FABM 2

12 Quarter 1

LEARNER’S MATERIAL

LAC
 Module

FABM 2 Grade 12
1
PIVOT IV-A Learner’s Material
Quarter 1 Module 1 WEEK
First Edition, 2020
1

GRADE 12
FABM 2
Quarter 1 Module
1 Financial Position
Statement of

Development Team of the Module

Writer: Lourdesita Adajar Cabral

Editor:

Reviewer:

Illustrator:

Layout Artist:

Management Team:

LAC
INTRODUCTION

What I need
to know

Most Essential Learning Competencies (MELCS)

The learners…
1. Identify the elements of the SFP and describe each of them.
(ABM_FABM12-Ia-b-1)
2. Prepare an SFP using the report form and the account form with proper
classification of items as current and noncurrent.
(ABM_FABM12- Ia-b-4)

Specific Learning Outcomes

At the end of the topic, learners should be able to:
1. Distinguish and describe the elements of SFP.
2. Prepare SFP using Report and Account Form.

What is
new?

Try this:
A. Prepare a Personal Statement of Financial Position in the box provided:
A.1 Write your current savings and everything that you own like
clothes, pen, pencil, etc.
A.2 Write the amount that you owe your friends, family members,
parents (tuition).
A.3 Deduct the amount you owe from the amount you own.
A.4 Associate amounts owned with assets and amount owed with
liabilities with the net amount as equity.

PERSONAL
Statement of Financial Position

Assets (Amounts owned): _________________

Less: Liabilities (Amount owed): _________________

Equity (Net amount): _________________

B. Financial statements are important because they contain significant information

about a company’s financial health. Financial statements help companies make
informed decisions since they highlight which areas of the company provide the
best ROI (return on investment). It’s also important that companies file financial
statements once a year.
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Assets are increased when debited while liabilities and equity are increased when
credited. They are decreased when there are entries on the other side (credit for
assets and debit for liabilities).

There might be some cases that the result of the learner’s computation is zero or
even negative. This means that their liabilities to their friends, relatives and/or
parents are higher than their assets. The companies usually have assets that are
bigger than their liabilities and that almost all learners have bigger liabilities than
assets.

Therefore, having higher assets does not mean companies or individual is

profitable.

DEVELOPMENT

What I
know?

Activity 1.1: MULTIPLE CHOICE (Pre-test)

Directions: Encircle the letter corresponding to the correct answer for each
question provided.
1. It is the obligations of the company payable in money, goods or services.
A. Liabilities C. Cash
B. Prepaid Expense D. Equity
2. It is the most liquid assets without physical substance.
A. Equity C. Liabilities
B. Prepaid Expense D. Cash
3. It is a written promise from the costumer to pay his receivables on a certain
future date.
A. Rent Expense C. Equity
B. Notes Receivable D. Assets
4. It is the claim of the owner also known as the capital.
A. Rent Expense C. Assets
B. Notes Receivable D. Equity
5. Examples of this are cash, account receivable and prepaid expenses.
A. Rent Expense C. Assets
B. Notes Receivable D. Equity
6. The following are the examples of current assets except ________.
A. Prepaid Insurance C. Land
B. Cash D. Trade Receivable
7. The following are the examples of current liabilities except ________.
A. Unearned Income C. Salaries Payable
B. Utilities Payable D. Accumulated Depreciation

LAC
 8. The following are terms used synonymously with equity except _______.
A. Capital C. Net Worth
B. Net Assets D. Revenue

9. Which of the following are the elements of the financial statements?

l. ASSETS ll. LIABILITIES lll. EQUITY lV. INCOME V. EXPENSES

A. l, ll, lll C. l, ll, lll, V

B. lV, V D. l, ll, lll, lV, V
10. The elements directly related to the measurement of financial position in the
balance sheet are __________.
l. ASSETS ll. LIABILITIES lll. EQUITY lV. INCOME V. EXPENSES

A. l, ll, lll C. l, ll, lll, V

B. lV, V D. l, ll, lll, lV, V

Activity 1.2: PROBLEM SOLVING.

Directions: Read and analyze each statement or question carefully and fill in the
blank(s) with the correct answer. Choose your answer from the box below.

1. If assets are Php17, 000 and owner's equity is Php10, 000, liabilities are
___________.

2. At the end of the first month of operations for Angela’s Delivery Service, the
business had the following accounts: Accounts Receivable, Php1,200;
Prepaid Insurance, Php500; Equipment, Php36,200 and Cash, Php 40,650.
On the same date, Angela owed the following creditors: Nina’s Supply
Company, Php12,000; Maria’s Equipment, Php9,500.The current assets for
the Angela’s Delivery Service are ___________.

3. At the end of the first month of operations for Angela’s Delivery Service, the
business had the following accounts: Accounts Receivable, Php1,200;
Prepaid Insurance, Php500; Equipment, Php36,200 and Cash, Php40,650.
On the same date, Angela owed the following creditors: Nena’s Supply
Company, Php12,000 (due in 6 months); Maria’s Equipment, Php9,500 (due
after 2 years).Current liabilities are ___________.

