Statement of Comprehensive Income

STATEMENT OF COMPREHENSIVE
INCOME
- short for “Statement of profit or loss and other comprehensive
income”
It shows the following:

1. Profit or loss;
2. Other comprehensive income; and
3. Comprehensive income
INCOME
Income Statement vs. Statement of Comprehensive Income
Income Statement Statement of Comprehensive Income

Income ₱1,000 Income ₱1,000
Expenses (600) Expenses (600)
₱400 Profit or loss 400
Other comprehensive income 50
Comprehensive income ₱450
INCOME
Single-statement Presentation:
ABC Co.
Statement of Comprehensive Income
For the period ended December 31, 20x1
Income ₱1,000
Expenses (600)
Profit for the year 400
Comprehensive income for the year ₱450
INCOME
Two-statement Presentation:
a. First of two statements – the “Income statement”
ABC Co.
Income ₱1,000
Expenses (600)
Profit or loss 400
INCOME
Two-statement Presentation:
a. Second of two statements
ABC Co.
Profit or loss ₱400

Comprehensive income ₱450
INCOME
Elements of the Statement of Comprehensive Income
1. INCOME – increases in economic benefits during the period in

the form of increases in assets, or decreases in liabilities, that
result in increases in equity, excluding those relating to
investments by the business owner.
Income includes both revenues and gains.
a. Revenue – arises in the course of the ordinary activities of a
business, e.g., sales and service fees.
Service fees – refer to revenue earned by a service business
from rendering services.
Sales revenue or sales – refer to the revenue earned by a
merchandising business from selling goods
b. Gains – represents other items that meet the definition of
income and may or may not arise in the course of the ordinary
activities of an entity.
INCOME
Elements of the Statement of Comprehensive Income
1. EXPENSES – decreases in economic benefits during the period

in the form of decreases in assets, or increases in liabilities, that
result in equity, excluding those relating to distributions to the
business owner.
Expenses include both expenses and losses.
a. Expenses – arise in the course of the ordinary activities of a
business
b. Losses – represent other items that meet the definition of
expenses and may or may not arise in the course of the
ordinary activities of the entity.
The difference between income and expenses represents profit or
loss.
• If income is greater than expenses, the difference is profit.
• If income is less than expenses, the difference is loss.
INCOME
Illustration: SCI of a service business
The trial balance of ABC Co. on December 31, 20x1 shows the
following information:
Accounts Dr. Cr.
Service fees ₱870,000
Interest income 60,000
Gains 20,000
Salaries expense ₱300,000
Rent expense 30,000
Utilities expense 20,000
Supplies expense 10,000
Depreciation expense 40,000
Taxes and licenses 70,000
Transportation and travel expense 5,000
Interest expense 2,000
Miscellaneous expense 1,000
Losses 15,000
Totals ₱493,000 ₱950,000
INCOME
ABC Co.
INCOME
Service fees ₱870,000
Interest income 60,000
Gains 20,000
TOTAL INCOME 950,000
EXPENSES
Salaries expense 300,000
Rent expense 30,000
Losses 15,000
TOTAL EXPENSES 493,000
PROFIT FOR THE YEAR 457,000

