FUNDAMENTALS OF

ACCOUNTANCY, BUSINESS
AND MANAGEMENT 2
 WITHDRAWAL SLIP

At the end of the lesson, the learners will be able to:

1.Identify and understand the contents of a bank statement;
2.Memorize the parts of withdrawal slips for easy filling-
out the needed information of the owner;
3.Prepare withdrawal slips for the business transactions.
 WITHDRAWAL SLIP
The withdrawal slip of funds from the savings accounts is made through a withdrawal slip. Unlike the
deposit slip, this requires the signature of the account holder that matches with his/her identification card and
his/her signature file with the bank.
The basic fields of a withdrawal slip are the following:
 Date – write the current withdrawal date.
 Type of Account – write whether savings or current and peso or other currencies.
 Account Name – write here the name of the account holder.
 Account Number – write here the account number that the bank assigned to the account holder.
 Amount to be withdrawn in words and figures – write the amount of the withdrawal in words and in
figures.
 Account holder signature – the signature of the account holder is this field should match with what was
submitted to the bank in the initial application.
 Name and signature of representative – this field is for the authorized representative that the account
holder will authorize in case he/she will not be able to go to the bank for withdrawal.
 Cash breakdown/verified by/ approved by – this will be filled up by the bank only.
 Payment received by – this will be signed by the person who makes the withdrawal.
Sample of BDO Withdrawal Slip
Let’s take this example for Journal Entries of Withdrawal
 
Illustration 1
The accountant of RDW Enterprises went to TOP Bank on July 12, 2017 to withdrawn
cash for its business operations amounting to P50,000. This amount is intended for the
following:
 Payment of bank loan amounting to P20,000.
 Advances for liquidation of an employee for the purchase of supplies amounting to P5,000
and merchandise amounting to P25,000.
 Solution to Illustration 1
TOP Banking Corporation       Withdrawal Slip
  Date: July 12, 2017    
  I/We hereby declare under penalties of perjury that my
Savings X Current __ Peso __ U.S Dollar __ our co-depositors is/are still living.  
  Signature of Depositor/s
Account Name Withdrawal through Representative
RDW ENTERPRISES  I/we hereby authorize the person whose signature
Account Number appears below to make this withdrawal for me/us.
004510170912         
Amount in words FIFTY THOUSAND PESOS ONLY Signature of Depositor/s
_____________________ (Php 50,000.00)    
Machine Validation: Name of Representative Signature of Representative
  Cash Breakdown  
  Denomination No. of Pieces Amount
  1000 30 30,000.00
  100 200 20,000.00
    Total Amount 50,000.00
  Verified by: Payment Received by:
        Approved by:      
Journal Entry

Debit Credit
Loans Payable 20,000
Purchases 25,000
Supplies 5,000
Cash in bank-Topbank 50,000
To record withdrawal from Topbank in July 12, 2017
 THE BANK STATEMENT
A bank statement is a detailed-transaction statement of a current account holder that is issued by a bank to
its clients on a monthly basis. This provides the following information to the account holder:
 
 The beginning cash balance added to the account, such as:
 Cash or check deposits.
 Interests earned during the period.
 Amount credited back for errors or corrections.
 
 The amounts debited or amounts withdrawn from the account, such as:
 Funds withdrawn from the checking account.
 Checks issued to payees.
 Service charges and penalties charged against the account.
 
 Ending cash balance of the current account.
 Together with the bank statement, cleared checks are also forward by the bank to business clients.
The one receiving the bank statement should compare the details or information contained in the
statement against the business records. Any discrepancies that may have arisen at the bank and not yet
reflected in records of the business will be taken up as adjusting entries to the books of the business.
 
