SOLE PROPRIETORSHIP

UNDER PERIODIC INVENTORY SYSTEM Accounting Elements • Merchandise took for Basic Accounting Equation
• ASSETS personal use. • Asset = Liabilities + Owner’s Equity
Merchandise Inventory • LIABILITIES • Accrued interest Owner’s equity = Capital – Drawing + Income – Expense
Merchandise Inventory xx • OWNER’S expense as notes Increase Decrease Increase Decrease
Cash/ Accounts Payable xx EQUITY payable as interest
• INCOME expense. Statement of Comprehensive Income
INCOME ACCOUNTS • EXPENSES Sales revenue or service income Pxx
Sales Less: Expenses/Operating expense (xx) (xx)
Cash/Accounts Receivable xx Profit/ Profit for the month Pxx
Credit, Sales xx Trade discount – theories Merchandising business:
List price P30,000 Name of Company
Sales Discounts Less: Trade Discount 600 Statement of Comprehensive Income
Debit, Cash xx Invoice Price P29,400 Date of ended
Debit, Sales Discounts xx
Credit, Accounts Receivable xx Accounts Receivable xx Net Sales:
Estimated Uncollectable Accounts (xx) Sales Pxx
Sales Returns and Allowances Estimated Realizable Value XX Less: Sales Discount (Pxx)
Sales Returns & Allowances xx Sales Returns and allowances (xx) (xx)
Cash/Accounts Receivable xx PPE xx Net Sales Pxx
Accumulated Depreciation (xx) Cost of Goods Sold:
COST ACCOUNTS Net Book Value/Carrying Value XX Merchandise Inventory, beg. xx
Purchases Purchases xx
Debit, Purchases xx Less: Purchase Return and Allow. (xx)
Owner’s Equity, end xx
Cash/ Accounts Payable xx Purchase Discount (xx) (xx)
Owner’s Equity, beg. xx
Net Purchases xx
Decrease in Owner’s Equity xx
Purchase Discounts Add: Freight-in xx
Accounts Payable xx Beginning Delivered Cost of Purchases xx
Beginning balance xx + Sales/ Credit sales/
Purchase Discounts xx Goods Available for sale xx
Increase(Decrease) xx Sales on account
Cash xx Less: Merchandise Inventory, end (xx)
Ending balance xx + Accrual revenue
Cost of goods sold (xx)
- Ending
Purchases Returns and Allowances Gross Profit Pxx
+ Supplies beg. - Collection from
Cash/ Accounts Payable xx customers Less: Operating Expense
+ Purchase
Purchase Returns & Allowances xx - Sales returns; Sales General and Administrative Expenses
+ Purchase on account
discounts and allowances Other expenses
- Supplies end.
Freight-in - Accounts or notes Finance cost (xx)
=
Freight-in xx written off, Bad debts Profit for the month/ Net income PXX
Cash/ Accounts Payable xx - Trade notes receivable
ADJUSTING ENTRIES discounted Name of Company
●Accruals Trial balance
EXPENSE ACCOUNTS
•Accrued Income (Receivable) – already earned December 31, 20XX
but not yet collected/ receive
Freight-out
Accrued income xx Debit Credit
Freight-out xx
Income xx Current asset accounts xx
Cash/ Accounts Payable xx
Noncurrent asset Accounts xx
•Accrued Expense (Payable) – already incurred Current Liabilities Accounts xx
UNDER PERPETUAL INVENTORY
but not yet paid Noncurrent liabilities Accounts xx
SYSTEM
Interest Expense xx Capital xx
Accrued interest expense xx Drawing xx
Bought or purchase
Sales xx
Merchandise Inventory xx
●Deferrals Sales Returns & Allowances xx
Accounts Payable/ Cash xx
• Pre-collection of Income (Unearned Income) Sales Discounts xx
Unearned income xx Purchases xx
Returned
Income xx Purchase Returns and Allowances xx
Accounts Payable/cash xx
• Prepayment of Expenses (Prepaid Expense) Purchase Discounts xx
Merchandise Inventory xx
Expense xx Freight-in xx
Prepaid expense xx Freight out xx
Cost of Goods Sold
Income accounts xx
Cost of Goods Sold xx
●Estimated Uncollectable Accounts (Bad Debts) Expenses accounts xx __
Merchandise Inventory xx
Uncollectable Account Expense xx TOTAL XX XX
Estimated Uncollectable Account xx Unpaid water bill amounting 75% an beg asset is end
Discounts
to 590. Surcharges 40. capital
Accounts Payable xx
●Depreciation of PPE or Fixed Asset 120,000 deduct ha 100,000
Merchandise Inventory xx
= Cost of the Asset-Salvage Value/scrap value Accounts Receivable beg.
