Fundamentals of Accountancy, Business, Management 2: Quarter 1 Chapter 1: The Statement of Financial Position (SFP)

FUNDAMENTALS OF LEARNING
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Name: _______________________________________________________Date: _______________________________

Grade/Section: _________________________________________________Strand: _____________________________
QUARTER 1
CHAPTER 1: THE STATEMENT OF FINANCIAL POSITION (SFP)
Background Information:
The Statement of Financial Position, often called the balance sheet, is a financial statement that reports
the assets, liabilities, and equity of a company on a given date. In other words, it lists the resources, obligations,
and ownership details of a company on a specific day. You can think of this like a snapshot of what the company
looked like at a certain time in history.
This definition is true in the sense that this statement is a historical report. It only shows the items that
were present on the day of the report. The statement of financial position only records the company account
information on the last day of an accounting period.
In this sense, investors and creditors can go back in time to see what the financial position of a company
was on a given date by looking at the balance sheet.
Brief Discussion:
The Statement of Financial Position is formatted like the accounting equation (Assets = Liabilities +
Owner’s Equity). Thus, the assets are always listed first.
Assets are resources that the company can use to create goods or provide services and generate
revenues. There are many ways to format the assets section, but the most common size balance sheet divides
the assets into two sub-categories: current and non-current. The current assets include cash, accounts
receivable, and inventory. These resources are typically consumed in the current period or within the next 12
months. The non-current assets section includes resources with useful lives of more than 12 months. In other
words, these assets last longer than one year and can be used to benefit the company beyond the current
period. The most common non-current assets include property, plant and equipment.
Liabilities are debt obligations that the company owes other companies, individuals, or institutions.
These range from commercial loans, personal loans, or mortgages. This section is typically split into two main
sub-categories to show the difference between obligations that are due in the next 12 months, current liabilities,
and obligations that mature in future years, long-term liabilities. Current debt usually includes accounts payable
and accrued expenses. Bothe of these types of debts typically become due in less than 12 months. The long-
term section includes all other debts that mature more than a year into the future like mortgages and long-term
notes.
Owner’s Equity consists of the ownership of the company. In other words, this measures their stake in
the company and how much the shareholders or partners actually own. This section is displayed slightly
different depending on the type of entity. For example a corporation would list the common stock, preferred
stock, additional paid-in capital, treasury stock, and retained earnings. Meanwhile, a partnership would simply
list the members’ capital account balances including the current earning, contributions, and distributions.
The accounts in the balance sheet are called permanent accounts or real accounts. Their balances are
forwarded as beginning balances in the next accounting period.
PREPARED BY: ETHELINE CHLOE E. BRAGAS 1
ICHON NATIONAL HIGH SCHOOL – SENIOR HIGH SCHOOL ACCOUNTANCY, BUSINESS AND MANAGEMENT
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
The Statement of Financial Position or Balance Sheet contains:
A. The Heading
1. Name of the Business
2. Title of the Report
3. Date of the Report (specific date)
4. Currency
For example:
ABC Trading
Statement of Financial Position
December 31, 2019
(in Philippine Peso)
B. The Asset Section
C. The Liability Section
D. The Owner’s Equity Section
There are two forms of Statement of Financial Position or Balance Sheet, the report form and the account form.
Report Form – A form of the SFP that shows asset accounts first and then liabilities and owner’s equity
after.
Report Form
(Vertical Form)
Assets
Total Assets ₱ xxx
Liabilities ₱ xxx
Owner’s Equity ₱ xxx
Total Liabilities and Owner’s Equity ₱ xxx
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Sample Format
ANGEL SERVICE COMPANY

December 31, 2019
ASSETS
Current Assets:
Cash ON Hand and in Banks ₱ 52,000.00
Accounts Receivable ₱ 605,000.00
Less: Allowance for doubtful accounts 15,000.00 590,000.00
Notes Receivable 100,000.00
Unused Supplies 38,000.00
Prepaid Expenses 43,000.00
Total Current Assets ₱ 823,000.00
Noncurrent Assets:
Equipment ₱2,800,000.00
Less: Accumulated Depreciation 150,000.00
Net Equipment ₱ 2,650,000.00
TOTAL ASSETS ₱3,473,000.00
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable-Trade ₱ 850,000.00
Accounts Payable - Others 330,000.00
SSS/PHIC/PAG-IBIG Payable 20,000.00
Total Current Liabilities ₱1,200,000.00
Noncurrent Liabilities:
Loans Payable ₱ 138,000.00
TOTAL LIABILITIES ₱1,338,000.00
Owner’s Equity
Angel Reyes, Capital ₱2,135,000.00
TOTAL LIABILITIES AND OWNER’S EQUITY ₱3,473,000.00
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Account Form – A form of the SFP that shows assets on the left side and liabilities and owner’s equity on
the right side just like the debit and credit balances of an account.
Account Form
(Horizontal Form)
RIGHT
LEFT
Liabilities ₱ xxx
Assets ₱ xxx
Owner’s Equity ₱ xxx
Total Liabilities & Owner’s Equity ₱ xxx

Total Assets ₱ xxx
Sample Format
ANGEL SERVICE COMPANY

December 31, 2019
Assets Liabilities and Owner’s Equity
Current Assets Current Liabilities

Cash on Hand and in Banks ₱ 52,000.00 Accounts Payable – Trade ₱ 850,000.00
Accounts Receivable 590,000.00 Accounts Payable – Others 330,000.00
Notes Receivable 100,000.00 SSS/PHIC/PAG-IBIG Payable 20,000.00
Unused Supplies 38,000.00 Total Current Liabilities ₱1,200,000.00
Prepaid Expenses 43,000.00
Total Current Assets ₱ 823,000.00 Noncurrent Liabilities
Loans Payable ₱1,338,000.00
TOTAL LIABILITIES ₱1,338,000.00
Noncurrent Assets
Equipment ₱2,800,000.00
Less: Accum. Dep’n. 150,000.00 Owner’s Equity
Net Equipment ₱2,650,000.00 Angel Reyes, Capital ₱2,135,000.00
TOTAL ASSETS ₱3,473,000.00 TOTAL LIABILITIES & OWNER’S EQUITY ₱3,473,000.00
MELC/ Objectives: Identify the elements of the SFP and describe each of them. (ABM_FABM12-Ia-b-1)
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Prepare an SFP using the report form and the account form with proper classification
of items as current and noncurrent. (ABM_FABM12-Ia-b-4)
Directions: Match column A to column B the correct definition of accounting terms. Write your answer on the
space provided. Write the letters only.
Activity 1:
A. Match column A to column B the correct definition of accounting terms. Write your answer on the space
provided. Write the letters only.
A B
___ 1. Relates to the company’s receivables which might not be collected. A. Cash
___ 2. Are goods on hand and are available for sale. B. Trading Securities
___ 3. Earned but not yet received/collected. C. Accounts Receivable
___ 4. Is any medium of exchange that a bank will accept at face value. D. Allowance for
Doubtful Account
___ 5. Are claims against debtors or customers arising from services rendered E. Advances to
on account and sale of merchandise on account. Employees
___ 6. Are claims supported by promissory note. F. Notes Receivable
___ 7. Cash received by employees to be deducted from their salaries in the future. G. Merchandise
Inventory
___ 8. Is an asset that is not subject to depreciation. It appreciates as time goes by. H. Accrued Income
___ 9. Are expenses paid in advance by the business. I. Capital
___ 10. Includes computers, air-conditioning units, electric fans, freezers, truck, etc. J. Prepaid Expenses
___ 11. Are amounts due to creditors for assets acquired on account. K. Furniture & Fixtures
___ 12. Is revenue collected by the business in advance. L. Accrued Expenses
___ 13. Are amounts owed to other for unpaid expenses. M. Accounts Payable
___ 14. It is increased by the amount of profit earned during the year or is N. Unearned Income
Decreased by a LOSS.
___ 15. Are amounts due to creditors “within” one year, evidenced by written O. Office/Store Supplies
promise to pay.
P. Notes Payable
B. Match the accounts on the table with the appropriate elements of the SFP below:
Long-term payable Accounts Payable Notes Receivable

