Fundamentals of Accountancy,

Business and Management 2

Quarter 1 – Module 3:
Statement of Comprehensive
Income- Merchandising Business
Fundamentals of Accountancy, Business and Management 2
Alternative Delivery Mode
Quarter 1 – Module 3: Fundamentals of Accountancy, Business and Management 2 First
Edition, 2020

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Published by the Department of Education Secretary:

Leonor Magtolis Briones
Undersecretary: Diosdado M. San Antonio

Department of Education – Tagbilaran City Division

Dr. Cecilio Putong National High School
Senior High School ABM

Writer: EPIFANIA H. MIGUELES

Teacher II
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Introductory Message

For the facilitator:

Welcome to the (Fundamentals of Accountancy, Business and Management

2 Grade 12 ABM) Alternative Delivery Mode (ADM) Module on the
Statement of Comprehensive Income for a Merchandising Business!

This module was collaboratively designed, developed, and reviewed by

educators both from public and private institutions to assist you, the
teacher or facilitator in helping the learners meet the standards set by the K
to 12 Curriculum while overcoming their personal, social, and economic
constraints in schooling.
This learning resource hopes to engage the learners into guided and
independent learning activities at their own pace and time. Furthermore,
this also aims to help learners acquire the needed 21st century skills while
taking into consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator, you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing
them to manage their own learning. Furthermore, you are expected to
encourage and assist the learners as they do the tasks included in the
module.

4
For the learner:

Welcome to the Fundamentals of Accountancy, Business and Management 2

Alternative Delivery Mode (ADM) Module on Statement of Comprehensive
Income for a Merchandising Business!
This module is primarily designed for learners who are taking-up
Accountancy, Business and Management Track of Senior High School. It is
patterned from the most essential learning competencies of the K-to-12
Curriculum. The content of the modules are the elements and details of
Statement of Comprehensive Income for a merchandising business such as
sales, contra sales, purchases, contra purchase accounts, cost of goods sold
and general administrative and selling expenses of a merchandising
business that will equip him / her in the preparation of the SCI for
merchandising business at their own pace within the specified time
allotment to complete a specific section of self-learning material on a
particular content.

Indeed, learning is fun! So, make the most meaningful journey towards
independent learning and self-discovery of knowledge.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the module.

What I Know This part includes an activity that aims to

check what you already know about the lesson to take. If
you get all the answers correct (100%), you may decide to skip
this module.

What’s In This is a brief drill or review to help you link the

current lesson with the previous one.
What’s New In this portion, the new lesson will be introduced to
you in various ways such as a story, a song, a poem, a
problem opener, an activity or a situation.

What is It This section provides a brief discussion of the lesson.

This aims to help you discover and understand new
concepts and skills.

What’s More This comprises activities for independent practice

to solidify your understanding and skills of the topic. You

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 may check the answers to the exercises using the Answer Key at
the end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled in to process what you learned from
the lesson.

What I Can Do This section provides an activity which will help

you transfer your new knowledge or skill into real life situations or
concerns.

Assessment This is a task which aims to evaluate your level of

mastery in achieving the learning competency.
Additional Activities In this portion, another activity will be
given to you to enrich your knowledge or skill of the lesson learned. This
also tends retention of learned concepts.

Answer Key This contains answers to all activities in the module.

At the end of this module you will also find:

References This is a list of all sources used in developing this

module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any
part of the module. Use a separate sheet of paper in answering the
exercises.
2. Don’t forget to answer What I Know before moving on to the other
activities included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your
answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through
with it.

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 If you encounter any difficulty in answering the tasks in this module, do
not hesitate to consult your teacher or facilitator. Always bear in mind
that you are not alone.

We hope that through this material, you will experience meaningful

learning and gain deep understanding of the relevant competencies. You
can do it!