Cash xx
Estimated life in years - Bad debts 120,000 = 100,000 + 20,000
= Annual Depreciation Expense/12months + Cash sales 120,000 =
Paid freight/freight in– Bought
= Monthly Depreciation + Sales on account 240,000 = 150,000 + 90,000
Merchandise Inventory xx
- Collection
Cash xx
Depreciation Expense xx - Accounts Receivable end.
Accumulated Depreciation xx
9k+11k+5k-16k = 9k
●Unused Supplies Inventory Adjustment
Supplies expense xx
Supplies xx
 STATEMENT OF FINANCIAL POSITION/ Balance Sheet (Permanent/Real Accounts)
❖ Assets, Debit
➢ Current Asset
• Cash and Cash equivalents
✓ Cash on hand
✓ Cash in bank
✓ Petty cash fund
✓ BSP treasury bill
✓ Petty cash fund
• Financial Assets at fair value- trading
securities and other investments in
quoted equity instruments.
• Financial Assets at FVPL
• Trade and other receivables
✓ Accounts receivable
o Estimated uncollectible accounts/Allow.
for doubtful accounts/Allow. for bad
debts-asset offset or contra asset, Credit
✓ Notes Receivable – nontrade/trade
✓ Accrued interest on notes receivable
✓ Advances to employees, collectible
currently or IOU
✓ Advances to suppliers, officers due
currently – receivables
✓ Accrued income
• Nontrade receivables
✓ Employee loans
✓ Wage advances
✓ Income tax refunds
✓ Interest payments
✓ Insurance claims
• Inventories
✓ Finished goods
✓ Goods in process
✓ Raw materials
✓ Manufacturing Supplies
• Merchandise Inventory
• Foreign currency
• Prepaid Expenses
✓ Supplies Inventory or Unused
Supplies/Unused office/shop supplies
✓ Prepaid Expenses/Rental/Insurance
• Assets classified as held for trading or
include in disposal group classified as
held for sale
✓ Noncurrent/long-term held for sale/use
✓ Equipment held for sale
• Cost in excess of billings on long-term
contracts – collectible within 12 months
➢ Non Current Asset / Fixed Asset-
residual definition
• Property, plant and equipment
✓ Land
✓ Land improvement
✓ Building
✓ Machinery
✓ Ship
✓ Aircraft
✓ Motor vehicle
✓ Equipment/Office equipment/Store
equipment/Delivery equipment
✓ Furniture & Fixtures/Office Furniture &
Fixtures /Store Furniture & Fixtures
o Accumulated Depreciation, Credit-contra
asset or asset offset , except LAND.
✓ Leasehold improvement
✓ Patterns, molds, dies and tools
✓ Bearer plants
• Long-term investment
✓ Investment in shares and bonds
✓ Cash surrender value
✓ Investment in associate, at equity
✓ Investments in subsidiaries or affiliates
✓ Investment in funds
▪ Sinking fund
▪ Plant expansion fund
▪ Preference shares redemption fund
✓ Investment property
✓ Investment in joint venture
✓ Financial assets at amortized cost
• Intangible assets
✓ Patent
✓ Franchise
✓ Copyright
✓ Lease right
✓ Trademark
✓ Computer software
✓ Goodwill- unidentifiable
• Biological assets
• Other noncurrent asset
✓ Long-term advances to employees,
shareholders, officers, & directors
✓ Abandoned property
✓ Long-term refundable deposit
• Contingent asset
• Financial Assets at FVOCI
✓ Equity investment- FVOCI
✓ Bond investment- FVOCI
• Cash fund long term
• Advances to subsidiary
• Non-marketable investments
• Deferred tax assets
❖ Liabilities , Credit
➢ Current Liabilities
• Trade and other payables
✓ Accounts payable
✓ Notes payable (short-term)
✓ Accrued interest on note payable
✓ Income tax payable
○ Estimated tax expense
✓ Dividends payable
✓ Accrued expense
• Current provisions
• Note payable - short-term debt
• Provisions – for damages and warranties
• Short-term borrowing
• Current portion of noncurrent financial
liabilities
✓ Current portion of long-term debt
✓ Current portion of bonds payable
• Rent payable
• Salaries payable
• Interest payable
• Taxes payable
• Withholding taxes payable
• Unearned Income
• Cash Dividends Payable
• Unsecured Note
• Warranty liability
• Premium liability
• Current tax liability
• Financial liabilities held for trading-
