12

Fundamentals of
Accountancy,
Business and
Management 2
Quarter 1 – Module 2:
Statement of Comprehensive
Income
Fundamentals of Accountancy, Business & Management 2 – Grade 12
Alternative Delivery Mode
Quarter 1 Module 2: Statement of Comprehensive Income
First Edition, 2020

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12

Fundamentals of
Accountancy,
Business and
Management 2
Quarter 1 – Module 2 :
Statement of Comprehensive
Income
For the learner:

Welcome to the Grade 12 Alternative Delivery Mode (ADM) Fundamentals of

Accountancy, Business & Management 2.

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This will give you an idea of the skills or

What I Need to
Know competencies you are expected to learn in the
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lesson to take. If you get all the answers
correct (100%), you may decide to skip this
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Learned sentence/paragraph to be filled in to process
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 What I Need to Know

At the end of the lesson, you should be able to:

1. Identify the elements of the Statement of Comprehensive Income (SCI) and
describe each of these items for a service business and a merchandising business.
(ABM_FABM12-Ic-d-5)
2. Prepare a Statement of Comprehensive Income (SCI) for a service business using
the single-step approach. (ABM_FABM12-Ic-d-6)
3. Prepare a Statement of Comprehensive Income (SCI) for a merchandising business
using the multiple-step approach. (ABM_FABM12-Ic-d-7)

What I Know

PRE –TEST ACTIVITY

Directions: Given below are Revenue and Expense accounts, list all that are
applicable to a service business or a merchandising business. (Hint: Some accounts
could be used for both service and merchandising business)

 Salaries expense
 Professional fees
 Utilities expense
 Cost of Sales
 Sales returns and allowances
 Interest expense
 Permits and licenses
 Representation expense
 Sales discount
 Depreciation
 Bad debts
 Rent Expense
 Supplies Expense
 Sales

A. Revenue and expense accounts applicable to service business: (Write your

answer/solution in your activity notebook)
1. _______________________ 6. _____________________

2. _______________________ 7._____________________

3.________________________ 8. _____________________

4. _______________________ 9. ____________________

5. _______________________ 10. ___________________

B. Revenue and expense accounts applicable to merchandising business: (Write

your answer/solution in your activity notebook)

1. _______________________ 8. _____________________

2. _______________________ 9.______________________

3.________________________ 10. _____________________

4. _______________________ 11. ____________________

5. _______________________ 12. ____________________

6.________________________ 13. ____________________

7. _______________________
 Statement of
2 Comprehensive Income

What’s In

REVIEW ACTIVITY
A. Can you still remember the elements of Statement of Financial Position? Can you
enumerate them? (Write your answer/solution in your activity notebook)
1.__________________

2.__________________

3. __________________

B. Now, can you enumerate the elements of Statement of Comprehensive Income?

(Write your answer/solution in your activity notebook)

1. _______________

2. _______________

If you got the correct answers to the last question, that is what this next topic on
financial statements all about. In this module we are going to study the elements
and preparation of Statement of Comprehensive Income.
 What’s New

Fig 2.1 EXAMPLE OF A STATEMENT OF COMPREHENSIVE INCOME –

SERVICE BUSINESS (Single-step Approach)
See Explanation No.

DE LEON ACCOUNTING OFFICE 1

Statement of Comprehensive Income 2
For the Period Ended December 31, 2019 3

PROFESSIONAL FEES 1,400,000 4

OPERATING EXPENSES 5
Salaries expense 845,000
Rent expense 120,000
Utilities expenses 240,000
Representation expenses 46,000
Permits and licenses 10,000
Supplies 62,000
Bad debts 900
Depreciation – office equipment 15, 500
Depreciation-furniture and fixtures 12,500
Interest Expense 1,000 1,352,900 6
NET INCOME/Total Comprehensive Income 47,100 7
Fig 2.2 EXAMPLE OF A STATEMENT OF COMPREHENSIVE INCOME –
MERCHANDISING BUSINESS (Multiple-Step Approach)
See Explanation No.

