Presented to:

Mr. Cesar Legaspi

Adviser – ABM Class A
 1. Rosyl d. guiao 10. Aphrodite g. baluyut
2. Ma. cristina R. bondoc 11. Antonia j. canlas
3. Rex p. bernarte 12. Mechelita a. gacusana
4. Noel m. Salazar jr 13. Bernadeth j. arciga
5. Arnold l. carreon 14. RUBEN L. CONCEPCION
6. Charlyn p. laodenio
7. Jasmin f. morales
8. Cristina b. rodriguez
9. Carmel mary g. corpuz

MTOT - ABM Class A Applied Economics

 CHAPTER 2

Statement
of
Comprehensive Income
 LESSON TOPICS

2.1 Purpose of Income Statement

2.2 Elements of Income Statement
2.3 Elements of Statement of
Comprehensive Income
(Service Business)
2.4 Elements of Statement of
Comprehensive Income
(Merchandising Business)
GROUP ACTIVITY
 Basic Financial Statements

Balance Sheet
Income Statement
Statement of Cash Flows
 Basic Financial Statements

Balance Sheet
Income Statement
Statement of Cash Flows
 Income Statement
 also known as the Profit and Loss
Statement, reports the company's financial
performance and results of its operations in
terms of net profit or loss over a specified
period.
 Net profit or loss is arrived by deducting
expenses from income.
 Purpose of Income Statement

Income Statement answers basic questions

including:
– What is the company’s current financial
status?
– What was the company’s operating results for
the period?
– How did the company obtain and use cash
during the period?
 Parts of Income Statement

1. Heading
Answers the three W’s:
Who – the name of the business
What - the name of the statement
When – the date which is for a particular
day
2. Body of the statement - states the various
revenues generated and expenses incurred by the
business.
 “Statement of Allowance”

–Write down the amount of your school allowance.

–List down also the things/food that you buy with
corresponding amounts.
–How much do you save everyday, if any, from your
school allowance?
• Income accounts are presented before expenses. In the
above statement, the income account is Service
Revenue. Other income accounts for service type
businesses include Professional Fees, Rent Income,
Tuition Fees, etc.
• Expenses are presented after the income accounts. It is
a good practice to arrange expenses according to
amount (largest to smallest). Some users who are
interested in the company's expenses are concerned
about the size of each expense. Arranging the expenses
from largest to smallest results in a more useful and
organized report. Nonetheless, Miscellaneous
Expense or Sundry Expense is presented last.
• The income statement complies with
the accrual basis of accounting.

• Income is recognized when earned regardless

of when collected. Expenses are recognized
when incurred regardless of when paid.
What’s the Business?
 Statement of
Comprehensive Income
Service Business
 Income
• Professional fees - income derived in the
practice of profession for the professional
services rendered.
• Fare Income - income derived from
transportation services provided to others.
 Income
• Rent Income - income derived by lessor
engaged in the business of renting apartment,
building, condominium, market stalls,
automobiles, machines
• Interest Income - income derived from
lending money to others.
 Expenses
• Salaries and Wages Expense – amount incurred or paid
for the services rendered by the employees and workers in the
business.
• Advertising Expenses - payments made in the promotion of
business merchandise, goods and/or services.

• Office Supplies Expenses - office related materials used by

the business.

• Rent Expense - amount incurred/paid for the use of space

for the office, store and or factory area
 Expenses
• Utilities Expense- amount incurred for the use of
electricity, water and telephone facilities.
• Taxes and license expenses - taxes, licenses and
other fees paid or incurred.
• SSS, Pag-ibig, Medicare Contribution- the
employer’s share in the payment of SSS, Pag-ibig and
medicare for the welfare of its employees and workers.
Guess the Company
 Statement of
Comprehensive Income
MERCHANDISING BUSINESS
 Merchandising Concern
- is a type of business organizations that buys
goods and sells the same good (without
further processing) at a price higher than its
acquisition cost.
- The inventory or stocks consists of finished
products awaiting sales.
 Income Statement of Service
and Merchandising Concern

- Similar in terms of content and forms

- Both types of concerns have revenue and
expense section.
- Merchandising concern differ when it comes
to account names for revenues and cost of
goods sold section of the said statement.
 The account names maintained in the
accounting records of Merchandising Concerns

