DEVELOPMENT TEAM FOR

FUNDAMENTALS OF A.B.M 2
NORMA B. SAMANTELA, CESO VI Schools Division Superintendent
MA. JEANY T. ABAYON, Ed.D Assistant Schools Division Superintendent
LAURO B. MILLANO Assistant Schools Division Superintendent

DIVISION EVALUATION TEAM

CID Chief, Sancita B. Peñarubia

PSDS/Division Mathematics Coordinator, Felma A. Bonito

FUNDAMENTALS OF ABM 2 LP TEAM FOR QUARTER 1

WRITERS:

May Sarcia Arnoza Edna B. Lositano

Leah N. Dalisay- Amora Hazel R. Veloso

Jennivic L. Mangampo Cherry B. Lantican

Efren N. Nocete Ma. Ceazare D. Barnuevo

Teresita O. Mandac Chairmaine M. Oraye

Maribel N. Veluz Ross Alden A. Bigtas

Lourdes M. Bataller Cynthia L. Abiera

TEAM LEADER : Cynthia L. Abiera

CONTENT EDITOR : Eduardo L. Llanera Jr.
LANGUAGE EDITOR : Julius A. Martillana
Nathan Ted O. Mandac

TECHNICAL SUPPORT : Mecyel M. Endrano

 CONTENT

Week No. Learning Competencies Page No.

1. identify the elements of the SFP and describe each
1
of them
Week 1 2. prepare an SFP using the report form and the
account form with proper classification of items as 11
current and noncurrent
3. identify the elements of the SCI and describe each
of these items for a service business and a 20
Week 2 merchandising business
4. prepare an SCI for a service business using the
32
single-step approach
5. prepare an SCI for a merchandising business using
Week 3 40
the multistep approach

Week 4 6. prepare an SCE for a single proprietorship 50

7. discuss the components and structures of a CFS 56

Week 5
8. prepare a CFS 67

9. define the measurement levels, namely, liquidity,

77
solvency, stability, and profitability
Week 6
10. perform vertical and horizontal analyses of
92
financial statements of a single proprietorship
11. compute and interpret financial ratios such as
current ratio, working capital, gross profit ratio,
Week 7 100
net profit ratio, receivable turnover, inventory
turnover, debt-to-equity ratio, and the like
12. identify the types of bank accounts normally
113
Week 8 maintained by a business
13. prepare bank deposit and withdrawal slips 119
130
14. identify and prepare checks
Week 9
15. identify and understand the contents of a bank 139
statement
NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 1A

IDENTIFY THE ELEMENTS OF THE STATEMENT OF FINANCIAL POSITION

BACKGROUND INFORMATION FOR LEARNERS

Financial statements are very important tool for all businesses as they allow
shareholders, managers, and investors to make informed future business decisions and
understand the performance of the business over time. By interpreting financial statements,
businesses are able to move in a direction to improve their finances and secure the future of
a business.

There are two main financial statements used in business, the SCI or income
statement and the statement of financial position, or balance sheet.

In this Learning Packet, you will be guided in the study of the first main financial statement-
the Statement of Financial Position.
A statement of financial position, or balance sheet, considers key financial
information that allows a business to monitor where the money comes from and where it has
been spent, along with the overall value of a business. This document is often referred to as
a ‘balance sheet’. A statement of financial position is a snapshot in time, so it can only consider
business performance and value at a particular point in time.

This statement includes the amounts of the company’s total assets, liabilities, and
owner’s equity which in totality provides the condition of the company on a specific date
(Haddock, Price, & Farina, 2012).

RO_FABM2_Grade 12_Q1_Week1_LP1 1
Elements of the Statement of Financial Position

(1) Assets
In broad terms, assets are things that a business owns.

Assets are split into two different categories, current and noncurrent:

Current Noncurrent
are short term, assets are long (fixed assets)
assets
they will be term, they will be
owned for, or last owned, or last
for, less than a for, more than a
year. year.

Cash Property, Plant and Equipment (PP&E)

is money in the form of currency, are long-term physical assets that
which includes all bills, coins, and are an important part of a company’s
currency notes. core operations, and they are used in the
Cash equivalents production process or sale of other
are investments that can readily be assets. The assets come in a physical
converted into cash. The investment form, and they are not easily converted
must be short term, usually with a to cash or liquidated.
maximum investment duration of three Goodwill
months or less. is an intangible asset that is
Accounts Receivable created when one company purchases
is the money due to a company for another entity. It is generated when the
goods or services delivered or used but price paid for the company exceeds the
not yet paid for by customers fair value of all identifiable assets and
Merchandise Inventory liabilities assumed in the transaction.
is goods that have been acquired by a Trademark
distributor, wholesaler, or retailer from is a symbol, phrase, or insignia that
suppliers, with the intent of selling the is recognizable and represents a
goods to third parties. product that legally separates it from
other products. A trademark is
Prepaid Expense exclusively assigned to a company,
is a type of asset on the balance meaning the company owns the
sheet that results from a business trademark so that no others may use or
making advanced payments for goods copy it.
or services to be received in the future.
Franchise
Accrued income is a license that a company,
is money that's been earned but has individual, or party–called the
yet to be received franchisee–purchases allowing them to
use a company's–the franchisor–name,
trademark, proprietary knowledge, and
processes.

RO_FABM2_Grade 12_Q1_Week1_LP1 2
 ❖ Contra Assets are those accounts that are presented under the assets portion of the
SFP but are reductions to the company’s assets. Contra assets includes:

Allowance For Doubtful Accounts

is a contra-asset account that is associated with accounts receivable and serves to reflect
the true value of accounts receivable. The amount represents the estimated value of
accounts receivable that a company does not expect to receive payment for.
Accumulated Depreciation

is a contra asset to the company’s Property, Plant & Equipment. This account represents
the total amount of depreciation booked against the fixed assets of the company.

(2) Liabilities
It is a debt owed by a company that requires the entity to give up an economic benefit
(such as cash or any other assets) to settle past transactions or events. It is typically
an amount owed by a company to a supplier, bank, lender, or other provider of
goods, services, or loans.

Liabilities are also split into two different categories, current and non-current (long-term):

Current liabilities Noncurrent (long-term)

~or short-term debts liabilities
~ are any debts a business owes ~is money borrowed that is paid
that will need to be paid back within back in more than a year.
a year.

Accounts Payable (AP) is an account Long Term Loans/Loans Payable-

within the general ledger that represents loans that a firm will have to pay over a
a company's obligation to pay off a short- longer duration (which is likely to be more
term debt to its creditors or suppliers. than one year) are considered to be long-
term loans.
Utilities payable is the amount owed
to suppliers for electricity, gas, Internet Notes Payable- Some businesses
connections, telephones, and water. The borrow money from other businesses
utilities payable account is used when an using notes, a method of borrowing that
organization wants to separately identify doesn’t require the company to put up an
this type of liability. It may choose to asset, such as a mortgage on a building
instead record utility bills in its accounts or a car loan, as collateral. This account
payable account, which contains all trade tracks any notes due.
payables.
Mortgage payable is a type of long-
term debt that the company (or
individual) needs to use the real property
as the collateral to secure the loan.

RO_FABM2_Grade 12_Q1_Week1_LP1 3
 (3) Owner’s Equity

● is defined as the proportion of the total value of a company’s assets that can
be claimed by its owners (sole proprietorship or partnership) and by its
shareholders (if it is a corporation).
● It is calculated by deducting all liabilities from the total value of an asset (Equity
= Assets – Liabilities).
● Owner's equity represents the owner's investment in the business minus
the owner's draws or withdrawals from the business plus the net income (or
minus the net loss) since the business began.

It includes:

Capital

This account is only necessary for small, unincorporated businesses. The

Capital account reflects the amount of initial money the business owner
contributed to the company as well as owner contributions made after initial
start-up.

Drawing

This account is for businesses that aren’t incorporated. The Drawing

account tracks any money that a business owner takes out of the business.
If the business has several partners, each partner gets his or her own
Drawing account.

Retained Earnings

This account tracks the profits or losses accumulated since a business

was opened. At the end of each year, the profit or loss calculated on the
income statement is used to adjust the value of this account.

All these elements are what we call permanent accounts. Permanent accounts are accounts
that are not closed at the end of the accounting period, hence are measured cumulatively.
Permanent accounts refer to asset, liability, and equity accounts -- those that are reported in
the balance sheet.

RO_FABM2_Grade 12_Q1_Week1_LP1 4
 Parts of the Statement of Financial Position
LEARNING IS FUN COMPANY
STATEMENT OF FINANCIAL POSITION HEADING
AS OF DECEMBER 31, 2020
CURRENT ASSETS
Assets
Current Assets
Cash Php 100,000.00
Accounts Receivable 500,000.00
Less: Allowance for Doubtful Accounts 50,000.00 450,000.00
Accrued Income 300,000.00
Inventory 200,000.00
Prepaid Expenses 50,000.00
Total Current Assets 1,100,000.00

Non-Current Assets NON-CURRENT

1,250,000.0 ASSETS
Long Term Investments
0
Intangible assets 500,000.00
1,000,000.0
Property, Plant & Equipment
0
Less: Accumulated Depreciation 300,000.00 700,000.00
Total Noncurrent Assets 2,450,000.00
Total Assets 3,550,000.00

Liabilities and Owner's Equity

Liabilities CURRENT LIABILITIES
Current Liabilities
Accounts Payable 250,000.00
Accrued Expenses 100,000.00
Unearned Income 80,000.00
Notes Payable 150,000.00
Total Current Liabilities 580,000.00
Non-current Liabilities NON CURRENT
Mortgage Payable 500,000.00 LIABILITIES
Loans Payable 2,000,000.00
Total Non-current Liabilities OWNER’S 2,500,000.00
Owner's Equity EQUITY 3,080,000.00
Total Liabilities and Owner's Equity 470,000.00
Php3,550,000.00

RO_FABM2_Grade 12_Q1_Week1_LP1 5
 LEARNING COMPETENCY
\

Identify the elements of SFP and describe each of them. ABM_FABM12-Ia-b-1.

ACTIVITIES

INSTRUCTION: Use a separate sheet of paper for your answers on the following tasks to be
submitted to your teacher.

ACTIVITY 1: KNOW ME
Directions: Identify if what account is asked or being referred to. Choose among the given
choices below.

Allowance for
Merchandise Retained Accounts Owner's
Doubtful Inventory Earnings Payable Capital
Accounts

1. What do you call the account that is referred to as the accumulated portion of a
business’s profits that are not distributed as dividends to shareholders but instead are
reserved for reinvestment back into the business?
2. What account reflects the amount of initial money the business owner contributed to
the company as well as owner contributions made after initial start-up?
3. What is an account within the general ledger that represents a company's obligation
to pay off a short-term debt to its creditors or suppliers?
4. It is a contra-asset account that is associated with accounts receivable and serves
to reflect the true value of accounts receivable. The amount represents the estimated value of
accounts receivable that a company does not expect to receive payment for.
5. It is the account on a balance sheet that reflects the total amount paid for products
that are yet to be sold.

ACTIVITY 2: PICK ME UP
Directions: Given below are accounts or elements included in a balance sheet. Classify
whether it is an Asset, Liability or Owner’s Equity. Write A for Asset, L for Liability and OE for
Owner’s Equity.

1. Capital 6. Accumulated Depreciation, Equipment

2. Accounts Receivables 7. Cash
3. Accounts Payable 8. Notes Payable
4. Prepaid Rent 9. Retained Earnings
5. Notes Payable 10. Mortgage Payable

RO_FABM2_Grade 12_Q1_Week1_LP1 6
ACTIVITY III. “BRING ME”

Direction: Complete the table by classifying the accounts that will complete the parts and
elements of the SFP using the given accounts below.

Accounts Property, Plant Retained Franchise

Capital
Receivable & Equipment Earnings

Mortagage Merchandise
Trademark Prepaid Expense Accrued Income
Payable Inventory

Allowance for
Accounts Doubtful
Cash Loans Payable Drawings Payable Accounts

Assets Liabilities
Owner’s
Equity
Current Noncurrent Current Noncurrent

RO_FABM2_Grade 12_Q1_Week1_LP1 7
 LET’S LEVEL UP

Directions: Name the account title being described. And then, identify what element of
SFP it belongs to. Draw for current or for non-current.
Current
Statement Account title Elements of SFP
Non-Current
1. It includes bills and
coins on hand, bank
accounts, and
operating funds.
2. These are fixed
assets that are
important part of a
company’s core
operations
3. Type account that
refer to as debt of the
company and
requires real
property as a
collateral to secure
the loan.
4. This is an account that
pertains to expenses
incurred but not yet
paid, examples are
salaries, rent and
utilities.

5. This account tracks

any money that a
business owner takes
out of the business.

RO_FABM2_Grade 12_Q1_Week1_LP1 8
 REFLECTION

REST ASSURED”
Complete the statement below, by coloring the emoticon -yellow.

“The part of this task that I like the most, is answering…”

Activity I Activity II Activity III

“The man who moves a mountain begins by carrying away small stones.” —Confucius

REFERENCES

Books:

(1) M.C.A. Labay, et al. First Edition,2020. Fundamentals of Accountancy, Business and
Management 2-Grade 12. Statement of Financial Position. Department of Education-
National Capital Region.

(2) Monfero R.P.P., et al., 2016.Teaching Guide for Senior High School. Fundamentals of
Accountancy Business and Management 2. Commission on Higher Education K to 12
Transition Program Management Unit, Diliman, Quezon City.

Websites:

(1) Components of financial statements – statement of financial position - Analysing the

financial performance of a business - AQA - GCSE Business Revision - AQA - BBC Bitesize.
Retrieved from https://www.bbc.co.uk/bitesize/guides/z6p892p/revision/3.

(2) Equity Definition: Formula, Calculation, & Examples. Retrieved from

https://www.investopedia.com/terms/e/equity.asp.

(3) Liabilities - What are liabilities? | Debitoor invoicing software. Retrieved from
https://debitoor.com/dictionary/liabilities.

(4) Purpose of financial statements - Analysing the financial performance of a business -

AQA - GCSE Business Revision - AQA - BBC Bitesize. Retrieved from
https://www.bbc.co.uk/bitesize/guides/z6p892p/revision/1.

(5) https://www.sage.com/en-ca/blog/what-why-balance-sheets-important/.

RO_FABM2_Grade 12_Q1_Week1_LP1 9
 (6) Merchandise Inventory – Meaning, Accounting and More (efinancemanagement.com).
Retrieved from https://efinancemanagement.com/costing-terms/merchandise-
inventory#:~:text=Merchandise%20Inventory%20is%20the%20most%20common%2
0form%20of,from%20the%20supplier%2C%20who%20may%20be%20a%20manufa
cturer.

ANSWER KEY

Prepared by:

LEAH N. DALISAY-AMORA
Polangui General Comprehensive High School
Writer

RO_FABM2_Grade 12_Q1_Week1_LP1 10
NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 1B
PREPARING SFP USING THE REPORT FORM AND THE ACCOUNT FORM
WITH PROPER CLASSIFICATION OF ITEMS AS CURRENT AND NONCURRENT

BACKGROUND INFORMATION FOR LEARNERS

Steps in preparing a simple Statement of Financial Position (SFP):

1. Start with a heading. The heading includes the:

i. Name of the business or entity (individual or company),
ii. Name of the financial statement (ex. Statement of Financial Position) and;
iii. Date of preparation. Use as of in SFP because the amounts of the items are
cumulative from the start of the operations of the business up to the
accounting date (ex. As of December 31, 2019).

RO_ABM_FABM12_Q1_WK1B_LP2 11
 2. Next, present the Asset. These are classified into current and non- current assets.
i. Find the total current assets,
ii. Next, find the total non-current assets,
iii. Then, find the total assets.

Current
Assets

Non -Current
Assets

Current Assets are arranged in liquidity order or in the amount of time it would
usually take to convert them into cash.

RO_ABM_FABM12_Q1_WK1B_LP2 12
 3. Then, present the Liabilities. These should also be classified into current and non-
current liabilities.
i. Find the total current liabilities,
ii. Next, find the total non-current liabilities,
iii. Then, find the total liabilities.

Current
Liabilities

Non-Current
Liabilities

RO_ABM_FABM12_Q1_WK1B_LP2 13
 4. Finally, present the owner’s equity. Add the owner’s equity to liabilities to complete
the accounting equation (Assets= Liabilities + Equity).

JOLLY COMPANY STATEMENT OF

FINANCIAL POSITION
AS OF DECEMBER 31, 2016
Assets
Current Assets
Cash Php 150,000.00
Accounts Receivable Php 500,000.00
Less: Allowance for Doubtful Accounts (50,000.00) 450,000.00
Accrued Income 350,000.00
Inventory 250,000.00
Prepaid Expenses 100,000.00
Total Current Assets Php 1,300,000.00
Noncurrent Assets
Long Term Investments Php 1,300,000.00
Intangible Assets 550,000.00
Property, Plant and Equipment Cost Php 1,000,000.00
Less: Accumulated Depreciation (300,000.00) 700,000.00
Total Noncurrent Assets Php 2,650,000.00
Total Assets Php 3,850,000.00

Liabilities and Owner’s Equity

Current Liabilities
Accounts Payable Php 300,000.00
Accrued Expenses 150,000.00
Unearned Income 130,000.00
Notes Payable 200,000.00
Total Current Liabilities 780,000.00
Noncurrent Liabilities
Mortgage Payable Php 1,500,000.00
Loans Payable 1,000,000.00
Total Noncurrent Liabilities Php 2,500,000.00
Total Liabilities Php 3,280,000.00
Owner’s Equity
Owner’s Capital 1/1/2016 520,000.00
Owner’s Less: Withdrawals 50,000.00
Equity Owner’s Capital 12/31/2016 470,000.00
Add: Net Income from operation 100,000.00
Total Owner’s Equity Php 570,000.00
Total Liabilities and Owner’s Equity Php 3,850,000.00

Statement of Financial Position Report Form

The illustration is an example of a simple statement of the financial position of a single/

sole proprietorship. Other forms of business organizations like partnership and corporation
have different presentations depending on the nature of the business.

RO_ABM_FABM12_Q1_WK1B_LP2 14
The total assets and the total liabilities and owner’s equity must always be equal. Good accounting
form suggests that every time an amount is computed a single line is drawn. It implies that a
mathematical operation has been completed. The total assets and the total liabilities and equity are
double-ruled showing that it is the end part of a financial statement.

