Review

• Investment?
• Investing is purchasing a financial product or other item of value with
an expectation of favorable returns.
• Return of Investment (ROI)?
• ROI is the rate of revenues received for every dollar on invested in an
item or activity.
• Stocks?
• Stock is an instrument that signifies ownership in a corporation and
represents claim on a share of a corporation’s assets and profits.
• Bonds?
• Bonds are interest-bearing certificates used as a way for government
or business to raise money
• Mutual Funds?
• Mutual funds are open-ended investments that are professionally
managed and consist of a variety of investment instruments including
stocks, bonds, options, commodities, and money market securities.
 Review
• Real estate?
• Real estate is a piece of land and any buildings or
structures on it.
• Collectibles?
• Collectibles are items which have value due to its rarity
and desirability, such as antiques, coins, cars, and art.
• Precious Metals?
• Precious metals are natural metals that have value,
such as gold, silver, platinum, and palladium.
 Stocks, Bonds & Mutual Funds

Uma will be retiring in five years. She needs a low-

risk place to put her money that will earn interest.
Where might she invest? Why?

Bonds would be a good place for her retirement

monies. They are typically low-risk and still pay
interest.
 Stocks, Bonds & Mutual Funds

Skip will be retiring in 38 years. He has an emergency

fund that could support him for nine months if
something were to happen. Skip wants his money to
work for him and he is not scared of market
fluctuations. Where might he invest? Why?

Stocks and/or mutual funds would be good options.

Typically, stocks and mutual funds perform well over time
and outperform other investments.
 Stocks, Bonds & Mutual Funds

Imogene needs to start an emergency fund.

Where might she invest? Why?

A savings account in a bank would be a good option for

her. It is a low-risk investment, easily accessible and it
earns interest.
 Profit and Loss
The profit and loss account is produced by a business to show:

 How much net profit has been made

 How much net loss has been made
 All the expenses for the year.
Net profit or loss for the financial year is calculated as follows:

Gross profit – Expenses = Net profit or loss

The profit and loss account is presented in a vertical format.

 The Profit and Loss Account
The profit and loss statement shows the trading
performance of the business and the distribution of
profit. Profit is not equivalent to cash in bank
Income
Customer sales, profit/loss from sale of tangible fixed assets, “non
operating” income, investment income
Expenses
Variable (direct) costs, Fixed (overhead) costs, interest paid,
depreciation allowance on tangible fixed assets
Distribution
Drawings/dividends, retained profit
 Profit and Loss account
Measuring profit
Income

Expenses

The profit and loss statement

shows the trading performance of Net Profit
the business and the distribution
Drawings or
of profit. dividends

Retained
Increase in assets
profit
 Or measuring loss

Turnover

Costs

Net Loss

Drawings or
dividends

Retained
Decrease in assets
loss
Expenses
Expenses are the day-to-day running costs that
the business will have to pay.
Expenses are also known as revenue
expenditure.
The revenue expenditure for the year must be
listed in the profit and loss account.
 Example of Expenses
 Rent Insurance
 Rates Repairs
 Wages and Telephone
salaries Discount allowed
Depreciation on
 Heating
fixed assets
 Lighting Legal fees
 Cleaning
 SIMPLE COMPANY LTD - Profit and loss
account for year ending 31.12.08
£
Turnover 950,000
Cost of sales (Direct costs) 525,000
Gross profit 425,000 Trading account
Expenses (Overheads) 325,000
Other Costs (Depreciation) 10,000
Operating profit 90,000
Non-operating income 24,000
Interest payable 15,000
Profit on ordinary activities before Profit and Loss
taxation/Net profit 99,000 Account
Corporation tax 22,500
Profit after tax 76,500
Dividends 30,000
Appropriation
Retained profit for the period 46,500
Account
 Cost of sales (Direct costs)
Production wages £ £
110,000
Material costs
Opening stock 01.01.08 110,000
Plus purchases during the year 500,000
610,000
Less closing stock 31.12.08 195,000
415,000
415,000
Service facilitation
Cost of Sales 525,000
Expenses (overheads) £ £
Wages and salaries (admin) 140,500
Heating and lighting 35,500
Rent and rates 40,000
Telephone 10,000
Advertising 16,000
Car expenses 42,000
Printing and stationery 17,000
Accountant fee 5,000
Insurances 10,000
Provision for bad debts 9,000 325,000
Other Costs
Depreciation 10,000
335,000
 Depreciation
• Fixed assets such as cars, computers, and machinery are
not treated the same as other expenses.
• Instead of being offset against revenue in the year of
purchase, a proportion of the purchase value is allowed as
an expense each year over the life of the asset.
• At the end of the useful life of the asset, it is disposed of
(scrapped or sold) and added into the P&L account as non
operating income

