Statement of

Comprehensive
Income
Learning Objectives

1. Understand the purpose of the SCI;

2. Identify the elements of the SCI;
3. Describe the nature of the accounts reported on the
SCI;
4. Preprare a single-step SCI for a service company;
5. Prepare a multi-step SCI for a merchandising
company; and
6. Deermine the normal balances of the elemetns of the
SCI.
Results of the Company’s
Operations
The SCI is a statement that reports the results of
operations of the business for one accounting
period. This statement contains the following
information:
a. Revenue generated by operating the business;
b. Costs spent to generate the revenue; and
c. Income which is the excess of revenue over
costs.
Two kinds of income

Revenue – income generated from the

primary operations of the business.
Gains – income derived from other
activities of the business.
Two kinds expenses

Expenses – are related to the primary

operations of the business.
Losses – are from other activities of
the business.
Elements of the Statement of
Comprehensive Income
REVENUE

Service Income – the Service Income account is

generally used to describe revenue derived from
rendering of services. A more specific account
name may be used to identify the services
rendered such as Rental Income, Professional Fee
and Tuition Fee Revenue.
Elements of the Statement of
Comprehensive Income
REVENUE

Sales – the Sales account is generally used

to describe revenue derived from selling of
goods. A more specific account name may
be used to identify the goods sold such as
Office Supplies Sales, Book Sales, Food
Elements of the Statement of
Comprehensive Income
EXPENSES

Cost of Goods Sold (Cost of Sales) – an account used

by companies that sells goods instead of services. For
trading operations, Cost of Sales collects the cost of
the merchandise sold. This includes the purchase price
of inventory, brokerage, and shipment cost (Freight-In)
to bring the goods to the premises of the company.
Cost of Sales (CoS), continued…

CoS – is part of inventory accounting.

Two ways of keeping records of
inventory – perpetual and periodic
inventory system.
Perpetual Inventory System

Inventory and Cost of Goods Sold (CoGS)

accounts are “perpetually” updated. The
inventory account is increased when goods
for sale are acquired and decreased when
goods are sold. The CoGS account is
updated every time a sale is made.
Account used is “Merchandise Inventory”.
Periodic Inventory System

Inventory account is only “periodically” updated.

“Periodically” means that the inventory account is
updated only at the end of the year or the end of
the month. Account used is “Purchases”.
 Periodic Inventory System:
Cost of Good Sold and Net Purchases

Cost of Goods Sold

Inventory, beg.
Add: Net Purchases
Purchases
Add: Freight-In
Gross Purchases
Less: Purchase Returns and Allownces
Purchase Discount
Net Purchases
Cost of Goods Available for Sale
Less: Inventory, end
Cost of Goods Sold
Operating Expenses

Refer to all other expenses related to the

operation of the business, other than cost
of sales. These include salaries of
employees, supplies, utilities (electricity,
telephone and water bills), gasoline
expense, representation, bad debts
expense, depreciation and amortization.
Other Expenses and Other Income

Losses and other expenses as well as gains and

other income are reported after the operating
section of the SCI. Line items included under this
section are interest income from investments of
excess cash, interest expense from borrowings
and gain or loss from sale of equipment (proceeds
from sale less net book value of PPE on date of
sale).
Presentation of Statement of Comprehensive
Income

Single Step SCI – groups all revenue items

together and all expense items together; net
income is computed using only one step,
deducting total expenses from total revenues.
Subtotal are not computed and presented on the
SCI; generally, used by small businesses and
service businesses because of its simplicity.
Single-Step
SCI
 Multi-Step SCI

Multi-step is also associated

with the function of expense
format. The function of expense
classifies operating expenses
into three categories based on
usage: Cost of Sales, General
and Administrative and Selling
Expenses.
Single-
Step vs
Multi-
Step