Question

Describe the general purpose of the statement of comprehensive income. In addition, explain the terms income and expenses as defined by the Conceptual Framework for Financial Reporting. [15 marks]

Answer 1

General purpose of the statement of Comprehensive income :

Actually the stakeholders of an entity need information about the entity's financial performance to evaluate how effectively company is operating and to assess entity's ability to generate economic resources .

The general purpose of the statement of Comprehensive income is to provide information to stakeholders about the financial performance of business over the accounting period i.e about the profitability of the entity. It provides a summary of Income and Expenses over the accounting period so that company's Profit/loss can be calculated.

Definition of INCOME : Income refers to Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabillities that results in increases in Equity other than those relating to contributions from Equity participants.

Definition of EXPENSES : Expenses refers to decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants