Fundamentals of

Accountancy, Business,
and Management PII
Quarter 3 – Module 3
Statement of
Comprehensive Income
Part II

SDO_AC_Q3_FAMB1_SHS_ Module 3
Fundamentals of Accountancy Business and Management II – Grade 11
Alternative Delivery Mode
Quarter 3 – Module 3: Statement of Comprehensive Income Part II
First Edition, 2024

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 Fundamentals of
Accountancy, Business
and Management II
Quarter 3 – Module 3: Week 3
Statement of Comprehensive
Income Part II

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Introductory Message
This Self-Learning Module (SLM) is prepared so that you, our dear learners,
can continue your studies and learn while at home. Activities, questions,
directions, exercises, and discussions are carefully stated so that you can
understand each lesson.

Each SLM is composed of different parts. Each part will guide you step by
step as you discover and understand the lesson prepared for you.

Pre-tests are provided to measure your prior knowledge of lessons in each

SLM. This will tell you if you need to proceed with completing this module or if
you need to ask your facilitator or your teacher’s assistance for a better
understanding of the lesson. At the end of each module, you need to answer the
post-test to self-check your learning. Answer keys are provided for each activity
and test. We trust that you will be honest in using these.

In addition to the material in the main text, Notes to the Teacher are also
provided to our facilitators and parents for strategies and reminders on how they
can best help you with your home-based learning.

Please use this module with care. Do not put unnecessary marks on any
part of this SLM. Use a separate sheet of paper to answer the exercises and tests.
And read the instructions carefully before performing each task.

If you have any questions about using this SLM or any difficulty in answering
the tasks in this module, do not hesitate to consult your teacher or facilitator.

Thank you.

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 What I Need to Know

In general, this module aims to encourage the learners to appreciate and study the
statement of comprehensive income. Students will be able to accurately interpret and
analyze a Statement of Comprehensive Income, identifying key components such as
revenues, expenses, gains, and losses, as well as understanding their impact on
overall financial performance and the implications for stakeholder decision-making.
Additionally, students will demonstrate the ability to compare and contrast this
statement with the traditional income statement, highlighting its relevance in
providing a more complete understanding of a company’s financial health.

The module covers only one topic, that is:

● Lesson 1 – Statement of Comprehensive Income Part II

After going through this module, you are expected to:

MELC:

1. Prepare a SCI for service business using the single step approach.
2. Prepare a SCI for a merchandising business using the multi-step approach.

LO:
1. Construct a single step Statement of Comprehensive Income for service
business.
2. Construct a multiple step Statement of Comprehensive Income for
merchandising business.
3. Analyze how information in the Statement of Comprehensive Income
influences the decision-making process.
4. Differentiate the single and multiple step method of Statement of
comprehensive income.

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 What I Know

Multiple Choice; Choose the letter of the correct answer. Write your answer
on a separate sheet of paper.

1. Which of the following is the correct gross profit formula?

A. Sales - Cost of sales = Gross profit
B. Sales + Gross profit = Cost of sales
C. Sales - Gross profit = Cost of sales
D. Cost of sales = Sales + Gross profit

2. Which of the following is classified as a selling expense?

A. Salaries of salesmen
B. Depreciation of automobile
C. Salaries of corporate executives
D. Depreciation of corporate headquarters

3. Which of the following appears on the statement of comprehensive income

using the nature of expense?
A. Gross profit
B. Selling expenses
C. Operating expenses
D. Depreciation expenses

4. Which of the following appears on the statement of comprehensive income

using the function of expense?
A. Gross profit
B. Rent expense
C. Salary expense
D. Depreciation expense

5. Which method presents the cost of good sold separately in the statement of
comprehensive income?
A. Nature of expense
B. Function of expense
C. Single step presentation
D. Multiple step presentation

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Use the following information for question 6 to 10.
Mermaids Cafe, Alaminos City shows the following account balances on December
31, 2024

Accounts Dr. Cr.

Sales 73,900.00
Interest income 4,500.00
Gains 1,500.00
Inventory, January 1 6,500.00
Purchases 18,000.00
Freight-in 1,000.00
Purchase returns 500.00
Purchase discount 900.00
Freight-out 3,000.00
Sales commission 4,500.00
Advertising expense 2,500.00
Salaries expense 24,000.00
Rent expense 3,000.00
Depreciation expense 5,000.00
Utilities expense 2,500.00
Supplies expense 1,500.00
Transportation and travel expense 1,500.00
Insurance expense 1,000.00
Taxes and licenses 6,000.00
Interest expense 500.00
Miscellaneous expense 300.00
Loss on sale of equipment 500.00

Additional information.

a. Ending inventory is 9,000.00

b. One-fourth of the salaries, rent and depreciation expenses pertain to non-
sales department. The sales department does not share in the other
expenses.

