SlideShare a Scribd company logo
1 of 12
Download to read offline
FUNDAMENTALS OF ABM 2
A B M S P E C I A L I Z E D S U B J E C T
The course deals with the preparation and analysis of financial statements of a service
business and merchandising business using horizontal and vertical analyses and financial
ratios. Knowledge and skills in the analysis of financial statements will aid the future
entrepreneurs in making sound economic decisions.
Presentation made by:
GIAN PAULO M. RABANAL, LPT, MBA©
Lesson 1 Elements of the SCI
Lesson 2 Presentation of SCI
At the end of the session the learners will be able to:
a. Identify the elements of the SCI.
b. Prepare a single-step SCI for a service company.
c. Prepare a multi-step SCI for a merchandising company
Chapter 2
Statement of Comprehensive Income
Statement of Comprehensive Income
Statement that reports the results of operations
of the business for one accounting period. This
statement contains the following information:
a. Revenue generated by operating the
business
b. Cost spent to generate the revenue
c. Income, which is the excess of revenue over
costs.
“For the Period”
The SCI is described as a “for the period” report.
This means that the amounts presented on the
report include only those that occurred within the
given period.
ABC Company
Statement of Comprehensive Income
For the year ended December 31, 2016
REVENUES P1,290,000
Less: EXPENSES 890,000
Net Income 400,000
Components of SCI
What are the actions reported on SCI?
Income
It refers to a transaction that increases assets
and /or decreases liabilities leading to increase
in equity resulting from the operations of the
business and not from the owner’s contribution.
Expenses
These are transactions that decrease assets and
/ or liabilities leading to decrease in equity
resulting from the operations of the business and
not because of distributions to owners.
Revenues
Income generated from the primary
operations of the business.
Gains
Income derived from other activities of the
business.
Expenses
Expenses related to the primary operations
of the business.
Losses
Losses from other activities of the
business.
CLASSIFICATION OF INCOME as to revenue and
gains is dependent on the nature of the business.
Components of SCI cont.
Income Expenses
REVENUES
GAINS
EXPENSES
LOSSES Limited occurrence
Regular occurrence
Primary operations of the business is the main criterion for the classification. It helps the
readers of the financial statements to understand the operations of the reporting
company.
Elements of SCI
REVENUE
Account generally used to describe revenue
derived from rendering services.
RENTAL INCOME
PROFESSIONAL FEE
TUITION FEE REVENUE
EXPENSES
Service Income
Revenue account generally used to describe
revenue derived from selling of goods.
OFFICE SUPPLIES SALES
BOOK SALES
FOOD SALES
Revenue from sales of goods is recognized when
goods have been delivered.
Sales
Account used by companies that sells goods
instead of services.
PRICE OF INVENTORY
BROKERAGE
SHIPMENT COST / FREIGHT-IN
Cost of Goods Sold / Cost of Sales
Refers to all other expense related to the operation of
the business, other than cost of sales.
SALARIES OF EMPLOYEES
SUPPLIES
UTILITIES
GASOLINE
REPRESENTATION
BAD DEBTS
AMORTIZATION
DEPRECIATION
Operating Expenses
Net Sales
Only NET SALES is reported on the face of the SCI.
Gross Sales
Less: Sales Returns and Allowances
Sales Discount
NET SALES
SALES P 450.00
Less: Sales Returns and Allowances 75.00
Sales Discount 7.50
NET SALES p 367.50
Cost of Goods Sold / Cost of Sales
Part of inventory accounting.
Beginning Inventory
Add: Net Purchases
Cost of Goods Available for Sale
Less: Ending Inventory
COST OF GOODS SOLD
Beginning Inventory P 0.00
Purchases P 55,344.00
Add: Freight-In 430.00
Less: Purchase Returns 760.00
Net Purchases 55,014.00
Cost of Goods Available for Sale 55,014.00
Less: Ending Inventory 2,320.00
COST OF GOODS SOLD p 52,694.00
Purchases
Add: Freight-In
Less: Purchase Returns
Purchase Discounts
NET PURCHASES
Presentation of SCI
There are two formats for the SCI, namely the
single – step and the multi-step.
Single-Step SCI
Closely related to the nature of expense format.
It lists down the expenses based on the source
of expenses such as salaries, purchases,
supplies, utilities, fuel and depreciation
Groups all revenue items together and all the
expense items together.
So called because net income is computed using
only one step, deducting total expenses from
total revenues.
Generally used by small businesses and service
businesses because of its simplicity.
ABC Company
Statement of Comprehensive Income
For the year ended December 31, 20X1
Service Revenue xxx
Rental Income xxx
Interest Income xxx
Increase in Inventory* xxx
TOTAL REVENUES AND INCOME XXX
Net Purchases yyy
Depreciation Expense yyy
Utilities Expense yyy
Salaries Expense yyy
Interest Expense yyy
Insurance Expense yyy
Supplies Expense yyy
TOTAL EXPENSES YYY
NET INCOME XXX-YYY
Presentation of SCI cont.
There are two formats for the SCI, namely the
single – step and the multi-step.
Multi-Step SCI
Associated with the function of expense.
Characterized by the presentation of several
subtotals until net income is determined. It is
popularly used in business,
The subtotals are additional information that give
the readers more understanding of the
operations of the business.
First subtotal is GROSS PROFIT
Next subtotal is INCOME FROM OPERATIONS
Last is the bottom line which is the NET INCOME
ABC Company
Statement of Comprehensive Income
For the year ended December 31, 20X1
Gross Sales A
Sales Returns and Allowances (B)
Sales Discounts (C)
Net Sales D=A-B-C
Cost of Good Sold E
Gross Profit F=D-E
Operating Expenses:
General and administrative expenses G
Selling Expense H I=G+H
Income from Operations J=F-I
Interest Income K
Interest Expense L
NET INCOME J+K-L
Class Activity
Preparation of SCI
Divide the class into 2 groups.
1 group will prepare Single-
step SCI and another group
will prepare Multi-step SCI
using the provided accounting
worksheet.
(15 minutes)
Thank You!
Reference(s):
D. R. C. Salazar, CPA, 2017. Fundamentals of Accountancy Business and Management 2. Rex
Bookstore First Edition. Pages 33 -56
Presentation made by:
GIAN PAULO M. RABANAL, LPT, MBA©
For suggestions, email your message to:
hyperion.helios22@gmail.com

