UNIT VII: BASIC FINANCIAL

STATEMENTS
Lesson 1: Steps of Product Development
a. Protecting Intellectual Property

b. Record Keeping

c. Preparation of Financial Statements

d. Statement of Financial Position

e. Interpretation of Financial Statements

a. Protecting Intellectual Property

What is
Intellectual
Property?
 Intellectual Property
• Refers to creations of the mind:
o Inventions
o Trademarks
o Digital IP Assets
o Designs
o Patents
o Copyrights
 Inventions
Definition Examples Protect
• Printer
• Machine • Engine
• Clothing Register
Product
• Cellular
• Phones
• Televisions
 Trademarks
Definition Examples Protect

• Brands • Starbucks
• Slogan • Apple
Register
• Trade • Microsoft
Names Google
 Digital IP Assets
Definition Examples Protect

• Domain
• Gmail.com
Name • Ymail.com Manage
• Social
• @lapinid
Media • @liguez
Handles
 Designs
Definition Examples Protect

• Product • Furniture
• Shape • Packaging Register
• Configurat • Fashion
ion Design
 Patents
Definition Examples Protect

• Inventions- • Technology for

technical Ergonomic Register
solutions to a Chair
problem
 Copyright
Definition Examples Protect
• Art
• Written • Art Work
works • Graphics Manage
• Software • Drawings
• Graphics
• Music
b. Record Keeping

What is record keeping?


What is
Record keeping is the method of keeping track
of businessIntellectual
transactions and activities either
manually or digitally.
Property?
 b. Record Keeping

2 Record Keeping Systems

1. Manual Record Keeping

 Uses the traditional pen-and-paper method.

2. Digital Record Keeping

 Uses technologies and devices.
b. Record Keeping

Principles of Good Record Keeping

According to ISO 15489, regardless of form or

structure, good record keeping requires a record
to possess certain characteristics.
 b. Record Keeping

Characteristics for Good Record Keeping

Authenticity - a record qualifies as authentic if it is

proven.

Reliability - content of the records should be a full and

accurate representation.
 b. Record Keeping

Integrity - records should be complete and unaltered.

Usability - a usable record is one that can be located,

retrieved, presented, and interpreted.
b. Record Keeping

Why it
matters?
 b. Record Keeping

Protects Against Various Risks

• It can help businesses comply and stay compliant

with a range of laws and regulations and industry
standards.
 b. Record Keeping

Monitors Progress and Health

• Aside from keeping track of compliance and

financial aspects, recordkeeping also enables
businesses to monitor progress towards goals and
their overall stability.
 b. Record Keeping

Supports Long Term Accountability and

Sustainability

• As the business continues to grow, challenges of

sustainability and accountability become even more
evident.
 c. Preparation of Financial Statement

What is Financial Statement?

Financial statements are a collection of summary-

level reports about an organization's financial
results, financial position, and cash flows.
 c. Preparation of Financial Statement
Types of Financial Statement
Balance Sheet Presents a company’s assets, liabilities and
stockholders equity at a specific point in
time.
Income Statement Summarizes a company’s revenues and
expenses over a specified period.
Statement of Cash Flows Tracks the cash inflows and outflows during a
specific period.
Statement of Stockholders Shows the changes in the components of
Equity stockholders equity over specified period.
 c. Preparation of Financial Statement
Steps in Financial Statement Preparation

1. Identify and Gather Financial Data

2. Adjust and Classify Transactions
3. Prepare Financial Statement Components
4. Consolidation of Financial Statements (if
applicable)
5. Finalize and Present Financial Statements
 c. Preparation of Financial Statement
1. Identify and Gather Financial Data

Identifying and gathering relevant financial data from

a company's accounting records. This process
involves collecting information on transactions, such
as sales, expenses, investments, and borrowings, and
organizing it in a systematic manner.
 c. Preparation of Financial Statement
2. Adjust and Classify Transactions

