Republic of the Philippines

DEPARTMENT OF EDUCATION
Region I
Schools Division Office I Pangasinan
Pangasinan National High School
Lingayen, Pangasinan

FUNDAMENTALS OF
ACCOUNTANCY, BUSINESS
AND MANAGEMENT II
Statement of Comprehensive Income

Quarter 1 - Week 2 – Module 2

Most Essential Learning Competency: Identify

the elements of the Statement of
Comprehensive Income and describe each of
these items for a service business and a
merchandising business.
What I Need to Know
Distance Learning Delivery of Education today as a mode of learning and communicating to
students in the new normal form of education. Modules and Activity Sheets are the types of Printed Modular
Distance Learning that will be used in Fundamentals of Accountancy, Business and Management II (FABM
2) aside from Digital Modular Distance learning and Online Distance Learning.
At the end of this module, you will be able to know the elements and how the preparation of
Statement of Comprehensive Income in a service and merchandising business.
Specifically, this module will help you to:

✓ Identify the elements of the statement of Comprehensive Income as to whether it is an

Income/Profit or Expense/Loss.
✓ Demonstrate the nature and function of each elements in the Statement of Comprehensive Income
in a service and merchandising business.

What I Know
Directions: Classify the following whether as Profit (P) or Expense (E) or Not included in Profit
or Loss (N)

___1. Rent Income

___2. Salaries expense
___3. Accrued Expense
___4. Marketing Expense
___5. Interest Income
___6. Allowance for doubtful account
___7. Sales
___8. Unearned Income
___9. Administrative expense
___10. Taxes payable
___11. Prepaid Expense
___12. Freight In
___13. Accumulated Depreciation
___14. Depreciation Expense
___15. Doubtful account expense
 What is It
This module in Fundamentals of Accountancy, Business and Management II (FABM 2)
leads the learners through the process of preparation of a Financial Statements. It is written
specifically to meet the needs of senior high school learners in ABM strand. It introduces learners
to a complete skill and knowledge acquisition and application from accounting theories, principles
and practices. Learners can use the module as a practical guide and source to navigate through
each stage of the accounting cycle.
In module two of week two, it introduces the identification of the elements in Statement
Comprehensive Income as well as the preparation of it to the end user with subtopics on the
principles and practices according to General Accepted Accounting Principles (GAAP).

Discussions
In module one, we encountered the first financial tool – the Statement of Financial Position. This
statement provides information that help economic decision makers evaluate the present condition
of a company on how much resources are controlled by an entity and how these resources were
generated.

Lesson 2 Statement of Comprehensive Income

Introduction
In business, realistic prediction of the future performance depends on the quality
assessment of both present condition and past performance of the firm. To assess the past
performance of a company, decision makers rely on another financial tool – the Statement of
Comprehensive Income. This statement provides information about business activities of a
company during a particular period.

STATEMENT OF COMPREHENSIVE INCOME

NATURE
DO YOU KNOW?
The Statement of Comprehensive Income is a financial
INCOME STATEMENT VS
statement that provides information about the entity’s past
STATEMENT OF COMPREHENSIVE
performance. The purpose of this statement is to measure the INCOME
results of the entity’s operation for some specific time period.
This statement is also known as Income Statement. Income Statement shows income from
the sale of goods or services as well as
expenses actually paid or incurred.
Common Elements of Statement of Comprehensive Income A statement of comprehensive income,
on the other hand, provides more details
The common elements of SCI are namely: about the company's financial situation
1. Income than what is found on a basic income
2. Expenses statement. This more robust document is
usually only used by a larger corporation,
3. Other comprehensive Income
especially one operating in more than one
country.
INCOME

These are increasing in economic benefits during the period in the form of inflows of assets or
decreases of liabilities that result in increases in equity, other than those relating to investments
by the business owners.
 Income includes both:
a. Revenue - arises in the course of the ordinary activities of a business and is referred
to by a variety of different names including sales, fees, interest, dividends, royalties
and rent.
• Revenue earned by a service business from rendering services is referred
to as “service fee”
• Revenue earned by a merchandising business from its sales of goods is
referred to as “sales revenue or simply sales”

Some examples of income:

Transaction Service Company Merchandising

Company
Perform/Sold product to a Service Sales/ sales
customer Revenue/ revenue
Professional
fees
Earned income from rent Rent Income Rent Income
Earned income from Interest Income Interest Income
interest
Dividend received from Dividend Dividend
stocks Income Income

b. Gains - represent other items that meet the definition of income and may or may
not arise in the course of the ordinary activities of an entity.

Example: The business sold a property/investment that the selling value is more
than the present value of the property/investment. (ABC company sold the
equipment for Php 100,000 which is now valued at 80,000, you have gained 20,000)

EXPENSES

These are decreasing in economic benefits during the period in the form of outflows or
depletions of assets or increases of liabilities that result in decreases in equity, other than those
relating to distributions to the business owners.