Forms of Statement of Financial Position (SFP)

The Statement of Financial Position (SFP) has two forms, the Report form and the Account
Form. Neither format is naturally better than the other. The format in the preparation of the
SFP depends on the preference of the user.

1. Report Form- the report form SFP is a simple list, a form wherein accounts are
presented vertically, the Assets are presented first, followed by the Liabilities and then
the Equity. The Statement of Financial Position shown earlier is in report form.

2. Account Form- it is a form of SFP wherein accounts are presented horizontally, the
Assets are presented on the left side while the Liabilities and the Equity are on the right
side of the Balance Sheet. It looks like the debit and credit balances of an account.

RO_ABM_FABM12_Q1_WK1B_LP2 15
 .

The Statements of the two types of businesses differ on the inventory account. A
service company has supplies inventory classified under the current assets of the company.
While a merchandising company also has supplies inventory classified under the current
assets of the company, the business has another inventory account under its current assets
which is the Merchandise Inventory, Ending.

LEARNING COMPETENCY

Prepare an SFP using the report form and the account form with proper classification
of items as current and noncurrent (ABM_FABM12-Ia-b-4).

ACTIVITIES

ACTIVITY 1: READY MY ASSET

DIRECTIONS: Prepare the assets of the statement of financial position of the given balances.
Then, answer the questions that follow.

Cash – 25,000
Building – 98,000
Supplies – 2,500
Equipment – 21,000
Accounts Receivable – 3,800

1. What is the total current assets?

2. What is the total non-current assets?
3. What is the total assets?

ACTIVITY 2- ASSET IS MY LIABILITY

DIRECTIONS: Prepare the liability and owner’s equity of the statement of financial position of
the given balances. Then, answer the questions that follow.
Loans Payable – 52,000
Accounts Payable – 29,300
Owner’s Capital- 71,000
Withdrawals- 12,000
Unearned income- 10000

1. What is the total current liabilities?

2. What is the total non-current liabilities?
3. What is the total owner’s equity?
4. What is the total liabilities and owner’s equity?

RO_ABM_FABM12_Q1_WK1B_LP2 16
ACTIVITY 3: COMPLETE MY TRUE FORM
DIRECTIONS: Prepare a financial statement in account form using your answers in activities
1 and 2. Make sure that the total asset and total liability and owner’s equity are equal. Use any
business name and the end of the current year for the heading.

LET’S LEVEL UP

DIRECTION: Prepare a Statement of Financial Position in report form of the May’s Convenient
Store’s accounts. The balances are as of December 31, 2020

Account title Amount

Cash Php 80,000

Furniture P 93,000

Accounts Receivable P 35,000

Merchandise Inventory P24,000

Insurance Payables P7,500

Utilities payable P3,000

Loans Payable P50,000

Prepaid Rent P18,000

Accounts Payable P52,000

Owners Capital P 165,000.00

RO_ABM_FABM12_Q1_WK1B_LP2 17
 REFLECTION

After learning the competency of preparing an SFP using the report form and the account
form with proper classification of items as current and noncurrent, assess your understanding
by checking the box that corresponds to reactions.

I know this very well. I feel like I can teach this to others.

I know this well. I get almost every question right.

I feel like I’m still learning this. I still have some

questions and need clarifications.

I have lots of questions. I don’t know what to do with the

activity.

REFERENCES

Monfero, R., et. Al. (2016).Teaching Guide for Senior High School: Fundamentals of
Accountancy, Business and Management 2. Philippines: Published by Commission on
Higher Education (CHED).

Dela Pena, D. (2017). Fundamentals of Accountancy, Business, and Management 2. Quarter

1. Module 1. Statement of Financial Position Quezon Palawan: Department of
Education.
Salazar, D. (2020). Fundamentals of Accountancy, Business, and Management 2. First
Edition. City: Rex Bookstore Inc.

To further understand the lesson, you may visit the following links:

https://www.youtube.com/watch?v=aAOFIZP9jJ0
https://www.youtube.com/watch?v=CYuNkREfGEI

RO_ABM_FABM12_Q1_WK1B_LP2 18
 Prepared by:

MAY SARCIA ARNOZA

Polangui General Comprehensive High School
Writer

RO_ABM_FABM12_Q1_WK1B_LP2 19
NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 2A

IDENTIFYING THE ELEMENTS OF STATEMENT OF COMPREHENSIVE INCOME

(SCI) and DESCRIBING EACH OF THESE ITEMS FOR A SERVICE BUSINESS
AND MERCHANDISING BUSINESS

BACKGROUND INFORMATION FOR LEARNERS

The Statement of Comprehensive Income (Income Statement) tells

the reader about the "performance" and activities of the company for a certain
period (e.g., for the period ended, December 31, 20 ). It generally contains the
revenues and expenses incurred by an entity for the specific period.

A statement of comprehensive income is conventionally compared to

a running video because it represents an entity's business activities from the
start to the end of the period.

A statement of comprehensive income consists of all the revenues,

gains and losses that cause the equity accounts to change at the end of the
accounting period. They are nominal or temporary accounts because at the
end of the accounting period, balances under these accounts are transferred
to Capital Account, thus having only temporary amounts and resulting to
zero balances at the beginning of the following year. All nominal/temporary
accounts are being closed at end of accounting period.

RO_FABM2_Grade 12_Q1_WK2A_LP 3 20
 I. THE HEADING
OR TITLE

II. REVENUES
ELEMENTS OF A III. EXPENSES
STATEMENT OF
COMPREHENSIVE
INCOME

IV. GAINS AND V. OTHER

LOSSES ITEMS

I. THE HEADING OR TITLE

The Statement of Comprehensive Income is a financial report. As a financial report, it

must be properly identified and dated. The appropriate title of the statement will enable
the users to differentiate the statement of comprehensive income from the other
financial reports issued by the entity. The heading is comprised of the name of the
entity, followed by the name of the report and the period it covers. It should be written
at the center of the working paper.

Example: TOM Company

Statement of Comprehensive Income
For the year ended, December 31, 2018

RO_FABM2_Grade 12_Q1_WK2A_LP 3 21
II. REVENUES

Revenues, as defined by The Conceptual Frameworks for Financial

Reporting (International accounting Standards Board 2010): “…arises in the
course of the ordinary activities of an entity and is referred to by a variety of
different names including sales, fees, interests, dividends, royalties, and rent.

Revenues are the first line item in the statement of comprehensive income. Revenues
earned by the business vary according to the nature of the entity. Revenues may come from
the following:

3. INTERESTS and
1. SALES - the main 2. PROFESSIONAL FEES - DIVIDENDS that are
revenue of merchandising the main revenue of service earned on financial
business. business instruments such as time
deposits and equity shares.

4. ROYALTIES charges to 5. RENT charge from third

individual for using party using their fixed
established brand and properties such as building
technology. and land.

Smaller and less complex entities will have one or two sources of
revenue. Larger and more complex entities, on the other hand will have multiple
sources of revenues.
Finally, remember that revenue is recorded when earned rather
when the related cash is received.

RO_FABM2_Grade 12_Q1_WK2A_LP 3 22
III. EXPENSES
Expenses as defined by The Conceptual Frameworks for Financial Reporting
(International Accounting Standards Board 2010) as arising during the ordinary activities of
the entity including, for example, cost of sales, wages, and depreciation. They usually take
the form of an outflow or depletion of assets such as cash and cash equivalent, inventory,
property, plant, and equipment.

Remember: Revenues earned by business are matched with expenses.

SERVICE BUSINESS provides different types of intangible products performed by

individuals or a team of experts. Service businesses includes accounting firms, law firms,
consulting firms, medical treatment, transportation, hospitality, repairs, etc.
For example, an accounting firm generating revenues by providing the accounting services
to its clients such as bookkeeping and auditing services also generates expenses.

For Service Entities/Businesses, expenses are usually categorized as cost of services

or operating expenses. These include:

1. Salaries - for the professional

working in the firm, and office 2. Rent for office space
staff

4. Depreciation of office
3. Permits and tax paid to local equipment and other similar
expenses. As one can notice,
government.
costs of services are more
related to revenues.

Identifying and classifying expenses for MERCHANDISING BUSINESS is more

complex than that of a service concern. For a merchandising concern, the expenses are
classified as either cost of sales, selling expenses, or administrative (operating)
expenses.

RO_FABM2_Grade 12_Q1_WK2A_LP 3 23
1. COST OF SALES is the amount paid or payable by the business entity to its suppliers for
the merchandise sold to the business entity’s customers. Cost of sales will take a general
formula as seen below:

a. Beginning inventory is the stock of goods carried over from prior reporting period. For
example, beginning inventory for December 31, 2017 Statement of Comprehensive
Income is the ending inventory from December 31, 2016 SCI. Remember that as real
accounts, ending inventory balances are carried over to the subsequent year.

b. Net purchase for the year is the total amount paid or payable to supplier for the
period. Net purchases follow a formula as shown below:

Gross Purchases are the general ledger balance of the purchases account for the
period. Purchase discounts are usually granted by suppliers to buyers to encourage prompt
payments of the latter’s account. Also, some suppliers may grant purchase returns and
allowances for merchandise purchased which does not meet the original specification of the
buyer. Finally, freight-in is a necessary expense incurred in the purchase of merchandise.
Freight-in is an expense incurred to transport the merchandize to the place of buyer.

RO_FABM2_Grade 12_Q1_WK2A_LP 3 24
2. SELLING EXPENSES are incurred in accordance with the disposition of the merchandise
to the customers. Examples of selling expenses are commissions paid to salesmen, salaries
of sales staff and delivery expenses.

3. OPERATING EXPENSES are also called general and administrative expenses. Expenses
under this type are those which are not covered in the previous expense types. Examples of
these expenses are general depreciation expenses, general rent expenses, office salaries,
taxes, and licenses.

These classifications discussed above are based on the function of the

expenses. These classifications may answer the question “How are they related
to the normal operations of the business?” In other words, these classifications
are made by relating the said expenses to the major source of revenue (e.g., the
“function” of the cost of sale is to match such costs directly to the related sales).

Expenses can also be classified by nature. When an expense is classified by nature,

the classification answers the question “What are these expenses? “Common examples of
expense by nature are salaries and depreciation. An expense classified by nature may still be
classified by function. For Example, the salaries expense can still be broken down to selling
expenses (salaries of sales personnel) and administrative expenses (salaries of office
personnel).

IV. GAINS AND LOSSES

Gains as defined by The Conceptual Frameworks for Financial Reporting
(International Accounting Standards Board 2010) as that which represent other items that
meet the definition of income and may or may not arise in the course of the ordinary
activities of an entity.

Gains are incidental to the operations of a business. For example, if an

Accounting Firm sells its office equipment for P10,000 when the carrying amount of
the equipment is P9,000, a gain amounting to P1,000 must be recorded. It must be
noted that the said amount cannot be classified as revenue since the revenue of an
Accounting Firm pertain to professional fees/service earned for the period.

RO_FABM2_Grade 12_Q1_WK2A_LP 3 25
 Losses on the other hand, is defined as follows (International Accounting Standards
Board 2019): “Represent other items that meet the definition of expenses and may or may
not, arise in the course of the ordinary activities of the entity.”

One can say that loss is to expense as gain is to revenue. Generally, a loss is
not expected to be incurred periodically by business organizations. For example, if an
accounting firm sells for 2,000 an office equipment with a carrying value of P5,000,
there is a loss of P3,000. The said amount cannot be categorized as an expense
(specific) since such is not expected to occur routinely and normally.

V. OTHER ITEMS

Other items included in the computation of the total comprehensive income are
income taxes and items of other comprehensive income. Income tax is the sum
of money payable to the government. Items of other comprehensive income are
increases or decreases in economic benefits for a period. However, accounting
standards prohibits business organizations in including these items in the
computation of profit or loss. These items, however, are included in computing
the total comprehensive income.

There are two main formats for the preparation of the Statement of
Comprehensive Income (SCI), namely:
1. Single-step which is closely related to the nature of expense format
2. Multiple-step approach which is associated with the function of expense.

RO_FABM2_Grade 12_Q1_WK2A_LP 3 26
 LEARNING COMPETENCY

Identify the elements of Statement of Comprehensive Income (SCI) and describe each
of these items for a Service Business and Merchandising. (ABM_FABM12-lc-d-5)

ACTIVITIES

ACTIVITY 1. REMEMBER ME
Directions: Read carefully each statement below then write the word being described on
the corresponding number in the puzzle.

Hint: These are clues for you to be able to answer the puzzle
1. Earnings from selling of merchandize
2. This includes sales and professional fees
3. It contains the name of the company, the title of the report and the period/date.
4. Includes cost of sales, salaries, rents, transportation, etc.
5. If a law firm sells its office equipment at P6,000 with a carrying amount of
8,000. The difference is known as .

2 3

RO_FABM2_Grade 12_Q1_WK2A_LP 3 27
ACTIVITY 2. KNOW ME
Direction: Identify whether the account title is a selling expense or operating/general
expense. Draw a if it is a selling expense and if it is an operating/general expense.

1. Advertising expense
2. Salaries of administrative assistant
3. Rental of Sales Office building
4. Sales Commission of Account Executive
5. Light and water of home office

ACTIVITY 3 WHERE DO I BELONG?

Directions: Identify if which among the items below is a revenue or an expense. Fill in the
table below with their corresponding amount. Total the revenue and expense.

Transactions Amount Transaction Amount

Service rendered 45,000 Salaries of Employees 10,000
Payment of the electricity bill 1,000 Bought supplies 3,000
Rental received from the 5,000
lessee
Gains from sale of equipment 2,500

Revenues Amount Expenses Amount

Why is it that Gains from the sale of equipment was not included as a revenue?

RO_FABM2_Grade 12_Q1_WK2A_LP 3 28
 LET’S LEVEL UP

Directions: Identify which among the items below belongs to the elements of SCI. Write your
answer in their corresponding shapes.

Depreciation of office equipment December 31, 2017 Salaries of Utility Staff

Insurance of delivery van Cost of sale Interest income on time
deposits
Representation expense of sales Income tax Gain from sales of
manager equipment
Professional fee Sales Salaries of sales agents

REVENUES
HEADING

GAINS or LOSS

EXPENSES
OTHER ITEMS

RO_FABM2_Grade 12_Q1_WK2A_LP 3 29
 REFLECTION

I fully understood the lessons in

I find it in answering the activities.

I need to do additional work to fully understand the topic in

.

REFERENCES

Baticon, J, Domingo, J.C and Yabut, F.A. (2016 by Vibal Group, Inc) Fundamentals of
Accountancy, Business and Management 2

Valencia, E.G., & Roxas, G.F. (2010). Basic Accounting (3rd ed.) Mandaluyong City,
Philippines: Valencia Educational Supply

Teaching Guide in Senior High School Fundamentals of Accountancy Business and

Management 2, donated by the Commission on Higher Education in Collaboration with
Philippine Normal University to Department of Education

https://www.wikiaccounting.com/accounting-for-cost-of-services-for-a-service-business/c

RO_FABM2_Grade 12_Q1_WK2A_LP 3 30
 ANSWER KEY

TERESITA O. MANDAC
Libon Agro-Industrial High School
Writer

RO_FABM2_Grade 12_Q1_WK2A_LP 3 31
NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 2B

PREPARING A STATEMENT OF COMPREHENSIVE INCOME FOR A SERVICE

BUSINESS USING THE SINGLE-STEP APPROACH

BACKGROUND INFORMATION FOR LEARNERS

The single- step Statement of Comprehensive Income (Figure 3) groups all revenue items
together and all expense items together. It is called a single- step SCI because net income is
computed using only one step, deducting total expenses from total revenues. Subtotals are not
computed and presented on the SCI. This format is generally used by small businesses and
service businesses because of its simplicity.

The single- step SCI is also closely linked to the nature of expense format. It lists down
the expenses based on the source of expenses such as salaries, purchases, supplies, utilities,
fuel, and depreciation.

Net Income/(Net Loss)

RO_FABM2_Grade 12_Q1_WK2_LP4 32
 Procedures on the Preparation of the Single-Step of the Statement of
Comprehensive Income of Service Business:

A single-step income statement has two main sections: one reporting revenue and the other
reporting expenses.

BTS Company HEADING

Statement of Comprehensive Income
For the year ended December 31, 2021

Service revenue ₱ 25,000.00

20,000.00 REVENUES
Rental Income
Interest Income 10,000.00

Total revenues ₱ 55,000.00

Rent expense ₱3,000.00

Depreciation expense 5,000.00
Utilities expense 4,000.00
EXPENSES
Salaries expense 5,000.00
Interest expense 1,000.00
Insurance expense 2,000.00
Supplies expense 3,000.00

Total expenses ₱ 23,000.00

Net Income ₱ 32,000.00 NET INCOME

RO_FABM2_Grade 12_Q1_WK2_LP4 33
 Figure 3: Single-Step Statement of Comprehensive Income

RO_FABM2_Grade 12_Q1_WK2_LP4 34
 LEARNING COMPETENCY

Prepare a Statement of Comprehensive Income using the single-step approach

(ABM_FABM12-Ic-d -6)

ACTIVITIES

ACTIVITY 1: EXPLORE
Given are the figures from the account of Kuya Daniel’s Vulcanizing Shop. Based on the
Trial Balance:
1. Identify and total all the revenues of the entity.
2. Identify and calculate the total expenses.
3. Determine the Net Income/Loss.

Kuya Daniel's Vulcanizing Shop

Trial Balance
June 30, 2021
Debit Credit
Cash ₱26,200.00
Accounts Receivable 10,500.00
Prepaid Insurance 1,200.00
Automobile 150,000.00
Accounts Payable ₱ 12,000.00
Notes Payable 5,500.00
B. Sabado, Capital 130,000.00
B. Sabado, Drawing 7,500.00
Service Income 76,000.00
Gains from Sales of Automobile 12,500.00
Salary Expense 15,000.00
Rent Expense 7,500.00
Advertising Expense 2,500.00
Automobile Expense 5,000.00
Supplies Expense 3,500.00
Miscellaneous Expense 1,500.00
Utility Expense 5,600.00
Total ₱236,000.00 ₱236,000.00

RO_FABM2_Grade 12_Q1_WK2_LP4 35
ACTIVITY 2: DEEPEN

Let us have other business transactions to ponder.

Prepare a Statement of Comprehensive Income for the following independent transactions. Use
your surname as your company name.

