Lesson 2.2 Preparation of Statement of Comprehensive Income

Lesson 2.
Preparation of Statement
of Comprehensive Income
Fundamentals of Accountancy, Business,

and Management 2
Accountancy, Business, and Management
1
The Statement of Comprehensive
Income reports the profit or loss
earned by a business for a
particular period.
2
The SCI helps in the decision-making
process, specifically in figuring out
how the total expenses could still be
decreased and how the total income
could be increased.
3
However, service and merchandising businesses earn and operate
differently. Thus, they use different approaches in presenting their
SCIs.
4
Seeking Answers
You are an employee of ABC Merchandise, and your team is tasked to prepare financial
statements to be presented to prospective investors. You were assigned to prepare the
financial records for profitability. How much profit is the company generating? Does
the company maximize the utilization of company assets in order to generate income?
Are operations efficient and cost-effective? These are the questions that your report
should answer.
This financial statement will be the deciding factor whether or not the investors will
invest in the business.
5
Questions to Ponder
1. What approach will you use in preparing the statement of comprehensive income?
2. How will this approach help you answer the questions that your report seeks to
answer?
3. How will you prepare the statement of comprehensive income to be presented to

investors?
6
Preparation of Statement of Comprehensive Income
Single-Step Approach
Separates revenues from

expenses to determine whether
the company will gain profit or
incur losses.
Service Business
7
Preparation of Statement of Comprehensive Income
Multi-Step Approach
● Determines the gross profit

by getting all the total sales
and deducting the cost of
goods sold from it
● Operating expenses and
non-operating expenses Merchandising Business
8
Service Business and SCI
Laurence owns a laundry shop that offers its services to the residents within
the town. After three months, he thought of also offering snacks to its
customers so they could have something to eat while waiting.
The following year, he prepared income statements for both businesses.
9
10
11
How do users benefit from the presentation of a Statement of
1 Comprehensive Income?
Answer area
12
Preparing the Single-Step SCI
Pro-forma Single-Step SCI
13
Preparing the Single-Step SCI
Provide the
List all expenses.
heading.
1 2 3 4
Get the total Compute the Net

revenues. Income/Loss.
14
ABC Co., a service business, was able to generate the following for the
month of January 2021.
Utilities Expense: ₱8,952 Salaries Expense: ₱21,500

Service Income: ₱107,500 Depreciation Expense: ₱3,500
Rent Expense: ₱10,000
Prepare the ABC company’s statement of comprehensive income for

January.
15
16
Preparing the Multi-Step SCI
Multi-Step Approach
● Commonly used by merchandising businesses.
● Gross profit is computed first before presenting all the expenses
categorized into operating and non-operating expense
17
Pro-forma
Multi-Step SCI
18
Provide the Get the Total

heading. Contra Sales.
1 2 3 4
Get the total Compute the Net

sales. Sales
19
Compute the List and categorize

Cost of Goods operational and
Sold non-operational expenses.
5 6 7 8
Compute the Compute the Net

Gross Profit Income/Loss.
20
Total Contra Sales
21
Net Sales
22
Cost of Goods Sold

● The amount of beginning inventory will be added to the net cost of
purchases.
● To compute the net cost of purchases, net purchases will be added to
the amount of freight-in.
23
Cost of Goods Sold

● Net purchases are computed by subtracting the total amount of contra
purchases from the total purchases.
● The final step in computing the cost of goods sold is to subtract the
cost of ending inventory.
24
Gross Profit
25
Net Income/Loss
26
Merchandising and SCI
ABC Merchandise was able to generate the following for the month of
February, 2021. Prepare the company’s statement of comprehensive income
using the multi-step approach.
Sales ₱ 64,500 Purchases ₱11,000
Sales Discounts 3,500 Purchase Discounts 2,000

Sales Returns and 1,800 Purchase Returns and 2,600
Allowances Allowances
Beginning Inventory 8,650 Ending Inventory 3,725
Freight In 3,000 Advertising Expense 2,950
Utilities Expense 5,675 Interest Expense 3,650
Rent Expense 8,750
27
Merchandising and SCI
See the ABC Merchandise Statement of Comprehensive Income:
ABC Merchandise Statement of Comprehensive Income

