Sipack Fabm2 1st QTR Final

DEPARTMENT OF EDUCATION
REGION III
Division of City of San Fernando
PAMPANGA HIGH SCHOOL
PHS Blvd., Brgy. Lourdes, City of San Fernando, Pampanga
in
Grade 12
Prepared by:
Mrs. Aphrodite G. Baluyut

Mr. Arnold L. Carreon
Table of Contents
Week Contents Page

1 Statement of Financial Position (SFP) 1
2 Statement of Comprehensive Income (SCI) 23
3 Statement of Changes in Equity (SCE) 38
4 Statement of Cash Flows (SCF) 47
Analysis and Interpretation of Financial

5 61
Statements (Horizontal and Vertical Analysis)
Analysis and Interpretation of Financial

6 74
Statements (Financial Ratios)
Basic Documents and Transactions Related
7&8 90
to Bank Deposits
SELF - INSTRUCTIONAL PACKETS
FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT
GRADE 12
School Teaching Dates/ August 24-28, 2020

PAMPANGA HIGH SCHOOL Week (Week 1)
Teacher Aphrodite G. Baluyut Quarter First

Arnold L. Carreon
I. OBJECTIVES
A. Content Standards
The learner demonstrates understanding of account titles under the assets, liabilities,
and capital accounts of the Statement of Financial Position, namely, cash, receivables,
inventories, prepaid expenses, property, plant and equipment, payables, accrued
expenses, unearned income, long-term liabilities and capital that will equip him/her in
the preparation of the SFP using the report form and account form.
B. Performance Standards
The learner is able to solve exercises and problems that require preparation of an SFP
for a single proprietorship with proper classification of accounts as current and
noncurrent using the report form and the account form.
C. Learning Competencies
1. Identify the elements of the SFP and describe each of them

(ABM_FABM12-Ia-b-1)
2. Classify the elements of the SFP into current and non-current items
(ABM_FABM12-Ia-b-2)
D. Objectives
At the end of the lesson, the learners should be able to:
1. Identify the elements of the SFP and describe each of them;

2. Classify the elements of the SFP into current and non-current
II. CONTENT
STATEMENT OF FINANCIAL POSITION (SFP)
Learning Resources
A. Reference
Fundamentals of Accounting, Business and Management 2

Beticon, Josefina L. et al Textbook pp. 104-110
B. Other Learning Resources
Fundamentals of Accounting
Ong, Flocer L. (3rd Edition) Textbook pp. 2 – 15
http://lrmds.deped.gov.ph/shs/track/12/905
III. PROCEDURES
1
Day 1
A. Reviewing previous lesson or presenting the new lesson
Hello there! How are you? Do you miss being in school? I do. Due to our current
situation we’re doing a modular distance learning in delivering our lessons.
Don’t worry you will soon see your friends and teachers in school.
Now, let us start by identifying the elements of the Statement of Financial Position
(SFP) using the puzzle below. Let’s see if you still remember the accounting terms
discussed in FABM1? Use Yellow Paper in answering.
B. Establishing a purpose for the lesson
How do businesses generate financial statements? It produces its financial

statement by performing the accounting cycle. See the cycle below.
1. Analysis of Business Transactions

2. Journalizing
3. Posting
4. Preparation of Unadjusted Trial Balance
5. Adjusting Entries
6. Preparation of Adjusted Trial Balance
7. Preparation of Financial Statements
8. Closing Entries
9. Post-Closing Trial Balance
What is a Financial Statement?
➢ Represents a formal record of the financial activities of an entity.

➢ Written report that quantifies the financial strength, performance and liquidity of
a company.
➢ Reflects the financial effect of business transactions and events on the entity.
Purpose of Financial Statements is to communicate
Financial statement tells you and others the state of your business. With these
financial statement you can see the company’s assets like equipment inventory, furniture
and liabilities like personal loan, bank loans are in one place, you can see how much is
the available cash needed to acquire inventory. You’ll know what is currently owed to the
bank, creditors and others. You’ll know how much of what is owed is due to next 12
months.
2
The objective of financial statement is to provide information about the financial
position, performance and changes in financial position of an enterprise that is useful to a
wide range of users in making economic decisions (IASB Framework).
Four (4) Types of Financial Statements