4. If during the year total assets increase by Php75,000 and total liabilities
decrease by Php16,000, by how much did owner's equity increase/decrease?
___________.

7,000.00 27,000.00 42,350.00 57,050.00

21,500.00 12,000.00 59,000.00 91,000.00

LAC
 What
is in?

Review topics discussed in FABM 1

1. The Accounting Equation – Assets = Liabilities + Equity

2. Assets – are the resources owned and controlled by the firm.

classified into two:

i. Current Assets – Cash, Account Receivable, Notes
Receivable, Inventories, Supplies, Prepaid
Expenses
ii. Non-current Assets – Property, Plant & Equipment,
Accumulated Depreciation, Intangible
Assets.

3. Liabilities – are obligations of the firm arising from past events which are
to be settled in the future.
Classified into two:
i. Current Liabilities – Accounts Payable, Notes Payable,
Accrued Liabilities, Unearned Revenues,
current portion of long-term debt.
ii. Non-Current Liabilities – Mortgage Payable, Bonds Payable,
Loans Payable

4. Equity – also called as Capital, Net Assets or Net Worth.

5. Single/sole Proprietorship Business – A form of business is owned by one

person.

What
is it?

LESSON l. STATEMENT OF FINANCIAL POSITION

l. FINANCIAL STATEMENTS
The basic purpose of accounting is to provide information that is useful
for making economic decisions. Accounting information is most commonly
communicated to users through the financial statements.

Elements of the Financial Statements:

1. Assets
2. Liabilities
3. Equity
4. Income or Revenue
5. Expenses

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 Types of Financial Statement:
1. Statement of Financial Position
2. Statement of Comprehensive Income
3. Statement of Changes in Equity
4. Statement of Cash Flows
ll. Statement of Financial Position also known as the balance sheet. This
statement includes the amounts of the company’s total assets, liabilities,
and owner’s equity which in totality provides the condition of the company
on a specific date. (Haddock, Price, & Farina, 2012).

The accounts in the balance sheet are called permanent accounts or real
accounts. Their balances are forwarded as beginning balances in the next
accounting period.

Examples of permanent account include Cash, Accounts Receivable, Accounts

Payable, Loans Payable and Capital among others. Basically, assets,
liabilities and equity accounts are permanent accounts.

lll. Elements of the Statement of Financial Position:

l. ASSETS
2. LIABILITIES
3. EQUITY

lV. The Report Form and Account Form

Report Form – A form of the SFP that shows asset accounts first and then
liabilities and owner’s equity accounts after. (Haddock, Price, &
Farina, 2012)
Account Form – A form of the SFP that shows assets on the left side and
liabilities and owner’s equity on the right side just like the debit and
credit balances of an account. (Haddock, Price, & Farina, 2012)
a. The two are only formats and will yield the same amount of total
assets, liabilities and equity.
b. Assets should always be equal to liabilities and equity.

V. Parts of the Statement of Financial Position or Balance Sheet:

A. The Heading
A.1. Name of the Business
A.2. Name of the Report
A.3. Date of Report
A.4. Currency
Example:
Cabral LPG Trading
Statement of Financial Position
December 31, 20xx
(in Philippine Peso)
B. The Asset Section
C. The Liability Section
D. The Owner’s Equity Section

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 Vl. Sample Account Form SFP

Cabral LPG Trading

Statement of Financial Position
As of December 31, 20xx
ASSETS LIABILITIES AND OWNER’S EQUITY
Current Assets: Current Liabilities:
Cash Php 100,000.00 Accounts Payable Php 250,000.00
Accounts Receivable Php 500,000.00 Accrued Expenses 100,000.00
Less: Allowance for Doubtful (50,000.00) 450,000.00
Accounts Unearned Income 80,000.00
Accrued Income 300,000.00 Notes Payable 150,000.00
Inventory 200,000.00 Total Current Liabilities 580,000.00
Prepaid Expenses 50,000.00

Total Current Assets 1,100,000.00 Non-current Liabilities:

Mortgage Payable 1,500,000.00
Non-current Assets: Loans Payable 1,000,000.00
Long Term Investments 1,250,000.00 Total Non-current Liabilities 2,500,000.00
Intangible Assets 500,000.00
TOTAL LIABILITIES 3,080,000.00
Property, Plant and
Equipment
Cost 1,000,000.00 OWNER’S EQUITY 470,000.00
Less: Accumulated (300,000.00) 700,000.00
Depreciation
Total Non-current Assets 2,450,000.00
TOTAL LIABILITIES AND
TOTAL ASSETS Php 3,550,000.00 OWNER’S EQUITY Php 3,550,000.00

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 HEADINGS

Vll. Sample of a Report Form SFP

Cabral LPG Trading

Statement of Financial Position
As of December 31, 20xx

ASSETS
Current Assets:
Cash Php 100,000.00
Accounts Receivable Php 500,000.00
Less: Allowance for Doubtful Accounts (50,000.00) 450,000.00
Accrued Income 300,000.00
Inventory CURRENT ASSETS 200,000.00
Prepaid Expenses 50,000.00
Total Current Assets 1,100,000.00