Notes payable
PREPARED BY: ETHELINE CHLOE E. BRAGAS Cash Prepaid expense 5
Property, plant and equipment Owner’s Capital Accrued expenses
Accounts receivable Unearned income Inventory
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Asset Liabilities Equity
Activity 2:
Direction: Answer the following questions and use separate sheet of paper for your solutions.
1. Pinklane Company had current assets amounting to ₱ 100,000. Noncurrent assets for the year totaled ₱
76,000. How much is the company’s total assets?
2. Samplar Company’s total liabilities amounted ₱ 10,000. Total equity had an ending balance of ₱ 20,000.
How much is total assets?
3. DM Trading had the following accounts at year end: Cash ₱250,000, Accounts Payable ₱ 70,000, Prepaid
Expense ₱ 15,000. Compute for the company’s current assets.
4. Malaki Company’s Accounts Receivable amounted to ₱ 500,000. Prepaid Expense and Unearned Income
totaled ₱30,000 and ₱ 10,000 respectively. Cash balance amounted to ₱ 100,000 while Accounts
Payable and Inventory totaled to ₱ 20,000 and ₱ 10,000 respectively. How much is the company’s
current assets? Current liabilities?
5. Company’s Total Liabilities and Equity amounted to ₱285,000. Total noncurrent assets ended at ₱
85,000. Cash totaled ₱ 50,000. Inventory amounted to ₱ 100,000. Assuming the company had no other
assets, how much is Accounts Receivable?
6. Total assets amounted to ₱ 575,000. Total equity amounted to ₱ 250,000. Accounts Payable amounted
to ₱50,000 while Unearned Income totaled ₱ 85,000. Assuming there are no other current liabilities,
compute for the company’s noncurrent liabilities.
7. If assets are ₱ 17,000 and owner’s equity is ₱ 10,000, liabilities are ___________________.
8. At the end of the first month of operations for Juana’s Delivery Service, the business had the following
accounts: Accounts Receivable ₱ 1,200; Prepaid Insurance ₱ 500; Equipment ₱ 36,200; and Cash ₱
40,650. On the same date, Juana owed the following creditors: Nena’s Supply Company ₱ 12,000;
Maria’s Equipment ₱ 9,500. The current assets for the Juana’s Delivery Service are
______________________.
9. At the end of the first month of operations for Juana’s Delivery Service, the business had the following
accounts: Accounts Receivable ₱ 1,200; Prepaid Insurance ₱ 500; Equipment ₱ 36,200; and Cash ₱
40,650. On the same date, Juana owed the following creditors: Nena’s Supply Company ₱ 12,000;
Maria’s Equipment ₱ 9,500 (due after 2 years). The current liabilities are ______________________.
10. If during the year total assets increase by ₱ 75,000 and total liabilities decrease by ₱ 16,000, by how
much did owner’s equity increase/decrease?_______________________________.
Activity 3:
A. Prepare a Statement of Financial Position using the following accounts (one in report form and one in
account form). You can use any business name and the end of the current year for the heading.
Cash ₱ 5,000.00
Loans Payable 77,500.00
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Accounts Receivable 2,600.00
Supplies 2,300.00
Equipment 17,000.00
Owner’s Equity 40,000.00
Accounts Payable 22,400.00
Building 113,000.00
B. You were hired by Ms. Maria Kurdapya to prepare his sari-sari store’s Statement of Financial Position. In
order to prepare the statement, you identified the following assets and liabilities of Ms. Kurdapya:
a. Her sari-sari store has cash deposited in a bank account amounting to ₱50,000.
b. Her sari-sari store had a lot of uncollected sales from customers amounting to ₱ 75,000.
c. The total amount of merchandise left inside the store is ₱ 30,000.
d. She already paid one year’s rent in advance amounting to ₱ 12,000.
e. The value of all the company’s furniture amounted to ₱ 100,000.
f. She bought merchandise from her supplier amounting to ₱ 25,000 and the supplier agreed that
payment can be made 2 months after year-end.
g. SSS, Philhealth and Pag-ibig Payables for her one employee totaled ₱ 5,000.
h. The sari-sari store had outstanding liabilities to utility companies amounting to ₱ 3,000.
i. She had a loan from the bank amount to ₱ 50,000 to be paid in 3 years.
Required:
Prepare a Statement of Financial Position for the company (one in report form and one in
account form).
Activity 4:
Direction: Prepare Statement of Financial Position as of December 31, 2019 ( one in report form and one in
account form).
Madelaine Company
Post-Closing Trial Balance
December 31, 2019
Code Account Title Dr Cr

1110 Cash in Bank ₱ 123,153
1120 Petty Cash Fund 10,000
1130 Accounts Receivable 659,340
1131 Allowance for Bad Debts ₱ 15,000
1140 Notes Receivable 132,200
1150 Merchandise Inventory, Dec. 31, 2019 774,307
1160 Prepaid Expenses 3,200
1210 Furniture and Fixture 900,000
1211 Accumulated Depreciation-Furniture & Fixture 45,000
1220 Transportation Equipment 1,400,000
1221 Accumulated Depreciation – Transportation Equipment 140,000
2110 Accounts Payable – Trade 960,300
2120 Notes Payable – Noncurrent 234,000
2130 SSS, Philhealth, HDMF Payable 4,000
2140 Withholding Taxes Payable 2,600
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
2150 Accrued Expenses Payable 1,300
3110 Madelaine Ramos, Capital 2,600,000
Total ₱ 4,002,200 ₱ 4,002,200
Guide Questions:
1. Does the Statement of Financial Position or Balance Sheet always balance?
________________________________________________________________
________________________________________________________________
________________________________________________________________
2. What elements are included in the Statement of Financial Position?
________________________________________________________________
________________________________________________________________
3. Differentiate the account form and report form SFP in preparation of financial statements.
________________________________________________________________
________________________________________________________________
________________________________________________________________
Reflection:
What is the importance of SFP in the preparation of financial statements?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
References:
1. Fundamentals of Accountancy, Business and Management 2 Teaching Guide, Lesson 1, pp. 1-18 by CHED in
collaboration with PNU.
2. Fundamentals of Accountancy, Business and Management 2 Textbook, Chapter 1, pp.2-32 by Salazar, D./Rex
Bookstore, Inc.2
3. Fundamentals of Accountancy, Business and Management: A Textbook in Basic Accounting 2, Chapter 1, pp.2-13
by Solita A. Frias/Erlinda C. Pefianco,EdD, Phoenix Publishing House
Answer Key: A
1.
Answer Key: B
Assets: Cash, A/R, N/R, Prepaid Expenses, Inventory, PPE
Liabilities: A/P, N/P, Accrued expenses, Unearned income, Long term payable
PREPARED BY: Owner’s
Equity: ETHELINEcapital
CHLOE E. BRAGAS 8
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Name: _______________________________________________________Date:_______________________________
Grade/Section: _________________________________________________Strand: _____________________________
QUARTER 1
CHAPTER 2: STATEMENT OF COMPREHENSIVE INCOME (SCI)
The Statement of Comprehensive Income is a statement that reports the results of operations of the
business for one accounting period. The SCI is the same as the Income Statement. It contains the ff. information:
a. Revenue generated by operating the business
b. Costs spent to generate the revenue; and
c. Income, which is the excess of revenue over costs.
The SCI is described as a “for the period” report. This means that the amounts presented on the report
include only those that occurred within the given period.
Financial statements is a set of interconnected reports and SCI is prepared first. The net income is
transferred out to the Statement of changes in equity to be included in the determination of the Owner’s capital
balance as of the end of the year. The capital balance is transferred to the SFP.
The Statement of Comprehensive Income calculates the net income of a company by subtracting total
expenses from total income. This calculation shows investors and creditors the overall profitability of the
company as well as how efficiently the company is at generating profits from total revenues.
Brief Discussion:
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Statement of Comprehensive Income – also known as the income statement. Contains the results of the
company’s operations for a specific period of time which is called net income if it is a net positive result while a
net loss if it is a negative result. This can be prepared for a month, a quarter or a year.
Temporary Accounts – also known as nominal accounts are the accounts found under the Statement of
Comprehensive Income. They are called such because at the end of the accounting period, balances under these
accounts are transferred to the capital account, thus having only temporary amounts and resulting to zero
beginning balances at the beginning of the following year. Examples of temporary accounts include revenues,
sales, utilities expense, supplies expense, salaries expense, depreciation expense, interest expense among
others.
Elements of Income Statement
Revenues
Sales An account used to summarize sale of goods of a
trade or merchandising business. This includes cash
sales and sales on account.
Service Income The earning derived from service rendered by a
servicing business to its customers. This includes cash
and on account service.
Professional Fees The earning derived from services rendered by a
professional or professional servicing firm which
could be in cash or in collectibles to its clients.
Interest Income The earning representing the time value of money
derived from promissory notes received by the
business, whether in cash or collectibles in the future.
Rent Income The income earned from allowing others to use
property or facility of the business.
Gain on Sales of other Assets The income derived from the sales of assets used in
the business operation. There is a gain on sale if the
proceeds exceed the book value or cost of disposed
asset.
Cost of Sales or Cost of Services
Cost of Sales The value of merchandise sold.
Salaries and Wages Expense The amount paid to service rendered by the
employees in the operation of the business.
Utilities Expense This includes telephone, water, and electricity used.
Rent Expense This includes rentals for the use of equipment, office,
building, and land spaces owned by others.
Supplies Expense The amount of supplies consumed or used by the
business during the period. Examples: used in papers,
inks, ballpoint pens, etc.
Transportation Expense This includes fare for trips and travels; cost of
gasoline and oil used for company vehicles.
Depreciation Expense This includes portion of the cost of building and
equipment allocated to one accounting period.
Representation Expense This includes the amount paid to restaurants, hotels
for treating customers and others.
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Interest Expense This includes interest on debts or monetary
obligations.
Insurance Expense The amount of insurance policy incurred during the
current period.. Examples; premiums on building
insurance, life insurance, plant insurance, etc.
Taxes and Licenses Expenses The cost of local as well as national taxes that are
incurred and required to be paid in connection with
the conduct of the business. Examples; cost to
acquire mayor’s permit, registration cost of the
building, percentage tax on sales, etc.
Doubtful Account Expenses The estimated amount of losses the uncollectible
accounts arising from credit sales of the current
period. This is also called the debt expense or
uncollectible account expense.
SCI of a Service company and of a Merchandising Company

