FUNDAMENTALS OF

SENIOR
ACCOUNTANCY, BUSINESS HIGH
AND MANAGEMENT 2 (FABM 2) SCHOOL
2
Self-
Elements of the Statement of Learning
Module
Comprehensive Income 4

Quarter 1
Fundamentals of Accountancy, Business and Management 2 (FABM2) – Grade 12
Quarter 1 – Self-Learning Module 4: Elements of the Statement of Comprehensive
Income
First Edition, 2020

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Pasig City
FABM2 SENIOR
HIGH
SCHOOL

Self-
Learning
Module 4

Quarter 1

Elements of the Statement of

Comprehensive Income
Introductory Message

For the facilitator:

Welcome to the Fundamentals of Accountancy, Business and Management 2

for Grade 12 Self-Learning Module on Elements of the Statement of
Comprehensive Income !

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and

independent learning activities at their own pace and time. Further, this also aims
to help learners acquire the needed 21st century skills especially the 5 Cs, namely:
Communication, Collaboration, Creativity, Critical Thinking, and Character while
taking into consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies
that will help you in guiding the learners.

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. Moreover, you are expected to encourage and assist
the learners as they do the tasks included in the module.
For the learner:

Welcome to the Fundamentals of Accountancy, Business and Management

2 Self-Learning Module on The Elements of the Statement of Comprehensive
Income !

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 material while being an
active learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

After going through this self-learning module, you are expected to:
1. identify the elements of the Statement of Comprehensive Income;
2. describe each of the items of the Statement of Comprehensive Income
for a Service Business and a Merchandising Business; and
3. reflect on the importance of preparing Statement of Comprehensive
Income.

PRETEST

Multiple Choice. Directions: Encirle the letter of the best answer.

1. Which is the financial statement that reports the results of the
operations of the business for one accounting period?
A. Statement of Financial Position
B. Statement of Comprehensive Income
C. Statement of Changes in Equity
D. Statement of Cash Flow

2. What refers to as a gross inflow of economic benefits (cash,

receivables, other assets) arising from the ordinary operating activities
of an entity?
A. Revenues C. Gains
B. Expenses D. Losses

3. Which element of the Statement of Comprehensive Income has the

following examples: cost of sales, wages, and depreciation.
A. Revenues C. Gains
B. Expenses D. Losses

4. What is the result if Purchase Discounts and Purchase Returns and

Allowances were deducted, and then Freight-in was added to Gross
purchases?
A. Net Income C. Net Purchases
B. Net Loss D. Cost of Sales

5. What is the result of the operation of the business if the total revenue
is greater than the total expenses?
A. Net Income C. Break-even
 B. Net Loss D. Bankrupt

6. RECAP

Directions: Determine which type of business do the following examples

belong to. Put a check-mark.

Service Business Merchandising

Business
1. Sari-sari Store
2. Laundry Shop
3. Canteen
4. Convenient Store
5. Repair Shop

L E S S ON

Prepare a Personal Statement of Comprehensive Income:

Prepare a Personal SCI:

a. Get your notebook.

b. Write your monthly allowance. (it can be your daily allowance multiplied
by the number of days in a month).
c. Write the amount you spend on food, transportation, e-load, etc. (make it
monthly to match your allowance).
d. Deduct the amount you spend from the amount in your allowance.
e. How much is left?

We can now associate your allowance with the revenue, spending with
the expense, and the net amount as net income.

Statement of Comprehensive Income

People engage in business to pursue their passion, but oftentimes
people take the risk and start a business to earn a lot of money. Many
people earn a living out of the profit/income they gain from their business.
Profit is the amount left after deducting all the expenses incurred by the
business to its revenues or sales. (Beticon 2016, 45)
Comprehensive Income is defined by the International Accounting
Standards as the change in equity during a period resulting from
transactions and other events, other than those changes resulting from
transactions with owners in their capacity as owners. This includes the
components of a company’s profit or loss and components of other
comprehensive income. (Binuya 2016, 22)
Therefore, the Statement of Comprehensive Income is a statement that
reports the results of the operations of the business for one accounting
period. This statement contains the following information: a. revenue
generated by operating the business; b. costs spent to generate the revenue;
and income, which is the excess of revenue over costs. (Salazar 2017, 33)
Statement of Comprehensive Income is also known as the “Income
Statement,” containing results of the company’s operations for a specific
period of time which is called net income. It is a positive result while a net
loss is a negative result. This can be prepared for a month, quarter or a
year. (Haddock, Price, & Farina, 2012 as cited by Monfero et.al. 2016, 33-34
)

Key Features / Elements of Statement of Comprehensive Income

1. The Title or Heading

The statement of comprehensive income is a financial report. As

a financial report, it must be properly identified and dated. The appropriate
title of the statement will enable the user to differentiate the statement of
comprehensive income from other financial reports issued by the entity. An
appropriate comprehensive title or heading includes the name of the entity,
the title of report (Statement of Comprehensive Income, and the period it
covers.