1. Service Revenue Php95,000.00; Salaries Expense Php5,000.00; Transportation Expense

Php15,000.00; Rent Expense Php20,000.00; Utilities Expense Pph3,000.00; Other
Comprehensive Income is Php8,000.00

2. Salaries Expense Php25,000.00; Transportation Expense Php1,000.00; Rent Expense

Php10,000.00; Utilities Expense Php5,000.00; and Service Revenue is Php40,000.00.

ACTIVITY 3: GAUGE

Below are the accounts of Sarah’s Laundry Shop for August 31, 2021.
Service Income ₱ 50,000.00
Salaries Expense 5,000.00
Utilities Expense 3,500.00
Cleaning Supplies expense 2,000.00
Rent Expense 3,000.00
Insurance Expense 1,500.00
Transportation Expense 1,400.00

You were employed by the shop as its bookkeeper. You are now to prepare the Statement of
Comprehensive Income for August 31, 2021.

LET’S LEVEL UP

Direction: Prepare a single-step Statement of Comprehensive Income for each transaction

below.

1. Here is another sample of business transactions for Kuya Jimin’s Auto Shop for February
2021. The business: Cash, Php 30,000; Prepaid Rent, Php5,000; Equipment, Php5,000,
Supplies Php 3,000.00 and Accounts Payable Php7,000. By the end of the month, Berting's
had earned Php50, 000 of Service Income, Php 1,500 of Utility Expenses and Php 6,500 of
Salaries Expense and P 1,500 for Rent Expense. How much is the net income of the Kuya
Jimin?

RO_FABM2_Grade 12_Q1_WK2_LP4 36
2. Calculate the net income of Aling Liza’s Parlor for April 2020, given the following
information.

Paid rent 3,500.00

Provided rebonding and other beauty services 20,000.00
Paid the telephone bill 1,000.00
Paid the electric bill 4,500.00
Paid the water bill 1,000.00
Gains from the sales of the equipment 3,000.00
Paid salaries of beauticians 20,000.00
Paid the cleaning and laundry services 2,000.00

REFLECTION

Photo by: canva.com

Lockdown has crippled many businesses in the Philippines. Since many businesses were
closed during the ECQ, many employees were displaced from work. The income of the displaced
employees becomes zero while the expenses are still the same as that of the normal business
situation. I hope your parents or other members of the family are not among them.
https://soffront.com/blog/best-tips-run-business-timelockdown/. Describe your feelings
about our current situation through a song, poem, slogan, or poster.

RO_FABM2_Grade 12_Q1_WK2_LP4 37
 RUBRIC FOR SCORING

RUBRICS:

Criteria Excellent (15 pts) Very good (12 pts) Good (10 pts)

Content (70%) Thorough and Complete Shows some

insightful understanding of understanding
understanding of the concept of the concept
the concept discussed. discussed.
discussed.

Creativity Enthusiastically Use ideas and Shows some

(20%) uses ideas and materials for use of ideas and
materials for enhancement materials for
enhancement enhancement

Presentation Presented ideas in Presented ideas Presented ideas

(10%) a unique way properly using properly but with
which is minimal creativity. lesser creativity.
appropriate to the
idea that is being
conveyed

REFERENCES

Textbooks:

Salazar, (2017). Fundamentals of Accountancy, Business & Management Part 2. 1st Edition

Ferrer, R & Millan, Z. V. (2017). Fundamentals of Accountancy, Business & Management Part
2. 1st Edition

Haddock, M., Price, J., & Farina, M. (2012). College Accounting: A Contemporary Approach,
Second Edition. New York: McGraw-Hill/Irwin.

RO_FABM2_Grade 12_Q1_WK2_LP4 38
Valencia, E. G., & Roxas, G. F.(2010). Basic Accounting (3rd ed.). Mandaluyong City,
Philippines: Valencia Educational Supply.

Teaching Guide in Senior High School Fundamentals of Accountancy Business and

Management 2, donated by the Commission on Higher Education in Collaboration with the
Philippine Normal University to Department of Education

Websites:

https://asia.nikkei.com/Spotlight/Coronavirus/Manila-lockdown-cripplesbusinesses-big-and-
small
https://soffront.com/blog/best-tips-run-business-time-lockdown/
https://youtu.be/LR7dr1TguCg
https://www.freshbooks.com/hub/accounting/single-step-income-statement
https://www.deskera.com/blog/understanding-the-single-step-income-statement/
https://www.accountingtools.com/articles/2017/5/15/the-single-step-income-statement
https://www.wallstreetmojo.com/single-step-income-statement/

RO_FABM2_Grade 12_Q1_WK2_LP4 39
 ANSWER KEY

Prepared by:

MARIBEL N. VELUZ
Libon Agro-Industrial High School

RO_FABM2_Grade 12_Q1_WK2_LP4 40
NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 3

PREPARING A STATEMENT OF COMPREHENSIVE INCOME FOR

MERCHANDISING BUSINESS USING MULTI-STEP APPROACH

BACKGROUND INFORMATION FOR LEARNERS

Now that you have the adjusted trial balance of a merchandising business, you can
already prepare your Statement of Comprehensive Income using the multi-step approach.
Multi-step income statement is one of the two income statement formats businesses
can use to report its profit. It provides a detailed reporting of a company’s revenues and
expenses using multi-steps to arrive at net income. Unlike the simple, single-step income
statement, the multi-step income statement differentiates between operating and non-
operating, revenues and expenses, giving both business owners and investors a better look
at company operations and profitability levels.
To illustrate the major parts of the merchandising income statement selected
transactions made by Sambella Trading will be used unless otherwise stated.

NET SALES
Net Sales is the first part of the merchandising income statement as presented below:

SAMBELLA TRADING
Partial Income Statement
For the Period Ended December 31, 2020

Sales P 129,000.00
Less: Sales returns and allowances 5,000.00
Sales Discount 5,000.00
Net Sales P 119,000.00

Exhibit 1 Partial Income Statement – Net Sales

RO_ABM_FABM2_Grade 12_Q1_WK3_LP5 40
 COST OF SALES
Cost of Sales or cost of goods sold is the largest single expense of a merchandising
business. It is the cost of inventory that the entity has sold to customers. To understand
fully the concept of cost of sales, it is necessary to examine the details affecting the
merchandise inventory and net purchases.

Beginning Net
Inventory Purchases

Goods Available for Sale

Ending Cost of Goods

Inventory Sold

Exhibit 2 Goods Available for Sale

SAMBELLA TRADING
Partial Income Statement
For the Period Ended December 31, 2020

Cost of Sales
Merchandising Inventory, January 1 P 80,000.00
Purchases P 50,000.00
Less: Purchase returns and allowances P 4,500.00
Purchase discounts 5,000.00 9,500.00
Net Purchases P 40,500.00
Add: Freight In 2,000.00
Net Cost of Purchases 42,500.00
Goods available for sale P 122,500.00
Less: Merchandise Inventory, December 31 50,000.00
Cost of Sales P 72,500.00

Exhibit 3 Partial Income Statement – Cost of Sales

RO_ABM_FABM2_Grade 12_Q1_WK3_LP5 41
 OPERATING EXPENSES
Operating Expenses make up the third major part of the income statement for a
merchandising business. These are expenses, other than the cost of sales, which are
incurred to generate profit from the entity’s major line of business- merchandising.
Distribution costs, administrative expenses and other operating expenses are the
categories.

STEPS IN PREPARING A MULTI-STEP INCOME STATEMENT

1. Prepare the report heading. The heading includes the name of the company, the type of financial
statement and the period covered.

SAMBELLA TRADING
Statement of Comprehensive
For the Year Ended December 31, 2020

2. Calculate the gross profit or gross margin. This is done by subtracting the cost of goods sold in
the first section of the statement (net sales) rather than listing it with other expenses.

SAMBELLA TRADING
Statement of Comprehensive Income
For the Year Ended December 31, 2020

Sales P 129,000.00
Less: Sales returns and allowances 5,000.00
Sales Discount 5,000.00
Net Sales P 119,000.00
Cost of Sales
Merchandising Inventory, January 1 P 80,000.00
Purchases P 50,000.00
Less: Purchase returns and allowance P 4,500.00
Purchase discounts 5,000.00 9,500, 00
Net Purchases P 40,500.00
Add: Freight In 2,000.00
Net Cost of Purchases 42,500.00
Goods available for sale P 122,500.00
Less: Merchandise Inventory, December 31 50,000.00 72,500.00
Gross Profit P 46,500.00

RO_ABM_FABM2_Grade 12_Q1_WK3_LP5 42
3. Calculate the Operating Income. This is done by subtracting the operating expenses from the
gross profit.

SAMBELLA TRADING
Statement of Comprehensive Income
For the Year Ended December 31, 2020

Sales P 129,000.00
Less: Sales returns and allowances 5,000.00
Sales Discount 5,000.00
Net Sales P 119,000.00
Cost of Sales
Merchandising Inventory, January 1 P 80,000.00
Purchases P 50,000.00
Less: Purchase returns and allowance P 4,500.00
Purchase discounts 5,000.00 9,500, 00
Net Purchases P 40,500.00
Add: Freight In 2,000.00
Net Cost of Purchases 42,500.00
Goods available for sale P 122,500.00
Less: Merchandise Inventory, December 31 50,000.00 72,500.00
Gross Profit P 46,500.00
Less: Operating Expenses
Salaries P 14,500.00
Freight Out 3,500.00
Insurance Expense 500.00
Interest Expense 580.00
Bad Debts 7,400.00
Depreciation-store equipment 10,500.00
Depreciation- store furniture 7,200.00 44,180.00
Net income for the period P 2,320.00

RO_ABM_FABM2_Grade 12_Q1_WK3_LP5 43
4. Calculate the Net Income. This is done by adding in any non-operating income or expenses and
adding or subtracting those amounts from the operating income to arrive at net income.

SAMBELLA TRADING
Statement of Comprehensive Income
For the Year Ended December 31, 2020

Sales P 129,000.00
Less: Sales returns and allowances 5,000.00
Sales Discount 5,000.00
Net Sales P 119,000.00

Cost of Sales
Merchandising Inventory, January 1 P 80,000.00
Purchases P 50,000.00
Less: Purchase returns and allowance P 4,500.00
Purchase discounts 5,000.00 9,500, 00
Net Purchases P 40,500.00
Add: Freight In 2,000.00
Net Cost of Purchases 42,500.00
Goods available for sale P 122,500.00
Less: Merchandise Inventory, December 31 50,000.00 72,500.00
Gross Profit P 46,500.00
Less: Operating Expenses
Salaries P 14,500.00
Freight Out 3,500.00
Insurance Expense 500.00
Interest Expense 580.00
Bad Debts 7,400.00
Depreciation-store equipment 10,500.00
Depreciation- store furniture 7,200.00 44,180.00
Net income for the period P 2,320.00
Add: Other income
Commission income P 7,000.00
Interest income 345.00 7,345.00
Net Profit P 9,665.00

Exhibit 4 Multi-step Statement of Comprehensive Income

RO_ABM_FABM2_Grade 12_Q1_WK3_LP5 44
 LEARNING COMPETENCY

The learner prepares an SCI for a merchandising business using the multistep approach
(ABM_FABM12-Ic-5)

ACTIVITIES

Let’s try the following activities to deepen our understanding on the preparation of income
statement for merchandising business using the multi-step approach

ACTIVITY 1: COMPUTE TO COMPLETE

DIRECTIONS: Compute the missing elements of the income statement of two (2) companies
below. Complete the table by replacing the numbered blanks with the appropriate amounts
listed in the box. Use a pad paper for your answer. You will earn one (1) point for every correct
answer. (5 points)

P 20,000.00 P 90,000.00

P 180,000.00 P 120,000.00

P 70,000.00 P 25,000.00

Company A Company B

Net sales 1 3

Merchandise Inventory, Beg. P 30,000.00 P 50,000.00

Net Purchases P 80,000.00 4

Goods available for sale P110,000.00 P 160,000.00

Merchandise Inventory, End P 40,000.00 5

Cost of Sales 2 P 140,000.00

Gross Profit P 50,000.00 P 40,000.00

RO_ABM_FABM2_Grade 12_Q1_WK3_LP5 45
ACTIVITY 2: FILL IT PROFIT-LY!

DIRECTIONS: Using the income statement below of JUNYAN ENTERPRISE, determine the
missing words/figures in each blank item. Write your answer in a pad paper. You will earn one
(1) point for every correct answer. (10 points)

a
Statement of Comprehensive Income
For the Year Ended December 31, 2020

Net Sales
Gross Sales P h
Less: Sales Returns and
Allowances P 45,000.00
Sales Discounts 15,000.00 g
Net
Sales P f
Cost of Goods Sold
Merchandise Inventory, 220,000.0
1/1/2020 P 0
Purchases P 985,000.00
Less: Purchase Returns 31,000.0
and Allowances P 0
Purchase 20,000.0
Discounts 0 B

934,000.0
Net Purchases 0
Transportation-in 36,000.00
Net Cost of Purchases c
Goods available for
sale P d
Less: Merchandise Inventory, 260,000.0
12/31/2020 0
Cost of Goods Sold e
620,000.0
Gross Profit P 0
Operating Expenses j
Net Profit P i

Clue: Note that the Gross Profit is 40% of Net Sales and Profit is 10% of Net
Sales.

RO_ABM_FABM2_Grade 12_Q1_WK3_LP5 46
 ACTIVITY 3: PREPARE TO EARN!

DIRECTIONS: Given the selected amounts from the accounting records of Bicol Souvenirs,
prepare the income statement for the year-ended December 31, 2020 using the multi-step
approach. (25 points)

Accounts Receivable P 48,300.00 Owner’s Equity, 1/1/2020 P 126,070.00

Accumulated Depreciation 18,700.00 Purchases 91,300.00

Cost of Goods Sold ? Purchase Discounts 3,000.00

Distribution Cost 37,840.00 Purchase Returns 2,000.00

Freight-In 2,200.00 Sales 301,000.00

General Expenses 23,800.00 Sales Discounts 9,000.00

Merchandise Inventory,1/1/2020 21,870.00 Sales Returns 16,000.00
Merchandise Inventory, 12/31/2020 19,450.00 Unearned Revenues 6,500.00

Other Operating Expenses 1,500.00

LET’S LEVEL UP

DIRECTIONS: With the given amounts below, prepare the income statement of SC&MC
Traders for the year-ended December 31, 2020 using the multi-step approach. In a separate
schedule, show the computation of the Cost of Goods Sold.

Gross Sales P 2,463,500.00 Transportation-In P 82,360.00

Merchandise Inventory,
528,000.00 Purchases 1,264,000.00
1/1/2020

Sales Returns and Allowances 27,500.00 Purchase Discounts 21,360.00

Merchandise Inventory,
1,796,000.00 Sales Salaries 225,000.00
12/31/2020

Store Supplies Expense 15,400.00 Transportation-Out 57,400.00

Insurance Expense-Distribution 5,600.00 Office Salaries Expense 171,000.00

Depreciation Expense-
Utilities Expense 48,000.00 26,000.00
Building

Depreciation Expense-
Office Supplies Expense 12,040.00 22,000.00
Office Equipment

Insurance Expense-General 3,600.00 Accounts Payable 25,678.50

RO_ABM_FABM2_Grade 12_Q1_WK3_LP5 47
 Additional Information:
1. Purchase Returns and Allowances is 4.45% of Purchases.
2. Sales Discounts is 1.74% of Gross Sales.
3. Accounts Receivable is P 289,000.00 and Unearned Revenue is P 345,600.00.

REFLECTION

A multi-step income statement is composed of steps to arrive at net profit. As a Senior

High School student, how will you relate this in your life? What are the steps that you will
undertake to achieve your goals? In 10 sentences or less, write your answer in a pad paper.

REFERENCES

Arganda,A. (2016). Fundamentals of Accounting Bookkeeping 1.Mandaluyong City: Anvil

Publishing, Inc.
Ballada, W., Ballada, S. (2016). Accounting Fundamentals. DomDane Publishers & Made
Easy Books.
https://www.fool.com/the-blueprint/amp/multi-step-income-statement The beginners guide
to the multi-step income statement I The blueprint
https://www.freshbooks.com How to create a multi-step income statement

RO_ABM_FABM2_Grade 12_Q1_WK3_LP5 48
 ANSWER KEY

Prepared by:

ARIANE L. LOÑOSA
Marcial O. Rañola Memorial School

RO_ABM_FABM2_Grade 12_Q1_WK3_LP5 49
NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 4

PREPARING A STATEMENT OF CHANGES IN EQUITY (SCE) FOR A SINGLE

PROPRIETORSHIP

BACKGROUND INFORMATION FOR LEARNERS

In this learning packet, we will learn how to prepare a statement of changes in equity
(SCE).

Statement of changes in equity, also known as statement of owner’s equity, reports

all changes, whether increases or decreases to the owner’s interest in the company, during a
period. This statement is prepared prior to preparation of the Statement of Financial Position
to be able to obtain the ending balance of the equity to be used in the SFP. (Haddock, Price,
& Farina, 2012).

Below are some of the important terms that we need to know to fully understand the
discussion.

SINGLE/SOLE PROPRIETORSHIP –An entity whose assets, liabilities,

income, and expenses are centered or owned by only one person (Haddock,
Price, & Farina, 2012).

INITIAL INVESTMENT – The very first investment of the owner to the

company.

ADDITIONAL INVESTMENT – Increases to owner’s equity by adding

investments by the owner. (Haddock, Price, & Farina, 2012)

WITHDRAWALS –Decreases to owner’s equity by withdrawing assets by

the owner (Haddock, Price, & Farina, 2012).

RO_FABM2_Grade 12_Q1_WK4_LP6 50
 Statement of Changes in Equity for a Single/Sole Proprietorship

The statement of changes in equity portrays changes in the capital balance of a

business over a reporting period. The concept is usually applied to a sole proprietorship, where
income earned during the period is added to the beginning capital balance and owner draws
are subtracted. The result is the ending balance in the capital account.

The amount of owner's equity is increased by income and owner contributions. The
balance is decreased by losses and owner’s drawings.

The parts of the SCE are:

A. Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wording – “for the”)

B. Increases to Equity
i. Net income for the year
ii. Additional investment

C. Decreases to Equity
i. Net loss for the year
ii. Withdrawals by the owner

Below is a sample format of SCE for a single proprietorship:

RO_FABM2_Grade 12_Q1_WK4_LP6 51
Sample Illustration:

On July 1, 2019, Super Sales Stores had a beginning capital of Php 100,000 and incurred a
profit of Php 1,148 at the end of the month. The owner also withdrew a total of Php 5,000 for
personal expenses during the month.