Bank statement can be delivered in hard copies or in printed version of the computer-generated
copies. These statements can also be downloaded online from the bank website.
 The following is a sample format of a bank statement:

TOPBanking Corporation   STATEMENT OF ACOOUNT

 
        SOA No. ______________
    Account No. ___________
        DATE ______________
   
   
OPENING BALANCE Php
________ CLOSING BALANCE Php ______  

     

DATE PARTICULARS DEBIT CREDIT BALANCE

         

  TOTAL      
Illustration 2
RDW Enterprises received its monthly bank statement for the period June 1-30, 2017 in July 10, 2017. The
accountant found out some transactions in the bank statement that are not reflected in the books, as follows:
 Interest earned during the month for P650.
 A bank charge for check issued due to insufficient funds for P1,500.
 A bank charge for new check requisitions amounting to P300.
 
Record the details reflected in the bank statement and not yet recorded in the books of accounts.
Solution to Illustration 2
  Debit Credit
Journal Entry #01

Cash in bank 650.00

Interest income 650.00
To record interest earned during the month of June.

Journal Entry #02

Bank charges 1,800.00

Cash in bank 1,800.00
To record bank charges incurred during the month.
 INTRODUCTION TO BANK RECONCILIATION STATEMENT

At the end of the lesson, the learners will be able to:

1. Describe the nature of a bank reconciliation statement;
2. Enumerate procedures on bank reconciliation;
3. Identify common reconciling items and describe each of them.
BANK
TRANSACTIONS
What is Bank Reconciliation?
The bank reconciliation is a process of comparing the information in a business
accounting records of a cash-in-bank account with the corresponding information on a bank
statement. The goal of this process is to reconcile the differences between the amount
balance in the bank and the amount balance in the book of the business. This process ensures
the correctness in both entities’ records.
This process should be performed at regular intervals, normally after the end of each
month. This will ensure that the business cash records are correct and penalties or bank
charges may be avoided as a result of un-monitored low cash in bank balance.
 Deposit in transit - Cash or checks that have been received and recorded by a
business, but have not yet been reflected in the bank records are termed as
deposit in transit. This happens because cut-offs in recording are different
between each entities.
 Outstanding checks are checks that have been written and recorded in
the company's Cash account but have not! Yet cleared the bank account
or presented to the bank by the payee. Checks written during the last few
days of the month plus a few older checks are likely to be among the
outstanding checks.
 Bank errors are mistakes made by the bank. Bank errors could include the
bank recording an incorrect amount, entering an amount that does not belong
on a company's bank statement, or omitting an amount from a company's
bank statement. The company should notify the bank of its errors.
Bank Reconciliation Terminologies
 Interest earned will appear on the bank statement when a bank gives a company interest on its account balances.
The amount is added to the checking account balance and is automatically on the bank statement. Hence there is
no need to adjust the balance per the bank statement.
 Notes Receivable are assets of a company. When notes come due, the company might ask its bank to collect the
notes receivable. For this service the bank will charge a fee. The bank will increase the company's checking
account for the amount it collected (principal and interest) and will decrease the account by the collection fee it
charges. Since these amounts are already on the bank statement, the company must be certain that the amounts
appear on the company's books in its Cash account.
 Errors in the company's Cash account result from the company entering an incorrect amount, entering a
transaction that does not belong in the account, or omitting a transaction that should be in the account. Since the
company made these errors, the correction of the error will be either an increase or a decrease to the balance in
the Cash account on the company's books.
Bank Reconciliation Procedure
The bank reconciliation procedure is a tedious process when done manually for voluminous transactions. That is why,
businesses which have plenty of cash transaction will resort to automating it that only requires less human intervention.
Step 1. Compare the bank statement and the business general ledger of the cash account.
Using a pencil, compare and check all the debit items in the general ledger against the credit items in the bank
statement and the credit items in the general ledger against the debit items in the bank statement. This process will ensure
that all transactions recorded in the books of the business are also contained in the business bank account.
 
Step 2. Identify all reconciling items.
This process segregates the items according to the right terminologies so that these can be properly placed in the bank
reconciliation statement.
 
Step 3. Summarize the deposits.
Deposits reflected in the bank and are not in the books are unrecorded deposits while deposits recorded in the books
and are not reflected in the bank are deposit in transit. These un-reconciled deposits may be errors in the records but these
cases seldom happen.
Step 4. Summarize the deposits.
These checks have been recorded in the books of the business but are not yet cleared in the bank.
 