quoted debt instrument
• Estimated liability for coupons
• Undelivered checks
• Billing in excess of cost on long-term
contracts – collectible within 12 months
• Advances from customer
• Credit balance in customer’s account
• Liability directly associated with assets
classified as held for sale
➢ Non-current liabilities- residual
definition
• Notes Payable (long-term)
• Senior Bonds
• Bond Payable
(-) Discount on bonds payable
(+) Premium on bonds payable
• Mortgage Payable
• Contingent Liability
• Deferred Tax Liability
• Noncurrent portion of long-term
debt
• Finance lease liability
• Long-term obligation to company
officers
• Long-term deferred revenue
• Advances from affiliates
❖ Owner’s Equity/ Shareholder’s
Equity
• Robert Jaworski, Capital, Credit
• Robert Jaworski, Drawing, Debit
• Income & Expense Summary
(temporary account)
• Preference Share Capital/ Preferred
stock
• Ordinary Share Capital/ Common
stock
• Dividends
• Share capital and share premium/
Contributed capital
✓ Capital stock/Share Capital
✓ Subscribe capital stock/ Subscribed
share capital
✓ Share premium/ Additional paid
capital
• Retained Earnings
✓ Deficits/Accumulated Profits(losses)
✓ Appropriated / Accumulated reserve
✓ Unappropriated retained earnings
• Revaluation surplus
✓ Revaluation reserve
✓ Sound value
✓ Depreciated replacement
✓ Carrying amount
• Treasury Shares / Treasury Stock
• Reserves
✓ Share premium reserve/ Additional
paid capital
✓ Appropriation reserve
✓ Retained earnings appropriated for
contingencies.
✓ Asset revaluation reserve/
revaluation surplus
✓ Other comprehensive income reserve
Notes Receivable
– nontrade, look the due date, within 1 year (CA),
Beyond 1 year (NCA).
- Trade, still current asset, regardless of the due
date.
Reasonably possible- disclosure
 STATEMENT OF COMPREHENSIVE INCOME/ STATEMENT OF FINANCIAL PERFORMANCE/
Income statement (Temporary/ Nominal Accounts)
❖ Income or revenue , Credit
• Royalties income
• Service income/ service revenue
• Professional income
• Miscellaneous income
• Sales
• Sales discount- contra account
• Sales returns and allowances- contra
account
• Investment income- equity method
• Distribution income from trusts
• Other income
✓ Interest income/ revenue
✓ Dividend revenue/ income
✓ Rental income/ rent income or revenue
✓ Ancillary income
✓ Gain from expropriation
✓ Gain on sale of investment
✓ Gain on sale of equipment
✓ Gain on Property, plant and equipment
✓ Gain on sale of intangible asset
✓ Unusual and infrequent gain
• Income from continuing operations
• Income from discontinued operation
• Share of profit of associate
Other Comprehensive Income
• Unrealized gain (loss) on equity
investment at FVOCI
• Unrealized gain (loss) on debt investment
at FVOCI
• Unrealized gain on futures contract
designated as cash flow hedge
• Unrealized gain on derivative contract
• Translation loss on foreign operation
• Net measurement gain on defined benefit
plan
• Loss on credit risk of a financial liability at
FVPL
• Revaluation surplus during the year
• Unrealized gain (loss) on foreign currency
translation
• Adjustment of P/L of prior year for error
❖ Expenses , Debit
➢ Operating expenses
✓ Rent expense – Selling / General and Administrative Expenses
✓ Miscellaneous expense
✓ Employee benefits costs
✓ Sales or office salaries
✓ SSS & Philhealth – sales / office
✓ Bonuses
• General and Administrative Expenses - office
✓ Officers and Office Salaries
✓ Repairs and maintenance
✓ Depreciation expense – office or building equipment
✓ Taxes and Licenses – except INCOME TAX
✓ Certain taxes
✓ Contribution
✓ Professional fees – Accounting, legal and audit fees
✓ Bonuses
✓ Office Supplies Expense / used
✓ Doubtful accounts/ Bad debt expense/Uncollectible Accounts
✓ Expenses of general executives
✓ Expenses of general accounting, credit and collection department
✓ Amortization of intangible assets
