SILLIMAN UNIVERSITY

COLLEGE OF BUSINESS ADMINISTRATION

FINANCIAL ACCOUNTING AND REPORTING BSA 13C-C

GROUP NO. 1

Submitted by:

Solon, Leigh Marie

Banquiao, Vienna Joy

Bayron, Ella Amabelle

Espraguera, Julius Adriane

Ocupe, Kyle Aundre

Pusta, Mary Hernaleth Hearth

Saagundo, Graciel

Sandalo, Arianne Faith

Sandariega, Nica
 TABLE OF CONTENTS

I. COMPANY BACKGROUND................................................................................................... 1

History........................................................................................................................................1

Company Profile........................................................................................................................ 1

II. PROBLEM(S) IDENTIFIED.................................................................................................. 1

III. APPLICATION OF FAR CONCEPTS.................................................................................2

IV. FINANCIAL STATEMENTS................................................................................................. 4

A. Statement of Financial Performance..................................................................................... 4

B. Statement of Changes in Owner’s Equity............................................................................. 5

C. Statement of Financial Position.............................................................................................6

D. Statement of Cash Flows.................................................................................................... 7

V. SUMMARY................................................................................................................................ 8

VI. REFERENCES...................................................................................................................... 11
 I. COMPANY BACKGROUND

History

The group’s chosen proponent is 21 Dental Clinic, located at RM. M21 2nd Flr. Twin

Arcade Bldg. Perdices St. Dumaguete City. The business is a sole proprietorship, owned and

founded by the attending dentist himself, Dr. Jonathan W. Cunanan. The business has been

around for over 16 years, having been established on the 8th of January 2007 for the purpose of

providing dental services to prevent the deterioration of his customers dental health and to boost

their resilience against dental or medical complications that may affect their everyday life.

Company Profile

21 Dental Clinic provides an array of services for dental health, from preventive care

such as regular dental check ups and teeth cleaning, to more advanced procedures such as dental

filling, root canal, dental braces, tooth extractions, and dentures. Their objectives are to correct

problems with people’s teeth and jaws and improve chewing and proper digestion of food along

with speech problems. Dr. Cunanan and his clinic assistant, who also serves as the secretary,

make up the clinical staff. The clinic offers services for people of all ages, from children,

teenagers, and adults. They accept walk-in customers and also installment plans for their

advanced treatments such as dental braces requiring a downpayment.

II. PROBLEM(S) IDENTIFIED

The owner of 21 Dental Clinic articulated a unique stance on client payments. He

expressed a willingness to patiently await full payment rather than prematurely declaring unpaid

bills as bad debts. This approach reflects a commitment to fostering positive client relationships,

allowing individuals to settle their financial obligations at their own pace. However, this leniency

1
could potentially impact the clinic’s cash flow and overall financial stability, risking the firm’s

longevity in exchange for positive reputation among clients.

Furthermore, the observation underscores the delicate boundary between the business and

personal finances of the owner. The fact that the firm loses its distinct legal entity status when the

owner utilizes company funds for personal expenses suggests a potential disregard for the

separation of business and personal finances. This raises concerns about financial transparency,

legal implications, and the protection of personal assets in the event of business liabilities - the

possibility of the owner’s personal assets to be used to extinguish the business’s liabilities.

Additionally, the acknowledgment that inaccurate bookkeeping may arise from the

absence of an accountant underscores the critical role of professional financial management. The

lack of a dedicated accountant may result in challenges related to the precise recording and

categorization of financial transactions, potentially leading to flawed financial statements. This,

in turn, could compromise the clinic's ability to make informed business decisions and adhere to

regulatory standards.

In essence, the statements reveal a nuanced financial approach at 21 Dental Clinic,

combining client-focused flexibility with potential risks associated with the mingling of personal

and business finances, as well as the absence of professional financial oversight. Striking a

balance between client relations and sound financial practices will be pivotal for the clinic's

long-term sustainability and compliance with legal and regulatory obligations.