 A service company provides services in order to generate revenue and the main cost associated
with their service is the cost of labor which presented under the account Salaries Expense.
 A merchandising company sells goods to customers and the main cost associated with the activity
is the cost of the merchandise which is presented under the line item Cost of goods sold.
Differentiates the single-step and multi-step format of the SCI
Single-step
 Called single-step because all revenues are listed down in one section while all expenses are listed in
another. Net income is computed using a “single-step” which is Total Revenues minus Total
Expenses.
 Single-step SCI is commonly used by service companies
 To prepare the single-step income statement:
a. Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wording – “for the”
b. Sample of a Report Form SCI
i. First part is revenues
This is the total amount of revenue that the company was able to generate from
providing services to customers.
ii. Second part is expenses (can be broken down into General and Administrative
and Selling Expenses)
iii. Revenues less Expenses. Net income for a positive result and net loss for a
negative result.
Sample Format
Learning Is Fun Company
Statement of Comprehensive Income
For the Year Ended December 31, 2019
Service
PREPARED BY: ETHELINE CHLOE E. Revenue
BRAGAS ₱ 100,000.00 11
Expenses:
Salaries Expense ₱ 40,000.00
Rent Expense 20,000.00
Depreciation Expense 10,000.00
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Multi-step
 Called multi-step because there are several steps needed in order to arrive at the company’s net
income.
 Multi-step format is commonly used by merchandising companies.
 To prepare multi-step income statement:
i. First part is Sales
This is the total amount of revenue that the company was able to generate from selling products
ii. Second part compose of contra revenue – called contra because it is on the opposite side of the
sales account. The sales account is on the credit side while the reductions to sales accounts are
on the debit side. This is “contrary” to the normal balance of the sales or revenue accounts.
ii.i Sales returns – this account is debited in order to record returns of customers or
allowance for such returns. Sales returns occur when customers return their products
for reasons such as but not limited to defects or change of preference.
ii.ii Sales discount – this is where discounts given to customers who pay early are recorded.
Also known as cash discount. This is different from trade discounts which are given when
customers buy in bulk. Sales discount is awarded to customers who pay earlier or before
the deadline.
iii. Sales less Sales returns and Sales discount is Net Sales
iv. Third part is Cost of Goods Sold – this account represents the actual cost of merchandise that
the company was able to sell during the year.
iv.i Beginning inventory – this is the amount of inventory at the beginning of the accounting
period. This is also the amount of ending inventory from the previous period.
iv.ii Net Cost of Purchases = Purchases + Freight In
iv.ii.i Net Purchases = Purchases – (Purchase discount and purchase returns)
iv.ii.i.i Purchases – amount of goods bought during the current
accounting period.
iv.ii.i.ii. Contra Purchases – an account that is credited being “contrary”
to the normal balance of purchase account.
iv.ii.i.ii.i Purchase discount – account used to record early
payment by the company to the suppliers of
merchandise. This is how buyers see a sales discount
given to them by a supplier.
iv.ii.i.ii.ii Purchase returns – account used to record
merchandisereturned by the company to their suppliers. This is
how buyers see a sales return recorded by their supplier.
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
iv..ii.ii Freight In – this account is used to record transportation costs
of merchandise purchased by the company. Called freight in
because this Is recorded when goods are transported into the
company.
iv.iii Add Beginning inventory and Net cost of Purchases to get Cost of Goods Available
for Sale
iv.iv. Ending inventory – amount if inventory presented in the Statement of Financial
Position. Total cost of inventory unsold at the end of the accounting cycle.
v. Sales less Cost of Goods Sold is Gross Profit
vi. Fourth Part is General and Administrative Expenses – these expenses are not directly
related to the merchandising function of the company but are necessary for the
business to operate effectively.
vii. Fifth Part is Selling Expenses – these expenses are those that are directly related to the
main purpose of a merchandising business: the sale and delivery of merchandise. This
does not include cost of goods sold and contra revenue accounts.
viii. Gross Profit less General and Administrative Expenses less Selling Expenses is Net Income for a
positive result while Net Loss for a negative result.
Sample Format
HAPPY SELLING COMPANY
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2019
Sales ₱ 500,000.00
Less: Sales Returns ₱ 30,000.00
Sales Discounts 10,000.00 40,000.00
Net Sales ₱ 460,000.00
Cost of Goods Sold
Beginning Inventory ₱ 250,000.00
Net Cost of Purchases
Purchases ₱ 100,000.00
Purchase Returns ( 20,000.00)
Purchase Discounts ( 10,000.00)
Net Purchases 70,000.00
Freight In 15,000.00 85,000.00
Cost of Goods Available for Sale 335,000.00
Ending Inventory ( 50,000.00) 285,000.00
Gross Profit ₱ 175,000.00
General and Administrative Expenses
Salaries Expense (₱ 20,000.00)
Rent Expense ( 15,000.00)
Depreciation Expense ( 10,000.00)
Utilities Expense ( 5,000.00)
Miscellaneous Expense ( 1,000.00) ( 51,000.00)
Selling Expenses
Salaries Expense (₱ 10,000.00)
PREPARED BY:Rent
ETHELINE
Expense
CHLOE E. BRAGAS ( 8,000.00) 13
Depreciation
ICHON NATIONAL Expense
HIGH SCHOOL – SENIOR HIGH SCHOOL ACCOUNTANCY,(BUSINESS
7,000.00)
AND MANAGEMENT
Utilities Expense ( 6,000.00) ( 31,000.00)
Net Income ₱ 93,000.00
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
MELC/ Objectives: Identify the elements of the SCI and describe each of these items for a service business
and a merchandising business. (ABM_FABM12-Ic-d-5)
Prepare an SCI for a service business using the single-step approach.
(ABM_FABM12-Ic-d-6)
Prepare an SCI for a merchandising business using the multistep approach.
(ABM_FABM12-Ic-d-7)
Exercises/Activities:
A. Read each sentence carefully and determine whether the statement is True or False. Write your answers in
the space provided before the number.
__________1. The SCI is a picture of the results of operations of the company as of the cut-off date.
__________2. The major elements of the SCI are income and expenses.
__________3. Expenses decrease assets and therefore have credit normal balances.
__________4. Revenue result in increase in equity and therefore has a credit normal balance.
__________5. Goods returned by customers are immediately deducted to the Sales Revenue account.
B. Identify the what elements of the SCI is being described and state whether it’s a service business or a
merchandising business. Choose from the box below.
Cost of Sales Interest income Selling expense

