Senior High School

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ENTREPRENEURSHIP
Quarter 2 – Module 8

Identifying a Profit or
Loss in the Business

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 Second Quarter, Module 8, Week 8
Identifying a profit or loss in the business

Content Standard : The learner demonstrates understanding of

concepts, underlying principles, and processes of
starting and operating a simple business.
Performance Standard : The learner independently or with his/her
classmates starts and operates a business according
to the business plan and presents a terminal report
of its operation.
Competencies : Prepare a financial record to identify profit or loss in
the business transactions.
Learning Outcomes : Upon the completion of the given unit, the SHS
learners are expected to use the templates for the
financial report of profit or loss in the business
operation.

What I Know

See for real if your business is in a good deal. Let it show that you know.
Multiple choice. Choose from the list a term to complete each statement to
identify profit or loss. Answers may be repeated. Write the correct answer clearly
on a separate sheet.
A. Do the computation….
Accounts 1. add for the ________ of income
2. that could be for a ________
3. exclude ________ revenue
Adding
B. Do calculate….
Answer 4. to add ________ accounts payable
5. for the ________ of expenses
6. that is of the same ________
Excluding
C. Solve for the difference…
Financial 7. by ________ expenses of the business
8. by excluding ________ payable
9. by _________ expenses from income of the business
Period

D. Take note of the answer after solving…

Statement 10. if the _________ is a positive value then there is profit
11. if the _________ is a negative value then it is a loss
subtracting 12. if the _________ is a zero (0) then it is break-even

E. This is the preparation of ….

sum
13. a _________ report
14. a _________ statement
unearned 15. a _________ of income

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 What I Need to Know

You are to identify profit or loss for your simple home-based business
application.

In this key move you are expected to:

• follow the steps to identify profit or loss in the business
• use template and format to identify profit or loss in the business
• prepare a financial report to identify a profit or loss in the business

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What’s In

Be fit for profit and be the boss without the loss.

Brief essay. Study each template well to observe on the connection. Note one (1)
similarity and one (1) difference. Write the answers clearly on a separate sheet
for your observation.

General Journal 1 (GJ1) Template

Date Particulars Debit Credit

2020
October 30 Cash Php1,100.00-
C. Gosyu, Capital Php1,100.00-
Investment
Inventory 800.00-
Cash 800.00-
Bought materials
31 Cash 1,800.00-
Sales 1,800.00-
Sold in cash

Telecommunication Expense 250.00-

Cash 250.00-
paid call card
Cash 3,600.00-
Unearned revenue 3,600.00-
Received advance
Payment

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Three (3) column General Ledger1 (GL1) for the Cash account.
CASH NO.1001
Date Items PR Debit Credit Balance
2020
October 30 Investment GJ1 Php1,100.00- Php1,100.00-

Bought GJ1 Php800.00- 300.00-

materials
31 received GJ1 1,800.00- 2,100.00-
from sold
items
Paid call GJ1 250.00- 1,850.00-
card
Received GJ1 3,600.00- 5,450.00-
advance
pay

What’s New

Application. Follow instructions for the computation and observation.

Write the answer clearly on a separate sheet.
a. Add for the sum of values from each column of Debit and Credit.
b. Find the difference from the sum of Debit minus the sum of Credit.
c. Compare the value of the difference to that of the final value on the
balance column.
d. What is your observation?

Three (3) columns General Ledger1 (GL1) for the Cash account.
CASH NO.1001
Date Items PR Debit Credit Balance
2020
October 30 Investment GJ1 Php1,100.00- Php1,100.00-

Bought GJ1 Php800.00- 300.00-

materials
31 received GJ1 1,800.00- 2,100.00-
from sold
items
Paid call GJ1 250.00- 1,850.00-
card
Received GJ1 3,600.00- 5,450.00-
advance
pay

The observation you will have is whether the computed value and the last
balance value are equal.

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 Your general ledger on cash is a cash-flow information, both for
income and expense, in one "cash" account.

What Is It

How can you identify a profit or loss in the business?

The Profit and Loss Statement, also called a Statement of Income,

that shows details of the financial performance of a business for a
specific period.

