Fundamentals of
Accounting, Business and
Management 2
Quarter 1 – Module 2:
Statement of Comprehensive Income
Fundamentals of Accounting, Business and Management 2 – Grade 12
Alternative Delivery Mode
Quarter 1 – Module 2: Statement of Comprehensive Income (SCI)
First Edition, 2020
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Fundamentals of
Accounting, Business
and Management 2
Quarter 1 – Module 2:
Statement of Comprehensive
Income (SCI)
Introductory Message
For the facilitator:
Welcome to the Fundamentals of Accounting, Business and Management 2 – Grade
12 Alternative Delivery Mode (ADM) Module on the Statement of Comprehensive
Income (SCI)!
This module was collaboratively designed, developed, and reviewed by educators
both from public and private institutions to assist the teacher or facilitator in
helping the learners meet the standards set by the K to 12 Curriculum while
overcoming their personal, social, and economic constraints in schooling.
This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration their
needs and circumstances.
In addition to the material in the main text, you will also see this box in the body of
the module:
Notes to the Teacher
This contains helpful tips or strategies that will help you in guiding the learners.
As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them
to manage their own learning. Furthermore, you are expected to encourage and
assist the learners as they do the tasks included in the module.
1
For the learner:
Welcome to the Fundamentals of Accounting, Business and Management 2 – Grade
12 Alternative Delivery Mode (ADM) Module on the Statement of Comprehensive
Income (SCI)!
The hand is one of the most symbolized part of the human body. It is often used to
depict skill, action and purpose. Through our hands we may learn, create and
accomplish. Hence, the hand in this learning resource signifies that you as a
learner is capable and empowered to successfully achieve the relevant
competencies and skills at your own pace and time. Your academic success lies in
your own hands!
This module was designed to provide you with fun and meaningful opportunities
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learner.
This module has the following parts and corresponding icons:
What I Need to Know
This will give you an idea of the skills or
competencies you are expected to learn in the
module.
What I Know
This part includes an activity that aims to
check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.
What’s In
This is a brief drill or review to help you link
the current lesson with the previous one.
What’s New
In this portion, the new lesson will be
introduced to you in various ways such as a
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activity or a situation.
What is It
This section provides a brief discussion of
the lesson. This aims to help you discover
and understand new concepts and skills.
What’s More
This comprises activities for independent
practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.
What I Have Learned
This
includes
questions
or
blank
sentence/paragraph to be filled in to process
what you learned from the lesson.
What I Can Do
This section provides an activity which will
help you transfer your new knowledge or skill
into real life situations or concerns.
Assessment
This is a task which aims to evaluate your
level of mastery in achieving the learning
competency.
Additional Activities
In this portion, another activity will be given
to you to enrich your knowledge or skill of the
lesson learned. This also tends retention of
learned concepts.
Answer Key
This contains answers to all activities in the
module.
At the end of this module you will also find:
References
This is a list of all sources used in
developing this module.
The following are some reminders in using this module:
1. Use the module with care. Do not put unnecessary mark/s on any part of
the module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
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5. Finish the task at hand before proceeding to the next.
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If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.
We hope that through this material, you will experience meaningful learning
and gain deep understanding of the relevant competencies. You can do it!
What I Need to Know
STATEMENT OF COMPREHENSIVE INCOME (SCI)
This module is about the elements of a statement of comprehensive income.
It comprises three lessons that will mesh its broad concept.
Lesson 1: Introduction to the Statement of Comprehensive Income (SCI)
Lesson 2: Single-step Approach SCI
Lesson 3: Multi-step Approach SCI
At the end of the lessons, you should be able to:
1. Identify the elements of the Statement of Comprehensive Income (SCI) and
describe each of these items for a service business and a merchandising
business. (ABM_FABM12-Ic-d-5)
2. Prepare an SCI for a service business using the single-step approach.
(ABM_FABM12-Ic-d-6)
3. Prepare an SCI for a merchandising business using the multistep
approach (ABM_FABM12-Ic-d-7)
What I Know
Let’s try and test your understanding of the income and expense accounts.
