Statement of

Comprehensive Income
(SCI)
Module 2
FABM II
Objectives
The learners should be able to:
1. identify the elements of the SCI and describe each of
these items for a
service business and a merchandising business
2. prepare an SCI for a service business using the single-
step approach
3. prepare an SCI for a merchandising business using the
multi-step approach
Introduction
A. Communicate learning objectives
At the end of the topic, I should be able to
1. Identify the elements of the SCI and describe each of these items for a service
business and a
merchandising business
2. Prepare an SCI for a service business using the single-step approach
3. Prepare an SCI for a merchandising business using the multi-step approach
B. Present terms
At the end of this topic, I should be able to define the following terms:
1. Statement of Comprehensive Income
2. Temporary Accounts
3. Contra Purchases
4. Cost of Goods Sold
5. General and Administrative Expenses
6. Selling Expenses
7. Single-Step
Review
Define/discuss the following terms
a. Accrual
b. Revenues
c. Expenses
d. Service business
e. Merchandising business
Review
a. Accrual – accrued income, accrued expense
b. Revenues – service income, sales
c. Expenses – salaries expense, depreciation expense
d. Service business – school, repair shop
e. Merchandising business – sari-sari store, vegetable
vendor
Definition
STATEMENT OF COMPREHENSIVE INCOME – Also
known as the income statement. Contains the results
of the company’s operations for a specific period of
time which is called net income if it is a net positive
result while a net loss if it is a net negative result. This
can be prepared for a month, a quarter or a year.
(Haddock, Price, & Farina, 2012)
TEMPORARY ACCOUNTS – Also known as nominal
accounts are the accounts found under the SCI. They
are called such because at the end of the accounting
period, balances under these accounts are transferred to
the capital account, thus having only temporary
amounts and resulting to zero beginning balances at
the beginning of the following year.(Haddock, Price, &
Farina, 2012)Examples of temporary accounts include
revenues, sales, utilities expense, supplies expense,
salaries expense, depreciation expense, interest expense
among others.
Single-step – Called single-step because all revenues
are listed down in one section while all expenses are
listed in another. Net income is computed using a
“single-step” which is Total Revenues minus Total
Expenses. (Haddock, Price, & Farina, 2012)
Multi-step – Called multi-step because there are
several steps needed in order to arrive at the company’s
net income. (Haddock, Price, & Farina, 2012)
a. Emphasize that the two are only formats and will
yield the same amount of net income/loss
b. Discuss that single-step SCI is more commonly used
by service companies while multi-step format is more
commonly used by merchandising companies
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.
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)
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