Typical example
Computer £ 1100, life of 3 years, expected to
make £50 at disposal
Depreciation (£1100-£50)/3 = £350 per year
 Interest and charges
£ £
• Non-operating income
– Interest on bank accounts 24,000
– Other investment income 0
• 24,000
• Interest payable
– Loan interest 12,000
– Overdraft charges 3,000
• 15,000
Let us have a break 10 mins
Commission (different
salary scheme)
 Gross Income versus Net Income
• What is the difference?
– Gross- What you make before taxes are taken out
– Net- The amount that is deposited in your bank
account (After taxes are taken out)

 Hourly Versus Salary versus
Commission
• What is the difference?
– Hourly- Paid by the hour
– Salary- You make a specified amount no matter the
number of hours you work
– Commission- Your pay is directly related to job
performance (Sales)
 Overtime
• Overtime- Must be paid when you work over 40
hours in a pay period (Week)
– Pay depends on the company but it is usually time and a half
• EX: If you are paid Php 200 an hour, then overtime pay would be
Php 300 per hour
• ONLY paid overtime for the number of hours worked over 40
hours.
 Overtime- Calculation practice
• I worked 52 hours in the past week. If I get paid Php
200 per hour, and get paid time-and-a- half for
overtime, calculate the total amount I would get
paid BEFORE taxes.
 Hourly Pay
• Research 3 different careers which pay an hourly
wage.
– Give the hourly pay range
– Calculate the yearly gross income- Assuming 40 hours per
week for 52 weeks
 Salary Pay
• Paid the same amount each month, no matter how
many hours you work.
• If I worked 50 hours per week would I get any
overtime?
 Salary Pay
• Research 5 different careers which pay in a salary.
– Give the salary ranges
– Determine the hourly rate (Assuming you work 40 hours
a week for 52 weeks)
 Commission Pay
• 2 Major Types:
– Straight Commission
– Base Salary plus Commissions
 Straight Commission
• Paid based directly off how much of a product(s)
you sell.
– Paid once a month usually
– Often risky– if you don’t sell much you are not going to make
that much for the month
– Found in many retail clothing, cosmetics, office products and
real estate businesses
 Straight Commission

• Average commission rates:

– Cellular Stores: Php 500 per line activation, 10% on accessory sales
– Beauty Retail (make-up, handbags, etc.): 3-5%
– Department Retail (shoes, appliances, electronics): 8-10%
– Furniture: 2-6%
– Real-Estate: 2.5-3%
– Car Sales: 30% of the front end price (difference between selling price and
dealer price)
 Base Salary plus Commissions
• Salesperson has a base salary PLUS they have an additional
performance-based commission structure.
– Found in many larger businesses where people have to travel
for sales
• Example: Sportswear manufacturer, technology company, etc.
– Usually works well for careers with long-term relationship
building and for positions with accumulated expertise
 Commission Pay
• Drawing against commission
– Receiving an advance against a future commission– used when
salesperson needs money now but will not get paid for a while
(If they have a big client in the next pay period)
 Commission Pay
• Assume you are getting paid straight commission.
– You sell Php 150,450 worth of merchandise for a
given pay period, and you make 6% commission
off the total sales. What is your paycheck before
taxes for the given pay period?
 Commission Pay
• Research 5 different careers which pay based on
commission.
– What is the average commission for those careers?
 Pro’s and Con’s
• Create a list of at LEAST 5 Pro’s and at Least 5 Con’s
for each of the three types of pay.
DEDUCTIONS
Yes, the government wants it’s
cut! 
Taxes- Vary by yearly income
pag-IBIG
Social Security system
PHILHEALTH
 Summary
• Profit and loss?
• Salary?
• Commission?
• Combination of Salary and Commission?
• Deduction?