✓ Insurance expense
✓ Salaries expense
✓ Utilities expense
✓ Salaries and wages
• Selling Expenses/Distribution costs - sales
✓ Advertising and publicity
✓ Promotions
✓ Delivery of goods to customers
✓ Shipping supplies
✓ Selling
✓ Sales salaries (sales agent)
✓ Supplies expense/ Store Supplies Expense/Shop supplies expense
✓ Depreciation-store or delivery equipment
✓ Salesmen's salaries or sales commissions
✓ Traveling and marketing expenses
✓ Freight-Out
✓ Gas & oil
✓ Goods in transit to customer
• Other Expenses – not selling & administrative function
✓ Loss on sale of trading investments
✓ Loss on sale of land
✓ Loss on sale of intangible asset
✓ Loss on disposal of PPE
✓ Loss on sale of noncurrent investment
✓ Loss on early retirement of long-term investment
✓ Casualty loss – flood, earthquake, fire, other natural disaster
✓ Expropriation loss
➢ Costs, debit
✓ Purchases
✓ Purchase Discount – Contra Account
✓ Purchase Returns and Allowances – contra account
✓ Freight out
➢ Finance cost
✓ Interest expense
✓ Interest expense on bank loan
✓ Interest expense on bonds payable
✓ Gain on early extinguishment
PARTNERSHIP
Partnership Formation Partner was admitted in the partnership as an Accounts Receivable = AR/outstanding receivable × _%
Money- recorded at Face Value industrial partner with __% on the profit only. = The required allowance (–) EUA
Property- Agreed Value, otherwise Fair If the under depreciated copy the amount to = Amount of adjustment (increase).Credit
Value; Fair market value/ Current Value the adjusting entry. Credit, add Or = AR/outstanding receivable × _%
& Book value/Historical Value/Carrying If the over depreciated copy the amount to the = The required allowance (+) EUA
Value. Appraised value. adjusting entry. Debit, deduct = Amount of adjustment (decrease).Debit
Rule #1 Assume LIABILITIES only if stated. If collectible AR x %= answer Rule #6 If the
Non-cash- Agreed value
Rule #2 Do not record any expenses. PPE = Fair market value – PPE = answer
Contribution- Fair value account was
Rule #3 There is Bonus if TIC is equal to(=) TAC. = answer – ADA
Excluding service- omitted / not yet
Rule #4 Use Bonus method if the problem is silent. = Amount of adjustment
Historical cost/Book value recorded, the entry
Rule #5 If Fair market value is higher than current value it Revalued/Valued same formula
must in the normal
is Increase. If lower than current value it is decrease. ● If Unpaid = Accrued expenses
● If Not collected = Accrued income balance.
Rule #6 If overvalued decrease the normal balance and if undervalued increase balance.
Partnership Operations 10 % of net income over salary, interest Statement of Changes in Partner's Equity
- Partners deficiency or partner’s capital Overvalued/ undervalued Original Investment xx
debit. Owes capital Add: Additional Investment xx
Rule #1 Partner’s capital contribution is Marshalling assets Total xx
not included. Profit × P/L Liquidation workback Less: Permanent Withdrawal (xx)
Rule #2 If there is industrial partner: Balance xx
1) Profit × shares of industrial partner Add: Profit (xx)
= shares of industrial partner Total xx
2) Profit – shares of industrial partner × Less: Temporary Withdrawal (xx)
division of P/L of non industrial partner Partner’s Equity XX
Rule #3 If the case is silent, use the
simple average capital.
Rule #4 Initial investment only, Income & Expense Summary xx Partner
considered as average partner’s capital. Partners, Drawing xx Profit Salaries xx
Partners, Drawing xx Interest xx
Bonus xx
Partners, Drawing xx Residual / remainder xx
Partners, Drawing xx Loss As distribution/profit allocation XX
Income & Expense Summary xx Rule #6 Losses follow the division of profits while profits does
B=(NI-S-B) - Profit before deducting salaries and bonus. Profit × bonus rate = bonus not follow the division of loss.
