CHAPTER 6

STATEMENT OF
COMPREHENSIVE INCOME

MACAPULAY, ANJELIKA JOYCE J.

INCOME STATEMENT

Is a financial statement that

reports a
company's
financial performanceover a
specificaccounting period.

Financial performance of an entity is primarily

measured in terms of the level of income
earned by the entity through the effective
and efficient utilization of its resources

Also known as the results of operations of the

entity.

Presents the income, expenses, gains, losses,

and net income or loss recognize during the
period.

Useful in predicting future performance and

ability to generate future cash flows

COMPREHENSIVE INCOME
Is the change in equity during a period
resulting from the transactions and other
events, other than changes resulting from
transaction with owners with their capacity
as owners.
Includes;
1. Components of profit and loss
2. Components of other
comprehensive
income

PROFIT OR LOSS

The term profit or loss is the

total
of income less expenses,
excluding the
components of comprehensive income.

In other words this is the bottom line in

the traditional income statement.
An
entity may use net income
or net
loss to describe profit
or loss.

HANNAH MARIELLE S.
SEROGNAS

OTHER COMPREHENSIVE
INCOME (OCI)

Other comprehensive income comprises

items of income and expenses including
reclassification adjustments that are not
recognized in profit or loss as required or
permitted by Philippine Financial Reporting
Standards

COMPONENTS OF OTHER
COMPREHENSIVE INCOME :

Unrealized gain or loss on equity investment

measured at fair value
Unrealized gain or loss on debt investment
measured at fair value
Gain or loss from translation of the financial
statements of a foreign operation
Revaluation surplus during the year

Unrealized gain or loss from derivative

contracts designated as cash flow hedge
Remeasurements of defined benefit plan,
including actuarial gain or loss.
Change in fair value attributable to credit
risk of a financial liability designated at fair
value through profit or loss

PRESENTATION OF OTHER
COMPREHENSIVE INCOME

PAS 1, paragraph 82A, provides that the

statement of comprehensive income shall
present line items for amounts of other
comprehensive income during the period
classified by nature

The line items for amounts of OCI shall be

grouped as follows:
OCI that will be reclassified subsequently to
profit or loss when specific conditions are
met
OCI that will not be reclassified subsequently
to profit or loss

AIRAH JOYCE S. EGUAL

Components of OCI that will reclassified

subsequently profit or loss:

Unrealized gain or loss on debt

investment measured at fair value
through other comprehensive income

Gain or loss from translating financial

statements of foreign operation.

Unrealized gain or loss on derivative

contracts designated as cash flow hedge.

Component of OCI that will not be

reclassified subsequently to profit or loss:
Unrealized gain or loss on equity
investment measured at fair value
through other comprehensive income.

Revaluation surplus during the year.

-through retained earnings

 Remeasurements

of defined benefit plan,

including actuarial gain or loss.

Change

in fair value attributable to credit

risk of a financial liability designated at fair
value through profit or loss.

LASCUA, VANESSA TRISHA L.

PRESENTATION OF
COMPREHENSIVE INCOME
2 OPTIONS:
1. Two Statements
a. Income Statement showing components of
profit or loss
b. Statement of Comprehensive Income
beginning profit or loss as shown in the
income statement plus or minus the
components of other comprehensive
income

PRESENTATION OF
COMPREHENSIVE INCOME
2. Single Statement of Comprehensive income
this is the combined statement showing the
components of profit or loss and components
of other comprehensive income in a single
statement.

SOURCES OF INCOME
a. Sales of merchandise to customers
The income from the sales shall include
all
sales to customers during the period.
Sales returns, allowances and discounts shall be
deducted from gross sales to arrive at net sales.
b. Rending of services
Income from rendering of services , among others,
includes professional fees, media advertising
commissions, insurance agency commissions,
admission fees for artistic performance and
tuition fees.

SOURCES OF INCOME
c. Use of entity resources
This income category
includes
interest, rent,
royalty, and dividend
income.
d. Disposal of resources other than products
Example includes gain on sale of investment,
gain on sale of property, plant and
equipment and gain on sale of intangible
asset

COMPONENTS OF EXPENSES
A.
B.
C.
D.
E.