• Merchandise Inventory – commodities or

goods acquired by the business intended for
sale but remain unsold.
• Delivery Expense/Freight out – amount
incurred/paid for transporting merchandise to
customers such as cost of fuel, gasoline and
oil.
 The account names maintained in the
accounting records of Merchandising Concerns

• Purchases – amount of commodities or goods

acquired by the business intended for sale at a
profit.
+ Freight in – amount incurred or paid for merchandise
bought, the transportation expense of which was
shouldered by the buyer.
– Purchase returns and allowances – a contra account
that accumulate the cost of merchandise returned to
suppliers
– Purchase Discount – a reduction in the purchase price
due to payment of the buyer to the seller before the
day the discount period is over
 The account names maintained in the
accounting records of Merchandising Concerns

• Sales – revenues derived from sale of goods either in cash

or on account.
- Sales Returns and Allowances – a contra-sales account
that accumulates the amount of merchandise sold to
customers but returned for various reasons like errors in
style, color, sizes
- Sales Discount – a reduction in the selling price due to
payment of the buyer to the seller before the day the
discount period is over.
 Expenses
Selling Expenses – pertain to expenses related to selling
the products of the company.
 Advertising expenses
 Rent Expense of the store
 Commission expense
 Depreciation expense of the store
 Depreciation expense of the delivery van
 Freight out
 And other selling related expenditures
 Expenses
Administrative Expenses - pertain to expenses related
to office and administrative work.

 Salaries expense of employees

 Rent of office
 Utilities of the head office
 Office supplies
 And other office related expenditures
Other income – revenue from sources not directly related to the
central operating activities of the business.
Ex. Interest income and gains from sale of fixed assets

Other expenses – other expenses that are not directly associated

with the operating activities of the business.
Ex. Interest expense, loss from lawsuit, losses in the
disposal of fixed assets, discount loss
 Net Sales

Sales P xxxx
Less: Sales Returns and Allowances P xxx
Sales Discount xxx xxx

Net Sales P xxx

 Cost of Goods Sold or Cost of Sales
Other Comprehensive Income
Revaluation Surplus P 20,000.00
Merchandise Inventory, Beginning P XXX
Unrealized Translation Gain 10,200.00 30,200.00
Add: Net Cost of Purchases:
Purchases P XXX
Less: Purchases Discount P XXX
Purchase Returns and Allowances XXX XXX
Net Purchases XXX
Add: Freight-in XXX XXX
Total Goods Available for sale P XXX
Less: Merchandise Inventory, Ending XXX
Cost of Sales P XXX
 Other Income

Revaluation Surplus P XXX

Unrealized Translation Gain XXX

Total P XXX
 Selling Expenses

Salary P XXX
Rent XXX
Store Supplies XXX
Depreciation - Store Equipment XXX
Utilities XXX
Total P XXX
 Administrative Expenses

Salary P XXX

Rent XXX

Office Supplies XXX

Depreciation - Office Equipment XXX

Utilities XXX

Total P XXX
 Other Expenses

Interest Expense P XXX

Loss on sale of furniture XXX

Total P XXX
 Statement of
Comprehensive Income
Exercises & Problems
INSTRUCTION: Classify the following into ASSETS, LIABILITIES, CAPITAL, INCOME,
EXPENSE
1. Merchandise Inventory
2. Office Equipment
3. Accrued Interest Expense
4. Accounts Receivable
5. Utilities Expense
6. Unearned Interest Income
7. Depreciation Expense
8. Interest Expense
9. Allowance for Bad Debts
10. Withholding Tax Payable
11. Salaries Payable
12. Mr. Antonio, Drawing
13. Office Supplies Inventory
14. Due from Officers and
Employees
15. Office Supplies Expense
16. Accumulated Depreciation
17. Interest Income
18. Building
19. Land
20. SSS Premium Expense
21. Cash on Hand
22. Petty Cash Fund
23. Mortgage Payable
24. Notes Payable
25. Prepaid Supplies
 Classify the following whether they are Income,
Expense and Other Comprehensive Income
1. Rent income surplus
2. Unrealized gain or loss on 9. Selling expense
investment of equity 10.Miscellaneous expense
3. Salaries expense 11.Unrealized gain or loss
4. Utilities expense from derivative contracts
5. Gain or loss from 12.Interest income
translating the financial 13.Rent expense
statements of a foreign 14.Actuarial gain or loss on
operation defined benefits plan
6. Administrative expense 15.Gain on sale of fixed assets
7. Income tax expense
8. Change in revaluation