Other comprehensive income -
COMPREHENSIVE INCOME FOR THE YEAR ₱457,000
INCOMEof Expenses
Presentation
Nature of expense method
Under this method, expenses are presented according to their nature
(for example, depreciation, purchases of materials, transport costs,
etc.) and are not reallocated among their functions within the entity.
A statement of comprehensive income that shows expenses by their
nature is referred to as prepared using a single-step approach.
Function of expense method
Under this method, expenses are classified and presented according
to their function as part of cost of sales or, for example, the costs of
distribution or administrative activities. At a minimum, cost of sales
is presented separately from other expenses. A statement of
comprehensive income that shows expenses by their function is
referred to as prepared using a multi-step approach.
INCOME
Major Categories of Expenses
1. Cost of sales (or Cost of goods sold)
2. Distribution costs (or Selling expenses) – are costs attributable to
selling activities. Examples: freight-out or delivery expenses,
sales commissions, advertising, salaries of sales personnel,
depreciation on delivery equipment, rent pertaining to space
occupied by the sales department, and the like.
3. Administrative expenses – is a residual category of expenses,
meaning an expense that does not qualify for classification under
the other categories (i.e., numbers 1, 2 and 4 to 6) is included in
this category. Examples: insurance, taxes and licenses (except
income tax expense), salaries of non-sales personnel,
depreciation of assets not used by the sales department, rent
pertaining to office, and the like.
INCOME
Major Categories of Expenses
4. Other expenses – includes losses, like casualty losses and losses
on sale of properties
5. Interest expenses (or Finance cost)
6. Income tax expense – includes taxes on income. Other taxes are
presented in the administrative expenses category under “taxes and
licenses” account.
INCOME
Illustration: Function of expense
The accounts of an entity show the following balances:
Cost of goods sold ₱250,000
Insurance expense 120,000
Advertising expense 18,000
Freight-out 36,000
Loss on sale of equipment 4,000
Rent expense (one-half pertains sales department) 120,000
Salaries expense (1/4 pertains to non-sales personnel) 200,000
Sales commission expense 20,000
Bad debts expense 6,000
Requirements: Determine the amounts of expenses classified as (1)
distribution costs and (2) administrative expenses.
INCOME
Solution:
(1) Selling expenses
*(1 minus ¼
Advertising expense ₱18,000 pertaining to
Freight-out 36,000 non-sales
Rent expense (120,000 x ½) 60,000 personnel =
¾ pertaining
Salaries expense (200,000 x ¾) 150,000 to sales
Sales commission expense 20,000 personnel)
Selling expenses ₱284,000
(2) Administrative expenses
Advertising expense ₱18,000
Freight-out 36,000
Rent expense (120,000 x ½) 60,000
Salaries expense (200,000 x ¾) 150,000
Sales commission expense 20,000
Selling expenses ₱284,000
INCOME
Illustration: Function of expense
 “Cost of goods sold” is presented separately.
 The “Loss on sale of equipment” is presented under the “Other
expenses” category. However, material amounts of losses shall be
presented separately.
 “Interest expense” is presented separately.
INCOME
Illustration: SCI of a merchandising business
The nominal accounts columns of the trial balance of ABC Co. on
December 31, 20x1 show the following information:
Accounts Dr. Cr. Accounts Dr. Cr.
Sales ₱900,000 Utilities expense 20,000
Interest income 60,000 Supplies expense 10,000
Gains 20,000 Transportation and travel 5,000
expense
Inventory, beg. ₱50,000
Insurance expense 12,000
Purchases 200,000
Freight-in 10,000
Purchase returns 5,000
Purchase discounts 7,000
Loss on the sale of 15,000
Freight-out 25,000 equipment
Sales commission 30,000 Totals ₱835,000 ₱992,000
Rent expense 30,000
INCOME
Illustration: SCI of a merchandising business
Additional information:
a. Ending inventory is ₱80,000.
b. One-half of the salaries, rent, and depreciation expenses pertain
to the sales department. The sales department does not share in
the other expenses.
Requirements: Prepare the statement of comprehensive income
using the following:
c. Nature of expense method (Single-step approach)
d. Function of expense method (Multi-step approach)
INCOME(a): Single-step approach
Requirements
ABC Co. Utilities expense 20,000
For the period ended December 31, 20x1 Supplies expense 10,000
INCOME Transportation and travel expense 5,000
Sales ₱900,000 Insurance expense 12,000
Interest income 60,000 Taxes and licenses 70,000
Gains 20,000 Interest expense 2,000
TOTAL INCOME 980,000 Miscellaneous expense 1,000
Loss on sale of equipment 15,000
EXPENSES TOTAL EXPENSES 743,000
Net purchases ⁽ᵃ⁾ 198,000
Change in inventory ⁽ᵇ⁾ (30,000) PROFIT FOR THE YEAR 237,000
Freight-out 25,000 Other comprehensive income -
Sales commission 30,000 COMPREHENSIVE INCOME ₱237,000