6. How much is the net purchases?

A. 16,500
B. 17,600
C. 19,400
D. 19,200

7. How much is the change in inventory in 2024 ?

A. 1,000.00 increase
B. 1,500.00 decrease
C. 2,000.00 decrease

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 D. 2,500.00 increase

8. How much is the cost of goods sold?

A. 15,100
B. 19,500
C. 26,900
D. 32,700

9. How much is the total selling expense?

A. 22,000
B. 26,000
C. 28,000
D. 34,000

10. How much is the total general and administrative expense?

A. 8,000
B. 12,000
C. 13,000
D. 20,800

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 Lesson
Statement of Comprehensive
1 Income Part II
The statement of comprehensive income can be presented using two primary
methods: the single-step method and the multi-step method. The single-step method
aggregates all revenues and gains at the top, followed by all expenses and losses,
culminating in net income without distinguishing operating and non-operating
activities. In contrast, the multi-step method separates operating revenues and
expenses from non-operating ones, presenting gross profit, operating income, and
comprehensive income in a more detailed manner. Each method has its advantages,
with the multi-step method providing users with more insight into the company's
operating performance.

What’s In
Before we proceed to the new lesson, Let’s try to recall our
lesson on Statement of Comprehensive Income Part 1.

Directions: identify the key terms being referred to in the statement provided
choose from the list of possible answer below:

Administrative Expense Cost of Sales Expenses

Gains Gross Profit Losses
Operating Income Revenues Selling Expenses
Statement of Comprehensive Income

1. It tells the reader about the performance or result of operation

of the company.
2. Referred to as variety of different names including sales, fees,
interest, dividends, royalties or rents.
3. They usually take in the form of outflow assets such cash etc.
4. It represents other items that meet the definition of income
and may or may not, arise in the course of ordinary course of
business.
5. It represents other items that meet the definition of expenses
and may or may not, arise in the course of the ordinary activities.
6. The amount paid by the business to its suppliers for the
merchandise sold to the entity’s customers.
7. The difference between the net sales and cost of sales
8. The cost incurred to promote and deliver the product.
9. The cost incurred for business administration
10. the difference of gross profit and operating expense.

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 What’s New
Are you ready for the new lesson try this activity to have an
idea on what to expect.

Directions: Put a check mark (√) on all the items that are included in the Statement
of Comprehensive Income and X if it is not. First item is done for you.

The following are the accounts of Save Merchandising for December 31, 2024

Sales 1. √ Beginning Inventory 11.

Salaries Expense 2. Notes payable 12.

Patent 3. Purchases 13.

Supplies Expense 4. Equipment 14.

Land 5. Accounts Receivable 15.

Depreciation Expense 6.

Utility Expense 7.

Building 8.

Insurance Expense 9.

Rent expense 10.

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 What is It

Presentation of expense

The firm’s expenses that were incurred may be presented in the statement of
comprehensive income using either of the following methods
1. Nature of expense method
This method presents the expenses according to their nature and are not
reallocated among their function within the entity. This method is simple
to apply due to no reclassification of expense necessary. A statement of
comprehensive income that shows expense to their nature is called as
single step approach. This approach is suitable for Service type of
business.

Example of SCI prepared using the Single step approach

Punta Riviera Resort

Statement of Comprehensive Income
San Jose Drive, Alaminos City

Income
Service fee 87,000.00
Interest income 6,000.00
Gains 2,000.00
Total Income 95,000.00

Expenses
Salary expense 30,000.00
Rent expense 3,000.00
Utility expense 2,000.00
Supplies expense 1,000.00
Depreciation expense 4,000.00
Taxes and licenses 7,000.00
Transportation and travel expense 500.00
Interest expense 200.00
Miscellaneous expense 100.00
Losses 1,500.00
Total expense 49,300.00
Profit for the year 45,700.00
Other comprehensive income -
Comprehensive income for the year 45,700.00

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2. Function of expense method

This method classifies and present expenses according to their function.

At the minimum the cost of goods sold is presented separately from other
expenses. A statement of comprehensive income that shows expense by
their function is referred to as multiple step approach. The following are
the major categories of expense under this method:
a. Cost of goods sold (COGS)
refers to the direct costs attributable to the goods sold by a company.
COGS is a crucial metric for businesses as it affects gross profit and
ultimately net income. It can help businesses manage inventory and
pricing strategies effectively.

