Fundamentals of Accountancy,

Business and Management 2

Quarter 1- Module 3
Statement of Comprehensive Income:
Multi-step

Compiled and Repackaged by:

Easter A. Lumang
Teacher II
Schools Division of the City of Batac

i
FABM2– Grade 12
Compiled and Repackaged Module
Quarter 1 – Module 3: Statement of Comprehensive Income: Multi-step
First Edition, 2020

Development Team of the Module

Compiler and Layout Artist: Easter A. Lumang

Editors: Alexander L. Lino, EdD, Nemalyn M. Ulep

Reviewer: Whellalyn G. Duldulao, Blesilda B. Antiporda

Cover Art Artist: Clarence C. Manarpaac

Management Team: Joel B. Lopez, EdD CESO V Marilou B. Sales, EdD

Annie D. Pagdilao, EdD Aubrhey Marie R. Oasay, PhD

Jhon Rey D. Ortal, EdD

Marlene C. Castillo

Printed by the Schools Division of the City of Batac

Department of Education – Region I

Office Address: 16S Quiling Sur, City of Batac, 2906 Ilocos Norte, Philippines
Telefax: (077) 677-1993
Website: www.csdbatac.com
E-mail: batac.city@deped.gov.ph

ii
Introductory Message
For the facilitator:

Welcome to the Fundamentals of Accountancy, Business and Management 2 Grade 12

Compiled and Repackaged Module 3, Lesson 3 on Statement of Comprehensive Income:
Multi-step!

This module was collaboratively compiled, repackaged, and reviewed by educators of the
Department of Education Schools Division of the City of Batac to assist you, the teacher or
facilitator in helping the learners meet the standards set by the K to 12 Curriculum while
overcoming their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and independent learning
activities at their own pace and time. Furthermore, this aims to help learners acquire the
needed 21st century skills and the four livelihood skills for survival – the 4As (agtagibalay,
agtaraken, agmula, agliwliwa), which are considered very vital in surviving any crisis.

As a facilitator, you are expected to orient the learners on how to use this module. You also
need to keep track of the learners' progress while allowing them to manage their own learning.
Furthermore, you are expected to encourage and assist the learners as they do the tasks
included in the module.

iii
For the learner:

Welcome to the Fundamentals of Accountancy, Business and Management 2 Grade 12

Compiled and Repackaged Module 3, Lesson 3 on Statement of Comprehensive Income:
Multi-step!

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

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the module.
Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities included
in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.

If you encounter any difficulty in answering the tasks in this module, do not hesitate to
consult your teacher or facilitator. Always bear in mind that you are not alone.

We hope that through this material, you will experience meaningful learning and gain deep
understanding of the relevant competencies. You can do it!

iv
 What I Need to Know

In this module, you will learn to solve exercises and problems that will equip you in the
preparation of the SCI for merchandising business using the multi-step approach.

The module focuses on the Statement of Comprehensive Income: Multi-step approach which
is divided into two topics, namely:
 Topic 1 – Parts of a multi-step SCI
 Topic 2 – Preparation of SCI for a Merchandising Business

Most Essential Learning Competencies (MELC)

1. Prepare an SCI for a merchandising business using the multi-step approach
(ABM_FABM12-Ic-d-7)

After going through this module, you are expected to:

1. Identify the parts of a Multi-step SCI;
2. Identify account under general and administrative and selling expenses;
3. solve exercise and problems in the preparation of the SCI for merchandising business;
4. appropriately prepare an SCI for merchandising business; and
5. reflect on the importance of preparing the SCI using the multi-step.

1
 What I Know

Directions: Choose the letter of the best answer. Write the chosen letter on a separate sheet
of paper.

