Statement of income

2. 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 it is 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.

3. 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

4.  Revenues
 Sales
 Utilities expense
 Supplies expense
 Salaries expense
 Depreciation expense
 Interest expense

5.  Single-step – Called single-step because all
revenues are listed down in one section while
all expenses are listed in another. Net
income/loss is computed using a “single-
step” which is Total Revenues minus Total
Expenses.
NET INCOME= TOTAL REVENUE – TOTAL EXPENSES
(Revenue is GREATER THAN Expenses)
NET LOSS = TOTAL REVENUE – TOTAL EXPENSES
(Revenue is LESS THAN Expenses)

6.  Multi-step – Called multi-step because there
are several steps needed in order to arrive at
the company’s net income.
1. The two are only formats and will yield the
same amount of net income/loss
2. Single-step SCI is more commonly used by
service businesses while multi-step format is
more commonly used by a merchandising
business.

7. ABM KA HI RAP COMPANY
STATEMENT OF COMPREHENSIVE INCOME
AS OF AUGUST 31, 2020
Service Revenue Php 100,000.00
Expenses:
Salaries Expense Php 40,000.00
Rent Expense 20,000.00
Depreciation Expense 10,000.00
Utilities Expense 5,000.00
Miscellaneous Expense 1,000.00
Total Expenses (Php 76,000.00)
Net Income Php 24,000.00

8. ABM KA HI RAP COMPANY
STATEMENT OF COMPREHENSIVE INCOME
AS OF AUGUST 31, 2020
Service Revenue Php 50,000.00
Expenses:
Salaries Expense Php 40,000.00
Rent Expense 20,000.00
Depreciation Expense 10,000.00
Utilities Expense 5,000.00
Miscellaneous Expense 1,000.00
Total Expenses (Php 76,000.00)
Net Loss (Php 26,000.00)

9. MULTI-STEP
SAMPLE

10. i. First part is sales
This is the total amount of revenue that the company was able to
generate from selling products
ii. Second part compose of contra revenue – 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.
ii.i. Sales returns – This account is debited in order to record returns
of customers or allowances for such returns Sales returns occur when
customers return their products for reasons such as but not limited to
defects or change of preference.
ii.ii.Sales discount – This is where discounts given to customers who
pay early are recorded. 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.
iii. Sales less Sales returns and Sales discount is Net Sales

11. iv. Third part is Cost of Goods Sold – This account represents the actual cost of
merchandise that the company was able to sell during the year.
iv.i. Beginning inventory – This is the amount of inventory at the beginning of the
accounting period. It is also the amount of ending inventory from the previous period.
iv.ii.Net Cost of Purchases = Purchases + Freight In
iv.ii.i.Net Purchases = Purchases – (Purchase discount and purchasereturns)
iv.ii.i.i.Purchases –amount of goods bought during current
accountinperiod.
iv.ii.i.ii.Contra Purchases –An account that is credited being “contrary”
to the normal balance of Purchases account.
iv.ii.i.ii.i.Purchase discount – Account used to record early
payments by the company to the suppliers of merchandise.
iv.ii.i.ii.ii.Purchase returns – Account used to record
merchandise returned by the company to their suppliers.
v.ii.ii.Freight In – This account is used to record transportation costs of
merchandise purchased by the company. Called freight in because this is
recorded when goods are transported into the company.

12. iv.iii.Add Beginning inventory and Net cost of Purchases
to get Cost of Goods Available for Sale
iv.iv.Ending inventory – amount if inventory presented in
the Statement of Financial Position.
Total cost of inventory unsold at the end of the
accounting cycle.
v. Sales less Cost of Goods Sold is Gross Profit

13. vi. Fourth Part is 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.
vii. Fifth Part is 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.
viii.Gross Profit less General and Administrative Expenses less Selling
Expenses is Net Income for a positive result while Net Loss for a
negative result

14. ABM KA HI RAP COMPANY
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2019
NET SALES Php 460,000.00
Cost of Goods Sold (285,000.00)
Gross Profit Php 175,000.00
General & Administrative Expenses
Salaries Expense (Php 20,000.00)
Rent Expense (15,000.00)
Depreciation Expense (10,000.00)
Utilities Expense (5,000.00)
Miscellaneous Expense (1,000.00) (51,000.00)
Selling Expenses
Salaries Expense (Php 10,000.00)
Rent Expense (8,000.00)
Depreciation Expense (7,000.00)
Utilities Expense (6,000.00) (31,000.00)
Net Income Php 93,000.00

15.  COMPREHENSIVE PROBLEM. The following are taken from the records of CHER
LAU Company for the year ended December 31, 2018. Prepare a Multi-step
SCI.
DEBIT CREDIT
Sales 764,985
Purchase discount 8,200
Purchase returns and allowances 5,465
Purchases 459,990
Freight in 9.180
Sales Discount 13,300
Sales returns and allowances 5,455
Depreciation expense 25,000
Amortization expense 10,000
Salaries Expense 80,000
Utilities expense 55,000
Advertising expense 35,000
Rent Expense 60,000
Interest income 5,444
Interest expense 5,677
Gain on Sale of PPE 5,465
Bad debt Expense ?????

16.  NOTES:
 1.Based on actual physical count, inventory
balance are as follows.
 2. Depreciation of Php 5,000 is for computer
equipment used in the admin office.
 3. Amortization is attributed to office leasehold
improvements.
 4. 40% of salaries are attributed to sales
personnel.
 5. Utilities for the store represent 35% of utilities
expense.
 6. Rent for the office space is 20,000.
January 1, 2018 25,455
December 31, 2018 20,765