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Statement of Comprehensive Income

The document outlines the structure and components of an income statement, detailing how it reports a company's financial performance through revenues, expenses, and net income. It distinguishes between income (which includes revenue and gains) and expenses (which encompass both expenses and losses), and explains the differences between single-step and multi-step income statements. Additionally, it compares the income statement with the statement of comprehensive income, highlighting the latter's inclusion of other comprehensive income.

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0% found this document useful (0 votes)

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Statement of Comprehensive Income

Uploaded by

bombalesthirdy

We take content rights seriously. If you suspect this is your content, claim it here.

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Income statement

- Reports the company’s financial performance through

presenting the entity’s revenues, gains, expenses, and
losses for the period ended.

Revenues
- Expenses
Net income before tax
- Income tax expense
Net income

Elements of financial performance

Income - Is increases in economic benefits during the
accounting period in the form of inflows or enhancements of
assets or decreases of liabilities that result in increases in
equity, other than those relating to contributions from equity
participants.

Expenses - 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.

Income
Income encompasses both revenue and gains
- Revenue arises in the course of ordinary regular activities.
Gains - are other items that represent increases in economic
benefits but do not regularly arise in ordinary business
operations. For example, gain on sale of assets

A merchandising company who sells their inventories earns

sales revenue. If that company, however, decides to sell their
equipment at a price higher than its carrying value, it’s a gain
on sale of equipment.

Expense
Expense encompasses both expense and losses
- Expenses are decreases in economic benefits due to, for
example, salaries, rent, and depreciation.

Losses - Do not arise in regular business operations such as loss

from fire, loss from disasters, or loss from sale of assets.

Single-step income statement for sole proprietorship business

- Total revenues less total expenses = net income

Multi-step income statement for merchandising business

- Whole details including gross sales, gross purchases,
beginning inventory and COGS, etc.

Function of expense method

Comprising of notes
Note 7 - Net sales
Note 8 - Net purchases
Note 9 - Cost of goods sold
Note 10 - Operating expenses
Single-step income statement for merchandising business
- Net sales less cost of goods sold is equal to gross profit
add other income = total revenues less total operating
expenses = net income

Nature of expense method

Note 7 - net sales
Note 8 - net purchases

- Net sales plus other income = total revenue minus to

deductions and expenses = net income

Income statement vs Statement of comprehensive income

Income statement - Presents the results of the entity’s
operations and financial performance through the reporting of
the entity’s revenues and expenses.