Do you still remember some account titles? Some will be new to you and we’ll
discuss these accounts as you go along with the lesson.
Select the letter of the correct answer. Write it in a separate answer sheet.
1.
It is the revenue of a business derived from rendering service for a customer.
a. Service income
b. Insurance expense
c. Sales
d. Utilities expense
2. The income by a merchandising business derived from selling goods,
products, or merchandise to customers.
a. Service income
b. Sales
c. Cost of goods sold
d. Purchases
3.
An expense account used to record paid utilities for the period.
a. Insurance expense
b. Salaries expense
c. Depreciation expense
d. Utilities expense
4. Expenses necessary in the conduct of managerial or administrative activities
of the business.
a. Administrative expense
b. Selling expense
c. Purchase discount
d. Sales discount
5. Expenses incurred in selling of merchandise.
a. Administrative expense
b. Sales
c. Selling expense
d. Service income
Lesson
1
Introduction to SCI
The statement of comprehensive income (also known as an income
statement) shows the result of operations in an accounting period. It is composed of
income and cost/expense accounts. There are two forms or approaches used in the
preparation of SCI.
TWO APPROACHES IN THE PREPARATION OF SCI
A. SINGLE-STEP APPROACH. It is called a single step because it directly
deducts expenses in the gross income from services. It is also called the
nature of expense method. This approach is only used in the service
business.
B. MULTI-STEP APPROACH. It is called multi-step because of the series of
steps needed in the computation of net income. It must recognize the
function of each expense and cost incurred in the selling of merchandise (ex.
Administrative expense, selling expense, or cost of sales) before deducting
from the net sales. This approach is only used in the merchandising
business.
Below is the illustrative explanation of how these two approaches differ in function.
SINGLE-STEP APPROACH
Income from Services
MULTI-STEP APPROACH
P xxx
Less: Operating Expenses xxx
Net Income/LossP xxx
Net Sales
Less: Cost of Sales Gross Profit
P xxx
xxx P xxx
Less: Operating Expenses xxx
Net Income/LossP xxx
Figure 1: Comparing Single-step and Multi-step SCI
In a single-step approach, expenses are directly deducted from the income
and these expenses are collectively known as operating expenses. While in the
multi- step approach, the expenses are recognized by its function before deducting
from the net sales to arrive at a net income/loss. Cost of sales are the expenses
incurred in the purchase of merchandise and the operating expenses are the
administrative and selling expenses.
Lesson
2
Single-step Approach SCI
The SINGLE-STEP APPROACH is called a single step because it directly
deducts expenses in the gross income from services. It is also called the nature of
expense method. This approach is only used in the service business.
The following are the accounts that comprise the single-step SCI:
A. INCOME ACCOUNTS
SERVICE INCOME includes revenue of a business derived from rendering
service for a customer. Service income account titles are named after the activity of
the business. Consultancy Fee for a counseling business, Tutorial Fee for an
English tutorial business, Spa Revenue for a spa business are some examples.
OTHER INCOME includes income that comes from sources other than the
normal course of the business activity. Example: A photocopying business’ main
income comes from photocopy, printing, lamination, typing, and lamination services.
But somehow the business may have engaged in selling its old machines, earning
income from dividends, have an extra space in its building, and lent it for lease. With
these, the business can earn from other sources under the name of the business
and thus, called other income.
Dividend income, rent income, interest income, and gain from the sale of
equipment are some examples of other income. It is important to know the
business activity in order to classify other income.
B. EXPENSE ACCOUNTS
SALARIES AND WAGES EXPENSE is the amount paid to employees for their
services to the business. Examples of this account are salaries/wages, bonuses,
cost of living allowances, and other benefits of employees.
SUPPLIES EXPENSE are supplies used by the business in its operations.
INSURANCE EXPENSE is the expired coverage of the prepaid insurance.