The formula to calculate COGS is:

COGS = Beginning Inventory + Net Purchases - Ending Inventory

Net Purchases= Purchases +Freight in – Purchase return, allowance

and discount.
b. Distribution cost or selling expense
Selling expenses are the costs incurred by a company to promote and
sell its products or services. These expenses are crucial for generating
sales and can include a variety of costs associated with marketing,
advertising, sales personnel, and other related activities.
Example
Freight out Depreciation of delivery equipment
Sales commission Rent expense for sales department
Advertising Salaries of sales personnel

c. Administrative expenses
Administrative expenses are the costs associated with running an
organization that is not directly tied to the selling or services. These
expenses are crucial for the overall operation of a business, enabling it
to function smoothly and maintain organizational structure.
Example
Insurance Salaries of non-sales personnel
Taxes and licenses Depreciation of assets not used by
sales Department.
Rent expense pertaining office space

d. Other expenses
Expenses includes losses, like casualty losses and losses on sale of
properties.

e. Interest expense or finance cost

Finance costs, often referred to as the cost of finance or interest
expense, are critical components of a company’s financial statements.
These costs represent the costs incurred by a business for borrowed
funds.

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 f. Income tax expense
It includes taxes on income only. Other taxes are presented in the
administrative expenses category under the taxes and licenses
account.

Illustration: SCI of a merchandising business

The nominal accounts column of the trial balance of Cell Bank located in
Alaminos City on December 31, 2024, shows the following information:

Accounts Debit Credit

Sales 90,000.00
Interest income 6,000.00
Gains 2,000.00
Inventory- January 1 5,000.00
Purchases 20,000.00
Freight-in 1,000.00
Purchase return 500.00
Purchase discount 700.00
Freight-out 2,500.00
Sales commission 3,000.00
Advertising expense 1,500.00
Salaries expense 30,000.00
Rent expense 3,000.00
Depreciation expense 4,000.00
Utilities expense 2,000.00
Supplies expense 1,000.00
Transportation and Travel 500.00
Insurance expense 1,200.00
Taxes and licenses 7,000.00
Interest expense 200.00
Miscellaneous expense 100.00
Loss on sale of equipment 1,500.00
Total 83,500.00 99,200.00

Additional information:
a. Ending inventory is 8,000
b. One-half of the salaries, rent and depreciation expenses pertain to the
sales department. The sales department does not share in the other
expenses.

Requirement: Prepare the statement of comprehensive income using the

following:
1. Nature of expense (single step approach)
2. Function of expense method (Multiple Step approach)

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Solution to the illustration

1. Nature of expense/single step method

Cell Bank
Statement of Comprehensive Income
San Jose Drive, Alaminos City

Income
Service fee 90,000.00
Interest income 6,000.00
Gains 2,000.00
Total Income 98,000.00

Expenses
Net purchases (1) 19,800.00
Change in inventory (2) (3,000.00)
Freight-out 2,500.00
Sales commission 3,000.00
Advertising expense 1,500.00
Salary expense 30,000.00
Rent expense 3,000.00
Depreciation expense 4,000.00
Utility expense 2,000.00
Supplies expense 1,000.00
Transportation and travel expense 500.00
Insurance expense 1,200.00
Taxes and licenses 7,000.00
Interest expense 200.00
Miscellaneous expense 100.00
Losses 1,500.00
Total expense 74,300.00
Profit for the year 23,700.00
Other comprehensive income -
Comprehensive income for the year 23,700.00

Notes to financial statements

1. Net purchases computation

Purchases 20,000.00
Freight-In 1,000.00
Purchase return (500.00)
Purchase discounts (700.00)
Net Purchases 19,800.00

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 2. Change in inventory computation

Inventory- January 1 5,000.00

Inventory- December 31 8,000.00
Change in Inventory (3,000.00)

Note:
The change in inventory is the difference between the beginning and ending
inventory. An increase in inventory is a deduction and a decrease in inventory is
an addition.