Step 5. Identify book and bank errors.
Errors seldom occur. Examples are incorrect deposit amount reflected in the bank or transportation error and
posting error in the books of the business.
 
Step 6. Identify the bank and penalty charges.
These are penalties and charges incurred by the business for NSF, payment orders, new check stubs, etc.
 
Step 7. Identify Interest Earned.
These are interest earned for an interest bearing account.
 
Step 8. Prepare the bank reconciliation statement.
Using the adjusted balances method of bank reconciliation, the following should be noted:
Book Column
a) Add the unrecorded deposits.
b) Add the interest income earned.
c) Add or deduct any book errors.
d) Deduct bank charges.
 
Bank Column
e) Add the deposits in transit
f) Add or less any bank errors
g) Deduct outstanding checks
Step 9. Check that book and bank balances in the reconciliation statement if it both balance.
The amounts appearing in the reconciliation statement should have balanced to the last centavo. When this done
not happen, then a thorough review should be done.
 
Step 10. Prepare the adjusting entries.
This process records unrecorded items that are reflected in the bank and not in the books. It is also corrects any
errors that the bank should adjust in their records.
 BANK RECONCILIATION METHOD

At the end of the lesson, the learners will be able to:

1. Analyze the effects of the identified reconciling items;

2. Prepare a bank reconciliation statement.
 BANK RECONCILIATION METHOD
There are two most commonly methods used by accountants and bookkeepers in dong the bank
reconciliation. These are (1) Book to Bank balance method, and (2) Adjusted Balanced method.
 
Book to Bank Balance Method
This method of bank reconciliation starts with the book balance to arrive at the bank balance. Since it
starts with the book balance, it reflects reconciling items of the book and the bank in the following
manner.
1. Add the unrecorded deposits.
2. Add the interest income earned.
3. Add or deduct any book or bank errors.
4. Deduct bank charges
5. Deduct deposits in transit
6. Add outstanding checks
 Format of a Book to Bank Balance Method

XYZ COMPANY
Bank Reconciliation Statement
June 30, 2017
   
Book Balance, June 30   0.00
Add:    
Unrecorded deposits 0.00  
Outstanding checks 0.00  
Interest income 0.00 0.00
Total   0.00
Deduct    
Deposit in transit 0.00  
Bank charges & penalties 0.00 0.00
     
Bank Balance, June 30   0.00
Adjusted Balances Method
This method of bank reconciliation provides two columns: one for the book
column and its adjustments and one for the bank column and its adjustment. It
starts with both unadjusted balances wherein the reconciling items for the book
and bank account are added to or deducted from the unadjusted balances to come
up with adjusted balances.
 Format of Adjusted Balances Method
XYZ COMPANY
Bank Reconciliation Statement
June 30, 2017
   
  Book Bank
Unadjusted Balances, June 30 0.00 0.00
Add:    
Erroneous debit charges   0.00
Deposit in transit   0.00
Unrecorded deposit 0.00  
Interest income 0.00  
Total    
Deduct:    
Outstanding checks   0.00
Bank charges & penalties 0.00  
     
Adjusted Balances, June 30 0.00 0.00
Illustration 1
ABC Phils, Inc. is closing its book ended March 31, 2017. The entity’s accountant prepares a bank reconciliation
based on the following reconciling items.
 
1. The bank statement has an ending bank balance of Php 131,980.
2. The cash in bank general ledger book balance is Php 46,300.
3. The bank statement contains a Php 350 charges for new checks that the company ordered.
4. The bank statement returns a deposit of Php 5,000 due to not sufficient funds for an accounts receivable being
collected, and charges the company for Php 500.
5. The bank statement contains interest income of Php 1,030.
6. ABC issued Php 145,500 of checks that have not yet cleared in the bank.
7. ABC deposited Php 55,000 of checks at month-end that have not appeared yet on the bank statement.
 