What I Need to Know

This module is intended to help you understand the elements and details of the
Statement of Comprehensive Income for a merchandising business such as sales,
contra sales, purchases, contra purchase accounts, cost of goods sold, and general
administrative and selling expenses, describe each of these items, solve exercises
and problems that require preparation of SCI for a merchandising business.
Statement of Comprehensive Income answers the questions: Does the business
make profit? Does the business incur loss? Does the business make no profit and
incur no loss? The business makes profit if total income earned exceeds total
expense incurred. If total expenses incurred exceed total income earned, the
business incurs a loss. Statement of Comprehensive Income is financial statement
which shows the performance of the enterprise for a given period of time. Hence,
this lesson provides you, our dear learners with the elements of SCI that will equip
you in the preparation of the SCI for a merchandising business.

The Module is intended to equip you with knowledge to explain the elements of the
Statement of Comprehensive Income for a merchandising business.

After going through this module, you are expected to:

1. Identify the elements of the Statement of Comprehensive Income for a

merchandising business.
2. Describe each elements of the Statement of Comprehensive Income for a
merchandising business
3. Prepare a Statement of Comprehensive Income for a merchandising business
using a multi-step approach.

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 What I Know

Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.

1. What financial statement informs the reader about the “performance

“and activities of the company for a certain period?
a. Statement of cash flows
b. Statement of changes in equity
c. Statement of comprehensive income
d. Statement of financial position

2. What should be the typical date of the statement of comprehensive

income?
a. “As of December 31, 2019”
b. “For the period ended December 31, 2019”
c. Either a or b
d. None of the above

3. Which of the following is an element of a statement of comprehensive

income?
a. Accounts payable
b. Accounts receivable
c. Owner’s equity
d. Sales

4. Which of the following is an element of a statement of comprehensive

income?
a. Accounts receivable
b. Bonds payable
c. Owner’s equity
d. Purchases

5. Which of the following is an element of a statement of comprehensive

income?
a. Bonds payable
b. Interest expense
c. Interest receivable

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 d. Merchandise Inventory, end

6. Which of the following is an element of a statement of comprehensive

income?
a. Accrued expense
b. Cash
c. Merchandise Inventory, end
d. Prepaid rent

7. Which of the following is an element of statement of comprehensive

income?
a. Equipment
b. Furniture and fixtures
c. Prepaid insurance
d. Sales returns and allowances

8. Which of the following is only ancillary to the entity’s operation?

a. Gain on sale of land
b. Professional fees charged by an auditing firm
c. Sales revenue earned by a convenience store
d. Sales revenue earned by a drug store

9. Which of the following is classified as selling expense?

a. Depreciation of administration building
b. Depreciation of office equipment
c. Salaries of the president
d. Salaries of sales executive

10. Which of the following is an element of statement of comprehensive

income?
a. Accrued expense
b. Interest receivable
c. Purchase returns and allowances
d. Unearned income

11. What do you call the excess of revenues over costs and expenses?
a. Breakeven
b. Expenditure
c. Loss
c. Profit

12. What do you call the excess of costs and expenses over revenues?
a. Breakeven

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 b. Expenditure
c. Loss
d. Profit

13. Which of the following account titles that fits the description of income
earned but not yet received?
a. Accrued expense
b. Accrued income
c. Income
d. Unearned income
14. What form of a statement of a comprehensive income is used in a
merchandising business?
a. Account report
b. Financial position form
c. Multi-step form
d. Single-step form

15. The Statement of Comprehensive Income shows the performance of an

enterprise-
a. As of a given date
b. At the end of the period
c. At the time of changes
d. At the time of crisis

Lesson
What is a Statement of
1 Comprehensive Income?

In this module, the learners will hold an understanding about the

elements of the Statement of Comprehensive Income of a merchandising
business and prepare a multi- step form of a Statement of Comprehensive
Income. It is termed as multi-step because there are several steps needed in
order to arrive at the company’s net income.

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 What’s In

Statement of Comprehensive Income for a Service

Business

Last topic, we talked about the different elements of the Statement of

Comprehensive Income for a service business. The statement of
comprehensive income informs reader about the “performance” and
activities of the company for a certain period. It generally contains the
revenues and expenses incurred by an entity for the specific period. 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 period. Let us recall more of your knowledge on our topic from the
previous module.