2. Function of expense or Multiple step

Cell Bank
Statement of Comprehensive Income
San Jose Drive, Alaminos City

Notes
Sales 90,000.00
Cost of goods sold 1 (16,800.00)
Gross Profit 73,200.00
Other income 2 8,000.00
Distribution cost 3 (25,500.00)
Administrative expense 4 (30,300.00)
Other expenses 5 (1,500.00)
Interest expense (200.00)
Profit for the year 23,700.00
Other comprehensive income ______________
Comprehensive income for the year 23,700.00

Notes to financial statements

1. Cost of Sales
This account consists of the following

Inventory -January 1 5,000.00

Purchase 20,000.00
Freight -in 1,000.00
Purchase return (500.00)
Purchase discount (700.00)
Total goods available for sale 24,800.00
Inventory- December 31 (8,000.00)
Cost of goods sold 16,800.00

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 2. Other Income
This account consists of the following

Interest income 6,000.00

Gains 2,000.00
Other income 8,000.00

3. Distribution Cost
This account consists of the following

Freight-out 2,500.00
Sales commission 3,000.00
Advertising Expense 1,500.00
Salaries expense (30,000x1/2) 15,000.00
Rent expense (3,000x1/2) 1,500.00
Depreciation expense (4,000x1/2) 2,000.00
Total Distribution cost 25,500.00

4. Administrative expenses
This account consists of the following

Salaries expense (30,000x1/2) 15,000.00

Rent expense (3,000x1/2) 1,500.00
Depreciation expense (4,000x1/2) 2,000.00
Utility expense 2,000.00
Supplies expense 1,000.00
Transportation and travel expenses 500.00
Insurance expense 1,200.00
Advertising Expense 1,500.00
Taxes and licenses 7,000.00
Miscellaneous expense 100.00
Total Administrative expenses 30,300.00

5. Other expenses
This account consists of loss incurred on the sale of equipment.

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 What’s More
Now that you have learned the forms of statement of SCI you
are now ready to answer the following activities.

Activity 1: Selling expense vs. Administration

Information on the accounts of Celas Cafe, Alaminos City as of December 31,
2024, is as follows:
Cost of goods sold 320,000.00
Insurance expense 75,000.00
Advertising expense 25,000.00
Freight out 30,000.00
Loss on sales of Equipment 7,000.00
Rent expense -one half pertains to sales dept. 80,000.00
Salaries expense -1/4 pertains to non-sales personnel 150,000.00
Sales commission 10,000.00
Bed debts expense 5,000.00
Interest expense 5,000.00

Directions: Compute the following, Write your solution on a separate sheet.

a. Total Distribution cost/Selling expense

b. Total Administrative expenses

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 What I Have Learned

Directions: Create a report highlighting the similarities and

difference of the two method or approach of the statement of
comprehensive income namely:
1. Nature of expense/single step and
2. Function of expense/multiple steps.

You may choose from but not limited to the following:

a. Narrative report
b. Power point presentation
c. Video presentation
d. Other as deemed more appropriate

Activity Rubrics
Excellent Very Satisfactory Needs Points
(4 pts.) Satisfactory (2 pts.) Improvement Earned
(3 pts.) (1 pt.)

1.Understan Demonstrates Demonstrates Demonstrates Demonstrates

ding thorough considerable some limited
Information understanding understanding of understanding understanding
and Ideas of topic or topic or theme. of topic or of topic or
theme. theme. theme.

2.Clarity of Communicates Communicates Communicates Communicates

Ideas ideas with a ideas with ideas with some ideas with
high degree of considerable clarity. limited clarity.
clarity. clarity.

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 What I Can Do
Balancing the Debit and Credit!

Directions: Prepare a properly classified statement of comprehensive

income using the following format.
a. Nature of expense or single step
b. Function of expense or multiple step

The trial balance of Kaboom, located in Alaminos City on December 31, 2024 show
the following information

Accounts Debits Credits

Sales 104,500.00
Interest income 8,000.00
Gains 3,000.00
Inventory- January 1 8,000.00
Purchases 30,000.00
Freight-in 3,000.00
Purchase return 1,500.00
Purchase discount 2,700.00
Freight-out 2,500.00
Sales commission 6,000.00
Advertising expense 3,500.00
Salaries expense 35,000.00
Rent expense 6,000.00
Depreciation expense 8,000.00
Utilities expense 4,000.00
Supplies expense 3,000.00
Transportation and Travel 2,500.00
Insurance expense 1,000.00
Taxes and licenses 5,000.00
Interest expense 500.00
Miscellaneous expense 200.00
Loss on sale of equipment 1,500.00

Additional information:
a. Ending inventory on December 31 is 10,000.00

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 b. ¾ of salaries, rent and depreciation expenses pertain to the sales
department. The sales department does not share in the other expenses.

