The statement of comprehensive income

This statement provides information about the performance of an entity in a period. It consists of two parts:
 A statement of profit or loss – a list of income and expenses which result in a profit or loss for the period; and
 a statement of other comprehensive income – a list of other gains and losses that have arisen in the period.
Transactions that would appear in the statement of other comprehensive income are not in your syllabus.

Income

Income consists of:
 revenue from the sale of goods or services
 other items of income such as interest received from investments
 gains from disposing of non-current assets for more than the amount at which they are carried in the records (carrying amount). For example, if a machine is sold for Rs. 15,000 when its value in the statement of financial position is Rs. 10,000, there is a gain on disposal of Rs. 5,000.
The term ‘revenue’ means income earned in the course of normal business operations. In a statement of comprehensive income , revenue and ‘other income’ are reported as separate items.

Expenses
Expenses consist of:
 expenses arising in the ordinary course of activities, including the cost of sales, wages and salaries, the cost of the depletion of non-current assets, interest payable on loans and so on
 losses arising from disasters such as fire and flood, and also losses from disposing of non-current assets for less than their carrying value in the statement of financial position.

Format of a simple statement of comprehensive income
The order of presentation is usually as follows:
 revenue (sales)
 the cost of sales
 gross profit (sales minus the cost of sales)
 other income, such as interest income and gains on the disposal of noncurrent assets
 other expenses, which might be itemised in some detail. (There is no rule about the sequence of expenses in the list, but it is usual to show expenses relating to administration, followed by expenses relating to selling and distribution, and finally expenses relating to financial matters, such as interest charges, bad debts and audit fees.)
 net profit (gross profit plus other income and minus other expenses).
A company’s statement of comprehensive income would also include the tax charge on the company’s profits.

Gross profit and net profit
It is usual to show both the gross profit and the net profit in a statement of comprehensive income .
 Gross profit is the sales revenue minus the cost of sales in the period, and
 Net profit (or loss) is the profit after taking into account all other income and all other expenses for the period.
The expenses included in ‘cost of sales’ differ according to the activities or type of industry in which the entity operates. For example:
 in a retailing business, the cost of sales might be just the purchase cost of the goods that have been sold
 in a manufacturing business, the cost of sales might be the cost of producing the goods sold during the period.