DEPRECIATION EXPENSE is the annual cost of depreciable assets due to wear
and tear and passage of time.
BAD DEBT EXPENSE is the amount lost by the business due to uncollectible
accounts from accounts receivable.
INTEREST EXPENSE the amount charged to a borrowed money. This can also
be called finance cost.
OTHER EXPENSE includes expenses not connected to the operation of the
business. Loss on sale of assets and discount lost are some examples of other
expenses.
Single-step Approach Statement of Comprehensive Income
ABM CONSULTANCY SERVICES
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2020
Consultancy Fee
Other Income
Rent Income
Dividends Income
Gain On Sale Of Equipment
Interest Income
Total Income
Expenses
Salaries
Rent
Depreciation
Supplies
Insurance
Loss On Sale Of Equipment
Interest Expense
Net Income
Figure 2: Single-step SCI
₱
323,000
₱
33,000
356,000
₱
147,000
209,000
₱ 10,000
6,000
12,000
5,000
98,000
10,000
7,000
4,000
10,000
3,000
15,000
Lesson
3
Multi-step Approach SCI
The MULTI-STEP APPROACH is called multi-step because of the series of
steps needed in the computation of net income. It must recognize the function of
each expense and cost incurred in the selling of merchandise (ex. Administrative
expense, selling expense or cost of sales) before deducting from the net sales. It is
also called the cost of sales method. This approach is only used in the
merchandising business.
The following are the accounts that comprise the Multi-step SCI:
A. INCOME ACCOUNTS
SALES (Gross Sales) is the proceeds from the sale of goods within the accounting
period.
*Contra-sales accounts: (1) SALES DISCOUNT is the reduction from the
selling price of the merchandise sold to a client paying within the discount
period; and (2) SALES RETURN AND ALLOWANCE is the amount of the
merchandise returned by the client or the allowance given by the seller to
the buyer of goods.
NET SALES is the result of the Gross Sales deducting the Sales Returns and
Allowances and Sales Discount. Computation of Net Sales is illustrated below:
Gross Sales
Less: Sales Returns and Allowances
Sales Discount
Net Sales
₱
323,000
₱
17,000
340,000
₱ 10,000
7,000
Figure 3: Net Sales Section of Multi-step SCI
OTHER INCOME includes income that comes from sources other than the
normal course of the business activity.
Example: A sari-sari store’s main sales comes from selling its general
merchandise. But somehow the business may have engaged in selling its old
refrigerator, earning income from dividends, have an extra space in its building, and
lent it for lease. With these, the business can earn from other sources under the
name of the business, and thus, called other income.
Dividend income, rent income, interest income, and gain from sale of equipment
are some examples of other income. It is important to know the business activity to
classify other income.
B. COST OF SALES
MERCHANDISE INVENTORIES are the items a store sell. Ending merchandise is
the item left unsold for the period and becomes the beginning merchandise for the
next period.
PURCHASES are the goods bought for resale.
*Contra-purchases accounts: (1) PURCHASE DISCOUNT is a deduction to
the amount purchased by paying within the discount period and (2)
PURCHASE RETURN AND ALLOWANCE is the amount of the items returned
to the seller or the allowance given by the seller to the buyer of goods.
FREIGHT-IN is the transportation expense incurred by the business from buying
merchandise.
COST OF SALES is also called cost of goods sold. It represents the cost of
merchandise sold by the business. Computation of the Cost of Sales is illustrated
below:
Merchandise Inventory, Beginning
Add:
Purchases
Less: Purchase Returns and Allowances
Purchase Discount
₱
150,000
₱
₱
277,000
427,000
175,000
252,000
₱ 300,000
₱ 10,000
15,000
Add: Freight-in
Goods Available for Sale
Less: Merchandise Inventory, Ending
Cost of Sales
25,000
₱ 275,000
2,000
₱
Figure 4: Cost of Sales Section of Multi-step SCI
Note: GROSS PROFIT is the result of the cost of sales DEDUCTED FROM net
sales (see figure 5).
