CHAPTER 2

STATEMENT OF
COMPREHENSIVE INCOME
(SCI)
LEARNING COMPETENCIES
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
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
net loss if it is a net negative result.
This can be prepared for a month, a
quarter or a year.
 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 are transferred to the capital
account, thus having only temporary amounts and
resulting to zero beginning balances at the beginning of
the following year.
 TEMPORARY ACCOUNTS
Examples of temporary accounts include
revenues, sales, professional fees
utilities expense, supplies expense, salaries
expense, depreciation expense, interest expense
among others.
The Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the
wording – “for the”)
 SINGLE-STEP INCOME STATEMENT
oAll revenues are listed down in one
section while all expenses are listed in
another.
Net Income/ Net Loss =Total Revenues- Total Expenses
oCommonly used by service companies
 SINGLE STEP INCOME STATEMENT
First part is Revenues
This is the total amount of revenue that the company
was able to generate from providing services to
customers
Second part is Expenses
Can be broken down into General and Administrative
and Selling Expenses
Revenues less Expenses. Net income for a
positive result and net loss for a negative result
PREPARE A SINGLE-STEP STATEMENT OF
COMPREHENSIVE INCOME USING THE FOLLOWING:
Revenues – 20,000
Rent expense – 3,000
Salaries expense – 4,000
Utilities expense – 2,000
Use any business name and the end of the current year
for the heading.
MULTI-STEP INCOME STATEMENT
Several steps needed in order to arrive at
the company’s net income.
Commonly used by merchandising companies
 MULTI-STEP INCOME STATEMENT-
MERCHANDISING COMPANIES
1. Sales- This is the total amount of revenue that the company was
able to generate from selling products
MULTI-STEP INCOME STATEMENT- MERCHANDISING
COMPANIES
2. Second part compose of contra revenue
This account is debited in order to record returns of customers or
allowances for such returns
Sales returns- occur when customers return their products
for reasons such as but not limited to defects or change of
preference.
Sales discount – This is where discounts given to customers
who pay early are recorded. Sales discount is awarded
to customers who pay earlier or before the deadline.
MULTI-STEP INCOME STATEMENT- MERCHANDISING
COMPANIES
3. Net Sales- The difference between sales and contra
revenue accounts
MULTI-STEP INCOME STATEMENT- MERCHANDISING
COMPANIES
4. Cost of Goods Sold – This account represents the actual cost of
merchandise that the company was able to sell during the year.
 COST OF GOODS SOLD
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.
 COST OF GOODS SOLD
Purchases
Amount of goods bought during the current accounting
period
Contra Purchases –An account that is credited being
“contrary” to the normal balance of Purchases account
Purchase discount – Account used to record early payments
by the company to the suppliers of merchandise.
Purchase returns – Account used to record merchandise
returned by the company to their suppliers.
COST OF GOODS SOLD

Freight In
This account is used to record transportation costs
of merchandise purchased by the company.
Ending inventory
Amount if inventory presented in the Statement of
Financial Position. Total cost of inventory unsold at
the end of the accounting cycle.
COST OF GOODS SOLD
COMPUTE FOR THE COST OF GOODS SOLD
USING THE FOLLOWING
Sales – 15,000
Purchases – 2,000
Purchase returns – 200
Purchase discounts – 200
Freight in – 100
Beginning inventory – 1,000
Ending inventory – 500
MULTI-STEP INCOME STATEMENT- MERCHANDISING
COMPANIES
5. Gross Profit
Difference between sales and cost of goods sold
MULTI-STEP INCOME STATEMENT- MERCHANDISING
COMPANIES
6. 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
7. 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
IDENTIFY IF THE ACCOUNT IS PART OF THE
GENERAL AND ADMINISTRATIVE EXPENSES
OR SELLING EXPENSES
Nena had the following expense E. Rent of office building
accounts for the year ended F. Depreciation of office
December 31, 2016: equipment
A. Salaries of admin personnel G. Depreciation of delivery
B. Salaries of janitors van
C. Salaries of sales agents H. Advertising
D. Utilities of home office I. Cost of merchandise sold
during the year
MULTI-STEP INCOME STATEMENT-
MERCHANDISING COMPANIES
8. Net Income/ Net Loss
Gross Profit less General and Administrative
Expenses less Selling Expenses is
Net Income for a positive result while
Net Loss for a negative result
SIMPLE MULTI-STEP
PREPARE A SIMPLE MULTI-STEP STATEMENT OF
COMPREHENSIVE INCOME USING THE FOLLOWING:
Sales – 20,000
Cost of Goods Sold – 10,000
General and administrative expenses – 4,000
Selling expenses – 2,000
Use any business name and the end of the current
year for the heading.
During October, a sari-sari store had the following
transactions involving revenue and expenses. Did the
firm earn a net income or incur a net loss for the
period? What was the amount?
Paid Php1,200 for rent
Provided services for Php2,750 in cash
Paid Php250 for telephone service
Provided services for Php1,900 on credit
Paid salaries of Php1,675 to employees
Paid Php350 for office cleaning service
 At the end of the first month of operations for Juan’s Service Company,
the business had the following accounts:
Cash, Php19,000
Prepaid Rent, Php500
Equipment, Php5,000
and Accounts Payable Php2,000.
By the end of the month, Jackson's had earned Php20,000 of Revenues,
Php1,000 of Utilities Expenses and
Php1,500 of Salaries Expenses.
Calculate the net income to be reported by the company for this first
month.
Learning is Fun Company generated revenues
amounting to Php 100,000. Expenses for the
year totaled Php 76,000. How much is the
company’s net income for the year?
 Happy Selling Company’s salaries to sales
agents amounted to Php 10,000. Salaries of
accountants amounted to Php 20,000. No other
expenses were incurred. How much is the
company’s general and administrative expense?
Happy Selling’s beginning inventory
amounted to 250,000. Net purchases
amounted to 70,000. Freight In totaled
15,000. Compute for the company’s cost of
total goods available for sale.
Happy Selling’s Sales amounted to Php 500,000.
Sales returns and sales discounts amounted to Php
30,000 and Php 10,000 respectively. Purchases of
the company totaled Php 100,000 while purchase
returns and purchase discounts amounted to Php
20,000 and Php 10,000 respectively. How much is
the company’s Net Sales? Net Purchases?
Company’s Cost of Goods Sold amounted to
Php 285,000. Net cost of purchases totaled
Php 85,000. Beginning inventory amounted to
Php 250,000. Sales amounted to Php 500,000.
Compute for the company’s Ending Inventory.
Gross profit of Happy Selling amounted
to Php 175,000.
Beginning Inventory totaled Php 250,000.
Ending Inventory amounted to Php 50,000
Net Cost of Purchases totaled Php
85,000. Compute for Happy’s Net Sales