1. A form of the Income Statement which shows several steps needed in order to arrive
at the company’s net income/loss.
A. Report Form
B. Account Form
C. Multi-step Form
D. Single-step Form

2. What part of SCI is depreciation of office equipment belongs?

A. Selling Expenses
B. Cost of Goods Sold
C. General and Administrative Expenses
D. None of the above

3. What part of SCI is Freight-in belongs to?

A. Selling Expenses
B. Cost of Goods Sold
C. General and Administrative Expenses
D. None of the above

4. What part of SCI is Freight-out belongs?

A. Selling Expenses
B. Cost of Goods Sold
C. General and Administrative Expenses
D. None of the above

2
5. What approach is best in preparing the SCI for a merchandising business?
A. Multi-step Approach
B. Single-step Approach
C. Both a and b
D. None of the above

6. It is an account used to record early payments by the company to supplier of

merchandise.
A. Sales Discount
B. Purchase Discount
C. Sales Returns and Allowances
D. Purchase Returns and Allowances

7. It is an account awarded to customers who pay earlier or before the deadline.

A. Sales Discount
B. Purchase Discount
C. Sales Returns and Allowances
D. Purchase Returns and Allowances

8. The third part on a multi-step of SCI which represents the actual cost of merchandise
a company was able to sell during the year.
A. Selling Expenses
B. Cost of Goods Sold
C. General and Administrative Expenses
D. None of the above

9. The fifth part on a multi-step of SCI which represents the cost incurred directly
related to the main purpose of a merchandising business but not include cost of
merchandise and contra revenue accounts.
A. Selling Expenses
B. Cost of Goods Sold
C. General and Administrative Expenses
D. None of the above

3
For numbers 10 to 15 the following accounts are given below:

Sales P 20,000 Sales Discounts P 500

Sales Returns 300 Gen. and Adm. Exp. 4,000
Selling Exp. 2,000 Purchases 2,000
Purchase ret. 200 Purchase discounts 200
Freight in 100 Beginning inventory 1,000
Ending inventory 500

10. Compute for the net sales.

A. 19,200
B. 19,700
C. 20,200
D. 20,800

11. Compute for the net purchases.

A. 1,500
B. 1,600
C. 2,400
D. 2,500

12. What is the Cost of Goods Available for Sale?

A. 2,000
B. 2,200
C. 2,600
D. 2,700

13. Compute for the Cost of Goods Sold.

A. 2,000
B. 2,200
C. 2,600
D. 2,700

4
14. How much is the Gross Profit?
A. 11,000
B. 17,000
C. 17,600
D. 21,400

15. Compute for the Net Income of the firm.

A. 11,000
B. 17,000
C. 17,600
D. 21,400

5
 Lesson Statement of Comprehensive Income
3 (SCI): Multi-step Approach

What’s In

In this lesson, you will be familiarized with the parts and learn to solve exercises and
problems on the preparation of a Statement of Comprehensive Income (SCI) using the multi-
step approach of a merchandising business.

Do you still remember what a merchandising business do?

A Merchandising business sells goods to customers.

Can you give examples of merchandising business found in your barangay?

Merchandising business- sari-sari store, vegetable vendor

How about the difference on the Statements of the two types of business (Service and
Merchandising)?

The main difference of the Statements of the two types of business lies on how they generate
their revenue. A service company provides services in order to generate revenue and the main
cost associated with their service is the cost of labor which is presented under the account
Salaries Expense. On the other hand, a merchandising company sells goods to customers
and the main cost associated with the activity is the cost of the merchandise which is presented
under the line item Cost of Goods Sold. In presenting these items on the Statement of
Comprehensive Income, a service company will separate all revenues and expenses (as seen
in the single-step format) while a merchandising company will present total sales and cost of
goods sold on the first part of the statement which will net to the company’s gross profit before
presenting the other expenses which are classified as either administrative expenses or selling
expenses (as seen in the multi-step format).

6
 What’s New

Activity 1. Understanding Cost of Goods Sold

Directions:
1. Get 10 pieces of spoon or fork that you wash in the morning.
2. Lay 9 pieces of spoon and pork beside you and hold the last one.
3. How many spoon or fork do you hold?
4. Get one piece of each spoon and fork.
5. How many spoon or fork do you hold now?
6. Repeat steps 4 and five until you hold all the spoon or fork.

The first spoon or fork that you held relates to beginning inventory, step 4 relates to purchases,
the total spoon or fork that you hold is the cost of goods available for sale, remaining spoon
or fork as ending inventory and the spoon or fork you got/given is the cost of goods sold.

