FINANCIAL ACCOUNTNG AND REPORTING
Lesson to Research:
OUTLINE TOPIC:
1. The Worksheet and Financial Statements
2. Preparing the Worksheet
3. The essence of Financial Statements
4. Complete Set of Financial Statements
5. Preparing the Financial Statements
OBJECTIVE:
1. Describe the flow of accounting information from the unadjusted trial
balance into the adjusted trial balance and finally, to income statement
and balance sheet.
2. Prepare accurately and in good form a worksheet.
3. Develop the skills in preparing the worksheet
4. Explain the importance of worksheet.
5. Illustrate how worksheet is link to financial statements.
6. Prepare and explain the use of financial statements.
LEARNING OUTCOME:
1. Understand the relevance of information from the worksheet to the
financial statements
2. Understand and appreciate the usefulness of financial statements.
3. Identify the information needed in preparing the financial statements.
4. Able to explain how financial statements are interellated.
Guide Questions:
1. In what ways is the worksheet useful to accountants?
2. Discuss the steps in preparing the worksheet.
3. What are the ways to detect errors in the worksheet?
4. What are the objectives achieved in preparng the balance sheet?
5. Differentiate the two forms in which balance sheet may be
presented.
6. Explain the rationales in preparing the financial statements.
MODULE
1. A typical income statement and balance sheet of a corporation.
2. What can be found and the uses of the accounts found in the income
statement and balance sheet.
3. The significance of profit / loss in the worksheet.
4. Why is Closing entries important?
5. What a Post-closing trial balance is?
6. The two formats of presenting balance sheet.
7. Classification of items found in the balance sheet.
Important Terms to Remember:
Worksheet
- prepared by accountants when making adjustments usually at year-
end.
- simplifies adjusting and closing entries.
- steps required in preparing the worksheet
- the adjusted trial balance and the unadjusted trial balance are found
in the worksheet
Trial Balance
- Balances of accounts (debits and credits) in columns and the total
amounts.
- Helps ientify the accounts that need adjustments.
- Accounts with debit balances are added to adjustments with debit
amounts while accounts with credit balance are likewise added.
Deductions are made when accounts with debit balances have credit
adjustments while accounts with credit balances are reduced by
debit adjustments.
Ledger
- The source of balances appearing in the Trial balance.
- Journal entries are posted to individual accounts in the ledger
FINANCIAL ACCOUNTNG AND REPORTING

Closing entries
- Entry made where income, expense and withdrwal account (normally
called temporary accounts) balances are transferred to owner’s
capital account.
- All debit balances are credited and all credit balances are debited
when preparing closing entry.
- A temporary account is said to be closed when an entry is made such
that its balance becomes zero.
- A summary account – “Income Summary” is used to close the income
and expense accounts.
- The withdrawal account is closed to the capital account
- Lists the assets on the left side and the liabilities and owner’s equity
on the right side of the Balance Sheet.
Problem Solving: Worksheet Extensions ( 20 points in each column
Total = 60 Points)
1. Classify each of the accounts listed below as: Assets (A), Liabilities
(L), Owner’s equity (OE), Revenue (R), Expense (E).
2. Indicate the normal debit or credit balance of each account

Income Statement 3. Indicate whether each account will appear in the Income Statement
- The source of profit / loss information of a company. columns ( I ) or Balance Sheet columns ( B ) of the worksheet.

- The components of Expenses (eg. Salaries expense)

and Income (eg. Interest Income; Sales revenue) are found
- The information found in this statement are the total for the period (1) (2) (3)
Account Classification
Normal I or B
- The statement that shows the performance of a company for a given Balance
period of time _________________________________________________________
1. Accounts Receivable
Balance Sheet 2. Depreciation expense-Building
- The statement that shows the financial position or condition of an 3. Accounts payable
entity 4. Supplies
- Lists the assets, liabilities and owner’s equity at a specified period or 5. Computer Equipt.
date. 6. HJ, Capital
- The information need for this statement are the net balances at the 7. Accu. Deprn.- CE
end of the period. 8. HJ, Withdrawals
9. Service Revenues
Report format 10. Prepaid Insurance
- Simply lists the assets, followed by the liabilities, then the owner’s 11. Salaries Expense
equity in vertical sequence in the Balance Sheet 12. Accrued interests
13. Unearned Revenue
Account format 14. Rental Income
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FINANCIAL ACCOUNTNG AND REPORTING

15. Notes Payable Land 90,000 Oro, Capital 346,000

16. Accrued Taxes Total P380,000 Total P 380,000
17. Income Tax
18. Interest Payable The following accounting events apply to 2019:
19. Interest Receivable
20. Bills Payable Jan. 1 Received P100,000 additional cash investment from owner.
21. Interest expense 1 Purchased a service vehicle costing P80,000; salvage value of
22. Accrued wages P8,000 and useful life of 3 years.
23. Electricity expense Feb 1 Borrowed P100,000 by issuing a note at 9% annual interest rate
24. Prepaid Electricity and 1-yr. term.
25. Deferred Revenue 1 Paid P24,000 cash in advance for a 1-yr. lease for office space.
26. Unearned Rental Income Mar 1 Oro withdrew P30,000 for emergency personal use.
27. Interest Income April 1 Acquired land that cost P70,000 cash.
28. Deferred Advertising May 1 Paid accounts payable amounting to P15,000.
29. Advertising Income July 1 Received P42,000 cash in advance as a retainer for services to be
30. SSS Contributions-Employer Share performed monthly over the coming year.
31. Utilties expense
32. Sales discounts
33. Purchases Sept. 1 Sold the land previously nought for P100,000 cash.
34. Purchases returns and allowances Oct. 1 Purchased P20,000 of supplies on account.
35. Purchase discounts Nov. 1 Purchased a 1-yr.P50,000 certificate of deposit that paid
36. Accumulated depreciation-Building a 6% annual rate of interest.
37. Philhealth Contributions-Employer Share Dec. 31 Total earned service revenues (on account) for the year,
38. Transportaion In P250,000.
39. Merchandise Inventory 31 Total cash collections from accounts receivable amounted to
40. Sales returns and allowances P200,000.
31 Incurred other operating expenses on account during the year
Amounted to P80,000.
Problem Solving: Effect of Events on Financial Statements

As of December 31, 2018, the accounting records of Gabe Oro Advertising 31 Accrued salaries amounted to P32,000.
contained the following balances: 31 P1,000 of supplies remained on hand at the time at the end of
the period.
Assets: Equities:
Cash P180,000 Accounts Payable P 34,000 REQUIRED: Based on the preceding information, answer the following
Accounts Receivable 110,000 questions. All questions pertain to the 2019 financial statements.

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FINANCIAL ACCOUNTNG AND REPORTING

1. What is the total amount of revenues appearing on the income

statement? Sources/ References:
2. What is the amount of supplies expense that would appear on BOOK READING/S
the income statement?  Basic Financial Accounting and Reporting – Win Ballada
3. What is the amount of interest expense that would appear on  Fundamentals of Accounting – Zeus Millan
the income statement?
4. What is the amount of rent expense that would appear on the
income statement?  Financial Accounting – Conrado Valix
5. What is the amount of total expense that would appear on the
income statement?
6. What is the amount of the gain from sale of land appearing in
the income statement?
7. What is the amunt of profit appearing on the income statement?
8. What is the amount of unearned revenue that would appear on
the balance sheet?
9. What is the amout of interest payable that would appear on the
balance sheet?
10. What is the amount of total liabilities that would appear on the
balance sheet?

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