C. OPERATING EXPENSES
DISTRIBUTION/SELLING EXPENSES are those incurred from the selling of
merchandise. Examples are salaries of store personnel, commissions of selling
personnel, store supplies, promotion expenses, delivery expenses incurred to
transport merchandise to customers, store utilities, and depreciation expense of
store assets.
GENERAL/ADMINISTRATIVE EXPENSES are expenses necessary in the conduct of
managerial or administrative activities such as salaries of the office personnel,
office supplies, office utilities and depreciation expense of office assets and bad
debts expense. Note: If a business shares store and office in the same building,
administrative, and selling classification may not be necessary.
OTHER EXPENSE includes expenses not connected to the operation of the
business. Loss on sale of assets and discount lost are some examples of other
expenses.
INTEREST EXPENSE is the amount charged to a borrowed money. This can also be
called finance cost.
Below are the accounts of ABM General Merchandise for the year ended June 30,
2020. Prepare a statement of comprehensive income using a multi-step approach.
ABM GENERAL MERCHANDISE
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2020
Gross Sales
Less:
Sales Returns and
Allowances
Sales Discount
Net Sales
Less: Cost of Sales
Merchandise Inventory, Beginning
Add: Purchases
Less: Purchase Returns and
Allowances
Purchase Discount
₱ 476,000
₱ 10,000
7,000
17,000
₱ 459,000
₱ 150,000
₱ 300,000
₱ 10,000
15,000
Add: Freight-in
Goods Available for Sale
Less: Merchandise Inventory, Ending
Gross Profit
Other Income
Interest Income
25,000
₱ 275,000
2,000
277,000
₱ 427,000
175,000
252,000
₱ 207,000
₱ 10,000
8,000
Rent Income
Total Income
Operating Expenses
Selling Expenses
Sales
Salaries
Depreciation Expense - Store Equipment
Utilities Expense - Store
Administrative Expenses
Office Salaries
Office Supplies
Bad Debts
Finance Cost
Net Income
18,000
₱ 225,000
₱ 50,000
6,000
3,000 ₱
50,000
8,000
3,000
59,000
61,000
2,500
₱ 122,500
₱ 102,500
Figure 5: Multi-step SCI
*Note: The italicized figures are purposely written to reflect the accounts to be
deducted.
What’s In
Piece of cake! You have just finished the basics of the statement of
comprehensive income. Let’s go over the terms once again.
Name the accounts or terms being described. Write in a separate answer sheet.
1.
are expenses necessary in the conduct of managerial or administrative
activities such as salaries of the office personnel, office supplies, office
utilities, and depreciation expense of office assets and bad debts expense.
2.
3.
_ approach is only used in the service business.
includes income that comes from sources other than the normal
course of the business activity.
4.
is the result of the Gross Sales deducting the Sales Returns and
Allowances and Sales Discount.
5.
includes revenue of a business derived from rendering service for a
customer.
6.
are expenses incurred from the selling of merchandise.
7.
are amounts paid to employees for their services to the business.
8.
is the amount charged to a borrowed money. This can also be called
finance cost.
9.
is also called the cost of sales method.
10.
represents the cost of merchandise sold in the business.
Notes to the Teacher
Remember that computing net income is about the concept of income minus expense. All expense/cost acco
What’s New
Below are accounts in the statement of comprehensive income. Put a check in the
column to identify if it belongs in the single-step or/and multi-step approach.
ACCOUNTS
Sales
Laundry income
Depreciation of store equipment
Salaries of office personnel
Sales returns and allowances
Finance cost
Gain from sale of equipment
Purchases
Consultancy fee
Purchase discount
Singlestep
Multistep
What is It
Identifying and classifying accounts may be challenging to do. Some
accounts may also appear to both approaches of SCI. Here are some cues that will
help you refine your understanding.
SINGLE STEP
(Service Business)
a. Income accounts
- Service income (you can
rename this account so that
it fits the business’ activity)
-
Other income
(dividends, rent, interest
income)
b. Expense accounts
- All expenses are classified as
operating expenses
(salaries, depreciation,
supplies, rent, etc.)