Later, you go to deeper understanding on the part of SCI for merchandising business using
the multi-step approach.

7
 What is It

Sample of a Multi-step Statement of Comprehensive Income

LIWLIWA SELLING COMPANY

STATEMENT OF COMPREHENSISVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2019

Sales Php 520,000.00

Sales Returns (Php 30,000.00)

Sales discounts (10,000.00) (40,000.00)

NET SALES Php 480,000.00

Cost of Goods Sold

Beginning Inventory Php 250,000.00

Net Cost of Purchases

Purchases Php 100,000.00

Purchase Returns (20,000.00)

Purchase Discounts (10,000.00)

Net Purchases 70,000.00

Freight In 15,000.00 85,000.00

Cost of Goods Available for Sale 335,000.00

Ending Inventory (50,000.00) (285,000.00)

GROSS PROFIT Php 195,000.00

8
GROSS PROFIT Php 195,000.00

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 113,000.00

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 is composed 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. (Haddock, Price, & Farina, 2012)
a. Sales returns – This account is debited in order to record returns of customers
or allowances for such returns.(Haddock, Price, & Farina, 2012) Sales returns
occur when customers return their products for reasons such as but not limited
to defects or change of preference.
b. Sales discount – This is where discounts given to customers who pay early
are recorded. (Haddock, Price, & Farina, 2012) 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.

9
iii. Sales less Sales returns and Sales discount is Net Sales
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. (Haddock, Price, &
Farina, 2012)
a. Beginning inventory – This is the amount of inventory at the beginning of the
accounting period. This is also the amount of ending inventory from the
previous period.
b. Net Cost of Purchases = Purchases + Freight In
b.1.Net Purchases = Purchases – (Purchase discount and purchase returns)
i. iv.ii.i.i.Purchases – amount of goods bought during the current
accounting period.
ii. iv.ii.i.ii.Contra Purchases –An account that is credited being “contrary”
to the normal balance of Purchases account.
1. iv.ii.i.ii.i.Purchase discount – Account used to record early
payments by the company to the suppliers of merchandise.
(Haddock, Price, & Farina, 2012) This is how buyers see a sales
discount given to them by a supplier.
2. iv.ii.i.ii.ii.Purchase returns – Account used to record
merchandise returned by the company to their suppliers.
(Haddock, Price, & Farina,2012) This is how buyers see a sales
return recorded by their supplier
b.2 Freight In – This account is used to record transportation costs of
merchandise purchased by the company. (Haddock, Price, & Farina, 2012) Called
freight in because this is recorded when goods are transported into the company.

c. Add Beginning inventory and Net cost of Purchases to get Cost of Goods
Available for Sale
d. 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
v. 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. (Haddock, Price, & Farina, 2012)
vi. 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. (Haddock,
Price, & Farina, 2012)

10
vii. Gross Profit less General and Administrative Expenses less Selling Expenses is Net
Income for a positive result while Net Loss for a negative result

11
 What’s More

Practice: Computation and Preparation of SCI using multi-step

1. Liwliwa Selling Company’s salaries to sales agents amounted to Php 10,000.
Salaries of accountants amounted to Php 20,000. No other expenses were
incurred. How much is the company’s general and administrative expense?
Answer: P20,000.
2. Liwliwa Selling’s beginning inventory amounted to 250,000. Net purchases
amounted to 70,000. Freight In totaled 15,000. Compute for the company’s cost of
goods available for sale. Answer: P335,000.
3. Liwliwa Selling’s Sales amounted to Php 500,000. Sales returns and sales
discounts amounted to Php 30,000 and Php 10,000 respectively. Purchases of the
company totaled Php 100,000 while purchase returns and purchase discounts
amounted to Php 20,000 and Php 10,000 respectively. How much is the company’s
Net Sales? Net Purchases? Answer: Net sales - P460,000; Net Purchases -
P70,000
4. Company’s Cost of Goods Sold amounted to Php 285,000. Net cost of purchases
totaled Php 85,000. Beginning inventory amounted to Php 250,000. Sales
amounted to Php 500,000. Compute for the company’s Ending Inventory. Answer:
P50,000.
5. Gross profit of Liwliwa Selling amounted to Php 175,000. Beginning Inventory
totaled Php 250,000. Ending Inventory amounted to Php 50,000 while Net Cost of
Purchases totaled Php 85,000. Compute for Happy’s Net Sales. Answer: P460,000

In item no. 1, you got an answer of Php 20,000. How? By identifying expenses on
general and administrative expenses and selling expenses.