Activity 1: “Determination of Unknown Elements of SCI”

Direction: Solve for the unknown elements of SCI. Write your answer on a
separate sheet of paper.

1. Prepaid Expense P 50,000

Uncollectible Accounts 2,500
Accrued Expense 16,000
Depreciation Expense 7,000
Estimated Uncollectible Accounts (3,000)
Taxes and Licenses 15,000
Salaries Expense 20,000
Supplies Used 8,000

How much is the total expenses? P ___________

2. Wellina Reyes, Capital P 275,000

Unearned Commission Income 10,000
Commission Income 75,000
Utilities Expense 9,000
Interest Income 15,000
Accrued Interest income 20,000
Miscellaneous income 5,000

How much is the total revenue? P ____________

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3. Wellina Reyes, Capital P 400,000
Uncollectible Accounts 8,000
Other Income 10,000
Accrued Rent Expense 15,000
Unearned Service Revenue 20,000
Accrued Interest Income 9,000
Depreciation Expense 30,000
Delivery Equipment 450,000
Taxes and Licenses 7,000
Service Revenue 80,000

How much is the profit from operations? P _____________

4. Estimated uncollectible Account P 6,000

Employee’s Benefits 35,000
Salaries and Wages 110,000
Uncollectible Accounts 15,000
Professional Income 150,000
Depreciation Expense 8,000
Accrued Taxes and Licenses 10,000
Repairs and Maintenance 9,000

How much is the loss from operation? P _____________

5. If Income is P85,000.00 and Expenses are P125,000

How much is the net income / (net loss)? P ______________

What’s New

Activity 1.1 Understanding Statement of Comprehensive Income for a

merchandising business

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 Juana Dela Cuz, owner of Friendly Convenience Store, sold 3
boxes of ballpoint pens to Mrs. Susan Gonzales on account at a price
of P150 per box or P15 per pen. Juana gave Mrs. Gonzales two weeks
to pay the account. Moreover, Juana told Mrs. Gonzales that she will
deduct 2% discount if she pays within the week.

Mrs. Gonzales returned one week later. She returned five pens
and took advantage of the discount.

Instructions: Analyze the given situation and answer the given questions
below:

1. Determine the amount of sales?

_______________________

2. Determine the amount of sales return?

________________________

3. Determine the amount of sales discount?

__________________________

4. Determine the amount of net sales?

__________________________

5. How will you compute net sales?

__________________________

What is It

NATURE OF MERCHANDISING BUSINESS

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 Unlike service concern where the business generates income from
rendering of services to customers or clients, in merchandising
business, it generates revenue from sale of goods or commodities that
it buys. The business therefore could be a buyer at one hand and a
seller on the other hand. Basically, there are two (2) major activities
that are involved in a merchandising business, these are buying and
selling activities.
Let’s take a look at the pro forma Income Statements under service
concern and merchandising business:

INCOME STATEMENT

MERCHANDISNG BUSINESS
NET SALES
Minus
COST OF SALES
Equals
GROSS PROFIT
Add or Minus
INCOME OR EXPENSES
Equals
PROFIT
SERVICE CONCERN
SERVICE INCOME OR
REVENUE
Minus
EXPENSES
Equals
PROFIT

Income Statement under Service Concern follows the “Single Step” form
wherein Service Revenue is deducted by Operating Expense to arrive at
Profit while the Merchandising business follows the “Multiple Step” form
wherein there are various steps needed before we arrive at profit.

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ACCOUNT TITLES PECULIAR TO MERCHANDISING BUSINESS

There are account titles peculiar to merchandising business which are not
found in service concern, these are as follows:

ASSET

Merchandise Inventory, End – this refers to unsold merchandise at the end

of the accounting period as determined by physical counting or inventory
taking. It is usually dated December 31. The normal balance of the account
is a debit.

INCOME

Sales – refers to the account title of merchandise that are sold either in cash
or on account. The normal balance of the account is a credit.

Sales Returns and Allowances – this is a reduction from sales account for
goods that were already sold but were returned by the buyer due to bad
order or not conforming with the order. The normal balance of the account is
a debit.

