Professional Documents
Culture Documents
DENVER G. ALIWANA
Developer
Department of Education • Cordillera Administrative Region
Published by
Learning Resource Management and Development System
COPYRIGHT NOTICE
2020
“No copyright shall subsist in any work of the Government of the Philippines.
However, prior approval of the government agency of office wherein the work is
created shall be necessary for exploitation of such work for profit.”
This material has been developed for the implementation of K-12 Curriculum
through the DepEd Schools Division of Baguio City – Curriculum Implementation
Division (CID). It can be reproduced for educational purposes and the source must be
acknowledged. Derivatives of the work including creating an edited version, an
enhancement or a supplementary work are permitted provided all original work is
acknowledged and the copyright is attributed. No work may be derived from this
material for commercial purposes and profit.
ii
PREFACE
This module is a project of the DepEd Schools Division of Baguio City through
the Curriculum Implementation Division (CID) which is in response to the
implementation of the K to 12 Curriculum.
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ACKNOWLEDGEMENT
The developer would like to express his deep and sincere gratitude to those
who contributed significantly in the development of this learning material.
Our assistant school head in the Senior High department, Mr. Rey D. Gapasin,
for the motivation. Our school’s supervisory office led by our school principal, Madam
Brenda M. Cariño. Thank you all for your moral and technical support in the crafting of
this learning module. To my friend, colleague and mentor Mr. Sydney Shan M. Cariño
for editing this manuscript as well as for the invaluable guidance throughout the
preparation of this humble work. To my colleagues in the ABM group of Baguio City
National High School, Baguio City National Science High School and Guisad Valley
National High School for the fruitful collaboration and for sharing their knowledge and
expertise as I develop this learning resource.
Development Team
Author/s: Denver G. Aliwana
Illustrator: Estrella Ramos (Cover Art) and Marilyn Degay-Bugatti (Label Icons)
Language Editor: Sydney Shan M. Cariño
School Learning Resources Management Committee
Brenda M. Cariño School Principal
Rey D. Gapasin Subject/ Learning Area Specialist
Sherwin L. Fernando School LR Coordinator
CONSULTANTS
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TABLE OF CONTENTS
v
What I Need to Know
Hello learner! This module was designed and written with you in mind. This
module is designed to introduce you to the elements of the Statement of
Comprehensive Income (SCI) for both service and merchandising business.
While going through this module, you are expected to:
1) solve simple problems involving SCI;
2) prepare SCI of a service business using the single-step approach ; and
3) prepare SCI of a merchandising business using the multistep approach.
By the way, always remember to use a separate sheet of paper for you to write
your answers of the different activities presented in this learning module. DO NOT
ANSWER here directly.
Now, here is an outline of the different parts of your learning module. The
descriptions will guide you on what to expect on each part of the module.
1
What I Know
If you answer all the test items correctly in this pretest, then you may skip
studying this learning material and proceed to the next learning module.
A. ALTERNATE RESPONSE.
Direction: Write the word True if the statement is correct, and False if it’s
otherwise. Write your answers on the spaces provided before each number.
________ 1. The SCI has two parts, the Income Statement and the Other
Comprehensive Income.
________ 2. The single-step approach is more appropriate in preparing the
SCI of a merchandising concern.
________ 3. The Net Income is referred to as the ‘bottom-line.’
_______ 4. Net Income occurs when total income is lesser than total
expenses.
________ 5. The second line of the heading of the SCI is the date of
preparation of the report.
________ 6. Merchandise inventory are items held for sale in the ordinary
course of business.
________ 7. The ending inventory of the previous period is the beginning
inventory of the succeeding period.
________ 8. The Notes to Financial Statement (FS) contains supplemental
information or computation about a certain item in the FS.
________ 9. The multistep approach is more appropriate in preparing the SCI
of a service concern.
________ 10. Cost of Goods Available for Sale is the sum of ending inventory
and net purchases.
B. MULTIPLE-CHOICE.
Direction: Choose the letter of the correct answer. Write your answers on the
spaces provided before each number. Use this set of data to answer the
questions.
