Yllana Bay View College, Inc.

“The Builder of Future Leaders”

Senior High School Department
Enerio Street, Balangasan District, Pagadian City
Contact Number: (062) 2154176 / Email Address: [email protected]

INTERACTIVE MODULE
FOR

FUNDAMENTALS OF
ACCOUNTANCY,
BUSINESS AND
MANAGEMENT 2
Teacher Ann Margaret A. Dela Fuente
Educational Attainment College Graduate (BSAcT)
Subject Fundamentals of Accountancy, Business and Management 2
Topic Chapter II – Statement of Comprehensive Income

Module Content:

Lesson 1: Define Statement of Comprehensive Income and introduce

Temporary accounts
Lesson 2: Single-step and multiple-step format of Comprehensive
Income
Lesson 3: Different Parts of Statement of Comprehensive Income

LEARNING COMPETENCIES

The learners…

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 multistep
approach.
 Statement of Comprehensive Income

I. Pretest (True or False)

Direction: Write the correct answer in a long bond paper.

1. Statement of Comprehensive income accounts are also called “real accounts”.

2. The normal balance of Revenue or income account is Credit and Expense is Debit.
3. Statement of Comprehensive income was previously known as “Income Statement”.
4. Revenue and Expenses are temporary accounts of Liabilities.
5. Revenue and Expenses are closed at the end of the accounting period.
6. Revenue decreases Owner’s Equity. Conversely, Expense increases Owner’s Equity.
7. Service Concern usually follows the single-step form while Merchandising business follows the multiple-
step form.
8. The Statement of Comprehensive Income is dated “for the period ended”
9. In the multiple-step form of Statement of Comprehensive Income preparation, operating expenses are
directly deducted from Sales Revenue to arrive at Profit.
10. The Statement of Comprehensive Income tells us whether the business makes profit or incurs a loss.
11. Operating Expenses are classified into functional and natural expenses.
12. The revenue that derived from a service company is “Service Revenue” while the revenue derived from
Merchandising business is “Sales Revenue”.
13. Gross profit is arrive at by deducting Sales from Cost of Sales.
14. The business incurs a loss when the revenue is higher than the expenses.
15. Revenue refers to proceeds from the sale of merchandise.

II. Class Activity

Direction: Kindly write your answer on the Activity sheet (Long bond paper).

1. This is to check if can still recall your FABM 1; write the definition of the following
terms:

a. Accrual
b. Revenues
c. Expenses
d. Service business
e. Merchandising business

2. Give specific account titles for each of the terms above and give examples of single/sole
proprietorship businesses and merchandising businesses.
III. Instruction on the Proper use of this module:
1. Follow closely the instruction in every activity.
2. Be honest in answering and checking your exercises.
3. Answer the pre-test before going over the materials. This is to find out what you already
know.
4. Answer the exercises encountered at the end of every lesson.
5. Review the lesson that you think you failed to understand.
6. Seek assistance from your teacher if you need help.

Motivation (Activity)

Prepare a Personal SCI:

a. Ask the learners to get a ¼ piece of paper (any paper will do if they don’t have a ¼ sheet)
b. Ask them to write their monthly allowance (computed by daily allowance x number of days in
a month)
c. Ask them to write the amount they spend on food, transportation, phone load, etc. (make it
monthly to match their allowance)
d. Tell learners to deduct the amount they spend from the amount their allowance
e. Associate allowance with revenue and spending with expense with the net amount as net
income

IV. Introduction
Accounting is the language of business and an effective communication of financial
information that is the key to success of every business. Business owners, employees,
consumers, government agencies, banks, investors, etc. depend upon data that are supplied
by accountants to answer the following types of questions:

 Is the company profitable?

 Is there enough cash to meet payroll needs?
 How much debt does the company have?
 Should the company invest money to expand?

Accountants must present an organization’s financial information in clear, concise

reports that would help make questions like these easy to answer. In this module, we will be
able to know more about Statement of Comprehensive Income that is timely and relevant to
the business. Note that business can still earn even without having cash and can still lose
even with a full bank account to make them curious and tell them that they will understand
these concepts as you go through with the subject
Lesson 1: Define Statement of Comprehensive Income and introduce Temporary accounts

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 while a net loss if it is a net negative result. This can be
prepared for a month, a quarter or a year.
– It is a financial statement that shows the “results of operation” of the business for
a given period of time.
– It presents the two (2) temporary accounts of owner’s equity which are the Revenue
or Income, Costs and Expenses.

TEMPORARY ACCOUNTS
– Also known as nominal accounts
– They are called such because at the end of the accounting period, balances under these
accounts are transferred to the capital account, thus having only temporary amounts and
resulting to zero beginning balances at the beginning of the following year.

Examples:
a. revenues, sales
b. utilities expense
c. supplies expense
d. salaries expense
e. depreciation expense
f. interest expense among others.

Sample Statement of Comprehensive Income

LESSON 2: Single-step and multiple-step format of Comprehensive Income

Single-step

– Called single-step because all revenues are listed down in one section while all
expenses are listed in another. Net income is computed using a “single-step” which is
Total Revenues minus Total Expenses. Sample provided above.