DE LEON MERCHANDISING 1
Statement of Comprehensive Income 2
For the Period Ended December 31, 2019 3

Sales 7,500,000 4
Less: Cost of Sales 6,000,000 5
Gross Profit 1,500,000 6
Less: Operating Expenses 7
Selling Expenses 8
Salespersons’ salaries 180,000
Utilities expense 180,000
Rent expense 180,000
Depreciation – store equipment 25,000
Depreciation – delivery equipment 16,600
Freight out 24,000
Advertising 2,000 607,600 9
Administrative Expenses 10
Administrative salaries 180000
Utility expenses 60,000
Rent Expense 60,000
Permit and Licenses 10,000
Depreciation- office equipment 3,000
Office Supplies 10,000
Bad debts 400 323,400 11
Total Operating Expenses 931,000 12
Income from Operation/Earnings Before 569,000 13
Interest and Tax
Less: Interest Expense 2,000 14
Net Income before Tax 567,000 15
Less: Income Tax 170,100 16
NET INCOME/Total Comprehensive Income 396,900 17

So, what’s new about those figures shown? Perhaps you’re also asking…
A. What is a Statement of Comprehensive Income?

B. What is meant by those revenues and expenses?

C. How to prepare the Statement of Comprehensive Income for a service

business?

D. How to prepare the Statement of Comprehensive Income for a merchandising

business?
 What is It

Here are the answers to your questions!

A. DEFINITION OF STATEMENT OF COMPREHENSIVE INCOME

Statement of Comprehensive Income (SCI) is a financial performance statement
that listed down all profit and loss and other comprehensive income of entity for the
period of time.
It usually prepares and presents monthly, quarterly, and annually.

The Statement of Comprehensive Income (SCI) covers the same period of time as
the income statement and consists of two major sections:
Net income (or net earnings) from the company's income statement

Other comprehensive income, which consists of positive and/or negative amounts

for foreign currency translation and hedges, and a few other items
It should be noted however, that for the purposes of this module, the topic SCI focuses
on the net income or the income statement of the business.

B. ELEMENTS OF STATEMENT OF COMPREHENSIVE INCOME

 REVENUES- arises in the course of the ordinary activities of an entity and is

referred to by a variety of different names including sales, service revenues,
professional fees, interests, dividends, royalties, and rent. Revenues
earned by the business vary according to the nature of the entity.

Examples of other revenues earned by both service and merchandising

businesses not arising from the course of ordinary activities
a. Rent income – income earned for properties rented to others
b. Interest income – interest earned for money lent to others
c. Dividend income – income earned for some investments like stocks.

 EXPENSES- arises in the course of ordinary activities of the entity, like cost
of sales, salaries, utilities, and depreciation, etc.

Example of other expense incurred by both service and merchandising

businesses not arising from the course of ordinary activities include interest
expense.
C. HOW TO PREPARE THE STATEMENT OF COMPREHENSIVE INCOME FOR A
SERVICE BUSINESS USING THE SINGLE-STEP APPROACH

The single-step income statement presents the revenue, expenses and ultimately
the profit or loss generated by a business, but it reports on this information by using
just one equation to calculate profits. The equation used in a single-step income
statement is:

Net Income = (Revenues + Gains) – (Expenses + Losses)

The single-step income statement offers a straightforward accounting of the financial
activity of your business. It’s easy to understand and relatively easy to prepare. The
single-step method is also called nature of expense method.

Beside figure 2.1, I have written the corresponding explanation number so you
could easily follow the way to prepare it. So here they are. (Please take note
that explanation no. is not part of the financial statements)

Explanation 1. Write the name of the company or business (if in the problem there
is no stated name of the business, use the name of the owner of the business). The
company name or business name is already an indication of the kind of business
you are preparing for. Figures 2.1 is a service business since it is an accounting
office.

Explanation 2. Write the title of the report. The title is Statement of Comprehensive
Income. It is important to write the title to let the readers know of what you are
preparing is all about.
Explanation 3. Write the date of the report. The SCI presents information for a
certain period of time. In the above example, the contents of the SCI pertain to the
financial performance of the company for the period January 1 - December 31, 2019,
or the company’s accounting period

Explanation 4. Write the Revenues of the Business.

