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Fundamentals of Accountancy, Business and Management 2

This document provides background information and learning activities about the statement of comprehensive income (SCI) for a learning activity sheet on fundamentals of accountancy, business, and management. It defines key elements of the SCI, including temporary accounts, single-step and multi-step formats, and explains the differences between how a service company and merchandising company report revenues and expenses on the SCI. It includes three activities for students to identify account titles for expenses, administrative/selling expenses, and examples of service and merchandising businesses.

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40 views

Fundamentals of Accountancy, Business and Management 2

This document provides background information and learning activities about the statement of comprehensive income (SCI) for a learning activity sheet on fundamentals of accountancy, business, and management. It defines key elements of the SCI, including temporary accounts, single-step and multi-step formats, and explains the differences between how a service company and merchandising company report revenues and expenses on the SCI. It includes three activities for students to identify account titles for expenses, administrative/selling expenses, and examples of service and merchandising businesses.

Uploaded by

DYLAN
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 2

Name of Learner: ________________Grade Level: __________________


Section: ________________________ Date: ________________________

LEARNING ACTIVITIY SHEET WEEK 3

Background Information for Learners

STATEMENT OF COMPREHENSIVE INCOME – One of the main


financial statements used by accountants, analyst and business
owners to show the profitability of a company during specific period
of time. 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 itis 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. (Haddock, Price, & Farina, 2012)
TEMPORARY ACCOUNTS – Also known as nominal accounts are
the accounts found under the SCI. 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.(Haddock, Price, & Farina, 2012)Examples of
temporary accounts include revenues, sales, utilities expense,
supplies expense, salaries expense, depreciation expense, interest
expense among others.
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. (Haddock, Price, & Farina, 2012)
Multi-step – Called multi-step because there are several steps
needed in order to arrive at the company’s net income. (Haddock,
Price, & Farina, 2012)
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
The main difference of the Statements of the two types of business
lies on how they generate their revenue. A service company
provides services in order to generate revenue and the main cost
associated with their service is the cost of labor which is presented
under the account Salaries Expense. On the other hand, a
merchandising company sells goods to customers and the main
cost associated with the activity is the cost of the merchandise
which is presented under the line item Cost of Goods Sold. In
presenting these items on the Statement of Comprehensive Income,
a service company will separate all revenues and expenses (as seen
in the single-step format) while a merchandising company will
present total sales and cost of goods sold on the first part of the
statement which will net to the company’s gross profit before
presenting the other expenses which are classified as either
administrative expenses or selling expenses (as seen in the multi-
step format).
Sales returns – This account is debited in order to record returns of
customers or allowances for such returns.(Haddock, Price, &
Farina, 2012) Sales returns occur when customers return their
products for reasons such as but not limited to defects or change of
preference. Sales discount – This is where discounts given to
customers who pay early are recorded. (Haddock, Price, & Farina,
2012) 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.

Sales less Sales returns and Sales discount is Net Sales.


Cost of Goods Sold – This account represents the actual cost of
merchandise that the company was able to sell during the year.
(Haddock, Price, & Farina, 2012)
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.
Net Cost of Purchases = Purchases + Freight In
Net Purchases = Purchases – (Purchase discount and purchase
returns) 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. (Haddock, Price, &
Farina, 2012) 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. (Haddock, Price, & Farina,2012)
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.
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. (Haddock,
Price, & Farina, 2012)
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.

ACTIVITY 1: LISTING DOWN OF ALL THE ACCOUNT TITLES


Direction: List down all the account titles that belongs to expenses.

EXPENSES

ACTIVITY 2:
Direction: List down all the account titles that belongs to a General
Administrative Expenses and Selling Expenses.

General Administrative Selling Expenses


Expenses
ACTIVITY 3:
Direction: Name all the business venture that belongs to a
Servicing and Merchandising. Put as many as you can.

SERVICING MERCHANDISING
Learning Competency with Code:

Identify the elements of the SCI and describe each of these items for
a service business and a merchandising business. ABM_FABM12-
lc-d-5

Reflection:
After Learning the topic, assess your understanding

I know this well, I get almost every question


right.

I feel like im still learning this, I still have


questions and need some clarifications.

I have lots of questions, I don’t know what to


answer most of the time.
ANSWERS KEY:

ACTIVITY I

EXPENSES

SALARIES EXPENSE ADVERTISING EXPENSE

UTILITY EXPENSE TRANSPORTATION EXPENSE

RENT EXPENSE INTEREST EXPENSE


SUPPLIES EXPENSE

DEPRECIATION EXPENSE MISCELLANEOUS EXPENSE

ACTIVITY 2

General Administrative Expenses Selling Expenses

SALARIES SALARIES OF SALARIES SALARIES OF


EXPENSE JANITOR EXPENSE SALES AGENT

RENT EXPENSE SALARIES OF DEPRECIATION DEPRECIATION


ADMIN EXPENSE OF DELIVERY
VAN

DEPRECIATION DEPRECIATION ADVERTISING DEPRECIATION


EXPENSE OF OFFICE EXPENSE OF COMPUTER
EQUIPMENT EQUIPMENT OF
SALES AGENT

UTILITIES RENT OF OFFICE RENT EXPENSE


Development Team of the Module

Writers: Jennivic L. Mangampo

REFERENCES
(1) Haddock, M., Price, J., & Farina, M. (2012). College Accounting: A Contemporary Approach, Second Edition.
New York: McGraw-Hill/Irwin.
(2) Valencia, E. G., & Roxas, G. F. (2010). Basic Accounting (3rd ed.). Mandaluyong City, Philippines: Valencia
Educational Supply.
(3) 1999-2020 study finance / http://www.studyfinance.com

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