2. Revenue

Revenues as defined by International Accounting Standards are the

gross inflow of economic benefits (cash, receivables, other assets) arising
from the ordinary operating activities of an entity (such as sales of goods,
sales of services, interests, royalties, and dividends). [IAS 18.7]

Revenues that are earned by the business differ according to the

nature of the entity. A Sari-sari store will have sales as its main revenue.
Also, revenue may be generated from interests and dividends earned on
financial instruments such as time deposits and shares. Another example
is, owners of fixed properties (land and building) may charge other business
entities with rent.
 3. Expenses

The Conceptual Frameworks for Financial Reporting (IASB, 2018)

defined expenses as decreases in economic benefits during the accounting
period in the form of outflows or depletions of assets or incurrences of
liabilities that result in decreases in equity, other than those relating to
distributions to equity participants.

The definition of expenses encompasses losses as well as those

expenses that arise in the course of the ordinary activities of the entity.
Expenses that arise in the course of the ordinary activities of the entity
include, for example, the cost of sales, wages, depreciation, etc. They usually
take the form of an outflow or depletion of assets such as cash and cash
equivalents, inventories, properties, plant, and equipment.

Revenues earned by businesses are matched with expenses. For

service entities, expenses are usually categorized as cost of service or
operating expense. (Beticon et.al 2016, 47). In a Beauty Parlor, cost of
service includes the salaries paid to Beauticians who render services to its
customers. Operating expenses, on the other hand, include rent, utility
expense, business permits paid, depreciation of equipment, and other
related expenses.

Classifying expenses for merchandising business is more complex

than in a service business. For a merchandising business, the expenses are
classified as cost of sales, selling expenses, and administrative (operating)
expenses. (Beticon et.al. 2016, 47-48)

The cost of sales is the amount paid or payable by the business entity
to its supplier for the merchandise sold to the business entity’s costumers.
The general formula for cost of sale is shown below:

Beginning Inventory
Add: Net purchases
Total Goods Available for Sale
Less Ending Inventory
Cost of Sales

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 Purchases are the total amount paid or payable to suppliers for
the period. The formula for Net Purchases is shown below:

Gross Purchases
Less: Purchases Discounts
Less: Purchases Returns and Allowances
Add: Freight-In
 Net Purchases

Gross purchases are the price of the inventory you buy during an
accounting period. Thus, a purchase discount is a deduction that a
company may receive if the supplier offers it and the company pays the
supplier's invoice within a specified time. The purchase discount is also
known as a cash discount or early-payment discount. Also, Purchase
returns and allowances may also be granted by suppliers that represent the
amount of merchandise that is returned to suppliers and the amounts
allowed as deductions by suppliers for goods not returned. Finally, freight-
in is an expense incurred to transport the merchandise to the buyer’s place.
Another cost classification aside from the cost of sale for
merchandising concern is selling expenses and general and administrative
expenses. Expenses that are directly related to the main purpose of a
merchandising business which is the sale and delivery of merchandise are
called Selling Expenses. This does not include the cost of goods sold and
contra revenue accounts. Examples of selling expenses include sales
commissions, delivery expenses, and advertising expenses. On the other
hand, expenses that are not directly related to the merchandising function
of the company but are necessary for the business to operate effectively are
called General and Administrative Expenses. Example of general and
administrative expenses include utilities for a home office, salaries of admin
personnel (Haddock, Price, & Farina, 2012 as cited by Monfero et. At. 2016,
27)

4. Gains and losses

The Conceptual Frameworks for Financial Reporting (IASB, 2018)

defined gains as they represent other items that meet the definition of
income and may or may not arise in the course of the ordinary activities of
an entity. Gains represent increases in economic benefits and as such are
no different in nature from revenue. Also, Losses are also defined by the
International Accounting Standard Board, 2018 as it represents other items
that meet the definition of expenses and may or may not arise in the course
of the ordinary activities of the entity. Losses represent decreases in
economic benefits and as such, they are no different from other expenses.

5. Other Items
 Other items included in the computation of the total comprehensive
income are income taxes and items of other comprehensive income.
An income tax is a tax that the government imposed on income generated by
businesses and individuals within their jurisdiction. (Kagan 2020, 1). Also,
the sum or total of comprehensive income is calculated by adding net
income to other comprehensive income. Other comprehensive income items
occur rather infrequently for smaller businesses, so it is most important for
valuing larger corporations.
The Statement of Comprehensive Income is important because the
amount helps to reflect a company's true income during a specific period.
This is valuable information for businesses especially those with a large
number of investments.