Examples of revenues of a service business
a. Professional fees - for services of professionals like doctors, accountants,
lawyers, architects, etc.
b. Service revenue – for services offered by laundry, welding shop, spa,
beauty parlor, etc.

Explanation 5. Write the Operating Expenses of the business. Operating expenses

are those incurred in the ordinary course or operation of the business.
Examples of expenses of a service business
a. Cost of service – for salaries of professionals who rendered their service in
behalf of the business
b. Operating expenses – include:
 Rent for office space or shop
 Salaries for staff
  Permits and licenses paid to local government units; utilities
for light and water
 Depreciation of equipment and other fixed assets for its
depreciated portion
 Bad debts – for accounts that are not probable to be collected.
Also called Doubtful Accounts, Uncollectible Accounts
 Supplies expense – for used office and other supplies
 Representation expense – charges incurred in representing the
business before employees and customers.
 Other expenses like interest expense

Explanation 6. Add all the operating expenses on the list to get the total.

Explanation 7.Compute for the Net Income by deducting the total operating
expenses from the total revenues which is the professional fees.

D. HOW TO PREPARE THE STATEMENT OF COMPREHENSIVE INCOME FOR A

MERCHANDISING BUSINESS USING THE MULTIPLE-STEP APPROACH

The multi-step income statement breaks down operating revenues and operating
expenses versus non-operating revenues and non-operating expenses. This
separates revenues and expenses that are directly related to the business’s
operations from those that are not directly tied to its operations. The multiple step is
also called functional or cost of sales method.
Beside figure 2.2, I have written the corresponding explanation number so you
could easily follow the way to prepare it. So here they are. Please take note
that explanation no. is not part of the financial statements)
Explanation 1. Write the name of the company or business (if in the problem there
is no stated name of the business, use the name of the owner of the business). The
company name or business name is already an indication of the kind of business
you are preparing for. Figures 2.2 is a merchandising business.

Explanation 2. Write the title of the report. The title is Statement of Comprehensive
Income. It is important to write the title to let the readers know of what you are
preparing is all about.

Explanation 3. Write the date of the report. The SCI presents information for a
certain period of time). In the above example, the contents of the SCI pertain to the
financial performance of the company for the period January 1 - December 31, 2019,
or the company’s accounting period

Explanation 4. Write the Revenues of the Business. The revenue of a merchandising

business is called Sales. This account arises from selling products.
a. Sales returns and allowances – this account is used for any returns of
goods made by customer and is deducted from the sales account

b. Sales discounts - this account is used for any discounts given to customer
and is deducted from the sales account
 It is to be noted that for the purposes of this module, sales returns and
discounts are not included in the illustration.
Explanation 5. Write the Cost of Sales of the Business. This is an expense distinct
for a merchandising business because it is the amount paid or payable by the
business entity to its suppliers for the merchandise sold to the business entity’s
customers.

It is to be noted that the perpetual inventory method was used in the

illustration for the purposes of this module. The periodic inventory
which includes accounts like purchases, purchase returns and
allowances, purchase discounts and freight in are not included in the
discussion.

Explanation 6. Write the Gross Profit of the business. It is computed by deducting

Cost of Sales from Sales.
Explanation 7. Write the Operating Expenses of the business. Operating expenses
are those incurred in the ordinary course or operation of the business. It is classified
into selling expenses and administrative expenses.
Explanation 8. List the Selling Expenses of the business. These are incurred in
accordance with the selling or disposal of the products to the customers.

Examples
 Salaries of salesperson
 Salesmen commission
 Advertising expense
 Depreciation of store building
 Depreciation of store equipments
 Depreciation of delivery equipment
 Utilities ( like light, water incurred in the store)
 Bad debts (if collection is in the hands of salesperson)
 Other selling expenses
Explanation 9. Add all the selling expenses on the list to get the total.

Explanation 10. List the Administrative Expenses of the business. These are
incurred but not in relation to selling the products.

