• Statement of Changes in Equity

business is defined as an organization or enterprising entity engaged in commercial, industrial, or

professional activities.
organization is the structure that holds the business entity together.
The 3 Forms of Business Organization
A. Single/sole proprietorship
- A form of business whose assets, liabilities, income and expenses are owned by only one
person
B. Partnerships
- Often do not have to pay minimum taxes that are required of corporations.
C. Corporation
-It is a form of business organization whose assets, liabilities, income and expenses are owned
by itself being a legally separate entity from its owners.

capital statement is often referred to as the statement of changes in equity. SCE is the equity account's
specifics in the balance sheet. It displays changes to the owners' capital account. SCE typically consists of
the capital that the owners have invested and the company's net profit or loss.

Structure
1. Beginning / initial investment – the balance of capital balance carried forward from the previous year.
2. Additional investment – some owners invest additional cash or other assets to finance the operation
of their business.
3. Owner’s drawings – are capital withdrawal usually in cashThese drawings are generally for personal
use of the owner.
4. Net income or Net loss –net income or net loss is closed to the equity account. Income earned will
form part of the capital of the owner that could be personally withdrawn or as an additional fund to the
business operation.

A corporation statement of equity has the following capital structure:

1. Common Stock – also called as ordinary share. Ownership of common stock entitles the stockholder a
voting right in the stockholders’ meeting.

2. Preferred stock – also known as the preference share. Preferred stockholders have preferential
dividend rates and claims over the Common stockholders.

3. Share premium – this account is the excess of payment over the par value of the stocks, either
common or preferred. From the above example, if a stockholder
4. Retained earnings – this account consists of
accumulated income or loss of the company. In
other words, this is the part of the equity where
net income or net loss is closed.
• Statement of Cash Flow (Direct and Indirect
Method)
-It provides an analysis of inflows and outflows
of cash to operating, investing and financial
activities
Cash from Operating Activities- includes any
source and uses of cash from business activities
Cash from Investing Activities- generally invade
long term assets
Cash from Financing Activities- involves liability
and stockholders equity items
Direct Method- income statement method,
reports cash receipts and cash disbursement
from operation
Indirect Method- reconciliation method, adjust
the net income for item that affected reported
net income but did not affect cash
Financial Statement Analysis- It is the process of
evaluating risk, performance, financial health,
future prospects of a business using
computational and analytical techniques with
the objective of making economic decisions.
Comparability is one of the key qualities which
accounting information must have. Accounting
information is comparable when accounting
standards and policies are applied and
consistently from one period to another.
a. INTRACOMPARABILITY
The company’s financial statements for
the current period are being compared with the
financial statements of the past periods.
. INTERCOMPARABILITY
The company’s financial statements are
being compared against a direct competitor.
. INDUSTRY STANDARD
The company’s financial statements are
being compared within the industry.
• Vertical Financial Analysis- is a common size
statement analysis or proportional analysis of a
financial statement. For the SFP, the based is
total assets. On the other hand, sales or net
sales is used as the base amount for the SCI.
Component Percentage- analytical technique
Percentage= xxx/ total asset x 100
• Horizontal Financial Analysis -is the
comparison of two or more financial statements
over the time. It helps to see if there are
changes whether it is high or low that may lead
for further investigation of the reason for
changes.
Newest year- Oldest year= Amount of Inc/Dec
Percent = Amount of Dec or Inc/ Oldest year
• Ratio Analysis and Interpretation
a quantitative analysis technique applied by an
entity to be able to assess the company's
liquidity, solvency, profitability, and operational
efficiency
1. Liquidity – it is the company’s ability to
pay its short-term obligations. A good
liquidity position would encourage
banks or financial institutions to lend.
Short term obligation is a liability will be
paid back within 12 months.
a. Current Ratio - measures the ability of
the business to pay its current
obligations arising from operations
 b. Number of Days Sales in Inventory-
indicates the length of time it takes to
b. Quick or Acid-Test Ratio- measures the acquire, sell and replace the
ability of the business to pay its current merchandise inventory.
obligations arising from operations