More Related Content

What's hot

Review of Financial Statements
Review of Financial StatementsReview of Financial Statements
Review of Financial StatementsFatima Khan
 
Statement of Financial Position
Statement of Financial PositionStatement of Financial Position
Statement of Financial PositionEdmerConstantino
 
Journalizing
JournalizingJournalizing
Journalizingjho2008
 
Statement of Financial Position (SFP) - Chapter 1
Statement of Financial Position (SFP) - Chapter 1Statement of Financial Position (SFP) - Chapter 1
Statement of Financial Position (SFP) - Chapter 1Edmer Constantino
 
FABM2- Module 2-SCI.pptx
FABM2- Module 2-SCI.pptxFABM2- Module 2-SCI.pptx
FABM2- Module 2-SCI.pptxEarlVonneRoque
 
Lesson 5 Contemporary Economic Issues Affecting The Filipino Entrepreneur.pptx
Lesson 5 Contemporary Economic Issues Affecting The Filipino Entrepreneur.pptxLesson 5 Contemporary Economic Issues Affecting The Filipino Entrepreneur.pptx
Lesson 5 Contemporary Economic Issues Affecting The Filipino Entrepreneur.pptxHeronLacanlale1
 
Ch7 acctg cycle service business
Ch7 acctg cycle  service businessCh7 acctg cycle  service business
Ch7 acctg cycle service businessSowie Althea
 
Chapter 1: Fundamentals of Accounting
Chapter 1: Fundamentals of AccountingChapter 1: Fundamentals of Accounting
Chapter 1: Fundamentals of AccountingAfzalur Rahman
 
Rules of debit and credit
Rules of debit and creditRules of debit and credit
Rules of debit and creditpawanrajput911
 
INTRODUCTION TO ACCOUNTING
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING
INTRODUCTION TO ACCOUNTINGNorman Samera
 
1. introduction to business finance
1. introduction to business finance1. introduction to business finance
1. introduction to business financeAileen MANC
 