Account Balances
Inventory, beginning 20,000
Inventory, ending 15,000
Purchases 100,000
Purchase Discounts 5,000
Sales 330,000
Sales Discount 5,000
Sales Returns and Allowances 3,000
Total Expenses 86,000
2
________ 1. How much is Net Sales?
A. 317,000
B. 322,000
C. 335,000
D. 338,000
3
Lesson: Statement of Comprehensive
Income: single-step and multistep
approach
What’s In
You have learned in the previous module the elements of SCI (Income and
Expenses) as well as the different account titles in each element for both service and
merchandising business.
In this module, you will now prepare the SCI by combining these elements and
accounts titles and performing some mathematical operations on them too. The SCI
must be able to show the net income (profit) or net loss realized by the business in a
given period.
You must also recall from your lessons in FABM 1 that a merchandising concern
deals with items for sale (known as Inventories). At the end of each accounting period,
the amount and volume of ending inventory is determined. There are two methods of
keeping inventory records that a business may adopt – the Periodic and the
Perpetual Inventory System. Remember that FABM 1 deals only with the Periodic
Inventory System. Hence, you will be applying this concept in this module.
There are two approaches in preparing the SCI – the single-step and the multi-
step. The single step will be more appropriate for a service business, while the
multistep is for a merchandising business.
4
What’s New
Directions: Fill-in the missing amounts in each equation. Use the formula as your
guide.
2. Formula:
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦, 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 + 𝑁𝑒𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝑆𝑎𝑙𝑒
Equation: 12,500 + _______________ = 120,000
5
What Is It
The SCI of a Service Business: single-step approach
The SCI has two parts: the Income Statement and the Other Comprehensive
Income. Often, small businesses have no Other Comprehensive Income, thus the
Income Statement is sufficient enough to present the performance of the business in
one accounting period.
The Income Statement shows the total income, the total expenses and the net
income or net loss realized in the given accounting period. The net income/net loss is
referred to as the ‘bottom-line’ as it is the last item appearing on the Income
Statement. So when asked, “What is your bottom-line?” One may answer, positive
(for net income) or negative (in case of a loss).
If total income is greater than total expenses, there is Net Income. To illustrate,
assume that total income is P 50,000 while total expenses is P 30,000. Using the
formula, we have a net income of P 20,000 as shown below:
50,000 – 30,000 = 20,000
However, if total income is lesser than total expenses, then there is Net Loss.
Assume that total income is P50,000 while total expenses is P 60,000. Using the same
formula, we have a net loss of P 10,000 as shown below:
50,000 – 60,000 = (10,000)
Sometimes, net loss is written in red ink. This gave rise to the jargon ‘in the red’
as an answer to the question “What is your bottom line?”
Combining the second element of the SCI, the Other Comprehensive Income
is simply added to Net Income to get Total Comprehensive Income.
Pro-forma
The SCI is a formal document that must follow a certain presentation format
(referred to as pro-forma) following the GAAP to enhance its understandability as
mentioned in the What’s In part of this module. The pro-forma SCI is shown below:
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(Heading)
Sample SCI
Income
Ticketing Services P 450,000
Visa Assistance 300,000 Income
Passporting Services 100,000
Total Income P 850,000
Expenses
Salaries Expense P 180,000
Rent Expense 120,000
Internet Expense 50,000
Utilities Epense 30,000
Advertising Expense 20,000 Expenses
Supplies Expense 50,000
Depreciation Expense 100,000
Miscellaneous Expenses 50,000
Total Expenses P 600,000
Net Income P 250,000
Other Comprehensive Income 10,000
Total Comprehensive Income P 260,000
Heading
Just like the other financial reports, the SCI must have a heading. The first line
contains the name of the business, the second line is the title of the report, in this case
Statement of Comprehensive Income. The third line starts with the phrase “For the
year ended” followed by the date when the year or the period ends. The year may be
replaced with month or quarter when making interim reports or periods that are less
than one year.
