STATEMENT OF COMPREHENSIVE INCOME (SCI)

LEARNING OBJECTIVES:
At the end of the topic, learners should be able to…….

1. Identify the elements of the SCI and describe each of these items for a
service business and 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 multi-step approach

Complete set of Financial Statements

A complete set of financial statements consists of the following:

1. Statement of Financial Position

2. Statement of Comprehensive Income
3. Statement of Changes in Equity
4. Statement of Cash Flows
5. Notes (is used in conjunction with other financial statements)
 Let as Recall: Define the following:
Accrual
Revenues
Expenses
Service Business
Merchandising Business

Statement of Comprehensive Income (SCI)- is also called the ‘Statement of Profit or

Loss and Other Comprehensive Income’. It shows information on the entity’s financial
performance during the period.

Concepts of profit or loss and comprehensive income

Profit or loss is defined as "the total of income less expenses, excluding the components
of other comprehensive income".
Other comprehensive income is defined as comprising "items of income and expense
(including reclassification adjustments) that are not recognized in profit or loss as
required or permitted by other PFRSs".
Total comprehensive income is defined as "the change in equity during a period resulting
from transactions and other events, other than those changes resulting from transactions
with owners in their capacity as owners".
What are some examples of comprehensive income?

Other Comprehensive Income is

discussed in higher accounting studies,
so right now, we don’t need to worry
about them! ☺ ☺
The Statement of Profit or Loss and Other Comprehensive Income (or Statement of
Comprehensive Income) is different from the Income Statement.

The Income Statement (or Statement of Profit or Loss) shows only the profit or loss,
while the Statement of Profit or Loss and Other Comprehensive Income shows the profit
or loss and other comprehensive income.
Choice in presentation and basic requirements
An entity has a choice of presenting:
❑ a single statement - with profit or loss and other comprehensive income presented in
two sections, or
I. Single Statement Presentation
DEF Co.
Statement of Comprehensive Income
For the period ended Dec. 31, 2022

Income P2,000
Expenses (600)
Profit or Loss 1,400
OCI 500
Comprehensive Income P1,900

❑ two statements:
•a separate statement of profit or loss
•a statement of comprehensive income,
immediately following the statement of profit or loss and
beginning with profit or loss
 II. Two-statement presentation
a. This is the first of two-statements – the ‘Income
Statement’
DEF Co.
Statement of Comprehensive Income
For the period ended Dec. 31, 2022

Income P2,000
Expenses (600)
Profit or Loss P1,400

II. Two-statement presentation

b. This is the second of two-statements –

DEF Co.
Statement of Comprehensive Income
For the period ended Dec. 31, 2022

Profit or Loss P1,400

OCI 500
Comprehensive Income P1,900
 ELEMENTS OF SCI
INCOME

• Are increases in economic benefits during the period in the form of -

• Increase in assets or
• Decrease in liabilities that result in increase in equity, excluding those relating to investments
by the business owner.

• Income includes both revenue and gains

Revenue – arises in the course of the ordinary activities of a business (sales and service fees)
Sales or Sales Revenue – refer to revenue earned by a merchandising business
from selling goods.
Service Fees – refer to revenue earned by a service business from rendering
services

Gains – represent other items that meet the definition of income and may or may not arise
in course of the ordinary activities of an entity.
 Let us say that you are into the business of selling computers and you have provided the following within the
year or the accounting period:

Sales of computers = 400,000

Costs of computers sold = 120,000
Income from operations = 280,000
Tax and other expenses = 50,000
Gain from sale of company’s service vehicle = 20,000
Net income = 250,000

Total Income = 420,000 which is Revenue from sale of Revenue is simply the gross sales from the
computer (400,000) + Gain from sale of service vehicle sales of computers amounting to 400,000.
(20,000). (ordinary course of business)

Income can be Gross Income = 280,000 which Sales of Gain, which is also part of the total income,
computers (400,000) – Cost of computers sold amounts to 20,000 – the gain from selling
(120,000) the company’s service vehicle. We have
assumed that the 20,000 is the excess of the
Income can be Net Income (or Profit) = 250,000 vehicle selling price over its net carrying or
(excess of total income over the total expenses) net book value. (does not constitute
If total expenses > than total income = Net Loss ordinary business operation)
 ELEMENTS OF SCI (continued)
EXPENSE

• Are decreases in economic benefits during the period in the form of -

• Decreases in assets or
• Increase in liabilities that result in decrease in equity, excluding those relating to distributions
by the business owner.