Net Sales General and administrative expense Sales discounts
Merchandise inventory Tuition Fee Depreciation expense
Professional fee Commission expense Operating expense
Ex.
_Tuiti
on Fee – Service business______ 1. Recorded as revenue of Educational institutions.
___________________________________ 2. Recorded as revenue of trading corporations less discounts and allowances.
___________________________________ 3. Refers to expenses related to the operation of the business
___________________________________ 4. Is the cost of the merchandise sold.
___________________________________ 5. Revenue derived from rendering professional services.
___________________________________ 6. Is the cost of the merchandise owned.
___________________________________ 7. The decreased value of property plant and equipment over a period of time.
___________________________________ 8. Contra-sales account taken by customers for discounts.
___________________________________ 9. Revenue derived from other investments that earns interest.
___________________________________10. Expenses used by non-trade operations.
A. Identify the elements of the SCI. Identify if the account is part of the general & administrative expenses or selling
expenses.
_______________________ 1. Salaries of admin personnel
_______________________ 2. Salaries of janitors
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
_______________________ 3. Salaries of sales agents
_______________________ 4. Utilities of home office
_______________________ 5. Rent of office building
_______________________ 6. Depreciation of office equipment
_______________________ 7. Depreciation of delivery van
_______________________ 8. Advertising
_______________________ 9. Cost of merchandise sold during the year
_______________________10. Rent of the Merchandising Store
B. Supply the missing element of SCI.
Income Expenses Profit

(Loss)_____
a. 840,000 __________ 360,000
b. 2,400,000 __________ 540,000
c. 1,300,000 860,000 _______
d. ________ 2,000,000 720,000
e. ________ 1,800,000 (400,000)
C. Practice Problems:
Easy:
1. Learning is Fun Company generated revenues amounting to P100,000. Expenses for the year totaled P76,000. How
much is the company’s net income for the year? Answer: ______________
2. Happy Selling Company’s salaries to sales agents amounted to P10,000. Salaries of accountants amounted to P20,000. No
other expenses were incurred. How much is the company’s general and administrative expense? Answer: _______________
Medium:
1. Happy Selling’ beginning inventory amounted to 250,000. Net purchases amounted to 70,000. Freigh In totaled 15,000.
Compute for the company’s cost of goods available for sale. Answer: ____________________
2. Happy Selling’s Sales amounted to P500,000. Sales returns and sales discounts amounted to P30,000 and P10,000
respectively. Purchase of the company totaled P100,000 while purchase returns and purchase discounts amounted to
P20,000 and P10,000 respectively. How much is the company’s Net Sales? Net Purchases? Answer: _______________
Difficult:
1. Company’s cost of goods sold amounted to P285,000. Net cost of purchases totaled P85,000. Beginning inventory
amounted to P250,000. Sales amounted to P500,000. Compute for the company’s ending inventory. Answer: _________
2. Gross profit of Happy Selling amounted to P175,000. Beginning Inventory totaled P250,000. Ending Inventory
amounted to P50,000 while Net cost of purchases totaled P85,000. Compute for Happy’s Net sales. Answer:
__________________
Problem Solving: Preparation of a Single-Step SCI. (Use a separate sheet)

Problem 1. The Happy Toddlers
The Happy Toddlers is a preparatory school for children three to five years old. Students are enrolled for
a school-year. Parents can pay the full tuition fee of Php70,000 at the start of the school year (June). There is also
an option to pay two installments of Php37,000 each at the start of every semester (June 1 and November 1). Of
the 150 students enrolled, 80 are paid in full at the start of the year. The remaining students are on installment
basis. One school year runs from June 1 to March 31.
Determine the tuition fee revenue for the period December 31. This is the first year of Happy Toddlers
operations.
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Answer: ____________________
Problem 2. The Happy Toddlers (continuation)
The Happy Toddlers (THT) is a preparatory school for children three to five years old. There are 10
teachers employed by (THT), 5 senior teachers with a salary of Php30,000 a month and 5 junior teachers at
Php18,000 a month. There are also 4 administrators with average monthly salary of Php35,000. Annual
Depreciation for furniture and fixtures amounted to Php100,000. Utilities expense for the year totals to
Php200,000.
Requirements: (use a separate sheet)
1. List down the expenses of Happy Toddlers following the nature of expense approach or single-step.
2. Prepare a single-step SCI (CY December 31) for Happy Toddlers. Use the revenue information from
Problem 1.
Problem 3. Prepare a single-step Statement of Comprehensive Income using the following:

Revenues ₱ 20,000
Rent Expense 3,000
Salaries Expense 4,000
Utilities Expense 2,000
You can use any business name and the end of the current year for the heading.
Problem 4. Prepare a single-step income statement here are the nominal accounts (Temporary Accounts).
Liberty Medical Services

Nominal Accounts
For the Year Ended December 31, 2019
Debits Credits
Service income ₱ 9,660,000.00
Cost of Services ₱ 6,030,000.00
Salaries Expense 1,200,000.00
Employees Benefits 200,000.00
Professional Fees 180,000.00
Utilities Expense 360,000.00
Taxes and Licenses 120,000.00
Supplies Expense 175,000.00
Advertising Expense 132,000.00
Transportation Expense 240,000.00
Representation Expense 180,000.00
Interest Expense 20,000.00
Totals ₱ 9,377,000.00 ₱ 9,660,000.00
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Problem Solving: Preparation of a Multi-Step SCI. (Use a separate sheet)

Problem 5:The Happy Toddlers Bookstore (Use a separate sheet)
The Happy Toddlers Bookstore sells the books used in classes such as workbooks and coloring books. All
the enrolled students (150 students) purchased the three prescribed books at Php500 each. The books cost
Php200 each. Also, sales of various school supplies amounted to Php500,000. Costs of these school supplies
amounted to Php250,000.
The monthly salary of the bookstore manager is Php20,000. The store is manned by one clerk with
monthly salary of Php6,000. Utilities expense for the year totals Php80,000. Of this, 25% is for the small office at
the back of the Bookstore. Depreciation for store fixtures amounted to Php50,000. Prepare a multi-step
Statement of Comprehensive Income for the year ended December 31 for Happy Toddlers bookstore.
Problem 6: Prepare a multi-step income statement, listed here are the income statement accounts of Karel
Trading Company as of December 31, 2019.
Debit Credit
Sales ₱ 8,875,000.00
Sales Discount ₱ 16,000.00
Sales Returns and Allowances 101,000.00
Purchases 115,000.00
Purchase Returns and Allowances 118,000.00
Freight-in 206,000.00
Salaries Expense 1,218,000.00
Utilities Expense 840,000.00
Bad Debts Expense 116,000.00
Transportation Expense 360,000.00
Insurance Expense 60,000.00
Supplies Expense 240,000.00
Taxes and Licenses 180,000.00
Merchandise Inventory, January 1, 2019 728,000.00
Merchandise Inventory, December 31, 2019 810,000.00
Problem 7:Pertinent accounts gathered from the records of Karla Corporation for 2019 are given below:
Purchases 105,000.00
Purchase returns and allowances 3,000.00
Rental income 5,000.00
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Selling Expenses:
Freight out 3,500.00
Salesman’s commission 13,000.00
Depreciation – Store Equipment 2,500.00
Merchandise Inventory, January 1 20,000.00
Merchandise Inventory, December 31 30,000.00
Sales 153,000.00
Sales returns and allowances 2,800.00
Sales discounts 200.00
Administrative Expenses:
Officer’s salaries 10,000.00
Depreciation – Office Equipment 6,000.00
Freight in 10,000.00
Income tax 5,000.00
Interest expense 1,000.00
Purchase discounts 2,000.00
Required:
a. SCI for the year 2019 using the multiple step form.
b. SCI for year 2019 using the single-step form.
Guide Questions:
1. What is considered an expense on the income statement?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
2. How do you calculate the income statement?

________________________________________________________________
________________________________________________________________
3. What is an income statement used for?

________________________________________________________________
________________________________________________________________
________________________________________________________________
4. Who uses an income statement?

________________________________________________________________
________________________________________________________________
________________________________________________________________
Reflection:
Why is SCI prepared first before SFP?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Differentiate the SCI of a Service company vs SCI of a Merchandising Company
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
How often should SCI be prepared?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
What are the advantages of multi-step income statement over a single-step income statement?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
References:
Bookstore, Inc.2
Answer Key:
A. 1. True 2. True 3. False 4. True 5. True
B. 2.. Net sales 5. Professional fee 8. Sales discount
3. operating expense 6. Merchandise inventory 9. Interest income
4. cost of sales 7. Depreciation 10. General and adm. Expense
Answer Key:
A. 1. Gen and Adm 4. Gen and Adm 7. Selling 10. Selling
2. Gen and Adm 5. Gen and Adm 8. Selling
3. Selling 6. Gen and Adm 9. N/A (cost of goods sold)
B. Easy Medium Difficult
1. 24,000 1. 335,000 1. 50,000
2. 20,000 2. Net sales – 460,000 2. 460,000
Net purchases – 70,000
Answer Key:
Problem. 1. P10,780,000
Problem 2. Net income – P7,861,667
Answer Key:
Net income – P73,000
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Name: _____________________________________________________Date: _______________________________
Grade/Section: _______________________________________________Strand: _____________________________
QUARTER 1
CHAPTER 3: STATEMENT OF CHANGES IN EQUITY
The Statement of Changes in Equity, is one of four general purpose financial statements and is the
second financial statement prepared in the accounting cycle. This statement displays how equity changes from the
beginning of an accounting period to the end.
In other words, the statement of changes in equity is a basic reconciliation of how the ending equity is
calculated. How did the equity balance on January 1 turn into the equity balance on December 31? Net income is
needed to calculate the ending equity balance for the year. This is why the statement of changes in equity must be
prepared after the income statement or Statement of Comprehensive Income. This statement is prepared prior to
preparation of the Statement of Financial Position to be able to obtain the ending balance of the equity to be used
in the SFP.
Brief Discussion:
Forms of Business Organization
Single/Sole Proprietorship – an entity whose assets, liabilities, income and expenses are centered or owned by
only one person.
Different parts of the Statement of Changes in Equity
a. Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wowrding – “for the”)
b. Increases to Equity
i. Net income for the year
ii. Additional investment
c. Decreases to Equity
i. Net loss for the year
ii. Withdrawals by the owner
Sample Format
LEARNING IS FUN COMPANY

STATEMENT OF CHANGES IN EQUITY
Owner, Capital, January 1, 2019 ₱ 100,000.00

Add: Net Income for the year 2019 ₱ 50,000.00
Additional investment 25,000.00 75,000.00
Sub-total ₱ 175,000.00
Less: Withdrawal for the year 30,000.00
Owner, Capital, December 31, 2019 ₱ 145,000.00
Differentiate the initial investment from the additional investments and define withdrawals
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Initial Investment – the very first investment of the owner to the company.
Additional Investment – increases to owner’s equity by adding investments by the owner.
Withdrawals – decreases to owner’s equity by withdrawing assets by the owner.
Partnership – an entity whose assets, liabilities, income and expenses are centered or owned by two or more
persons.
The Statement of Changes in Partner’s Equity is used by a partnerships instead of the Statement of
Changes in Owner’s Equity. The differences between the two are as follows:
a. Title – instead of owner’s partners’ is used to denote that this is a partnership
b. There are two or more owners in a partnership thus, the changes in the capital account of each
partner is presented.
c. The net income is divided between partners (not always equal. Based on the agreement. Example :
60;40, 40:60, etc.)
Sample Format
STATEMENT OF CHANGES IN PARNTERS’ EQUITY
Partner A Partner B Total__

Capital, January 1, 2019 ₱100,000 ₱150,000 ₱250,000
Add: Net Income 2019 25,000 25,000 50,000
Additional Investment 50,000 20,000 70,000
Sub-total ₱175,000 ₱195,000 ₱370,000
Less: Withdrawals 100,000 100,000 200,000
Capital, December 31, 2019 ₱ 75,000 ₱ 95,000 ₱ 170,000
Corporation – an entity whose assets, liabilities, income and expenses are centered or owned by itself being a
legally separate entity from its owners. Owners are called shareholders or stockholders of the company.
The Statement of Changes in Shaareholders’ Equity is used by a corporation instead of the Statement of
Changes in Owners’ Equity. The differences between the two are as follows:
a. Title – instead of owners’, shareholders’ is used to denote that this is a corporation
b. There are an unlimited number of shareholder but unlike the partnership, the names of the
shareholders are not indicated here. Instead, the corporation keeps an official list with the corporate
secretary
c. The capital account is called share capital (just like owner’s being shareholders)
d. Instead of additional investment, share issuances (happens when shares are sold to shareholders)
increases the share capital of a corporation
e. Instead of withdrawals, distribution of net income to shareholders decreases the Capital of the
corporation
Sample Format

STATEMENT OF CHAANGES IN SHAREHOLDERS’ EQUITY
ICHON NATIONAL
Capital, HIGH
January SCHOOL – SENIOR HIGH SCHOOL
1, 2019 ACCOUNTANCY, BUSINESS
₱ AND MANAGEMENT
1,000,000.00
Add: Share Issuance ₱ 500,000.00
Net Income 2019 150,000.00 650,000.00
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
MELC/ Objectives: Prepare an SCE for a single proprietorship. (ABM_FABM12-Ie-9)
Activity 1: Direction: Answer the following questions. And write the answer on the space provided.
_______________________ 1. Increases in owner’s equity without additional investment.