In item no. 2, Cost of goods available for sale is Php 335,000 How? By using
calculation of Cost of goods available for sale (BI + net cost of purchases)

For item no. 3, the company’s net sales is Php 460,000.00 and net purchases of
Php 70,000. How? By using the calculation of net sales (sales- contra sales) and
net purchases (Purchases – contra purchases).

12
 For item no. 4, the company’s ending Inventory is Php 50,000. How? By using the
computation on Cost of Goods Sold (BI + Net cost of Purchases – EI = COGS)

For iten no. 5, Liwliwa Selling Net sales is Php 460,000. How? By computing first
the COGS and used the Gross Profit computation (Gross Profit = Net sale – COGS)

Activity 1
Directions:
1. Compute for the Cost of Goods Sold using the following:
Sales – 15,000
Purchases – 2,000
Purchase returns – 200
Purchase discounts – 200
Freight in – 100
Beginning inventory – 1,000
Ending inventory – 500
2. Prepare a multi-step Statement of Comprehensive Income using the following:
Sales – 20,000
Cost of Goods Sold – 10,000
General and administrative expenses – 4,000
Selling expenses – 2,000
You can use any business name and the end of the current year for the heading.

***Service companies don’t have inventories that is why service business often used single-
step while merchandising often used multi-step.
***The contra accounts are used to easily determine those accounts that are directly
connected to sales and purchases.
***Company can know how to reduce expenses and increase net income by pin pointing which
expense is very high that is why the separation of General and administrative expenses from
selling expenses is important.

13
 What I Have Learned

Write two to three sentences to complete the following:

I realized that:
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________

I resolved that:

_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________

14
 What I Can Do

Activity 1
Directions:
Liwliwa had the following expense accounts for the year ended December 31, 2019:
1. Salaries of admin personnel
2. Salaries of janitors
3. Salaries of sales agents
4. Utilities of home office
5. Rent of office building
6. Depreciation of office equipment
7. Depreciation of delivery van
8. Advertising
9. Oil and gas for delivery van
10. Cost of merchandising sold during the year
Identify if accounts if part of the General and administrative expense (GAE) or selling
expenses (SE). Use separate sheet for your answer

Activity 2
Directions:
a. Identify a merchandising business that is found in your barangay or
nearby areas (example sari-sari store) or you can establish from the
activities you do in your home like selling unused clothes,
appliances and kitchen wares; selling plants, fruits and vegetables,
selling harvested eggs, chicken meats; and selling unwanted toys or
gadgets.

b. Identify the different accounts that the business can use in preparing
their or your statement of comprehensive income using the multi-
step approach.

c. Assume a hypothetical amount on the accounts and prepare a

statement of your chosen business.

15
 Assessment

Directions: Choose the letter of the best answer. Write the chosen letter on a separate sheet
of paper.

1. What part of the SCI does depreciation of store equipment belongs?

A. Selling Expenses
B. Cost of Goods Sold
C. General and Administrative Expenses
D. None of the above

2. A form of the Statement of Comprehensive Income which shows several steps

needed in order to arrive at the company’s net income/loss.
A. Report Form
B. Account Form
C. Multi-step Form
D. Single-step Form

3. On what part of SCI does freight-out belong to?

A. Selling Expenses
B. Cost of Goods Sold
C. General and Administrative Expenses
D. None of the above

4. On what part of SCI does salaries of security guard belong to?

A. Selling Expenses
B. Cost of Goods Sold
C. General and Administrative Expenses
D. None of the above

16
5. What approach is often used by a merchandising business?
A. Multi-step Approach
B. Single-step Approach
C. Both a and b
D. None of the above