Accounting - Lesson 3 : The Business Transactions
 Accounting - Lesson 3 : The Business Transactions    Accounting - Lesson 3 : The Business Transactions
Accounting - Lesson 3 : The Business Transactions Elearningpower
 
Calculating and Interpreting Profit
Calculating and Interpreting ProfitCalculating and Interpreting Profit
Calculating and Interpreting Profittutor2u
 
AE_L6_Contemporary Economic Issues_demo
AE_L6_Contemporary Economic Issues_demoAE_L6_Contemporary Economic Issues_demo
AE_L6_Contemporary Economic Issues_demoMarienor Solas
 

What's hot (20)

Review of Financial Statements
Review of Financial StatementsReview of Financial Statements
Review of Financial Statements
 
Cash Flow Statement
Cash Flow StatementCash Flow Statement
Cash Flow Statement
 
Statement of Financial Position
Statement of Financial PositionStatement of Financial Position
Statement of Financial Position
 
Journalizing
JournalizingJournalizing
Journalizing
 
Statement of Financial Position (SFP) - Chapter 1
Statement of Financial Position (SFP) - Chapter 1Statement of Financial Position (SFP) - Chapter 1
Statement of Financial Position (SFP) - Chapter 1
 
FABM2- Module 2-SCI.pptx
FABM2- Module 2-SCI.pptxFABM2- Module 2-SCI.pptx
FABM2- Module 2-SCI.pptx
 
Lesson 5 Contemporary Economic Issues Affecting The Filipino Entrepreneur.pptx
Lesson 5 Contemporary Economic Issues Affecting The Filipino Entrepreneur.pptxLesson 5 Contemporary Economic Issues Affecting The Filipino Entrepreneur.pptx
Lesson 5 Contemporary Economic Issues Affecting The Filipino Entrepreneur.pptx
 
Ch7 acctg cycle service business
Ch7 acctg cycle  service businessCh7 acctg cycle  service business
Ch7 acctg cycle service business
 
Module fabm1-q4-week-1
Module fabm1-q4-week-1Module fabm1-q4-week-1
Module fabm1-q4-week-1
 
Chapter 1: Fundamentals of Accounting
Chapter 1: Fundamentals of AccountingChapter 1: Fundamentals of Accounting
Chapter 1: Fundamentals of Accounting
 
Accounting equation
Accounting equationAccounting equation
Accounting equation
 
Rules of debit and credit
Rules of debit and creditRules of debit and credit
Rules of debit and credit
 
INTRODUCTION TO ACCOUNTING
INTRODUCTION TO ACCOUNTINGINTRODUCTION TO ACCOUNTING
INTRODUCTION TO ACCOUNTING
 
1. introduction to business finance
1. introduction to business finance1. introduction to business finance
1. introduction to business finance
 
Types of major accounts
Types of major accountsTypes of major accounts
Types of major accounts
 
Accounting - Lesson 3 : The Business Transactions
 Accounting - Lesson 3 : The Business Transactions    Accounting - Lesson 3 : The Business Transactions
Accounting - Lesson 3 : The Business Transactions
 
Calculating and Interpreting Profit
Calculating and Interpreting ProfitCalculating and Interpreting Profit
Calculating and Interpreting Profit
 
2. branches of accounting
2. branches of accounting2. branches of accounting
2. branches of accounting
 
AE_L6_Contemporary Economic Issues_demo
AE_L6_Contemporary Economic Issues_demoAE_L6_Contemporary Economic Issues_demo
AE_L6_Contemporary Economic Issues_demo
 
FABM 1.pptx
FABM 1.pptxFABM 1.pptx
FABM 1.pptx
 

Similar to Fundamentals of abm2 statement of comprehensive income abm specialized subject

Similar to Fundamentals of abm2 statement of comprehensive income abm specialized subject (20)

LESSON 2.pptx
LESSON 2.pptxLESSON 2.pptx
LESSON 2.pptx
 
Module 5.2 - Financial sustainability
Module 5.2 - Financial sustainabilityModule 5.2 - Financial sustainability
Module 5.2 - Financial sustainability
 
Orca share media1519133633713
Orca share media1519133633713Orca share media1519133633713
Orca share media1519133633713
 
