11 SENIOR HIGH SCHOOL

FABM 2
Quarter 3 - Module 2
Statement of Comprehensive Income
for Service & Merchandising Business

NegOr_Q3_FABM211_Module2_V2

NegOr_Q3_FABM211_Module2_V2
FABM 2 – Grade 11
Alternative Delivery Mode
Quarter 3 – Module 2: Statement of Comprehensive Income for Service &
Merchandising Business
Second Edition, 2021

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Published by the Department of Education

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Undersecretary: Diosdado M. San Antonio

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Writer: Salvador G. Aguilar Jr.
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Reviewer: Maria Acenith D. Pastor
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Management Team: Senen Priscillo P. Paulin, CESO V Elisa L. Baguio, EdD
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Nilita L. Ragay, EdD Elmar L. Cabrera

Inilimbag sa Pilipinas ng ________________________

Department of Education - Region VII Schools Division of Negros Oriental

Office Address: Kagawasan, Ave., Daro, Dumaguete City, Negros Oriental

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Introductory Message
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Thank you.

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 I

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at our own pace and time. You will be
enabled to process the contents of the learning resource while being an active learner.

This module identify the elements of the SCI and describe each of these items for a
service business and a merchandising business, prepare an SCI for a service business using the
single-step approach and prepare an SCI for a merchandising business using the multistep
approach.

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Pre-assessment:
Directions: Identify what is asked in each item. Write the letter of the correct answer in your
notebook.
1. A kind of business or company where it focuses on selling goods like school supplies,
vegetables and etc.
A. Service B. Merchandising
C. Corporation D. None of these are correct
2. It is the total income returned by an investment / business.
A. Expenses B. Capital C. Revenue D. Equity
3. It is an expenditure.
A. Expenses B. Capital C. Revenue D. Equity
4. These are goods which was given back to the you(as the seller) because it is damaged.
A. Sales Return B. Purchase returns
C. Sales discount D. Purchase discount
5. It is a price reduction for the goods being sold.
A. Sales Return B. Purchase returns
C. Sales discount D. Purchase discount
6. A kind of business or company which is focused on providing work like offering repairs
and maintenance.
A. Servicing B. Merchandising
C. Corporation D. None of these are correct
7. It is a decrease which is unrecoverable and unanticipated in a resource or asset outside of
normal business operations.
A. Expenses B. Profit
C. Loss D. None of these are correct
8. The difference between what a merchant invests into business and what he receives in
return.
A. Expenses B. Profit
C. Loss D. None of these are correct
9. It is the net amount of funds invested in a business by its owners, plus any retained
earnings (Bragg, S. 2020).
A. Expenses B. Sales C. Revenue D. Equity
10. It is an expense which refers to the total cost of using rental property for each reporting
period.
A. Utilities Expense B. Rent expense
C. Salaries expense D. Interest expense
11. It refers to all the items, goods, merchandise, and materials held by a business for selling
in the market to earn a profit.
A. Sales B. Purchases

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 C. Inventory D. None of these are correct
12. It is the cost incurred by using utilities such as electricity, water, waste disposal, heating,
and sewage.
A. Utilities Expense B. Rent expense
C. Salaries expense D. Interest expense
13. It is the business entity’s Net sales minus cost of goods sold, and expenses. This is
usually represented as a positive increase resulted from the business operations for a
given accounting period.
A. Gross profit B. Operating profit
C. Net loss D. Net income
14. It is a negative result in the statement of comprehensive income.
A. Gross profit B. Operating profit
C. Net loss D. Net income
15. It is one of the formats used in making the statement of comprehensive income which
uses three different accounting formulas to arrive at the net income.
A. Single-step B. Multi-step
C. Periodic inventory system D. Perpetual inventory system

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 ’s In

Task 1
Direction: This is a sample statement of comprehensive income for service business. Use
the words found in the box to label the unlabeled items in the statement below.

Net Income Operating Expenses

Service Revenue Heading

Statement of Comprehensive income of a service business

1. _________
LEARNING IS FUN COMPANY
STATEMENT OF FINANCIAL POSITION
For the year ended DECEMBER 31, 2016
2. ______________ ₱ 100,000.00

Less:
Salaries Expense (40,000.00)
Rent Expense (20,000.00)
Depreciation Expense (10,000.00)
Utilities Expense (5,000.00) 3. _________
Miscellaneous Expense (1,000.00)
Total Expenses (76,000.00)
4. _________ ₱ 24,000.00

’s New

Task 2
Your family owns a merchandising store which is now currently managed by your
sister. Since it is her first time managing the store, she is struggling and is very busy preparing
the book of accounts for her to prepare the financial statements which will be used to prepare
documents used in renewing the business license. Since you are already knowledgeable on the
preparation of financial statements your sister asked you which accounts are necessary to create
a statement of comprehensive income. Enumerate a few elements you can name to prepare this
financial statement:

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Elements of a statement of comprehensive income for a merchandising business

1.

