ALI MART, INC.

NOTES TO FINANCIAL STATEMENTS

As at and for the years ended December 31, 2021 and 2020
(Amounts in Philippine Peso)

1. GENERAL INFORMATION

ALI MART, INC. (the Company) is a stock corporation organized and incorporated in the Philippines
and registered with the Securities and Exchange Commission (SEC) under registration number 74770.
The Company currently engages in wholesale and retail of grocery items, plastic and etc.

The Company’s registered office which is also its principal place of business is located along S.K.
Pendatun Avenue, Cotabato City

These financial statements were approved by the Board of Directors and authorized for issue on
March 12, 2022.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of preparation

The financial statements as at and for the year ended December 31, 2021 has been prepared in
accordance with the PFRS for Small Entities (the “Framework”) as approved by the Financial Reporting
Standards Council, Board of Accountancy, and Securities and Exchange Commission (SEC). They have
been prepared on a historical cost basis, except for investment property that has been measured at
fair value.

2.2 Financial instruments

A financial instrument is any contract that gives rise to both a financial asset of one entity and a
financial liability or equity instrument of another entity. A financial instrument is recognized when the
entity becomes a party to its contractual provisions. The Company classifies its financial instruments
into the following categories: (a) basic financial instruments; and (b) complex financial instruments.

The Company’s basic financial instruments consist of cash and cash equivalents, trade and other
receivables, borrowings, trade and other payables. The Company does not have complex financial
instruments.

2.3 Basic financial instruments

Initial measurement

On initial recognition, a debt financial instrument is measured at transaction price (including

transaction costs), unless arrangement is in effect a financing transaction. In this case, it is measured
at present value of the future payment discounted using a market rate of interest for a similar debt
instrument.

Subsequent measurement

The Company’s debt financial instruments are subsequently measured at amortized cost using the
effective interest method.

Impairment of financial instruments measure at amortized cost

At each reporting date, the Company assesses whether there is objective evidence of impairment on
any financial assets that are measured at amortized cost. Where there is any objective evidence of
impairment, an impairment loss is recognized immediately in profit or loss.
The impairment loss is the difference between the asset’s carrying amount and the present value of
estimated cash flows discounted at the asset’s original effective interest rate.

Derecognition of financial assets

An entity only derecognizes a financial asset when the contractual rights to the cash flows from the
assets have expired or are settled, or the entity has transferred to another party substantially all the
risks and rewards of ownership relating to the financial asset.

Derecognition of financial liabilities

Financial liabilities are derecognized only when these are extinguished – that is, when the obligation is
discharged, cancelled or has expired.

2.4 Cash and cash equivalents

Cash and cash equivalents include cash of hand, demand deposits and other short-term highly liquid
investments with original maturities of three months or less.

2.5 Trade receivables

Trade receivables are recognized initially at the transaction price. They are subsequently measured at
amortized cost using the effective interest method. A provision for impairment of trade receivables is
established when there is objective evidence that the original terms of the receivables.

2.6 Merchandise inventories

Merchandise inventories are stated at the lower of cost or market value (i.e., the probable selling
price to willing buyers as at the reporting date). Cost is determining using the first-in, first-out (FIFO)
method.

2.7 Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any
accumulated impairment losses.
Land is not depreciated. Depreciation on other classes of property, plant and equipment is charged so
as to allocate cost of assets less their residual values over their estimated useful lives, using the
straight-line method. The estimated useful lives of the Company’s depreciable assets are as follows:

Building 20-30 years

Delivery equipments 10-15 years
Building improvements 10-20 yeas
Furnitures and fixtures 7-15 years
Store equipments 5-10 years
Store improvements 7-10 years

The asset’s residual values, useful lives and depreciation methods are reviewed, and adjusted
prospectively if appropriate, if there is an indication of a significant change since the last reporting
date.

2.8 Trade and other payables

Trade and other payables are recognized initially at the transaction price and subsequently measured
at amortized cost using the effective interest method.
2.9 Provisions

Provisions are recognized when: the Company has an obligation as a result of past event; it is
probable that a transfer of economic benefits will be required to settle the obligation; and the
amount can be reliably estimated. Provisions are not recognized for future operating expenses.