Income statement
Income statementIncome statement
Income statement
 
Financial_Statement_Preparation (1).ppt
Financial_Statement_Preparation (1).pptFinancial_Statement_Preparation (1).ppt
Financial_Statement_Preparation (1).ppt
 
Block2 4plsatement
Block2 4plsatementBlock2 4plsatement
Block2 4plsatement
 
Preparation Financial Statement.ppt
Preparation Financial Statement.pptPreparation Financial Statement.ppt
Preparation Financial Statement.ppt
 
Chapter 14
Chapter 14Chapter 14
Chapter 14
 
Financial Statements
Financial StatementsFinancial Statements
Financial Statements
 
Income Statement Basics
Income Statement BasicsIncome Statement Basics
Income Statement Basics
 
Income statement
Income statementIncome statement
Income statement
 
Financial-Stmt-Analysis-Bootcamp-Slides.pdf
Financial-Stmt-Analysis-Bootcamp-Slides.pdfFinancial-Stmt-Analysis-Bootcamp-Slides.pdf
Financial-Stmt-Analysis-Bootcamp-Slides.pdf
 
trial
trialtrial
trial
 
P&l satement
P&l satementP&l satement
P&l satement
 
Unlocking Financial Statements - Day 2
Unlocking Financial Statements - Day 2Unlocking Financial Statements - Day 2
Unlocking Financial Statements - Day 2
 
Understanding financial statements - ITT Project
Understanding financial statements - ITT Project Understanding financial statements - ITT Project
Understanding financial statements - ITT Project
 
Brewer chapter 10
Brewer chapter 10Brewer chapter 10
Brewer chapter 10
 
Demystifying profit and loss statement webinar
Demystifying profit and loss statement webinarDemystifying profit and loss statement webinar
Demystifying profit and loss statement webinar
 
Management Accounting
Management AccountingManagement Accounting
Management Accounting
 
Trading Profit And Loss CMD
Trading Profit And Loss CMDTrading Profit And Loss CMD
Trading Profit And Loss CMD
 

Recently uploaded

Global Economic Outlook, 2024 - Scholaride Consulting
Global Economic Outlook, 2024 - Scholaride ConsultingGlobal Economic Outlook, 2024 - Scholaride Consulting
Global Economic Outlook, 2024 - Scholaride Consultingswastiknandyofficial
 
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshare
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshareAon-UK-DC-Pension-Tracker-Q1-2024. slideshare
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshareHenry Tapper
 
Banking: Commercial and Central Banking.pptx
Banking: Commercial and Central Banking.pptxBanking: Commercial and Central Banking.pptx
Banking: Commercial and Central Banking.pptxANTHONYAKINYOSOYE1
 
Thoma Bravo Equity - Presentation Pension Fund
Thoma Bravo Equity - Presentation Pension FundThoma Bravo Equity - Presentation Pension Fund
Thoma Bravo Equity - Presentation Pension FundAshwinJey
 
Money Forward Integrated Report “Forward Map” 2024
Money Forward Integrated Report “Forward Map” 2024Money Forward Integrated Report “Forward Map” 2024
Money Forward Integrated Report “Forward Map” 2024Money Forward
 
2B Nation-State.pptx contemporary world nation
2B  Nation-State.pptx contemporary world nation2B  Nation-State.pptx contemporary world nation
2B Nation-State.pptx contemporary world nationko9240888
 
OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptx
OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptxOAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptx
OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptxhiddenlevers
 
10 QuickBooks Tips 2024 - Globus Finanza.pdf
10 QuickBooks Tips 2024 - Globus Finanza.pdf10 QuickBooks Tips 2024 - Globus Finanza.pdf
10 QuickBooks Tips 2024 - Globus Finanza.pdfglobusfinanza
 
What is sip and What are its Benefits in 2024
What is sip and What are its Benefits in 2024What is sip and What are its Benefits in 2024
What is sip and What are its Benefits in 2024prajwalgopocket
 
Building pressure? Rising rents, and what to expect in the future
Building pressure? Rising rents, and what to expect in the futureBuilding pressure? Rising rents, and what to expect in the future
Building pressure? Rising rents, and what to expect in the futureResolutionFoundation
 