III. APPLICATION OF FAR CONCEPTS

21 Dental Clinic is organized as a sole proprietorship. Dr. Jonathan Cunanan owns and

operates the clinic with a single assistant. The business is registered under the Department of

Trade and Industry (DTI) as a sole proprietorship with Dr. Cunanan being identified as the

2
business’ sole proprietor. He has complete control over the business and assumes all risks of loss

and business debts and obligations. Moreover, the business operates as a service-based business

that specializes in delivering expert dental service.

To account for a service business, the following statements need to be presented: 1) a

statement of financial performance, 2) a statement of changes in owner’s equity, and lastly, 3) a

statement of financial position.

Since the business operates in the Philippines, the currency used in the presentation of

financial statements is the Philippine peso (₱), which is in line with the stable monetary unit

concept. Moreover, the accrual basis of accounting was utilized. Revenues were recognized

when it was earned rather than when it was collected, and all expenses were recognized when it

was incurred rather than when it was paid.

As previously stated, one of the problems identified in 21 Dental Clinic is its owner’s

willingness to wait indefinitely for client payment. However, this will result in overstated assets

as well as create a misleading impression on the business’ financial well-being. This goes

against the objective of accounting, so the group applied the concept of prudence in accounting

estimates under the conditions of uncertainty. We chose the unfavorable outcome of the customer

not being able to pay their dues to ensure that the financial statements are accurate and reliable.

3
IV. FINANCIAL STATEMENTS

A. Statement of Financial Performance

21 Dental Clinic
Statement of Financial Performance
For the Month Ended November 17, 2023

Dental Revenues ₱120,000

Less: Salary Expense ₱12,000
Dental Supplies Expense 10,000
Rent Expense 8,400
Utilities Expense* 4,687
Bad Debts Expense 4,800 ₱39,887
Net Income ₱80,113

*Electricity (₱3,038) + Water (₱650) + Internet (₱999)

4
 B. Statement of Changes in Owner’s Equity

21 Dental Clinic
Statement of Owner's Equity
For the Month Ended November 17, 2023

Cunanan, Capital, 10/17/2023 ₱87,100

Net Income 80,133
Total ₱167,233
Less: Withdrawals
Car Loan ₱5,000
Groceries 15,000 ₱20,000
Cunanan, Owner's Equity, 11/17/2023 ₱147,233

5
 C. Statement of Financial Position

21 Dental Clinic
Statement of Financial Performance
For the Month Ended November 17, 2023

Assets Total Liabilities: ₱0

Cash ₱84,300
Accounts Receivable ₱32,311 Owner's Equity
Less: Allowance for
Uncollectible Accounts (4,800) ₱27,511 Cunanan, Capital 11/17/23 ₱147,233
Dental Supplies 35,422 Total Owner's Equity: ₱147,233
Total Assets: ₱147,233 Total Liabilities and Owner's Equity: ₱147,233

6
 D. Statement of Cash Flows

21 Dental Clinic
Statement of Cash Flows
For the Month Ended November 17, 2023
Net Income before Taxes: ₱80,113

Cash Flows from Operating Activities:

Increase in accounts receivable ₱32,311
Bad Debts Expense -4,800
Net cash flow from operating activities ₱27,511

Cash Flows from Investing Activities

Net cash flow from investing activities ₱0

Cash Flows from Financing Activities

Cash withdrawals by owner (20,000)
Net cash flow from financing activities -₱20,000

Net Increase in Cash ₱127,624

Cash, Beginning -
Cash, Ending ₱127,624

7
 V. SUMMARY

The one month and a half we spent in collaboration with 21 Dental Clinic was

enlightening. This project granted us the opportunity to witness how the lessons we learned in

the classroom apply in real life. One notable aspect that we learned during this experience was

the realization that not all aspects of accounting could be readily applied in a real-life setting.

Throughout the semester, we answered a multitude of accounting problems in a variety of

situations and circumstances. These problem-solving exercises served as a comprehensive

learning experience; however, the disparity between these exercises and the practicalities of

real-world accounting soon became apparent to us. It is common in our academic exercises to

assume that businesses regularly face a diverse set of financial transactions. Unfortunately—for

us—this is not always the case in real life. For instance, accounts such as depreciation expense,

liabilities, and owner’s investment do not occur on a regular, monthly basis. Despite this minor

setback, it proved that our classroom learning provided a solid foundation for real-life

accounting.

Moreover, we were able to identify the different accounting concepts and principles 21

Dental Clinic used as well as the ones they did not use. An example of a concept they did not

make use of was the separate entity concept. This concept was one of the earliest topics in

Financial Accounting and Reporting (FAR), with its first mention being in chapter one of our

textbook. The separate entity concept is the most basic accounting concept. It states that a

business should be distinct from its owner and that transactions relating only to the business are

recorded, and apparently this is quite common among sole proprietors in the Philippines - to not

apply the separate entity concept in their business practice and have personnel transactions be

part of the business expenses. When Dr. Cunanan gave us the list of expenses for the period, he

8
included in his list personal expenses such as groceries and car loans. These would normally not

be recorded in the financial statements; however, the money for said expenses came from the

business itself. Since it affected the business, we recognized both expenses as owner’s

withdrawal in the statement of changes in owner’s equity. The aforementioned encounter

provided guidance on maneuvering the complexities of real-world financial practices and

emphasized the importance of adaptability and critical thinking in the field of accounting.

Those experiences allowed us to enhance not only our technical skills but also other skills

such as communication, teamwork, and problem-solving. We communicated with our proponent

every Friday to gather information. We ensured our communication went smoothly by not

overwhelming them with accounting terms they would not understand. We asked them questions

like: “naa moy na gasto this week?” and “pila inyo na gasto?” instead of asking them how

many expenses they incurred that week. We enhanced our teamwork skills by working together.

We made sure to talk things out in team meetings, where we got to know each other’s strengths

and areas where we could use some help. Our team had a mix of different ideas, which turned

out to be a great thing—it made us more creative and better at solving problems. We faced

challenges we encountered in the creation of our term paper and financial reports together and

resolved them by taking into account each member’s input and proposed ideas, which gave us a

chance to learn from both success and difficulties. We embraced the practice of offering

constructive feedback, recognizing its pivotal role in our continuous improvement. In the end, we

realized that our combined efforts made our projects way more successful than if we had tackled

them on our own individually.

Furthermore, our weekly visits allowed us to observe and immerse ourselves in 21 Dental

Clinic’s unique work culture and practices. The clinic’s work environment exuded a refreshing

9
informality since its workforce only consisted of two people, including the owner. The business’

goals and values aligned with ours after we witnessed firsthand how ethical and proper they are

when handling patients. We saw how they prioritized the patients over anything else. When

asked why Dr. Cunanan wanted to start the business, not only did he say he wanted to gain

profit—which is the goal for every business—but he was also passionate about dentistry and

wanted to promote good dental and oral health. In envisioning our future careers, we aim to work

for a business that values professional excellence above all else, much like 21 Dental Clinic. We

believe that a mutual dedication to excellence will create a thriving and dynamic workplace that

will encourage us to consistently improve our skills and deliver excellent results.

In conclusion, our collaborative experience with 21 Dental Clinic proved to us how much

our classroom learning impacted us. It shed light on the intricacies of accounting, exposing the

deviations from textbook scenarios that businesses may face. It ultimately reinforced the idea

that the classroom serves as a setting stone for success in the practical challenges of a career in

accounting. The clinic’s usage of accounting concepts, particularly its deviation from the

separate entity concept, further emphasized the adaptability required in the field of accounting.

This exposure to real-world financial practices not only improved our technical skills but also

developed our soft skills, including communication, teamwork, and problem-solving. We gained

insights into the clinic’s work culture through our weekly visits and discovered how the business’

values resonated with our own. In the near future, we want to work for a business that shares the

same commitment as us regarding professional excellence to create a thriving, dynamic, and

healthy workplace.

10
VI. REFERENCES

Ballada, W. (2023). Basic financial and reporting. DomDane Publishers & Made Easy Books.

Cunanan, J. (October 16, 2023). Personal communication.

Millan, Z. (2023). Conceptual framework for accounting standards. Bandolin Enterprise

11