Requirement: Prepare bank reconciliation statement
8. Book to bank balance method
9. Adjusted balances method.
10. Prepare adjusting journal entries.
 Book to Bank Balance Method

ABC PHILS INC.

Bank Reconciliation Statement
March 31, 2017

Book Balance, June 30   46,300.00

Add:    

Outstanding checks 145,500.00  

Interest income 1,030.00 146,530.00

Total   192,830.00
Deduct:    

Deposit in transit 55,000.00  

Returned check 5,000.00  

Bank charges & penalties 850.00 60,850.00

Bank Balance, March 31   131,980.00

 Adjusted Balances Method

ABC PHILS INC.

Bank Reconciliation Statement
March 31, 2017
   
  Book Bank
Unadjusted Balances, March 31 46,300.00 131,980.00
Add:    
Deposit in transit   55,000.00
Interest income 1,030.00  
Total 47,330.00 186,980.00
Deduct:    
Outstanding checks   145,500.00
Returned check 5,000.00  
Bank charges & penalties 850.00  
  5,850.00 145,500.00
Adjusted Balances, March 31 41,480.00 41,480.00
Adjusted Journal Entries

Debit Credit
1. Cash in Bank 1,030.00
Interest income 1,030.00
To record interest income for the month of March.
 
2. Accounts Receivable 5,000.00
Cash in bank 5,000.00
To record returned check.
3. Bank charges 850.00
Cash in bank 850.00
To record bank charges for the month.

Please take note in the adjusted journal entries above that only the interest income, returned check and bank
charges will be recorded and adjusted in the books which are reflected in the book column. This means that only
those reflected in the book column shall have journal entries that will be recorded in the books. The outstanding
checks and deposit in transit were already recorded in the books of ABC Phils Inc.
PROBLEM NO. 2
PROBLEM NO. 3
 INTRODUCTION TO INCOME AND BUSINESS TAXATION

At the end of the lesson, the learners will be able to:

1. Define income and business taxation and its principles and
processes;
2. Know the principles of sound tax system;
3. Determine the purpose of taxation;
4. Identify the process of taxation.
What is Taxation?
Taxation in the eyes of a common person is a burden or an obligation. It can be in many
forms like a service, money or non-monetary valuable things. The taxes could mean future
benefits for them or may be for purposes of compliance or protection.
Taxation is the inherent power by which the sovereign state imposes financial burden
upon persons and property as a means of raising revenues in order to defray the necessary
expenses of the government (Tax Digest by Cresencio Co Untian, 2002).
It is the power by which a state imposes a tax as an enforced proportional contribution
from persons, legal entities and properties that bears its burden and some measure is
privileged to enjoy its benefits.
Tax is the lifeblood of the government and without this, it cannot subsist to carry out its
functions to run as a government, exist and carry out its legitimate objectives. It is a pervasive
and strong in terms of the power of the government because it is enacted by legislators and
supported by a law.
PRINCIPLES OF SOUND TAX SYSTEM
There are three principles of sound tax system.
1. Fiscal Adequacy
This means that the source of revenues should be sufficient to meet the demands of Public
expenditures regardless of economic conditions. That is why every government agency
submits a budget to congress so that it can be appropriated with funds. In case there is
shortfall, the government will sell assets or avail of loans.
2. Theoretical Justice
When imposing a tax, the burden should be in proportion of the taxpayer’s capacity to pay
which is measured by the taxpayer’s earnings or income; the greater income that you will
earn, the greater amount of tax that you will pay. This means there is equality on its
imposition.
3. Administrative Feasibility
This means that tax imposition should administratively be capable of being enforced;
convenient for compliance and reasonable in amount, as to time and manner of payment.
PURPOSE OF TAXATION
The purpose of taxation is categorized into two: primary and secondary.
 Primary Purpose - This is the financial aspect of the taxation purpose which is to
raise revenues for the support of the government to carry out its legitimate objectives.

