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Financial Accounting · Statement of profit or loss and other comprehensive income

Format of the Statement of Profit or Loss and OCI

Updated 11 October 2026 · Fact-checked

The statement of profit or loss and other comprehensive income shows an entity's income, expenses, profit and other comprehensive income for a period. IAS 1 lets you show it as one statement or two, and classify expenses by nature or function. To solve questions, list the required lines in order and fill in the figures.

Understand Format of the Statement of Profit or Loss and OCI

A company needs to report how well it performed over a year. The statement of profit or loss and other comprehensive income (SPLOCI) does this. It starts with revenue and ends with total comprehensive income for the year.

IAS 1 allows two presentations. In the single-statement approach, profit or loss and other comprehensive income (OCI) appear in one statement. In the two-statement approach, a statement of profit or loss shows profit for the year. A second statement starts with that profit and adds OCI. The totals are the same either way.

IAS 1 also lets you classify expenses in the profit or loss section in two ways. By function groups costs by what they are used for: cost of sales, distribution costs and administrative expenses. This shows gross profit. By nature groups costs by what they are: depreciation, wages, purchases of materials, and changes in inventories. Most ACCA FA questions use the function method.

IAS 1 requires certain line items on the face of the statement. These include revenue, finance costs, tax expense, profit or loss for the year, each component of OCI, and total comprehensive income. Other lines, such as gross profit, are added when they help understanding.

OCI holds items that IFRS Accounting Standards say go outside profit or loss. At this level, the usual example is a revaluation surplus on property, plant and equipment. Profit for the year plus OCI gives total comprehensive income.

Key formulas to remember

Gross profit
Gross profit = Revenue − Cost of sales
Cost of sales = opening inventory + purchases − closing inventory (plus any other costs of sale).
Profit from operations
Profit from operations = Gross profit + Other income − Distribution costs − Administrative expenses
Finance costs are not deducted here. Show them on a separate line below.
Profit before tax
Profit before tax = Profit from operations − Finance costs
Investment income, if any, is added at this point.
Profit for the year
Profit for the year = Profit before tax − Income tax expense
This is the bottom line of profit or loss.
Total comprehensive income
Total comprehensive income = Profit for the year + Other comprehensive income for the year
A revaluation surplus is added. A revaluation deficit charged to OCI is deducted.
Expenses by nature
Total expenses by nature = Changes in inventories + Raw materials used + Employee costs + Depreciation + Other expenses
No gross profit line is needed in this method.
Dividends
Dividends paid are not an expense
They appear in the statement of changes in equity, not in the SPLOCI.

How to solve Format of the Statement of Profit or Loss and OCI questions

Use this method for any question that asks you to prepare or identify parts of the statement.

  1. 1Read the question to see which format is required: single or two statements, by function or by nature.
  2. 2Write the headings in order: revenue, cost of sales, gross profit, other income, distribution costs, administrative expenses, finance costs, profit before tax, tax, profit for the year.
  3. 3Calculate cost of sales using opening inventory, purchases and closing inventory, and add other items such as depreciation of production assets if the question says so.
  4. 4Allocate each remaining expense to distribution costs or administrative expenses, and adjust for accruals, prepayments, depreciation and irrecoverable debts.
  5. 5Put finance costs and income tax on their own lines. Leave dividends out.
  6. 6Add the OCI section for items such as a revaluation surplus, then compute total comprehensive income.
  7. 7Check that the profit for the year agrees with your workings and that no item appears twice.

Quickest way: Template-first approach

When to use it: Use this for multiple choice and number entry questions that give a list of balances and ask for one subtotal.

  1. Decide what the question asks for: gross profit, profit from operations, profit for the year or total comprehensive income.
  2. Scan the list and ignore items that belong in the statement of financial position, such as receivables, payables and share capital.
  3. Pick out only the relevant income and expense items and apply the adjustments given.
  4. Compute the target subtotal directly from the formula and do not draw the whole statement.
  5. Check that you have not deducted dividends or added a revaluation surplus to profit.