_______________________ 2. Decreases to owner’s equity apart from net effect of revenues and expenses.
_______________________ 3. Beginning owner’s equity amounted to ₱ 300,000. Net loss for the year totalled
₱ 45,000. No additional investments and withdrawals for the period. Compute
for total increase in equity for the year.
_______________________ 4. Ending owner’s equity amounted to ₱ 70,000. Additional investments during the
year amounted to ₱30,000. Withdrawals totalled ₱50,000. Compute for the
company’s net income for the year assuming beginning equity is ₱10,000.
_______________________ 5. Which form of business organization is owned by only one person?
_______________________ 6. Decreases in equity aside from withdrawals of the owners.
_______________________ 7. A type of business that is owned by at least 2 persons.
_______________________ 8 .In the Statement of Changes in Equity, the company had decreases in capital
wherein income is distributed to owners. Identify the kind of business.
_______________________ 9. Owner, Juan invested an initial capital amounting ₱50,000 in order to put up his
Janitorial services company. During the first year of operations (2018), the
company had a loss of ₱25,000. Because of this, Juan invested additional capital
amounting to ₱50,000 in 2019. In the second year (2019), the company had a
net income of ₱100,000 and Juan withdrew ₱10,000 for personal use. Compute
for the ending capital balance of Juan for the year 2019.
_______________________ 10.Owner Juana invested ₱100,000 to start her laundry business. During the first
year of operations (2018), the company had a net income of ₱15,000. Juana
invested additional ₱100,000 to grow the business. In 2019, the business earned
₱50,000. As of December 31, 2019, Juana’s capital balance is ₱200,000. How
much is Juana’s withdrawal?
Activity 2. Problem Solving

Problem 1. Beginning owner’s equity amounted to P300,000. Net loss for the year totaled P45,000. No
additional investments and withdrawals for the period. Compute for total increase in equity for the year.
Answer: _____________
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Problem 2. Ending owner’s equity amounted to P70,000. Additional investments during the year
amounted to P30,000. Withdrawals totaled P50,000. Compute for the company’s net income for the year
assuming beginning equity is P10,000.
Answer: ____________
Problem 3. Owner, Juan invested an initial capital amounting to P50,000 in order to put up his janitorial
services company. During the first year of operations (2019), the company had a loss of P25,000. Because of this,
Juan invested additional capital amounting to P50,000 in 2020. In the second year (2020), the company had a net
income of P100,000 and Juan withdrew P10,000 for personal use. Compute for the ending capital balance of
Juan for the year 2020.
Answer: _____________
Activity 3.Preparation of Statement of Changes in Owner’s Equity

A. The following balances were retrieved from the records of Juan’s Janitorial Services for the year ended
December 31, 2019:
Capital, January 1, 2019 ₱ 500,000.00
Withdrawals 100,000.00
Additional Investments 50,000.00
Net Loss 45,000.00
Required: Prepare the Statement of Changes in Equity
B. Prepare a Statement of Changes in Owner’s Equity for sole proprietorship illustrating (A) net income and
(B) net loss follow:
The equity of the owner of the business in a sole proprietorship is the balance in the balance sheet
account, Owners’ Capital. The latter is given his name. For example, Greg Templo: Capital (in Templo Trading) is
expected to have a natural credit balance. It is forwarded as a beginning balance in the succeeding accounting
period. If Greg Templo: Capital has a credit balance of ₱900,000 on December 31, 2018, the carry forward
balance on January 1, 2019 is ₱900,000. For the accounting period 2019, the ₱900,000 will change as a result of
transactions and events in 2019.
(A) Net Income for 2019 ₱ 750,000.00

(B) Net Loss for 2019 ( 280,000.00)
Additional Investment by Greg Templo 200,000.00
Cash withdrawals by Greg Templo 80,000.00
Activity 4: Prepare the Statement of Changes in Equity (use a separate sheet)

Problem 1.
Mighty Minds Tutorial Center’s statement of financial position on December 31, 2018 showed an
owner’s equity of ₱1,664,000. The December 31, 2019 statement of financial position showed owner’s equity of
₱1,976,000. During the year, the owner withdrew ₱273,000 for personal use. What is the net income or net loss
for the year 2019? Present the statement of changes in equity for year ended December 31, 2019.
Problem 2.
The owner’s equity of Jupiter Spa owned and operated by Mr. Joe showed a beginning balance of
₱391,300. The results of operations at the end of the year yielded a net loss of ₱124,800. During the year, Mr. Joe
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
withdrew ₱24,570 for personal use. Prepare the statement of changes in equity for Jupiter Spa for year ended
December 31, 2019.
Guide questions:
1. Which form of business organization is owned by only one person?__________________________
2. Increases in owner’s equity without additional investment is?______________________________
3. Decreases to owner’s equity apart from net effects of revenues and expenses is?_______________
Reflection:
What is the importance of preparing the Statement of Changes in Equity in the SFP?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
References:
Bookstore, Inc.
Answer Key:
Problem 1. Increase is zero but decrease is P45,000
Problem 2. P80,000
Problem 3. P165,000
Answer Key:
Problem 1. Net income – P585,000; Capital, end – P1,976,000
Problem 2. Capital, end – P241,930
Name: ____________________________________________________Date: _______________________________

Grade/Section: ______________________________________________Strand: _____________________________
QUARTER 1
CHAPTER 4: STATEMENT OF CASH FLOWS (SCF)
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
A Statement of Cash Flows (or Cash Flow Statement), is the fourth general-purpose financial statement
and summarizes how changes in balance sheet accounts affect the cash account during the accounting period. It
also reconciles beginning and ending cash and cash equivalents account balances.
This statement shows investors and creditors what transactions affected the cash accounts and how
effectively and efficiently a company can use its cash to finance its operations and expansions. This is
particularly important because investors want to know the company is financially sound while creditors want to
know the company is liquid enough to pay its bills as they come due. In other words, does the company have good
cash flow?
The term cash flow generally refers to a company’s ability to collect and maintain adequate amounts of
cash to pay its upcoming bills. In other words, a company with good cash flow can collect enough cash to pay for
its operations and fund its debt service without making late payments.
Brief Discussion:
MELC/ Objectives: Discuss the components and structures of a CFS. (ABM_FABM12-If-10)

A. Identify whether the cash account will increase / decrease or no effect. Write your answer on the blank
space provided.
___________ 1. When Mary Smith invests her personal money into her new company, what will happen to her
company's Cash account?
___________ 2. When a company purchases inventory (merchandise purchased in order to be resold) what will
happen to its Cash account?
___________ 3. What is the effect on its Cash account when a company pays some of its Accounts Payable?
___________ 4. What is the effect on its Cash account when a company prepays a 6-month insurance premium?
___________ 5. What is the effect on its Cash account when a company sells merchandise, but allows the
customer to pay in 30 days?
___________ 6. What is the effect on its Cash account when a company receives payment from one of its
customers 30 days after the sale was recorded?
___________ 7. If a company's Accounts Payable account decreased, what is the likely effect this will have on
Cash?
___________ 8. If the asset account Prepaid Insurance increased, what is the likely effect on Cash?
___________ 9. When a liability increases, the Cash account?
___________ 10. When a liability decreases, the Cash account?
B. Identify which of the following transactions fall under operating, investing, financing or non-cash
activities. Write your answer on the blank space provided.
__________ 1. Cash received from customers
__________ 2. Cash paid to suppliers
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
__________ 3. Cash paid to employees
__________ 4. Cash paid to purchase equipment (Company does not sell equipment)
__________ 5. Cash received from sale of furniture (Company’s main line of business is not related to furniture)
__________ 6. Depreciation expense
__________ 7. Sale of goods on credit
__________ 8. Purchase of goods on credit
__________ 9. Cash received from getting a loan from a bank
__________10. Cash paid to owners
Reflection:
What is the importance of preparing the Statement of Cash Flows?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
References:
Bookstore, Inc.
Answer Key:
A. 1. Increase 6. increase
2. decrease 7. decrease
3. decrease 8. decrease
4.decrease 9. increase
5. no-effect 10. Decrease
B. 1. Operating 6. Non-cash
2. operating 7. Non-cash
3. operating 8. Non- cash
4. investing 9. financing
5. investing 10. financing
Name: ____________________________________________________Date: September 24, 2020 (Thurs/7:30-9:30 am)