 Secondary Purpose - This is the non-financial aspect wherein the government will
promote the general welfare and economic development of the state including the
social development of the people.
PROCESS OF TAXATION
There are three stages in the imposition of taxes:
1. Levy - it is the legislative act that determine a tax of a certain amount or
percentage shall be imposed on the persons or properties.
2. Assessment – It is the official action of an officer authorized by law to
determine the amount of tax under such law it is enacted to be levied on a
taxpayer.
3. Collection - It is the act of collecting by authorized government or accredited
agencies for taxes assessed and imposed by the government.
INDIVIDUAL INCOME TAX
Individual Income Tax is a tax on a person’s income, emoluments, profits arising from property, practice of profession,
conduct of trade or business or on the pertinent items of gross income specified in the Tax Code of 1997 (Tax Code), as
amended, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income, by the
Tax Code, as amended, or other special laws.
The individual taxation is categorized into the following:
1. Resident citizens receiving income from sources within or outside the Philippines.
 Employees deriving purely compensation income from 2 or more employers, concurrently or successively anytime
during the taxable year;
 Employees deriving purely compensation income regardless of the amount, whether from a single or several employers
during the calendar year, the income tax of which has not been withheld correctly (i.e. tax due is not equal to the tax
withheld) resulting to collectible or refundable return;
 Self-employed individuals receiving income from the conduct of trade or business and/or practice of profession;
 Individuals deriving mixed income, i.e., compensation income and income from the conduct of trade or business and/or
practice of profession.
 Individuals deriving other non-business, non-professional related income in addition to compensation income not
otherwise subject to a final tax;
 Individuals receiving purely compensation income from a single employer, although the income of which has been
correctly withheld, but whose spouse is not entitled to substituted filing;
 Marginal income earners.
 The above individual income earners should accomplish BIR Form 1700 which will
be filed annually on or before April 15.
For employees deriving purely compensation income from a single employer during
a calendar year and whose income tax has been withheld correctly, the employees
will be reported to the BIR annually by their employers through the Alphalist BIR
Form 1604-CF. Correspondingly, the employees will be issued by the employers with
BIR Form 2316 as proof of their earnings and income tax in lieu of not filing the BIR
Form 1700.

2. Non-resident citizens receiving income from sources within the Philippines

3. Aliens, whether resident or not, receiving income from sources within the
Philippines.
Sample BIR Form 2316 and BIR Form 1700
 TAX TABLE FOR INDIVIDUAL TAXPAYERS

At the end of the lesson, the learners will be able to:

1. Explain the procedure in the computation of gross taxable income and tax
due;
2. Compute the gross taxable income and tax due.
TAX TABLE FOR INDIVIDUAL TAXPAYERS
How to compute the income tax due of an individual taxpayer?
1. Get the details of the tax payers. These are his:
 Tax Identification Number (TIN)
 Present address
 Date of birth
 Marital Status
 Community Tax Certificate
2. Compute the tax due using tax table.
 Examples:
1. For a CALL CENTER AGENT who receives a monthly salary of P21,000 with mandatory annual
deductions of P15,166.00 consisting of SSS, Philhealth, and Pag-ibig contributions, the income
tax is computed as:

A. Annual Basic Salary P252,000.00

B. 13th Month Pay and Other Benefits 21,000.00
C. Mandatory Contributions 15,166.00
Computation for Income Tax  
Annual Gross Income ( the sum of A and B) 273,000.00
Deductions and Exemptions (the sum of B and C) 36,166.00

Net Taxable Income 236,834.00

Income Tax Rate: (please see above table)

Over 0 to P250,000 = 0%
TAX DUE = P0.00
2. For a public school TEACHER (Salary Grade 14, Step1) who receives a monthly salary of
P26,494.00 with mandatory annual deductions of P34,185.00 consisting of GSIS, Philhealth, and
Pag-ibig contributions, the income tax is computed as:
A. Annual Basic Salary P317,928.00
B. 13th Month Pay and Other Benefits 26,494.00
C. Mandatory Contributions 34,185.00
Computation for Income Tax  
Annual Gross Income ( the sum of A and 344,422.00
B)
Deductions and Exemptions (the sum of 60,679.00
B and C)
Net Taxable Income 283,743.00