OF THE YEAR
Rent expense 30,000

INCOME(a): Single-step approach
Requirements
⁽ᵃ⁾ “Net purchases” is computed as follows:
Purchases ₱200,000
Freight-in 10,000
Purchase returns (5,000)
Purchase discounts (7,000)
Net Purchases ₱198,000
⁽ᵇ⁾ “Change in inventory” is the difference between the beginning
inventory and ending inventory. This is computed as follows:

Inventory, end 80,000
A decrease
Change in inventory
in inventory - increase is a deduction.
(₱30,000)
 A decrease in inventory is an addition. Notice: the inverse
relationship
INCOME
The treatments for “Net purchases” and “Change in inventory” are
necessary so that “cost of goods sold” is properly reflected on the
single-step statement of comprehensive income.
Regular computation:

Purchases 200,000
Freight-in 10,000
Total goods available for sale 248,000
Inventory, end (80,000)
INCOME
As reflected on the statement of comprehensive income above:
Net purchases ₱198,000

Change in inventory - increase (30,000)
INCOME(a): Multi-step approach
Requirements
ABC Co.
Notes
Sales ₱900,000
Cost of sales 1 (168,000)
GROSS PROFIT 732,000
Other income 2 80,000
Distribution costs 3 (255,000)
Administrative expenses 4 (303,000)
Other expenses 5 (15,000)
Interest expense (2,000)
PROFIT FOR THE YEAR 237,000
Other comprehensive income -
COMPREHENSIVE INCOME FOR THE YEAR ₱237,000
Requirements
The breakdowns of the line items are shown in the “Notes” as
follows:
Note 1: Cost of sales
This account consists of the following:
Purchases 200,000
Freight-in 10,000
Total goods available for sale 248,000
Inventory, end (80,000)
Cost of sales ₱168,000
Requirements
follows:
Note 2: Other income
Interest income ₱60,000
Gains 20,000
Other income ₱80,000
Requirements
follows:
Note 3: Distribution costs
Freight-out ₱25,000
Sales commission 30,000
Salaries expense (300,000 x ½) 150,000
Rent expense (30,000 x ½) 15,000
Depreciation expense (40,000 x ½) 20,000
Distribution costs ₱255,000
Requirements
follows:
Note 4: Administrative expenses
Salaries expense (300,000 x ½) ₱25,000
Rent expense (30,000 x ½) 30,000
Depreciation expense (40,000 x ½) 15,000
Insurance expense
Taxes and licenses
Miscellaneous expense
Administrative expenses ₱303,000
Requirements
follows:
Note 5: Other expenses
This account consists of a loss incurred on the sale of equipment.

Statement of Comprehensive Income

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Statement of Comprehensive Income

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STATEMENT OF COMPREHENSIVE

It shows the following:

Income Statement Statement of Comprehensive Income

Profit or loss ₱400

1. INCOME – increases in economic benefits during the period in

1. EXPENSES – decreases in economic benefits during the period

TOTAL INCOME 950,000

TOTAL EXPENSES 493,000

PROFIT FOR THE YEAR 457,000

INCOME Transportation and travel expense 5,000

Sales ₱900,000 Insurance expense 12,000

Interest income 60,000 Taxes and licenses 70,000

Gains 20,000 Interest expense 2,000

TOTAL INCOME 980,000 Miscellaneous expense 1,000

Loss on sale of equipment 15,000

EXPENSES TOTAL EXPENSES 743,000

Net purchases ⁽ᵃ⁾ 198,000

Change in inventory ⁽ᵇ⁾ (30,000) PROFIT FOR THE YEAR 237,000

Freight-out 25,000 Other comprehensive income -

Sales commission 30,000 COMPREHENSIVE INCOME ₱237,000

Salaries expense 300,000

Rent expense 30,000

Depreciation expense 40,000

Inventory, beg. ₱50,000

Inventory, beg. ₱50,000

Net purchases ₱198,000

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