QUARTER 1
CHAPTER 4: STATEMENT OF CASH FLOWS (SCF)
Cash is an important asset. It is an account affected by many transactions. The debit and credit sides of
the cash account generally represent cash receipts and cash disbursements, respectively.
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Statement of Cash Flows is the financial statement that explains the net change in cash for the year. It
presents cash inflows (receipts) and outflows (payments) in the three activities of business: operating, investing,
and financing.
MELC/ Objectives: Prepare a CFS. (ABM_FABM12-If-11)
Exercise/Activity. Prepare a Statement of Cash flows.
Problem Solving.
The cash account of ABC Company has a beginning balance of Php 259,875.00. Its year-end balance
stands at Php 509,850.00. The table below show the summarized transactions from the cash account of ABC
Company.
Cash received from customers Php 1,450,350.00

Payments to suppliers 601,095.00
Payments for other operating expenses 117,700.00
Salaries paid 39,985.00
Purchase of machinery 506,000.00
Sale of delivery equipment (motorcycle) 13,750.00
Proceeds from sale of computer equipment 85,525.00
Withdrawals of owners 458,700.00
Proceeds from bank loan 165,000.00
Contribution of owners 275,000.00
Interest paid 16,170.00
Required: (use a separate sheet)
1. Prepare the Statement of Cash flows of ABC Company for the year ended 2019.
2. Is ABC’s Statement of Cash Flows reconciled with the balance of the cash account as of the end of the
year? Show your computation.
Reflection:
Describe the three sections of the Statement of Cash Flows?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
References:
Bookstore, Inc.
Name: ____________________________________________________Date: September 29, 2020 (Tues/7:30-9:30 am)

QUARTER 1
CHAPTER 5: FINANCIAL STATEMENT ANALYSIS
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Financial Statement (FS) Analysis is the process of evaluating risks, performance, financial health, and
future prospects of a business by subjecting financial statement data to computational and analytical techniques
with the objective of making economic decisions. There are 3 kinds of FS analysis techniques:
 Financial ratios
 Horizontal analysis
 Vertical analysis
Financial ratio analysis expresses the relationship among selected items of financial statement data. The
relationship is expressed in terms of a percentage, a rate, or a simple proportion. It is composed of a numerator
and a denominator. There are many ratios used in business. Some of these are the profitability, operational,
financial health (liquidity and solvency) ratios.
 Profitability ratios measure the ability of the company to generate income from the use of its assets and
invested capital as well as control its cost. Examples of these are gross profit ratio, operating income
ratio, net profit ratio, return on asset and return on equity.
 Operational efficiency ratio measures the ability of the company to utilize its assets. It is measured based
on the company’s ability to generate sales from the utilization of its assets, as a whole or individually.
The turnover ratios are primarily used to measure operational efficiency such as Asset turnover, fixed
asset turnover, inventory turnover and accounts receivable turnover.
 Financial health ratios look into the company’s solvency and liquidity ratios. Solvency refers to the
company’s capacity to pay their long term liabilities. On the other hand, liquidity ratio intends to measure
the company’s ability to pay debts that are coming due. Examples of these are debt ratio, equity ratio,
debt to equity ratio and time interest earned ratio.
MELC/ Objectives: Define the measurement levels, namely, liquidity, solvency, stability, and profitability.
(ABM_FABM12-Ig-h-12)
Exercise/Activity. Answer the ff. questions: (use a separate sheet)
1. What are the profitability ratios?
2. Which profitability ratios involve SCI and SFP accounts?
3. What is measured by operational efficiency ratio?
4. How is solvency different from liquidity?
5. What is being measured by liquidity and solvency ratios?
Reflection:
How does financial statement analysis benefit creditors?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
References:
Bookstore, Inc.
Name: ____________________________________________________Date: October 1, 2020 (Thurs/7:30-9:30 am)

QUARTER 1
CHAPTER 5: FINANCIAL STATEMENT ANALYSIS 1
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Another financial statement analysis is the horizontal and vertical analysis.
Horizontal analysis is also known as trend analysis. It is a technique that involves the comparison of a
line item (account) over a number of periods. It may be performed on all financial statements, specifically for
both the SFP and SCI. Changes can be expressed in monetary value (peso) or percentages computed by using the
following formula:
Peso change = Balance of Current Year – Balance of Prior Year
Peso change
Percentage change = ----------------------------
Balance of Prior Year
The results of historical horizontal analysis may be used for projecting financial statements. For example,
from a horizontal analysis a sales grew at an average of 10% per year. If Sales for the Calendar year 2014 is
P1,000,000 and there are no changes in the economic situations and business operations, then we can project
Sales for Calendar 2015 at P1,100,000 = [P1,000,000 + (1,000,000 x 10%)].
Vertical analysis is the preparation of common-size financial statement. It is a technique that expresses
each financial statement line item as a percentage of a base amount. For the SFP, the base amount used is total
assets. On the other hand, sales or net sales is used as base amount for the SCI.
Common-size financial statements show standardized or relative amounts that enable the readers to make
comparison of companies of different sizes.
MELC/ Objectives: Perform vertical and horizontal analyses of financial statements of a single proprietorship.
A. True or False
_________________ 1. Horizontal analysis is the financial analysis technique that compares the balances of
two accounts in one reporting period.
________________ 2. Vertical analysis compares the balances of one account over different periods.
________________ 3. Financial statement analysis uses computational and analytical techniques to evaluate
the company’s risks, performance, financial health, and future prospects with the objective of making
economic decisions.
________________ 4. Horizontal analysis can be performed with the SFP and SCI.
________________ 5. A common-size SFP presents accounts expressed as a percentage of total liabilities and
equity.
B. Problem solving. Perform horizontal and vertical analysis of the financial statements.
Problem 1. The aggregated SFP of Jenny Company is presented below:
12/31/2014 12/31/2013 Increase (Decrease)

P %
Current Assets 500,000 400,000
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Property, Plant, & Equipment 1,584,000 1,320,000
Current Liabilities 364,000 280,000
Long-term Liabilities 532,000 380,000
Owner’s Capital 1,188,000 1,060,00
Required: Perform horizontal analysis for 2014 using 2013 as base year.
Problem 2. The SCI of Alexis Company is reproduced below:
12/31/2014 % 12/31/2013 %
Net sales 3,375,000 2,700,000
Cost of goods sold 2,092,500 1,755,000
Selling expenses 540,000 324,000
Administrative expenses 270,000 243,000
Interest expense 148,500 108,000
Net income 324,000 270,000
Required: Perform vertical analysis for 2014 and 2013 income statement.
Reflection:
How is the vertical and horizontal analysis technique used as a tool in financial statement analysis?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
References:
Bookstore, Inc.
Answer Key:
A. True or False B. Problem 1 Problem 2
1. False 100,000 25% 100% 100%
2. False 264,000 20 62 65
3. True 84,000 30 16 12
4. True 152,000 40 8 9
5. True 128,000 12 4.4 4
9.6 1
Name: ____________________________________________________Date: October 6, 2020 (Tues/7:30-9:30 am)

QUARTER 1
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
This lesson will focus on financial ratios. Ratio analysis expresses the relationship among selected items
of financial statement data. The relationship is expressed in terms of a percentage, a rate, or a simple proportion.
A financial ratio is composed of a numerator and a denominator.
There are many ratios used in business. These ratios are generally grouped into 3 categories: (a)
profitability (b)operational efficiency and (c)financial health.
MELC/ Objectives: Compute and interpret financial ratios such as current ratio, working capital, gross profit
ratio, net profit ratio, receivable turnover, inventory turnover, debt-to-equity ratio, and the like.
Exercise/Activity: Problem Solving. (use a separate sheet)
Compute for the profitability, operational efficiency and financial health ratios using the information below.
C & F Store C & F Store
Statement of Financial Position Statement of Comprehensive Income
As of December 31 For the period ending December 31
2014 2013 2014 2013
Cash 110,000 87,400 Sales 810,000 686,000
Accounts Receivable 90,000 69,920 Cost of goods sold 348,300 301,750
Inventory 129,000 218,500 Gross Profit 461,700 384,250
Prepaid rent 12,000 4,370 Operating expenses 234,900 205,800
Delivery van 550,000 493,810 Interest expense 40,500 17,150
Total assets 891,000 874,000 Net income 186,300 161,300
Accounts payable 75,000 67,298