To prepare a profit and loss statement or the Statement of Income, you will be
solving the basic formula for calculating profit:

Profit = Revenues – Expenses

To calculate for the accounting of profit or loss you will:

1. Add up all your income for the period.
2. Add up all your expenses for the period.
3. Calculate the difference by subtracting from total income the total
expenses.
4. The result is your profit or loss.

Do take note that the Cost of Goods Sold (COGS) account is included in your
Statement of Income as it is an expense account. Here is the simple formula for
Cost of Goods Sold:

Cost of Goods Sold (COGS)

= (Beginning inventory + purchases during the period) – ending inventory

This is the basic format of the Statement of Income.

Cocone Nut Oil

P. Del Rosario Extension, Cebu City
Statement of Income
For the period ended October 2020

Revenues
Sales-----------------------------------Php1,800.00-
Total revenue ------------------------------------Php1,800-
Less Expenses:
Cost of Goods Sold------------------Php 800.00-
Telecommunication expense---------------250.00-
Net income (loss)-------------------------------------------------Php750.00-

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What Does a Profit and Loss Statement Tell You?
The profit and loss statement will show if your business is gaining. It reflects the
sales you are earning and how you are managing your expenses.

Why Is a Profit and Loss Statement Useful for Business?

A profits and loss statement is useful because it can help you analyze the
financial health of your business. It compares the money going out of your
business to the money coming into it, so you can cut back costs to increase your
profits.
Profit and Loss statements is needed to prepare for taxes.
You need to have a formal profit and loss statements. Monthly or quarterly
reports are good for partial reports on revenue only.

There are four (4) basic financial statements for business.

Financial Statements are the summary of the result from business
transactions in an accounting or fiscal period.
• Statement of Income
A report on net income or loss for a specific period.

• Statement of Owner’s Equity

A summary of changes in the owner’s capital account because of the
business transactions during the period.

• Statement of Financial Position or Balance Sheet

A report of the balances in the permanent accounts at the end of the period
that shows the basic accounting equation: Assets = Liabilities + Equity.

• Statement of Cash Flows

A summary of the amount of cash taken in, sources of cash, amount paid
out, uses of cash.

A trial balance document supports the financial statements.

What is a trial balance?

A trial balance is a bookkeeping worksheet in which the balance of

all ledgers are compiled into debit and credit account column totals that are
equal.
An overall report of the business activity will then be made from ratio
analysis.

What is a ratio analysis?

Ratio Analysis is the process of evaluating the relationship between

various amounts in financial statements. This is to know the financial strength,
activity, or debt-paying ability of a business.

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 What’s More

For this Activity, you will use the details from the business example of
Ms. Cocone Gusyo.

Do the Comparison.
a. Observe which details from the General Journal are found in the
Statement of Income. Write a list of three (3) answers clearly on a separate sheet.

Date Particulars Debit Credit

2020
October 30 Cash Php1,100.00-
C. Gosyu, Capital Php1,100.00-
Investment
Inventory 800.00-
Cash 800.00-
Bought materials
31 Cash 1,800.00-
Sales 1,800.00-
Sold in cash

Telecommunication Expense 250.00-

Cash 250.00-
paid call card
Cash 3,600.00-
Unearned revenue 3,600.00-
Received advance
payment

Cocone Nut Oil

P. Del Rosario Extension, Cebu City
Statement of Income
For the period ended October 2020

Revenues
Sales-----------------------------------Php1,800.00-
Total revenue ------------------------------------Php1,800-
Less Expenses:
Cost of Goods Sold------------------Php 800.00-
Telecommunication expense---------------250.00-
Net income (loss)-------------------------------------------------Php750.00-

b. Refer to the details of the General journal and Statement of Income to explain
this application of the formula for the Cost of Goods sold.

Cost of Goods Sold = (800 + 0)-0

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 What I Have Learned

Let it tell if the business is well.

Application. Use the details of the general journal from your home-based
business. Prepare a general ledger on Cash for a one-week period of operation.
Write the answer clearly in a separate sheet.