Non-current Assets: NON-CURRENT ASSETS

Long Term Investments 1,250,000.00
Intangible Assets 500,000.00
Property, Plant and Equipment
Cost 1,000,000.00
Less: Accumulated Depreciation (300,000.00) 700,000.00
Total Non-current Assets 2,450,000.00
TOTAL ASSETS Php 3,550,000.00

LIABILITIES AND OWNER’S EQUITY

Current Liabilities:
Accounts Payable Php 250,000.00
Accrued Expenses CURRENT LIABILITIES 100,000.00
Unearned Income 80,000.00
Notes Payable 150,000.00
Total Current Liabilities 580,000.00
NON-CURRENT LIABILITIES
Non-current Liabilities
Mortgage Payable 1,500,000.00
Loans Payable 1,000,000.00
Total Non-current Liabilities 2,500,000.00
TOTAL LIABILITIES 3,080,000.00
EQUITY
OWNER’S EQUITY 470,000.00
TOTAL LIABILITIES AND OWNER’S EQUITY Php 3,550,000.00

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ENGAGEMENT

What is
more?

Activity 2: TRUE OR FALSE

Directions: Before each statement, write LAC if the statement is true or LCA if the
statement is false.

___________1. The basic purpose of accounting is to provide information that is

useful for making economic decisions.
___________ 2. Financial statements are the structured representation of an entity’s
financial position and results of its operations.
___________ 3. The balance sheet omits many items that are of financial value to the
business but cannot be recorded objectively
___________ 4. A classified balance sheet shows information on current and non-
current assets and liabilities.
___________ 5. An unclassified balance sheet does not show distinction between
current and non-current assets and liabilities.
___________ 6. Assets are classified as non-current when they are realized within 12
months from the end of reporting period.
___________ 7. Some receivables and payables are presented as current even if they
are collectible or payable within 12 months.
___________ 8. Financial statements are the end product of the accounting process.

___________ 9. Statement of Financial Position is synonymous to income statement.

___________10. Liabilities are classified as non-current when they are expected to be

settled more than 12 months from the end of reporting period.

What I
can do?

Activity 3: Problem Solving

Directions: Answer easy, medium, and difficult questions can focus on the two
formats of the SFP.

Easy:
1. Learning is Fun Company had current assets amounting to Php 100,000.
Noncurrent assets for the year totaled Php 76,000. How much is the company’s
total assets? Ans. _______________
2. Happy Selling Company’s total liabilities amounted Php 10,000. Total equity had
an ending balance of Php 20,000. How much is total assets? Ans. _______________

Medium:
1. Happy Selling’s had the following accounts at year end: Cash-250,000, Accounts
Payable-70,000, Prepaid Expense-15,000. Compute for the company’s current
assets. Ans. _______________
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2. Happy Selling’s Accounts Receivable amounted to Php 500,000. Prepaid Expense
and Unearned Income totaled Php 30,000 and Php10,000 respectively. Cash
balance amounted to Php 100,000 while Accounts Payable and Inventory totaled to
Php 20,000 and Php 10,000 respectively. How much is the company’s current
assets? Current liabilities? Ans. _______________

Difficult:
1. Company’s Total Liabilities and Equity amounted to Php 285,000. Total
noncurrent assets ended at Php 85,000. Cash totaled Php50,000. Inventory
amounted to Php100,000. Assuming the company had no other assets, how much
is Accounts Receivable? Ans. _______________
2. Total assets amounted to Php 575,000. Total equity amounted to Php 250,000.
Accounts Payable amounted to Php 50,000 while Unearned Income totaled
Php85,000. Assuming there are no other current liabilities, compute for the
company’s noncurrent liabilities. Ans. _______________

What else
I can do?

Activity 4: Problem Solving

Directions: Prepare a Statement of Financial Position using a report form. Write
your answer inside the box below.
Cash – 5,000
Loans Payable – 77,500
Accounts Receivable – 2,600
Supplies – 2,300
Equipment – 17,000
Owner’s equity – 40,000
Accounts Payable – 22,400
Building – 113,000
Note: Learners can use any business name and the end of the current year for the
heading.

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ASSIMILATION

What I have
Learned?

Activity 5: Problem Solving

Directions: Prepare a Statement of Financial Position for the company in account
form. Write your answer inside the box below.

You were hired by Ms. LJ Angela Cabral to prepare her sari-sari store’s Statement
of Financial Position. In order to prepare the statement, you identified the following
assets and liabilities of Ms. LJ Angela Cabral:
1. Her sari-sari store has cash deposited in a bank account amounting to
P50,000.
2. Her sari-sari store had a lot of uncollected sales from customers amounting
to P75,000.
3. The total amount of merchandise left inside the store is P30,000.
4. She already paid one year’s rent in advance amounting to P12,000.
5. The value of all the company’s furniture amounted to P100,000.
6. She bought merchandise from her supplier amounting to P25,000 and the
supplier agreed that payment can be made 2 months after year-end.
7. SSS, Philhealth and Pag-ibig Payables for her one employee totaled P5,000.
8. The sari-sari store had outstanding liabilities to utility companies amounting
to P3,000.
9. She had a loan from the bank amounting to P50,000 to be paid in 3 years.

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 What I can
achieve?