Thus, the statement of changes in Equity of Super Sales Store is:

Super Sales Stores

Statement of Changes in Equity
For the month ended July 31, 2019

Beginning Capital, 07/01/2019 Php 100,000

Add: Profit 1,148
Total 101,148
Less: Drawing (5,000)
Ending Capital, 07/31/2019 Php 96,148

LEARNING COMPETENCY

Prepare a Statement of Changes in Equity (SCE) for a single/sole proprietorship.

(ABM_FABM12-le-9)

ACTIVITIES

ACTIVITY 1:

Directions: Accomplish the Statement of Changes in Equity (SCE) of Rivera Supply by

supplying the missing information in the given form below.

Rivera Supply
Statement of Owner’s Equity
For the month ended March 31, 2018

Capital, (1) Php 350,000

Add: Additional Investment 28,000
Profit (2)
Total Php 383,600
Less: (3) 3,500
(4) (5)

RO_FABM2_Grade 12_Q1_WK4_LP6 52
ACTIVITY 2: COMPLETE ME

Direction: Complete the table below using the following information:

The following balances were retrieved from the records of Juan’s Janitorial Services
for the year ended December 31, 2020:

Capital, December 1, 2020

Php 500,000
Withdrawals
Php 100,000
Additional Investments
Php 50,000
Net loss
Php 45,000

Juan’s Janitorial Services

STATEMENT OF CHANGES IN EQUITY
For the month ended December 31, 2020
Capital, December 1, 2020
Add: Additional investment
Net loss
Total
Less: Withdrawal
Capital, December 31, 2020

ACTIVITY 3: PREPARE ME
Below are the Income Statement and Balance Sheet of Hobert Supply and Services. Using
these data, prepare the company’s Statement of Changes in Equity.
Herbert Supply and Services
For the ended month ended June 30, 2017

RO_FABM2_Grade 12_Q1_WK4_LP6 53
 LET’S LEVEL UP

DIRECTION: Read the problem below and perform what is being asked in each item.

Matias Delivery Services’ ending capital for the month of August 2020 amounted to
70,000. Additional investments of the owner during the month amounted to 25,000.
Withdrawals add up to 11,000.

a. What is the net income for the month assuming that the beginning equity is 10,000?

b. Prepare the SCE of Matias Delivery Services.

REFLECTION

After learning the topic, assess your understanding by shading the corresponding figure.

I know this well, I get almost every question right.

I feel like I'm still learning this, I still have questions and need some
clarifications.

I have lots of questions, I don’t know what to answer most of the time.

REFERENCES

Printed References

(1) Haddock, M., Price, J., & Farina, M. (2012). College Accounting: A Contemporary Approach, Second
Edition. New York: McGraw-Hill/Irwin.

(2) Valencia, E. G., & Roxas, G. F. (2010). Basic Accounting (3rd ed.). Mandaluyong City, Philippines:
Valencia Educational Supply.

Online Reference
(3) 1999-2020 study finance / http://www.studyfinance.com

RO_FABM2_Grade 12_Q1_WK4_LP6 54
 ANSWER KEY

Prepared by:

Jennivic L. Mangampo
Marcial O. Rañola Memorial School, T-I

RO_FABM2_Grade 12_Q1_WK4_LP6 55
NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 5A

DISCUSSING THE COMPONENTS AND STRUCTURES OF CASH FLOW

STATEMENT (CFS)

BACKGROUND INFORMATION FOR LEARNERS

A Cash Flow Statement is a component of financial statements that provides information about the
cash receipts and cash payments of an entity for the accounting period. It generally presents the
sources and utilization of an organization’s cash and cash equivalents. The statement of cash flow
has three major sections namely operating, financing and investing activities. Each section
represents the classification of the organization’s cash related activities. It shows the net increase or
decrease in cash during the period and the cash balance at the end of the period.

Source:https://www.google.com/search?q=flow+of+funds+within+an+organization&source=lnms&tbm=isch&sa=X&ved=2ahUKEwjb
vKa036DyAhUKHXAKHST_D1EQ_AUoAXoECAEQAw&biw=1280&bih=632#imgrc=JGNIcBf9Hv9kEM&imgdii=D_s0EFuLMhRTdM

RO_FABM2_Grade 12_Q1_WK5A_LP7 56
 Three Major Sections/Components of the Cash Flow Statement

RO_FABM2_Grade 12_Q1_WK5A_LP7 57
 Operating Activities.

- the cash inflows (receipts) and the cash outflows (payments) arising from normal
operations of the business. Those transactions that are affecting the Statement of
Comprehensive Income, Current Assets and Current Liabilities of the Statement of Financial
Position

Structures/Activities of Operating Activities

EFFECTS
Structures/Activities + (increases cash) inflow
- (decreases cash) outflow
Cash receipts from sale of goods and rendering of +
services
Cash receipts from royalties, fees, commission, +
and other revenues
Cash payments to suppliers of goods and services -
Cash payments to employees -
Cash payments to income taxes -
Interest paid -
Interest received +
Dividends received +

Investing Activities

- the cash inflows (receipts) and cash outflows (outflows) from the purchase and
sale of property and equipment, investment in debt or trading securities activities. These
are generally a result from acquisition and disposal of non-current/long-term assets.

RO_FABM2_Grade 12_Q1_WK5A_LP7 58
Structures/Activities of Investing Activities

EFFECTS
Structures/Activities + (increases cash) inflow
- (decreases cash) outflow
Cash payments to acquire property, plant and equipment -
Cash payment to acquire intangible assets -
Cash receipts from sales of property, plant and +
equipment
Cash receipts from sales of intangible assets +
Cash receipts from sale of long-term assets +

Financing Activities

- the cash inflows (receipts) and cash outflows (outflows) arise from changes in
borrowings/non-current liabilities and owner’s equity of a business organization. In other
words, its activities are the cash flows that result from transactions between the entity and
its owners and between the entity and its creditors.

Structures/Activities of Financing Activities

EFFECTS
Structures/Activities + (increases cash) inflow
- (decreases cash) outflow
Cash investment from owners +
Cash proceeds from bank loans +
Cash distribution from owners -
Repayment of bank loans -

RO_FABM2_Grade 12_Q1_WK5A_LP7 59
 Differentiate the Direct and Indirect
Approach of the Cash Flow Statement

Direct – The operating cash flow section of the

CFS under the direct method would show each
major class of gross cash receipts and gross
cash payments.
Indirect – The operating cash flow section of the CFS under the indirect method will reconcile the
net income/loss of the company with the total cash flows generated/used in operating activities
by adjusting the net income/loss for effects of non-cash transactions.

Emphasize that the two are only approaches and will yield the same amount of
cash flow from operating activities. Note that the Investing and Financing sections of
the CFS are the same under the two approaches.
Note: Businesses are given an option whether to present the statement of cash
flow using the direct or indirect method.

1. Direct Method
The direct method means that the major classes of cash receipts and cash payments are
disclosed. In other words, the direct method shows in detail or itemizes the cash receipts and
cash payments. Businesses encourage the use of the direct method. Below is an example of a
direct method.
LCC Trading
Statement of Cash Flows
For the Period/Year Ended December 31, 2020
Cash Flow from Operating Activities:
Cash receipts from rendering of services ₱ 200,000.00
Cash payment to suppliers of goods and services ( 50,000.00 )
Net cash flow from Operating Activities 150,000.00
Cash Flow from Investing Activities:
Proceeds from sale of equipment 100,000.00
Net cash flow from Investing Activities 100,000.00
Cash Flow from Financing Activities:
Proceeds from cash investment from owners 250,000.00
Proceeds from bank loan 30,000.00

RO_FABM2_Grade 12_Q1_WK5A_LP7 60
 Payment to owners ( 15,000.00 )
Net cash flow from Financing Activities 265,000.00
Net Change in Cash ₱ 515,000.00
Cash, beginning of the period 300,000.00
Cash, end of the period ₱ 815,000.00

Sample of Statement of Cash Flows using Direct Method.

2. Indirect method
The indirect method means that the net income or loss is adjusted for the effects of
transactions of a non-cash nature, any deferrals or accruals of past or future operating cash
receipts and payments and items of income or expense associated with investing and financing
activities. Below is an example of a statement of cash flows presented using the indirect method:
Soriano Trading
Statement of Cash Flows
For the Period/Year Ended December 31, 2020
Cash Flow from Operating Activities:
Net Income ₱ 125,000.00
Adjustment for:
Depreciation 10,000.00
Amortization 20,000.00
Operating income before working capital changes 155,000.00
Increase in accounts receivable ( 10,000.00)
Decrease in inventories 15,000.00
Increase in accounts payable 5,000.00
Decrease in notes payable (15,000.00)
Net cash flow from Operating Activities ₱ 150,000.00
Cash Flow from Investing Activities:
Proceeds from sale of equipment 100,000.00
Net cash flow from Investing Activities 100,000.00
Cash Flow from Financing Activities:
Proceeds from cash investment from owners 250,000.00
Proceeds from bank loan 30,000.00
Payment to owners ( 15,000.00 )
Net cash flow from Financing Activities 265,000.00
Net Change in Cash ₱ 515,000.00

Cash, beginning of the period 300,000.00

Cash , end of the period ₱ 815,000.00
Sample of Statement of Cash Flows using Indirect Method.
The indirect method of presenting the cash flow from operations begins with the accrual basis
net income and applies a series of adjustments to convert the net income into a cash

RO_FABM2_Grade 12_Q1_WK5A_LP7 61
 LEARNING COMPETENCY

Discuss the components and structures of a Cash Flow Statement (CFS). [ABM_FABM12-lf-10]

ACTIVITIES

ACTIVITY 1. DISTINGUISH ME
Directions: Distinguish if which of the following transactions fall under operating, investing,
financing activities or not a cash flow activity. Write OA if operating; IO if investing; FA if financing;
NOT if non-cash activity.

1. Cash received from customers

2. Cash paid to suppliers
3. Cash paid to employees
4. Cash paid to purchase equipment
5. Cash received from sale to furniture
6. Depreciation expense
7. Sale of goods on credit
8. Purchase of goods on credit
9. Cash received from getting a loan from a bank
10. Cash paid to owners

RO_FABM2_Grade 12_Q1_WK5A_LP7 62
ACTIVITY 2. IDENTIFY ME
Direction: Identify the following statements if it is used in Direct Method or Indirect Method. Write
DM if direct method, otherwise write IM.
1. Proceed from sale of equipment.
2. Increase in Accounts Payable.
3. Cash Received from trade customers.
4. Depreciation of Equipment
5. Investment of Owner

ACTIVITY 3. TELL ME
Direction: Answer the questions given below by writing “T” if the statement is true and “F” if the
statement is false.
1. There is an outflow of funds in depreciation.
2. The purchase of land is classified in the statement of cash flows of operating
activities.
3. Selling a piece of equipment below cost is an example of investing activity.
4. Paying dividends to investors creates a cash outflow from financing activities.
5. The primary purpose of the statement of cash flows is to provide cash-basis
information about the company’s operating, investing, and financing activities.

LET’S LEVEL UP

Directions: Classify each transaction whether they are operating, financing or investing. After

which, determine the effects to the classification and indicate the reason for such classification.

(Reasons: Affects Equity, Affects Current Assets, Affects Non-Current Assets, Affects

Current Liabilities, Affects Non-Current Liabilities)

RO_FABM2_Grade 12_Q1_WK5A_LP7 63
 EFFECTS
NATURE CLASSIFICATION REASON

Ex. Cash investment of owner Financing Affects equity

1. Proceeds from bank loan

2. Collection from customers

3. Payment of business permit

4. Payment of annual rent

5. Purchase of office supplies

6. Purchase of equipment

7. Cash withdrawal of owner

8. Payment of salaries

9. Payment to suppliers of goods

10. Receipts from goods sold

GUIDE QUESTIONS

1. What is a cash flow statement?

2. What are the different components and structures of a cash flow statement?
3. What are the different approaches to cash flow statements?
4. How to classify and discuss the components and structures of a cash flow statement?

RO_FABM2_Grade 12_Q1_WK5A_LP7 64
 REFLECTION

Rate yourself. For each parameter, please put a check on the column that shows how much you
understand the Learning Activity Sheet.

Parameters Confident
Need Confused
Support
1. I can classify the different components
and structures of a cash flow statement.
2. I can distinguish the direct and indirect
method of a cash flow statement.
3. I can discuss the different components
and structures of a cash flow statement.

REFERENCES

● Ong, F. L. (2017). Fundamentals of Accountancy, Business and Management 2. C & E

Publishing, Inc.
● Reyes, V. D. (2017). Fundamentals of Accountancy, Business and Management 2. GIC
Enterprises & Co., Inc.
● Salazar, D. R. (2017). Fundamentals of Accountancy, Business and Management 2. Rex
Bookstore.
● Valix, C.T., et al. (2010). Financial Accounting Vol. 3. GIC Enterprises and Co., Inc.
● https://www.youtube.com/watch?v=vfehsJMMIgc

RO_FABM2_Grade 12_Q1_WK5A_LP7 65
 ANSWER KEY

Prepared by:
CHERRY B. LANTICAN, T-III
San Jose National High School
San Jose Malilipot, Albay

RO_FABM2_Grade 12_Q1_WK5A_LP7 66
NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 5B

PREPARING A CASH FLOW STATEMENT (CFS)

BACKGROUND INFORMATION FOR LEARNERS

The Statement of Cash Flows provides information about the cash receipts and cash
payments of an entity during a period. It provides information that enables users to evaluate
the changes in the net's assets of an entity, its financial structure, liquidity and solvency. Cash
Flow information is useful in assessing the ability of the entity to generate cash and cash
equivalents.

Preparing the Cash Flow Statement

1. Determine the heading

The heading of the statement includes the company name, title of the statement,
and the period covered by the statement. Below is the heading of the statement of the
cash flow for the illustrative case:

2. Analyze the Cash Transaction

Every cash transaction should be carefully analyzed to determine its nature, the
effect and the classification or section where it belongs.

RO_FABM2_Grade 12_Q1_WK5B_LP8 67
 3. Prepare the Operating Activities Section
All cash transactions that will affect net income of profit and loss will be classified
as operating activities. See examples of transactions under operating activities in the
previous discussion.

4. Prepare the Investing Activities Section

All cash transactions that will affect the non-current assets are classified under
this section. See examples of transactions under investing activities on the previous
discussion.

5. Prepare the Financing Activities Section

All cash transactions affecting non-current liabilities and equity will be classified
as financing. See examples of transactions under this section in the previous
discussion.

6. Determine the net change in cash, Cash at the beginning of the period and
Cash at the end of the period.

RO_FABM2_Grade 12_Q1_WK5B_LP8 68
ILLUSTRATION: DIRECT METHOD

Ren Ren merchandising started its business last October. The following are its transactions.
Classify each transaction as an operating, investing, or financing activity.
Transactions Activity
1. Investment in the business, ₱ 22,200 Financing
2. Proceeds of sale of furniture and equipment ₱23,000 Investing
3. Collection of interest, ₱ 9,000 Operating
4. Collection from customers, ₱ 315,800 Operating
5. Proceeds from bank loan, ₱ 200,000 Financing
6. Payment of operating expenses, ₱ 151,000 Operating
7. Cash withdrawal of owners, ₱30,000 Financing
8. Collection of rent, ₱ 42,000 Operating
9. Purchase of furniture, ₱ 31,000 Investing
10. Payment of bank loan, ₱ 150,000 Financing
Based on the classification of activities above, the following is the statement of cash flow for
Ren Ren Merchandising for the year ended December 31, 2019.

RO_FABM2_Grade 12_Q1_WK5B_LP8 69
 Ren Ren Merchandising
Cash Flow Statement
For the year ended December 31, 2019
Cash Flow from Operating Activities
Cash Receipts:
Collection from customers ₱ 315,800
Rent Income 42,000
Interest Income 9,000
Cash Payments:
Operating Expenses (₱ 151,000)
Net Cash from Operating Activities ₱ 215,800
Cash Flow from Investing Activities
Cash Receipt:
Proceeds from sale of furniture and equipment ₱ 23,000
Cash Payment:
Purchase of furniture (₱ 31,000)
Net Cash from Investing Activities (₱ 8,000)
Cash Flow from Financing Activities
Cash Receipts:
Investment of Owner ₱ 22,200
Proceeds of bank loan ₱ 200,000
Cash Payments:
Cash Withdrawal of Owner (₱ 30,000)
Payment of Bank Loan (₱ 150,000)
Net Cash Flow from Financing Activities ₱ 42,200
---------------
Net Increase/Decrease in Cash ₱ 250,000
Cash Balance, Jan.1, 2019 ₱ 200,000
----------------
Cash Balance, Dec. 31, 2019 ₱ 450,000

Note: The beginning balance of cash is added to the net increase or decrease in cash
resulting from the operating, investing and financing activities in order to get the ending
cash balance which is the same as the amount of the cash account presented in the
Statement of Financial Position. l

RO_FABM2_Grade 12_Q1_WK5B_LP8 70
ILLUSTRATION: INDIRECT METHOD

The changes of Currents Assets and Current Liabilities are summarized as follows:
2020 2019 INCREASE
(DECREASE)
Accounts Receivable 940,000 350,000 590,000
Merchandise Inventory 175,000 100,000 75,000
Prepaid Insurance 15,000 20,000 (5,000)
Accounts Payable 170,000 150,000 20,000
Accrued Salaries Payable 25,000 10,000 15,000
Accrued Interest Payable 10,000 15,000 (5,000)
Income Tax Payable 350,000 250,000 100,000
Unearned Rent Income 10,000 40,000 (30,000)

Note: Include the non-cash account which are the Depreciation amounting to ₱50,000
and Amortization of Patent amounting to ₱10,000 which is coming from the Statement
of Financial Performance with Net Income of ₱ 1,500,000.

The net cash flow from Operating Activities using indirect method may appear
as follows:
NET INCOME ₱ 1,500,000
Increase in accounts receivable (590,000)
Increase in merchandise inventory (75,000)
Decrease in prepaid insurance 5,000
Increase in accounts payable 20,000
Increase in accrued salaries payable 15,000
Decrease in accrued interest payable (5,000)
Increase in income tax payable 100,000
Decrease in unearned rent income (50,000)
Depreciation 50,000
Amortization of Patent 10,000
Net Cash Flow from Operating Activities 1,000,000

Note: The direct method and indirect method are applicable only to operating
activities.