Assessment

Multiple Choice; Choose the letter of the correct answer. Write

your answer on a separate sheet of paper.

1. Which of the following is the correct gross profit formula?

A. Sales + Cost of sales = Gross profit
B. Sales + Gross profit = Cost of sales
C. Sales - Gross profit = Cost of sales
D. Cost of sales = Sales + Gross profit

2. Which of the following is classified as a selling expense?

A. Salaries of salesmen
B. Depreciation of automobile
C. Salaries of corporate executives
D. Depreciation of corporate headquarters

3. Which of the following appears on the statement of comprehensive income

using the nature of expense?
A. Gross profit
B. Selling expenses
C. Operating expenses
D. Depreciation expenses

4. Which of the following appears on the statement of comprehensive income

using the function of expense?
A. Gross profit
B. Rent expense
C. Salary expense
D. Depreciation expense

3
 5. Which method presents the cost of good sold separately in the statement of
comprehensive income?
A. Nature of expense
B. Function of expense
C. Single step presentation
D. Multiple step presentation

Use the following information for questions 6 to 10.

Mermaids Cafe, Alaminos City shows the following account balances on December
31, 2024

Accounts Debit Credit

Sales 73,900.00
Interest income 4,500.00
Gains 1,500.00
Inventory, January 1 6,500.00
Purchases 18,000.00
Freight-in 1,000.00
Purchase returns 500.00
Purchase discount 900.00
Freight-out 3,000.00
Sales commission 4,500.00
Advertising expense 2,500.00
Salaries expense 24,000.00
Rent expense 3,000.00
Depreciation expense 5,000.00
Utilities expense 2,500.00
Supplies expense 1,500.00
Transportation and travel expense 1,500.00
Insurance expense 1,000.00
Taxes and licenses 6,000.00
Interest expense 500.00
Miscellaneous expense 300.00
Loss on sale of equipment 500.00

4
Additional information
c. Ending inventory is 9,000.00
d. One-fourth of the salaries, rent and depreciation expenses pertain to non-
sales department. The sales department does not share in the other
expenses.

6. How much is the net purchases?

A. 16,500
B. 17,600
C. 19,400
D. 19,200

7. How much is the change in inventory in 2024 ?

A. 1,000.00 increase
B. 1,500.00 decrease
C. 2,000.00 decrease
D. 2,500.00 increase

8. How much is the cost of goods sold?

A. 15,100
B. 19,500
C. 26,900
D. 32,700

9. How much is the total selling expense?

A. 22,000
B. 26,000
C. 28,000
D. 34,000

10. How much is the total general and administrative expense?

A. 8,000
B. 12,000
C. 13,000
D. 20,800

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 Additional Activities
Accounting: The language of business
Activity 2: How much is the cost

Information on the accounts of Avon Inc., Alaminos City as of December 31,

2024, is as follows:
Case 1
Inventory -January 1 8,000.00
Inventory- December 31 12,800.00
Purchase 32,000.00
Freight -in 1,600.00
Purchase return 800.00
Purchase discount 1,120.00

Case 2
Inventory -January 1 12,000.00
Inventory- December 31 19,200.00
Purchase 48,000.00
Freight -in 2,400.00
Purchase return 1,200.00
Purchase discount 1,680.00

Direction: Compute the cost of goods sold for each case, write your answer on a
separate sheet of paper.

6
 Answer Key

References
Tugas, Florenz C., and Herminigilda E. Salendrez. Fundamentals of Accountancy,
Business, and Management 2, 2016

Beticon, Josefina Loria, Fermin Antonio Yabut, and James Christopher Domingo.
Fundamentals of Accountancy, Business, and Management 2, 2016.

Ferrer, Rodiel C., and Zeus Vernon B. Millan., Fundamentals of Accountancy,

Business, and Management 2, 3rd editon

Millan, Zues Vernon B., Intermediate Accounting 3, 2020

Millan, Zues Vernon B., Intermediate Accounting IA, 2020

Florendo, Joselito G., Fundamentals of Accountancy, Business, and Management

2, First Edition

Manalaysay, Benedick., Fundamentals of Accountancy, Business, and

Management 1, 2017

Ferrer, Rodiel C., and Zeus Vernon B. Millan., Fundamentals of Accountancy,

Business, and Management, 2018-2019 edition

Palencia, Feme M., Fundamentals of Accountancy, Business, and Management,

2017

Ballada, Win and Susan Ballada, Fundamentals of Accountancy, Business, and

Management, 18th Editio

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