FABM2 LEARNER’S PACKET 3

QUARTER 1: MELC #4 & 5 ( Week 3)

Demonstrate an understanding of the service income and operating

Content
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expenses of a service business as well as sales, contra sales,
purchases, contra purchases accounts, cost of goods sold and general
Standards and administrative selling expenses of a merchandising business that
will equip him/her in the preparation of the SCI for both service and
merchandising businesses.
Performance Solve exercises and problems that require preparation of SCI for a
Standards service business and a merchandising business
Most Essential Learning
Competencies (MELC’S) Content
1.Prepare a SCI for a service business using the Teaching
single-step approach. (ABM_FABM12-lc-d-6) No. of days Dates
2. Prepare a SCI for merchandising business using
the multistep approach. (ABM_FABM12-lc-d-7) 2
WRITE ANSWERS ON AN A4 BOND PAPER.
What is it?

SINGLE-STEP FORMAT OF THE SCI

Service business generates revenue from rendering service to customers while merchandising business offers
tangible products to produce income. This is the main difference between the two types of business and the
presentation of income and expenses apparently depends on how income was generated.
There are two ways in presenting the SCI, the Single-step and the Multi-step format. The difference of the two
presentation lies in how a business generates revenue. This topic will focus on the Single-step Format.
Single-step Format presents revenues in one section while expenses are listed in another. Net Income in a
single-step format is computed by deducting Total Expenses from the Total Revenues. (Total Revenues – Total
Expenses = Net Income)
Service companies more commonly used the Single-step Format of the SCI.
PARTS (ELEMENTS) OF A SINGLE-STEP FORMAT OF THE SCI

Harry Rookie Transport Services

HEADING
Statement of Comprehensive Income
For the period ended December 31, 2019
INCOME
Service Revenue Ᵽ105,000
(REVENUE)
Less: Expenses
Salaries Expense Ᵽ 45,000
Rent Expense 15,000
Depreciation Expense 7,500 EXPENSES
Utilities Expense 6,000
Miscellaneous Expense 500
Total Expenses 74,000
NET INCOME
Net Income Ᵽ 31,000 or
NETLOSS

I. Heading
a. Name of Company

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 b. Name of Statement
c. Period Covered (with emphasis on “For the”)
“For the” is used to indicate date or period since amounts in this statement are temporary so each
period (for the month, quarter, semester, year) will go back to ZERO at the start of another accounting
cycle.
II. Income (Revenue)
This is the total amount of earnings by the company from the services rendered/provided to
customers. The normal balance of this account is CREDIT.
III. Expenses
This is the cost incurred by the company in conducting its business activities. Expenses can be broken
down into selling and administrative expenses. (This will be further discussed in the Multi-step format
of the SCI.) The normal balance of expense account is DEBIT.
IV. Net Income or Net Loss
This part is the RESULT of operation.
Income or Loss is derived by deducting Revenue from Expenses.
Net Income if result is positive or Revenue is greater than Expense.
(R > E = NI)
Net Loss if result is negative or Revenue is less than Expense.
(R < E = NL)
Income refers to inflows of cash that increases the economic benefits of an organization/entity during
the course of business operation.
Loss is decrease in economic benefits in the form of cash outflows thereby resulting in the decrease
in equity.

MULTI-STEP FORMAT OF THE SCI

With countless varieties to offer, from food to apparel, fresh produce to seeds, trees and crops, delivery,
cooked food, seminars (webinar) online, anything under the sun, name it and the internet has it. Your finger can do
the job in a click, no more traffic and hustle and bustle just to get to where you’re going, we can now do things that
we have never done before in the comforts of our home. These were the changes that we encountered in this so
called new normal brought about by the pandemic. When will it end? when will we go back to the usual? Only God
can tell.
And, these changes have created a very big impact on the business environment. We noticed a lot of people
selling merchandise online. Even well known celebrities have joined the bandwagon. It has created a big impact on
lives of people especially those affected by the pandemic and diverted their efforts to selling online.
These type of activities are described as a merchandising business whose revenues come from selling
tangible products to customers to generate net income.
To report the results of its operation for a particular period, Merchandising companies more commonly used
the Multi-step Format of the SCI.
Multi-step Format unlike Single-step format needs several steps to arrive at the Net Income/Net Loss
(Haddock, Price, & Farina, 2012) wherein total sales and cost of sales (cost of goods sold) are presented on the first
part of the statement that will net to the company’s gross profit before presenting other expenses that are classified
as either administrative or selling expenses.