Sample template for Ledger

CASH NO.1001
Date Items PR Debit Credit Balance
2020
October 30 Investment GJ1 Php1,100.00- Php1,100.00-

What I Can Do

Application. Use the details of the general journal from your home-based
business and prepare a Statement of Income for a one-week period of operation.
Write the answer clearly in a separate sheet.

Sample Statement of Income

Business name
address
Statement of Income
For the period ended month and year

Revenues
Sales-----------------------------------Php
Total revenue ------------------------------------Php
Less Expenses:
Cost of Goods Sold------------------Php
Telecommunication expense---------------
Net income (loss)-------------------------------------------------

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 Assessment

Be right on every bit and be fit for profit.

MULTIPLE CHOICE: Read each item carefully. Write the corresponding letter of
the correct answer in a separate sheet.

1. A Statement of Income is prepared for business. Why is it prepared?

A. To identify profit or loss.
B. To limit the profit or loss.
C. To remove the profit or loss.
D. To shorten the profit or loss period.

2. Details of financial performance are shown in business. When is it shown?

A. Specific day period B. Specific fiscal period
C. Specific local period D. Specific weekly period

3. A basic equation is used to compute profit. How is profit computed?

A. Profit = Revenues + Expenses B. Profit = Revenues / Expenses
C. Profit = Revenues - Expenses D. Profit = Revenues x Expenses

4. Sum up income for the period. Why do the sum up?

A. To compute period. B. To compute a sum.
C. To compute revenue. D. To compute the total.

5. Total expenses are computed. How to do the total?

A. Expenses are divided for the period.
B. Expenses are multiplied for the period.
C. Expenses are subtracted for the period.
D. Expenses are subject to sum up for the period.

6. Earning in sales minus spending. Why compute this?

A. Know it cancels. B. Know if it’s loss.
C. Know if it profits. D. Know if it’s the sum.

7. Compare the money going out to the money coming in. Why compare?
A. Financial health is acted. B. Financial health is analyzed.
C. Financial health is appealed. D. Financial health is averted then.

8. To decrease some costs is to increase profit. How to know which cost?

A. Agency analysis B. Balance analysis
C. Delivery analysis D. Financial analysis

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9. Businesses prepare for taxes. How do businesses prepare?
A. Prepare entry records. B. Prepare financial records.
C. Prepare general records. D. Prepare manpower records.

10. Business documents are also requirements. Which updates on profits?

A. General records B. financial records
C. Financial Statements D. Statement of Income
11. The business transactions are summarized. How are transactions
summarized?
A. Financial Statements B. General Journal entries
C. official receipts release D. vouchers paid out details

12. The trial balance as a support also aids in the preparation of documents.
Which documents are these?
A. Chart of accounts B. Financial Statements
C. General journal entries D. Overall business report

13. A trial balance is a compiled financial report. How does it compile?

A. compiled into cash and checks
B. compiled into capital and share
C. compiled into the dates and time
D. compiled into the debit and credit

14. Debit and credit should be equal in a trial balance. Why must it be equal?
A. Equal is account for one.
B. Equal is balanced with no error.
C. Equal is credit of values in a side.
D. Equal is debit of values in a column.

15. An Overall report must be made for the business. Why is the report a must?
A. To ask for business activities.
B. To buy for business activities.
C. To check on business activities.
D. To demand on business activities.

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 Additional
Activities

Stay fit for your simple home-based business profit?

Brief Essay. Write clearly on a separate sheet of paper for your response.

a. How will you do the practical daily living use of what you have learned from
this module? Include how it will allow you to promote a constructive and
responsible attitude. Answer aptly in one (1) sentence.
______________________________________________________________________________
b. Ask-all-You-can about what you took up here. I will write back and post
answers online.
______________________________________________________________________________

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 Answer Key

References
https://www.freshbooks.com/hub/accounting/calculate-profit-and-loss-
account
https://www.freshbooks.com/hub/accounting
Accounting Profit: How to Calculate Profit or Loss on Income ...
www.beginner-bookkeeping.com › accounting-profit
https://studyfinance.com/single-step-income-statement/
https://smallbusiness.chron.com/need-prepare-business-profit-loss-
statement-55177.html
Accounting Trial Balance Example and Financial Statement ...
content.moneyinstructor.com › trialbalance

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