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  1. Singapore comprises one main island and several offshore islands.

  2. Singapore is comprised of one main island and several offshore islands.

Are these two sentences grammatically correct and which one better?

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Both of the sentences are equally acceptable. As for which is better, that would be your choice of style.

Some argue that "BE comprised of" is incorrect usage, but there's really no reason to treat it differently from other transitive verbs.

Usage note

Comprise has had an interesting history of sense development. In addition to its original senses, dating from the 15th century, “to include” and “to consist of ” ( The United States of America comprises 50 states), comprise has had since the late 18th century the meaning “to form or constitute” ( Fifty states comprise the United States of America). Since the late 19th century it has also been used in passive constructions with a sense synonymous with that of one of its original meanings “to consist of, be composed of ”: The United States of America is comprised of 50 states.These later uses are often criticized, but they occur with increasing frequency even in formal speech and writing.

For the record, comprises has a frequency of 1204 and is comprised of has a frequency of 358, of course part of it due to overzealous copy-editing.

Also, the n-gram agrees with what's already said in dict.reference. The existence of "is comprised of" is certainly notable and not negligible:

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Both the sentences are correct grammatically.

Comprise is a transitive verb. You can also use it in the passive voice in the form of "be comprised of". You can use either Comprise or comprised of; both are usually used in formal English.

You can use " consist of" instead of comprise/be comprised of as "consist of" is more common and used in both formal and informal English.

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