Activity 6.1: MULTIPLE CHOICE (Post-test)

Directions: Encircle the letter corresponding to the correct answer for each
question provided.
1. It is the most liquid assets without physical substance.
A. Equity C. Liabilities
B. Prepaid Expense D. Cash
2. The following are terms used synonymously with equity except _______.
A. Capital C. Net Worth
B. Net Assets D. Revenue
3. It is a written promise from the costumer to pay his receivables on a certain
future date.
A. Rent Expense C. Equity
B. Notes Receivable D. Assets
4. It is the claim of the owner also known as the capital.
A. Rent Expense C. Assets
B. Notes Receivable D. Equity
5. It is the obligations of the company payable in money, goods or services.
A. Liabilities C. Cash
B. Prepaid Expense D. Equity
6. Examples of this are cash, account receivable and prepaid expenses.
A. Rent Expense C. Assets
B. Notes Receivable D. Equity
7. The following are the examples of current assets except ________.
A. Prepaid Insurance C. Land
B. Cash D. Trade Receivable
8. The following are the examples of current liabilities except ________.
A. Unearned Income C. Salaries Payable
B. Utilities Payable D. Accumulated Depreciation
9. Which of the following are the elements of the financial statements?
l. ASSETS ll. LIABILITIES lll. EQUITY lV. INCOME V. EXPENSES

A. l, ll, lll, lV, V C. lV, V

B. l, ll, lll, V D. l, ll, lll

10. The elements directly related to the measurement of financial position in the
balance sheet are __________.
l. ASSETS ll. LIABILITIES lll. EQUITY lV. INCOME V. EXPENSES

A. l, ll, lll, lV, V C. lV, V

B. l, ll, lll, V D. l, ll, lll
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Activity 6.2: PROBLEM SOLVING
Directions: Read and analyze each statement or question below carefully and fill in
the blank(s) with the correct answer.

1. If assets are Php17, 000 and owner's equity is Php10, 000, liabilities are
___________.

2. At the end of the first month of operations for Angela’s Delivery Service, the
business had the following accounts: Accounts Receivable, Php1,200;
Prepaid Insurance, Php500; Equipment, Php36,200 and Cash, Php 40,650.
On the same date, Angela owed the following creditors: Nina’s Supply
Company, Php12,000; Maria’s Equipment, Php9,500.The current assets for
the Angela’s Delivery Service are ___________.

3. At the end of the first month of operations for Angela’s Delivery Service, the
business had the following accounts: Accounts Receivable, Php1,200;
Prepaid Insurance, Php500; Equipment, Php36,200 and Cash, Php40,650.
On the same date, Angela owed the following creditors: Nena’s Supply
Company, Php12,000 (due in 6 months); Maria’s Equipment, Php9,500 (due
after 2 years).Current liabilities are ___________.

4. If during the year total assets increase by Php75,000 and total liabilities
decrease by Php16,000, by how much did owner's equity increase/decrease?
___________.

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 Answer Key

Activity 1.1: MULTIPLE CHOICE (Pre-test)

1. A 6. C
2. D 7. D
3. B 8. D
4. D 9. D
5. C 10. A

Activity 1.2: PROBLEM SOLVING

1. Php 7,000
2. Php 42,350
3. Php12,000
4. Php 91,000

Activity 2: TRUE OR FALSE

1. LAC 6. LCA
2. LAC 7. LCA
3. LCA 8. LAC
4. LAC 9. LCA
5. LAC 10. LAC

Activity 3: Problem Solving

Easy: Medium: Difficult:
1. P176,000 1. P265,000 1. P50,000
2. P30,000 2. P640,000 and P30,000 2. P190,000

Activity 4: Problem Solving: STATEMENT OF FINANCIAL POSITION (Report Form)

BUSINESS NAME
Statement of Financial Position
As of _________ 31, 20xx
ASSETS
Current Assets:
Cash Php 5,000.00
Accounts Receivable 2,600.00
Supplies 2,300.00
Total Current Assets 9,900.00

Non-current Assets:
Building 113,000.00
Equipment 17,000.00
Total Non-current Assets 130,000.00
TOTAL ASSETS Php 139,900.00

LIABILITIES AND OWNER’S EQUITY

Current Liabilities:
Accounts Payable Php 22,400.00
Non-current Liabilities
Loans Payable 77,500.00
TOTAL LIABILITIES 99,900.00

OWNER’S EQUITY 40,000.00

TOTAL LIABILITIES AND OWNER’S EQUITY Php 139,900.00

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Activity 5: Problem Solving

STATEMENT OF FINANCIAL POSITION (Account Form)

BUSINESS NAME
Statement of Financial Position
As of _________ 31, 20xx

ASSETS LIABILITIES AND OWNER’S EQUITY

Current Assets: Current Liabilities:
Cash Php 50,000.00 Accounts Payable Php 25,000.00
Accounts Receivable 75,000.00 Utilities Payable 3,000.00
Merchandise Inventory 30,000.00 SSS, Philhealth & Pagibig Payables 5,000.00
Prepaid Rent 12,000.00 Total Current Liabilities 33,000.00
Total Current 167,000.00 Non-current Liabilities:
Assets
Non-current Loans Payable 50,000.00
Assets:
Furnitures 100,000.00 TOTAL LIABILITIES 83,000.00
OWNER’S EQUITY 184,000.00
TOTAL LIABILITIES AND
TOTAL ASSETS Php 267,000.00 OWNER’S EQUITY Php 267,000.00