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The SCI of a Merchandising Business: multi-step approach
Our concern in the preparation of SCI are the two inventory values described
below:
1. Inventory, beginning – the peso value of inventories at the beginning of
the accounting period. This is the ending inventory of the previous
accounting period.
2. Inventory, ending – the peso value of inventories at the end of the
accounting period. This becomes the beginning inventory of the next
accounting period.
Net Sales = Gross Sales – Sales Discounts – Sales Returns and Allowances
Now, can you verify if the computed Net Sales is correct? You may use your
calculator.
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Net Purchases = Gross Purchases + Freight In – Purchase Discounts –
Purchase Returns and Allowances
Have you noticed a new terminology in the illustration? The Cost of Goods
Available for Sale (CGAFS). It is the sum of the beginning inventory and net
purchases. Though, this may be omitted for brevity of presentation.
Gross Profit or Gross Profit from Sales, effectively identifies the amount of profit
derived from the main activities of the business – the buying and the selling. This
amount is important in guiding owners, managers and employees plan for strategies
to increase profit or to determine if the mark-up is sufficient to cover expenses.
We have determined Net Sales from step 1 and CGS from step 3. Thus, the
Gross Profit is this illustration is
9
SCI Presentation
After performing the required computations, you are now ready to prepare the
SCI of a merchandising concern. Study the illustration below:
DGA Trading
Statement of Comprehensive Income
For the month ended June 30, 2020
Notes to SCI:
10
Note 4: Computation of Total Expenses
What have you observed? How is this similar or different to that of a service
business?
This SCI has only few elements unlike the previous SCI for a service business.
It has a heading similar to that of a service business. You also noticed that the
Expenses portion down to the Total Comprehensive Income are similar.
You might be wondering what the Notes are for. Recall that a complete set of
financial statements may include Notes to FS. They exist to make the FS concise such
that the most important information are presented on the first page. Details such as
computations or narrative explanations are discussed in the notes and are attached to
the main document.
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What’s More
Activity 1: What’s your bottom-line?
Directions: Read the situation carefully then compute for the total income, total
expenses and net income/loss. Write your answers on the numbered cells provided.
Situation: Three months ago, one of your neighbors started a Dropping Station
business along Session Road. He caters primarily to online sellers having no physical
stores. His set-up is to accept parcels or product items from online sellers to be picked-
up by their respective customers. “Handling Fee” is charged for every parcel or item
dropped. He wants to compare the performance of his business for the first three
months of operation. He provided the following information and asked for your
assistance in computing total income, total expenses and net income/loss.
Months
Accounts
April May June
Income
Handling Fee 8,500 10,500 12,800
Cash Drop Fee 1,300 3,700 3,100
Total Income (1) (4) (7)
Expenses
Rent Expense 7,500 7,500 7,500
Utilities Expense 450 520 575
Office Supplies Expense 1,200 960 850
Sanitation Supplies Expense 1,300 600 740
Advertising Expense 600 - -
Total Expenses (2) (5) (8)
Net Income (Loss) (3) (6) (9)
Directions: Read the situation carefully. Substitute the given values to the formula to
solve for the missing information.
Situation:
An aunt of yours has an ukay shop (second-hand clothing store). On March 15,
2020, the whole Baguio City was placed under Enhanced Community Quarantine
(ECQ). With this, ukay shops were prohibited from operating.
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In July 2020, ukay shops were finally allowed to operate. However, your aunt
believes that business is bleak for this type and decided to temporarily close her shop
until the end of the year. To effectively close the business, she must submit interim
financial statements from January 1 up to the closure date.
Upon checking, she discovered that some accounting records were destroyed
by rats while some were rendered unreadable when they got soaked with rainwater.