Hello this ppt is about seminar final project
Hello this ppt is about seminar final projectHello this ppt is about seminar final project
Hello this ppt is about seminar final projectninnasirsi
 
2024-04-09 - Pension Playpen roundtable - slides.pptx
2024-04-09 - Pension Playpen roundtable - slides.pptx2024-04-09 - Pension Playpen roundtable - slides.pptx
2024-04-09 - Pension Playpen roundtable - slides.pptxHenry Tapper
 
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτος
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτοςΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτος
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτοςNewsroom8
 
Zimbabwe's New Gold-Backed Currency- A Path to Stability or Another Monetary.pdf
Zimbabwe's New Gold-Backed Currency- A Path to Stability or Another Monetary.pdfZimbabwe's New Gold-Backed Currency- A Path to Stability or Another Monetary.pdf
Zimbabwe's New Gold-Backed Currency- A Path to Stability or Another Monetary.pdfFREELANCER
 
Introduction to Health Economics Dr. R. Kurinji Malar.pptx
Introduction to Health Economics Dr. R. Kurinji Malar.pptxIntroduction to Health Economics Dr. R. Kurinji Malar.pptx
Introduction to Health Economics Dr. R. Kurinji Malar.pptxDrRkurinjiMalarkurin
 
ekthesi-trapeza-tis-ellados-gia-2023.pdf
ekthesi-trapeza-tis-ellados-gia-2023.pdfekthesi-trapeza-tis-ellados-gia-2023.pdf
ekthesi-trapeza-tis-ellados-gia-2023.pdfSteliosTheodorou4
 
TACLOBAN-CITY-DIVISION-POPQUIZ-2023.pptx
TACLOBAN-CITY-DIVISION-POPQUIZ-2023.pptxTACLOBAN-CITY-DIVISION-POPQUIZ-2023.pptx
TACLOBAN-CITY-DIVISION-POPQUIZ-2023.pptxKathlynVillar
 
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...Amil baba
 
Demographic transition and the rise of wealth inequality
Demographic transition and the rise of wealth inequalityDemographic transition and the rise of wealth inequality
Demographic transition and the rise of wealth inequalityGRAPE
 

Recently uploaded (19)

Global Economic Outlook, 2024 - Scholaride Consulting
Global Economic Outlook, 2024 - Scholaride ConsultingGlobal Economic Outlook, 2024 - Scholaride Consulting
Global Economic Outlook, 2024 - Scholaride Consulting
 
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshare
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshareAon-UK-DC-Pension-Tracker-Q1-2024. slideshare
Aon-UK-DC-Pension-Tracker-Q1-2024. slideshare
 
Banking: Commercial and Central Banking.pptx
Banking: Commercial and Central Banking.pptxBanking: Commercial and Central Banking.pptx
Banking: Commercial and Central Banking.pptx
 
Thoma Bravo Equity - Presentation Pension Fund
Thoma Bravo Equity - Presentation Pension FundThoma Bravo Equity - Presentation Pension Fund
Thoma Bravo Equity - Presentation Pension Fund
 
Money Forward Integrated Report “Forward Map” 2024
Money Forward Integrated Report “Forward Map” 2024Money Forward Integrated Report “Forward Map” 2024
Money Forward Integrated Report “Forward Map” 2024
 
2B Nation-State.pptx contemporary world nation
2B  Nation-State.pptx contemporary world nation2B  Nation-State.pptx contemporary world nation
2B Nation-State.pptx contemporary world nation
 
OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptx
OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptxOAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptx
OAT_RI_Ep18 WeighingTheRisks_Mar24_GlobalCredit.pptx
 
10 QuickBooks Tips 2024 - Globus Finanza.pdf
10 QuickBooks Tips 2024 - Globus Finanza.pdf10 QuickBooks Tips 2024 - Globus Finanza.pdf
10 QuickBooks Tips 2024 - Globus Finanza.pdf
 
What is sip and What are its Benefits in 2024
What is sip and What are its Benefits in 2024What is sip and What are its Benefits in 2024
What is sip and What are its Benefits in 2024
 
Building pressure? Rising rents, and what to expect in the future
Building pressure? Rising rents, and what to expect in the futureBuilding pressure? Rising rents, and what to expect in the future
Building pressure? Rising rents, and what to expect in the future
 