B=(NI-S×B) - Profit after deducting salaries but before bonus. Profit after salary × % = B 12 months; 4 weeks in a month; 31 days
B=(P-S-I-B)% - Profit after deducting salaries, interest and bonus. Profit/after=/1+%×%=B Simple weighted average
B=(R-ER×B) - Bonus on revenues in excess of _ - Rule #5 If excess get the difference. = (beg. + end.) × income = answer
B=(NI-I-B-S) – Bonus on net income before salaries, but after interest and bonuses. + (Beg. + end.) × income = answer
B=(NI-I×B-S) – Bonus based on net income after interest but before bonus and salaries = Total both partners
Partnership Dissolution •New partner capital is greater than the Pro-forma:
- partnership will not terminated. contribution, bonus given to new partner; Debit, Selling Partner’s Capital xx
●The personal gain or loss is not •Capital credit of new partner is less than his Credit, Buying Partner’s Capital xx
recorded in the partnership books. contribution, bonus given to old partners; Cash xx
●Total Invested Capital (TIC) or total •Capital credit of new partner is equal to his Admitted Partner xx
contributed capital. contribution, neither the new nor the old Partner’s capital xx Bonus to new partner
●Total Agreed Capital (TAC) or capital partner receive the bonus or NO BUNOS at all. New partner w/ bonus xx
credit, Agreed Capital Rule #1 When total agreed capital cannot be Debit, New partner xx Bonus to old /
determined, assume that the TOTAL Agreed Credit old partners xx remaining partner
Capital is equal to TOTAL contributed capital. Debit, Cash & Credit, Capital No bonus
Rule #2 New partner capital credit is assumed Retired partner xx Given to the heirs
to be equal to his contribution in case former Cash xx Then,
cannot be arrived at. Retires partner xx The Heirs doesn’t
Partnership capital revalued amount implied by Heirs xx want to withdraw the
the excess payment -> Excess ÷ % = Goodwill New partners retired shares.
× % of each partners.
Partnership Liquidation Cash xx Othr. Prtnrs, Cap. xx Balance before liquidation
-is the process of winding up the Partner, Capital xx Def. Part., Cap. xx Sale of non-cash assets:
business, converting NCA into cash. NCA xx To record capital Gain on realization (Loss on realization)
Rule #1: All Liabilities will be deducted to Sale of NCA at deficiencies of Balances
Cash. Realization loss Partner’s name being Payment of Liabilities
Rule #2: If there is deficient partner and absorbed by solvent Payment of liquidation expense
have loans. Partner’s loan will offset Accounts Payable xx partner. Payment of Loan
against Capital deficiency. If there is Cash xx Partners loan offset against his capital deficiency
balance it will absorb by other partners. To record payment of Partner’s, Capital xx Partner capital deficiency paid by the Partnership
Rule #3: The capital deficiency of one Liabilities Cash xx Partners are insolvent, Capital deficiency absorbed by partner
partner will absorb by other partners if To record cash Balances
stated before the loans Partner’s, Loan xx distribution to partner Cash distribution to partners
Partner’s, Capital xx
To offset loan against G/L on Realization xx Ex. NCA of P60,000 were sold for P25,000.
capital deficiency Partner, Capital xx Cash NCA
To distribute net gain 25,000 (60,000) loss on realization
Partner’s loan xx on realization based 65,000 (60,000) gain on realization
Cash xx on P/L ratio
To record payment of
Partner’s loan account
CORPORATION
Memorandum Entry Journal Entry Above par
(If the problem is silent of what method will be Land
used, it's the memorandum entry method.) Unissued Share Capital-O Share capital-O/P
Unissued Share Capital-P Share premium
Archers Corporation was authorized to issue xx Authorized Share Capital-O To record the issuance of share capital for land.
ordinary share /preference shares with par Authorized Share Capital-P
value, Pxx. To record authorization of 5,000 preference Below par
shares at par value of P100 per share and 20,000 Land
Subscription Shares: share ordinary at par value of P50 per share. Discount on share capital
Subscription Receivable-O Share capital- O/P
Subscription Receivable-P Subscription Shares: To record the issuance of share capital for land.
Subscribed Share Capital-O Subscription Receivable-O
Subscribed Share Capital-P Subscription Receivable-P Legal fees
To record subscriptions, above par/below par Subscribed Share Capital-O Share capital
value. Subscribed Share Capital-P Share premium
To record the issuance of share capital for service
Partial Collection: Partial Collection: rendered.