6. An account used to record early payments by the company to supplier of

merchandise.
A. Sales Discount
B. Purchase Discount
C. Sales Returns and Allowances
D. Purchase Returns and Allowances

7. An account awarded to customers who pay earlier or before the deadline.

A. Sales Discount
B. Purchase Discount
C. Sales Returns and Allowances
D. Purchase Returns and Allowances

8. The fifth part on a multi-step of SCI which represents the cost incurred directly
related to the main purpose of a merchandising business but not include cost of
merchandise and contra revenue accounts.
A. Selling Expenses
B. Cost of Goods Sold
C. General and Administrative Expenses
D. None of the above

9. The third part on a multi-step of SCI which represents the actual cost of merchandise
a company was able to sell during the year.
A. Selling Expenses
B. Cost of Goods Sold
C. General and Administrative Expenses
D. None of the above

17
For numbers 10 to 15 the following accounts are given below:
Sales P 25,000 Sales Discounts P 700
Sales Returns 500 Gen. and Adm. Exp. 3,000
Selling Exp. 3,500 Purchases 5,000
Purchase ret. 200 Purchase discounts 200
Freight in 100 Beginning inventory 1,000
Ending inventory 500

10. Compute for the net sales.

A. 21,500
B. 23,800
C. 24,600
D. 26,200

11. Compute for the net purchases.

A. 4,500
B. 4,600
C. 5,400
D. 5,500

12. What is the Cost of Goods Available for Sale?

A. 4,000
B. 5,200
C. 5,600
D. 5,700

13. Compute for the Cost of Goods Sold.

A. 4,000
B. 5,200
C. 5,600
D. 5,700

14. How much is the Gross Profit?

A. 12,000
B. 18,000
C. 18,600
D. 22,400
18
15. Compute for the Net Income of the firm.
A. 11,300
B. 12,100
C. 18,500
D. 20,400

19
 Additional Activities

Directions: Prepare a Statement of Comprehensive Income for the company using a

multi-step form – to be prepared using a spreadsheet program.

You were hired by Mr. Vic Mannalon to prepare his Sari-sari store’s Statement of
Comprehensive Income. In order to prepare the statement, you identified the following
transactions of Mr. Mannalon:

a. His sari-sari store has a sales amounting of P40,000

b. He collected receivables from customers amounting to P15,000
c. He already paid one month rent mounting to P3,000
d. The value of all the supplies used in his store is P2,500
e. He pays SSS, Philhealth and Pag-ibig for all of his employees totalled
P3,000
f. Pay salaries of his employee amounting to P10,000
g. Depreciation Expenses of the sari-sari’s equipment amounting to 500

20
 21
What I Know What’s New
1. C
2. C Answers may vary
3. B
4. A
5. A
6. B
7. A What’s More
8. B
Activity1
9. A
10. A 1. Php 2,200.00
11. B
12. D 2. Answers may vary
13. B
14. B
15. A
Assessment
What I Can Do
1. A
Activity 1 2. C
3. A
1. GAE 4. C
2. GAE 5. A
3. SE 6. B
4. GAE 7. A
5. GAE 8. A
6. GAE 9. B
10.B
7. SE
11.B
8. SE 12.D
9. SE 13.B
10. NA 14.C
15.B
Answer Key
References

Commission on Higher Education in Collaboration with the Philippine Normal

University to Department of Education. Teaching Guide in Senior High School
Fundamentals of Accountancy Business and Management 2

Haddock, M., Price, J., & Farina, M. College Accounting: A Contemporary Approach,
Second Edition. New York: McGraw-Hill/Irwin, 2012

Valencia, E. G., & Roxas, G. F. Basic Accounting (3rd ed.). Mandaluyong City,
Philippines: Valencia Educational Supply, 2010

22
For inquiries or feedback, please write or call:
Department of Education –
Schools Division of the City of Batac

16S Quiling Sur, City of Batac,

2906 Ilocos Norte, Philippines
Telephone No: (077) 677-1993

23