1. Statement of Financial Position
2. Statement of Comprehensive Income
3. Statement of Changes in Equity
4. Statement of Cash Flows
C. Presenting examples/instances of the new lesson
In reality, the Statement of Comprehensive Income is the first to be prepared,

followed by the Statement of Changes in Equity, followed by the Statement of Financial
Position and then the Statement of Cash Flow, For discussion purposes. Let’s focus first
on Statement of Financial Position. I believe you have seen and already have a knowledge
of the SFP in your FABM1 buts let’s have a detailed discussion on this statement. I’ll show
you the parts, forms and the elements of SFP. Let’s define the SFP.
Statement of Financial Position (SFP)
➢ Also known as the Balance Sheet / Statement of Financial Condition

➢ Provides a snapshot of a business’ health at a point in time.
➢ It provides insight as to the liquidity, solvency, financial structure and flexibility of
the company.
Liquidity – pertains to the capacity of the company to pay for its currently maturing
obligations.
Solvency - pertains to the ability of the company to pay for its long-term obligations.
Financial Structure – shows the composition of the claim over the assets of the
company.
Flexibility – shows insight as to the capacity of the company to adapt to various

circumstances.
➢ Prepared at the close of an accounting period. (Month End, Quarter End, Year End)
➢ The structure of the statement of financial position is similar to the basic
accounting equation. (Assets = Liabilities + Owner’s Equity)
D. Discussing new concepts and practicing new skills #1
Let’s discussed the Elements of the SFP.
A. Permanent Accounts
As the name suggests, these accounts are permanent in a sense that their
balances remain intact from one accounting period to another. (Haddock, Price, &
Farina, 2012) They are called permanent accounts because the accounts are
retained permanently in the SFP until their balances become zero.
Assets: Something a business owns or controls

Eg. cash, receivable, inventory, prepayments, plant and machinery, etc)
Liabilities: Something a business owes to someone

(e.g. accounts payable, notes payable, loan payable, mortgage payable etc)
3
Equity: What is left over for the owners.
This represents the amount of capital that remains in the business after its assets
are used to pay off its outstanding liabilities. Equity therefore represents the
difference between the assets and liabilities
(e.g. Baluyut, Capita; Carreon, Capital)
B. CONTRA ASSETS
are those accounts that are presented under the assets portion of the SFP but
are reductions to the company’s assets.
These includes:
1. Allowance for Doubtful Accounts

This represents the estimated amount that the company may not be able to
collect from delinquent customers.
2. Accumulated Depreciation.
represents the total amount of depreciation booked against the fixed
assets of the company.
E. Discussing new concepts and practicing new skills #2
Below, I provide a sample of SFP as your overview. Classification of the SFP were
discussed in detailed in your FABM 1. (The Types of Major Accounts/Classifications of
Accounts) You may use your lectures.
Observe the proper classifications of assets and liabilities into current and non-
current..
1.1. Current Assets
➢ are short-term economic resources that are expected to be converted into cash
within one year.
a. Cash and cash equivalents

b. Marketable Securities
c. Trade and other receivables (Accounts Receivable, Notes Receivable)
d. Inventories (Merchandise Inventory, raw materials, in-progress goods, finished
goods ready for sale)
e. Prepaid expenses (Office Supplies, Prepaid Rent, Prepaid Insurance)
1.2. Non-Current Assets
➢ Long-term assets that a company expects to hold longer than twelve months .
➢ They provide value to a company but cannot be readily converted to cash within a
year.
a. Property, plant and equipment (buildings, furniture and fixtures, office