RO_FABM2_Grade 12_Q1_WK5B_LP8 71
 LEARNING COMPETENCY

Prepare a Cash Flow Statement (CFS). [ABM_FABM12-lf-11]

ACTIVITIES

ACTIVITY 1: PREPARE ME DIRECTLY

Direction: The following data are taken from the records of Albay Delivery Services for the
year 2020. Prepare a Cash Flow Statement and determine the following: 1.) Net Cash Flow
from Operating Activities; 2.) Net Cash Flow from Investing Activities; 3.) Net Cash Flow from
Financing Activities; 4.) Net Increase/Decrease in Cash; 5.) Cash Balance on December 31,
2020.
Cash Received:
● From Customers ₱ 980,000
● Collection of Accounts 90,000
● Proceeds of financing loan 420,000
● Proceeds from sale of furniture 55,000
● Dividends Income 23,000
● Commission 11,000
● Additional Investment 88,000
● Rent Income 99,000
Cash Paid:
● Purchase of Land ₱ 700,000
● Interest on loan 45,000
● Partial payment of financing loan 180,000
● Operating Expenses 310,000
● Taxes and Licenses 3,750

Cash Balance, January 31 ₱ 98,000

RO_FABM2_Grade 12_Q1_WK5B_LP8 72
ACTIVITY 2: PREPARE ME INDIRECTLY
Direction: Prepare the Net Cash Flow from Operating Activities using indirect method.
2019 2018 INCREASE
(DECREASE)
Accounts Receivable ₱ 250,000 ₱ 140,000 110,000
Merchandise Inventory 110,000 175,000 (65,000)
Prepaid Insurance 20,000 15,000 5,000
Accounts Payable 150,000 170,000 (20,000)
Accrued Salaries Payable 10,000 25,000 (15,000)
Accrued Interest Payable 15,000 10,000 5,000
Income Tax Payable 150,000 50,000 100,000
Unearned Rent Income 40,000 10,000 30,000
Depreciation ₱ 15,000
Amortization ₱ 20,000
Net Income ₱ 500,000

LET’S LEVEL UP

Direction: The following data are taken from the records of Dr. Quakie. Prepare a Cash Flow
Statement using a Direct Method by determining the following:
1. Net cash flow from operating activities.
2. Net cash flow from investing activities.
3. Net cash flow from financing activities.
4. Net Increase/decrease in cash.
5. Cash Balance on December 31, 2017
Collection of Accounts ₱ 990,000
Cash collectible from patients 2,600,000
Depreciation Expense 30,000
Cash purchase of equipment 110,000
Provision of Bad Debts 8,400
Dividends Received from stock investment 14,000
Royalty Income received 9,000
Rent Income received 32,000

RO_FABM2_Grade 12_Q1_WK5B_LP8 73
 Operating Expenses 180,000
Principal of bank loan paid 600,000
Interest paid on bank loan 24,000
Proceeds from sale of furniture 60,800
Cash Balance on January 1, 2017 is ₱ 188,000

GUIDE QUESTIONS

1. How to classify the components and structures of a cash flow statement?

2. How to prepare a cash flow statement using a direct method?
3. How to prepare a cash flow statement using an indirect method?

REFLECTION

Rate yourself. For each parameter, please put a check on the column that shows how much
you understand the lessons in this Learner’s Packet.

Parameters
Need Confused Confident
Support
1. I can classify the different components
and structures of a cash flow statement.
2. I can prepare direct method cash flow
statements.
3. I can prepare an indirect method of cash
flow statements.

REFERENCES
● Ong, F. L. (2017). Fundamentals of Accountancy, Business and Management
2. C & E Publishing, Inc.
● Reyes, V. D. (2017). Fundamentals of Accountancy, Business and Management
2. GIC Enterprises & Co., Inc.
● Valix, C.T., et al. (2010). Financial Accounting Vol. 3. GIC Enterprises and Co.,
Inc.
● https://www.youtube.com/watch?v=-6JAVkrxgsE

RO_FABM2_Grade 12_Q1_WK5B_LP8 74
 ANSWER KEY

Activity 1: PREPARE ME DIRECTLY

RO_FABM2_Grade 12_Q1_WK5B_LP8 75
Activity 2: PREPARE ME INDIRECTLY

Prepared by:
CHERRY B. LANTICAN, T-III
San Jose National High School
San Jose Malilipot, Albay

RO_FABM2_Grade 12_Q1_WK5B_LP8 76
NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 6A

DEFINING THE MEASUREMENT LEVELS, NAMELY, LIQUIDITY, SOLVENCY,

STABILITY, AND PROFITABILITY

BACKGROUND INFORMATION FOR LEARNERS

In the earlier discussion, the different financial statements that are being prepared by an
entity were introduced to you. It is not enough that the accountant can prepare the said financial
statements correctly. Its importance lies in the ability of the company to make use of such
financial data in their decision making. The relevance of such documents can only be achieved
if it could make a positive impact on the day-to-day decisions being made by the entity.

Financial ratios are the most common tools of managerial decision making. A ratio is a
comparison of one number to another-mathematically, a simple division problem. Financial ratios
involve the comparison of various figures from the financial statements in order to gain
information about a company’s performance. It is the interpretation, rather than the calculation,
that makes financial ratios a useful tool for business managers. Ratios may serve as indicators,
clues, or red flags regarding noteworthy relationships between variables used to measure the
firm’s performance in terms of profitability, asset utilization, liquidity, leverage, or market
valuation.

MEASUREMENT LEVELS:

LIQUIDITY

Liquidity is a measure of the ability of a debtor to pay their debts as and when they fall
due. It is usually expressed as a ratio or a percentage of current liabilities. Liquidity is the ability
to pay short-term obligations. The most common liquidity ratio is the current ratio which is the
ratio of current assets to current liabilities. This ratio indicates a company’s ability to pay its short-
term bills.

RO_FABM2_Grade 12_Q1_WK6_LP9 77
Different ratios under liquidity ratio are shown below:

1. Working Capital- the working capital measures a firm’s ability to pay off its current
liabilities with current assets. The working capital is important to creditors because it
shows the liquidity of the company.

Working Capital = Current Assets- Current Liabilities

Illustration

2017 (ABC Co.)

Current Assets 1,160,000
Less: Current Liabilities (400,000)
Working Capital 760,000

2018 (ABC Co.)

Current Assets 1,260,000
Less: Current Liabilities (450,000)
Working Capital 810,000

For both periods, the company has a positive working capital. This is something good.
However, comparing the two periods together, we can conclude that the company is in a
better liquidity position in 2018 than in 2017.

2. Current Ratio- is a liquidity and efficiency ratio that measures a firm’s ability to pay off its
short-term liabilities with its current assets. The current ratio is an important measure of
liquidity because short-term liabilities are due within the next year.

FORMULA: Current Ratio = Current Assets/ Current Liabilities

Illustration
Ding’s Clothing Store is applying for a loan to remodel the storefront. The bank asks Ding
for a detailed statement of financial position, so it can compute the current ratio. Ding’s
statement of financial position included the following accounts:

Cash ......................................................................... 10,000

Accounts Receivable… ........................................... 5,000
Inventory… ............................................................... 5,000
Stock Investments… ................................................ 1,000
Prepaid Taxes ........................................................... 500
Current Liabilities… .................................................. 15,000
Current Ratio = 10,000+ 5,000+ 5,000+ 1,000+ 500/15,000= 1.43

Ding’s current ratio of 1.43 means that the store is liquid, considering it can pay off all the
current liabilities with current assets and still have some current assets left over.

RO_FABM2_Grade 12_Q1_WK6_LP9 78
 3. Quick Ratio (Acid -test ratio)- the quick ratio or acid test ratio is a liquidity ratio that
measures the ability of a company to pay its current liabilities when they come due with
only quick assets. Quick assets are current assets that can be converted into cash within
90 days or in the short-term. Cash, cash equivalents, short term investments or
marketable securities, and current accounts receivable are considered quick assets.

FORMULA: Quick Ratio = Cash + cash equivalents + Short Term Investments + Current
Accounts Receivables/ Current Liabilities

Illustration

Suppose Tea’s Clothing Store is applying for a loan to remodel the storefront. The bank asks
Tea for a detailed statement of financial position, so it can compute the quick ratio. Tea’s
statement of financial position included the following accounts:

Cash 10, 000

Accounts Receivable 5, 000
Inventory 5, 000
Stock Investments 1, 000
Prepaid taxes 500
Current liabilities 15,000
Quick ratio= 10, 000 + 5,000 + 1,000/ 15,000=1.07

Tea’s quick ratio of 1.07 means that the store can pay off all of the current liabilities with quick
assets and still have some quick assets left over.

4. Accounts Receivable Turnover Ratio- accounts receivable turnover ratio measures

how many times a business can turn its accounts receivable into cash during a period. In
other words, the accounts receivable turnover ratio measures how many times a business
can collect its average accounts receivable during the year.

FORMULA: Accounts Receivable Turnover = Net Credit Sales/ Average Accounts

Receivable

Example: 2017 Net Sales 5,200,000

÷
Average Accounts Receivable 250,000
A/R turnover Ratio 20.80 times
2018 Net Sales 6,000,000
÷
Average Accounts Receivable 265,000
A/R turnover Ratio 22.64 times

Comparing the computed A/R Turnover Ratios for the two periods, the company has a higher
ratio for 2018. This can be attributed to a better performance from its collection department.

RO_FABM2_Grade 12_Q1_WK6_LP9 79
 5. Average Collection Period- the average collection period states the usual number of
days that it would take before the company would be able to collect a certain group of
receivables. This ratio is usually compared with the previous A/R Turnover Ratio. In fact,
the A/R Turnover itself is a component for the computation of the average collection
period. It serves as the denominator in the formula.

For the numerator, the company makes use of either 360 or 365 days. This would
depend on the policy of the company. For our illustrative examples, we will use 365 days
as a numerator.

As much as possible, the goal is to have a shorter average collection period. This
would mean the company is efficient in collecting their outstanding Accounts Receivable
from their customers. A shorter average collection period means that the company has
more immediate cash that can be used in its operation.

FORMULA: 365 days /A/R Turnover Ratio

Example:

2017 365 365

÷
A/R Turnover Ratio 20.80 times
Average Collection Period 17.54 days

2018 365 365

÷
A/R Turnover Ratio 22.64
Average Collection Period 16.12 days

The shorter average collection period in 2018 shows that the collection increased its efforts
to collect company receivables as they fall due.

RO_FABM2_Grade 12_Q1_WK6_LP9 80
 6. Inventory Turnover Ratio- this ratio measures the number of times the company was
able to sell its entire inventory to customers during the year. As much as possible, the
goal is to have a high inventory turnover ratio. A high turnover ratio shows how efficient
the company is in selling its inventory to customers.

FORMULA: CGS / Average Inventory

Example:

2017 CGS 1,200,000

÷
Average Inventory 370,000
Inventory Turnover Ratio 3.24 times

2018 CGS 1,500,000

÷
Average Inventory 395,000
Inventory Turnover Ratio 3.79times

It can be seen in our computation that the inventory turnover increased in 2018. It means
that the sales department sold more products to customers in 2018.

7. Average Days in Inventory- this ratio states that the number of days that it would take
before an inventory would be entirely sold by the company. This follows the same concept
in computing the average collection period. The company uses 360 or 365 as the
numerator and the inventory turnover ratio as denominator. The goal is to have shorter
average days in inventory. A shorter amount would mean that the cash of the company
is not being tied up to its inventory for a very long period of time.

FORMULA: 360 or 365 / Inventory Turnover Ratio

Example: 2017 365 365

÷
Inventory Turnover Ratio 3.24
Average day in Inventory 112.65 days

2018 365 365

÷
Inventory Turnover Ratio 3.79
Average Day in Inventory 96.30 days

The average days in inventory of this company improved in 2018. This is because the
inventory turnover in 2018 also improved.

RO_FABM2_Grade 12_Q1_WK6_LP9 81
 8. Number of Days in Operating Cycle-These are the measures on how long it would take
for the company to transform its inventory back to cash. This is the combination of the
average collection period and the average age of inventory. The goal is to always have
a shorter number of operating cycles. A shorter number would indicate that the company
would have additional cash at an earlier time.
FORMULA:
Number of Days in Operating Cycle= Collecting Period/ Ave. Age of Inventory
Example:
2017 Collecting Period 17.54 days
÷
Average age of Inventory 112.65 days
Number of Days in OC 130.19 days

2018 Collecting Period 16.12 days

÷
Average age of Inventory 96.30 days
Number of Days in OC 112. 42 days

A comparison between the two periods shows an improvement of at least 17 days in the
operating cycle. It means that the company improved as a whole when it comes to selling their
products and collecting their receivables.

SOLVENCY OR STABILITY RATIOS

These are a group of financial ratios that measure the ability of a business firm to settle
its financial obligation when they mature and still remain stable. The different ratios under this
category also reflect the extent to which a firm utilizes debt financing: hence they are also called
financial leverage ratios.

The following are commonly used financial leverage ratios will be highlighted:

1. Debt To Total Assets Ratio- is a solvency ratio that measures a firm’s total liabilities as
a percentage of its total assets. In a sense, the debt ratio shows a company’s ability to
pay off its liabilities with its assets. This shows how many assets the company must sell
to pay off all of its liabilities.

The debt ratio is computed as follows:

Debt ratio = Total liabilities / Total assets

Example: Gino’s Guitar Shop is thinking about building an addition at the back of its
existing building for more storage. Gino consults with the banker about applying for a
new loan. The bank asks for Gino’s statement of financial position to examine the overall
debt levels. The banker discovers that Gino has total assets of 100,000 and total liabilities
of 25,000. Gino’s debt ratio would:
.25 = 25,000/ 100,000

RO_FABM2_Grade 12_Q1_WK6_LP9 82
 Gino’s debt ratio of .25 is often considered less risky. This means that the company has
4 times as many assets as liabilities. Or said in a different way, this company’s liabilities
are only 25 percent of its total assets. Essentially, only its creditors own ¼ of the
company’s assets and the owners own the remainder of the assets.

2. Debt to Equity Ratio. The debt-to-equity ratio is a financial, liquidity ratio that compares
a company’s total debt to total equity. The debt-to-equity ratio shows the percentage of
company financing that comes from creditors and investors. A higher debt to equity ratio
indicates that more creditor financing (bank loans) is used than investor financing
(shareholders)

FORMULA:

Debt to Equity Ratio = Total Liabilities / Total Equity

Illustration

Assume a company has 100,000 of bank lines of credit and a 500,000 mortgage on its property.
The owners of the company have invested 1.2 million. The debt-to-equity ratio will be as follows.

.50 = 100,000 + 500,000 / 1,200,000

A debt ratio of .5 means that there are half as many liabilities as there is equity.

3. Times Interest Earned Ratio- time interest earned is a tool that measures the debt
paying ability of the company. It reflects the degree of protection provided by an entity to
its long-term creditors. It is favorable to investors if the business firm has a higher ratio
of times interest earned.

FORMULA:

TIE = Income before interest and taxes / Interest expense

Consider the table below indicating the operating income and interest expense of Charm’s
Company for 2014 and 2015.
2015 2014

Operating income 600,000 460,000

Interest Expense 100,000 100,000

The times interest earned of Charm Company is computed as follows:

2015 (600,000/100,000) = 6.0 times

2014 (460,000/100,000) = 4.6 times

The ratio may indicate that Charm can cover interest payment from its operating income
6 times in 2015 against 4.6 times in 2014. The improvement in the measure gave better
protection to the creditors.

RO_FABM2_Grade 12_Q1_WK6_LP9 83
PROFITABILITY RATIOS

Profitability, as its name suggests, is a measure of profit which business is generating.

Profitability ratios are basically a financial tool which helps us to measure the ability of a business
to create earnings, given the level of expenses they are incurring. These ratios take into account
various elements of the Income statement and balance sheet to analyze how the business has
performed. Higher the value of these ratios as compared to competition and market, better the
business’s performance.

TYPES OF PROFITABILITY RATIOS

1. Gross Profit Ratio

As the term implies, this is the proportion of the gross profit of the company with its net
sales. Gross profit is the difference between the net sales of the company and cost of goods
sold.
As much as possible, the company wants to have a big gross profit ratio. It means that it
was able to generate more sales from its cost of goods sold.

FORMULA:

Gross Profit Ratio = Gross Profit / Net Sales

Example:

2017

Gross Profit 4,000,000

÷
Net Sales 5,200,000
Gross Profit ratio 76.92%

2018

Gross Profit 4,500,000

÷
Net Sales 6,000,000
Gross Profit ratio 75%

The company’s gross profit ratio slightly decreased in 2018. This should be avoided or
at least be minimized. The gross profit ratio can be improved by continuously finding inventories
with lower cost, without sacrificing quality.

RO_FABM2_Grade 12_Q1_WK6_LP9 84
 2. Profit Margin Ratios

These ratios compare various profits of the business (gross profit, operating profit,
net profit, etc.) with its sales. The profit being mentioned here is the Net Income After Tax
(NIAT). This ratio measures the proportion between the NIAT and the net sales of the
company. This is a more precise measure of the company’s profitability because it has
already considered the operating expenses and other expenses of the entity. Like the
gross profit ratio, companies would want to have a high profit margin ratio. This ratio can
be computed by dividing the company’s NIAT with the company’s net sales.

FORMULA:
PROFIT MARGIN RATIO= NIAT/Net SALES

2017
Net Income After Tax 1,750,000
÷
Net Sales 5,200,000
Profit Margin Ratio 33.65%

2018
Net Income After Tax 1,400,000
÷
Net Sales 6,000,000
Profit Margin Ratio 23.33%

Comparing the ratios for the two periods, there is an obvious decline in the company’s
profit margin ratio in 2018. This can be attributed to the lower NIAT coupled by an
increase in net sales.

3. Operating Expenses to Sales Ratio

Operating expenses are the biggest expenses of every company. It can be further
classified into General and Administrative Expenses and Selling Expenses. These
expenses are needed to generate sales.

FORMULA:

Operating Expenses to Sale Ratio = Operating Expenses / Net Sales

Example:
2017 Operating Expenses 1,000,000
÷
Net Sales 5,200,000
OE to Sale Ratio 19.23%

2018 Operating Expenses 500,000

÷
Net Sales 6,000,000
OE to Sale Ratio 8.33%

RO_FABM2_Grade 12_Q1_WK6_LP9 85
Comparing the data for the two years involved shows that there is a huge improvement in the
operating expenses to sales ratio. This can be attributed to lower operating expenses and
increase in net sales.

