DESCRIBE ME!

Think of words that best

describe revenues.
expenses
Statement of Comprehensive
Income
 What accounting elements are used to
determine profit?

 Why are accounting elements in the

SCI referred to as temporary
accounts?
 How important are they in the
preparation of the Statement of
Comprehensive Income?
STATEMENT OF INCOME

 Is a financial statement providing

information about the results of
an entity’s past performances.
Purpose of Statement of Income

 Measure the results of entity’s

operations for some specific
time period.
 Elements of a
Statement of Income
REVENUES

Frias and Pefianco, FABM2

 Revenues are Sales or Service (gross)

Income from sale of company
products and services.
COST and EXPENSES

 are direct cost of the products sold or

services rendered.
 Sacrifices required to attain revenues
GAINS or LOSSES
Arise from the sale or loss in
value of assets other than
merchandise.
May include equipment,
machinery, investments in
marketable securities
Difference of the SCI of a
service company and of a
merchandising company.
Service company-cost of
labor
Merchandising company-
cost of goods
ACTIVITY
Activity on Classification of accounts
1. Materials needed: Sheets of Paper and play money.
2. Learners should be grouped into 3 groups.
3. The 1st group will create paper airplanes and
assign them with a hypothetical cost of ₱__ each.
5. The other 2 groups are given play money.
6. The groups with the paper boats will “sell” them to
the other group with the play money at an amount
that the group will decide. In turn, the group who
bought from the boats from the first group will sell
these boats to group 3. Only one member will sell the
PREPARATION OF Statement of Income
 Heading
Name of business
Name of the statement
Period

ABM International Inc.

Income Statement
For the year ended, December 31, 2018
Format OF Statement of Income
 A. Single-Step Format
All revenues are added to get “total
revenues”.

All expenses are added to create

“total expenses”.
 ABM International Inc.
Single-step Income Statement
For the year ended, December 31, 2018
Revenues:
Service Revenue ₱ 260,000
Rent Revenue 30,000
 Total Revenues 290,000
Expenses:
Salaries Expense 103,500
Rent Expense 17,500
Depreciation Expense 15,000
Utilities Expense 25,000
Total Expenses 161,000
Net Income ₱ 129,000
Format OF Statement of Income
 Multi-Step Format
Gross Profit (Margin) calculated by subtracting
Cost of Goods Sold from Sales
Operating Income –determined by subtracting
from Gross Profit (Margin) the operating expenses
(selling and administrative)
. Sales- total amount of revenue generated from
i

selling products
ii. Contra revenue – (REDUCTION from Sales)

Sales returns
Sales discount
ILLUSTRATION:

Sales ₱ 500
Less:
Sales Returns and Allowances ₱ 5
Sales Discounts 10 15
Net Sales 485
Cost of Goods Sold – actual cost of merchandise that the
company sold during the year.
Beginning inventory – amount of inventory at the
beginning. It is also the amount of ending inventory from
the previous period.

Purchases – amount of goods bought during the current

accounting period.
Contra Purchases – (DEDUCTION) an account that is
credited being “contrary” to the normal balance of
Purchases account.
a. Purchase discount
b. Purchase returns –
c.Freight In – account used to record
transportation costs of merchandise purchased by
the company.
Freight in is recorded when goods are
transported into the company.
ILLUSTRATION:

Purchases ₱ 200
Less:
Purchase Returns ₱ 15
Purchase Discounts 15 30
Net Cost of Purchases 170
Add: Freight in 5
Net Purchases 175
vi. General and Administrative Expenses – not
directly related to the merchandising function of the
company but are necessary for the business to
operate effectively.

EX. Salaries of admin, janitor, depreciation of office

equipment, rental office building, utilities expense of
home office
vii. Selling Expenses – those that are directly related to
the main purpose of the business
sale and delivery of merchandise.

Do NOT include cost of goods sold and contra revenue

accounts.
EXAMPLE:
salary of sales agent
Advertising expense
Depreciation of delivery van
Sales ₱ 485
Less:Cost of Goods Sold
Beg inventory ₱ 50
Add: Purchases 175
Total Goods Available for Sale 225
Less: Ending Inventory 50 175
Gross Profit 315
Less: General administrative expense 100
Selling expense 80 180
Net Income ₱ 135
 APPLICATION
 Activity: THINK, PAIR and SHARE
 THINK: Analyze the given problem and try to classify
each account titles.
 PAIR: Get a partner. Discuss your answer. Do you have
the same answer with your partner?
 SHARE: Share and discuss your answer..
 Be able to discuss your answer in class.
ASSESSMENT
Identify if the account is part of the general and administrative expenses or
selling expenses
1. Salaries of admin personnel
2. Salaries of janitors
3. Salaries of sales agents
4. Utilities of home office
5. Rent of office building
6. Depreciation of office equipment
7. Depreciation of delivery van
8. Advertising
9. Cost of merchandise sold during the year
10.13th Month pay of Administrative personnel
 AGREEMENT:
Write your answer on your activity Notebook.

 If you were the owner of a

company, which format of income
statement would you prefer to
use? Why?
God bless you!!!