Expenses includes both:

a. Expenses – are outflows of assets arising from delivering or producing goods,

rendering services or carrying out other activities in the course of ordinary business.
Expenses are the sacrifices required to attain revenues.
b.
Some examples of expenses:

Transaction Service Company Merchandising

Company
Incurred Supplies Expense Cost of Sales
materials/supplies used
 in the production or
service
Incurred utilities used in Utilities Expense Utilities Expense
production/service
Incurred labor made by Salaries/Wage Salaries/Wage Expense
the employees Expense

METHODS OF PRESENTATION OF EXPENSES IN THE STATEMENT OF

COMPREHENSIVE INCOME

1. Nature of expense method

The nature of expense method provides information about expenses arising from the
main inputs that are consumed in order to accomplish an entity’s business activities—
such as expenses related to materials (raw material purchases), employees (labor and
other employee benefits), equipment (depreciation) or intangibles (amortization)—
without reference to how these are allocated to functions within the business.

This represents
the nature of
the expense

2. Function of expense method (Cost of sales method)

The function of expense method allocates and combines expense items according to
the activity from which the item arises.
For example, cost of sales is a functional line item that may combine the following
natural line items: raw material costs, labor and other employee benefit costs,
depreciation or amortization. These expenses all arise from the entity’s production
activities.

This represents the

function of the
expense with
allocation line of:
1. Cost of sales
2. Selling
expenses/
Distribution
Costs
3. Administrative
Expenses
 Accounting elements included in the following

Cost of sales/ Cost Selling Expenses/ Administrative

of goods sold Distribution Cost Expenses
1. Purchases 1. Freight out 1. Licensing and
Taxes
2. Freight In 2. Labor incurred by 2. Labor Incurred by
sales employees administrative
employees
3. Purchase Return 3. Depreciation of Store 3. Depreciation of
Property Main Office Property
4. Purchase 4. Expenses related to 4. Expenses related to
Discounts selling the product administrative works
c. Losses - represent other items that meet the definition of expense and may or may not
arise in the course of the ordinary activities of an entity.

Example: The business sold a property/investment that the selling value is less than
the present value of the property/investment. (ABC company sold the equipment
for Php 80,000 which is now valued at 100,000, you have loss 20,000)

OTHER COMPREHENSIVE INCOME

This is composed of income and expenses that are not presented as income/gain or expense/loss
as required by the Philippine Financial Reporting Standards. These are special accounts such as:

• Unrealized gain or loss on investment in equity instrument measured at fair value

through other comprehensive income.
• Gain or loss from translating the financial statements of a foreign operation.
• Change in revaluation surplus
• Unrealized gain or loss from derivative contracts designated as cash flow hedge
• Actuarial gain or loss on defined benefits plan by the full recognition approach
Note: These accounts are used commonly to company with multi-business, or large scale.

What’s More

Title of the Activity: Determine the Account Titles in the Statement of

Comprehensive Income
Most Essential Learning Competency: Identify the elements of the SCI and describe
each of these items for a service business
and a merchandising business
K to 12 BEC CG: ABM_FABM12-Ic-d-5

Directions: Answer correctly the following account titles corresponding to its

elements in the Statement of Comprehensive Income
I. Classify the following whether as Other Comprehensive Income/Loss (OCI) or part of the
Profit/Loss (PL) or Not included in SCI (N)
___1. Dividend Income ___11. Actuarial gain or loss on defined
___2. Rent Income benefit plan
___3. Unrealized gain or loss from ___12. Sales
derivative contracts ___13. Unearned Income
___4. Salaries expense ___14. Administrative expense
___5. Unearned Income ___15. Taxes payable
___6. Gain or Loss from translation of FS in ___16. Prepaid Expense
foreign operation ___17. Freight In
___7. Marketing Expense ___18. Accumulated Depreciation
___8. Interest Income ___19. Depreciation Expense
___9. Change in revaluation surplus ___20. Doubtful account expense
___10. Allowance for doubtful account

II. Determine the following accounting expenses as to its proper classification whether
Administrative Expense (AE) or Selling Expense (SE) or Cost of goods sold (COGS)
___1. Purchases ___6. Maintenance expense of delivery van
___2. Depreciation expense store building ___7. Salaries of accountant
___3. Depreciation expense main office ___8. Freight Out
___4. Store Supplies Expense ___9. Purchase Return
___5. Salaries of store staff ___10. Freight In
III. Multiple Choice: Select the best answer and write the CAPITAL letter in space provided.

