The document discusses the components and purpose of an income statement and the statement of comprehensive income, outlining key elements for both service and merchandising businesses. It covers the structure of the income statement including income, expenses, and various account classifications, emphasizing differences between service and merchandising concerns. Additionally, it provides exercises for classifying financial elements into categories such as assets, liabilities, capital, income, and expenses.

2. WEEK 2
Statement
of
Comprehensive Income

3. 2.1 Purpose of Income Statement
2.2 Elements of Income Statement
2.3 Elements of Statement of
Comprehensive Income
(Service Business)
2.4 Elements of Statement of
Comprehensive Income (Merchandising
Business)
LESSON TOPICS

4. GROUP ACTIVITY

5. Basic Financial Statements
Balance Sheet
Income Statement
Statement of Cash Flows

6. Basic Financial Statements
Balance Sheet
Income Statement
Statement of Cash Flows

7. Income Statement
 also known as the Profit and Loss
Statement, reports the company's financial
performance and results of its operations in
terms of net profit or loss over a specified
period.
 Net profit or loss is arrived by deducting
expenses from income.

8. Income Statement answers basic questions
including:
– What is the company’s current financial
status?
– What was the company’s operating results for
the period?
– How did the company obtain and use cash
during the period?
Purpose of Income Statement

9. Parts of Income Statement
1. Heading
Answers the three W’s:
Who – the name of the business
What - the name of the statement
When – the date which is for a particular
day
2. Body of the statement - states the various
revenues generated and expenses incurred by the
business.

10. –Write down the amount of your school allowance.
–List down also the things/food that you buy with
corresponding amounts.
–How much do you save everyday, if any, from your
school allowance?
“Statement of Allowance”

11. • Income accounts are presented before expenses. In the
above statement, the income account is Service
Revenue. Other income accounts for service type
businesses include Professional Fees, Rent Income,
Tuition Fees, etc.
• Expenses are presented after the income accounts. It is
a good practice to arrange expenses according to
amount (largest to smallest). Some users who are
interested in the company's expenses are concerned
about the size of each expense. Arranging the expenses
from largest to smallest results in a more useful and
organized report. Nonetheless, Miscellaneous
Expense or Sundry Expense is presented last.

12. • The income statement complies with
the accrual basis of accounting.
• Income is recognized when earned regardless
of when collected. Expenses are recognized
when incurred regardless of when paid.

13. What’s the Business?

14. Statement of
Comprehensive Income
Service Business

15. Income
• Professional fees - income derived in the
practice of profession for the professional
services rendered.
• Fare Income - income derived from
transportation services provided to others.

16. Income
• Rent Income - income derived by lessor
engaged in the business of renting apartment,
building, condominium, market stalls,
automobiles, machines
• Interest Income - income derived from
lending money to others.

17. Expenses
• Salaries and Wages Expense – amount incurred or paid
for the services rendered by the employees and workers in the
business.
• Advertising Expenses - payments made in the promotion of
business merchandise, goods and/or services.
• Office Supplies Expenses - office related materials used by
the business.
• Rent Expense - amount incurred/paid for the use of space
for the office, store and or factory area

18. Expenses
• Utilities Expense- amount incurred for the use of
electricity, water and telephone facilities.
• Taxes and license expenses - taxes, licenses and
other fees paid or incurred.
• SSS, Pag-ibig, Medicare Contribution- the
employer’s share in the payment of SSS, Pag-ibig and
medicare for the welfare of its employees and workers.

19. Guess the Company

20. Statement of
Comprehensive Income
MERCHANDISING BUSINESS

21. Merchandising Concern
- is a type of business organizations that buys
goods and sells the same good (without
further processing) at a price higher than its
acquisition cost.
- The inventory or stocks consists of finished
products awaiting sales.

22. Income Statement of Service
and Merchandising Concern
- Similar in terms of content and forms
- Both types of concerns have revenue and
expense section.
- Merchandising concern differ when it comes
to account names for revenues and cost of
goods sold section of the said statement.

23. The account names maintained in the
accounting records of Merchandising Concerns
• Merchandise Inventory – commodities or
goods acquired by the business intended for
sale but remain unsold.
• Delivery Expense/Freight out – amount
incurred/paid for transporting merchandise to
customers such as cost of fuel, gasoline and
oil.