2 How is the Cost of Goods Sold computed?
Answer area
29
PAL’s Bouncing Back
To slash its $2 billion debt, restructure contracts, and obtain fresh capital,
the Philippine Airlines (PAL) filed its bankruptcy in the United States in
2021. PAL was one of the greatly hit companies during the pandemic,
where travel restrictions were imposed upon travelers, causing a huge
decline in its revenue. As the costs are ongoing while the revenues are
constantly declining, the company needed to restructure its plans to cope up
with the upcoming challenges.
Benjamin L. Vergara, “PAL filing for bankruptcy in US,”The Manila Times, September 05, 2021,
https://www.manilatimes.net/2021/09/05/news/national/pal-filing-for-bankruptcy-in-us/1813591, last accessed on May 29, 2022.
“PAL operator flies back to profit in 2021,” CNN Philippines (CNN Philippines, April 06, 2021),
https://www.cnnphilippines.com/business/2022/4/6/PAL-operator-flies-back-to-profit-in-2021.html, last accessed on May 29, 2022.
“Philippine Airlines back to profitability in Q1 with ₱1.2B income,” CNN Philippines (CNN Philippines, May 14, 2022),
https://www.cnnphilippines.com/business/2022/5/14/Philippine-Airlines-Q1-2022-income.html, last accessed on May 29, 2022
30
Fortunately, the fruits of PAL’s efforts to fly back to its profitability were
seen during the latter part of 2021. In fact, the company was able to end
2021 with ₱60.61 billion consolidated earnings compared to ₱73 billion
losses in 2020. Moreover, its revenue in 2021 amounted to ₱58.7 billion
while that of 2020 amounted to ₱55.26 billion.
31
It still continues to face the year 2022 with optimism as it reports ₱1.2
billion of net income during the 1st Quarter. This may be traced from the
significant increase in the number of its passengers as there are now less
travel restrictions. The company is being constantly challenged by higher
fuel prices, the Ukraine-Russia conflict, and the continuous recovery of the
travel market. However, it still strives to at least maintain the good start that
it exemplified during the start of 2022.
32
● The preparation of a statement of comprehensive income depends on how a
business generates its income/revenue.
● There are two approaches used to prepare the statement of comprehensive income:
single-step and multi-step approaches.
33
34
● The pro-forma income statement prepared using the single-step is presented below.
35
● The pro forma income
statement prepared using
the multi-step approach is
presented here.
36
True or False.
1. A statement of comprehensive income is also known as the Balance

Sheet.
True False
37
True or False.
2. An SCI reports the performance of a company for a given period.
True False
38
True or False.
3. The Single-step approach involves the computation of Cost of Goods

Sold.
True False
39
True or False.
4. The Cost of Goods Sold is deducted from the Net Sales to get the
Gross Profit.
True False
40
True or False.
5. Net Loss results from the total expenses exceeding the total revenue.
True False
41

Lesson 2.2 Preparation of Statement of Comprehensive Income

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Lesson 2.2 Preparation of Statement of Comprehensive Income

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Lesson 2.

Fundamentals of Accountancy, Business,

3. How will you prepare the statement of comprehensive income to be presented to

Separates revenues from

● Determines the gross profit

The following year, he prepared income statements for both businesses.

Pro-forma Single-Step SCI

Get the total Compute the Net

Utilities Expense: ₱8,952 Salaries Expense: ₱21,500

Prepare the ABC company’s statement of comprehensive income for

Provide the Get the Total

Get the total Compute the Net

Compute the List and categorize

Compute the Compute the Net

Total Contra Sales

Cost of Goods Sold

Cost of Goods Sold

Sales Discounts 3,500 Purchase Discounts 2,000

See the ABC Merchandise Statement of Comprehensive Income:

ABC Merchandise Statement of Comprehensive Income

1. A statement of comprehensive income is also known as the Balance

2. An SCI reports the performance of a company for a given period.

3. The Single-step approach involves the computation of Cost of Goods

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