equipment)
b. Long term investment (investment in stocks and bonds,
c. Intangible assets (franchise, copyright, brand names)
d. Other Assets - are long term assets that are not classified as investment,
property, plant, equipment, or intangible assets
2.1. Current Liabilities
➢ are the obligations that are due within one year of the balance sheet's date and
will require a cash payment or will need to be renewed.
Ex. Trade and Other Payables
4
2. 2. Non-Current liabilities
➢ are obligations extending beyond the current operating cycle or one year,
whichever is longer.
Ex. Mortgage Payable, Bonds Payable, Long term notes payable.
Sample of Statement of Financial Position
Day 2
F. Developing mastery
Activity 1 (Write the answers in your notebook)
Fill in the missing figure in order to satisfy the accounting equation
Score Description
5 Very Good
3-4 Good
2 Fair
0-1 Turn to Page 8 sec J and work on the
enrichment activities
5
Now, check your work by turning to page 9 for the key to correction. How many correct answers
did you get? Rate your result using the table above.
Activity 2 (Use your notebook in answering)
Compute the amount of the missing account the accounting equation.
1. Let Scramble Company has the assets of 80,000 and owner’s equity of P 53,500.
2. Faith Engineering Service has liabilities of P65,000 and owner’s equity of P 23,500
3. Rene Plumbing Contractor has assets of P420,650 and liabilities of P380,000
4. Vilma Dramatic Guild has assets of P 425,000 and owner’s equity of 155,650
5. Ely Music and Video Services has assets of 85,000 and liabilities of P 46,000.
Score Description
5 Very Good
3-4 Good
2 Fair
Now, check your work by turning to page 9 for the key to correction. How many correct answers
did you get? Rate your result using the table above.
Activity 3 (Use your notebook in answering)
Classify the following accounts whether they are asset, liability, or equity accounts. For asset
and liability accounts, classify whether they are current or non-current.
Account Element Classification

Utilities Payable Liabilities Current
1. Cash
2. Notes Receivable
3. Loan Payable (13 months)
4. Mortgage Payable
5. Land
6. Copyright
7. Marketable Securities
8. Prepaid Rent
9. Salaries Payable
10. Office Supplies
Now, check your work by turning to page 10 for the key to correction. How many correct
answers did you get? Rate your result using the table below.
Score Description
9-10 Very Good
7-8 Good
5-6 Fair
6
G. Finding practical applications of concepts and skills in daily living
The classifications of asset and liabilities can be applied in our life. We can classify our
personal properties or belongings into current and non-current assets.
➢ Your money can be classified as current asset, it can be used within a year.
➢ School supplies can be classified as current asset because it can be used and sold
into cash within a year.
➢ Good quality shoes can be classified as non-current asset because it can last more
than a year.
➢ Cellphone can be classified as non-current assets because it can be used more
than a year.
➢ The money you borrowed from a friend can be classified as current liability it can
be paid not less than a year.
➢ The appliances you purchased on installment basis can be classified as non-
current liability because it can be paid more than a year.
H. Making generalizations and abstractions about the lesson
Without the SFP, the company cannot know if it truly owns anything because in case
of bankruptcy, liabilities are paid first. -Small businesses don’t usually account for their
assets and liabilities as long as the owners see that cash is coming in. They sometimes
forget that when liabilities become due, if they don’t have enough current assets to be able
to pay those liabilities, then they can get in trouble with their debts.
Separation of the current and noncurrent – current liabilities are upcoming liabilities
and the company should be prepared to pay them. Companies should prepare as early
as today for payment of noncurrent liabilities as these usually have large balances. Current
assets shows the company’s ability to sustain its current operations while noncurrent
assets shows the company’s ability to sustain long-term operations.
I. Evaluating learning
Quiz: Use 1 yellow paper and copy the heading as your guide.
Name: ____________________________________ Grade & Section: _________

Subject : FABM2 Week 1 Parent’s Signature: _________
Subject Teacher: _____________________________
Instruction: Classify the following accounts whether they are asset, liability, or equity
accounts. For asset and liability accounts, classify whether they are current or non-
current.

1 Cash
2 Inventory
3 Prepaid Rent
4 Baluyut, Capital
5 Account Receivable
6 Furniture and Fixtures
7 Accrued Interest expense
8 Unearned income
9 Office Equipment
7
10 Long Term Liability
11 Franchise
12 Income tax payable
13 Due to employees
14 Bank Loan
15 Machinery held for sale
J. Additional activities for application or remediation
Activity 1.1 (Use your notebook in answering)
Fill in the missing figure in order to satisfy the accounting equation.
To check your work, you may turn to page 10 for the answer.
Compute the amount of the missing account the accounting equation.
1. Wash Your Problem has assets of P40,650 and liabilities of P30,000

