In general, a business can only include revenues and expenses that have been realized on an income statement. Revenues and expenses that haven't been realized, like gains and losses on equity and debt that the company still holds, are considered to be other comprehensive income. Comprehensive income is the sum of net income for the period and accumulated other comprehensive income.
Calculate all operating revenue for the period. Operating income is generally service revenue, sales revenue and service fees less any allowances for discounts and returns. Subtract the cost of goods sold to arrive at gross profit. The cost of goods sold is the direct labor, materials and overhead expense from the product or services sold.
Subtract total operating expenses. Operating expenses are the costs incurred performing normal business functions. Typical operating expenses include salaries, commissions, rent, utilities, advertising, bank fees, maintenance and supplies.
Add any nonoperating revenue and income from discontinued operations. Nonoperating revenue is revenue from sources other than normal business operations. Common sources of nonoperating revenue are interest revenue and gains on the sale of investment. Revenue from discontinued operations is revenue from a business project or department that is no longer in existence.
Subtract any nonoperating expenses and extraordinary expenses. Like nonoperating revenue, nonoperating expenses are expenses incurred from non-business functions, like losses on investments and interest expense. Extraordinary expenses are losses that are unusual or infrequent in occurence, like losses from an unlikely natural disaster. The resulting figure is net income.
Calculate revenue and gains considered other comprehensive income. Other comprehensive income items are revenues, gains, expenses and losses that are not yet realized. Potential revenues from other comprehensive income are unrealized gains on available-for-sale securities, derivative instruments and debt securities. Include any gains from intra-company foreign currency transactions or adjustments. Gains and credits on pensions and post-retirement benefit plans also fall into this category.
Subtract expenses and losses from other comprehensive income. Other comprehensive expenses and losses come from the same source as other comprehensive revenues. Include any unrealized losses, losses on intra-company foreign currency transactions, and losses on pension plans and post-retirement plans. The resulting figure is net other comprehensive income for the period.
Add the net total of other comprehensive income for the period to the previous period accumulated other comprehensive income. Add net income to the new balance of accumulated other comprehensive income. The total is comprehensive income.