensive Income ₱ 16,000.00

The standards require entities to present a Statement of Comprehensive Income.

Meaning, presenting an Income Statement alone without “other comprehensive income”
is prohibited.

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Statement of Comprehensive Income for a Service business using a Single-step approach.

Example 1: Without “other comprehensive income”

MARIWASA COMPANY
Statement of Comprehensive Income
For the Month Ended July 31, 2020

Revenues ₱ 20,000.00
Expenses:
Rent Expense ₱ 3,000.00
Salaries Expense 4,000.00
Utilities Expense 2,000.00 (9,000.00)
Net Income ₱ 11,000.00

Example 2: With “other comprehensive income”

MARIWASA COMPANY
Statement of Comprehensive Income
For the Month Ended July 31, 2020

Revenues ₱ 20,000.00
Expenses:
Rent Expense ₱ 3,000.00
Salaries Expense 4,000.00
Utilities Expense 2,000.00 (9,000.00)
Profit ₱ 11,000.00
Other Comprehensive Income 5,000.00
Comprehensive Income ₱ 16,000.00

III- Engagement

What’s More
Activity 4: Put a / is the given transaction is part of the Statement of Comprehensive Income and X if it
is not.
1. The owner invested cash of P 150,000.
2. Paid advertising, P 15,000
3. Paid insurance premium, P 6,000
4. Bought repair supplies for cash, P 12,000
5. Paid Meralco P 2,500 for the electric bill
6. The owner withdrew P 12,000 for his personal use.
7. Paid the December rent in advance, P 10,000
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8. Cash received for repair services rendered to various customers, P 48,950
9. Bought computer from Rivel Trading, P 21,600 terms 60 days.
10. Cash received from various customers for repair services rendered, P 22,500

Activity 5: Complete the given Statement of Comprehensive Income by computing the missing amount

1. Income ₱ 200,000
Expenses:
Utilities expense ₱ 5,000
Insurance expense 7,500
Rent expense 10,000 (1. ______)
Net Income ₱ 177,500

2. Income ₱ 80,000
Expenses:
Salaries expense ₱ 23,500
Transportation expense 3,300
Miscellaneous expense 5,000 (31,800)
Net Income ₱ _______

3-4. Income ₱ 380,000

Expenses (125,600)
Profit 3. ₱ _______
Other Comprehensive income 50,000
Comprehensive Income 4. ₱ _______

5. Income ₱ 66,000
Expenses (44,200)
Profit ₱ 21,800
Other Comprehensive income 15,000
Comprehensive Income 5. ₱ _______

What I Can Do
Activity 6: On July 1 of the current year, Elvis Mabilis started his trucking business under the name
SPEEDY TRUCKING SERVICE. On July 31, the preliminary trial balance showed the following:
DEBIT CREDIT
Cash ₱ 49,330
Accounts Receivable 12,600
Furnitures and Fixtures 68,000
Delivery Trucks 2,150,000
Mortgage Payable ₱ 2,114,000
E. Mabilis Capital 150,000
E. Mabilis Drawing 25,000
Trucking Service Income 180,500
Gas and Oil Expense 26,500

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Salaries Expense 40,250
Utilities Expense 3,680
Office Supplies Expense 14,400
Insurance Expense 36,000
Taxes and Licenses Expenses 18,740
Totals ₱ 2,444,500 ₱ 2,444,500

Requirement: Prepare a Statement of Comprehensive Income using the Single-step approach.

Activity 7: Based on the given data below, prepare a Statement of Comprehensive Income of ACR
Company using the Single-step approach for the month ended June 30, 2019

Supplies Expense P 15,000

Transportation Expense 5,000
Permits and Licenses Expense 8,500
Utilities Expense 3,500
Repair Income 36,300
Rent Income 20,000
Other Comprehensive Income 3,000

Additional Activities
Activity 8: The following are the balance of the different accounts of Copy Trade Photocopying Center
on December 31, 2019 which is the end of the accounting period. Prepare a Statement of
Comprehensive Income for a Service business using the Single-step approach.

Cash P 37,500
Accounts Receivable 28,000
Notes Receivable 1,000
Furniture and Fixtures 34,500
Photocopying Equipment 220,000
Accounts Payable 26,500
Loan Payable 58,000
Note Payable 3,000
Bugoy Capital 200,000
Bugoy Drawing 5,000
Service Income 150,000
Rental Income 8,000
Salaries Expense 32,000
Supplies Expense 60,000
Utilities Expense 10,000
Advertising Expense 15,500
Miscellaneous Expense 2,000

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 III. ASSIMILATION What I Have Learned

Activity 9: Answer the given questions below.

1. What is the difference of a Statement of Comprehensive Income from an Income Statement?
2. What is a Single-step approach?
3. How do we prepare an SCI for a Service business?
4. What is the formula in getting the total comprehensive income?
5. What is the importance of financial management in relation to your family income?

IV. REFLECTION

Write your personal insights about the lesson using the prompts below. Write your answer on the space
provided below.

I understand that _____________________________________________________

_________________________________________________________________________
I realize that ________________________________________________________
_________________________________________________________________________

References
Printed sources
Abeleda, Nelson S., Simplified Accounting for Sole Proprietorship, Volume 1, 2010 Edition
CHED-PNU, Teaching Guide for Senior High School, Fundamentals of Accountancy, Business and
Management 2, 2016
Ferrer, Rodiel C., et. al, Fundamentals of Accountancy, Business and Management 2, 2017

Online sources https://accountinginfocus.com/managerial-accounting-2/introduction-managerial-

accounting-
2/income-statements-for-service-companies/
https://smallbusiness.chron.com/difference-income-statements-service-company-vsmerchandising-
company-25928.html
https://study.com/academy/lesson/merchandising-business-definition-examples.html
https://study.com/academy/lesson/what-is-a-service-business.html
https://wps.prenhall.com/wps/media/objects/11463/11738516/Fill_in/PowerPoint_Chapter_1
_1B.pdf
https://www.freeagent.com/en/glossary/income-accounts/
https://www.investopedia.com/terms/i/interestexpense.asp
https://www.investopedia.com/terms/c/cogs.asp
https://www.thebalance.com/is-it-important-to-track-my-expenses-2385679

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