Activity 6.1: MULTIPLE CHOICE (Post-test)

1. D 6. C
2. D 7. C
3. B 8. D
4. D 9. A
5. A 10. D

Activity 6.2: PROBLEM SOLVING

1. Php 7,000 (Topic: Assets = Liabilities + Owner’s Equity)
2. Php 42,350 (Topic: Identifying current assets)
3. Php12,000 (Topic: Identifying current liabilities)
4. Increase by Php 91,000 (Topic: Effect of changes in one account to the other accounts in
the statement)

References

https://www.youtube.com/watch?v=wOaYW19k7w0

https://www.youtube.com/watch?v=GC8roRCwNjQ&t=18s

Basic Accounting 2008 Philippine Copyright – 13th Edition by Win Ballada and Susan Ballada

Teaching Guide donation by CHED to DepEd. K to 12 Senior High School ABM Specialized Subject –
Fundamentals of Accountancy, Business and Management 2 May 2016

Fundamentals of Accountancy, Business and Management: A Textbook in Basic Accounting 1 & 2

Copyright 2016 by Phoenix Publishing House Inc. and Solita A. Frias

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 Module
2
FABM 2 Grade 12
PIVOT IV-A Learner’s Material WEEK
Quarter 1 Module 2
First Edition, 2020 2 to 3

GRADE 12
FABM 2
Quarter 1 Module 1
Statement of
Comprehensive Income

Development Team of the Module

Writer: Lourdesita Adajar Cabral

Editor:

Reviewer:

Illustrator:

Layout Artist:

Management Team:

17

LAC
INTRODUCTION

What I need
to know?

Most Essential Learning Competencies (MELCS)

The learners…
1. Identify the elements of the SCI and describe each of these items for a
service business and a merchandising business.
(ABM_FABM12-Ic-d-5)
2. Prepare an SCI for a service business using the single-step approach.
(ABM_FABM12- Ic-d-6)
3. Prepare an SCI for a merchandising business using the multi-step approach.
(ABM_FABM12- Ic-d-7)

Specific Learning Outcomes

At the end of the topic, learners should be able to:
1. Distinguish and describe the elements of SCI.
2. Prepare SCI using single and multi-step approach.

What is
new?

Try this:
A. Prepare a Personal Statement of Comprehensive Income in the box provided:
1. Write your monthly allowance (computed by daily allowance x number of
days in a month)
2. Write the amount you spend on food, transportation, phone load, etc. (make
it monthly to match their allowance)
If the learner does not have a regular allowance… give an estimate.
3. Deduct the amount you spend from the amount of your allowance.
4. Associate allowance with revenue and spending with expense with the net
amount as net income.

PERSONAL
Statement of Comprehensive Income

Revenue (Allowance): _________________

Less: Expense (Spending): _________________

Net Income (Net amount): _________________

B. The Statement of Comprehensive Income provides a summary of a company’s

net assets over a given period of time. In other words, the statement
highlights the adjustments on equity during a given timeframe.
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 There might be some cases that the result of the learner’s computation is
zero or even negative. The business can still earn even without having cash
and can still lose even with a full bank account.

Small businesses don’t usually account for their revenues and expenses as
long as the owners see that cash is coming in. They sometimes forget that
equipment is depreciated and some expenses are accrued.

DEVELOPMENT

What I
know?

Activity 1.1: MULTIPLE CHOICE (Pre-test)

Directions: Encircle the letter corresponding to the correct answer for each
question provided.
1. On Nov. 15, 2019, cash is received in advance of rendering services.
Assuming that the services have been performed by Dec. 31, 2019, the
adjusting entry would be a debit to ____________.
A. Unearned Revenues and a credit to Cash.
B. Service Revenues and a credit to Accounts Receivable.
C. Unearned revenues and a credit to Service Revenues.
D. Cash and a credit to Service Revenues.
2. When a sale takes place, a __________.
A. Liabilities will increase.
B. One asset account will increase and another will decrease.
C. Assets will be unaffected.
D. Revenue account will increase.
3. Which of the following situations is an example of an accrual?
A. Recording unrecorded revenues.
B. Recording depreciation.
C. Recording supplies consumed.
D. Recording the portion of prepaid rent that has expired.
4. Expenses are incurred ___________.
A. To produce assets.
B. To produce liabilities.
C. To generate revenue.
D. Only during the adjustment process.
5. Which of the following is an example of an accrual?
A. Salaries incurred but not yet paid.
B. The purchase of office supplies.
C. Payment of two years’ insurance in advance.
D. Tuition revenue collected in advance.
6. Which of the following is not an application of accrual accounting?
A. Recording advertising revenues at the time the work is done.
B. Recording telephone expense when the monthly bill is received.
C. Recording advertising revenues at the time the cash payment is received.
D. Adjusting unearned advertising revenues to the proper balance at the end
of the month.
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 7. Which of the following accounts is an income statement account?
A. Salaries Expense
B. Accounts Receivable
C. Salaries Payable
D. Owner’s Capital

8. Which of the following transactions results in an increase in expenses?

A. Repayment of principal of bank loan.
B. Purchase of office equipment on credit.
C. Cost of employee salaries.
D. Payment on accounts payable.