Examples
 Salaries of the manager
 Salaries of the office staff
 Permits and licenses
 Depreciation of the office building
 Depreciation of office equipment
 Utilities (incurred incurred in the office)
 Bad debts (if collection is in the hands of office staff)
 Representation allowance
 Office supplies

Explanation 11. Add all the Administrative expenses on the list to get the total.
Explanation 12. Add the total selling and administrative expenses to get the total
operating expenses.
Explanation 13. Deduct the total operating expenses from the gross profit to get the
income from operation or the earnings before interest and tax.

Important: If there are no interest and income tax in the problem, the
resulting amount is already the NET INCOME/Total Comprehensive
Income

Explanation 14. Write the interest expense – This is incurred for money borrowed
from others.
Explanation 15. Deduct the interest expense from the earnings before interest and
tax to get net income before income tax.

Explanation 16. Write the income tax.

Explanation 17. Deduct the income tax from the net income before income tax to get
the NET INCOME/Total Comprehensive Income.

What’s More

Based on the discussion of Statement of Comprehensive Income, let’s

dig deeper by solving the following activities.

ENRICHMENT ACTIVITY 1 - (SCI of a service business – single step approach)

Given below are the accounts taken from the adjusted trial balance of SUPREMO
LAW OFFICE on December 31, 2019.

Salaries expense 500,000

Utilities expense 108,000
Professional fees 1,100,000
Representation expense 36,000
Depreciation – Furniture and fixtures 20,000
Depreciation – Office Equipment 25,000
Office supplies expense 60,000
Bad debts 10,000
Permits and licenses 15,000
Insurance expense 20,000
Rent expense 120,000
Required:
(Write your answer/solution in your activity notebook)
1. Compute for the following:
a. Revenue from professional fees
b. Operating expenses
c. Net Income/ Total Comprehensive Income
2. Prepare a properly classified Statement of Comprehensive Income of SUPREMO
LAW OFFICE for the year ended December 31, 2019 using the single-step approach.

ENRICHMENT ACTIVITY 2 - (SCI of a merchandising business – multiple step

approach)

Given below are the accounts taken from the adjusted trial balance of SNOW
MERCHANDISING on December 31, 2019.

Salaries expense allocated to (administrative) 300,000

Utilities expense (allocated to selling) 155,000
Salaries expense allocated to (selling) 200,000
Utilities expense (allocated to administrative) 45,000
Sales 3,500,000
Cost of Sales 2,450,000
Depreciation – Delivery equipment 20,000
Depreciation – Store Equipment 30,000
Depreciation – Office Equipment 20,000
Supplies expense (administrative) 40,000
Bad debts (administrative) 7,000
Permits and licenses 15,000
Insurance expense (administrative) 25,000
Interest expense 4,000
Rent expense (selling) 100,000
Rent expense (administrative) 20,000
Freight out 20,000
Income tax 30% of net income before tax

Required:
(Write your answer/solution in your activity notebook)
1. Compute for the following:
a. Revenue from Sales
b. Cost of goods sold
c. Gross Profit
d. Selling expenses
e. Administrative expense
f. Total Operating Expenses
g. Income from Operations/ Net earnings Before Interest and Tax
h. Net Income before tax
i. Income tax
 j. Net income/ Total comprehensive Income

2. Prepare a properly classified Statement of Comprehensive Income SNOW

MERCHANDISING for the year ended December 31, 2019 using the multiple -step
approach.

What I Have Learned

Okay, I hope you’re learning, let’s see if you can complete the following
sentences.

GENERALIZATION ACTIVITY
(Write your answer/solution in your activity notebook)

1. I have learned that the Statement of Comprehensive Income (SCI) is a

___________________statement that listed down all profit and loss and other
comprehensive income of entity for the ______________.
2. I have learned that that the Statement of Comprehensive Income (SCI) has two
approaches namely: ______________ and __________________.
3. I have learned that for a service business, the ______________approach is usually
used.
4. I have learned that for a merchandising business, the ______________approach is
usually used.

5. I have learned that _______________arises in the course of the ordinary activities of

an entity and is referred to by a variety of different names including sales, fees,
interests, dividends, royalties, and rent.