Cash Cash
Subscription Receivable-O Subscription Receivable-O Cash
Subscription Receivable-P Subscription Receivable-P Share capital – O/P
To record the collected % of Subscription Share premium
Receivable. Full Collection: To record issuance of share capital.
Cash
Full Collection: Subscription Receivable-O Treasury shares
Cash Subscription Receivable-P Cash
Subscription Receivable-O To record acquisition of treasury shares.
Subscription Receivable-P Issuance of Certificate:
To record the collected in full the balance of %. Subscribed Share Capital-O Cash
Subscribed Share Capital-P Treasury shares
Issuance of Certificate: Unissued Share Capital-O To record issuance of treasury shares at cost.
Subscribed Share Capital-O Unissued Share Capital-P Above cost
Subscribed Share Capital-P To record full payment of Incorporator’s Below cost
Share Capital-O subscription receivable and issuance of share
Share Capital-P certificate.
To record the issuance of stock certificate

Note: When there is collection in full,

automatically there should be an entry to record
issuance of certificate.
Preference Ordinary Shareholder’s Equity Authorized share capital xx
Shares Shares Contributed Capital: Unissued share capital (xx)
Issued xx xx Share Capital Issued share capital xx
Subscribed xx xx Subscribed Share Capital
Treasury (xx) (xx) Less: Subscription Receivable Share capital xx
Outstanding Share xx xx Reserves: Preference share capital xx
Dividends Per Share × xx × xx Share Premium in Excess of Par Value Ordinary share capital xx
Dividends Payable XX XX Share Premium from Treasury Share Share premium xx
Appropriated Accumulated Profits Subscribed share Capital xx
To find the dividend per share: (Losses) for Treasury Share Subscription Receivable (xx)
Preference share= __% × par value Revaluation Increment in Property Retained earnings xx
Ordinary Shares= __% × par value Accumulated Profits (Losses) (Unrestricted) Retained earnings unappropriated xx
Total Retained earning appropriated xx
To find issued, subscribed, treasury shares: Less: Treasury Share at Cost Share dividends payable xx
= Amount ÷ par value Total Shareholder’s Equity Other comprehensive income:
• Unrealized gain xx
Paid in Capital Sales xx • Revaluation surplus xx
Share capital xx Total expenses (xx) Cumulative translation adjustment-credit xx
Subscribed Share Capital xx xx Net income xx Cumulative translation adjustment-debit (xx)
Additional paid in capital Retained earnings- beginning xx Actuarial loss on defined benefit plan (xx)
Paid in Capital in excess of par xx Dividends declared/ paid (xx) Treasury shares, at cost (xx)
Total contributed capital XX Share dividend payable (xx) Total shareholder’s equity XX
Retained earnings- ending XX
Preference share capital xx Preference share capital xx Journal Entry
Ordinary share capital xx Ordinary share capital xx • Reissuance of 800 shares on treasury shares.
Subscribed preference share xx Subscribed preference share xx • Reissuance of 400 shares on treasury shares.
Subscribed ordinary share xx Subscribed ordinary share xx • Appropriated Accumulated Profits on treasury
Subscription Receivable – preference (xx) LEGAL CAPITAL XX shares.
Subscription Receivable – ordinary (xx) • Closing net income on retained earnings.