Sales Discounts – refers to a discount as an inducement given to a buyer for

early payment of an account or if payment is made within the discount
period. Like sales returns and allowances, sales discounts is also a reduction
from sales account. The normal balance of the account is a debit.

Net Sales – the first line after heading of the Income Statement is the net
sales. Net sales is computed as follows:

Gross Sales Ҏ xxx

Less: Sales Returns and Allowances Ҏ xxx
Sales Discounts xxx xxx
Net Sales Ҏ xxx

Other Income – income derived from sources other than the company’s
main line of business. Examples are interest income, dividends income,
commissions income, rent income, and gain on sale of assets.

COSTS

Cost of Sales or Cost of Goods Sold – refers to the cost to produce and sell
the merchandise. Sales less cost of goods sold is Gross Profit

Merchandise Inventory, Beginning – the merchandise inventory at the

beginning of the period which is usually dated January 1 is an asset but will

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turn into “cost” when such period ended. The account is usually credited in
the adjustment.

Purchases – refers to the account title for merchandise that are purchased
under periodic inventory system while under perpetual inventory system it is
treated as merchandise inventory which is an asset. The normal balance of
an account is a debit.

Freight –in – refers to transportation cost incurred in buying goods. Under

periodic system, this is treated as “cost” on the part of the buyer which is an
adjunct account or an addition to “purchases”. While under perpetual
inventory system, it is treated as an addition to merchandise inventory which
is an asset. The other term used is “transportation-in”. the normal balance is
a debit.

Purchase Returns and Allowances – the account title for merchandise that
were purchased but returned to the supplier for bad order or does not
conform with the specifications. This is a reduction from “Purchases”. The
normal balance is a credit. Under perpetual inventory, this is a reduction
from merchandise inventory account.

Purchase Discounts – refers to the discount availed for early payment of an

account or payment within the discount period under periodic inventory
system. Like purchase returns and allowances, purchase discount is also a
reduction from “Purchases”. The normal balance of the account is a credit.
Under perpetual inventory system, it is a reduction from merchandise
inventory account.

EXPENSES

Freight- Out – refers to transportation cost of merchandise sold. The normal

balance of the account is a debit.

There is only one account for merchandise inventory in the General Ledger
under both periodic and perpetual inventory system. Under periodic, being
an asset or cost can only be identified by indicating merchandise inventory,
end or merchandise inventory beginning.

General and Administrative Expenses - these expenses are not directly

related to the merchandising function of the company but are necessary for
the business to operate effectively. This includes the salaries of office
personnel, office supplies used, utilities used in the office, depreciation of
office assets and the provision for bad debts or uncollectible accounts.

Note: if the business has a small office, does not maintain a store and sales
are also made in the office, operating expenses need not be categorized under

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selling and administrative expense.

Selling Expenses - these expenses are those that are directly related to the
main purpose of a merchandising business: the sale and delivery of
merchandise. These do not include cost of goods sold and contra revenue
accounts. Examples are salaries of sales personnel, expenses incurred in
promoting or advertising the product, commissions on sales, store supplies
used, utilities used in the store, depreciation expense of assets used in the
store, and the cost of transporting the merchandise to the customer’s place
of business under the account title freight-out or delivery expense.

Gross Profit less general and administrative expenses and selling

expenses will yield a net income for a positive result while net Loss for a
negative result.

Other Expenses – are expenses not connected to the operating activities of

the business. An example of this is loss on sale of assets and discount lost.

Finance Cost – are the interest expense paid for the use of borrowed funds.

Under service concern, there is no classification of expense. it only falls on

the operating expense except where there is interest expense wherein it is
shown as finance charges after deducting the operating expenses but before
profit.

