ABM 2

TOPIC 2: STATEMENT OF COMPREHENSIVE INCOME-Single Step (Preparation)

1.1 LEARNING OBJECTIVES:

Dear student, after completing this topic you will be able to:

1. point out the parts of the SCI of a service business and a merchandising business
2. determine the steps in preparing SCI in a service business and merchandising business
3. prepare a single-step SCI for a service business

1.2 INTRODUCTION

A common form of presenting the income statement is classifying expenses

according to functions. The form starts with the revenue for the reporting period, then
deducting all expenses.

There are two formats for the SCI, namely, the single-step and the multi-step. The
single-step is closely related to the nature of expense format. On the other hand, the
multistep approach is also associated with the function of expense (this topic will
focus only on single-step SCI, multi-step SCI will be discussed on topic 3).

1.3 LET’S EXAMINE

ACTIVITY 2.1
1. Observe the following SCI then answer the question that follows.

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 Answer the following questions:
 Which of the following do you think is a single-step SCI? Encircle your choice. (5points)
 Is a single-step SCI is easy or hard to prepare? In a minimum of 3 sentences and a maximum of 5 sentences,
state your reasons why it is easy or hard to prepare. (10points)

1.4 LET’S DISCUSS

STEPS IN PREPARING SCI OF A SERVICE BUSINESS:

1. Gather the necessary information
 In an accounting system, the best tool to take information from would be the "adjusted trial
balance". This is the most updated trial balance (i.e. prepared after considering adjustments
to several accounts). In any case, any report that shows a complete listing of company
accounts can be used.

2. Start by making the heading

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  The heading of a financial statement is made up of three lines. The first line contains the
name of the company (Gray Electronic Repair Services). The second line shows the title of
the report (Income Statement). And the third line indicates the period reported.
 For income statements, we use For the Year Ended..., For the Quarter Ended..., For the
Month Ended..., etc., depending on the period covered in the report. Nonetheless, some
annual income statements omit the "For the Year Ended" phrase.

3. Report all revenue accounts

 From the trial balance, we will look for and report all income or revenue accounts. You will
need to be familiar with different income accounts such as Service Revenue, Sales,
Professional Fees, Interest Income, etc. If you need a review on that topic, you may visit this
lesson: Elements of Accounting.
Note: In the adjusted trial balance above, there is only one revenue account - Service
Revenue.

4. Report all expense accounts

 From the adjusted trial balance again, we will take all expenses and include them in the
report. Once they are all listed, we will get the sum of all the expenses.

5. Compute for the net income

 Net income is equal to total revenues minus total expenses.
 Again, we drew a single line under 8,790 to indicate that a mathematical operation was
made. Two horizontal lines are drawn under the final amount (1,060 net income). This is
known as "double-rule" and is similar to enclosing the final answers in a box or circle in your
math test.

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ACTIVITY 2.2
Instruction: Fill in the yellow arrows to complete the parts of SCI of a service business. Choose your answers
from the words encircled below.

REVENUE

HEADING

EXPENSES

ACTIVITY 2.3

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ACTIVITY 2.4

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ACTIVITY 2.5
Instruction: Read and analyze the problem below then answer the questions that follow.

The Happy Toddlers (THT)

The Happy Toddlers is a preparatory school for children three to five years Old. Students are enrolled for a
school-year. Parents can pay the full tuition fee of ?70.000 at the start of the School year (June). There is also an
option to pay two installments Of P37,OOO each at the start of the every semester (June 1 and November 1). Of the
150 students enrolled, are paid in full at the start of the year. The remaining students are on installment basis. One
school year runs from June 1 to March 31.

Requirement #1: Determine the tuition fee revenue for the period December 31. This is the first year of Happy
Toddlers operations.

(Continuation) The Happy Toddler' (THT) is a preparatory school for ichildren three to fiveyears Old. There are 10
teachers employed by (THT), 5 senior teachers with a salary of P30,000 a month and 5 junior teachers at P18,000 a
month. There are also 4 administrators with average monthly salary of P35, 000. Annual depreciation furnitures and
fixtures amounted to P100,000. Utilities expense for the year totals to P200, 000.

SELF-CHECK 2.1:

Instruction: Below are the rumbled steps in preparing the single-step SCI. Arrange it by correctly putting
the number (1-6) on the blank space before each sentences. (2 points each)

_______ Write the peso sign on the first amount in the amounts column and on the totals. Draw
double lines below the totals.

_______ Start with a clean paper by writing the heading.

a. Name of the Company
b. Income Statement
c. For the ended (period maybe a year or less)

_______ List the income account, and on rightmost section of the paper, the amounts.

_______ Deduct total cost and expenses from the income to arrive at the net income or net loss.
Write net income on the debit column or the net loss on the credit column to balance
Debits and Credits.

_______ Compute the total cost and expenses.

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________ List the cost and expense accounts on another amounts column on the left of (2).