Share premium - preference xx If no par value but there is stated value the share Effect in corporation
Share premium – ordinary xx premium is included in legal capital either SP – Ex. Asset Shareholder’s
Premium on Treasury Shares xx preference or ordinary Increase or decrease
Contributed Capital XX
CONCEPTUAL FRAMEWORK
Cash equivalents - as short-term, highly liquid OCI that will be reclassified to retained Name of Company
investments that are readily convertible into earnings: Statement of Comprehensive Income
known amount of cash and which are subject • Unrealized G/(L) on equity investment For the year ended December 31, 20XX
to an insignificant risk of changes in value. measured at FVOCI. Upon disposal of the
Examples of cash equivalents: investment. Net Sales:
• Three month BSP treasury bill • Change in revaluation surplus. Realization Sales Pxx
• Three year BSP treasury bill purchased three of the revaluation surplus. Less: Sales Returns and allowances (xx)
months before date of maturity • Remeasurements of a defined benefit Sales Discounts (xx) (xx)
• Three month time deposit plan. Not recycled. Net Sales Pxx
• Three month money market instrument • G/(L) attributable to credit risk of a Cost of Goods Sold:
BSP treasury bill purchased three years ago financial liability designated at fair value Merchandise Inventory, beg. xx
cannot qualify as cash equivalents. through profit or loss/FVPL. Recycle Purchases xx
Equity securities cannot qualify as cash Less: Purchase Return and Allow. (xx)
equivalents Name of Company Purchase Discount (xx) (xx)
Preference shares with specified redemption Statement of Financial Position Net Purchases xx
date and acquired three months before As of December 31, 20XX Add: Freight-in xx xx
redemption date can qualify as cash Cost of Goods Available for sale xx
equivalents. ASSET Less: Merchandise Inventory, end - NRV (xx)
Property, plant and equipment Cost of sales or cost of goods sold (xx)
• Assets that are held sale, including land, or Current assets: Gross Profit/Gross Income xx
held for investment are not included in Cash and cash equivalents xx Other income: xx
property, plant and equipment. Financial assets at fair value xx Investment income xx
Trade and other receivables xx Total income xx
• Long-term debt currently maturing Inventories xx Operating Expenses:
- An agreement to refinance or to reschedule Prepaid Expenses xx Distribution costs (xx)
payment on a long-term basis is completed Total current assets xx General and Administrative Expenses (xx)
after the end of reporting period and before Other expenses (xx) (xx)
the financial statements are authorized for Non-current assets: Income from Operations xx
issue, Current. Property, plant and equipment xx Finance cost (xx)
- If the refinancing on long-term basis is Investment in associate with, at E xx Income before tax xx
completed on or before the end of the Long term investments xx Income tax expense (xx)
reporting period, the refinancing is an Intangible assets xx Income from continuing operations xx
adjusting event and therefore the obligation Other noncurrent asset xx Income from discontinued operation xx
is classified as Non-current. Total noncurrent assets xx Net income xx
- If an entity has the discretion to refinance or TOTAL ASSETS XX Other Comprehensive Income
roll over an obligation for at least 12 months OCI to be realized to profit or loss: xx
after reporting period classified as Non- LIABILITIES AND SHAREHOLDER’S EQUITY OCI to be realized to retained earnings: xx
current. Total Comprehensive income PXX
Current Liabilities:
Comprehensive income includes profit or loss Trade and other payables xx DIRECT METHOD
and other comprehensive income. Note payable – short-term debt xx Accounts Receivable
Profit or loss is the total of income less Current portion of bonds payable xx Beginning Ending
expenses, excluding the components of other Warranty liability xx Sales/ Credit sales/ Sales Collection from customers
comprehensive income Total current liabilities xx on account Sales returns; Sales discounts
Example of Other Comprehensive Income: Accrual revenue and allowances
- Cumulative translation adjustment - credit, Noncurrent liabilities: Accounts or notes written
translation gain Bonds payable – remaining portion xx off, Bad debts
- Cumulative translation adjustment- debit, Note payable – due July 1, 2022 xx Trade notes receivable
translation loss Deferred tax liability xx discounted
Total noncurrent liabilities xx Accounts Payable
OCI that will be reclassified subsequently to TOTAL LIABILITIES xx Ending Beginning
profit or loss: Payments to Merchandise Purchases /Credit purchase/
• G/(L) from translating financial statements Shareholder’s equity creditors/ Payment to purchase on account
of a foreign operation. Share capital, P100 par xx suppliers
• Unrealized G/(L) on derivatives contracts Reserves xx Purchase Returns;Purchase
designated as a cash flow hedge. Retained earnings xx discounts and allowances
• Unrealized G/(L) on debt investment Accumulated Profits xx Unearned Rent Income
measured at fair value through OCI/FVOCI. Other components of equity xx Beginning Ending