Sample of a multi-step SCI

i. First part is sales
This is the total amount of revenue that the company was able to
generate from selling products

ii. Second part compose of contra revenue – called contra because it is on

the opposite side of the sales account. The sales account is on the credit
side while the reductions to sales accounts are on the debit side. This is
“contrary” to the normal balance of the sales or revenue accounts. (Haddock,
Price, & Farina, 2012)
ii.i. Sales returns – This account is debited in order to record returns
of customers or allowances for such returns.(Haddock, Price, & Farina,
2012) Sales returns occur when customers return their products for reasons
such as but not limited to defects or change of preference.
ii.ii.Sales discount – This is where discounts given to customers who
pay early are recorded. (Haddock, Price, & Farina, 2012) Also known as cash
discount. This is different from trade discounts which are given when
customers buy in bulk. Sales discount is awarded to customers who pay
earlier or before the deadline.

17
iii. Sales less Sales returns and Sales discount is Net Sales

iv. Third part is Cost of Goods Sold – This account represents the actual
cost of merchandise that the company was able to sell during the year.
(Haddock, Price, & Farina, 2012)
iv.i. Beginning inventory – This is the amount of inventory at the
beginning of the accounting period. This is also the amount of ending
inventory from the previous period.
Iv.ii.Net Cost of Purchases = Purchases + Freight In
Iv.ii.i.Net Purchases = Purchases – (Purchase discount and purchase
returns)
iv.ii.i.i. Purchases – amount of goods bought during the current
accounting period.
iv.ii.i.ii. Contra Purchases –An account that is credited being
“contrary” to the normal balance of Purchases account.
iv.ii.i.ii.i. Purchase discount – Account used to record early
payments by the company to the suppliers of merchandise. (Haddock,
Price, & Farina, 2012). This is how buyers see a sales discount given
to them by a supplier.
iv.ii.i.ii.ii. Purchase returns – Account used to record
merchandise returned by the company to their suppliers. (Haddock,
Price, & Farina,2012). This is how buyers see a sales return recorded
by their supplier

iv.ii.ii. Freight In – This account is used to record transportation

costs of merchandise purchased by the company. (Haddock, Price, &
Farina, 2012). Called freight in because this is recorded when goods
are transported into the company.

iv.iii. Add Beginning inventory and Net cost of Purchases to get

Cost of Goods Available for Sale

iv.iv. Ending inventory – amount if inventory presented in the

Statement of Financial Position. Total cost of inventory unsold at the
end of the accounting cycle.

v. Sales less Cost of Goods Sold is Gross Profit

vi. Fourth Part is General and Administrative Expenses –These

expenses are not directly related to the merchandising function of the
company but are necessary for the business to operate effectively.
(Haddock, Price, & Farina, 2012)

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 vii. Fifth Part is Selling Expenses – These expenses are those that are
directly related to the main purpose of a merchandising business: the
sale and delivery of merchandise. This does not include cost of goods
sold and contra revenue accounts. (Haddock, Price, & Farina, 2012)

viii. Gross Profit less General and Administrative Expenses less

Selling Expenses is Net Income for a positive result while Net Loss
for a negative result

An example of a Multi-Step Approach in a simpler format:

JOY SELLING COMPANY HEADING

STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2019

NET SALES P 460,000.00 SALES

Cost of Goods Sold (285,000.00) COST OF SALES
Gross Profit P175, 000.00 GROSS PROFIT

General & Administrative Expenses

Salaries Expense (P 20,000.00) GENERAL

Rent Expense (15,000.00) AND
Depreciation Expense (10,000.00) ADMINISTRATIVE
Utilities Expense (5,000.00)
Miscellaneous Expense (1,000.00)
Total (51,000.00)

Selling Expenses

Salaries Expense (P10, 000.00) SELLING EXPENSES

Rent Expense (8,000.00)
Depreciation Expense (7,000.00)
Utilities Expense (6,000.00)
Total (31,000.00)
Net Income P 93,000.00
Comprehensive Income 7,000.00
Total Net Income before Tax P100, 000.00 NET INCOME/
============ NET LOSS)

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SIMPLER SCI:

JOY SELLING COMPANY

STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2019

NET SALES P 460,000.00

Cost of Goods Sold (285,000.00)
Gross Profit P175, 000.00

General & Administrative Expenses

Salaries Expense (P 20,000.00)

Rent Expense (15,000.00)
Depreciation Expense (10,000.00)
Utilities Expense (5,000.00)
Miscellaneous Expense (1,000.00) (51,000.00)

Selling Expenses

Salaries Expense (P 10,000.00)

Rent Expense (8,000.00)
Depreciation Expense (7,000.00)
Utilities Expense (6,000.00) (31,000.00)
Net Income P 93,000.00
=============

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 What’s More

Activity 1.2 FIX ME!!!