4. Return on Investment Ratio

The return-on-investment ratio has two variations: Return on Asset and Return
on Shareholder’s Equity. They only differ on the denominator, which would be used in
the computation.

a. Return on Assets
Before profits can be realized, certain investments should be made. In this case,
assets will be used for the different projects of the company. The goal is to generate profit
based on the available assets during the year. Thus, the company aims for a higher return
on assets.
FORMULA:

Return on Assets = Profit / Average total Assets

Example: 2017 Profit 1,750,000

÷
Average Total Assets 2,000,000
Return on Assets .875

2018 Profit 1,400,000

÷
Average Total Assets 2,200,000
Return on Assets .6363

There was a decline in the return on assets of the company. This is something
negative. This can be attributed to a lower profit and higher average total assets. It means
that it is taking more assets that are used to generate the same number of profits for the
company.

b. Return on Equity

This is a slight variation of the earlier formula. In this case, it is the average
stockholder’s equity that will be used as a denominator. This is a more specific
computation of a company’s profitability because the denominator being used is the one
coming from stockholders alone. In the return on assets the average total assets being
used may come predominantly from creditors. Overall, a company should have a higher
return on equity.

FORMULA:
Return on Equity = Profit/ Average SHE

RO_FABM2_Grade 12_Q1_WK6_LP9 86
 Example:

2017 Profit 1,750,000

÷
Average SHE 500,000
Return on equity 3 .5

2018 Profit 1,400,000

÷
Average SHE 575,000
Return on equity 2.43

In 2018, the return on equity decreased. This could be attributed to a lower net
income after tax and a larger return on equity in 2018.

5. Asset Turnover Ratio-

This ratio measures the correlation between the assets owned by the company
and the net sales generated by such properties.

FORMULA:
Asset Turnover Ratio = Net Sales / Average Total Assets
Example:
2017 Net Sales 5,200,000
÷
Average Total assets 2,000,000
Assets Turnover Ratio 2.6

2018 Net Sales 6,000,000

÷
Average Total assets 2,200,000
Assets Turnover Ratio 2.72

The Asset turnover ratio slightly increased in 2018. This is something positive.
This can be attributed to bigger net sales generated for in 2018.

LEARNING COMPETENCY

Define the measurement levels namely, liquidity, solvency, stability, and profitability.
(ABM_FABM 12-Ig-h-12)

RO_FABM2_Grade 12_Q1_WK6_LP9 87
 ACTIVITIES

ACTIVITY 1: CHECK ME WHERE I BELONG!

DIRECTION: Put a check (/) in its respective column where the ratio belongs.

No. Ratio Liquidity Solvency Profitability

1. Debt to Total assets ratio

2. Return on Investment

3. Inventory Turnover ratio

4. Acid Test Ratio

5. Gross profit Ratio

6. Profit Margin Ratio

7. Current Ratio

8. Working Capital

9. Average Collection period

10. Debt To Equity Ratio

ACTIVITY 2: LET’S ACCOUNT FOR IT!

Direction: Identify what is being described in each item then write your answer on the space
provided.

1. This ratio measures the number of times a company was able to sell its entire
inventory to customers during the year.

2. These are the biggest expenses of the company.

3. The quotient of the current assets divided by the current liabilities of the
company.

4. It compares the liabilities of the company with its equity.

5. This ratio measures the frequency of conversion of the company’s Accounts

Receivable to Cash.

RO_FABM2_Grade 12_Q1_WK6_LP9 88
ACTIVITY 3

Direction: From the given table below, match column A to column B then write your answer by
putting the number in the space provided found in the first column.

Answer COLUMN A Item COLUMN B

Inventory Turnover 1 Total Liabilities / Total Equity
Current Ratio 2 365 days /A/R Turnover Ratio
Debt to Equity Ratio 3 CGS / Average Inventory
Average collection period 4 Gross Profit / Net Sales
Gross Profit Ratio 5 Current Assets/ Current Liabilities

LET’S LEVEL UP

Direction: Put a check (/) in its respective column where the ratio belongs.

No. Ratio Liquidity Solvency Profitability

1 Times Interest Earned Ratio
2. Return on Investment
3. Average Days in Inventory
4. Number of days in Operating Cycle
5. Asset Turnover ratio

Direction: Identify the following items then write the answer in the space provided before each
number.

6. This is the proportion of the gross profit of the company and its net sales.

7. The difference between current assets and current liabilities.

8. This measures the ability of the company to settle its currently maturing
obligations.

9. A strict variation of the current ratio formula. It removes the inventory and
prepaid expenses from the numerator component. test of the company’s ability to pay current
obligation.

10. This ratio states the number of days that will take before an inventory will be
entirely sold by the company.

RO_FABM2_Grade 12_Q1_WK6_LP9 89
 REFLECTION

Congratulations! You have completed the lessons successfully. Rate yourself on how well you
understand the lesson. Please put a check (/) in the appropriate emoticons below.

PARAMETERS

1. I can define liquidity.

2. I can define solvency.

3. I can define profitability.

REFERENCES

Books:
Yabut, Josefina L. Beticon/ james Cristopher D. Domingo/ fermin Antonio D. 2016. Fundamentals
of Accountancy, Business and Management 2. Quezon City: Vibal Groups Inc.

Angeles A. De Guzman, DBA,CPA. 2018. Fundamentals of Accountancy, Business and

Management 2. Quezon city: LORIMAR Publishing Inc.

Websites:
https://www.educba.com/profitability-ratios-

formula/https://www.investopedia.com/terms/l/liquidityratios.asp

RO_FABM2_Grade 12_Q1_WK6_LP9 90
 ANSWER KEY

Prepared by:
EDNA B. LOSITANO, T-III
Sto. Domingo National High School - Sto. Domingo, Albay

RO_FABM2_Grade 12_Q1_WK6_LP9 91
NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 6C

PERFORMING VERTICAL ANALYSIS OF FINANCIAL STATEMENTS OF A

SINGLE PROPRIETORSHIP

BACKGROUND INFORMATION FOR LEARNERS

In the statement of financial position, vertical analysis, otherwise known as common-size

analysis, helps management analyze the components of the total assets as well as the
components of the total liabilities and owner’s equity. It helps management answer certain
questions such as: (1). Of the total assets, what percent is classified as current? Non-current?
(2). Of the total liabilities and owner’s equity, what percent is liabilities? Owner’s equity? And
so on.

In the income statement, vertical analysis helps management analyze the components
of the income statement in relation to its revenue account which is sales. It helps management
answer certain questions as follows: (1). What percentage of net sales is cost of sales or cost
of goods sold? Gross Profit? Operating Expense? (2). What is the percentage of net income
to sales?

STEPS IN PERFORMING A HORIZONTAL ANALYSIS

1. Prepare comparative financial statements of two consecutive years.
2. Add one additional column on the right side of each year.
3. For the comparative statement of financial position, express each account as a
percentage of the total assets. The total assets are automatically 100%. Likewise,
total liabilities and owner’s equity is automatically 100%.

RO_FABM 2 _Grade 12_Q1_WK6C_LP 10

 Example
% of current assets. = 725.8 x 100% = 28%
2,592.2
% of non-current liabilities = 1,822.4 x 100% = 70.3%
2,592.2
4. For the comparative income statement, express each account as a percentage
of net sales. Net sales is automatically 100%.

Example
% of cost of good sold = 1,032.1 x 100% = 46.6%
2,213.3

Fidas Merchandising

Income statement

For the Years Ended December 31

(in millions)
2020 Percent 2019 Percent
Net Sales 2,213.3 100 1,738.7 100
Cost of Goods Sold 1,032.1 46.6 831.8 47.8

Gross Profit 1,181.2 53.4 906.9 52.2

Selling and Administrative
Expenses 889.2 40.2 659.5 38.0

Operating Income 292.0 13.2 247.4 14.2

Interest Expense 90.9 4.1 30.5 1.8
Income Before Income
Taxes 201.1 9.1 216.9 12.4
Income Tax Expense 60.3 2.7 65.0 3.7

Net Income 140.8 6.4 151.9 8.7

Note: Notice that for assets, each asset type is expressed as a percentage of the total assets
while the liabilities and the owner’s equity are expressed as a percentage of the total liabilities
and owner’s equity.

RO_FABM 2 _Grade 12_Q1_WK6C_LP 10

 Fidas Merchandising

Statement of Financial Position

As of December 31
(in millions)
Assets 2020 Percent 2019 Percent
Current Assets
Cash 222.9 8.6 330.2 27.0
Accounts Receivable (net) 282.5 10.9 172.1 14.1
Inventory 146.3 5.6 92.8 7.6
Prepaid Expense 74.1 2.9 70.3 5.8
Total Current Assets 725.8 28.0 665.4 54.5
Property, Plant, and
Equipment (net) 1,866.4 72.0 556.2 45.5

Total Assets 2,592.2 100 1,221.6 100

Liabilities and Owner’s

Equity

Current Liabilities 551.9 21.3 620.6 50.8

Non-Current Liabilities 1,822.4 70.3 376.6 30.8
Total Liabilities 2,374.3 91.6 997.2 81.6
Owner’s Equity 217.9 8.4 224.4 18.1

Total Liabilities and

Owner’s Equity 2,592.2 100 1,221.6 100

Note: Notice that each component of the income statement is expressed as a percentage of
net sales.

LEARNING COMPETENCY

Performing vertical Analysis of Financial Statements of a Single Proprietorship

(ABM_FABM12-Ig-h-13)

RO_FABM 2 _Grade 12_Q1_WK6C_LP 10

 ACTIVITIES

ACTIVITY 1. I CAN DO IT
Direction: Based on the information given, perform a vertical analysis for On The Dot Trading
Statement of Financial position.

On The Dot Trading

Statement of Financial Position
As of December 31
Assets 2020 Percent 2019 Percent
Current Assets
. Cash 158,000 84,000
. Short-Term Investments 130,000 192,000
Accounts Receivable, Net 240,000 200,000
. Merchandise Inventory 500,000 530,000
. Total Current Assets 1,028,000 1,006,000
Property, Plant, and
Equipment (net) 2,340,000 2,350,000
Total Assets 3,368,000 3,356,000
Liabilities and Owner’s Equity

Current Liabilities 530,000 584,000

Non-Current Liabilities 800,000 840,000
Total Liabilities 1,330,000 1,424,000
Owner’s Equity 2,038,000 1,932,000

Total Liabilities and

Owner’s Equity 3,368,000 3,356,000

RO_FABM 2 _Grade 12_Q1_WK6C_LP 10

ACTIVITY 2. I CAN DO IT MORE
Direction: Based on the information given, perform a vertical analysis for On The Dot Trading
Income Statement.

On The Dot Trading

Income statement
For the Years Ended December 31
(in millions)

2020 Percent 2019 Percent

Net Sales 4,972 4,150
Cost of Goods Sold 3,046 2,444
Gross Profit 1,926 1,706
Selling and Administrative
Expenses 1,556 1,500
Operating Income 370 206
Interest Expense 88 92
Income Before Income Taxes 282 114
Income Tax Expense 94 42

Net Income 188 72

LET’S LEVEL UP

Direction: Based on the information given, perform a vertical analysis for GHI Company’s Income
Statement.

GHI Company
Income statement
For the Years Ended December 31
(in millions)

2020 Percent 2019 Percent

Net Sales 6,000 5,200
Cost of Goods Sold 1,500 1,200
Gross Profit 4,500 4,000
Selling and Administrative
Expenses 500 1,000
Operating Income 4,000 3,000
Interest Expense 500 500
Income Before Income Taxes 3,500 2,500
Income Tax Expense 1,050 750

Net Income 2,450 1,750

RO_FABM 2 _Grade 12_Q1_WK6C_LP 10

 GUIDE QUESTIONS

1. What is the percentage of each account under the Statement of Financial Position to Total
Assets?
2. What is the percentage of each account under Income Statement to Sales?

REFLECTION

Have you learned

something?

What do you feel about

the topic?

How do you find the

lesson?

REFERENCES

Ong, F.L. (2016). Fundamentals of Accountancy, Business, and Management 2 for Senior
High School
Beticon, J.L.et. al.(2016) Fundamentals of Accountancy, Business, and Management 2
https://www.youtube.com/watch?v=1wKDqrEnq6U

RO_FABM 2 _Grade 12_Q1_WK6C_LP 10

 ANSWER KEY

ACTIVITY 1: I CAN DO IT

ACTIVITY 2: I CAN DO IT MORE

Prepared by:
LOURDES M. BATALLER, MAEd, MST
PNHS SHS-Teacher

RO_FABM 2 _Grade 12_Q1_WK6C_LP 10

NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 7

COMPUTING AND INTERPRETING FINANCIAL RATIOS SUCH AS CURRENT

RATIO, WORKING CAPITAL, GROSS PROFIT RATIO, NET PROFIT RATIO,
RECEIVABLE TURNOVER, INVENTORY TURNOVER, DEBT-TO-EQUITY RATIO,
AND THE LIKE

BACKGROUND INFORMATION FOR LEARNERS

Financial statements (balance sheet, income

statement, statement of cash flows, and statement of
owner’s equity) are designed to report a firm’s financial
position at a point in time, as well as the results of its
operations over a period of time. The real usefulness
of these statements comes from the help they provide
in predicting the firm’s future earnings and dividends
along with the risks associated with these variables.
These statements are analyzed through financial
ratios to know and understand the financial standing
of a business, its strengths and weaknesses, and its
performance towards meeting its objectives. Source:
https://www.flickr.com/photos/davedugdale/5099605109/

Financial ratios are a mathematical comparison of financial statement accounts or

categories. These are constructed by dividing various financial statement numbers into one
another. Ratios can be examined to determine more easily trends and reasons for changes in the
financial statement quantities.

RO_FABM2_Grade 12_Q1_WK7_LP11 100

 Ratios can be used to evaluate a firm’s performance over time as well as compare its
performance with those of similar firms or with industry averages. With this, users of financial
information are provided insight into the profitability of operations, the soundness of the firm’s
short-term and long-term financial condition, and the efficiency with which the management has
utilized the resources entrusted to it. However, financial ratios do not take into consideration the
size of a company.

TYPES OF FINANCIAL RATIOS

The financial ratios can be grouped into four categories:

a. Liquidity Ratios c. Efficiency Ratios

b. Profitability Ratios d. Leverage Ratios

Please see the table below for the summary of the most used financial ratios:

Financial Ratio Meaning Formula Interpretation

Liquidity Ratio Indicates the ability of a firm to meet short-term obligations to creditors as they come due

A higher ratio (significantly above

1) indicates that the company is
liquid and is “less risky” for
Measures a firm’s ability to creditors but could also indicate
cover its current liabilities 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 that the company is not efficient
a. Current Ratio
with its current assets 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 at using current assets for more
profit. It also depends on the
quality of receivables and
inventories.

Measures a firm’s ability to A higher number (significantly

meet current liabilities with above 1) indicates that the
its most liquid (quick) company is “less risky” for
assets 𝐶𝑎𝑠ℎ + 𝑀𝑎𝑟𝑘𝑒𝑡𝑎𝑏𝑙𝑒 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑖𝑒𝑠 creditors and could pay off its
b. Acid-test
+ 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 (𝑛𝑒𝑡) current liabilities without
(Quick) Ratio *Inventories are eliminated
in this comparison because 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 depending too heavily on its
it is one of the least liquid inventory or selling any long-term
current assets. assets.

A positive (+) working capital

shows that the company can pay
all of its current liabilities and still
have current assets left over.
Measures whether the
business can pay its short- 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
c. Working Capital term debt with its current − 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 A negative (-) working capital
assets shows that the company isn’t
running efficiently and can’t
cover its current debt properly.

RO_FABM2_Grade 12_Q1_WK7_LP11 101

Profitability Ratio Indicates the ability of a firm to generate returns on sales, assets and invested capital

Higher gross profit margin is

Measures how many pesos
a. Gross Profit 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 better because the company is
of gross profit is earned for
Margin selling their inventory at a higher
every peso of sale. 𝑆𝑎𝑙𝑒𝑠 profit percentage.

Higher net profit margin is better

Measures what percentage because you earn more profit for
b. Net Profit of sales is left after all 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 everyone peso of sales that you
Margin expenses are paid by the get. Also, it indicates how well
business 𝑆𝑎𝑙𝑒𝑠 expenses are managed relative
to net sales.

Higher ROA indicates that the

company is more efficient in
Measures the ability of a using assets to generate a profit
c. Return on company to generate 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Assets (ROA) income out of its
resources/assets 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Lower ROA indicates that a
company is less efficient in using
assets to generate profit.

Higher ROE indicates that the

company is more efficient in
Measures the rate of return
d. Return on 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 giving more profit to the
on resources provided by
company’s owner/s compared to
Equity (ROE) owners 𝐸𝑛𝑑𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
these owner’s personal
investment in the company

Efficiency Ratio Indicates how well a firm utilize its assets to generate income

a. Accounts Measures a firm’s ability to A high accounts receivable

efficiently collect its 𝑆𝑎𝑙𝑒𝑠 turnover ratio means efficient
Receivable
Turnover receivables 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 management of receivables.

b. Average Measures the days of A lower collection period

financing that a firm 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 indicates that an organization
Collection
Period extends to its customers 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠/365 collects payments faster.

Measures the how The higher the COGS to

c. Inventory efficiently the amount of 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑 inventory, the better. A high ratio
inventory is being indicates that little unused
Turnover 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
managed inventory is being stored.

Measures the pesos of

Generally, a higher ratio implies
d. Fixed Asset sales generated by each 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 that the company is using its
Turnover peso of the firm’s fixed
assets. 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 fixed assets more effectively.

Measures the pesos of Generally, the higher the ratio,

e. Total Asset sales generated by one 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠 the more efficiently its assets
Turnover peso of the firm’s assets. 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 have been used.

Leverage Ratio Indicates how much of the total assets are financed by debt and equity (capital structure)

Higher debt ratio over one

Measures the proportion of
indicates an increasing debt
total assets financed by
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 problem that could lead to long-
a. Debt Ratio total liabilities or money
term financial problems for the
provided by creditors (not 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 company. Low debt ratio is
by the business owners).
better.