2. Bread Pitt has assets of P 24,000 and owner’s equity of 5,650
3. Jean Repair Services has assets of 36,000 and liabilities of P 26,000
4. Cut and Face has the assets of 22,000 and owner’s equity of P 3,500.
5. Juan Laundry has liabilities of P67,000 and owner’s equity of P 13,900
INSTRUCTION: Classify the following accounts whether they are asset, liability, or equity
accounts. For asset and liability accounts, classify whether they are current or non-current.
1. Interest Receivable
2. Unearned Rent Income
3. Cash
4. Cruz, Capital
5. Franchise
8
KEY TO CORRECTION:
WORD PUZZLE
L C
I A
A S S E T S
N B H
O I
N L
C C I
A C C O U N T I N G
P U R Y
R R
T R E Q U I T Y
A E N
L N T
T
Activity 1
1. 3,500
2. 21,000
3. 37,000
4. 11,000
5. 70,000
You may proceed to the next activity if your score is at least 3 out of 5.
If not, you have to go back to the activity and try all over again.
If you need help, you may call or send us a private message in our facebook account:
09451144098, dhitegozunbaluyut for Ma’am Dite’s account; or call 09189030109, Arnold
Lansangan Carreon for Sir Noy’s account.
Activity 2
1. Liability – 26,500
2. Assets – 88,500
3. Equity – 40,650
4. Liability – 269,350
5. Equity 39,000
If you need help, you may send us a private message in our facebook account
dhitegozunbaluyut or call 09451144098 for Ma’am Dite’s account and Arnold Lansangan
Carreon or call 09189030109 for Sir Noy’s account.
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Activity 3

Utilities Payable Liabilities Current
1. Cash Asset Current
2. Notes Receivable Asset Current
3. Loan Payable (13 months) Liability Non-Current
4. Mortgage Payable Liability Non-Current
5. Land Asset Non-Current
6. Copyright Asset Non-Current
7. Marketable Securities Asset Current
8. Prepaid Rent Asset Current
9. Salaries Payable Liability Current
10. Office Supplies Asset Current
You may proceed to the next part of the discussion if your score is at least 7 out of 10.
KEY TO CORRECTION for the Enrichment (Section J)
Activity 1.1
1. 100,080.00
2. 80,000.00
3. 30,000.00
4. 75,000.00
5. 50,000.00
Activity 2.2
1. Equity 10,650
2. Liability 18,350
3. Equity 10,000
4. Liability 18,500
5. Asset 80,900
10
Activity 3.3
1. Asset - Current
2. Liability - Current
3. Asset - Current
4. Equity or Capital
5. Asset – Non- Current
You may proceed to the next discussion if your score is at least 3 out of 5.
If not, you have to go back to the activity and try again.
11
GRADE 12
School Teaching Dates/ August 24-28, 2020

Teacher
Aphrodite G. Baluyut Quarter First
Arnold L. Carreon
II. OBJECTIVES
The learner demonstrates understanding of account titles under the assets, liabilities,
and capital accounts of the Statement of Financial Position, namely, cash, receivables,
inventories, prepaid expenses, property, plant and equipment, payables, accrued
expenses, unearned income, long-term liabilities and capital that will equip him/her in
the preparation of the SFP using the report form and account form.
The learner is able to solve exercises and problems that require preparation of an SFP
for a single proprietorship with proper classification of accounts as current and
noncurrent using the report form and the account form.
The learner prepares an SFP using the report form and the account form with proper
classification of items as current and non-current. (ABM_FABM12-Ia-b-4)
D. Objectives
1. Identify the parts of SFP;

2. Describe the forms of SFP; and
3. Prepare an SFP using the Account Form and Report Form
II. CONTENT
STATEMENT OF FINANCIAL POSITION (SFP)
Learning Resources
A. Reference

https://artofthinkingsmart.com/understanding-life-balance-sheet/
III. PROCEDURES
12
Day 3
Hello there! How are you? How was the activity on the last module? Did you get it? Let’s
have a review on the classifications of accounts. Let’s classify the following accounts
whether they are asset, liability, or equity accounts. For asset and liability accounts,
classify whether they are current or non-current.. (Answer in your notebook)