When the effect of time value is material, provisions are measured at the present value of the amount
expected to be required to settle the obligation using a pre-tax rate(s) that reflect(s) current market
assessments of the time value of money and the risks specific to the obligation. Changes in the
provisions due to passage of time are recognized in profit or loss.

2.10 Equity

(a) Share capital and additional paid-in capital

Share capital is measured at par value for all share issued. Any amount received by the Company in
excess of par value of its shares is credited to additional paid-in capital. Incremental costs directly
attributable to the issuance of new shares are shown in equity as a deduction from proceeds, net of
tax.

(b) Retained earnings

Retained earnings consist of accumulated profits less any amounts distributed to the shareholders.

(c) Cash dividend distribution

Cash dividends to shareholders are recognized as a liability and deducted from equity when approved
by the Company’s Board of Directors.

2.11 Revenue recognition

Revenue is measured as the fair value of the consideration received or receivable, excluding
discounts, returns and value-added tax. The Company recognizes revenue to the extent that it is
probable that future economic benefits will flow to the entity and that the amount of revenue can be
reliably measured. The following specific recognition criteria must also be met before revenue is
recognized:

(a) Sales of goods

Sales of goods are recognized as revenue when the Company has delivered the products to the
customer and there is no unfulfilled obligation that could affect the customer’s acceptance of the
products.

(b) Interest income

Interest income is recognized using the effective interest method. Interest income is included in
‘other income’ account in the statement of income.

2.12 Income tax expense

The Company uses the taxes payable method to account for income taxes. Under this method, the
Company recognizes income tax expense and liability based on the taxable income for the year using
tax rates that have been enacted or substantively enacted at the reporting date.

2.13 Events after the reporting date

 Post year-end events that provide additional information about the Company’s position at the
reporting date (adjusting events) are reflected in the financial statements. Post year-end events that
are not adjusting events are disclosed in the notes to the financial statements when material.
3. Cash and cash equivalents

The account at December 31 consists of:

2021 2020
Cash on hand 325,000 250,000
Cash in bank 5,747,907 3,779,645
Cash equivalents - -
Total 6,072,907 4,029,645

4. Merchandise inventory

The Company’s merchandise inventories amounted to 1,651,535 and 1,112,662 (net of allowance for
impairment) as at December 31, 2021 and 2020, respectively.

5. Property, plant and equipment

The details of this account are shown in the reconciliation presented below
COSTS
Beg. Balance Provisions End. Balance
Land 250,000 - 250,000
Building 1,453,573 - 1,453,573
Delivery equipment 575,000 - 575,000
Furniture and fixtures 44,402 - 44,402
Store equipment 260,265 - 260,265
Store improvement 49,383 250,000 299,383
Total 2,632,623 - 2,882,623

ACCUMULATED DEPRECIATION
Beg. Balance Provisions End. Balance Net book value
Land - - - 250,000
Building 1,203,394 - 1,203,394 250,179
Delivery equipment 571,094 3,000 574,094 906
Furniture and fixtures 44,324 - 44,324 78
Store equipment 227,261 9,000 236,261 24,004
Store improvement 49,302 - 49,302 250,081
Total 2,095,375 12,000 2,107,375 775,248
6. Trade and other payables

The account at December 31 consists of:

2021 2020
Trade payables 5,699,001 3,179,557
Accrued expenses 23,113 19,450
Total 5,722,114 3,199,007
7. Share capital and additional paid-in capital

The details of the account as at and for the years ended

December 31 are as follows:
Number of shares Share Additional
issued and fully paid capital paid-in capital Total
At January 1, 2020 10,000 10,000 - 10,000
Share issue - - - -
at January 1, 2021 10,000 10,000 - 10,000
Share issue - - - -
At December 31, 2021 10,000 10,000 - 10,000

The total authorized number of ordinary shares as at December 31, 2021 and 2020 is 20,000 with a
par value of 100 per share. All issued shares are fully paid and have equal rights to vote at general
meetings and receive dividends. The Company fully utilized its appropriated retained earnings by
making renovations of building this year.