2. Solvency – it is the company’s capability to

pay its long-term obligations as they fall due. c. Accounts Receivable Turnover- indicates
Long-term obligation is defined as liability that the number of times the Accounts
will be paid back after 12 months. Receivable were collected from its
customers.
a. Debt Ratio- indicates the percentage of
the company’s asset that are financed
by debt.
d. Average Collection Period- indicates the
number of days it takes to collect the
customer’s accounts.
b. Debt to Total Assets Ratio- indicates the
company’s reliance to debt or liability as
a source of financing relative to equity.
high ratio suggest a high level of debt

4. Profitability – it is the company’s ability to

generate higher profit.

a. Rate of Return on Total Assets -

measures the business’ efficiency in
c. Owner’s Equity to Total Assets Ratio- utilizing its assets to generate profits. A
ratio measures the company’s ability to higher return on assets is better
cover the interest expense

b. Gross Profit Ratio- measures how

profitable a company sells its product

3. Operational Efficiency – it measures the

ability of the company to utilize its asset. Asset
are generally acquired for the purpose of c. Rate of Return on Investment- measures the
generating sales. profit’s percentage generated by investment by
owners.
a. Rate of Inventory Turnover- this ratio
measures the number of times the
company was able to sell its entire
inventory to customers during the year.
A high rate turnover ratio indicates a
great demand of the commodities
Ang Pusang Itim

Alam na sa lahat ang paniniwalang ang pusang itim ay nagdadala ng kamalasan, ito ang isa sa mga
dahilan kung bakit naniniwala ang kuting na si Drac kung bakit siya iniwan at inabandona ng kanyang
mga naunang amo. Sa kanyang paggagala sa malaking siyudad, nakikita ng pusang si Drac ang mga
pusang inaalagaan ng kanilang mga amo at hindi nya mapigilan ang makaramdam ng inggit sa mga ito.
Kinagabihan, habang nakatingin sa madilim na kalangitan humiling ang siya sa kalangitan “Sana
magkaroon na ako ng bahay na matitirahan, malinis na pagkain at inumin at mapagmahal na amo” anang
ng munting pusang itim. Kinabukasan pagkagising ni Drac ay ginawa lamang niya ang nakasanayan,
maghanap ng makakain at pamasdan ang mga tao sa kalsada masyadong nalibang si Drac sa
pagmamasid at bigla siyang nabangga ng batang si Ares “Naku, kawawa naman ang munting kuting na ito
tara at ampunin nalang kita” Nakita nito ang nametag na nakasabit kay Drac na naglalaman ng pangalan
nito “Drac ba ang pangalan mo?” ngumiyaw ang pusa at matamis na ngumiti ang batang si Ares. Naging
masaya ang pagsasama ni Drac at Ares, labis na napalapit ang pusa sa amo nito kahit na ilan na sa mga
kapitbahay ni Ares ang nagsasabing malas ang pusang itim. Isang araw nakita ni Drac na niyayaya siya ng
mga bata na maglaro mula sa bintana ng kwarto ni Ares, tuwang tuwa ang munting pusa kaya naman
sinundan nya ito. Gayun na lamang ang takot ni Drac nang hindi na nya malaman ang lugar na kaniyang
napuntahan. Madilim na ang kalangitan at hindi na umasa pa si Drac na hahanapin pa siya ni Ares
malamang ay aabandonahin na rin siya nito. Laking gulat na lamang ni Drac nang marinig niya ang boses
ni Ares na humahagilap sa kanya “Drac! Nariyan ka lamang pala, natakot ako” patakbong lumapit si

Drac sa kanyang amo at binuhat sya nito.

Napagtanto ni Drac na ang tunay na pagmamahal ay hindi nakabase sa kanyang anyo kundi sa nadarama
ng bawat isa.