1 Cash
2 Bonds Payable
3 Prepaid Rent
4 Canlas Capital
5 Account Receivable
How does the company prepare the SFP?
In the accounting cycle, the balance sheet or SFP and other financial statements are
prepared after the adjusted trial balance is done. Once the trial balance is adjusted and
updated to correct errors and other adjustments, we can now prepare the SFP and other
financial statements.
Let’s now identify the parts of the SFP. Please see the sample of Statement of Financial
Position for single proprietorship below.
1. Heading
Answers the three W’s:

Who – the name of the business
What - the name of the statement
When – date of preparation (“as of”)
2. Body of the statement - states the proper classification of assets, liabilities and capital
Heading
Body
13
Let’s describe the forms of the SFP. How do you observe the figure above?
How is the placement of the elements of the SFP? How is the format?
The figure above is called the Report Form.
➢ The assets are presented first followed by liabilities and owner’s equity. The
figures are properly aligned to their corresponding balances.
The next form is called the Account Form.
➢ The assets are presented on the left side of the statement while the liabilities and
owner’s equity are presented on the right side of the statement. Please see figure
below.
Since you already know the parts and the forms of the SFP. Let’s now go to the steps in
preparing for the SFP.
Steps in Preparing the SFP
1. Write the Heading – name of the company, name of the statement and the date of the
statement.
2. Categorize the accounts into asset and liabilities and owners’ equity section. Classify
the asset section into current and non-current assets.
3. Arrange the current asset first according to liquidity. Liquidity means how these
accounts can be easily converted into cash. (cash, short-term investment or marketable
securities, trade and other receivable, inventories and prepayment) Compute for the total
current asset.
4. Arrange the non- current assets (PPE, Long Term Investment, Intangibles, Other
Assets). Compute for the total non-current assets.
5. Compute the Total Assets. (Add up total current asset and total non-current asset) It
must be double ruled.
6. The total current assets, total non-current asset and total assets should be aligned
vertically.
7. Classify the liabilities into current and non-current liabilities.
14
8. Arrange and compute the total current liabilities.
9. Arrange and compute the total non-current liabilities.
10. Compute the Total Liabilities (Add up total current liabilities and total non-current
liabilities.
11. Write the owner’s equity balance below the Total Liabilities.
12. Compute for the Total Liabilities and Owner’s Equity. Double rule the final amount.
13. The total current liabilities, total non-current liabilities and total liabilities, total
liabilities and owner’s equity should be aligned vertically.
14. The peso sign is placed on the first amount of each column for assets section,
liabilities section; total assets; and total liabilities and owner’s equity.
14. Ensure that the accounting equation is balanced (A = L + OE)
Day 4
Drill 1. (Use 1 sheet of yellow paper in preparing for the SFP, present it in good
form and attached it in your notebook.)
Below are the account of Zia Firm for the year ended December 31, 2017.
Utilities Payable 12,000

Cash 36700
Long-Term Notes Payable 45,200
Prepaid Rent 36,000
Land 150,000
Salaries Payable 25,000
Z. Capital 226,200
Accounts Receivable 28,700
Furniture and Fixture 57,000
15
Prepare a properly classified SFP (Report Form and Account Form) of Zia Firm for the
year ended December 31, 2017. After which, answer the following questions.
1. How much is the total current asset of the entity?

2. How much is the total non-current asset of the entity?
3. How much is the total current liability of the entity?
4. How much is the total non-current liability of the entity?
5. How much is the total asset of the entity?
* We can prepare the SFP by following the steps discussed in Section E.
Turn to Page 19 for the KEY TO CORRECTION
A personal financial balance sheet shows you a snapshot of your financial health: how
much money and assets you have, how much debt and liabilities you have, and what
your net worth is when you subtract your liabilities from your assets.
Unlike a budget where you track how much money is coming in as income and how
much money is going out as expenses, a balance sheet tracks how much you have at a
fixed point in time. Even businesses, the government, and non-profits use a balance
sheet to measure their financial strength.
But a financial balance sheet isn’t the only thing we have nor is it the most important. We
also have to focus on our personal life balance sheet. What is it and what’s the
difference?
Personal Balance Sheet

