UNIVERSITY OF PERPETUAL HELP SYSTEM DALTA

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PREPARED BY:
MS. MAITA F. MAPALO
STUDENT LEARNING OUTCOMES

At the end of the topic, the student should be able to:

understand the purpose of the SCI

identify the elements of the SCI;
prepare an SCI for a service business using the
single-step approach;
prepare an SCI for a merchandising business using
the multistep approach; and
determine the normal balances of the elements of
the SCI.

STATEMENT OF COMPREHENSIVE INCOME

It is also known as the income statement. SCI is a

financial performance statement that listed down all
profit and loss and other comprehensive income of entity
for the period of time.
It usually prepares and presents monthly, quarterly, and
annually.
PARTS OF THE STATEMENT OF COMPREHENSIVE INCOME

1. The Name of the reporting entity - ABC Company

2. Title of the report -Statement of Comprehensive Income
3. The period of time covered by the report -For the year ended Dec. 31, 20X1

It contains the following information:

a. Revenue;
b. Costs and expenses; and
c. Net income or net loss.

Figure 1: Statement of Comprehensive Income



 COMPONENTS OF STATEMENT OF COMPREHENSIVE INCOME

Income Expenses
it refers to a transaction that increases assets and/or It refers to transactions that decrease assets / or increase
decreases liabilities leading to an increase in equity liabilities leading to a decrease in equity resulting from
resulting from the operations of the business and not the operations of the business and not because of
from the owner’s contribution. distributions to owners.
This is related to the primary operations of the business.
Two Kinds of Income
Revenue - income generated from the primary operations of
the business. Losses
Gains - income derived from other activities of the business. **These are from other activities of the business.
 FRIENDLY CONVENIENCE STORE - Income

1. Recall Maria Reyes, the regular customer of Juana Dela Cruz.

Maria purchased 3 small cans of sardines that Juana sells for
₱25 each. Maria asked Juana to include it in her account.
Juana purchased the sardines from her wholesale supplier at
₱15 per can.
2. Recall Pedro Benitez who rented a small space on the store’s
countertop for his coffee vending machine. On October 1,
20X1, he paid six months advance rental of ₱500 per month.
3. Juana Dela Cruz, the owner of the store, deposited ₱1,000 to

the store’s savings account from her personal account.

Which of the above transactions will be as income?

 2. As of Dec. 31, 20X1, the unearned rent will
have a balance of ₱1,500 (₱500 x 3). Its original
balance is ₱3,000 (500 x 6) representing the
6months advance rent paid by Pedro Benitez.
1.

Liability decreased by ₱1,500 which is the rent

from October to December. This met the
definition of income. A decrease in liability from
the operations of the business.

3. The asset, specifically cash will increased by

₱1,000. However, this is a contribution from the
owner and therefore not reportable as income.
 Accrual Concept of Accounting

The preparation of the SCI creates complications in accounting because of its cut-off date.

 Let's Analyze

Your parents went to the fast-food restaurant to make a

reservation and pay the down payment for your birthday
November 28, 20X1 party.

•The party was a complete success food, mascots. Your

parents paid the remaining balance using their credit
January 2, 20X2
card.

January 3, 20X2 •The credit card company paid the fast-food restaurant.

1. On what date should the restaurant record the revenue from your birthday party?
2. On what period should the costs of the foods served and other items used in your party be reported on the SCI?
3. So how will the fast-food restaurant account for the collection of Credit Card company on January 3, 20x2?
ACCRUAL CONCEPT OF ACCOUNTING

Accrual states that revenue must be reported on the

accounting period that it was earned. Similarly,
expenses must be reported during the same reporting
period they were incurred.
THREE METHODS OF RECOGNIZING EXPENSES

1. MATCHING PRINCIPLE
Expenses are “matched” and recorded in the same period that corresponding revenue is also
recognized.
Examples are utility expense, commission expense, and employees benefits.