___1. It is the change in equity during a period from transaction and other events, other than
changes resulting from transactions with owners in their capacity as owners.
A. Asset
B. Liabilities
C. Capital
D. Comprehensive Income
__2. Computed as net sales less cost of goods sold
A. Net income
B. Gross profit
C. Cost of goods available for sale
D. Operating Income
__3. These comprises the expense related to selling expenditure
A. Marketing expense
B. Purchases
 C. Administrative expense
D. Freight in
__4. The sum of the beginning and net purchases for the period.
A. Total goods available for sale
B. Net purchases
C. Net sales
D. Cost of goods sold
__5. Represents the return made by the customer after they purchase the merchandise
A. Sales return
B. Cost of goods sold
C. Purchase return
D. Sales discount

What I Have Learned

This module discussed the theories, applied concept and practices of Statement of
Comprehensive. It also includes application of such concepts, principles and practices to help
students understand the Statement of Comprehensive Income specifically the accounting elements
within it.
The major concept of this is the identification of accounting elements and titles in the
Statement of Comprehensive Income according to the standard presented by General Accepted
Accounting Principles (GAAP. The primary objective of the module is to:

1. The nature of the statement of comprehensive income

The purpose of the Statement of Comprehensive Income is to show the past

performance of the business during the period

2. Identify accounting elements within the Statement of Comprehensive Income which

includes the classification in income, expenses, and other comprehensive income.

The different effect of the accounting elements with in the SCI

1. Income – increases the Statement of Comprehensive Income

2. Expenses - decreases the Statement of Comprehensive Income

3. Other Comprehensive – depends on the effect of the transaction

3. Classification of the accounting elements in expense such as nature and function of

expenses.
 What I Can Do
Title of the Activity: Nature and Function of Statement of Comprehensive Income
Most Essential Learning Competency: Identify the elements of the SCI and describe
each of these items for a service business and a merchandising business
o K to 12 BEC CG: ABM_FABM12-Ic-d-5

Directions: Solve the following question with proper order of nature and
function in Statement of Comprehensive Income. Show your
solution.

I. Service Business
1. The following are the accounts of Superman Specialist for December 31, 2020.
Professional fees 200,000 Utilities expense 16,000
Salaries Expense 20,000 Insurance Expense 8,000
Supplies Expense 30,000 Rent Expense 36,000
Depreciation Expense 24,000 Interest Income 5,000
What will be the Net income of the service company for the year ended?

2. In the first year of operation MKB servicing company incurred the following accounts in their
income or loss for December 31, 2020. Service Revenue, P1,000,000; Salaries expense,
P100,000; Supplies Expense, P150,000; Depreciation expense of vehicle, P120,000; Utilities
Expense, P80,000; Insurance Expense, 40,000; Rent Expense, P180,000; Gain on sale of
equipment, P6,250. What is the Net income of MKB company for the year ended?

II. Merchandising Business

1. You are employed as a bookkeeper of Adi Merchandising. You able to know the following
accounts in its books on December 31, 2020.
Sales 5,000,000 Salaries Expense 100,000
Office Supplies 150,000 Store Supplies 120,000
Depreciation Expense 50,000 Insurance Expense – Sales Staff 40,000
Rent Expense 180,000 Beginning Inventory 100,000
Purchases 3,000,000 Ending Inventory 200,000
Sales Discount 10,000 Purchase Return 5,000
In addition, 20% of rent, depreciation and salaries expense pertains to the sales department while
the rest pertains to administrative department.
Required:
1. How much is the net sales for the year?
2. How much is the cost of sales for the year?
3. How much is the selling expense and administrative expense?
4. How much is the net income for the year?

2. KJ Corporation reported the following for 2020: Net sales, P1,200,000; cost of goods sold,
P750,000; selling and administrative expenses, P320,000 and an unrealized holding gain on
available for sale securities, P18,000. What is the total comprehensive income of the
corporation?

3. Argentina company incurred the following cost and expenses during the current year:

Repairs and maintenance of delivery van 200,000

Depreciation – office equipment 300,000
Depreciation – sales equipment 50,000
Taxes and licensing 100,000
Advertising expense 40,000
Freight out 10,000
Salaries (1/4 for officers, ¾ for sales) 700,000
Utilities expense (60% for office, 40% for store) 500,000

What is the total selling expense?

4. The following information is taken from Magali Merchandising Company’s accounting

records for the current year:
Purchases 5,200,000
Purchase returns 150,000
Ending inventory 2,250,000
Freight out 400,000
Freight in 225,000
Cost of goods sold 4,650,000

What is the Beginning Inventory of Toshiba during the year?

 REFERENCES

A. Books
Ma. Elenita B. Cabrera and Gilbert Anthony B. Cabrera . 2017. Fundamentals of
Accountancy, Business and Management 2 Volume 2 .CM Recto Avenue Manila
Philippines: GIC Enterprises and Co., INC
Maria Veronica Joy M. Binuya. 2016. Fundamentals of Accountancy, Business and
Management Book 2. Manila, Philippines: JFS Publishing Services

B. Government Publications

Josefina L. Beticon,et.al. 2016. Fundamentals of Accountancy, Business and Management

2. 1253 Gregorio Araneta Avenue, Quezon City, Philippines: Vidal Group, Inc.

C. Online and Other Sources

None