The table below shows you what a personal balance sheet looks like.
Personal Life Sheet

A life balance sheet is not much different from a financial one except that it is far more
valuable in my opinion. The best investment anyone can make is in YOURSELF. It is
investing in your education, knowledge, expertise, and skills.
Although your financial assets and liabilities can come and go, your life balance sheet is
priceless. Even if you took all the wealth away from Bill Gates, because of the
knowledge he has, the relationships he has cultivated, and the skills he has acquired, he
will not have a problem becoming rich again! That is because he has a very strong life
balance sheet.
The table below shows you what it is.
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The good thing about life liabilities is that they can be used as leverage to become
assets. Once you recognize your lack of skills and knowledge, you know what you need
to learn and get educated on. Unlike a financial balance sheet, your life balance sheet is
dependent solely on your ability to recognize and understand it, and then work hard to
overcome it.
The reason this is important is that no matter where you are financially, as long as
you concentrate on your life balance sheet, you can become financially independent.
Remember, the balance sheet is a fixed point in time, as long as you continue to
improve and get better, your balance sheet will too!
SOURCE :
Chang, David (2020). “Understanding Your Personal Life Balance Sheet”. Art of Thinking
Smart. Retrieved from ”https://artofthinkingsmart.com/understanding-life-balance-sheet/
The basic accounting equation (A = L + OE) is used in preparing for the SFP. The
assets and liabilities account should be properly classified. SFP can be presented
either in account or report form. This report is being used by the interested users to
know their financial status or condition of the company. It also aids the other users if
they will invest in the company.
Day 5
Quiz: Use 1 sheet of yellow paper and copy the heading as your guide.
Name: _________________________________ Grade & Section: _________

Subject Teacher: _____________________________
Part 1. Multiple Choice. Choose the correct answer and use capital letter.
1. The total equity of a business is equal to

A. the total assets less the current liabilities of the business
B. the total liabilities of the business
C. the total assets less the total liabilities of the business
D. the total assets of the business
2. The balance sheet shows

A. the financial performance of the business
B. the financial performance and the financial position of the business
C. the financial position of the business
D. the cash flow of the business
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3. Which section of the balance sheet includes contributions by the owner?
A. Asset
B. Liabilities
C. Equity
D. General Ledger
4. How should you order the list of current assets

A. liquidity
B. value
C. age
D. date
5. The assets on your balance sheet do not equal the liabilities and owner's equity. How
can you troubleshoot this problem?
A. Double check your math
B. Verify the account information
C. Check the ending capital
D. All of the above
6. Which of the following is a category or element of the balance sheet?

A. Expenses
B. Gains
C. liabilities
D. Losses
7. Forms of balance sheet where asset is presented first followed by liabilities and
owner’s equity.
A. Heading
B. Body
C. Account
D. Report
8. The balance sheet heading will specify a

A. Point in time
B. Period of time
C. Name of the Company
D. Name of the Statement
Part II Using the trial balance provided below, prepare a properly classified Statement of
Financial Position using the report form.
18
Drill 2 (Use yellow paper in preparing for the SFP and attached it in your
notebook)
Presented below are the balance sheet account of Sunrise Laundry Services as of
December 31, 2017. Prepare a detailed balance sheet in account form and answer the
following questions below.
Cash on Hand 175,000 Building 480,000

Cash in bank 125,000 Accum. Depreciation. - Building 20,000
Marketable securities 60,000 Accounts Payable 105,000
Accounts Receivable 40,000
Notes Payable 180,000
Allowance for bad debts 2,000
Notes Receivables 83,000 Accrued Expenses 19,000
Prepaid Rent 27,000 Mortgage Payable 300,000
Prepaid insurance 37,000 Loan Payable 200,000
Land 233,000 A. Capital 434,000
See the rubric provided above.
1. How much is the total current asset of the entity?

