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To answer problem #2, which asks for a *Statement of Comprehensive Income* (SCI) using the **Nature of Expense** format and the **single-step** method, we need to organize the company's income and expenses by their type, without categorizing them by function.

### 2. Prepare a Nature of Expense SCI using the single-step format:

Here's the breakdown:

#### ABC Company
**Statement of Comprehensive Income (SCI)**
*For the Year Ended December 31, 2022*

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**Revenue:**
- Sales: ₱ 764,985
- Less: Sales Returns & Allowances: ₱ 5,455
- Less: Sales Discount: ₱ 13,300

**Net Sales** = ₱ 746,230

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**Cost of Goods Sold (COGS):**
- Purchases: ₱ 459,990
- Less: Purchase Discount: ₱ 8,200
- Less: Purchase Returns & Allowances: ₱ 5,465
- Add: Freight-in: ₱ 9,180

**Net Purchases** = ₱ 455,505

- Add: Beginning Inventory (Jan 1, 2022): ₱ 25,455
- Less: Ending Inventory (Dec 31, 2022): ₱ 20,765

**Cost of Goods Sold** = ₱ 460,195

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**Gross Profit** = ₱ 286,035 (Net Sales - COGS)

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**Operating Expenses:**
- Depreciation Expense: ₱ 25,000
- Amortization Expense: ₱ 10,000
- Salaries Expense: ₱ 80,000
- Utilities Expense: ₱ 55,000
- Advertising Expense: ₱ 35,000
- Rent Expense: ₱ 60,000
- Bad Debts Expense (4% of Net Sales): ₱ 29,849.20 (₱ 746,230 × 4%)
  
**Total Operating Expenses** = ₱ 294,849.20

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**Operating Income (Loss)** = ₱ (8,814.20) (Gross Profit - Operating Expenses)

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**Other Income (Expenses):**
- Interest Income: ₱ 5,444
- Less: Interest Expense: ₱ 5,677
- Gain on Sale of PPE: ₱ 5,465

**Total Other Income** = ₱ 5,232 (₱ 5,444 + ₱ 5,465 - ₱ 5,677)

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**Net Income (Loss)** = ₱ (3,582.20) (Operating Income + Other Income)

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This provides a comprehensive breakdown of the income and expenses by nature, without dividing them into different operational functions.

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Would you like further details or have any questions? Here are five related questions to consider:

1. How does the multi-step format differ from the single-step format for income statements?
2. What are the main advantages of categorizing expenses by nature rather than function?
3. How can depreciation and amortization be allocated between administrative and selling expenses?
4. How would you handle inventory fluctuations in future financial planning?
5. Why is freight-in added to the cost of purchases in cost of goods sold?

**Tip:** Regularly track your gross and net profit margins to evaluate business efficiency.

Learn how to prepare a Nature of Expense Statement of Comprehensive Income (SCI) using the single-step method. This problem involves calculating net sales, net purchases, cost of goods sold, and net income for ABC Company for the year ended December 31, 2022. Detailed breakdowns of the income and expenses are provided. Suitable for accounting students.

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