Income Tax Rate: (please see above table)

Over 0 – P250,000 =0%
Over P250,000 – P400,000 = 20% of Excess over P250,000
= 283,743.00 – 250,000.00
= 33,743.00
TAX DUE :
P250,000.00 = P 0.00
33,743.00 x 20% = P 6,748.60
= P 6,748.60
 BUSINESS TAX
Business tax is tax imposed by the government to businesses for the income earned during a certain period.
These businesses are the partnerships and corporations. Unlike the tax for individuals which is straightforward
and only a few, the taxes for business are quite numerous that range from fixed to percentage types of taxes.
These are also based either on the gross revenues or gross income or net income.
 
There are two kinds of taxes for business: local taxes and national taxes. The local taxes are paid through the
municipal government, which are governed by the Local Government Code of the Phils., while the national
taxes are paid through the Bureau of Internal Revenue (BIR).
 
The national government taxes are governed by the National Internal Revenues Code. A business pays more
taxes on a national level than on a municipal level.
Under the Republic Act no. 10963 also known as Tax Reform Acceleration and Inclusion (TRAIN) Law, here
are some provisions under individual tax and business tax.
FRINGE BENEFITS - A final tax of 35% is imposed on the grossed up monetary value of fringe benefit granted to the
employee (except rank and file employees) by the employer, whether an individual or a corporation. Such tax is payable by
the employer.
 
OPTIONAL STANDARD DEDUCTION (OSD)
A general professional partnership and the partners comprising such partnership may avail of the OSD only once, either by
the general professional partnership or the partners.
Under current tax law, OSD gives the taxpayer a choice of computing for tax-deductible expenses at 40% of gross sales or
receipts, if the taxpayer is an individual, or on gross income, if a corporation. This is in lieu of itemizing expenses to be
claimed as tax deductions.
 
A choice of OSD means less work since it does away with the listing of expenses and the determination of whether these
expenses are allowed deductions of income. Each type of expense has its own elements to be allowed deductions in
computing net income subject to tax. And because there is no need to list down the deductions made, the law does not
require the attachment of audited financial statements to the income tax return in the case of individuals.
DONOR’S TAX - The tax payable by a donor for each calendar year shall be fixed at 6% based on the total gifts in
excess of P250,000.00.