2. How much is the total cash?
3. How much is the total trade and other receivables?
4. How much is the total prepaid expenses?
5. How much is the total non-current asset of the entity?
6. How much is the total property plant and equipment?
7. How much is the total current liability of the entity?
8. How much is the total trade and other payables?
9. How much is the total non-current liability of the entity?
10. How much is the total liabilities of the entity?
11. How much is the total assets of the entity?
*Turn to Page 21 for the KEY TO CORRECTION
KEY TO CORRECTION FOR SECTION F:
You need to classify first the accounts before preparing the SFP
Utilities Payable 12,000 Liability Current

Cash 36700 Asset Current
Long-Term Notes Payable 45,200 Liability Non-Current
Prepaid Rent 36,000 Asset Current
Land 150,000 Asset Non-Current
Salaries Payable 25,000 Liability Current
Z. Capital 226.200 Equity
Accounts Receivable 28,700 Asset Current
Furniture and Fixture 57,000 Asset Non-Current
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Report
Form
Account
Form
1. How much is the total current asset of the entity? P101,400

2. How much is the total non-current asset of the entity? P207,000
3. How much is the total current liability of the entity? P 37,000
4. How much is the total non-current liability of the entity? P45,200
5. How much is the total asset of the entity? P 308,400
Use the rubrics provided above to rate your answer. You should get a score of at least 20 out
of 30 to proceed to the next discussions. If not, you have to go back to the drill and start over
again.
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KEY TO CORRECTION FOR SECTION J
Sunrise Laundry Services

Statement of Financial Position
As of December 31, 2017
ASSETS LIABILITIES AND OWNER'S EQUITY
Current Assets Current Liabilities

Cash on Hand ₱175,000 Accounts Payable ₱105,000
Cash in bank 125,000 Notes Payable 180,000
Marketable Securities 60,000 Accrued Expenses 19,000 ₱304,000
Accounts Receivable ₱40,000
Less: Allowance for Bad Debts 2,000 38,000 Non Current Liablities
Notes Receivables 83,000 Mortgage Payable 300,000
Prepaid Rent 27,000 Loan Payable 200,000 500,000
Prepaid insurance 37,000 ₱545,000 Total Liabilities 804,000
Non-Current Assets Owner's Equity

Land 233,000 A, Capital 434,000
Building 480,000
Less: Accum. Dep. - Building 20,000 460,000 693,000
TOTAL ASSETS ₱1,238,000 TOTAL LIABILITIES AND OWNER'S EQUITY ₱1,238,000
1. How much is the total current asset of the entity? P545,000

2. How much is the total cash? P300,000
3. How much is the total trade and other receivables? P121,000
4. How much is the total prepaid expenses? P64,000
5. How much is the total non-current asset of the entity? P693,000
6. How much is the total property plant and equipment? P693,000
7. How much is the total current liability of the entity? P304,000
8. How much is the total trade and other payables? P304,000
9. How much is the total non-current liability of the entity? P500,000
10. How much is the total liabilities of the entity? P 804,000
11. How much is the total asset of the entity? P1,238,000
Solution for No. 2 - Cash
Cash on Hand ₱175,000

Cash in bank 125,000
Total ₱300,000
Solution for No. 3 - Trade and Other Receivables
Accounts Receivable ₱40,000

Less: Allowance for Bad Debts 2,000 ₱38,000
Notes Receivables 83,000
Total ₱121,000
Solution for No.4 - Prepaid Expenses
Prepaid Rent ₱27,000

Prepaid insurance 37,000
Total ₱64,000
Solution for No. 6 - Property, Plant and Equipment
Land ₱233,000
Building ₱480,000
Less: Accum. Dep. - Building 20,000 460,000
Total ₱693,000
21
Solution for No. 8 Trade and Other Payables
Accounts Payable ₱105,000

Notes Payable 180,000
Accrued Expenses 19,000
Total ₱304,000
Use the rubrics provided above to rate your answer. You should get a score of at least 20 out
of 30 to proceed to the next discussions. If not, you have to go back to the activity and start over
again.
Lansangan Carreon for Sir Noy’s account
22
GRADE 12
School Teaching Dates/ September 1 - 4, 2020