She asked for your help in reconstructing the accounting records necessary in
preparing the SCI. These are the only data available:
- - =
- =
+ =
- =
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What I Have Learned
Activity: Reflect
Rating Description
1 Help, I honestly have little mastery of it
2 I just need more time and activity to master it
3 I am nearing mastery of it
4 I am confident that I have mastery of it
Objectives Rating
1. I can solve for the net income of a service business.
2. I can distinguish net income from net loss.
3. I can solve for Net Sales
4. I can solve for Net Purchases
5. I can solve for Cost of Goods Sold
6. I can solve for Gross Profit
7. I can solve for the net income of a merchandising business
8. I can prepare the SCI of a service business using the
single-step approach
9. I can prepare the SCI of a merchandising business using
the multistep approach
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What I Can Do
Activity 1: The SCI of a Service Business
Directions: The following are the end-of-month balances of accounts taken from the
books of La Verdad Laundry Services for the month of May 2020. Prepare the SCI
using the template provided.
Account Balances
Laundry Fees - Regular 43,750
Laundry Fees - Dry Cleaning 1,900
Laundry Fees – Shoes and Bags 17,300
Laundry Supplies Expense 3,800
Water and Electricity Expense 7,200
Rent Expense 10,000
Depreciation Expense 6,500
Office Supplies Expense 580
Salaries Expense 12,000
Income
Expenses
Net Income
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Activity 2: The SCI of a Merchandising Business
Directions: The following are the end-of-quarter balances of accounts taken from the
books of Golden Fields General Merchandise for the quarter ending June 30, 2020.
Prepare the SCI using the template provided.
Account Balances
Sales 2,130,000
Sales Returns and Allowances 16,500
Sales Discount 35,870
Inventory, beginning 280,000
Inventory, ending 240,000
Purchases 1,870,000
Purchase Discounts 93,000
Store Supplies Expense 4,750
Utilities Expense 12,587
Salaries and Wages Expense 45,000
Depreciation Expense 18,200
Insurance Expense 1,600
Repairs and Maintenance Expense 16,250
Delivery Expense 7,900
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Note 2: Computation of Net Purchases
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Post-Assessment
A. ALTERNATE RESPONSE.
Direction: Write the word True if the statement is correct, and False if it’s
otherwise. Write your answers on the spaces provided before each number.
________ 1. The SCI has two parts, the Income Statement and the Other
Comprehensive Income.
________ 2. The single-step approach is more appropriate in preparing the
SCI of a merchandising concern.
________ 3. The Net Income is referred to as the ‘bottom-line.’
_______ 4. Net Income occurs when total income is lesser than total
expenses.
________ 5. The second line of the heading of the SCI is the date of
preparation of the report.
________ 6. Merchandise inventory are items held for sale in the ordinary
course of business.
________ 7. The ending inventory of the previous period is the beginning
inventory of the succeeding period.
________ 8. The Notes to Financial Statement (FS) contains supplemental
information or computation about a certain item in the FS.
________ 9. The multistep approach is more appropriate in preparing the SCI
of a service concern.
________ 10. Cost of Goods Available for Sale is the sum of ending inventory
and net purchases.
B. MULTIPLE-CHOICE.
Direction: Choose the letter of the correct answer. Write your answers on the
spaces provided before each number. Use this set of data to answer the
questions.
Account Balances
Inventory, beginning 20,000
Inventory, ending 15,000
Purchases 100,000
Purchase Discounts 5,000
Sales 330,000
Sales Discount 5,000
Sales Returns and Allowances 3,000
Total Expenses 86,000
18
________ 1. How much is Net Sales?
A. 317,000
B. 322,000
C. 335,000
D. 338,000
________ 2. How much is Net Purchases?
A. 95,000
B. 100,000
C. 105,000
D. 120,000
________ 3. How much is Cost of Goods Available for Sale?
A. 95,000
B. 100,000
C. 115,000
D. 145,000
_______ 4. How much is Cost of Goods Sold?
A. 90,000
B. 95,000
C. 98,000
D. 100,000
________ 5. How much is Gross Profit?
A. 217,000
B. 222,000
C. 235,000
D. 238,000
Additional Activity
Activity: Increasing your bottom-line
Directions:
Interview a business owner or an employee of a service or merchandising
business. Ask what specific strategies they are adopting to be able to increase net
income. Businesses may increase their net income by increasing net sales,
decreasing expenses or doing both.