9. Which of the following transactions results in an increase in revenues?

A. Collection of cash on account.
B. Receipt of cash from bank loan.
C. Sale of land at cost for cash.
D. Services rendered on credit.

10. The amount of accrued but unpaid expenses at the end of the period is both
an expense and ____________.
A. An asset.
B. A deferral.
C. An income.
D. A liability.

Activity 1.2: IDENTIFICATION

Directions: Identify if the account is part of the general and administrative expenses
or selling expenses. Write your answer on the blank provided.

Joel had the following expense accounts for the year ended December 31, 2019:

_____________________1. Salaries of admin personnel.

_____________________2. Salaries of janitors.

_____________________3. Salaries of sales agents.

_____________________4. Utilities of home office.

_____________________5. Rent of office building.

_____________________6. Depreciation of office equipment.

_____________________7. Depreciation of delivery van.

_____________________8. Advertising.

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 What
is in?

Review topics discussed in FABM 1

Specific account titles for each of the terms:

1. Accrual – is the recognition of “an expense already incurred but unpaid”, or
“revenue but uncollected”
- accrued expense, accrued income
2. Revenues – is the increase in economic benefits during the accounting
period in the form of inflows of cash or other assets or decreases of liabilities
that result in increase in equity.
- Service income, sales
3. Expenses – are decreases in economic benefits during the accounting period
in the form of outflows of assets or incidences of liabilities that result in
decreases in equity.
- salaries expense, depreciation expense

4. Service business – school, repair shop

5. Merchandising business – sari-sari store, vegetable vendor

What
is it?

LESSON 2. STATEMENT OF COMPREHENSIVE INCOME

l. 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. Break-even if
equal the income and expenses.
-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)

Examples of temporary accounts include revenues, sales, utilities expense,

supplies expense, salaries expense, depreciation expense, interest expense
among others.

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ll. Statement of Comprehensive Income of a Service Company and of a
Merchandising Company

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.

- 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)

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.

- 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)

lll. Two formats of the SCI

1. Single-step – 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)

2. Multi-step – there are several steps needed in order to arrive at the

company’s net income. (Haddock, Price, & Farina, 2012)

a. The two are only formats and will yield the same amount of net
income/loss

b. Single-step SCI is more commonly used by service companies

while multi-step format is more commonly used by merchandising
companies

lV. Parts of the Statement of Comprehensive Income

A. Single-Step SCI
Heading
* Name of the Company
* Name of the Statement
* Date of preparation

First part is Revenues

- This is the total amount of revenue that the company was able to
generate from providing services to customers

Second part is Expenses (can be broken down into General and

Administrative and Selling Expenses)
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B. Multi-Step SCI
Heading
* Name of the Company
* Name of the Statement
* Date of preparation

First part is SALES

- This is the total amount of revenue that the company was able to
generate from selling products
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)

i. Sales Returns – This account is debited in order to record returns of

customers or allowances for such returns.(Haddock, Price, & Farina,
2012)
- occur when customers return their products for reasons such as but
not limited to defects or change of preference.

ii. 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.

- Sales less Sales returns and Sales discount is Net Sales

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)

i. 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.

ii. Net Cost of Purchases = Purchases + Freight In

iii. Net Purchases = Purchases – (Purchase discount and purchase

returns)

iv. Purchases – amount of goods bought during the current accounting

period.
o 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.
o 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.
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 v. Freight In – This account is used to record transportation costs of
merchandise purchased by the company. (Haddock, Price, & Farina,
2012)
- this is recorded when goods are transported into the company.

vi. Add Beginning Inventory and Net Cost of Purchases to get Cost of
Goods Available for Sale
vii. Ending Inventory – amount if inventory presented in the Statement of
Financial Position.
- Total cost of inventory unsold at the end of the accounting
cycle.

viii. Sales less Cost of Goods Sold is Gross Profit

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)

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)

i. Gross Profit less General and Administrative Expenses less Selling

Expenses is Net Income for a positive result while Net Loss for a
negative result.

V. Sample Single-Step SFP

HEADING

Cabral LPG Trading

Statement of Comprehensive Income
December 31, 20xx

Service Revenue Php 100,000.00

Expenses: REVENUES
Salaries Expense 40,000.00
Rent Expense 20,000.00
Depreciation Expense 10,000.00
Utilities Expense 5,000.00
Miscellaneous Expense 1,000.00
Total Expenses 76,000.00
Net Income Php 24,000.00
EXPENSES
NET INCOME/LOSS

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 Vl. Sample of a Multi-Step SFP