RO_FABM2_Grade 12_Q1_WK7_LP11 102

 A lower debt-to-equity ratio (less
than 1) indicates that there is a
lower amount of financing by
debt via lenders vs. funding
through equity via shareholders.

b. Debt-to-Equity Measures the proportion of 𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

debt to equity A higher ratio (more than 1)
Ratio 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦
indicates that the company is
getting more of its financing by
borrowing money. The more a
company’s operations rely on
borrowed money, the greater the
risk of bankruptcy

Measures the amount of

𝑇 𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦 Higher equity ratios are typically
c. Equity Ratio assets that are financed by
favorable for companies.
owner’s investments 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Sample Illustration: Below are the financial statements of Reyes Enterprises. Using this
information, let’s compute and interpret the different financial ratios:

RO_FABM2_Grade 12_Q1_WK7_LP11 103

Computation and Interpretation:

Financial Ratio Computation Interpretation

Liquidity Ratio

The ratio is higher than 1 thus it indicates that

3,292,300 the company is “less risky” for creditors, and
a. Current = 2.40 times
1,373,050 that it could pay its current liabilities with
Ratio
current assets.

203,050+ 263,600+ 448,000 914,650

The ratio is lower than 1 which indicates that
1,373,050
= =
1,373,050
the company could not pay off its current
b. Acid-test 0.67 times liabilities without depending on its inventory or
(Quick) Ratio selling any long-term assets.
*470400-22400=448,000

The resulting working capital is positive; thus,

c. Working 3,292,300 − 1,373,050 = the company can pay all of its current liabilities
Capital 1,919,250 and still have current assets left over.

Profitability Ratio
The company has a high gross profit margin
4,311,800 and shows that the company is selling their
a. Gross Profit = 0.40 or 40% inventory at a higher profit percentage. They
Margin 10,780,000 are able to convert 40% of her sales into
profits.

Though the company was able to convert only

469,700
b. Net Profit = 0.04 or 4% 4% of its sales into profits, it is still a better net
Margin 10,780,000 profit margin after considering all expenses
incurred during the operation.

The company was able to generate 10% profit

469,700
c. Return on = 0.10 or 10% from utilizing its assets which is a positive
Assets 4,764,900 ROA. This indicates that the company is
(ROA) efficiently managing its assets.

This indicates that every peso of the owner’s

d. Return on 469,700 𝑥 100 = 0.04 or 4% invested capital earned about Php 0.04 or a
Equity (ROE) 2,296,750 4% return on investment for the year 2020.
This is still a positive ROE.

Efficiency Ratio
This shows a high accounts receivable
turnover ratio which means that there is an
10,780,000
a. Accounts = 22.92 times efficient management of receivables or that
Receivable 448,000 the company collects their receivables about
Turnover 22.92 times a year or almost once every 15
days (365/22.92).

b. Average 470,400−22400 This indicates a lower collection period; the

= 15.17 days organization collects payments faster, almost
Collection 10,780,000/365
Period once every 15 days.

RO_FABM2_Grade 12_Q1_WK7_LP11 104

 6,468,200 COGS is higher than the inventory. The high
c. Inventory = 2.75 times ratio indicates that little unused inventory is
Turnover 2,352,050
being stored.
10,780,000 This is a higher ratio thus the company is
d. Fixed Asset = 7.32 times
Turnover 1,472,600 using its fixed assets more effectively.
10,780,000 This is a higher ratio thus the assets have
e. Total Asset = 2.26 times
Turnover 4,764,900 been used more efficiently.

Leverage Ratio
The ratio is lower than one thus this is less
risky and since the value is around 0.5, it
means that the company has twice as many
2,468,150 assets as liabilities.
= 0.52 or 52%
a. Debt Ratio 4,764,900

(When the ratio is equal to 1, it means that

total liabilities equal total assets)

2,468,150 The ratio is a little bit higher than 1 which

b. Debt-to- = 1.07 or 107% indicates that the company is getting more of
Equity Ratio 2,296,750 its financing by borrowing money.

This indicates that equity finances 48% of the

2,296,750 company’s assets, which is lower than that of
= 0.48 or 48% debt financing. This is less favorable
c. Equity Ratio 4,764,900 especially for potential investors and
shareholders.

Based on the computed financial ratios, it appears that Reyes Enterprises is well
positioned for future growth. The company should however be cautious of the increased risk
associated with debt financing.

LEARNING COMPETENCY

Compute and interpret financial ratios such as current ratio, working capital, gross profit
ratio, net profit ratio, receivable turnover, inventory turnover, debt-to-equity ratio, and the like.

RO_FABM2_Grade 12_Q1_WK7_LP11 105

 ACTIVITIES

DIRECTION: For Activities 1-3, please use the financial statements below of GHI Company.

RO_FABM2_Grade 12_Q1_WK7_LP11 106

 ACTIVITY 1: AM I LIQUID?

DIRECTIONS: Compute and interpret the liquidity ratios of GHI Company. Use the table below
for your answer.

Liquidity Ratios Computation Interpretation

a. Current Ratio

b. Acid-test (Quick)
Ratio

c. Working Capital

ACTIVITY 2: AM I EFFICIENT?

DIRECTION: Complete the table below for the efficiency ratios of GHI Company, then, write
your interpretation.

Efficiency Ratios Computation Interpretation

a. Accounts
4,000,000
Receivable = 11.43 times
Turnover 350,000

b. Average
Collection
Period

c. Inventory 3,000,000
Turnover = 8.11 times
370,000

d. Fixed Asset
Turnover

4,000,000
= 2.5 times
e. Total Asset 1,600,000
Turnover

RO_FABM2_Grade 12_Q1_WK7_LP11 107

 ACTIVITY 3: AM I PROFITABLE AND FINANCED WELL?
DIRECTIONS: Compute and interpret the profitability and leverage ratios of GHI Company. Write
your answers on the table provided.
A)
Profitability Ratios Computation Interpretation

a. Gross Profit Margin

b. Net Profit Margin

c. Return on Assets
(ROA)

d. Return on Equity
(ROE)

B)

Leverage Ratios Computation Interpretation

a. Debt Ratio

b. Debt-to-Equity
Ratio

c. Equity Ratio

Based on your answers from Activities 1-3, explain the financial performance
of GHI Company. (5 points)

RO_FABM2_Grade 12_Q1_WK7_LP11 108

 LET’S LEVEL UP

DIRECTIONS: Using the financial statements below of NMC Enterprises, complete the table,
compute and interpret the selected financial ratio then answer the question that follows.

Financial Ratio Computation Interpretation

Debt-to-Equity
Ratio

Based on your interpretation of the debt-to-equity ratio of NMC Enterprises, what course
of action should be taken by the company?

RO_FABM2_Grade 12_Q1_WK7_LP11 109

 RUBRIC FOR SCORING

Please see below the rubrics for Activities 1-3.

Learners cannot Learner can compute Learner can compute all Learner can both
compute or interpret and correctly interpret types of financial ratio compute and
even one of the one or two financial per category but can interpret all types of
financial ratios per ratios per category. only interpret two or financial ratio per
category. three of them correctly. category.

(1 point) (3 points) (7 points) (10 points)

REFLECTION

Complete the following based on how you honestly feel.

1. I have learned that …

2. I have difficulty in …

3. I hope that …

RO_FABM2_Grade 12_Q1_WK7_LP11 110

 REFERENCES

Printed References:
Borja, D.V. and Cayanan, A. 2017. Business Finance, 1st edition. Rex Book Store, Inc.

Cabrera, Ma. E and Cabrera, G.A. 2017. Business Finance Principles and Applications. GIC Enterprises &
Co.,Inc.

De Guzman, Angeles, 2018. Fundamentals of Accountancy, Business and Management 2 for Senior High
School. Lorimar Publishing, Inc.

Melicher, Ronald and Norton, Edgar, 2009. Introduction to Finance: Markets, Investments and Financial
Management, 13th Edition. John Wiley and Sons, Inc.

Teaching Guide for Senior High School FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND
MANAGEMENT 1. Commission on Higher Education, 2016. Chairperson: Patricia B. Licuanan, Ph.D.

Online References:
● https://www.thebalancesmb.com/financial-ratio-analysis-tutorial-101-393590
● https://www.thebalancesmb.com/what-is-financial-ratio-analysis-393186
● https://mbabull.com/bull/2018/09/03/8-financial-ratio-analysis-tutorials-free/
● https://edwardlowe.org/how-to-analyze-your-business-using-financial-ratios-2/
● https://www.investopedia.com/terms/f/fixed-asset-turnover.asp
● https://www.investopedia.com/terms/a/average_collection_period.asp
● https://christygarett.weebly.com
● www.learningVideo.com

Video References:
https://youtube.com/watch?v=TZZFBkbC2lA&feature=share

RO_FABM2_Grade 12_Q1_WK7_LP11 111

 ANSWER KEY

Prepared by:

CHAIRMAINE M. ORAYE
Oas Polytechnic School, T-I

RO_FABM2_Grade 12_Q1_WK7_LP11 112

NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 8

IDENTIFYING DIFFERENT TYPES OF BANK ACCOUNTS NORMALLY

MAINTAINED BY A BUSINESS

BACKGROUND INFORMATION FOR LEARNERS

In this learning activity sheet, we are going to learn the different types of bank accounts
used in a business. Normally, a bank account represents funds entrusted by a depositor or
a business owner to a bank for safekeeping. There are three basic types of bank accounts
are:

TYPES OF BANK ACCOUNTS

1. Savings Account is a bank account that earns a

modest interest rate and is intended to encourage
savings. A savings is normally evidenced by a
“passbook”.
The passbook shows the depositor’s deposits
and withdrawals, the amount of interest earned by the
deposit, and the balance of the account.
The depositor may also opt to receive an automatic
teller machine (ATM) card either in lieu of a passbook
or together with a passbook. An ATM Card is a plastic
card, can be used as a debit card, meaning you can
use it to pay electronically. An interest on savings
deposit is accrued daily, based on the end of day
balance, but is reflected on the account at the end of
every quarter.

2. Current or Checking Account is a bank account

wherein the depositor can write checks.

R0_ABM_FABM2_Grade 12_Q1_Wk 8_LP 12 113

 A check is an instrument that orders a bank (drawee) to pay the person named on the
check or the bearer thereof (payee) a definite amount of money from the drawer’s bank
account. A current or checking account can be either of the following:
a. Basic Check Account – usually do not pay interests; or
b. Interest-Bearing Checking Account – pays interest just like a savings account.

1. Time Deposit (Certificate of Deposit or Term

Deposit) refers to an interest-bearing fund
maintained at a bank for a fixed period such as
30 days, 60 days, 90 days, etc. A time deposit
is similar to a savings account, but it earns a
higher interest rate. Moreover, a time deposit is
denominated in fixed amounts and, normally,
cannot be withdrawn until its maturity date. A
Time Deposit is evidenced by a certificate of
Deposit.

OTHER TYPES OF BANK ACCOUNTS

2. Dollar Account and Other Foreign Currency

Accounts is a dollar currency that allows the
business to withdraw in peso or dollar, opting to
cash out in the currency with the better
exchange rate.

Most foreign currency bank accounts in the Philippines come with a passbook and are
typically available in the following currencies:

• Australian Dollar • Chinese Yuan

• British Pound • Euro
• Canadian Dollar • Hong Kong Dollar
• Japanese Yen • US Dollar
• Singapore Dollar

3. Joint Account is used whether to open an individual account or a joint account. Business
partners, associations, and couples commonly use a joint account for convenience and
transparency in managing their shared income and expenses. Held under more than one

R0_ABM_FABM2_Grade 12_Q1_Wk 8_LP 12 114

 name, joint bank accounts can be a savings account, a checking account, or a time
deposit. Joint accounts come in two types: joint “and” and joint “or” accounts. A joint “and”
account needs the signature of both account holders for withdrawals. On the other hand,
a joint “or” account allows co-owners to withdraw anytime without the other person’s
signature.

4. Money Market Accounts are considered a cross between a savings and checking
account. Banks typically offer a higher interest rate on money market accounts than on
savings accounts and can also give limited monthly access to money via checks and a
debit card.

LEARNING COMPETENCY

Identifying the types of bank accounts normally maintained by a business.

(ABM_FABM12-IIc-5)

ACTIVITIES

ACTIVITY 1: FILL IN THE BLANKS

Direction: Supply the correct missing word in each sentence by writing it on the space
provided.

1. The bank account that earns moderate interest rate and promotes saving is called
.
2. Basic Check Account is usually pay interests.
3. Time deposit is similar to a savings account, but it earns interest rate.
4. The passbook shows the balance of an account, while a/an is a
plastic card that can be used as a debit card.
5. An is reflected on the account at the end of every quarter in a saving
deposit.

ACTIVITY 2: TRUE OR FALSE

Direction: Write True if the statement is correct and False if the statement is incorrect.

1. Certificate of Deposit or Term Deposit refers to an interest-bearing fund maintained at

a bank for a variable period of time.
2. A time deposit is denominated in fixed amounts and, normally, cannot be withdrawn
until its deposit date.
3. Just like saving accounts, Interest-Bearing Checking Account also pays interest.
4. An interest on savings deposit is accrued monthly.
5. A check is an instrument that orders a bank (payee) to pay the person named on the
check or the bearer thereof (drawee).

R0_ABM_FABM2_Grade 12_Q1_Wk 8_LP 12 115

ACTIVITY 3: COMPARE AND CONTRAST
On your answer sheet, draw a Venn diagram, compare and contrast
SAVINGS ACCOUNT and CHECKING ACCOUNT. How are they alike? How are
they different? Give at least 2 similarities and 2 differences.

SAVINGS ACCOUNT CHECKING ACCOUNT

LET’S LEVEL UP

Word Puzzle: Locate the words that are best described in each statement given
below.
M O N E Y M A R K E T A C C O U N T S T
P O W E R T A E G T C O H V T F U V G I
E W G H S E S C I I H U P H G H Y Y F S
R F G R T R D K G S E H E Q F G H G G O
U A D T A R O H Z E M A R K E T Y C H P
H Y Y T E O O U C E A Z A R E X U I P E
O F R Y B U S I N E S S Y Y C V G O O D
J E R S F Y U K G R T U O U R G T S G E
O U S S F H D U N G F Y I L K J G D B M
E A F G G T N U O C C A R A L L O D E I
P P R D G T N U O C C A S G N I V A S T

Hint:
1. This is the bank account that earns moderate interest rate and promotes saving.
2. Savings is normally evidenced by this type of document.

R0_ABM_FABM2_Grade 12_Q1_Wk 8_LP 12 116

 3. This is considered cross between a savings and checking account.
4. It is an interest-bearing fund maintained at banks for a fixed period of time.
5. Allows the business to withdraw in peso or dollar, opted to cash out in the
currency with the better exchange rate.

REFLECTION

Congratulations! You have completed the lessons successfully. Before going to the
next learning activity, reflect on the activities you have done.

I learned

A question I have is

I’m not sure

I realized

REFERENCES

Durana, Merlita M. Fundamentals of Accountancy Business, and Management 2. Makati City:

Diwa Learning System INC. 2017
Millan and Ferrer, Fundamentals of Accountancy, Business & Management 2 (2019),
Philippines: Bandolin Enterprise
Online References:
https://www.balikbayad.ph/blog/different-types-of-bank-accounts-in-the-philippines/
https://www.ramseysolutions.com/banking/types-of-bank-accounts

R0_ABM_FABM2_Grade 12_Q1_Wk 8_LP 12 117

 ANSWER KEY

Prepared by:
MA. CEAZARE D. BARNUEVO
SHS – ABM
Cotmon National High School

R0_ABM_FABM2_Grade 12_Q1_Wk 8_LP 12 118

 NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 8B

PREPARING BANK DEPOSIT AND WITHDRAWAL SLIPS

BACKGROUND INFORMATION FOR LEARNERS

In the previous lesson, you learned the different types of bank accounts, the
importance or advantage of maintaining a bank account, and how to create or open
an account with any of our preferred banks.

In this learner’s packet, you will learn the basics of preparing bank deposit
slips and withdrawal slips.

A withdrawal slip and deposit slip are written orders to the bank. These slips
are used to take out money or to put in money to the depositors account. When
validated, these slips serve as records of bank transaction between the account holder
and the bank where the account is held.

Similar to a purchase order, an invoice, or an official receipt, deposit slips and

withdrawal slips require several necessary information that the account holder
provides before it can be validated and acted upon by the bank employees:

RO_FABM2_Grade 12_Q1_WK8_LP13 119

 Deposit Slip

The bank provides deposit slip that the account holder will fill up every time he
will put in money to his account. The usually required information in a deposit slip are:

• Account Number – this is a unique identifier • Account Name – complete name of the
of the account maintained by the holder. This depositor as indicated in the records of the
is usually indicated alongside the account bank. If the account holder has a passbook, it
name in a passbook or the ATM card is indicated on first page inside the passbook.
although some banks place the account If the account holder has only an ATM card, it
number separately or at the back part of the is printed or otherwise embossed on the front
ATM card. face of the card.

• Type of Account – choose • Currency – Ph Peso is the default currency • Date – the date
between savings or a as foreign currency will only apply if one has a of the
current/checking account. foreign currency account. transaction

• Deposit Amount – the amount that the depositor desires to put into his account. Deposits
may be in the form of cash or check. If it is a cash deposit, the depositor will indicate the
number of 1000-peso bills, 500-peso bills, 100-peso bills, etc. and its sum. If it is a check
deposit, the details of the checks are indicated in the deposit slip: Issuing Bank, Branch or
Address of the Issuing Bank, the Check Number, and of course, the Amount. Deposits may
be a combination of cash and check. However, while some banks allow a depositor to
combine entries in one deposit slip, other banks require separate form be filled out for cash
deposits and another for check deposits.

RO_FABM2_Grade 12_Q1_WK8_LP13 120

 Withdrawal Slip
The withdrawal slip is a form that an account holder fills in with the necessary
information for the bank to process. Without a withdrawal slip, the bank will not allow you to
get money from your account. The required information in the withdrawal slip are:

• Account Number – this is a unique identifier • Account Name – complete name of the
of the account maintained by the holder. This depositor as indicated in the records of
is usually indicated alongside the account the bank. If the account holder has a pass
name in a passbook or the ATM card although book, it is indicated on first page inside
some banks place the account number the passbook. If the account holder has
separately or at the back part of the ATM only an ATM card, it is printed or
card. otherwise embossed on the front face of
the card.

• Amount to be Withdrawn – Banks require the • Currency – the currency the account holder
amount to be written in words and figures. desires to draw from the bank.

• Signature of the Account Holder –The signature is a proof that the account holder is authorizing
the bank to get money from his account. Usually, the bank compares the signature in the withdrawal
slip against the signature in the bank records submitted during the opening of the account. During
instances when the account holder cannot personally attend to the withdrawal of funds, he may
authorize a representative by indicating the name of the representative in the space provided and
where the representative signs off. There is a need for the representative to bring a valid
identification card upon withdrawal otherwise the bank will not recognize or approve of the
authorization.

