Republic of the Philippines

Department of Education
National Capital Region
DIVISION OF CITY SCHOOLS – MANILA
Manila Education Center Arroceros Forest Park
Antonio J. Villegas St. Ermita, Manila

FABM2

https://theinterviewportal.com/2017/05/07/visual-merchandiser

Quarter 1 Week 3 Module 3

Learning Competency:
Prepare Statement of Comprehensive Income of
a Merchandising Business Using a Multi-Step
Approach ABM_FABM12-Ic-d-7)
 Learning Module for Accountancy, Business and Management

HOW TO USE THIS MODULE?

Before starting the module, I want you to set aside other task/s that may
disturb you while enjoying the lessons. Read the simple instructions below
to successfully enjoy the objectives of this kit. Have fun!

1. Follow carefully all the contents and instructions indicated in

every page of this module.

2. Write on your notebook the concepts about the lessons.

Writing enhances learning, that is important to develop and
keep in mind.

3. Perform all provided activities in the module.

4. Let your facilitator/guardian assess your answers using the

answer key card.

5. Analyze conceptually the posttest and apply what you have

learned.

PARTS OF THE MODULE

Expectations - These are what you will be able to know
after completing the lessons in the module.
Pre-test - This will measure your prior knowledge and the concepts
to be mastered throughout the lesson.
Looking Back to your Lesson - This section will measure what
learnings and skills did you understand from the previous lesson.
Brief Introduction- This section will give you an overview of the
lesson.
Activities - This is a set of activities you will perform with a partner.
Remember - This section summarizes the concepts and applications
of the lessons.
Check your Understanding - It will verify how you learned from the
lesson.
Post-test - This will measure how much you have learned from
the entire module

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 Learning Module for Accountancy, Business and Management

The Statement of Comprehensive

LESSON
Income of a Merchandising Business
3

EXPECTATIONS

You will represent real-life situations using statement of comprehensive

income in a merchandising business.

Specifically, this module will help you:


know the Elements of a Statement of Comprehensive
 Income and describe
each of these in a merchandising business.
Let us start your journey
in learning more on SCI. I am sure
PRETEST you are ready and excited to
answer the Pretest. Enjoy
answering!
Answer the crossword puzzle below

Hint: These are clues for you to be

able to answer the puzzle
3 5 6
Down
1 2
1. This includes revenue, sales
4 and professional fees
2. Includes cost of sales and
7 salaries and transportation
3. Earnings from selling of
merchandize
4. These are expenses other than
those attributable to selling
expenses
5. If expenses are higher than net
income, you will arrive at….
6. Other term for income
8 Across

7. ____ income includes other

gains and losses of current
currencies
8. An approach for a
merchandizing business

Great, you finished answering the questions. You

may request your facilitator to check your work.
Congratulations and keep on learning!

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 Learning Module for Accountancy, Business and Management

=+
LOOKING BACK TO YOUR LESSON

Directions: Solve for the net income or net loss for the following independent
cases.
1. If Income is Php20,000.00 and Expenses are
Php15,000 Net income /(Net Loss ) is _________
2. If Income is Php75,000.00 and Expenses are Php100,000
Net income /(Net Loss ) is _________
3. If Income is Php85,000.00 and Expenses are Php65,000
Net income /(Net Loss ) is _________
4. If Income is Php56,000.00 and Expenses are Php100,000
Net income /(Net Loss ) is _________
5. If Income is Php88,000.00 and Expenses are Php200,000
Net income /(Net Loss ) is _________

BRIEF INTRODUCTION

You already learned the single approach SCI for a single proprietorship

business in module 2. This module will discuss about the multi-step approach

better for merchandising business. They termed it as multi-step because there are

several steps needed in order to arrive at the company’s net income.

According to Haddock, Price and Farina (2012), the elements of a

multi-Step approach of a merchandising company are as follows: First part

is Sale, the total amount of revenue that the company was able to generate from
selling products. The second part is contra revenue. Sales Returns 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. Sales discount is discount given to customers who pay
early and is also known as cash discount. Sales discount is awarded to
customers who pay earlier or before the deadline.

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 Learning Module for Accountancy, Business and Management

For the 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. Beginning Inventory is the amount of inventory at the beginning of the
accounting period. This is also the amount of ending inventory from the
previous period. Net Cost of Purchases is equal to Purchases plus Freight- In.
Net Purchases is Purchases minus the contra purchases account (Purchase
discount and purchase returns). Purchases is an amount of goods bought
during the current accounting period. Contra Purchases is an account that is
credited being “contrary” to the normal balance of purchases account.
Purchase discount is account used to record early payments by the company
to the suppliers of merchandise. Purchase returns is account used to record
merchandise returned by the company to their suppliers. Freight In is an
account used to record transportation costs of merchandise purchased by the
company. This is called freight in because this is recorded when goods are
transported into the company. You have to add beginning inventory and net
cost of purchases for you to get the cost of goods available for sale. Ending
Inventory is the total cost of inventory unsold at the end of the accounting
cycle. Sales less cost of goods sold is Gross Profit

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. 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. These do not
include cost of goods sold and contra revenue accounts. Gross Profit less
general and administrative expenses and selling expenses will yield a net
income for a positive result while net Loss for a negative result.