HEADINGS

Cabral LPG Trading

Statement of Comprehensive Income
December 31, 20xx

Sales 8,875,000
Less: Sales Returns CONTRA REVENUE 16,000
Sales Discounts 101,000 117,000
Net Sales COST OF GOODS SOLD 8,758,000
Less: Cost of Goods Sold
Beginning Inventory 728,000
Add: Purchases 4,125,000
Less: Purchase Returns (115,000)
Purchase Discounts (118,000)
Net Purchases 3,892,000
Add: Freight In 206,000 4,098,000
Total Cost of Goods Available for Sale 4,826,000
Less: Ending Inventory 810,000 4,016,000
Gross Profit 4,742,000
Less: Selling & Administrative Expenses:
Salaries Expense 1,218,000
Rent Expense 600,000
Utilities Expense 840,000
Depreciation Expense 116,000
Miscellaneous Expense 50,000
Transportation Expense 360,000
Insurance Expense 60,000
Supplies Expense 240,000
Taxes and Licenses Expense 180,000 3,664,000
Net Income P 1,078,000

SELLING AND ADMINISTRATIVE EXPENSES

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ENGAGEMENT

What is
more?

Activity 2: PROBLEM SOLVING

Directions: Read and analyze each statement or question carefully and fill each
blank with the correct answer, choose from the box below.

________1. At the end of the first month of operations for Angela’s Service Company,
the business had the following accounts:
Cash Php19,000
Prepaid Rent 500
Equipment 5,000
Accounts Payable 2,000
By the end of the month, Angela's had earned of…
Revenues Php 20,000
Utilities Expenses 1,000
Salaries Expenses 1,500
Calculate the net income to be reported by the company for this first
month.

________2. During October, a sari-sari store had the following transactions involving
revenue and expenses. Did the firm earn a net income or incur a net
loss for the period? What was the amount?

o Paid Php1, 200 for rent

o Provided services for Php2, 750 in cash
o Paid Php250 for telephone service
o Provided services for Php1,900 on credit
o Paid salaries of Php1,675 to employees
o Paid Php350 for office cleaning service

________3. Compute for the Cost of Goods Sold using the following:

Sales – 15,000
Purchases – 2,000
Purchase returns – 200
Purchase discounts – 200
Freight in – 100
Beginning inventory – 1,000
Ending inventory – 500

17,500 9,000 1,175

7,875 12,800 2,200

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 What I
can do?

Activity 3: PROBLEM SOLVING

Directions: Answer easy, medium, and difficult questions can focus on single-step
approach SCI and the general and administrative expenses and selling expenses
parts of the multi-step SCI. Computation of net income/loss and definition of terms
are also part of the easy questions.

Easy:
1. Learning is Fun Company generated revenues amounting to Php 100,000.
Expenses for the year totaled Php 76,000. How much is the company’s net
income for the year? Ans.____________________.
2. Happy Selling Company’s salaries to sales agents amounted to
Php10,000. Salaries of accountants amounted to Php 20,000. No other
expenses were incurred. How much is the company’s general and
administrative expense? Ans.____________________.

Medium:
1. Happy Selling’s beginning inventory amounted to 250,000. Net purchases
amounted to 70,000. Freight In totaled 15,000. Compute for the company’s
cost of goods available for sale. Ans.____________________.
2. Happy Selling’s Sales amounted to Php 500,000. Sales returns and sales
discounts amounted to Php 30,000 and Php 10,000 respectively. Purchases
of the company totaled Php 100,000 while purchase returns and purchase
discounts amounted to Php 20,000 and Php 10,000 respectively. How much
is the company’s Net Sales? Net Purchases? Ans.____________________.

Difficult:
1. Company’s Cost of Goods Sold amounted to Php285,000. Net cost of
purchases totaled Php85,000. Beginning inventory amounted to
Php250,000. Sales amounted to Php 500,000. Compute for the company’s
Ending Inventory. Ans.____________________.
2. Gross profit of Happy Selling amounted to Php 175,000. Beginning
Inventory totaled Php 250,000. Ending Inventory amounted to Php 50,000
while Net Cost of Purchases totaled Php 85,000. Compute for Happy’s Net
Sales. Ans.____________________.

What else
I can do?

Activity 4: PROBLEM SOLVING

Directions: Prepare a single-step Statement of Comprehensive Income using the
following:
Revenues – 20,000
Rent expense – 3,000
Salaries expense – 4,000
Utilities expense – 2,000
Note: Learners can use any business name and the end of the current year for the
heading. Write your answer inside the box provided.
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 Single-step SCI

ASSIMILATION

What I have
Learned?

Activity 5: Problem Solving

Directions: Prepare a multi-step Statement of Comprehensive Income using the
following:
Sales – 20,000
Cost of Goods Sold – 10,000
General and administrative expenses – 4,000
Selling expenses – 2,000

Note: Learners can use any business name and the end of the current year for the
heading. Write your answer inside the box provided.

Multi-step SCI

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 What I can
achieve?

Activity 6.1: TRUE OR FALSE (Post-test)

Directions: Before each statement, write JVC if the statement is TRUE or LJC if the
statement is FALSE.

___________1. The Statement of Comprehensive Income shows information on an

entity’s financial performance during the period.
___________2. Revenue includes both income and gains.

___________3. The revenue earned by a merchandising business from its sales of

goods is commonly referred to as sales.
___________4. If income is greater than expenses, the difference is loss.