MULTI-STEP
(Merchandising Business)
a. Income accounts
- Sales
- Sales discount
- Sales returns and
-
allowances
Other income
(dividends, rent, interest
income)
b. Expense accounts
- Cost of sales (accounts
-
related to the purchase of
merchandise and
inventory)
Administrative (office
related expenses)
Selling (store
related expenses)
Other expenses (loss
from sale of equipment)
Finance cost
(interest expense
What’s More
ENRICHMENT ACTIVITY 1
Below are the accounts of Comfort Room Spa Clinic for the year ended June
30, 2020. Compute for the net income using a single-step approach of the
statement of comprehensive income.
Clinic fee
Rent Income
Dividends Income
Gain On Sale Of Equipment
Interest Income
Salaries
Rent
Depreciation
Supplies
Insurance
Loss On Sale Of Equipment
Interest Expense
₱ 300,000
30,000
8,000
3,000
4,000
50,000
10,000
50,000
7,000
5,000
2,000
2,000
Remember:
1. Follow the format of the of the single-step approach.
2. Please make the proper indention of accounts as you write them in the SCI.
ENRICHMENT ACTIVITY 2
Below are the accounts of Llamado Poultry Supply Store for the year ended June 30,
2020.
Sales
Sales Returns and Allowances
Sales Discount
Merchandise Inventory, Beginning
Purchases
Purchase Returns and Allowances
Purchase Discount
Freight-in
Merchandise Inventory, Ending
Interest Income
Rent Income
Sales Salaries
Depreciation Expense - Store Equipment
Utilities Expense - Store
Office Salaries
Office Supplies
Bad Debts
Finance Cost
₱
100,000
1,000
1,500
38,000
30,000
2,000
1,000
700
20,000
7,000
3,000
12,000
9,000
2,000
12,000
1,000
1,300
2,100
Required:
1. Create SCI using a multi-step approach.
2. Please make the proper indention of accounts as you write them in the SCI.
The indention will serve as your guide in computing and will make your
document look formal.
What I Have Learned
As many as you can, write down the similarities and differences of a singlestep and a multi-step approach. Use the Venn Diagram below.
Single-step
Similarities
Multi-step
1.
1.
1.
1.
2.
2.
2.
2.
3.
3.
3.
3.
4.
4.
4.
4.
5…
5…
5…
5…
What I Can Do
Practice makes perfect! Let’s do more!
Application #1: Below are the accounts of MMK Review Center for the year
ended June 30, 2020.
Tutorial Fee
₱
900,000
Rent Income
30,000
Dividends Income
10,000
Gain on Sale of Equipment
3,200
Interest Income
4,000
Utilities Expense
25,000
Salaries Expense
200,000
Rent Expense
30,000
Depreciation Expense
60,000
Supplies Expense
23,000
Insurance Expense
15,000
Interest Expense
21,000
Required: (Show your computation)
1. Compute for the total income.
2. Compute for operating expenses.
3. Compute for net income.
Application #2: Below are the accounts of Para Sa ‘Yo Gift Store for the year
ended June 30, 2020. Prepare the statement of the comprehensive income using a
multi- step approach.
Sales
Sales Returns and Allowances
Sales Discount
Merchandise Inventory, Beginning
Purchases
Purchase Returns and Allowances
Purchase Discount
Freight-in
Merchandise Inventory, Ending
Discount Lost
Loss on Sale of Equipment
Interest Expense
Distribution Expense
Store Utilities Expense
Advertising Expense
Store Salaries Expense
Depreciation Expense - Store Furniture and Fixtures
Administrative Expense
Office Salaries Expense
Depreciation Expense - Office Furniture and Fixtures
Supplies Expense
Rent Expense
Bad Debts Expense
Office Utilities Expense
Required: (Show your computation)
1. Compute for net sales.
2. Compute for the cost of sales.
3. Compute for total operating expenses.
4. Compute for net income.
₱
1,300,500
20,600
35,200
90,000
489,000
37,800
29,000
13,400
80,000
2,000
1,400
21,300
10,300
120,000
150,600
3,000
100,500
6,000
12,000
34,000
2,500
3,400
Assessment
A. Identify the account’s title being described.
1. Miss Beautiful Salon bought an advertising subscription to promote her
salon in social media.
