FINANCIAL ASSUMPTIONS

1. The initial investment of the firm is P 2,500,000 which will be contributed by the partners
in cash.
2. Salaries and wages constitute the gross salaries of employees for the period.
3. Disbursement for fuel and oil is assumed to increase by 5% per year.
4. Permit and licences includes business permit and other fees paid to the local government
for the period
5. Communication expense is expected to increase by 5% per year.
6. Light, water and power is expected to rise by 5% annually.
7. Advertising expense paid to radio stations is expected to increase by 5% per year.
8. Supplies expense includes office supplies and other supplies necessary in the operation
and is expected to increase 5% yearly.
9. Petty expenses that cannot be classified are charged to Miscellaneous expenses account
and are expected to increase by 5% annually.
10. Building is estimated to have a useful life of 25 years and is depreciated using the straight
line method (SLM).
11. Furniture and fixtures are estimated to have a useful life of 5 years and are depreciated
using the SLM.
12. Machinery and equipment is estimated to have a useful life of 10 years and is depreciated
using the SLM.
13. Disbursement for supplies that is expected to be used for more than a year costing not
more than P1,000 is treated as outright expense.
14. Corporate income tax of 30% is charged to earnings for the period to get the net income
after tax.
15. Petty cash fund is managed using the Imprest Cash System.
16. Cash and cash equivalents shall be composed of the cash in bank, cash on hand and petty
cash fund. Cash on hand are collections waiting for deposit.