6. I have learned that _______________ arises in the course of ordinary activities of the
entity, like cost of sales, salaries, utilities, and depreciation, etc.
7. I have learned that the revenue for service business is called _______________
8. I have learned that the the revenue for merchanding business is called
_______________
9. I have learned that __________________ is the amount paid or payable by the
business entity to its suppliers for the merchandise sold to the business entity’s
customers.
10. I have learned that operating expenses are those incurred in the ordinary course
of business both for service and merchandising. But for merchandising business, it
is classified into two, namely: _________________ and ______________.
 What I Can Do

Now that you have learned how to prepare the statement of financial
position, let’s do the following activities.

PERFORMANCE ACTIVITY 1: “PREPARE YOUR OWN” (Service business)

(Write your answer/solution in your activity notebook)

Directions:
1. Think of your own service business.
2. Write the revenue of your business. Assume amount.
3. Write the operating expenses of your own business. Assume amounts.
4. Prepare a properly classified Statement of Comprehensive Income using the single-
step approach.

PERFORMANCE ACTIVITY 2: “PREPARE YOUR OWN” (Merchandising business)

(Write your answer/solution in your activity notebook)

Directions:
1. Think of your own merchandising business.
2. Write the sales of your business. Assume amount.
3. Write the cost of sales of your business. Assume amount.
4. Write the operating expenses of your own business classified into selling and
administrative. Assume amounts.
5. Prepare a properly classified Statement of Comprehensive Income using the
multiple-step approach.

Assessment

POST-TEST ACTIVITY 1
Multiple Choice: Choose the letter of your choice. (Write your answer/solution in your
activity notebook)
1. What is the other name for Statement of Comprehensive Income?
a. Statement of Financial Condition
b. Statement of Cash Flows
c. Balance Sheet
d. Income Statement
2. Which of the following is not true regarding the Statement of Comprehensive
income?
a. It shows the net inflow of economic resources to the entity for a certain
period of time.
b. It shows the net inflow of economic resources to the entity as of a certain
point in time.
c. If a net income is recorded during the period, revenues exceed expenses.
d. If a net loss is recorded during the period, expenses exceed revenues.
3. In the statement of comprehensive income, revenues are
a. Usually presented below net income and expenses.
b. Always presented below net income and expenses.
c. Usually presented above net income and expenses.
d. Always presented above net income and expenses.
4. Which of the following elements is not a component of comprehensive income?
a. Revenue
b. Expenses
c. Losses
d. Contribution by owners
5. The expenses are classified according to their function, as part of cost of sales,
selling expenses, administrative activities and other operating activities.
a. Multiple–step/functional / cost of sales method
b. Single-step/nature of expense method
c. Account form
d. Report form
6. Sales minus the Cost of Goods Sold equals
a. Gross Profit
b. Income from Operations
c. Net Income before tax
d. Net Income
7. The combination of Selling Expenses and Administrative Expenses is referred to
as:
a. General Expenses
b. Operating Expenses
c. Total Expenses
d. Other Expenses
8. Gross Profit minus Operating Expenses is best defined as
a. Net Income
b. Net Sales
c. Income from Operations
d. Operating Expenses
9. The income statement heading will specify which of the following?
a. A POINT In Time
b. A PERIOD Of Time
c. Endless Time
d. Certain Time
10. The following is an example of of a service revenue EXCEPT:
a. Professional fees
 b. Sales
c. Revenue from Repair Service
d. Revenue from Laundry Service

POST-TEST ACTIVITY 2

Problem Solving:
A. The following are the account balances of Angel Dental Clinic for the year ended
December 31, 2019.

Professional Fees 1,000,000

Salaries expense 270,000
Supplies expense 20,000
Utilities expense 80,000
Rent expense 120,000
Depreciation expense- Dental equipment 50,000
Insurance expense 20,000

Required:
(Write your answer/solution in your activity notebook)
1. Compute for the following:
a. Revenue from professional fees
b. Operating expenses
c. Net Income/ Total Comprehensive Income
2. Prepare a properly classified Statement of Comprehensive Income of Angel Dental
Clinic for the year ended December 31, 2019 using the single-step approach.