a. Advertising Expense
b. Supplies Expense
c. Freight-in
d. Purchases
2. Cool-Lab Refreshment Merchandise bought 10 boxes of different
flavored juice to sell in the store.
a. Advertising Expense
b. Supplies Expense
c. Freight-in
d. Purchases
3. Scratch Bright Junk Shop sold spare parts of the refrigerator to a client.
a. Service Income
b. Sales
c. Merchandise Inventory
d. Other Income
4. A wedding coordinator organizes a party to a client.
a. Sales
b. Service Income
c. Advertising Expense
d. Finance Cost
5. The business paid interest on a bank loan.
a. Interest expense
b. Interest income
c. Sales
d. Purchases
B. Below are the accounts of Kurips Financial Services for the year ended June
30, 2020. Prepare the statement of comprehensive income.
Auditing Fee
₱
500,000
Rent Income
34,000
Dividends Income
5,600
Gain on Sale of Equipment
4,300
Interest Income
2,300
Utilities Expense
10,800
Salaries Expense
70,000
Rent Expense
15,000
Depreciation Expense
10,000
Supplies Expense
4,000
Insurance Expense
8,000
Interest Expense
7,400
Bad Debt Expense
3,500
Remember:
1. Follow the format of the of the single-step approach.
2. Please make the proper indention of accounts as you write them in the SCI.
The indention will serve as your guide in computing and will make your
document look formal.
C. Below are the accounts of Pedal Bike Parts for the year ended June 30, 2020.
Prepare the statement of comprehensive income.
Sales
Sales Returns and Allowances
Sales Discount
Merchandise Inventory, Beginning
Purchases
Purchase Returns and Allowances
Purchase Discount
Freight-in
Merchandise Inventory, Ending
Discount Lost
Loss on Sale of Equipment
Interest Expense
Distribution Expense
Store Utilities Expense
Advertising Expense
Store Salaries Expense
Depreciation Expense - Store Furniture and Fixtures
Administrative Expense
Office Salaries Expense
Depreciation Expense - Office Furniture and Fixtures
Supplies Expense
Rent Expense
Bad Debts Expense
Office Utilities Expense
₱
187,000
3,000
2,100
25,000
65,000
5,000
6,000
1,700
34,000
900
1,200
14,000
2,000
13,000
30,000
3,200
10,000
6,000
3,000
3,000
2,000
2,000
Remember:
1. Follow the format of the of the multi-step approach.
2. Please make the proper indention of accounts as you write them in the SCI.
The indention will serve as your guide in computing and will make your
document look formal.
Additional Activities
Try to compute for the following accounts needed:
1. The business has net sales of P200,000, the cost of sales amount to
P50,000, and the operating expenses consist of P50,000. Compute for
the net income.
2. Sales amount to P23,000; 20% of sales belongs to sales return and
allowance, and the 5% of sales is a sale discount. Compute for the net
sales.
3. Service income amounts to P45,000, and 21% of income is an
operating expense. Compute for the net income.
4. Merchandise inventory beginning amounts to P10,000, goods available
for sale is P28,000, and the cost of sales is P23,000. Compute for the
merchandise ending.
5. The cost of sales is P100,000, an operating expense is P150,000, and
the net income is P400,000. Find the net sales.
References
Ballada, Win. 2005. Basic Accounting Made Easy. DomDane Publisher & Made
Easy Books.
Ong, Flocer Lao, and Janelle Gomendoza. 2017. Fundamentals of Accounting,
Business and Management 2 for Senior High School. C & E Publishing, Inc.
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