 Any contribution in cash or in kind to any candidate, political party or coalition of parties for campaign purposes
shall be governed by the Election Code as amended.
 Exemption of gifts made by a resident:
 Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not
conducted for profit, or to any political subdivision of the said Government.
 Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution,
accredited nongovernment organization, trust or philanthropic organization or research institution or organization:
Provided, that not more than 30% of said gifts shall be used by such donee for administration purposes.
VAT
 The threshold gross sales/receipts is PHP 3 Million.
 A purely self-employed individual and/or professional who is VAT registered but whose gross
sales/receipts now fall below the new VAT threshold may change his status to NON-VAT and avail of:
 The graduated income tax rates under Sec. 24(A)(2)(a) of the NIRC, as amended; or
 An 8% tax on gross sales/receipts and other non-operating income in excess of P250,000 in lieu of the
graduated income tax rates and the percentage tax under Sec. 116 of the NIRC, as amended.
NOTE: Once the option is made, such is already irrevocable for that particular taxable year.
 Coverage is expanded to include:
 Electric cooperatives; Domestic shipping importation; Power transmission; Low-cost housing (price
more than Php 2 Million) and socialized housing (price more than Php 450,000) until 2020; Lease of
residential units (exceeding Php 15 thousand); Boy Scouts of the Philippines; Philippine Sports
Commission; PTV Network; Philippine Postal Corporation; Bangko Sentral ng Plipinas; PhilHealth; 
GSIS; and  SSS.
 Additional Exemptions include:
 Sale of medicines prescribed for diabetes, high cholesterol, and hypertension beginning January 1,
2019; Sale of gold to the Bangko Sentral ng Pilipinas; Transfer of property under a de facto merger or
consolidation; and Condominium and homeowners association dues, membership fees and other
charges.
 Indirect Exporters are still VAT zero rated until the establishment and implementation of an enhanced
VAT refund system.
 Criteria of an enhanced VAT refund system:
 All applications filed from 1 January 2018 shall be processed and must be decided within 90 days
from the filing of the VAT refund application (NOTE: Failure on the part of the BIR official, agent or
employee to act on the application within the 90 day period is punishable under Sec. 269 of the NIRC,
as amended); and
 All pending VAT refund claims as of December 31, 2017 shall be fully paid in cash by December 31,
2019.  Official Development Assistance (ODA) projects are not subject to the final withholding VAT
[Sec. 114(C)].
FILING OF INCOME TAX RETURNS (ITR) AND PAYMENT OF TAXES
 An individual whose taxable income does not exceed P250,000 is not required to file an income
tax return.
 The ITR shall be composed of a maximum of four (4) pages in paper or electronic form.
 Substituted filing of ITR by employees receiving purely compensation income by respective
employers will be evidenced by the Certificate of Withholding filed and duly stamped “received”
by the BIR. It shall be tantamount to the substituted filing of ITRs by the said employees.
 The rate of withholding of tax at source shall not be less than 1% but not more than 15% of the
income payment beginning January 1, 2019.
How to compute the income tax due of a sole proprietor taxpayer with a merchandising
business/
1. Get the details of the taxpayers. These are his:
 Tax Identification Number (TIN)
 Present address
 Date of birth
 Marital status
 Community tax certificate
2. Compute the tax using the tax table (see previous lesson).
Example:
Using the following statement of income of Jeric Merchandising for the year ended December
31, 2019, compute the tax due of the business.
 JERIC MERCHANDISING
Statement of Income
For the Year Ended Dec 31, 2016
   
Gross Sales 2,200,000.00
Less: Sales returns and allowances 56,500.00  
Sales discounts 24,000.00 80,500.00
Net Sales 2,119,500.00
Deduct: Cost of Sales  
Merchandise inventory, Jan 1 75,000.00  
Add: Purchases 1,200,000.00  
Freight in 75,000.00  
Total 1,275,000.00  
Less: Purchase returns -350,000.00  
Purchase discounts -150,000.00 775,000.00  
Total Goods Available for sale 850,000.00  
Less: Merchandise inventory, Dec 31 325,000.00 525,000.00
Gross Profits  
Less: Expenses  
Freight out 65,000.00  
Salaries, wages & benefits 147,000.00  
Sales commissions 211,950.00  
Depreciation expenses 80,666.00  
Rent Expense 120,000.00  
Light and water 172,020.00  
Store supplies expense 29,100.00  
Insurance expense 33,750.00  
Communication expense 10,000.00  
Uncollectible account expense 9,550.00 879,036.00
Net Income     715,464.00
How to compute tax due if the sole proprietorship opted to use the itemized
deduction:
Computation of tax due
Over P400,000 to 800,000 = P30,000
P400,000 to 800,000 = 25% of excess
over P400,000
= 715,464 – 400,000
= 315,464.00
 
P400,000 to 800,000 = P30,000
+
315,464 X 25% = 78,866
Tax Due = P108,866.00
How to compute tax due if the sole proprietorship opted to use the Optional Standard
Deduction (OSD)
Computation of taxable income:
Net sales from business 2,119,500.00
Optional Standard Deduction (OSD) Rate 40%
847,800.00
= 2,119,500 – 847, 800
Net Taxable Income =1,271,700.00
Computation of tax due
Over P800,000 to 2,000,000 = P130,000.00
P800,000 to 2,000,000 = 30% of excess over P800,000
= 1,271,700 – 800,000
= 471,700
P800,000 to 800,000 = P130,000
+
471,700 X 30% = 141,510
Tax Due = 271,510
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GOD BLESS!!