2.

3.

4.

is It

Since we already reviewed the definition of the Statement of Comprehensive Income

(SCI) also known as the income statement, let us now identify the elements of each statements
on both service and merchandising business using the single step and multi-step format.

Elements of Sci in Both Service & Merchandising Business Using Single

Step and Multi-Step Format

In the presentation of the statement of comprehensive income, two formats are being
used depending on the type business (service or either merchandising) and the type of needs
the company wants to know in these statements which will be useful in decision making. These
formats are the following:

1. Single-step – it is called single-step because all revenues are listed down in one section while
all expenses are listed in another. Net income is computed using a “single-step” which is Total
Revenues minus Total Expenses (Haddock, Price, & Farina, 2012). These are the following
elements:

A. Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wording – “for the”)

B. Service Revenue - This is the total amount of income that the company was able to generate
from providing services to customers.

C. Operating Expenses – these are expenses directly related to the production of services that
is incurred during the business operation. It includes rent, salaries of employees, utilities and
other miscellaneous expenses including supplies.

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D. Net income / net loss – this is the revenue less expenses. If the result is positive, it means
that we have a net income, or the company gained for this accounting period. If the result is
negative, it means that we have a net loss.

Figure 1. Sample statement of comprehensive income of a service business using single step.

Heading or Title
Revenue LEARNING IS FUN COMPANY
STATEMENT OF COMPREHENSIVE INCOME
For the year ended DECEMBER 31, 2016

Service Revenue ₱ 100,000.00

Less:
Salaries Expense (40,000.00) Operating Expenses
Rent Expense (20,000.00)
Depreciation Expense (10,000.00)
Utilities Expense (5,000.00)
Miscellaneous Expense (1,000.00)
Total Expenses (76,000.00)
Net Income ₱ 24,000.00

2. Multi-step – it is called multi-step because there are several steps needed in order to arrive
at the company’s net income (Haddock, Price, & Farina, 2012). These are the following
elements:

A. Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wording – “for the”)

B. Sales Revenue - This is the total amount of income that the company was able to generate
from selling to customers.

C. Net sales – is the total amount after the sales return (returns due to damaged goods) and
sales discount (discounts given to customers) are deducted to the sales revenue.

D. The multi-step income statement uses three different accounting formulas to arrive
at the net income:

1. GROSS PROFIT = NET SALES – COST OF GOODS SOLD

Cost of goods sold is subtracted from net sales. This gives the gross profit.
2. OPERATING PROFIT = GROSS PROFIT – OPERATING
EXPENSES

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 Operating expenses are subtracted from gross profit. This gives you the operating
income.
3. NET INCOME = OPERATING INCOME + NON-OPERATING
REVENUES – OTHER EXPENSES
Operating profit or income is added to the net non-operating revenues, gains, and
other expenses and losses are deducted. This final figure gives the net income or net loss of
the business for the reporting period.

Figure 2. Semi-detailed sample of statement of comprehensive income of a merchandising

business (perpetual inventory system).

Heading or Title
LEARNING IS FUN COMPANY
STATEMENT OF COMPREHENSIVE INCOME
For the year ended DECEMBER 31, 2016
Sales Revenue ₱ 200,000.00
Less: Sales Return (5,000.00)
Sales Discounts (3,000.00) (8,000.00)
Net Sales 192,000.00
Less: Cost of Goods Sold (40,000.00)
Gross profit 152,000.00
Operating expenses
Less: Salaries Expense (20,000.00)
Sales Commission Expense (8,000.00)
Traveling Expense (7,000.00)
Miscellaneous Expense (5,000.00) (40,000.00)
Operating Profit 112,000.00
Other Non-operating income & other expenses
Add: Interest Income 2,000.00
Less: Interest Expense (1,000.00) (3,000.00)
Net Income ₱ 109,000.00

Note: Don’t forget that expenses in both formats whether for service and merchandising
business must be arranged from figures highest to lowest. Figures in the statement if
represented as deduction is marked with a parenthesis.

