1. Accounting and Finance Unit 4
Topic 4 Part A – Preparation of Company Financial Reports – Statement of Comprehensive Income

2. USERS OF FINANCIAL REPORTS INCLUDE:
Present and potential shareholders
Employees
Lenders
Suppliers and trade creditors
Customers
Governments
The general public

3. Statement of Comprehensive Income Statement of Financial Position
THE CORPORATIONS ACT SPECIFIES THE FOLLOWING STATEMENTS MUST BE INCLUDED IN A COMPANY’S FINANCIAL REPORT
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash flows (this will be covered in Topic 5)
ACCOUNTING STANDARDS REQUIRE THE PRODUCTION OF A
Statement of Changes in Equity

4. The “Statement of Comprehensive Income” is a financial statement that details the total comprehensive income of a company for a given period representing the change in equity over that period, other than changes resulting from transaction with owners in their capacity as owners. This comprises all income (revenue and gains) and expenses, including taxable income. This financial statement allows users to assess the profitability of a company.
The “Statement of Financial Position” (also known as a Balance Sheet) lists the assets, liabilities and equity of a company and enables users to evaluate the stability, liquidity and value of the company.
The “Statement of Changes in Equity” is a financial statement that details and explains the changes during the period in the three elements that make up a company’s equity – share capital, retained earnings, and reserves.

8. 1. Preparing a Statement of Comprehensive Income
Example 1 – Busy Traders

9. Workings… Depreciation on Buildings = 100,000 – 10,500 x .25 = $22,375
Salaries
70, = 70,800
Insurance expense
9,000 – 800 = 8,200
Interest Income
= 550
Rental income earned
30,000 – 3,000 = 27,000
Doubtful debts = 600

10. Allowance for Doubtful debts
Opening balance CR
Bad debts CR
Doubtful debts CR
600

12. In a Statement of Comprehensive Income
Main source of income (example sales or fees is called “Revenue”
Any other incomes (discount received, rent revenue, interest income etc) is called “Other Income”
Expenses are grouped together as one item called
“Expenses (excluding financial costs)”
Except for any expenses which are considered financial costs – these are grouped together as one item called
“Finance Costs”

14. Calculations of other income for Statement of Comprehensive Income
Discount received interest income rental income 27,000

15. Calculations of expenses for Statement of Comprehensive Income
Need to add up all expenses (excluding finance costs) for this statement:
Depreciation 22,375, +
Salaries 70,800 +
Insurance 8,200,
Rates and taxes 39,100 +
Advertising 7,900 +
Freight outwards 9,500 =
157,875
Finance costs = Interest expense 3,600 + doubtful debts 600 = 4,200

17. Example 2 – Statement of Comprehensive Income
Example 2 – 9.2 page 311 of textbook

19. QUESTIONS ON STATEMENT OF COMPREHENSIVE INCOME

23. 9.17

26. 9.18

29. Cars R Us….

34. Test Question 2011 - Merry Ltd

35. Merry Ltd

36. Chemhow Ltd