• Expenses include both expenses and losses

Expenses – arise in the course of the ordinary activities of a business
An expense is an incurred cost that has been consumed in order to earn
revenue. Examples of expenses are salary expense, rent expense, cost of goods
sold and utilities expense.

Losses – represent other items that meet the definition of expenses and may or may not
arise in course of the ordinary activities of an entity.
It is a reduction in value that is not related to earning revenue. For example, a business
generates a loss when it sells off machinery for a price that is lower than its carrying amount
(cost of the machinery minus the accumulated depreciation).
Accounts found in the SCI are classified as Temporary Accounts or Nominal
Accounts .
WHY? They are called such because at the end of the accounting period,
balances of 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 of temporary accounts include revenues, sales, utilities expense,

supplies expense, salaries expense, depreciation expense, interest expense
among others.

Think about your allowances and expenses..... and remaining funds being deposited to
the bank or kept in the piggy bank.
Q: How does an SCI of a Service Business look like?

SCI of a SERVICE BUSINESS

ABC Barber Shop
• Mr. Alfonso B. Castillo has a barber shop under Statement of Comprehensive Income
HEADING
the business name ABC Barber Shop. For the Period Ended January 31, 2023

• For the month of January 2023, Mr. ABC earned

₱22,500 from services rendered to customers. Service revenue REVENUES ₱ 22,500

• In operating the barber shop, he incurred the Expenses:

following expenses for January: salaries expense Salaries expense 6,000
of ₱6,000; rent expense, ₱3,000; supplies Rent expense 3,000
EXPENSES
Supplies expense 2,250
expense, ₱2,250; telephone expense, ₱1,500;
Telephone expense 1,500
electricity and water expenses, ₱2,000; and Electricity & water expenses 2,000
miscellaneous expense, ₱975. Miscellaneous expense 975
Total expenses 15,725

Profit 6,775
OCI -
INCOME/LOSS Comprehensive Income P 6,775
 Q: Are expenses always presented in the manner as illustrated in the SCI of a Service
Business?

PRESENTATION OF EXPENSES

Expenses may be presented in the SCI using either of the following methods

1. Nature of Expense Method

2. Function of Expense Method

NATURE OF EXPENSE METHOD - Expenses are presented according to their nature

Example: Depreciation, purchases of materials, transport cost, advertising costs etc.

This is also called a SINGLE STEP APPROACH. It is ‘single step’ because there is only one
operation to perform which is TOTAL REVENUES minus TOTAL EXPENSES.
All revenues are listed down in one section while all expenses are listed in another.
Example – SCI of ABC Barber Shop (previous slide)
 PRESENTATION OF EXPENSES...continued
FUNCTION OF EXPENSE METHOD - Expenses are classified and presented according to
their function or category.
The major categories of expenses are: Cost of Sales (Cost of Goods Sold), Selling
expenses, Administrative Expenses, Other Expenses, Interest Expense, Income Tax
Expense

This is called MULTI-STEP because there are several steps needed in order to arrive at the
company’s net income.

Understanding what is Selling Expense Category, Administrative Expense Category and

Other Expenses Category

Selling Expense or Distribution Expense - are costs attributable to selling activities.

Example: Delivery expense, sales commission, advertising, salaries of sales personnel,
depreciation on delivery equipment, rent pertaining to space occupied by sales
department and the like.
 Understanding what is Selling Expense Category, Administrative Expense Category and
Other Expenses Category

Administrative Expenses – expenses which do not belong to any of the other categories.
Example: Insurance Expense, Taxes and Licenses (except income tax expense), salaries of
non-sales personnel, depreciation of assets not used by the sales department, rent
pertaining to office space and the like.

Other Expenses – includes losses, like losses on sale of properties.

Q: How are expenses presented in the SCI following the Function of Expense
Method (Multi-Step)?
Sample Multi-Step SCI

Continuation from below….

What is a Contra Revenue?

It is 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.
To prepare for the presentation using the Single-Step Approach:

Step 1 - Compute the Net Purchases

Step 2 – Compute Change in Inventory

❑ An increase in inventory is a deduction

❑ A decrease in inventory is an addition

Steps 1 and 2 are necessary in the computation of the Cost of Goods Sold.