Multiple-step

– Called multi-step because there are several steps needed in order to arrive at the
company’s net income.
a. Emphasize that the two are only formats and will yield the same amount of net
income/loss
b. Discuss that single-step SCI is more commonly used by service companies while
multi-step format is more commonly used by merchandising companies

Activity 1.2:

Why do you think Statement of Comprehensive Income is important in business?

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
_________________________________________________________________________

Lesson 3: Different Parts of Statement of Comprehensive Income

a. Heading

i. Name of the Company

ii. Name of the Statement

iii. Date of preparation (emphasis on the wording – “for the”)

b. Sample of a Single-step SCI – REFERS TO THE ONE BELOW

i. First part is revenues – this is the total amount of revenue that the company was able to
generate from providing services to customers

ii. Second part is expenses (can be broken down into General and Administrative and
Selling Expenses)

iii. Revenues less Expenses. Net income for a positive result and net loss for a negative
result

c. Sample of a multi-step SCI

i. First part is sales – This is the total amount of revenue that the company was able to generate
from selling products

ii. Second part compose of contra revenue – called contra because it is on the opposite side of
the sales account. The sales account is on the credit side while the reductions to sales accounts
are on the debit side. This is “contrary” to the normal balance of the sales or revenue accounts.

1. Sales returns
– 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.
2. Sales discount
– This is where discounts given to customers who pay early are recorded.
 – Also known as cash discount.
– This is different from trade discounts which are given when customers buy in bulk.
Sales discount is awarded to customers who pay earlier or before the deadline.

iii. Sales less Sales returns and Sales discount is Net Sales
iv. Cost of Goods Sold – This account represents the actual cost of merchandise that the
company was able to sell during the year.
1. 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.
2. Net Cost of Purchases = Purchases + Freight In
a. Net Purchases = Purchases – (Purchase discount and purchase returns)
b. 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. This is how buyers see a sales
discount given to them by a supplier.
 Purchase returns – Account used to record merchandise returned by the
company to their suppliers. This is how buyers see a sales return
recorded by their supplier
 Freight In – This account is used to record transportation costs of merchandise
purchased by the company. Called freight in because this is recorded when
goods are transported into the company.
3. Add Beginning inventory and Net cost of Purchases to get Cost of Goods Available for
Sale
4. Ending inventory – amount if inventory presented in the Statement of Financial Position.
Total cost of inventory unsold at the end of the accounting cycle.

v. Sales less Cost of Goods Sold is Gross Profit

vi. 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.

vii. 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.

viii.Gross Profit less General and Administrative Expenses less Selling Expenses is Net Income
for a positive result while Net Loss for a negative result
Activity1.3:

1. 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
2. Prepare a 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

V. NEW LEARNINGS
 Also known as the income statement.
 It is a financial statement that shows the “results of operation” of the
business for a given period of time.
 It presents the two (2) temporary accounts of owner’s equity which are the
Revenue or Income, Costs and Expenses.
 There are two format under Statement of Comprehensive Income: Single-step and
Multi-step
VI. WHAT CAN I DO?
Answer the following questions:

Easy:
1. 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?
2. 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?

Medium:

1. 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 goods available for sale.
 2. 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?

Difficult

1. 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.
2. Gross profit of Happy Selling amounted to Php 175,000. Beginning
Inventory totaled Php 250,000. Ending Inventory amounted to Php
50,000 while Net Cost of Purchases totaled Php 85,000. Compute for
Happy’s Net Sales.

4. Identify if the account is part of the general and administrative expenses or

selling expenses

Nena had the following expense accounts for the year ended December 31,
2016:

A. Salaries of admin personnel

B. Salaries of janitors
C. Salaries of sales agents
D. Utilities of home office
E. Rent of office building
F. Depreciation of office equipment
G. Depreciation of delivery van
H. Advertising
I. Cost of merchandise sold during the year
VII. (True or False)

Direction: Write the correct answer on your portfolio

1. Statement of Comprehensive income accounts are also called “real accounts”.

2. The normal balance of Revenue or income account is Credit and Expense is Debit.
3. Statement of Comprehensive income was previously known as “Income Statement”.
4. Revenue and Expenses are temporary accounts of Liabilities.
5. Revenue and Expenses are closed at the end of the accounting period.
6. Revenue decreases Owner’s Equity. Conversely, Expense increases Owner’s Equity.
7. Service Concern usually follows the single-step form while Merchandising business follows the multiple-
step form.
8. The Statement of Comprehensive Income is dated “for the period ended”
9. In the multiple-step form of Statement of Comprehensive Income preparation, operating expenses are
directly deducted from Sales Revenue to arrive at Profit.
10. The Statement of Comprehensive Income tells us whether the business makes profit or incurs a loss.
11. Operating Expenses are classified into functional and natural expenses.
12. The revenue that derived from a service company is “Service Revenue” while the revenue derived from
Merchandising business is “Sales Revenue”.
13. Gross profit is arrive at by deducting Sales from Cost of Sales.
14. The business incurs a loss when the revenue is higher than the expenses.
15. Revenue refers to proceeds from the sale of merchandise.

BIBLIOGRAPHY

Teaching Guide for Senior High School: Fundamentals of Accountancy,

Business and Management 2 Published by the Commission on Higher
Education, 2016 Chairperson: Patricia B. Licuanan, Ph.D.

Fundamentals of Accountancy, Business and Management 2 by Rafael M. Lopez, Jr.