B. The following accounts taken from the adjusted trial balance of COVID
MERCHANDISING on December 31, 2019.

Administrative salaries 600,000

Utilities expense (allocated to selling) 310,000
Salesmen Salaries allocated to (selling) 400,000
Utilities expense (allocated to administrative) 90,000
Sales 7,000,000
Cost of Sales 4,900,000
Depreciation – Delivery equipment 40,000
Depreciation – Store Equipment 60,000
Depreciation – Office Equipment 40,000
Supplies expense (administrative) 80,000
Bad debts (administrative) 14,000
Permits and licenses 30,000
Insurance expense (administrative) 50,000
Interest expense 8,000
 Rent expense (selling) 200,000
Rent expense (administrative) 40,000
Freight out 40,000
Income tax 30% of net income before tax

Required:
(Write your answer/solution in your activity notebook)
1. Compute for the following:
a. Revenue from Sales
b. Cost of goods sold
c. Gross Profit
d. Selling expenses
e. Administrative expense
f. Total Operating Expenses
g. Income from Operations/ Net earnings Before Interest and Tax
h. Net Income before tax
i. Income tax
j. Net income/ Total comprehensive Income

2. Prepare a properly classified Statement of Comprehensive Income COVID

MERCHANDISING for the year ended December 31, 2019 using the multiple -step
approach.

Additional Activities

ADDITIONAL ACTIVITY 1
Given below are the accounts taken from the adjusted trial balance of PANDEMIC
Medical Clinic on December 31, 2019.

Salaries expense 1,000,000

Utilities expense 216,000
Professional fees 2,200,000
Representation expense 72,000
Depreciation – Furniture and fixtures 40,000
Depreciation – Medical Equipment 50,000
Office supplies expense 120,000
Bad debts 20,000
Permits and licenses 30,000
Insurance expense 40,000
 Rent expense 240,000

Required:
(Write your answer/solution in your activity notebook)
1. Compute for the following:
a. Revenue from professional fees
b. Operating expenses
c. Net Income/ Total Comprehensive Income
2. Prepare a properly classified Statement of Comprehensive Income of PANDEMIC
Medical Clinic for the year ended December 31, 2019 using the single-step approach.

ADDITIONAL ACTIVITY 2

B. The following accounts are taken from the adjusted trial balance of CORONA
MERCHANDISING on December 31, 2019.

Administrative salaries 900,000

Utilities expense (allocated to selling) 465,000
Salesmen Salaries allocated to (selling) 600,000
Utilities expense (allocated to administrative) 135,000
Sales 10,500,000
Cost of Sales 7,350,000
Depreciation – Delivery equipment 60,000
Depreciation – Store Equipment 90,000
Depreciation – Office Equipment 60,000
Supplies expense (administrative) 120,000
Bad debts (administrative) 21,000
Permits and licenses 45,000
Insurance expense (administrative) 75,000
Interest expense 12,000
Depreciation - Building (allocated to selling) 300,000
Depreciation - Building (allocated to administrative) 60,000
Freight out 60,000
Income tax 30% of net income
before tax

Required:
(Write your answer/solution in your activity notebook)
1. Compute for the following:
a. Revenue from Sales
b. Cost of goods sold
c. Gross Profit
d. Selling expenses
e. Administrative expense
f. Total Operating Expenses
 g. Income from Operations/ Net earnings Before Interest and Tax
h. Net Income before tax
i. Income tax
j. Net income/ Total comprehensive Income

2. Prepare a properly classified Statement of Comprehensive Income CORONA

MERCHANDISING for the year ended December 31, 2019 using the multiple -step
approach.
References:

Josefina L. Beticon, James Christopher D. Domingo, Fermin Antonio D. Yabut.

Fundamentals of Accountancy, Business and Management 2. Quezon City,
Philippines: Vibal Group Inc, and Department of Education, 2016
International Accounting Standards Board (IASB 2010). “The Conceptual Framework
for Financial Reporting”

International Accounting Standards Board (IASB 2013:A604) “Presentation of

Financial Statements”

https://www.accountingcoach.com/blog/what-is-the-statement-of-comprehensive-
income
https://www.wikiaccounting.com/statement-comprehensive-income-definition-
types-explanation/
https://www.freshbooks.com/hub/accounting/single-step-vs-multi-step-income-
statement
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https://www.wonderopolis.org/wonder/how-does-a-calculator-work

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