Financial Accounting · The main elements of financial statements

Statement of Profit or Loss and Other Comprehensive Income Format

Updated 11 October 2026 · Fact-checked

The statement of profit or loss and OCI shows an entity's performance for a period. It starts with revenue, deducts cost of sales and expenses to reach profit for the year, then adds other comprehensive income, such as revaluation gains, to give total comprehensive income. Work down the format line by line.

Understand Statement of Profit or Loss and Other Comprehensive Income

A statement of financial position shows what a business owns and owes on one date. The statement of profit or loss and other comprehensive income shows how well the business performed over a period, usually a year. It reports income and expenses.

Profit or loss covers the normal trading result. It starts with revenue, deducts cost of sales to give gross profit, then deducts distribution costs, administrative expenses and other expenses. Other income is added. Finance costs are deducted. Income tax is deducted last. The result is profit for the year.

Other comprehensive income (OCI) holds certain gains and losses that IFRS Accounting Standards say must not go through profit or loss. At this level, the main example is a revaluation surplus on property, plant and equipment. The gain increases equity, but it is not yet a trading result.

Total comprehensive income = profit for the year + other comprehensive income. This is the full change in equity from performance, before owner transactions such as share issues and dividends.

Dividends paid to owners are not an expense. They are shown in the statement of changes in equity, not here. Expenses are classified either by function (cost of sales, distribution, administrative) or by nature. The ACCA exam usually uses function.

Key formulas to remember

Gross profit: Gross profit = Revenue − Cost of sales; Cost of sales = opening inventory + purchases (and carriage inwards) − closing inventory.
Operating profit: Profit from operations = Gross profit + Other income − Distribution costs − Administrative expenses; Exact line names vary, but this is the order you follow.
Profit before tax: Profit before tax = Profit from operations − Finance costs; Interest on loan notes is a finance cost. Add investment income if given.
Profit for the year: Profit for the year = Profit before tax − Income tax expense; The tax expense is the current-year charge adjusted for any under- or over-provision from last year.
Total comprehensive income: Total comprehensive income = Profit for the year + Other comprehensive income; OCI includes revaluation surplus on non-current assets. A revaluation deficit is OCI only to the extent it reverses an earlier surplus on the same asset.

How to solve Statement of Profit or Loss and Other Comprehensive Income questions

Use this method for any question that asks you to prepare, complete or interpret the statement.

1Read the requirement and note the period. Identify whether you need profit for the year or total comprehensive income.
2List the adjustments given (accruals, prepayments, depreciation, irrecoverable debts, closing inventory, tax, revaluations) and mark each as profit or loss or OCI.
3Calculate revenue and cost of sales. Use opening inventory plus purchases less closing inventory.
4Work out each expense after adjustments. Accruals increase expenses. Prepayments reduce them.
5Allocate expenses to cost of sales, distribution costs, administrative expenses and finance costs as the question directs.
6Deduct finance costs and income tax to reach profit for the year.
7Add OCI items, such as a revaluation surplus, to reach total comprehensive income.
8Check: ignore dividends, drawings and purchases of assets. These are not expenses.

Quickest way: Top-down line check

When to use it: Use this in Section A objective questions that give a few figures and ask for one line, such as gross profit or total comprehensive income.

Write only the lines you need, for example Revenue, Cost of sales, Gross profit.
Fill in each figure and apply the adjustment given, such as closing inventory or depreciation.
Ask for each item: is it profit or loss, OCI, or neither?
Compute the single requested figure and match it to exactly one option.
Eliminate options that include dividends or capital items.

Common mistakes in Statement of Profit or Loss and Other Comprehensive Income

Treating a revaluation surplus as income in profit or loss.
It is a gain, so it feels like income.
Fix: Put revaluation surplus in OCI. It is unrealised and the standards require OCI treatment.
Deducting dividends as an expense.
Money leaves the business, so it looks like a cost.
Fix: Dividends are distributions of profit to owners. Show them in the statement of changes in equity only.
Forgetting to adjust cost of sales for opening and closing inventory.
Students use purchases as cost of sales.
Fix: Always compute opening inventory + purchases − closing inventory.
Ignoring accruals and prepayments on expenses.
The trial balance figure is used as the expense without reading the notes.
Fix: Adjust each expense: add accruals and subtract prepayments before placing it in the statement.
Including purchase of non-current assets as an expense.
Confusion between capital and revenue expenditure.
Fix: Only depreciation of the asset goes in profit or loss. The cost goes in the statement of financial position.
Stopping at profit for the year when total comprehensive income is asked.
Rushing and missing the wording of the requirement.
Fix: Underline the requirement and check whether any OCI item is given.

Worked examples

Example 1

For the year, a company has revenue of $500,000, opening inventory $40,000, purchases $280,000 and closing inventory $55,000. Administrative expenses are $60,000, distribution costs are $35,000 and finance costs are $10,000. Income tax is $18,000. A property revaluation gave a surplus of $30,000. Calculate profit for the year and total comprehensive income.

Show the solution

Cost of sales = 40,000 + 280,000 − 55,000 = $265,000.
Gross profit = 500,000 − 265,000 = $235,000.
Profit from operations = 235,000 − 60,000 − 35,000 = $140,000.
Profit before tax = 140,000 − 10,000 = $130,000.
Profit for the year = 130,000 − 18,000 = $112,000.
Total comprehensive income = 112,000 + 30,000 = $142,000.

Answer: Profit for the year is $112,000. Total comprehensive income is $142,000.

Example 2

A trial balance shows rent paid of $24,000 for the year to 31 December. $4,000 of this relates to the following year. Electricity paid is $9,000 and $1,500 is owed at year end. Depreciation is $12,000. All are administrative expenses. A dividend of $20,000 was paid. Calculate total administrative expenses.

Show the solution

Rent expense = 24,000 − 4,000 prepaid = $20,000.
Electricity expense = 9,000 + 1,500 accrued = $10,500.
Depreciation = $12,000.
Total = 20,000 + 10,500 + 12,000 = $42,500.
The dividend is excluded because it is not an expense.

Answer: Administrative expenses are $42,500.

Exam tips

In multiple-choice questions, wrong options are often built from common errors, such as including dividends or ignoring closing inventory. Calculate first, then look at the options.
Learn the order of the format: revenue, cost of sales, gross profit, other income, expenses, finance costs, tax, profit, OCI, total comprehensive income.
Section B questions on accounts preparation often need this statement. Show clear workings for cost of sales and adjusted expenses.
In number entry questions, check the units, such as $ or $000, and any rounding instruction before you type the answer.
Ask of each item: profit or loss, OCI, or neither. This one question separates most marks.

Practice questions from The main elements of financial statements

Statement of Profit or Loss and Other Comprehensive Income in other exams

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

Statement of Profit or Loss and Other Comprehensive Income: frequently asked questions

What is the difference between profit or loss and other comprehensive income?

Profit or loss holds income and expenses from normal activities. OCI holds specific gains and losses that standards require outside profit or loss, such as revaluation surplus on property. Together they make total comprehensive income.

What is other comprehensive income in ACCA FA?

It is income and expenses not recognised in profit or loss. In FA, the main example is a revaluation surplus on property, plant and equipment. It is shown below profit for the year.

Is the dividend shown in the statement of profit or loss?

No. Dividends are distributions to owners, not expenses. They appear in the statement of changes in equity.

How do I prepare the statement of profit or loss in the exam?

Work down from revenue. Calculate cost of sales, apply accruals, prepayments and depreciation to expenses, deduct finance costs and tax, then add any OCI. Follow the order of the format.