Common mistakes in Format of the Statement of Profit or Loss and OCI

  • Deducting dividends in the statement of profit or loss.

    Dividends look like a payment out of profit, so they seem like an expense.

    Fix: Dividends are a distribution of profit and go in the statement of changes in equity. They are never an expense.

  • Including a revaluation surplus in profit for the year.

    Students see a gain and add it to profit.

    Fix: Put the surplus in OCI. It increases total comprehensive income but not profit for the year.

  • Mixing the by-nature and by-function methods in the same statement.

    Students list depreciation and wages separately while also showing cost of sales.

    Fix: Choose one method. In the function method, allocate depreciation and wages into cost of sales, distribution costs and administrative expenses.

  • Including finance costs within administrative expenses.

    Loan interest is also a cost of running the business.

    Fix: IAS 1 requires finance costs to be shown as a separate line. Deduct them after profit from operations.

  • Forgetting to adjust cost of sales for opening and closing inventory.

    Students use purchases alone as cost of sales.

    Fix: Cost of sales = opening inventory + purchases − closing inventory. Include carriage inwards if given.

  • Calling total comprehensive income 'profit for the year'.

    Both sit near the bottom of the statement.

    Fix: Profit for the year ends the profit or loss section. Total comprehensive income includes OCI as well. Read the question wording.

Worked examples

Example 1

A company has revenue of $500,000, opening inventory of $40,000, purchases of $300,000 and closing inventory of $60,000. Distribution costs are $50,000, administrative expenses are $70,000, finance costs are $10,000 and income tax is $20,000. Calculate profit for the year.

Show the solution
  1. Cost of sales = 40,000 + 300,000 − 60,000 = $280,000.
  2. Gross profit = 500,000 − 280,000 = $220,000.
  3. Profit from operations = 220,000 − 50,000 − 70,000 = $100,000.
  4. Profit before tax = 100,000 − 10,000 = $90,000.
  5. Profit for the year = 90,000 − 20,000 = $70,000.

Answer: Profit for the year is $70,000.

Example 2

A company reports profit for the year of $70,000. During the year it revalued land and recognised a revaluation surplus of $25,000. It also paid dividends of $15,000. Calculate total comprehensive income for the year.

Show the solution
  1. Start with profit for the year: $70,000.
  2. The revaluation surplus of $25,000 is OCI, so add it.
  3. Total comprehensive income = 70,000 + 25,000 = $95,000.
  4. Ignore the dividend. It is shown in the statement of changes in equity and does not affect profit or total comprehensive income.

Answer: Total comprehensive income is $95,000.

Exam tips

  • Read whether the question wants profit for the year or total comprehensive income. The two differ by OCI.
  • In objective tests, ignore statement of financial position items and compute only the subtotal asked for.
  • For multiple response questions on IAS 1, remember that dividends are not an expense, and that a revaluation surplus is OCI. Check each option against that.
  • Learn the order of the lines. Section B questions often ask you to place figures into the right line of the template.
  • If a question says expenses are classified by nature, look for lines such as depreciation, employee costs and changes in inventories, and no gross profit line.

Practice questions from Statement of profit or loss and other comprehensive income

Format of the Statement of Profit or Loss and OCI in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Format of the Statement of Profit or Loss and OCI: frequently asked questions

Can I present one statement or two?

Yes. IAS 1 allows a single statement of profit or loss and OCI, or two statements. In the two-statement approach, the second starts with profit for the year and adds OCI. The totals do not change.

What is the difference between expenses by nature and by function?

By nature groups expenses by type, such as depreciation or wages. By function groups them by purpose, such as cost of sales or administrative expenses. The function method shows gross profit, and it is the one you will usually use in FA.

What goes in other comprehensive income?

OCI contains gains and losses that IFRS Accounting Standards require to be recognised outside profit or loss. A revaluation surplus on property, plant and equipment is the main example at this level.

Are dividends in the statement of profit or loss?

No. Dividends are a distribution to owners. They are shown in the statement of changes in equity and do not reduce profit for the year.