CHAPTER VI

ACCOUNTING POLICY, ESTIMATES, AND PERIODS

Introduction

The company applied specific principles, bases, conventions, rules, and

practices in preparing and presenting financial statements, compliance with any

specific IFRS applying to a transaction, event, or condition, and providing guidance

on developing accounting policies for other items that result in relevant and reliable

information. CLEAN FIRST follows these methods or guidelines to adhere to the rule and

generate financial statements on the following;

The financial statements have been prepared in compliance with the Philippine

Financial Reporting Standards and rules and regulations of the Philippine

Securities and Exchange Commission. The accounting policies adopted in the

preparation of financial statements have been applied on a consistent basis.

ACCOUNTING POLICIES

Cash and cash equivalent

CLEAN FIRST comprises its cash into cash on hand and cash in the bank.

As contemplated in accounting, cash includes the money and any other negotiable

instrument that is payable in money and acceptable by the bank for deposit and

immediate credit. According to standards, cash shall classify an asset as current if

when the asset is cash and cash equivalent unless it is restricted to settle a liability

for more than twelve months after the end of the reporting period.
Cost of service, CLEAN FIRST used the weighted average method to measure

the cost flow of the inventory of cleaning supplies and measured initially at cost

and subsequently measured at lower cost and net realizable value.

Property, Plant and Equipment

CLEAN FIRST used initially the cost model for the best estimate for

depreciation of the property, plant, and equipment excluded land and subsequently

measured at cost model.

Trade and other payables

According to the Philippines Financial Reporting Standard, all liabilities are

measured initially at present value and subsequently measured at amortized cost.

However, all short-term payables are measured at face value.

Investment of partners

The investment of partners is through cash basis which is measured at face

amount. Partners' contribution is 400,000 per partner totaling 1,600,000 worth of

investment.

ACCOUNTING PERIOD

CLEAN FIRST uses a Fiscal year to record its transactions starting from the

date of the operation of the business until twelve months every year and closing

its financials. Here, the accounting period is one year, i.e., from 1st April to 31st

March.
RECOGNITION OF REVENUE AND EXPENSES

The business will apply the matching principle which is an expense should

be reported in the same period in which the corresponding revenue is earned, and

is associated with accrual accounting and the revenue recognition should be

recorded during the period in which they are earned, regardless of when the

transfer of cash occurs. The business has direct costs which are the cleaning

supplies used during the operation and indirect costs such as administrative,

personnel, rent and utilities and security cost. If an expense is not directly tied to

revenues, the expense should be reported on the income statement in the

accounting period in which it expires or is used up. If the future benefit of a cost

cannot be determined, it should be charged to expense immediately.

The recognition of revenue and expenses are accrual basis. Every

transaction and other event are recognized when they occur and not received or

paid, and they are recorded and reported in the financial statements of the periods

to which they relate, which means that Clean First revenue is recognized when

they earned regardless of when they received and expense is recognized when

incurred regardless of when paid

 Table 6 – 1: CHART OF ACCOUNTS

Current assets Non-current assets Owner’s equity

Cash Cleaning equipment Partner’s, capital
Cleaning Supplies Vehicle – Mini Van Withdrawal
Accumulated Depreciation
Furniture and fixture
Leasehold Improvement
Office Equipment
Current Liabilities
-
-
-
Income statement
Service Revenue Fringe benefit expense
Rent expense Office supplies expense
Utilities expense Office equipment – depreciation expense
Repairs and maintenance Cleaning equipment – depreciation expense
Supplies expense Leasehold improvement – depreciation expense
Salaries expense Furniture and fixture – depreciation expense
Advertising expense Taxes and licenses
Insurance expense Sanitary tools and supplies expense