Instruction: Arranged the given jumbled letters to identify the correct
terminology. The definition will help you to derive the correct answer.
Answering this activity will develop your visual and analysis skills. Write
your answer in your answer sheet.

JUMBLED LETTERS DEFINITION

are the interest expense paid for
1. ASEITOCCFNN the use of borrowed funds.

refers to transportation cost of

merchandise sold. The normal
2. IEOUHRFGTT balance of the account is a
debit.

these expenses are those that

are directly related to the main
3. EEEEINNPSSXLLG purpose of a merchandising
business: the sale and delivery of
merchandise
are expenses not connected to
4. EEEEOPSSHTXRN the operating activities of the
business.
the account title for merchandise
that were purchased but
5. AAAAEEEEOUUCCHNNNPLLRRRSSSTW returned to the supplier for bad
order or does not conform with
the specifications
income derived from sources
6. EEIOOCHNMTR other than the company’s main
line of business

21

7. AAAAEEEEEEIIIDDGLMNNNNPRRSSSTTXV
8. AEIOUCSSSSDNTL
these expenses are not directly
related to the merchandising
function of the company but are
necessary for the business to
operate effectively
refers to a discount as an
inducement given to a buyer for
early payment of an account or if
payment is made within the
discount period

refers to the account title of

9. AELSS merchandise that are sold either
in cash or on account

this refers to unsold

merchandise at the end of the
10. AEEEEIIOCDDHMNNNNRRSTVY accounting period as determined
by physical counting or
inventory taking

Activity 1.3 Understanding the Elements of the Statement of

Comprehensive Income –Merchandising Business
(Classification of Accounts)
Direction: Identify if the account is part of the general and administrative
expenses or selling expenses. Write your answer on a separate sheet of
paper.

Wellina had the following expense accounts for the year ended December 31,
2019:

1. Salaries of admin personnel

2. Salaries of janitors
3. Salaries of sales agents
4. Utilities of home office
5. Rent of office building
6. Depreciation of office equipment
7. Depreciation of delivery van
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8. Advertising
9. Cost of merchandise sold during the year
10. Sales Commission of Account Executive
Activity 1.4 Understanding Statement of Comprehensive Income
Direction: Answer what is asked. Write your answer on a separate sheet of
paper.

1. Company’s Cost of Goods Sold amounted to P285, 000. Net cost of

purchases totaled P85, 000. Beginning inventory amounted to P250,
000. Sales amounted to P500, 000. Compute for the company’s
Ending Inventory.
___________________

2. Gross profit of Happy Selling amounted to P 175,000. Beginning

Inventory totaled P 250,000. Ending Inventory amounted to P 50,000
while Net Cost of Purchases totaled P85, 000. Compute for Happy’s
Net Sales.
___________________

3. Happy Selling’s Sales amounted to P500, 000. Sales returns and sales
discounts amounted to P 30,000 and P 10,000 respectively. Purchases
of the company totaled P 100,000 while purchase returns and
purchase discounts amounted to P20, 000 and P 10,000 respectively.
How much is the company’s Net Sales? Net Purchases?
____________________
____________________

4. Happy Selling’s beginning inventory amounted to 250,000. Net

purchases amounted to 70,000. Freight In totaled 15,000. Compute
for the company’s cost of goods available for sale.
____________________

5. Happy Selling Company’s salaries to sales agents amounted to P10,

000. Salaries of accountants amounted to P 20,000. No other
expenses were incurred. How much is the company’s general and
administrative expense?
_____________________

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 Stop and Reflect

Now review your previous Activity number 1.3 and 1.4. Do you think the

given ideas/concepts are clear for you to understand the elements of

SCI and the procedures in preparing SCI?
Agree or Disagree?