Hello this ppt is about seminar final project
Hello this ppt is about seminar final projectHello this ppt is about seminar final project
Hello this ppt is about seminar final project
 
2024-04-09 - Pension Playpen roundtable - slides.pptx
2024-04-09 - Pension Playpen roundtable - slides.pptx2024-04-09 - Pension Playpen roundtable - slides.pptx
2024-04-09 - Pension Playpen roundtable - slides.pptx
 
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτος
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτοςΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτος
ΤτΕ: Ανάπτυξη 2,3% και πληθωρισμός 2,8% φέτος
 
Zimbabwe's New Gold-Backed Currency- A Path to Stability or Another Monetary.pdf
Zimbabwe's New Gold-Backed Currency- A Path to Stability or Another Monetary.pdfZimbabwe's New Gold-Backed Currency- A Path to Stability or Another Monetary.pdf
Zimbabwe's New Gold-Backed Currency- A Path to Stability or Another Monetary.pdf
 
Introduction to Health Economics Dr. R. Kurinji Malar.pptx
Introduction to Health Economics Dr. R. Kurinji Malar.pptxIntroduction to Health Economics Dr. R. Kurinji Malar.pptx
Introduction to Health Economics Dr. R. Kurinji Malar.pptx
 
ekthesi-trapeza-tis-ellados-gia-2023.pdf
ekthesi-trapeza-tis-ellados-gia-2023.pdfekthesi-trapeza-tis-ellados-gia-2023.pdf
ekthesi-trapeza-tis-ellados-gia-2023.pdf
 
TACLOBAN-CITY-DIVISION-POPQUIZ-2023.pptx
TACLOBAN-CITY-DIVISION-POPQUIZ-2023.pptxTACLOBAN-CITY-DIVISION-POPQUIZ-2023.pptx
TACLOBAN-CITY-DIVISION-POPQUIZ-2023.pptx
 
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...
Uk-NO1 Rohani Amil In Islamabad Amil Baba in Rawalpindi Kala Jadu Amil In Raw...
 
Demographic transition and the rise of wealth inequality
Demographic transition and the rise of wealth inequalityDemographic transition and the rise of wealth inequality
Demographic transition and the rise of wealth inequality
 