PARTS (ELEMENTS) OF A MULTI-STEP FORMAT OF THE SCI

I. Heading
II. Net Sales
III. Cost of Sales
Net Purchases
Add: Beg Inventory
Goods Available for Sale
Less: Ending Inventory
IV. Gross Profit
V. Expenses (General and Administrative, Selling)
VI. Gains/Losses

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ILLUSTRATION: Heading
Kimmy Chow Foods & Delivery Enterprise Name of Company-WHO
Statement of Comprehensive Income Title of the Statement-WHAT
Period Covered-WHEN
For the period ended December 31, 2019

Sales Ᵽ 300,000
Less: Sales Returns Contra Ᵽ 30,000 Net Sales/
Sales Discounts Revenue 5,000 35,000 Revenues
Net Sales Ᵽ 265,000
Cost of Goods Sold:
Beginning Inventory Ᵽ 103,000
Net Cost of Purchases
Purchases Ᵽ 75,000
Purchase Returns (10,000)
Purchase Discounts (3,500) Cost of Sales
Net Purchases 61,500
Freight in 7,500 69,000
Cost of Goods Available for Sale 172,000
Ending Inventory 30,000 142,000
Gross Profit 123,000
General & Administrative Expenses
Salaries Expense 16,000
Rent Expense 15,000
Depreciation Expense 7,500
Utilities Expense 6,000
Miscellaneous Expense 500 (45,000) Expenses

Selling Expenses
Salaries Expense 12,000
Delivery Expense 8,000
Advertising Expense 4,000
Utilities Expense 3,000 (27,000)
Net Income Ᵽ 51,000

Remember:
Single line indicates ADDITION of the amounts above the line.
Double line indicates that the addition is COMPLETED.
Cost of Goods Sold is the amount of goods sold to customer while Cost of Goods Purchased is the
actual cost or the purchased price of the commodity.
Net Cost of Purchases contains the amount of Freight In while Net Purchases does not include the
Freight In.

Some expenses appearing under the General and Administrative Expenses maybe similar to those
under the Selling Expenses like Salaries, Depreciation Expense, etc., but the latter differ in the sense that these
expenses are directly related to the selling of the product examples of which includes sales commission,
delivery expenses, and advertising expenses.

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 What is more?

ACTIVITY 3.1: Identification (10 points)

After reading the lecture notes on Statement of Comprehensive Income, answer the statement below. Supply the correct
word or words to complete the statement.
1. ________ format of the SCI presents revenues in one section while expenses are listed in another.
2. The main difference in format of the the SCI for service and merchandising business depend on how revenue is
_______.
3. It is an increase in economic benefits in the form of increase of assets or decreases of liabilities resulting in increase
in equity _______
4.This occurs when revenue is greater than expenses. _____ ________
5. It can be broken down into selling and administrative. __________
6. Net Loss results when Income is __________ than expense. ____
7. Single-step statement of comprehensive income is commonly used by _______ _______.
8. Equity is decreased through owner’s withdrawal and _________.
9. This represents cash outflows to company employees for the services they rendered. ______
10. Cash paid to agencies like Meralco, Maynilad and PLDT. ___ ____

What I have learned?

ACTIVITY 2: Let’s check your understanding.
Required:
3.2.a Prepare a SCI using the Single step format for August, 2020. The following information were taken
from the books of ABM Foods & Delivery Enterprise. (10 points)
Salaries Expense Ᵽ 24,000.00; Transportation Expense Ᵽ 3,000.00;
Rent Expense Ᵽ 10,000.00; Utilities Expense Ᵽ 5,000.00; and Service
Revenue is Ᵽ 40,000.00
3.2.b Prepare a Multi-step format of the SCI using the following information derived from the books of Al B. Maine
Enterprises for December, 2020. (10 points)

Sales Ᵽ 50,000 General and administrative expenses Ᵽ 10,000

Purchase 10,000 Selling Expenses 5,000
Beginning Inventory 15,000 Ending Inventory 7,500

ACTIVITY 3.3: THINK and WRITE

Think and reflect on the activities that you did, then write your reflection and insights.
Guide questions:
1. While answering the activities, what have you realized relative to the format of the SCI pertaining to service and
merchandising business?
2.What areas of the activity do you consider difficult and easy to answer? Why?
3.While doing the activities, explain your most important learnings from the topic and how can you apply the
knowledge in your daily life?
DIRECTION:
a. Limit your answers to FIVE (5) sentences for each question.
b. Express your own thoughts and reflections honestly.
c. Points will be deducted from answers searched through the internet.

Prepared: Checked: Noted:

MA. AURORA C. ALONZO MARICRIS G. PETELO LIBRADA A. VIDALLON

Subject Teacher ABM Subject Coordinator Curriculum and Instruction Coordinator

“Specific instructions are embedded in this packet, hence WHLP is not needed.