Cost of good sold or cost of sales

Distribution cost or selling expenses
Administrative expenses
Other expenses
Income tax expenses

COST OF GOODS SOLD OF

MERCHANDISING CONCERN
Beginning inventory 500,000
Net Purchases2,000,000
Goods Available for sale 2,500,000
Ending inventory
(300,000)
Cost of goods sold 2,200,000
Gross purchases
1,900,000
Freight in
150,000
Total 2,050,000
Purchases returns, (50,000)
allowance and discounts
Net Purchases2,000,000

COST OF GOODS SOLD OF

MANUFACTURING CONCERN
Beginning raw materials
Net Purchases

500,000
2,000,000

Raw materials available for use

2,500,000

Ending raw materials

(300,000)

Raw materials used

2,200,000

Director Labor

3,000,000

Factory overhead

1,300,000

Total manufacturing cost

6,500,000

Beginning goods in process

900,000

Total cost of goods in process

7,400,000

Ending goods in process

Cost of goods manufactured

(1,000,000)
6,400,000

Beginning finished goods

1,600,000

Goods avaiilable for sale

8,000,000

Ending finished goods

(1,500,000)

Cost of good sold

6,500,000

CLASSIFICATIONS OF EXPENSES

Distribution Cost directly related to selling,

advertising and delivery of goods to
customers
a.
b.
c.
d.
e.
f.

Salesmens salaries
Salesmens commissions
Traveling and marketing expenses
Advertising and publicity
Freight out
Depreciation of delivery equipment and store
equipment

Administrative Expenses
- cost of administering the business
- include all operating expenses not related to selling
and cost of goods sold

a.
b.
c.
d.
e.
f.
g.
h.
i.
j.

Doubtful accounts
Office salaries
Expenses of general executives
Expenses of general accounting and
credit department
Office supplies used
Certain taxes
Contribution
Professional fees
Depreciation of office building and office equipment
Amortization of intangible assets

Other Expenses not directly related to the selling

and administrative function
a.
b.
c.
d.

Loss on sale of trading investment

Loss on disposal of property, plant, and equipment
Loss on sale of noncurrent investment
Casualty loss flood, earthquake, fire

KIRSTEN LAUREN U. TAPIA

LINE ITEMS

PAS 1, paragraph 82, provides that the income

statement and statement of comprehensive
income shall include the following line items:
a.
b.

c.
d.

e.
f.
g.
h.
i.

Revenue
Gain and loss from derecognition of financial asset
measured at amortized cost as required by PFRS 9
Finance cost
Share in income or loss of associate and joint venture
accounted for using the equity method
Income tax expense
A single amount comprising discontinued operations
Profit or loss for the period
Total other comprehensive income
Comprehensive income for the period being the total of
profit or loss and other comprehensive income

FORMS OF INCOME STATEMENT

PAS 1, paragraph 99, an entity shall present

an analysis of expense recognized in profit or
loss using function of expense or their nature
within the entity

2 ways that income statement be presented:

Functional presentation
Natural presentation

FUNCTIONAL PRESENTATION

- This form classifies expenses according to

their function as part of cost of goods sold,
distribution cost, administrative expenses,
and other expenses
- also known as the cost of goods sold
method
- an entity classifying expenses by function
shall disclose additional information on the
nature of expenses, including depreciation,
amortization, and employee benefit costs

FUNCTIONAL INCOME
STATEMENT EXAMPLAR COMPANY
Income Statement
Year ended December 31, 2016
Note
Net sales (1) 9,000,000
Cost of goods sold (2) (5,400,000)
Gross income 3,600,000
Other income (3) 900,000
Investment income (4) 500,000
Total income 5,000,000
Expenses:
Distribution cost (5) 1,350,000
Administrative expenses (6) 1,000,000
Other expenses (7) 320,000
Finance cost (8)
200,000 2,870,000
Income before tax 2,130,000
Income tax expense
580,000
Net income 1,550,000

Note 1 Net Sales

Gross sales9,300,000
Sales return and allowance
Sales Discount (200,000)
Net sales 9,000,000

(100,000)

Note 2 Cost of goods sold

Inventory, January 11,500,000
Purchases 6,000,000
Freight in 300,000
Total6,300,000
Purchase return and allowance (150,000)
Purchase discount (250,000) 5,900,000
Goods available for sale 7,400,000
Inventory, December 31 (2,000,000)
Cost of sales 5,400,000

Note 3 Other income

Interest revenue 180,000
Dividend revenue 120,000
Rent revenue 100,000
Gain from expropriation 500,000
Total 900,000

Note 4 Investment income

Share in net income of associate

500,000

Note 5 Distribution costs

Sales salaries 600,000
SSS and Philhealth sales 20,000
Sales Commission 180,000
Advertising 100,000
Store supplies expense 50,000
Delivery expense250,000
Depreciation store equipment 150,000
Total distribution costs 1,350,000

Note 6 Administrative expenses

Office salaries 650,000
SSS and Philhealth office 30,000
Bonuses100,000
Office supplies expense 70,000
Taxes and licenses 20,000
Doubtful accounts 40,000
Depreciation office equipment 90,000
Total administrative expenses 1,000,000

Note 7 Other expenses

Loss on sale of investment30,000
Loss on sale of property 120,000
Casualty loss from earthquake 170,000
Total 320,000

Note 8 Finance cost

Interest expense on bank loan 50,000
Interest expense on bonds payable 150,000
Total finance cost 200,000