8. Revenue

The details of the account for the years ended December 31 are as
follows:
2021 2020
Sales of goods - wholesale and retail 27,093,789 21,884,776
Rendering of services - -
Total 27,093,789 21,884,776

9. Cost of sales

The details of the account as at and for the years ended

December 31 are as follows:
2021 2020
Merchandise inventory, beginning 1,112,662 613,630
Purchases 23,890,410 19,346,313
Purchase return (120,000) -
Freigh-in 1,283,642 581,018
Total goods available for sale 26,166,714 20,540,961
Merchandise inventory, ending 1,651,535 1,112,662
24,515,179 19,428,300

10. General and administrative expense

 The components of selling, general and administrative expenses for the years ended
December 31 are as follows:
General and administrative
expenses
2021 2020
Salaries, wages and benefits 1,431,831 1,273,919
Security and services 149,911 156,429
Taxes and licenses 250,960 213,033
SSS/PHIC/HDMF contributions 154,547 123,004
Communication, light and water 98,494 92,881
Professional fees 58,000 58,000
Depreciation 12,000 25,000
Fuel and oil 21,429 -
Miscellaneous 37,389 210,574
Insurance 3,859 24,311
2,218,419 2,177,151
11. Income tax

The Company is subject to the regular corporate income tax (RCIT). Due to the passed CREATE Law,
BIR RR No. 5-2021 states the changes of Corporate Income Tax of corporations with net taxable
income not exceeding 5,000,000 and total assets not exceeding 100,000,000 excluding land on which
the particular business entity’s office, plant and equipment are situated. The new rate is now 20%
effective July 1, 2020.

The Company claims itemized deductions for tax purposes.

12. Supplementary information required under RR 15-2010

The following information required by Revenue Regulations No. 15-2010 is presented for purposes of
filing with the BIR and is not a required part of the basic financial statements.

12.1 Output value-added tax (VAT)

Output VAT declared and the revenues upon which the same was based as at 31 December 2021
consist of:

Net
Revenues Output VAT
Subject to 12% VAT
Sale of goods 27,093,789 3,251,255
Sale to government - -
Sale of services - -
Others - -
27,093,789 3,251,255
Zero rated
Sale of goods - -
Exempt
Sale of goods - -
Total 27,093,789 3,251,255

Zero-rated sale of goods pertains to direct export sales transactions with PEZA-registered activities
and international vessels pursuant to Section 106 (A) (2) of National Internal Revenue Code.

VAT Exempt sales pertain to transactions with exempt entities which are exempt pursuant to Section
109 of National Internal Revenue Code.

12.2 Input VAT

Movements in input VAT for the year ended 31 December 2021 follow:

Beginning balance -
Add: Current year's domestic purchases/payments for: -
Imporation of goods for resale/manufacture
Domestic goods for resale or manufacture 2,866,849
Services lodged under other accounts 186,320
Services rendered by non-residents -
Capital goods purchased -
Deduct: Claims for Tax credit/refund -
Total input VAT 3,053,169

12.3 All other local and national taxes

All other local and national taxes accrued and paid for the year ended December 31, 2021 consist of:

Mayor's permit and licenses 232,493.20

Real property tax 11,807.18
Annual registration fees 500.00
Others - Community tax 6,160.00
Taxes and Licenses 250,960.38

12.4 Taxes Payable

Income taxes, withholding taxes, value added taxes paid and accrued and/ or withheld for the year
ended 31 December 2021 consist of:

Paid Payable Total

Income tax 54,359 17,679 72,038
Withholding tax on compensation 16,500 280 16,780
Expanded withholding tax 254,109 22,184 276,293
Value added tax (VAT) 181,830 16,255 198,085
Total 506,799 56,398 563,196

12.5 Deficiency tax assessment and tax cases

The company does not have any deficiency tax assessments with the BIR or tax cases outstanding or
pending in court.