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PDF 1 FABM 2 SCI Week 2 PDF

This document discusses the Statement of Comprehensive Income (SCI). It defines the SCI as the income statement that contains the company's net income or loss for a period of time. It explains the concepts of temporary accounts found in the SCI and provides examples. The document compares the single-step and multi-step formats of the SCI and notes that service companies typically use single-step while merchandising companies use multi-step. It details the key parts and sections of the SCI for both formats. These include revenues/sales, expenses/costs, gross profit, net income/loss sections. Sample SCIs are also provided in the appendices for reference.

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92 views45 pages

PDF 1 FABM 2 SCI Week 2 PDF

This document discusses the Statement of Comprehensive Income (SCI). It defines the SCI as the income statement that contains the company's net income or loss for a period of time. It explains the concepts of temporary accounts found in the SCI and provides examples. The document compares the single-step and multi-step formats of the SCI and notes that service companies typically use single-step while merchandising companies use multi-step. It details the key parts and sections of the SCI for both formats. These include revenues/sales, expenses/costs, gross profit, net income/loss sections. Sample SCIs are also provided in the appendices for reference.

Uploaded by

Shann 2
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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PDF1

Week 2 - FABM 2
STATEMENT OF COMPREHENSIVE
INCOME (SCI)
Concepts
CONCEPTS ON STATEMENT OF
COMPREHENSIVE INCOME (SCI)

• STATEMENT OF COMPREHENSIVE INCOME

• TEMPORARY ACCOUNTS

• SAMPLE OF SCI

• FORMAT OF THE SCI


• Difference of the Statement of Comprehensive Income of a Service
Company and of a Merchandising Company

• PARTS OF SCI
STATEMENT OF
COMPREHENSIVE INCOME
Also known as the income statement.

Contains the results of the company’s operations for a specific

period of time which is called net income if it is a net positive

result while a net loss if it is a net negative result. This can be

prepared for a month, a quarter or a year. (Haddock, Price, &

Farina, 2012)
TEMPORARY ACCOUNTS

Also known as nominal accounts are the accounts found under

the SCI. They are called such because at the end of the

accounting period, balances under these accounts are

transferred to the capital account, thus having only temporary

amounts and resulting to zero beginning balances at the

beginning of the following year.(Haddock, Price, & Farina, 2012)


TEMPORARY ACCOUNTS

Examples of temporary accounts include revenues,

sales, utilities expense, supplies expense,

salaries expense, depreciation expense, interest

expense among others.


SAMPLE OF SCI
FORMAT
OF THE SCI
Single-step Format
Called single-step because all revenues are listed
down in one section while all expenses are listed in
another. Net income is computed using a “single-step”
which is Total Revenues minus Total Expenses.
(Haddock, Price, & Farina, 2012)
*The sample above is in Single-step format
Multi-step Format

Called multi-step because there are several

steps needed in order to arrive at the

company’s net income. (Haddock, Price, &

Farina, 2012)
The two formats are only formats. They will still yield the same

amount of net income/loss.

However, single-step SCI is more commonly used by service

companies while multi-step format is more commonly used by

merchandising companies.
Difference of the Statement of
Comprehensive Income of a Service
Company and of a Merchandising
Company
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).
PARTS OF SCI in
SINGLE-STEP FORMAT
* Please see Appendix A for the hard copy.
PARTS OF SCI in SINGLE-STEP

Heading:

a. Name of the Company


b. Name of the Statement
c. Date of preparation
(emphasis on the wording – “as of”)
PARTS OF SCI in SINGLE-STEP

Sample:
a. First part is Revenues
This is the total amount of revenue that
the company was able to generate from
providing services to customers.
PARTS OF SCI in SINGLE-STEP

Sample:

b. Second part is Expenses


It can be broken down into General and
Administrative and Selling Expenses.
PARTS OF SCI in SINGLE-STEP

Sample:

c. Revenues less Expenses


Net income for a positive result and net
loss for a negative result.
SAMPLE AND PARTS
OF SCI in MULTI-STEP
FORMAT
Continuation on the next slide… * Please see Appendix B for the hard copy.
This is a comprehensive discussion of the SCI. A simpler SCI can be found after
the discussion of the different parts.
* Please see Appendix B for the hard copy.
PARTS OF SCI in MULTI-STEP

a. First part is Sales


This is the total amount of revenue that
the company was able to generate from selling
products
PARTS OF SCI in MULTI-STEP

b. Second part compose 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)
PARTS OF SCI in MULTI-STEP

b. Second part compose of Contra Revenue


• 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
PARTS OF SCI in MULTI-STEP

b. Second part compose of Contra Revenue


• 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.
PARTS OF SCI in MULTI-STEP

c. Sales less Sales returns and Sales discount


is Net Sales
PARTS OF SCI in MULTI-STEP

d. 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)
PARTS OF SCI in MULTI-STEP

d. Third part is Cost of Goods Sold


• 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.
PARTS OF SCI in MULTI-STEP

d. Third part is Cost of Goods Sold


• Purchases – amount of goods bought during the current
accounting period.
• Contra Purchases –An account that is credited being
“contrary” to the normal balance of Purchases account.
PARTS OF SCI in MULTI-STEP

d. Third part is Cost of Goods Sold


• Net Cost of Purchases = Purchases + Freight In

• Net Purchases = Purchases – (Purchase discount


and purchase returns)
PARTS OF SCI in MULTI-STEP

d. Third part is Cost of Goods Sold


• 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.
PARTS OF SCI in MULTI-STEP

d. Third part is Cost of Goods Sold


• 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 .
PARTS OF SCI in MULTI-STEP

d. Third part is Cost of Goods Sold


• Add Beginning inventory and Net cost of Purchases
to get Cost of Goods Available for Sale
PARTS OF SCI in MULTI-STEP

d. Third part is Cost of Goods Sold


• Ending inventory – amount if inventory presented in
the Statement of Financial Position. Total cost of
inventory unsold at the end of the accounting cycle.
PARTS OF SCI in MULTI-STEP

e. Sales less Cost of Goods Sold is Gross


Profit
PARTS OF SCI in MULTI-STEP

f. 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)


PARTS OF SCI in MULTI-STEP

f. Fourth Part is General and Administrative Expenses

Example of general and administrative

expenses include utilities for home office and salaries

of admin personnel.
PARTS OF SCI in MULTI-STEP

g. 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)


PARTS OF SCI in MULTI-STEP

g. Fifth Part is Selling Expenses

Examples of selling expenses include sales commissions,

delivery expenses, and advertising expense.


PARTS OF SCI in MULTI-STEP

h. Gross Profit less General and Administrative


Expenses less Selling Expenses is Net
Income for a positive result while Net Loss
for a negative result.
Simpler SCI in Multi-step Format:

* Please see Appendix C for the hard copy.


Thank you!

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