After gathering financial data, accountants must

adjust and classify transactions according to the
appropriate accounting principles and standards.
Adjusting entries ensure that revenues and expenses
are recorded in the correct accounting period.
 c. Preparation of Financial Statement
3. Prepare Financial Statement Components

Once the transactions have been adjusted and

classified, the next step is preparing the individual
components of the financial statements, including the
balance sheet, income statement, statement of cash
flows, and statement of stockholders' equity.
 c. Preparation of Financial Statement
4. Consolidation of Financial Statements (if applicable)

This process involves combining the financial

information of the parent company and its
subsidiaries to present a unified view of the entire
corporate group's financial position and performance.
 c. Preparation of Financial Statement
5. Finalize and Present Financial Statements

This process ensures that all information is accurate,

complete, and compliant with the relevant accounting
standards. Once finalized, the financial statements are
presented to the company's management, board of
directors, and other stakeholders.
 d. Statement of Financial Position

What is Financial Position?

Financial position is the current balances of the

recorded assets, liabilities, and equity of
an organization.
 d. Statement of Financial Position

3 Important Elements

1. Assets
2. Liabilities
3. Shareholder’s Equity
 d. Statement of Financial Position

3 Important Elements
1. Assets
 are the resources owned and controlled by the
business. Assets are further classified into Current
Assets and Non-Current Assets.
 d. Statement of Financial Position

Current Assets Non-current Assets

• Consumed • long-term assets
• Sold • benefits are likely to
• Converted into cash accrue for several years.
 d. Statement of Financial Position

2. Liabilities
 are the amount of business owing to its
Lenders and Other Creditors. Liabilities are
further classified into Current Liabilities
and Long Term Liabilities.
 d. Statement of Financial Position

Current Liabilities Long term Liabilities

• Payables • Need to be repaid for
• Salary/Expense more than one year
• Short Term Loans
 d. Statement of Financial Position

3. Shareholder’s Equity

 which is the residual interest in the Net Assets

of a business that remains after deducting its
liabilities.
 e. Interpretation of Financial Statement

Financial statements include a balance sheet and an

income statement, commonly referred to as a profit
and loss statement.
e. Interpretation of Financial Statement

• Common Sized Statement

Prepare a common sized statement for the financial

statements presented.
e. Interpretation of Financial Statement

• Financial Statement Analysis

Analyze the common sized financial statements for

unusual trends.
e. Interpretation of Financial Statement

• Undertake Ratio Analysis

Ratios commonly used to analyze balance sheet

accounts include working capital and debt to equity
ratio.
e. Interpretation of Financial Statement

• Debt-to-Equity Ratio

Determine the company's debt to equity ratio.

e. Interpretation of Financial Statement

• Look at Gross Profit

Calculate the company's gross profit by dividing

total cost of goods sold by total revenues.
It’s important to assess whether the product meets
its objectives and customer needs, and to consider
feedback for future improvements. Additionally,
documenting the entire development process is
crucial for future reference and to aid in decision-
making for future projects.
Thank you!
MEMBERS

Lagungan, Efrel J.
Lapinid, Keightie U.
Liguez, Gerlie M.
Longyapon, Trixie Mae R.
Mabandos, Liamia L.
Macasambat, Tina Mariz A.
REFERENCE

Chron, 2020. Interpretation of a Financial Statement

Retrieved from https://
smallbusiness.chron.com/trade-working-capital-vs-total-working-capital-34033.html/
Tamplin, T. 2023. Financial Statement Preparation
Retrieved from
https://www.financestrategists.com/wealth-management/financial-statements/financial-statement-prep
aration
/
2023. Recordkeeping: Definition, Principles, and it’s Value for Businesses
Retrieved from https://safetyculture.com/topics/recordkeeping/
Francisco, JM. 2022. Intellectual Property
Retrieved from
https://m.facebook.com/groups/551559478754775/permalink/1312852779292104/?mibextid=Nif5oz/