Treasury shares (xx) Rent received Rent income
Total shareholder’s equity xx Prepaid Insurance
Total liabilities and shareholder’s equity XX Beginning Ending
Advance payment Insurance Expenses
Accrued salaries Payable
Ending Beginning
Payments Salaries Expenses
Accrued interest payable
Ending Beginning
Payments Interest Expenses
Income tax payable
Ending Beginning
Payment Income tax expense
STATEMENT OF CASH FLOW
Cash Flows from Operating Activities Cash Flows from Financing Activities
Cash Inflows: Cash Inflows:
Cash received/collected/receipts from customer Proceeds from sale of treasury shares
Cash received from sale of trading securities Proceeds from issuing share capital
Cash received from sale of goods and services Proceeds from issue of ordinary shares
Cash receive from royalties, fees, commissions and other revenue Proceeds from issuance of Capital Stock
Increase in trade accounts and notes payable Proceeds from short-term debt
Dividend received Proceeds from bank note payable
Interest received Proceeds from borrowing on a long-term note payable
Depreciation Cash received from issuance of shares
Accumulated depreciation Cash receives from investments by owner
Discount amortization Cash receipts from obtaining bank loan
Amortization of patent Cash borrowed from bank
Unrealized loss on financial asset held for trading Increase in long-term debt
Rendering of services Reissuance of treasury shares
Net income Issuance of share capital
Loss on sale of equipment Issuance of short-term note payable for cash
Unearned service income xx Issuance of bonds payable xx
Cash Outflows: Cash Outflows:
Cash paid to suppliers and employees Payment for bonds payable xx
Cash paid to purchase trading securities Payment of cash dividend
Cash paid to purchase inventory Payment of current bank note payable
Cash payment for wages and other operating expenses Payment of bank loan
Cash payment for insurance Repayment of short-term notes payable
Interest paid Cash paid to repay loan
Income taxes paid Purchase of treasury shares
Gain on sale of investment Extinguishment of long-term note payable
Gain on sale of equipment (xx) Retirement of ordinary shares
Net Cash Provided (Used) by Operating Activities xx Cash paid to owner for Withdrawal
Cash paid to bank for loan obtained
Cash Flows from Investing Activities Cash paid to shareholders on corporate dividends (xx)
Cash Inflows: Net Cash Provided (Used) by Financing Activities xx
Sale of investment Net Increase (Decrease) in Cash xx
Sale of investment securities Add: Cash Balance at the beginning of the period xx
Proceeds from sale of equipment Cash Balance at the end of the period xx
Proceeds from sale of long-term investment
Proceeds from Disposal of Plant Assets Cash flow from Operations
Proceeds from Collections of Notes Receivable Collection from customer/ Cash received from customers xx
Collection of nontrade note Receivable- principal only Rent received xx
Cash receipts from collections of long-term receivable Payment for rent (xx)
Cash receipts from payment of loan made to another entity Payment to suppliers/merchandise creditors (xx)
Cash proceeds from sale of plant Payment for salaries/Salaries paid (xx)
Vendor financing Payment for insurance/Insurance paid (xx)
Increase in financial assets at FVOCI xx Payment for other expense/Other expense paid (xx)
Cash Outflows: Payment for interest/Interest paid (xx)
Purchase of investment Payment for income tax/Income tax paid (xx)
Purchase of long-term investment Net Cash flow from Operations – Direct Method XX
Purchase of short-term investments
Purchase of bond investment Cash flow from Operations
Purchase of real estate for cash Net income xx
Purchase of property, plant and equipment Adjustment:
Purchase of marketable securities not cash equivalent (Increase) Decrease in accounts receivable xx
Purchase of patent for cash (Increase) Decrease in inventory xx
Purchase of plant for cash (Increase) Decrease in prepaid insurance xx
Payment of equipment Increase (Decrease) in accounts payable xx
Acquisition of deposit from bank Increase (Decrease) in accrued salaries payable xx
Cash paid for purchase of land Increase (Decrease) in accrued interest payable xx
Cash paid for purchase of building Increase (Decrease) in income tax payable xx
Cash paid for loans to other parties Increase (Decrease) in unearned rent income xx
Cash paid for acquisition of PPE Depreciation xx
Issuance of Notes Receivable (xx) Amortization of patent xx
Net Cash Provided (Used) by Investing Activities xx Net Cash flow from Operations – Indirect Method XX
Cash flow Except “other expenses”
Cash inflow:
Cash receipts; Cash collected; Cash received Statement of Cash Flows
Proceeds; Increase liability and revenue; Decrease Asset and expenses; Indirect Method
Increase capital; Invest; Sale; Issuance • If Asset increase - deduct
Cash outflow: • If Asset decrease – added
Cash payment; Cash disbursement; Cash paid; Acquisition; Purchase; Paid; • If Liability increase – added
Increase Asset and expenses; Decrease Liability and revenue; Withdrawal; • If Liability decrease – deduct
Drawings • If Equity increase – added
• If Equity decrease - deduct