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Figure 3. Detailed sample of statement of comprehensive income of a merchandising business
(periodic inventory system).
Heading or Title
LEARNING IS FUN COMPANY
STATEMENT OF COMPREHENSIVE INCOME
For the year ended DECEMBER 31, 2016
Sales Revenue ₱ 200,000.00
Less: Sales Return and allowances (5,000.00)
Sales Discounts (3,000.00) (8,000.00)
Net Sales 192,000.00
Cost of good sold
Merchandise inventory, beginning 30,000.00
Add: Purchases 20,000.00
Freight in 500.00
Less: Purchases returns (3,000.00)
Purchase discounts (1,000.00)
Merchandise inventory, end (10,000.00)
Less: Total Cost of Goods Sold (36,500.00)
Gross profit 155,500.00
Operating expenses
Less: Salaries Expense (20,000.00)
Sales Commission Expense (8,000.00)
Traveling Expense (7,000.00)
Miscellaneous Expense (5,000.00) (40,000.00)
Operating Profit 115,500.00
Other Non-operating income & other expenses
Add: Interest Income 2,000.00
Less: Interest Expense (1,000.00) 1,000.00
Net Income ₱ 114,500.00

Note: Periodic and perpetual inventory systems used in merchandising business are two
contrasting accounting methods that businesses use to track the number of products they have
available. The periodic inventory system uses an occasional physical count to measure the
level of inventory and the cost of goods sold (COGS). While the perpetual inventory
system keeps track of inventory balances continuously, with updates made automatically
whenever a product is received or sold. That is why we can see in Figure 2, Cost of goods
sold is already given since in it is already recorded continuously thereby, we can get the end
total of the inventory automatically. However, in the periodic inventory system as displayed
in Figure 3, Cost of goods Sold is being computed since the inventory system does not
continuously count / deduct the inventory each time there is a transaction, that is why we will
conduct physical count usually at the end of the period to compute the Cost of good sold.

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 Periodic inventory accounting systems are normally better suited to small businesses,
while businesses with high sales volume and multiple retail outlets (like grocery stores or
pharmacies) need perpetual inventory systems.

Differentiate Single-Step and Multi-Step Format of the SCI

Single step format is best suited for statement of comprehensive income for service
business since it only requires simple data and requires one equation [Net Income = (Revenues
+ Gains) – (Expenses + Losses)]. While multi-step format income statement reports much of
the same general information included in a single-step income statement, but it uses multiple
equations to determine the net income, or profit, of the company which is best suited for a
merchandising business.

A single-step income statement gives a simple accounting of a business’s net income,

whereas a multi-step income statement follows a three-step process to calculate net income,
separating operational from non-operational revenues and expenses.

Small businesses with a simple operating structure, including sole-proprietorships and

partnerships, can choose between creating single-step or multi-step income statements.

Single-step income statements are easier to prepare and require less calculations. For
many small businesses, the single-step income statement provides all the details you’ll need to
assess the financial health of your company.

However, if your small business is seeking a bank loan or looking to attract new
investment, a multi-step income statement is the best option as it gives potential creditors and
investors greater financial detail about your business, which can help them assess its long-term
viability.

’s More

Task 3
Directions: Prepare Statement of Comprehensive income using single-step in your activity
notebook. Use the following datas given below.

Service business – use single step format

Given:
Depreciation expense ₱ 1,000
Interest expense 500
Professional fees 247,000
Salaries expense 15,000
Rent expense 10,000
Permit & licenses expense 10,000
Utilities expense 8,000
Supplies expense 3,000

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Task 4
Directions: Prepare Statement of Comprehensive income using multi-step in your activity
notebook. Use the following data given below.

Merchandising business (perpetual)– use multi-step format

Given:
Sales Revenue ₱ 500,000.00
Sales Return 5,000.00
Cost of Goods Sold 340,000.00
Salaries Expense 25,000.00
Traveling Expense 6,000.00
Supplies Expense 5,000.00
Interest Expense 1,000.00

I Have Learned

Directions: Complete the following statements. Write your statements in your activity
notebook.

1. As an ABM student, I have learned that the Statement of comprehensive income

is_______________________.

2. As an ABM student, it is very important for us to learn Statement of comprehensive income

because _______________________.

3. Using the knowledge I have learned in this lesson, I will be able to...
_______________________.

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