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 Learning Module for Accountancy, Business and Management
An example of a Multi-Step Approach in a simpler format

THEONE JOY SELLING COMPANY

STATEMENT OF COMPREHENSIVE INCOME HEADING
For the year ended December 31, 2020

NET SALES Php 460,000.00 SALES

Cost of Goods Sold (285,000.00) COST OF SALES

Gross Profit Php 175,000.00 GROSS PROFIT

General & Administrative Expenses

Salaries Expense (Php 20,000.00)

Rent Expense (15,000.00)

GENERAL &
Depreciation Expense (10,000.00)
ADMINISTRATIVE
Utilities Expense (5,000.00)

Miscellaneous Expense (1,000.00)

Total (51,000.00)

Selling Expenses

Salaries Expense (Php10,000.00)

Rent Expense (8,000.00) SELLING

EXPENSES
Depreciation Expense (7,000.00)

Utilities Expense (6,000.00)

Total (31,000.00)

Net Income Php 93,000.00

Comprehensive Income 7,000.00

NET INCOME/
Total Net Income before Tax Php100,000.00
(NET LOSS)
============

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 Learning Module for Accountancy, Business and Management

ACTIVITIES

Activity 1. Determine whether the account title is general or selling.

1. Salaries of administrative assistant

2. Salaries of utility staff
3. Salaries of sales agents
4. Light and water of home office
5. Rental of Sales office building
6. Depreciation of office equipment
7. Depreciation of delivery van
8. Advertising expenses
9. Commission expense
10. Sales Commission of Account Executive

Activity 2 . Solve for the elements of Comprehensive Income for the following
independent Activity:
1. Joy Ride Company’s salaries to sales agents amounted to Php10,000.
Salaries of accountants amounted to Php20,000. No other expenses were
incurred. How much is the company’s general and administrative expense?
2. Joy Ride’s beginning inventory amounted to Php250,000. Net purchases
amounted to Php70,000. Freight is 15,000. Compute for the company’s
cost of goods available for sale.

3. Joy Ride’s purchases is Php100,000 while purchase returns and purchase

discounts amounted to Php20,000 and Php10,000 respectively. How much
is the company’s purchases?
4. Company’s Cost of Goods Sold amounted to Php235,000. Net cost of
purchases totaled Php85,000. Beginning inventory amounted to
Php250,000. Sales amounted to Php500,000. Compute for the company’s
Ending Inventory.
5. Gross profit of Happy Joy Ride amounted to Php175,000. Net Sales is
Php300,000, compute for cost of goods sold?

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 Learning Module for Accountancy, Business and Management
Activity 3. Prepare a multi-step Statement of Comprehensive Income for the
following accounts taken from Tin’s Ready to Wear Companyfor the period
ended of December 31, 2019

Net Sales Php75, 000.00, Cost of Sales Php30, 000.00, General and
Administrative Expenses Php12,000.00 and Selling Expenses Php25, 000.00

REMEMBER
The elements of a Comprehensive Income for a merchandising
business are Net Sales, Cost of Sales, and Expenses. Expenses are presented
according to function of expense method which is a Multi-Step Approach for
a merchandising business. Other expenses under the function of expense
method are distribution cost, administrative expenses, other expenses, interest
expense and income tax expense.
1. Net Sales is equal to sales less contra sales account (sales returns and
allowances and sales discount )
2. Gross Profit is equal to n et Sales less Cost of Goods Sold (Cost of Sales)
3. To arrive at cost of sales, you have to deduct merchandise inventory
end to the cost of goods available for sales.
4. To get the amount of cost of goods available for sale, you have add net
cost of purchases to merchandise inventory beginning.
5. Add freight in to Net purchases to get the Net Cost of purchases
6. Net Purchases is equal to purchases less purchase discount and
purchase returns and allowances.

