Statement of Comprehensive Income (Edexcel IGCSE Business)

Exam board Pearson Edexcel · IGCSEUpdated 2025-06-23

Introduction to the statement of comprehensive income

Spec point — 3.4.1 · The purpose of statements of comprehensive income: • main features – sales, cost of sales, gross profit, expenses, operating profit

Introduction to the statement of comprehensive income

A statement of comprehensive income records the income and costs of a business incurred over a period of time (usually one year)
- It is also known as a profit-and-loss account or income statement
- It is one of the key financial statements provided in the annual report

Structure of the statement of comprehensive income

Toys & Trikes Ltd's statement of comprehensive income shows revenue, costs and profit for both 2022 and 2023
- This enables its financial managers to make a year-on-year comparison of performance

Statement of comprehensive income for Toys & Trikes Ltd

Table comparing financial data for 2023 and 2022, including revenue, cost of sales, gross profit, expenses, and operating profit.

The statement of comprehensive income details revenue, costs and expenses over a trading year

Calculations in the statement of comprehensive income

Spec point — 3.4.1 · sales, cost of sales, gross profit, expenses, operating profit

Two types of profit are calculated in the income statement

Gross profit

Gross profit is made when revenue is greater than the cost of sales
Calculated by Revenue - Cost of Sales
- Revenue is money generated through selling goods and services
  - Calculated by Quantity sold x Selling price
- Cost of Sales is the cost of raw materials and labour used in producing or buying in the goods actually sold by the business during a time period
  - Calculated by Variable Cost per unit x Quantity Sold
In 2023, Toys & Trikes Ltd earned revenue of $274,000 and its cost of sales was $169,000
- Gross Profit was therefore $274,000 - $169,000 = $105,000

Operating Profit

Operating profit is profit made by a business after all costs have been deducted from revenue
Calculated by Gross Profit - Expenses
- Expenses are costs that are not directly related to the production of goods or purchasing stock for sales
In 2023, Toys & Trikes Ltd made a gross profit of $105,000 and had expenses of $48,000
- Operating Profit was therefore $105,000 - $48,000 = $57,000

Exam Hint Take the time to learn how to calculate gross profit and operating profit. These formulas are not provided in the exam paper.

Interpreting the statement of comprehensive income

Spec point — 3.4.1 · the use of statements of comprehensive income in decision making (students will not be required to construct an income statement) • the nature of profit and its importance.

Interpreting the statement of comprehensive income

Comparing Toys & Trikes Ltd's performance over time

Revenue

Revenue increased by $8,000 between 2022 and 2023
This may be due to increased sales volume,higher prices or a combination of the two

Cost of sales

Cost of sales increased by $15,000 between 2022 and 2023
This may be due to suppliers increasing prices, buying better quality supplies or increased wastage

Gross profit

Gross profit fell by $3,000 between 2022 and 2023
This is as a result of the increased cost of sales

Expenses

Expenses increased by $4,000 between 2022 and 2023
This may be as a result of increased salaries, higher utilities costs or rent increases

Operating profit

Operating profit fell by $7,000 between 2022 and 2023
This is as a result of both higher cost of sales and increased expenses

Considerations when analysing and interpreting the statement of comprehensive income

Finance managers analyse and interpret this data in order to make beneficial changes or set new strategic objectives

Business is making a profit	Business is making a loss
- Is the profit higher or lower than last year? - If higher, what has the business done that could have led to this? - E.g. Finding a cheaper supplier of raw materials or increasing sales due to a new promotional campaign - If lower, why is profit falling? - Have costs increased, such as higher energy bills for the premises, or have sales fallen due to a new competitor entering the market?	- Is this a short-term or long-term problem? - Lower profits may be a result of an external shock affecting all businesses, such as the 2020 Covid pandemic, in which many businesses had to close or reduce working hours - Some losses may be more long-term - E.g. E-commerce growth has led to many high-street stores closing down as the number of customers has dwindled
- Is the profit higher or lower than that of competitors? - If lower, what can be done to become as profitable as other businesses? - E.g. Does the business need to improve the quality of the products or increase the product portfolio?	- Are competitors making losses? - If they are, the business needs to consider whether the industry is changing to the point that it may become extinct - Alternatively, it needs to ask tough questions about what can be done to evolve with changing market conditions

Business is making a profit

Business is making a loss

- Is the profit higher or lower than last year?

- If higher, what has the business done that could have led to this?

- E.g. Finding a cheaper supplier of raw materials or increasing sales due to a new promotional campaign
- If lower, why is profit falling?

- Have costs increased, such as higher energy bills for the premises, or have sales fallen due to a new competitor entering the market?

- Is this a short-term or long-term problem?

- Lower profits may be a result of an external shock affecting all businesses, such as the 2020 Covid pandemic, in which many businesses had to close or reduce working hours
- Some losses may be more long-term

- E.g. E-commerce growth has led to many high-street stores closing down as the number of customers has dwindled

- Is the profit higher or lower than that of competitors?

- If lower, what can be done to become as profitable as other businesses?
- E.g. Does the business need to improve the quality of the products or increase the product portfolio?

- Are competitors making losses?

- If they are, the business needs to consider whether the industry is changing to the point that it may become extinct
- Alternatively, it needs to ask tough questions about what can be done to evolve with changing market conditions

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Business is making a profit	Business is making a loss
- Is the profit higher or lower than last year? - If higher, what has the business done that could have led to this? - E.g. Finding a cheaper supplier of raw materials or increasing sales due to a new promotional campaign - If lower, why is profit falling? - Have costs increased, such as higher energy bills for the premises, or have sales fallen due to a new competitor entering the market?	- Is this a short-term or long-term problem? - Lower profits may be a result of an external shock affecting all businesses, such as the 2020 Covid pandemic, in which many businesses had to close or reduce working hours - Some losses may be more long-term - E.g. E-commerce growth has led to many high-street stores closing down as the number of customers has dwindled
- Is the profit higher or lower than that of competitors? - If lower, what can be done to become as profitable as other businesses? - E.g. Does the business need to improve the quality of the products or increase the product portfolio?	- Are competitors making losses? - If they are, the business needs to consider whether the industry is changing to the point that it may become extinct - Alternatively, it needs to ask tough questions about what can be done to evolve with changing market conditions

Business is making a profit

Business is making a loss