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20
1. 1,266,500
2. 678,000
3. 278,000
4. 740,000
Activity 2
1. May and June
2. April
3. June
Assessment 1
1. 9,800
2. 11,050
3. (1,250)
4. 14,200
5. 9,580
6. 4,620
7. 15,900
8. 9,665
9. 6,235
Activity 1
What’s More
1. 35,000
2. 107,500
3. 123,000
4. 3,000
5. (17,000)
What’s New
1. B
2. A
3. C
4. D
5. B
B. Multiple-Choice
1. True
2. False
3. True
4. False
5. False
6. True
7. True
8. True
9. False
10. False
A. Alternate Response
What I know
ANSWER KEY
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Golden Fields General Merchandise
Statement of Comprehensive Income
For the quarter ended June 30, 2020
Net Sales (Note 1) 2,077,630
Less: Cost of Sales (Note 3) 1,817,000
Gross Profit 260,630
Less: Total Expenses (Note 4) 106,287
Net Income 154,343
Note 1: Computation of Net Sales
Sales 2,130,000
Less: Sales Discounts 35,870
Sales Returns and Allowances 16,500
Net Sales 2,077,630
Note 2: Computation of Net Purchases
Purchases 1,870,000
Less: Purchase Discounts 93,000
Net Purchases 1,777,000
Note 3: Computation of Cost of Goods Sold
Inventory, beginning 280,000
Add: Net Purchases 1,777,000
Cost of Goods Available for Sale 2,057,000
Less: Inventory, ending 240,000
Cost of Goods Sold 1,817,000
Note 4: Computation of Total Expenses
Store Supplies Expense 4,750
Utilities Expense 12,587
Salaries and Wages Expense 45,000
Depreciation Expense 18,200
Insurance Expense 1,600
Repairs and Maintenance Expense 16,250
Delivery Expense 7,900
Total Expenses 106,287
Activity 2: The SCI of a merchandising business
La Verdad Laundry Services
Statement of Comprehensive Income
For the month ended May 31, 2020
Income
Laundry Fees - Regular 43,750
Laundry Fees - Dry Cleaning 1,900
Laundry Fees – Shoes and Bags 17,300
Total Income 62,950
Expenses
Laundry Supplies Expense 3,800
Water and Electricity Expense 7,200
Rent Expense 10,000
Depreciation Expense 6,500
Office Supplies Expense 580
Salaries Expense 12,000
Total Expenses 40,800
Net Income 22,870
Activity 1: The SCI of a service business
What I can do
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1. B
2. A
3. C
4. D
5. B
B. Multiple-Choice
1. True
2. False
3. True
4. False
5. False
6. True
7. True
8. True
9. False
10. False
A. Alternate Response
Assessment
REFERENCES
Aliling, Leonardo E. Fundamentals of Basic Accounting. Quezon City: Rex Bookstore,
2013.
Deloitte. Conceptual Framework for Financial Reporting 2018. IASPlus. March 2018.
https://www.iasplus.com/en/standards/other/framework
Ferrer, Rodiel C., and Zeus Vernon B. Millan. Fundamentals of Accountancy, Business
and Management Part 2. 2nd ed. Baguio City: Bandolin Enterprise, 2018.
Financial Accounting. Minneapolis: University of Minnesota Libraries Publishing.
Accessed July 8, 2020. https://open.umn.edu/opentextbooks/textbooks/4. 2016
Franklin, Mitchell. Principles of Accounting, Volume 1: Financial Accounting. Houston,
Texas: Rice University. May 2019. https//openstax.org/details/books/financial-
accounting-principles
International Accounting Standards Board. IAS 1 Presentation of Financial
Statements. IFRS. Jan. 23, 2020. https://www.ifrs.org/issued-standards/list-of-
standards/ias-1-presentation-of-financial-statements/
Manalaysay, Benedick G. Fundamentals of Accountancy, Business and Management
2. Mandaluyong City: Anvil Publishing, 2017.
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