CHECK YOUR UNDERSTANDING

Prepare the Statement of Comprehensive income using a Multi-step Approach:

Sales Php80,000.00 Merchandise Inventory beg Php5,000.00
Sales Discount 5,000.00 Net Purchases 10, 500.00
Sales Returns 2,000.00 Freight In 8,000.00

Merchandise General Expenses 12,000.00

Inventory End 3,500.00 Selling Expenses 4,000.00
 POSTTEST

Choose the letter corresponding to the correct answer for each of the
questions provided below: Marie Co Company’s accounts show the following
balances as June 30, 2020

Net Sales Php1,250,000.00

Cost of Sales 380,000.00
Rent Expense (3/4 pertains to the Sales Department) 20,000.00
Salaries Expense (2/5 pertains to General & Admin) 250,000.00
Sales Commission Expense 80,000.00
Freight Out 50,000.00
Insurance Expense 25,000.00
Interest Expense 10,000.00
Other comprehensive income 30,000.00

1. What is the gross profit of Marie Co?

a. Php870,000 c. Php1,520,000
b. Php280.000 d. Php1,200,000

2. What is the amount of salaries attributable to non-sales personnel?

a. Php250,000 c. Php100,000
b. Php150,000 d. Php50,000

3. What is the rent expense attributable to Sales Department?

a. Php120,000 c. Php80,000
b. Php90,000 d. Php100,000

4. How much is the total General and Administrative Expenses?

a. Php250,000 c. Php155,000
b. Php125,000 d. Php165,000

5. How much is the total Selling Expenses?

a. Php370,000 c. Php365,000
b. Php320,000 d. Php300,00

6. How much is the comprehensive income of Marie Co?

a. Php315,000 c. Php365,000
b. Php380,000 d. Php120,000

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 Learning Module for Accountancy, Business and Management
7. How much is income tax expense (hint: 35%)
a. Php110,000 c.Php145,000
b. Php109,500 d.Php127,750

8. How much is comprehensive income after tax?

a.Php230,000 c. Php240,000
b Php237,250 d. Php335,000

REFLECTIVE LEARNING SHEET

Covid 19 has a great impact in every

C family and businesses including that of
L a merchandising business. Their sales
increases or decreases. Do you know
0 any business who increases their sales
S
during covid? How about your family,
what did your family do to increase
E family income and to lessen expenses
during pandemic?
D

https://sites.google.com/a/howland.k12.oh.us/mrs-hoso-s-social-studies/contact-information

The merchandising or trading business that increased their sales during covid:
__________________________________________________________________

To increase our income we _____________________________________________

________________________________________________________________________

________________________________________________________________________

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 Learning Module for Accountancy, Business and Management

E-SITES

To further explore the concept learned today and if it possible to

connect the internet, you may visit the following links:
https://www.accountingcoach.com/onlineaccountingcourse

REFERENCES

Ferrer, R & Millan, Z. V. (2017). Fundamentals of Accountancy, Business &

Management Part 2. (1st Ed): Sto Tomas, Baguio City: Bandolin Enterprise
Haddock, M., Price, J., & Farina, M. (2012). College Accounting: A Contemporary
Approach, Second Edition. New York: McGraw-Hill/Irwin.
Valencia, E. G., & Roxas, G. F. (2010). Basic Accounting (3rd ed.) Mandaluyong
City, Philippines: Valencia Educational Supply.
Anastacio, V. ( 2011). Accounting Essentials 1, Centro Escolar University
Publisher
Teaching Guide in Senior High School Fundamentals of Accountancy Business
and Management 2, donated by the Commission on Higher Education in
Collaboration with the Philippine Normal University to Department of Education

Acknowledgment
Writer: Ma. Cristina A. Labay, MM
Editor: Isabel A. Gumaru, DBA
Evaluator: Ellaine I. Dela Cruz, DBA
Illustrator: Ma. Cristina A. Labay, MM

Validators & Reviewers: Remylinda T. Soriano, EPS

Angelita Z. Modesto, PSDS
George B. Borromeo, PSDS

Management Team :
Maria Magdalena M. Lim, Schools Division Superintendent, Manila
Aida H. Rondilla, Chief Education Supervisor
Lucky S. Carpio, EPS in charge of LRMDS
Lady Hannah C. Gillo, Librarian II, LRMDS

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 Learning Module for Accountancy, Business and Management

Name: ____________________Grade Level: ______Section: _____Score:_______

Teacher:_________________________ School:________________________________

Worksheet Week 3

Objective: To be able to acquire the knowledge in the preparation of

Statement of Comprehensive Income.

Learning Content: To be able to differentiate general and administrative

expenses from selling expenses and familiarize with the elements of Statement
of Comprehensive Income

Instructions: Identify if the account given is part of General

and Administrative Expenses or Selling Expenses

1. Utility expense sales department

2. Payment for janitorial services

3. Salaries of collector/messenger

4. Representation Expenses of sales manager

5. Salaries of an administrative assistant

6. Gasoline Expense of the head of Human Resource Department

7. Payment of bill boards, print ads and brochures

8. Supplies Expense for home office

9. Insurance Expense of the delivery van

10. Insurance of the car of the president

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