Fundamentals of abm2 statement of comprehensive income abm specialized subject

  • 1. FUNDAMENTALS OF ABM 2 A B M S P E C I A L I Z E D S U B J E C T The course deals with the preparation and analysis of financial statements of a service business and merchandising business using horizontal and vertical analyses and financial ratios. Knowledge and skills in the analysis of financial statements will aid the future entrepreneurs in making sound economic decisions. Presentation made by: GIAN PAULO M. RABANAL, LPT, MBA©
  • 2. Lesson 1 Elements of the SCI Lesson 2 Presentation of SCI At the end of the session the learners will be able to: a. Identify the elements of the SCI. b. Prepare a single-step SCI for a service company. c. Prepare a multi-step SCI for a merchandising company Chapter 2 Statement of Comprehensive Income
  • 3. Statement of Comprehensive Income Statement that reports the results of operations of the business for one accounting period. This statement contains the following information: a. Revenue generated by operating the business b. Cost spent to generate the revenue c. Income, which is the excess of revenue over costs. “For the Period” The SCI is described as a “for the period” report. This means that the amounts presented on the report include only those that occurred within the given period. ABC Company Statement of Comprehensive Income For the year ended December 31, 2016 REVENUES P1,290,000 Less: EXPENSES 890,000 Net Income 400,000
  • 4. Components of SCI What are the actions reported on SCI? Income It refers to a transaction that increases assets and /or decreases liabilities leading to increase in equity resulting from the operations of the business and not from the owner’s contribution. Expenses These are transactions that decrease assets and / or liabilities leading to decrease in equity resulting from the operations of the business and not because of distributions to owners. Revenues Income generated from the primary operations of the business. Gains Income derived from other activities of the business. Expenses Expenses related to the primary operations of the business. Losses Losses from other activities of the business. CLASSIFICATION OF INCOME as to revenue and gains is dependent on the nature of the business.
  • 5. Components of SCI cont. Income Expenses REVENUES GAINS EXPENSES LOSSES Limited occurrence Regular occurrence Primary operations of the business is the main criterion for the classification. It helps the readers of the financial statements to understand the operations of the reporting company.
  • 6. Elements of SCI REVENUE Account generally used to describe revenue derived from rendering services. RENTAL INCOME PROFESSIONAL FEE TUITION FEE REVENUE EXPENSES Service Income Revenue account generally used to describe revenue derived from selling of goods. OFFICE SUPPLIES SALES BOOK SALES FOOD SALES Revenue from sales of goods is recognized when goods have been delivered. Sales Account used by companies that sells goods instead of services. PRICE OF INVENTORY BROKERAGE SHIPMENT COST / FREIGHT-IN Cost of Goods Sold / Cost of Sales Refers to all other expense related to the operation of the business, other than cost of sales. SALARIES OF EMPLOYEES SUPPLIES UTILITIES GASOLINE REPRESENTATION BAD DEBTS AMORTIZATION DEPRECIATION Operating Expenses
  • 7. Net Sales Only NET SALES is reported on the face of the SCI. Gross Sales Less: Sales Returns and Allowances Sales Discount NET SALES SALES P 450.00 Less: Sales Returns and Allowances 75.00 Sales Discount 7.50 NET SALES p 367.50
  • 8. Cost of Goods Sold / Cost of Sales Part of inventory accounting. Beginning Inventory Add: Net Purchases Cost of Goods Available for Sale Less: Ending Inventory COST OF GOODS SOLD Beginning Inventory P 0.00 Purchases P 55,344.00 Add: Freight-In 430.00 Less: Purchase Returns 760.00 Net Purchases 55,014.00 Cost of Goods Available for Sale 55,014.00 Less: Ending Inventory 2,320.00 COST OF GOODS SOLD p 52,694.00 Purchases Add: Freight-In Less: Purchase Returns Purchase Discounts NET PURCHASES
  • 9. Presentation of SCI There are two formats for the SCI, namely the single – step and the multi-step. Single-Step SCI Closely related to the nature of expense format. It lists down the expenses based on the source of expenses such as salaries, purchases, supplies, utilities, fuel and depreciation Groups all revenue items together and all the expense items together. So called because net income is computed using only one step, deducting total expenses from total revenues. Generally used by small businesses and service businesses because of its simplicity. ABC Company Statement of Comprehensive Income For the year ended December 31, 20X1 Service Revenue xxx Rental Income xxx Interest Income xxx Increase in Inventory* xxx TOTAL REVENUES AND INCOME XXX Net Purchases yyy Depreciation Expense yyy Utilities Expense yyy Salaries Expense yyy Interest Expense yyy Insurance Expense yyy Supplies Expense yyy TOTAL EXPENSES YYY NET INCOME XXX-YYY
  • 10. Presentation of SCI cont. There are two formats for the SCI, namely the single – step and the multi-step. Multi-Step SCI Associated with the function of expense. Characterized by the presentation of several subtotals until net income is determined. It is popularly used in business, The subtotals are additional information that give the readers more understanding of the operations of the business. First subtotal is GROSS PROFIT Next subtotal is INCOME FROM OPERATIONS Last is the bottom line which is the NET INCOME ABC Company Statement of Comprehensive Income For the year ended December 31, 20X1 Gross Sales A Sales Returns and Allowances (B) Sales Discounts (C) Net Sales D=A-B-C Cost of Good Sold E Gross Profit F=D-E Operating Expenses: General and administrative expenses G Selling Expense H I=G+H Income from Operations J=F-I Interest Income K Interest Expense L NET INCOME J+K-L
  • 11. Class Activity Preparation of SCI Divide the class into 2 groups. 1 group will prepare Single- step SCI and another group will prepare Multi-step SCI using the provided accounting worksheet. (15 minutes)
  • 12. Thank You! Reference(s): D. R. C. Salazar, CPA, 2017. Fundamentals of Accountancy Business and Management 2. Rex Bookstore First Edition. Pages 33 -56 Presentation made by: GIAN PAULO M. RABANAL, LPT, MBA© For suggestions, email your message to: hyperion.helios22@gmail.com