24. The account names maintained in the
accounting records of Merchandising Concerns
• Purchases – amount of commodities or goods
acquired by the business intended for sale at a
profit.
+ Freight in – amount incurred or paid for merchandise
bought, the transportation expense of which was
shouldered by the buyer.
– Purchase returns and allowances – a contra account
that accumulate the cost of merchandise returned to
suppliers
– Purchase Discount – a reduction in the purchase price
due to payment of the buyer to the seller before the
day the discount period is over

25. The account names maintained in the
accounting records of Merchandising Concerns
• Sales – revenues derived from sale of goods either in cash
or on account.
- Sales Returns and Allowances – a contra-sales account
that accumulates the amount of merchandise sold to
customers but returned for various reasons like errors in
style, color, sizes
- Sales Discount – a reduction in the selling price due to
payment of the buyer to the seller before the day the
discount period is over.

26. Expenses
Selling Expenses – pertain to expenses related to selling
the products of the company.
 Advertising expenses
 Rent Expense of the store
 Commission expense
 Depreciation expense of the store
 Depreciation expense of the delivery van
 Freight out
 And other selling related expenditures

27. Expenses
Administrative Expenses - pertain to expenses related
to office and administrative work.
 Salaries expense of employees
 Rent of office
 Utilities of the head office
 Office supplies
 And other office related expenditures

28. Other income – revenue from sources not directly related to the
central operating activities of the business.
Ex. Interest income and gains from sale of fixed assets
Other expenses – other expenses that are not directly associated
with the operating activities of the business.
Ex. Interest expense, loss from lawsuit, losses in the
disposal of fixed assets, discount loss

29. Net Sales
Sales P xxxx
Less: Sales Returns and Allowances P xxx
Sales Discount xxx xxx
Net Sales P xxx

30. Cost of Goods Sold or Cost of Sales
Merchandise Inventory, Beginning P XXX
Add: Net Cost of Purchases:
Purchases P XXX
Less: Purchases Discount P XXX
Purchase Returns and Allowances XXX XXX
Net Purchases XXX
Add: Freight-in XXX XXX
Total Goods Available for sale P XXX
Less: Merchandise Inventory, Ending XXX
Cost of Sales P XXX
Other Comprehensive Income
Revaluation Surplus P 20,000.00
Unrealized Translation Gain 10,200.00 30,200.00

31. Other Income
Revaluation Surplus P XXX
Unrealized Translation Gain XXX
Total P XXX

32. Selling Expenses
Salary P XXX
Rent XXX
Store Supplies XXX
Depreciation - Store Equipment XXX
Utilities XXX
Total P XXX

33. Administrative Expenses
Salary P XXX
Rent XXX
Office Supplies XXX
Depreciation - Office Equipment XXX
Utilities XXX
Total P XXX

34. Other Expenses
Interest Expense P XXX
Loss on sale of furniture XXX
Total P XXX

35. Statement of
Comprehensive Income
Exercises & Problems

36. INSTRUCTION: Classify the following into ASSETS, LIABILITIES, CAPITAL, INCOME,
EXPENSE
1. Merchandise Inventory
14. Due from Officers and
Employees
2. Office Equipment 15. Office Supplies Expense
3. Accrued Interest Expense 16. Accumulated Depreciation
4. Accounts Receivable 17. Interest Income
5. Utilities Expense 18. Building
6. Unearned Interest Income 19. Land
7. Depreciation Expense 20. SSS Premium Expense
8. Interest Expense 21. Cash on Hand
9. Allowance for Bad Debts 22. Petty Cash Fund
10. Withholding Tax Payable 23. Mortgage Payable
11. Salaries Payable 24. Notes Payable
12. Mr. Antonio, Drawing 25. Prepaid Supplies
13. Office Supplies Inventory

37. Classify the following whether they are Income,
Expense and Other Comprehensive Income
1. Rent income
2. Unrealized gain or loss on
investment of equity
3. Salaries expense
4. Utilities expense
5. Gain or loss from
translating the financial
statements of a foreign
operation
6. Administrative expense
7. Income tax expense
8. Change in revaluation
surplus
9. Selling expense
10.Miscellaneous expense
11.Unrealized gain or loss
from derivative contracts
12.Interest income
13.Rent expense
14.Actuarial gain or loss on
defined benefits plan
15.Gain on sale of fixed assets