___________5. A statement of comprehensive income that shows expenses by their

function is referred to as prepared using a multi-step approach.
___________6. The revenue earned by a service business from rendering services is
commonly referred to as service fees.
___________7. Expenses are decreases in economic benefits during the period in the
form of outflows or depletions of assets or increases of liabilities that
result in decreases in equity.
___________8. Expenses encompass both expenses and losses.

___________9. The Statement of profit or loss and other comprehensive income is

synonymous to the income statement.
___________10. A statement of comprehensive income may be presented using a
“single-statement” presentation only.

Activity 6.2: MULTIPLE CHOICE

Directions: Encircle the letter corresponding to the correct answer for each
question provided.
1. Which of the following transactions results in an increase in revenues?
A. Collection of cash on account.
B. Receipt of cash from bank loan.
C. Sale of land at cost for cash.
D. Services rendered on credit.
2. On Nov. 15, 2019, cash is received in advance of rendering services.
Assuming that the services have been performed by Dec. 31, 2019, the
adjusting entry would be a debit to ____________.
A. Unearned Revenues and a credit to Cash.
B. Service Revenues and a credit to Accounts Receivable.
C. Unearned revenues and a credit to Service Revenues.
D. Cash and a credit to Service Revenues.
3. The amount of accrued but unpaid expenses at the end of the period is both
an expense and ____________.
A. An asset.
B. A deferral.
C. An income.
D. A liability.

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4. When a sale takes place, a __________.
A. Liabilities will increase.
B. One asset account will increase and another will decrease.
C. Assets will be unaffected.
D. Revenue account will increase.

5. Which of the following situations is an example of an accrual?

A. Recording unrecorded revenues.
B. Recording depreciation.
C. Recording supplies consumed.
D. Recording the portion of prepaid rent that has expired.

6. Expenses are incurred ___________.

A. To produce assets.
B. To produce liabilities.
C. To generate revenue.
D. Only during the adjustment process.

7. Which of the following is an example of an accrual?

A. Salaries incurred but not yet paid.
B. The purchase of office supplies.
C. Payment of two years’ insurance in advance.
D. Tuition revenue collected in advance.

8. Which of the following is not an application of accrual accounting?

A. Recording advertising revenues at the time the work is done.
B. Recording telephone expense when the monthly bill is received.
C. Recording advertising revenues at the time the cash payment is received.
D. Adjusting unearned advertising revenues to the proper balance at the end
of the month.

9. Which of the following accounts is an income statement account?

A. Salaries Expense
B. Accounts Receivable
C. Salaries Payable
D. Owner’s Capital

10. Which of the following transactions results in an increase in expenses?

A. Repayment of principal of bank loan.
B. Purchase of office equipment on credit.
C. Cost of employee salaries.
D. Payment on accounts payable.

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 Answer Key

Activity 1.1: MULTIPLE CHOICE

1. C 6. C
2. D 7. A
3. A 8. C
4. C 9. C
5. A 10. C

Activity 1.2: IDENTIFICATION

1. General and Administrative Expense 5. General and Administrative Expense
2. General and Administrative Expense 6. General and Administrative Expense
3. Selling Expense 7. Selling Expense
4. General and Administrative Expense 8. Selling Expense

Activity 2: PROBLEM SOLVING

1. 17,500
2. 1,175
3. 2,200

Activity 3: PROBLEM SOLVING

Easy Medium Difficult
1. 24,000 1. 335,000 1. 50,000
2. 20,000 2. Net Sales – 460,000 2. 460,000
Net Purchases – 70,000

Activity 4: PROBLEM SOLVING (Single-step)

BUSINESS NAME
Statement of Comprehensive Income
For the _______ 31, 20xx
Revenues P 20,000
Less: Expenses
Rent Expense P 3,000
Salaries Expense 4,000
Utilities Expense 2,000 9,000
Net Income P 11,000

Activity 5: PROBLEM SOLVING (Multi-step)

BUSINESS NAME
Statement of Comprehensive Income
For the _______ 31, 20xx
Sales P 20,000
Less: Cost of Goods Sold (10,000)
Gross Profit 10,000
Less: General and Administrative Expense (P 4,000)
Selling Expense (2,000) (6,000)
Net Income P 4,000

Activity 6.1: TRUE OR FALSE

1. JVC 6. JVC
2. JVC 7. LJC
3. JVC 8. LJC
4. JVC 9. JVC
5. LJC 10. LJC
Activity 6.2: MULTIPLE CHOICE
1. C 6. C
2. C 7. A
3. C 8. C
4. D 9. A
5. A 10. C

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 References

https://www.youtube.com/watch?v=wOaYW19k7w0

https://www.youtube.com/watch?v=mhmaHayMha8

Basic Accounting 2008 Philippine Copyright – 13th Edition by Win Ballada and Susan Ballada

Teaching Guide donation by CHED to DepEd. K to 12 Senior High School ABM Specialized Subject –
Fundamentals of Accountancy, Business and Management 2 May 2016

Fundamentals of Accountancy, Business and Management: A Textbook in Basic Accounting 1 & 2

Copyright 2016 by Phoenix Publishing House Inc. and Solita A. Frias

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