PRESENTATION OF FINANCIAL STATEMENT

INCOME STATEMENT
An income statement is a formal statement showing the financial performance of an entity
for a given period of time.
The transaction approach is the traditional preparation of the income statement in
conformity with the accounting standards.
Information about financial performance is useful in predicting future performance and
ability to generate future cash flows.
Comprehensive income
Comprehensive income is the change in equity during a period resulting from transactions
and other events, other than changes resulting from and to owners in their capacity as owners.
Accordingly, comprehensive income includes:
a) Components of profit or loss
b) Components of other comprehensive income
Profit or Loss
The term profit or loss is the total income less expenses, excluding the components of other
comprehensive income.
In other words, this is the bottom line in the traditional income statement.
An entity may use net income to describe profit or loss.
Other comprehensive income (OCI)
Other comprehensive income comprises of income and expenses including reclassification
adjustments that are not recognized in profit or loss as required or permitted by PFRS.
The components of other comprehensive income include the following:
a) Unrealized gain or loss on equity investment measured at fair value through other
comprehensive income.
b) Unrealized gain or loss on debt instrument measured at fair value through other
comprehensive income.
c) Gain or loss from translation of the financial statements of foreign operation.
d) Revaluation surplus during the year.
e) Unrealized gain or loss from derivative contracts designated as cash flow hedge
f) Remeasurement of defined benefit plan, actuarial gain or loss.
g) Changes 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 during the
period shall present line items for the amounts of other comprehensive income during the period
classified by nature.
The line items are grouped as follows:
a) OCI that will be reclassified subsequently to profit or loss when specific conditions are
met.
1. Unrealized gain or loss on debt investments measured at fair value through
comprehensive income.
2. Gain or loss from translating financial statements of a foreign operation.
3. Unrealized gain or loss on derivative contracts designated as cash flow hedge.
b) OCI that will not be reclassified subsequently to profit or loss but to retained earnings.
1. Unrealized gain or loss on equity investment measured at fair value through other
comprehensive income.
2. Reevaluation surplus of the year.
3. Remeasurements of defined benefit plan, including actuarial gain or loss
4. Changes in fair value attributable to credit risk of a financial liability designated at
fair value through profit or loss.
Presentation of comprehensive income
An entity has two options of presenting comprehensive income, namely:
1. Two statements
2. Single statement
Sources of income
1. Sales of merchandise to customers
2. Rendering of services
3. Use of entity resources
4. Disposal of resources other than products
Components of expense
1. Cost of goods sold
2. Distribution cost or selling expense
3. Administrative Expenses
4. Other expenses
5. Income tax expense
Forms of income statement
1. Functional presentation
2. Natural presentation
 COMMON FORMAT OF STATEMENT OF COMPREHENSIVE INCOME
Jumbart Company
Statement of Comprehensive Income
As of December 31, 2022
Sales ₱ 7,850,000.00
Sales return and allowances -₱ 150,000.00
Sales discounts -₱ 10,000.00
Net Sales: ₱ 7,690,000.00

Cost of Goods Sold:

Merchandise Inventory, beg ₱ 1,000,000.00
Purchases P 5,250,000.00
Purchase return and allowances -P 150,000.00
Purchase discount -P 100,000.00
Net Purchases ₱ 5,000,000.00
Freight-in ₱ 500,000.00
Total Delivered Purchases ₱ 5,500,000.00
Goods Available for Sale ₱ 6,500,000.00
Merchandise Inventory, end -₱ 1,500,000.00 -₱ 5,000,000.00
Gross Profit ₱ 2,690,000.00
Other Income:
Rental income ₱ 250,000.00
Dividend revenue ₱ 150,000.00 ₱ 400,000.00
Total Income ₱ 3,090,000.00

Operating Expenses:
Selling Expenses or Distribution Cost:
Salesmen commission ₱ 650,000.00
Depreciation – store equipment ₱ 125,000.00 ₱ 775,000.00

General and Administrative Expenses:

Officers’ salaries ₱ 500,000.00
Freight-out ₱ 175,000.00
Depreciation – office equipment ₱ 300,000.00 ₱ 975,000.00

Other Expenses:
Loss on sale of investment ₱ 50,000.00
Loss on sale of equipment ₱ 50,000.00 ₱ 100,000.00 -₱ 1,850,000.00
Operating Income or Income before interest and taxes: ₱ 1,240,000.00
Finance Cost -₱ 10,000.00
Income before taxes or Taxable Income ₱ 1,230,000.00
Income tax -₱ 250,000.00
Net Income ₱ 980,000.00
Other Comprehensive Income:
Unrealized Gain – FAFV-OCI P100,000
Foreign Currency Loss (P50,000) P 50,000.00
Comprehensive Income P1,030,000.00

PRACTICE SETS:
1. Raph Company provided the following information of the current year:
Purchases P5,250,000
Purchase return and allowances 150,000
Rental income 250,000
Freight-out 175,000
Salesmen commission 650,000
Depreciation – store equipment 125,000
Merchandise Inventory, beg 1,000,000
Merchandise Inventory, end 1,500,000
Sales 7,850,000
Sales return and allowances 150,000
Sales discounts 10,000
Officers’ salaries 500,000
Depreciation – office equipment 300,000
Freight-in 500,000
Income tax 250,000
Loss on sale of equipment 50,000
Purchase discount 100,000
Dividend revenue 150,000
Loss on sale of investment 50,000
Interest expense 10,000

Prepare income statement under functional method.

Statement of Comprehensive Income
2. The incomplete records of Jam company showed the following information

Dec 31, 2017 Dec 31, 2016

Cash P216,000 P120,000
Accounts Receivable 362,000 240,000
Prepaid Rent 40,000 70,000
Furniture and Fixtures 600,000 540,000
Accounts Payable 224,000 188,000
Salaries Payable 52,000 14,000
 During the year, Jam withdrew cash of P250,000 and made additional investments of
P100,000

Determine the income of Jam

3. Pranz ICT shop had sales during 2021 of P895,000. Pranz’ gross profit percentage is
55%.

Purchase of inventory during 2021 totaled P466,250 and a count of inventory on hand at
the end of 2021 totaled 189,500. Selling expenses are 18% of sales and Gen and admin
expenses are 80% of selling expenses.

Pranz income tax rate is 30% and then company has 60,000 shares outstanding.

Prepare income statement.