ACTIVITIES

I. Practice
Directions: Fill in-the-box. Identify the Elements of the Statement
of Comprehensive Income. Write your answer in the box provided.

1. It is a decrease in economic benefits during the accounting period in the

form of outflows or depletions of assets or incurrences of liabilities that
result in decreases in equity.
2. It refers to the gross inflow of economic benefits (cash, receivables, other
assets) arising from the ordinary operating activities of an entity.
3. It represents other items that meet the definition of income and may or
may not arise in the course of the ordinary activities of an entity.
4. It is the amount paid or payable by the business entity to its supplier for
the merchandise sold to the business entity’s costumers.
5. It represents other items that meet the definition of expenses and may or
may not, arise in the course of the ordinary activities of the entity.

II. Keep Practicing

Directions: Identify each element if it can be found on a service or
merchandising business. Write S if it is in the service business and M if
it is in the merchandising business.
1. Service Revenue
2. Freight – in
3. Gross purchases
4. Cost of sales
5. Sales
6. Professional Fees
7. Consulting Income
8. Inventory
9. Advertising Revenue
10. Net Purchases

III. Reflection

Describe all the elements in the Statement of Comprehensive

Income for service and merchandising business given in Activity II.

W R A P-U P

Let’s wrap-up!
 What is Statement of Comprehensive Income?
 Can you identify the key features or the elements of the Statement of
Comprehensive Income? Give a brief description of each element.
 What is the importance of preparing a Statement of Comprehensive
Income?
 VALUING

1. As a future entrepreneur, what do you think is the importance of

preparing a statement of comprehensive income? Discuss your
answer.

2. Reflect on this quotation.

https://www.needpix.com

POSTTEST

Multiple Choice. Directions: Identify the letter of the best answer.

1. Which among the following is not included in the main elements of the
Statement of Comprehensive Income?
a. title or heading
b. revenues and expenses
c. investments by the owner
d. gains and losses

2. For service entities, expenses are usually categorized as cost of service

or operating expense.
a. The statement is correct.
b. The statement is wrong.
3. For a manufacturing business, the expenses are classified as cost of
sales, selling expenses, and administrative expenses.
a. The statement is correct.
b. The statement is wrong.

4. These are expenses that are directly related to the main purpose of a
merchandising business which is the sale and delivery of
merchandise.
a. General and Administrative Expenses
b. Tax Expenses
c. Selling Expenses
d. Other Expenses

5. What is the result if beginning inventory is added with the net

purchases, then deducted with the ending inventory?
a. Goods available for sale
b. Gross purchases
c. Net purchases
d. Cost of Sales
 KEY TO CORRECTION

5. d 5. Service 5. a
4. c 4. Merchandising 4. c
3. b 3. Service 3. b
2. a 2. Service 2. a
1. c 1. Merchandising 1. b
Post test Recap Pretest

R E F E R E N CE S

Beticon, J. L., Domingo, JC. D., Yabut, FA. D. 2016. Fundamentals of

Accountancy, Business, and Management 2, Teacher’s Manual.
Quezon City: Vibal Group Inc.
Beticon, J. L., Domingo, JC. D., Yabut, FA. D. 2016. Fundamentals of
Accountancy, Business, and Management 2. Quezon City: Vibal
Group Inc.
Binuya, MVJ. M. 2016. Fundamentals of Accountancy, Business, and
Management Book 2. Manila: JFS Publishing Services.
Dumrique, D. O., Cariño, C.I., Ignacio, R. M. 2014. Accounting MADE EASY.
Rizal: Jenher Publishing House
Monfero, RP. P., Andres, C. S., Salazar, DR. C., Honorario, C. B. Teaching
Guide for Senior High School, Fundamentals of Accountancy, Business,
and Management Book 2. Quezon City: Commission on Higher
Education.
Manuel, Z. V. 2016. 21st Century Accounting Process, International Edition.
Manila: Raintree Traiding and Publishing, Inc.
Salazar, D. R. 2017. Fundamentals of Accountancy, Business, and
Management 2. Manila: Rex Bookstore Inc.

Online References

https://www.accountingcoach.com/
https://www.iasplus.com/en/standards/ias/ias1#link19
https://www.iasplus.com/en/standards/ias/ias18
https://www.iasplus.com/en/standards/other/framework

https://www.investopedia.com/terms/i/incometax.asp#:~:text=An%20inco
me%20tax%20is%20a,source%20of%20revenue%20for%20governme
nts.

https://www.investopedia.com/ask/answers/102714/what-are-differences-
between-comprehensive-income-and-other-comprehensive-
income.asp
https://www.needpix.com/photo/1278024/business-paper-office-finance-
accounting-aerial-africa-african-african-american 06/29/2020