2. RATIONAL ALLOCATION
The principle of rational allocation requires the cost of long-term expenditure to be rationally
allocated over the period of usage based on the expected pattern of usage.
Example: depreciation of equipment.
3. EXPENSED IMMEDIATELY
The principle of expensed immediately, we cannot rationally estimate the “life” of the benefit.
Hence, the cost is charged to expense immediately, generally, in the year it was spent.
Example fired employee
 ELEMENTS OF STATEMENT OF COMPREHENSIVE INCOME

Revenue Expenses
Service Income - account is generally used to describe Cost of Goods Sold / Cost of Sales -account used by
revenue derived from rendering services. Rental companies that sells goods instead of services. Freight-
income, Professional fee and Tuition fee revenue. in., Freight out.
Sales - account is generally used to describe revenue Operating Expenses - refers to all other expenses
derived from selling of goods. Office supplies sales, related to the operation of the business, other than cost
Book sales, Food sales, etc. of sales. Salaries of employees, Supplies expense, Utilities
expense, Gasoline/transportation expense,
Net Sales = (Sales – Sales Return and Allowances – Representation expense, Bad debts expense,
Sales Discount) Depreciation expense, Interest expense, and Rent
expense.
Other expenses and other income - losses and other
expenses as well as gains and other income are reported
after the operating section of the SCI.
TWO WAYS OF KEEPING RECORDS OF INVENTORY

1. Perpetual Inventory System

2. Periodic Inventory System

Using the balances of the periodic inventory system accounts, the Cost of sales is computed as follows:
Beginning inventory

Add: Net purchases

Cost of Goods available for sale
Less: Ending Inventory
Cost of goods sold
 FRIENDLY CONVENIENCE STORE - Sales Revenue

Juana Dela Cruz, owner of the store, sold 3 boxes of ballpoint

pens to Mrs. Susan Gonzales on account at a price of ₱150 per box or
₱15 per pen. Juana gave Mrs. Gonzales two weeks to pay the account.
Moreover, Juana told Mrs. Gonzales that she will deduct 2% discount if
she pays within the week.
Mrs. Gonzales returned one week later. She returned five pens and
took advantage of the discount.

Determine the amount of Sales, Sales return, Sales Discount and

Net sales from the transaction with Mrs. Gonzales.

 FRIENDLY CONVENIENCE STORE - Cost of Goods Sold

Juana Dela Cruz, owner of Friendly Convenience Store, asked for your
help to determine the cost of sales of her store. This is the first year of
operations for Juana’s store. She provided the following data for you.

Based on the inventory count taken at the last year, the ending
inventory is valued at ₱ 2,320. How much is cost of sales?

 FRIENDLY CONVENIENCE STORE - Bad Debts Expense

Current year sales of the store amounted to ₱128,865. Of this, only

₱70,000 is cash sales. Based on the company’s experience, bad debts is
3% of total sales or 6.5% of credit sales. Determine bad debts expense
given the following:

1. Juana, the manager-owner decided to use percentage of total sales

method.
2. Juana, the manager-owner decided to use percentage of credit
sales method.

Discussion Questions
1. What is the account name for revenue of a service company?
2. What is the account name for the revenue of a trading company?
3. Identify the components of net sales.
4. What is the meaning of 2/10, n/30?
5. What are the components of Net Purchases?
6. Explain how cost of goods sold is computed under the periodic
method?
7. Differentiate periodic and perpetual method of inventory
accounting.
8. Give four examples of operating expenses.

PRESENTATION OF STATEMENT OF COMPREHENSIVE INCOME

1. Single-Step Statement of Comprehensive Income Approach

2. Multi-Step Statement of Comprehensive Income Approach
Single-Step Approach

It is called a single-step SCI because net income is computed using only one step,
deducting total expenses from total revenues. Subtotal is not computed and
presented on the SCI.

It lists down the expenses based on the source of expenses such as salaries,
purchases, supplies, utilities, fuel, and depreciation.
Multi-Step Approach

It is characterized by the presentation of several subtotals until net income is determined. It is

popularly used in business.
The subtotals are additional information that gives the readers more understanding of the
operations of the business.
Gross profit = Net Sales – Cost of Goods Sold
Income from operations = Gross Profit -Operating Expenses
Net income is next determined by adding Other income(i.e. interest income) and deducting Other
Expenses(i.e. interest expenses) from Income from Operations.
Discussion Questions
8. Name two formats of the Statement of Comprehensive Income (SCI)
9. What is the normal balance of revenue account?
10. What is the normal balance of expense accounts?

Tha nk
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