Loan payable 400,000 393,300
Cruz, Capital 416,000 413,402
Total Liabilities and Equity 891,000 874,000
Reflection:
How is financial ratio used as a tool in financial statement analysis?
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
References:
Bookstore, Inc.
Answer Key:
Profitability ratio Operational efficiency Financial Health
Gross profit ratio=57% Asset Turnover = .92 Debt to Equity = 1.14
Operating income ratio=28% Fixed asset turnover = 1.55 Debt ratio = 0.53
Net profit ratio=23% Inventory turnover = 4.66 Equity ratio = 0.47
ROA=21% Days in inventory = 78.29 Interest coverage = 5.60
ROE=45% A/R Turnover = 10.13 Current ratio = 4.55
Days in A/R = 36.03 Quick ratio = 2.67
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Name: ____________________________________________________Date: October 8, 2020 (Thurs/7:30-9:30 am)

QUARTER 1
Financial statement analysis is the process of evaluating risks, performance, financial health, and future
prospects of a business using computational and analytical techniques with the objective of making economic
decisions.
MELC/ Objectives: Compute and interpret financial ratios such as current ratio, working capital, gross profit
ratio, net profit ratio, receivable turnover, inventory turnover, debt-to-equity ratio, and the like.
(ABM_FABM12-Ig-h-14).
Exercise/Activity: Multiple choice problems. Choose the letter of the correct answer.
Merdana Trading Ltd. Merdana Trading Ltd.
Statement of Financial Position Statement of Comprehensive Income
As of December 31 For the period ending December 31
2014 2013
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
Cash and cash equivalents 12,250 10,470 Sales 104,705
Accounts Receivable 9,065 8,055 Cost of sales 32,275
Inventory 6,620 5,300 Gross Profit 69,430
Prepaid expenses 8,545 10,600 Selling expenses 35,325
Total current assets 36,480 34,425 Administrative expense 12,815
Other assets 92,500 78,685 Operating income 21,290
Total assets 128,980 113,110 Interest expense 1,050
Total current liabilities 36,150 42,335 Net income 20,240
Long term liabilities 23,990 18,960
Aldana, Capital 68,840 51,815
Total Liabilities and Equity 128,980 113,110
1. Which statement best describes Merdana Trading Ltd’s acid-test ratio?

a. Greater than 1
b. Equal to 1
c. Less than 1
d. None of the above
2. Merdana Trading Ltd.’s inventory turnover during 2014 was (amounts rounded)?
a. 6 times
b. 7 times
c. 8 times
d. Not determinable from the data given
3. During 2014, Merdana Trading Ltd’s days’in sales in receivables ratio was (amount rounded)
a. 34 days
b. 30 days
c. 32 days
d. 28 days
4. Which measure expresses Merdana Trading Ltd’s time-interest-earned-ratio? (amounts rounded)

a. 54.7%
b. 20 times
c. 34 times
d. 32 times
5. Merdana Trading Ltd.’s rate of return on equity can be described as
a. 33.55%
b. 16.72%
c. 35.29%
6. Merdana Trading Ltd’s rate of return on asset can be described as
a. 33.55%
b. 16.72%
c. 35.29%
7. Merdana Trading Ltd.’s gross profit rate can be described as
a. 34%
b. 19%
ACCOUNTANCY,
ACTIVITY BUSINESS,
SHEETS MANAGEMENT 2
c. 20%
d. 66%
Reflection:
What are the most commonly used techniques in the analysis and interpretation of financial statements?
Describe each.
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
References:
Bookstore, Inc.
Answer Key:
1. C
2. A
3. B
4. B
5. A
6. B
7. D

Fundamentals of Accountancy, Business, Management 2: Quarter 1 Chapter 1: The Statement of Financial Position (SFP)

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Fundamentals of Accountancy, Business, Management 2: Quarter 1 Chapter 1: The Statement of Financial Position (SFP)

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FUNDAMENTALS OF LEARNING

Name: _______________________________________________________Date: _______________________________

PREPARED BY: ETHELINE CHLOE E. BRAGAS 1

The Statement of Financial Position or Balance Sheet contains:

Owner’s Equity ₱ xxx

Total Liabilities and Owner’s Equity ₱ xxx

PREPARED BY: ETHELINE CHLOE E. BRAGAS 2

ANGEL SERVICE COMPANY

TOTAL ASSETS ₱3,473,000.00

LIABILITIES AND STOCKHOLDERS’ EQUITY

Total Current Liabilities ₱1,200,000.00

TOTAL LIABILITIES ₱1,338,000.00

TOTAL LIABILITIES AND OWNER’S EQUITY ₱3,473,000.00

PREPARED BY: ETHELINE CHLOE E. BRAGAS 3

Total Liabilities & Owner’s Equity ₱ xxx

ANGEL SERVICE COMPANY

Assets Liabilities and Owner’s Equity

Current Assets Current Liabilities

PREPARED BY: ETHELINE CHLOE E. BRAGAS 4

___ 3. Earned but not yet received/collected. C. Accounts Receivable

___ 6. Are claims supported by promissory note. F. Notes Receivable

___ 9. Are expenses paid in advance by the business. I. Capital

___ 12. Is revenue collected by the business in advance. L. Accrued Expenses

Long-term payable Accounts Payable Notes Receivable

Asset Liabilities Equity

PREPARED BY: ETHELINE CHLOE E. BRAGAS 6

Code Account Title Dr Cr

PREPARED BY: ETHELINE CHLOE E. BRAGAS 7

PREPARED BY: ETHELINE CHLOE E. BRAGAS 9

Elements of Income Statement

PREPARED BY: ETHELINE CHLOE E. BRAGAS 10

SCI of a Service company and of a Merchandising Company

Differentiates the single-step and multi-step format of the SCI

PREPARED BY: ETHELINE CHLOE E. BRAGAS 12

Cost of Sales Interest income Selling expense

PREPARED BY: ETHELINE CHLOE E. BRAGAS 14

B. Supply the missing element of SCI.

Income Expenses Profit

Problem Solving: Preparation of a Single-Step SCI. (Use a separate sheet)

PREPARED BY: ETHELINE CHLOE E. BRAGAS 15

Problem 3. Prepare a single-step Statement of Comprehensive Income using the following:

Liberty Medical Services

Problem Solving: Preparation of a Multi-Step SCI. (Use a separate sheet)

PREPARED BY: ETHELINE CHLOE E. BRAGAS 17

2. How do you calculate the income statement?

3. What is an income statement used for?

4. Who uses an income statement?

PREPARED BY: ETHELINE CHLOE E. BRAGAS 18

PREPARED BY: ETHELINE CHLOE E. BRAGAS 19

Forms of Business Organization

LEARNING IS FUN COMPANY

Owner, Capital, January 1, 2019 ₱ 100,000.00

PREPARED BY: ETHELINE CHLOE E. BRAGAS 20

Partner A Partner B Total__

LEARNING IS FUN COMPANY

MELC/ Objectives: Prepare an SCE for a single proprietorship. (ABM_FABM12-Ie-9)

_______________________ 1. Increases in owner’s equity without additional investment.

Activity 2. Problem Solving

PREPARED BY: ETHELINE CHLOE E. BRAGAS 22

Activity 3.Preparation of Statement of Changes in Owner’s Equity

Required: Prepare the Statement of Changes in Equity

(A) Net Income for 2019 ₱ 750,000.00

Activity 4: Prepare the Statement of Changes in Equity (use a separate sheet)

Name: _________________________Date: _

Name: ______________________Date: _