What I Have Learned

Exit Ticket

Have you learned so much from this module? What are the three
things that you learned today? What are the two things you found
interesting?

3 Things I learned Today 1. _______________________________________

_______________________________________
2.

3. ________________________________________

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2 Things I Found Interesting 1. ____________________________________

2. ____________________________________

1 Question I have 1. ________________________________________

What I Can Do

Now that you’ve already learned and understand the elements of the
Statement of Comprehensive Income, it’s time to work to demonstrate your
learning. Are you ready? Sure, you are!

Activity 1.5 Am I Ready?

Directions: Use your surname as your company name. Write your answer
on a separate sheet of paper.

1. Prepare the Statement of Comprehensive income using a Multi-step

Approach: Sales P80, 000.00 Merchandise Inventory beg P5, 000.00 Sales
Discount 5,000.00 Net Purchases 10, 500.00 Sales Returns 2,000.00 Freight
In 8,000.00 Merchandise General Expenses 12,000.00 Inventory End
3,500.00 Selling Expenses 4,000.00.

2. Compute for the Cost of Goods Sold using the following: Sales – 15,000
Purchases – 2,000 Purchase returns – 200 Purchase discounts – 200
Freight in – 100 Beginning inventory – 1,000 Ending inventory – 500.

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 Assessment

I. Choose the letter of the best answer. Write your answer on a

separate sheet of paper.

1. What business generates its income from buying and selling of

merchandise?
a. Merchandising business c. Partnership business
b. Manufacturing business d. Sole proprietorship business

2. Aside from selling activity, what other activity can a merchandise

business perform?
a. Manufacturing activity c. Buy and sell
b. Purchasing activity d. None of these

3. Which of the following is cost?

a. Freight –in c. It depends upon shipping term
b. Freight-out d. Merchandise inventory, end

4. Which if the following is an “adjunct” account to purchases?

a. Freight-in c. Merchandise inventory, beg.
b. Freight-out d. Merchandise inventory, end

5. Which of the following is an expense account?

a. Freight-in c. Merchandise inventory, beg.
b. Freight-out d. Merchandise inventory, end

6. What is the normal balance of an account Sales?

a. Credit balance c. In-balance
b. Debit balance d. Out of balance

7. Which of the following account refers to merchandise left on hand

and unsold at the end of the period?
a. Cost of merchandise sold c. Merchandise inventory, end
b. Merchandise inventory, beg d. Purchased left undelivered

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 8. Which of the following account refers to a reduction from sales
account for goods that were already sold but were returned by the
buyer due to bad order or not conforming with the order.
a. Purchase discounts
b. Purchase returns and allowances
c. Sales discounts
d. Sales returns and allowances

9. Which of the following account refers to the cost to produce and

sell the merchandise?
a. Cost of goods sold
b. Freight-in
c. Freight-out
d. Purchases

10. Which of the following is an element of statement of

comprehensive income?
a. Accrued advertising
b. Accumulated depreciation-office equipment
c. Allowance for bad debts
d. Bad debts

Additional Activities

Activity 1.6. Prepare a multi-step Statement of Comprehensive Income

using the following:

Sales – 20,000

Cost of Goods Sold – 10,000

General and administrative expenses – 4,000

Selling expenses – 2,000

You can use any business name and the end of the current year for the
heading.

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References

Lopez, Jr., Rafael M, “Fundamentals of Accounting,” Simplified Procedural

Approach 2013-2015 Edition

Teaching Guide in Senior High School Fundamentals of Accountancy

Business and Management 2, donated by the Commission on Higher
Education in Collaboration with the Philippine Normal University to
Department of Education

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For inquiries or feedback, please write or call:

Department of Education - Bureau of Learning Resources (DepEd-BLR)

Ground Floor, Bonifacio Bldg., DepEd Complex

Meralco Avenue, Pasig City, Philippines 1600

Telefax: (632) 8634-1072; 8634-1054; 8631-4985

Email Address: blr.lrqad@deped.gov.ph * blr.lrpd@deped.gov.ph

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