• Payment Receipt – Account Holder or the representative’s signature. This signifies the satisfactory
receipt of the total amount withdrawn by the account holder or the authorized representative.

• Cash Breakdown –Account holder may specify cash denominations if he so desires, and this feature is
especially convenient for those who require it. Otherwise, the bank teller will decide for him.

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 If the account has no passbook issued and only utilizes an ATM card for transactions,
a withdrawal slip would not be necessary as the transaction can be easily facilitated in any
ATM station. However, a minimal convenience or transaction fee is imposed for transactions
using ATM stations of a bank other than where the account holder holds account with. The
ATM would release a printout detailing the transaction, a record of which is also kept by the
bank. A more fastidious account holder can and may request a copy of his transactions with
the bank during a given period for his reference. Some banks require payment of a nominal
amount for this service.

Account holders who desire to deposit daily, perhaps to keep a daily sales record or
even for security purposes (businessmen usually deposit their cash sales after closing shop.
Some businesses have a given cutoff time to deposit their daily sales collections) do not need
to go after the banking hours. The ATM provides a convenient way of making deposits even
on off-hours or at whatever time the account holder thinks to make a deposit. A bank deposit
slip printed on an envelope is filled up in the same manner as that of the regular bank deposit
slip and the money is sealed inside the envelope after duly filling-up the slip. The envelope is
then entered into a slot in the ATM when prompted following entry of pertinent details during
the course of the transaction. Currently, only bills and not coins are accepted in this mode of
transaction. The ATM records the transaction but the amount will only be credited the following
day when two or more personnel of the bank opens the envelope, ensures that the amount
inside the envelope matches the entries on the deposit slip, and then validates the transaction.

Additional Note:

Validated deposit or withdrawal slips contain machine imprint with the date and time
stamp of the transaction including bank code for where the transaction was consummated.

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 The deposit or withdrawal slips are sometimes color coded by the banks for the
convenience of its account holders. The slips are usually filled out in duplicates, some banks
in triplicates.

While some banks employ guards that provide the account holder with the deposit or
withdrawal slips upon entry, together with a queue number, others have automated queuing
systems that require you to input into the machine the transaction you will be needing. After
giving out the details, the machine assigns the account holder a number in the queue where
you wait for the number to be called or otherwise flashed in the monitor usually placed facing
the bank client’s seats. Only then will the transaction be entertained. When there are not so
many clients present during any given part of the day, banks waive this protocol, and the
account holder may go directly to the teller to present the slips for the transaction.

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 Preferred clients who are withdrawing a large amount of cash have the option of
requesting the bank to deliver to the account holder’s preferred location the cash in an armored
vehicle. Preferred clients can also get a waiver on the banking hours, entering the bank before
business hours or even after the regular banking hours.

LEARNING COMPETENCY

Prepare bank deposit and withdrawal slips. (ABM_FABM12-IIc-7)

ACTIVITIES

ACTIVITY 1. TOTAL RECALL!

DIRECTION: Identify the necessary information in filling in the bank deposit/withdrawal slips as
described in each of the following:

1. The complete name of the depositor that is reflected in the records of the bank.

2. The unique identifier of the account maintained by the holder.

3. Date of Deposit – the date of the transaction

4. Typically, a choice between a savings or a current/checking account.

5. Ph Peso is the default currency as foreign currency will only apply if one has a foreign
currency account.

6. Written in both words and in figures.

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 ACTIVITY 2. SANA ALL!

At the conclusion of the academic year, Lourie Dimagiba achieved High Honors mark
for her scholastic performance. For this accomplishment, both of her father and mother gave
her one thousand pesos. Her kuya who just recently gained employment also chipped in 600
while her ate who is also a student like her gave 45 pesos. Her favorite aunt who works at a
bank in Legazpi City also gave her a check (B #564832) for 500. She decided to deposit the
amount in her bank account and determined that she would try to duplicate the feat next year
so that she would have the opportunity to receive cash gifts from her family again. Help
Lourie out by filling in the bank deposit slip for her. Her account number with the bank is 05-
111689-340.

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 ACTIVITY 3. BREAK IT DOWN!

The principal of BANUANG SUTIL HIGH SCHOOL hired laborers to construct a portion
of the school fence. She hired a skilled mason for 600/day and 2 laborers for 400/day. At the
end of the 6-day week, he will need to pay them for their work plus reimburse a laborer for the
197 pesos he is owed for supplying a portion of the materials they needed for the fence and
the 25 pesos tricycle fare.

Determine the bill breakdown that the principal will need to indicate in the withdrawal
slip to enable her to pay off each of the workers the required amount. Assume account number
is 05-111689-340 and date is August 2, 2021.

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 LET’S LEVEL UP

DIRECTIONS: Read the situation below and perform what is asked for.

You have been saving 20 pesos a day since January 1, 2021 in your coin bank as part
of your New Year’s Resolution. On June 30, 2021 you were able to attend a financial literacy
webinar where you learned that saving in a bank is a better choice than saving money in a
coin bank because the deposited money earns an interest. This convinced you to finally save
money in a bank. Thus, on July 1, 2021, you decided to deposit your savings worth Php 3,620
in a bank. But before you can deposit money, you need to fill out a deposit slip.

Using the form below, prepare a deposit slip.

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 REFLECTION

Congratulations! You have completed the lesson successfully. Rate yourself on how well you
understand the lesson. Please put a check (/) in the appropriate emoticons below.

PARAMETERS

1. I can prepare a bank deposit slip.

2. I can prepare a bank withdrawal slip.

3. I can assist anyone fill out a bank slip.

REFERENCES

Florendo, Joselito G., et. al., Teaching Guide for Senior High School FUNDAMENTALS OF
ACCOUNTANCY, BUSINESS, AND MANAGEMENT 2, Commission on Higher Education,
2016

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 ANSWER KEY

RO_FABM2_Grade 12_Q1_WK8_LP13 129

NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals Of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 9
IDENTIFYING AND PREPARING CHECKS

BACKGROUND INFORMATION FOR LEARNERS

A check is a written, dated, and signed instrument that directs a bank to pay a specific
sum of money to the bearer. Checks may be cashed or deposited. When the payee presents
a check to a bank or other financial institution to negotiate, the funds are drawn from the
payor's bank account.
Checks received as payment from another person entitles the holder to demand
payment from the drawee bank in the check. The dates in the check often indicate the date
when the check can be cashed or deposited in the bank.
Before the check can be converted to cash, it should first meet the following criteria:
a) The check must be received from the customer on or before the balance sheet
date; and
b) The check is dated on or before the balance sheet date.

KINDS OF CHECKS:
1. CUSTOMER’S CHECKS

These are checks received from the customers. These are usually issued as
payment for the inventories and services that they have received from the entity.

https://www.eastwestbanker.com/info/check-deposit-user-guide.asp?mode=d

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 2. Traveler’s Checks
This is a kind of check with security features. Upon receipt of a traveler’s check,
the payee should immediately sign the traveler’s check. Before the payee can make
use of such a check, the payee must sign the same check again.
This will prevent unauthorized use of the traveler’s check and become helpful
in cases the check is lost or stolen after the first signature was made. The holder of the
lost or stolen traveler’s check will not be able to use it because he or she cannot easily
copy the signature of the original payee.

3. MANAGER’S CHECK
This is a check issued by the bank manager. This is a guarantee by the bank
that the holder of the check has the necessary funds deposited in their financial
institution.

4. CASHIER’S CHECK
This is a check issued by the bank cashier. Like the manager’s check, a cashier
check guarantees that a certain amount has been deposited to the bank.
https://marketbusinessnews.com/financial-glossary/cashiers-check/

5. COMPANY’S UNDELIVERED CHECKS

These are checks prepared by the company that will be delivered to corporate
creditors and suppliers. As long as the checks are not yet delivered to creditors or
suppliers, the amounts indicated in the checks are still considered as part of the cash
balance of the issuing company.

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 6. COMPANY’S POSTDATED CHECKS
This is a company check already delivered to the payee, but it cannot be
encashed or deposited yet because the date indicated in the check has not yet arrived.
If the check dated October 11, 2017 was issued on September 30, 2018, the said check
is post-dated.

Since the payee or creditor still cannot deposit or encash the check, the check’s
value remains part of the cash balance of the issuing company

FUTURE

https://www.bankexamstoday.com/2015/01/various-types-of-cheques.html

7. COMPANY’S STALE CHECKS

These are checks issued by the company to the suppliers and creditors and
not encashed on time. Payees like suppliers and creditors are often given six months
from the date of the check to encash it.

If the checks are not yet encashed after the month period, then the checks will
be considered stale and no longer be accepted by the bank.

https://www.bankexamstoday.com/2015/01/various-types-of-cheques.html

However, the liability of the company to the creditors will still remain. The
creditor will just request for another check from the company as a replacement.

As long as the replacement check has not yet been issued, the amount
indicated in the company’s stale check will still be as part of the company’s cash
balance. This is due to the fact that the company still maintains control over the
amount.

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 8. CROSSED CHEQUES - two lines are made on the top right of the cheque. Amount
mentioned on the cheque is only transferred to the bank account of the payee. No cash
payment is made.

https://www.bankexamstoday.com/2015/01/various-types-of-cheques.html

HOW TO WRITE A CHECK:

Writing a check for the first time can be a challenge... but it doesn't need to be! All you need
is your checkbook, a pen and your checkbook register. Here is how you can write a check in
just a few, quick steps:

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Illustrative example:
Ethan L. Mortiz, a young lawyer, Began the practice of law and opened the Mortiz Law Office
on March 1, 2020. March 2,2020 Purchased and paid Php 2,500 office supplies from Luckiest
Educational supply. Prepare check payment.

LEARNING COMPETENCY

Identify and prepare checks (ABM_FABM12- IIc-8)

ACTIVITIES

ACTIVITY 1: CHECK IN THE PUZZLE

Direction: Read each statement on the right side of the puzzle board, and then write the word
described on the appropriate box.

Across:
1. Check issued by the bank cashier
2. It is a check already delivered to the payee, but the date
indicated in the check has not yet arrived
3. It is a check issued by the bank manager
6. Checks already delivered to the creditors and suppliers but not
cashed on time

Down:
1. Type of check receive by the company from their client
2. The person receives the check payment
4. This is the information written in the middle of the
check
5. It is written on the upper right corner of a check

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ACTIVITY 2: CHECK… IS IT RIGHT?

Directions: Prepare a check for every transaction given below. (note: if a printer is available,
you can take a picture of the sample check and then print it. Or you can access the link
https://www.template.net/business/word-templates/blank-check-template/ to download
templates in preparing bank checks. If you don’t have a printer, just draw the check in a bond
paper and then fill up the needed information in each part of the check.

Given:
Ethan L. Mortiz, a young lawyer, Began the practice of law and open the Mortiz Law Office
on March 1, 2020, and some of the transactions are as follows:
1) On March 10, 2020; Mortiz law office paid insurance premiums worth Php 5,500 to
Moonlight Insurance.
2) On March 15, the company paid the salary of the secretary Adeline G. Ken, amounting to
Php 10,000.

Answer the question:

You are expecting a check payment from a creditor, you are given a chance to choose
the type of check whether personal/customer’s check or manager’s Check. Which of these
will you prefer? Why? (Explain in at least 3 sentences)

ACTIVITY 3: MAKE YOUR OWN CHECK

Imagine yourself as a young entrepreneur 5 years from now. You are now the owner
of a fast-growing business. Of course, you are engaged with several business transactions
that require check payment.
Task:
1. Design your own check, either through drawing or through the template that can
be found in the link below. https://www.template.net/business/word-
templates/blank-check-template/ .
2. Think of at least two (2) sample transactions that require check payment. Include
information about date, amount and payee. And, then prepare the check with
complete information.

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 RUBRICS:
Criteria Excellent (15 pts) Very good (12 pts) Good (10 pts)
Content (90%) Thorough and Complete Shows some
insightful understanding of the understanding of the
understanding of the parts of a check parts of a check
parts of a check
Neatness & Check is presented in Check is presented Check is presented in
Organization a neat and organized in a neat and a neat but
(10%) fashion that is easy to organized fashion unorganized fashion
read but may be hard to
read

LET’S LEVEL UP

Answer the following:

1. Type of company’s check already delivered to the payee, but with future date.
2. Type of check with two lines on the top right of the cheque which means No cash
payment is allowed.
3. Refer to the figure below. Give the information to be written on the slot labelled a to
e.

b
a d

4. Prepare a check given the information below:

Mr. Eugene Apostol opened Apostol Car Rental on July 1, 2017. On July 3, he
purchased 2 cars from Eastern Company for Php 200,000 on the basis of 40,000 down
payment and the balance to be paid on monthly installment for one year. The first
payment is due in August.

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 REFLECTION

After performing all the activities, rate your learning by drawing a star in the appropriate
column.

I am …
confident Still confused
Still interested

In identifying checks.

In preparing Checks

REFERENCES

Beticon, J & et. Al, Fundamentals of Accountancy, Business & Management Teacher’s
Manual, Vibal Group Inc, 2016

Arganda, A. Fundamentals of Accounting and Bookkeeping 1. Anvil Publishing Inc. 2016

Ballada, W. Fundamentals of Accountancy, Business, and Management 2. DomDane

Publishers. 2017

https://www.eastwestbanker.com/info/check-deposit-user-guide.asp?mode=d
https://marketbusinessnews.com/financial-glossary/cashiers-check/

https://www.template.net/business/word-templates/blank-check-template/

RO_FABM2_Grade 12_Q1_WK9_LP14 137

 ANSWER KEY

ACTIVITY 1: CHECK IN THE PUZZLE

ACTIVITY 2: CHECK… IS IT RIGHT?

2.

1.

ACTIVITY 3: MAKE YOUR OWN CHECK

Answers may vary

Prepared by:

CYNTHIA L. ABIERA
SHS Teacher
Daraga National High school

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NAME: TEACHER:

STRAND AND SECTION: DATE:

Fundamentals Of Accountancy, Business

and Management 2 - Grade 12- Quarter 1, Week 9B

IDENTIFYING AND UNDERSTANDING BANK STATEMENT

BACKGROUND INFORMATION FOR LEARNERS

A bank statement is a document that is issued by a bank once a month to its customers,
listing the transactions impacting a bank account. The statement provides the following
information:

The beginning cash balance in the account

+ The total amount of each deposited batch of checks and cash
- Funds withdrawn from the account;
- Individual checks paid
+ Interest earned on the account
- Service fees and penalties charged against the account
= Ending cash balance in the account

A bank statement is a summary of all transactions in your business bank account. It

lists each transaction individually so you can see a breakdown of your income and spending
related to that account.
The bank statement shows the cumulative balance of cash in the account, net of all
the preceding transactions, as of the end of each day in the reporting period. ‘Some banks still
print these statements along with an accompanying set of images of all cleared checks.

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 PARTS OF A BANK STATEMENT

You will find important information on a business bank account statement. Understanding the
parts of your statement is key to using your statement in your business.

Common bank statement details include:

● Bank information
● Business information
● Account information
● Statement dates
● Account summary
● Transaction summary
● Bank messages

1. BANK INFORMATION

Your financial institution’s contact information is on each bank statement. It should list
the financial institution’s name, address, and customer support details (e.g., phone number
and website).
If there is a specific number for reporting discrepancies, your statement might include
it.
2. BUSINESS INFORMATION

Your statement also lists your business’s information, including your name, business
name, address, and phone number.
3. ACCOUNT INFORMATION
This part of your statement has basic and sensitive information about your bank
account. It includes your account name and account number.

4. STATEMENT DATES
Each statement tells you the period it covers. For example, it might
say Statement for June 15 to July 15, 2021.

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 5. ACCOUNT SUMMARY
A business bank statement also summarizes your account for the period. It includes
information like:

● Beginning balance
● Ending balance
● Total withdrawals
● Total deposits
The bank statement summary page is typically located above your transaction
summary breakdown.
6. TRANSACTION SUMMARY
And now for the main event: your transaction summary. The transaction summary
takes up most of the space on the bank statement.
This part of your company bank statement lists every account transaction in chronological
order. For each transaction, the statement lists the:

● Date
● Description
● Amount
● Account balance after the transaction
Bank statement descriptions might also list what kind of transaction you made and
where you made it.
7. BANK MESSAGES
Finally, you might see a little note somewhere on certain bank statements. Some
financial institutions include messages and news.

LEARNING COMPETENCY

Identify and understand the contents of a bank statement (ABM_FABM12-IIc-9)

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 ACTIVITIES

ACTIVITY 1: WHO AM I?
Identify the parts of the bank statement for each item in the given sample.

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ACTIVITY 2: “REVEAL THE MYSTERY WORD”
DIRECTIONS: Read each statement carefully. Arrange the jumbled letters to get the correct
answer and write them on the space provided in each item.
1. provides the information about your business, including your
name, business name, address, and phone number. (NEIBUSSS NOONTFIIRAM)

2. The details the summary of the account’s beginning balance, ending

balance, total withdrawals, and total deposits. (ANTCUCO YMAUSMR)

3. shows the financial institution’s contact information including the

name, address, phone number and website. (ANKB OOFRIIAMNTN)

4. provides the list of every transaction made by the business during

the inclusive dates of the bank statement. (IONTTANRSCA RMSAUYM)

5. states your account name and account number. (TUCCOAN

FRIOIAMNOTN)

ACTIVITY 3. SEEK AND YOU SHALL FIND

DIRECTIONS: Find and identify the missing parts of the bank statement presented below.
Write your answer on your answer sheet.

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 LET’S LEVEL UP

DIRECTIONS. Identify the parts of the bank statement by arranging the word clues given in
each item. Write your answer on the space provided before each number.

1.

2.

3.

4.
.
5
Statement Period: June 10-July 10, 2021

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 REFLECTION

After learning and identifying the different parts of a bank statement, check the box
that corresponds to your reactions upon completing this learning packet.

I know this very well. I feel like I can teach this to

others.

I know this well. I get almost every question right.

I feel like I’m still learning this. I still have some

questions and need clarifications.

I have lots of questions. I don’t know what to do with

the activity.

REFERENCES

https://www.accountingtools.com/articles/what-is-a-bank-statement.html
https://www.patriotsoftware.com/blog/accounting/bank-statement/

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 ANSWER KEY

Prepared by:
Jane B. Latoga
(T1-SHS) Ponso National High School

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