PAMPANGA HIGH SCHOOL
Week (Week 2)
Teacher Aphrodite G. Baluyut
Arnold L. Carreon Quarter First
III. I. OBJECTIVES
The learner demonstrates understanding of the service and operating expenses of a service
business as well as sales, contra sales, purchases, contra purchase accounts, cost of goods
sold and general administrative and selling expenses of a merchandising business that will
equip him / her in the preparation of the SCI for both service and merchandising business.
The learner is able to solve exercise and problems that require preparation of SCI for a
service business and a merchandising.
The learner
1. identifies the elements of the SCI and describe each of these items for a
service business and merchandising business. (ABM_FABM12-Ic-d-5)
2. prepares an SCI for a service business using the simple-step approach.
(ABM_FABM12-Ic-d-6)
3. prepares an SCI for a merchandising business using the multi-step approach.
(ABM_FABM12-Ic-d-7)
D. Objectives
1. recall the key features of the Statement of Comprehensive Income (SCI);

2. identify the elements of the SCI;
3. describe each of the elements of SCI for a service business and
merchandising business;
4. prepare a Statement of Comprehensive Income for a service business using
the single-step approach; and
5. prepare a Statement of Comprehensive Income for a merchandising business
using the multi-step approach.
II. CONTENT STATEMENT OF COMPREHENSIVE INCOME
Learning Resources
A. Reference
Fundamentals of Accountancy, Business and Management 2, 2016

Josefina L. Beticon, James Cristopher D. Domingo and Fermin Antonio D.
Yabut
23
III. PROCEDURES
Day 1
Hello there! How are you? Do you miss your Accounting lessons? I do.
How is your first week session in FABM2?
Don’t worry you will soon learn the different financial statements aside from SFP as we go
along.
Now, do you still remember the following terms in the given table? Let us have specific
account titles for each of the terms below and examples of service businesses and
merchandising businesses.
1. Accrual Accrued Income, Accrued Expense
2. Revenues Sales, Service Income
3. Expenses Salaries Expense, Depreciation Expense
4. Service business school, repair shop
5. Merchandising business Sari-sari store, Tusok-tusok vendor
Let us answer this question: What is the economic reward of entrepreneurs or businessmen?
The answer: Profit / Income! Most of the entrepreneurs are engage in business to pursue
their dreams and passion, but these businessmen take the risk and start a business to earn
a lot of money. The late Henry Sy, owner of SM, late John Gokongwei, owner of Robinsons
and other billionaires became successful and made more money due to their sensible skills
and judgment in estimating their earnings or income.
Do you want to be rich and successful like them? Yes.
Our topic is about Statement of Comprehensive Income, one of the financial statements. SCI
informs the reader or user about the “performance” and activities of the company for a certain
period (e.g. for the period ended December 31, 2019). It generally contains the revenue and
expenses incurred by an entity for the specific period.
Let us answer the question: Why Statement of Comprehensive Income or Income Statement
or Statement of Financial Performance is conventionally compared to a running video?
The answer: Because it presents an entity’s business activities from the start to the end of a
period.
Let us have an example of Statement of Comprehensive Income for a service business using
single-step approach. Take a look at the SCI of Liling Laundry Services.
24
Liling Laundry Services
Statement of Comprehensive Income
For the Year Ended December 31, 2019
Laundry Service Revenue P160,000

Less: Expenses
Salaries Expense P 40,000
Laundry Supplies Expense 26,100
Rent Expense 20,500
Utilities Expense 11,300
Depreciation Expense 5,000 102,900
Net Income P 57,100
The above SCI uses the Single Step Form (Natural Form). It divides the statement into two
major parts, namely: revenue section and the expense section.
A single step of deducting expenses from revenue is performed to arrive at the net
income or net loss.
Income accounts are presented before expenses. In the above statement, the income
account is Service Revenue. Other income accounts for service type businesses include
Professional Fees, Rent Income, Tuition Fees, etc.
Expenses are presented after the income accounts. It is a good practice to arrange expenses
according to amount (largest to smallest). Some users who are interested in the company's
expenses are concerned about the size of each expense.
Arranging the expenses from largest to smallest results in a more useful and organized
report. Nonetheless, Miscellaneous Expense or Sundry Expense is presented last.
Another example is the Statement of Comprehensive Income of a merchandising business

using multi-step approach. Multi- Step Form (Functional Form) is being used in
merchandising business, a series of step is performed to arrive at the net income or net loss.
It separates the major source of business revenue and their corresponding expenses from
the minor sources of business revenues and their corresponding expenses. Take a look at
the SCI of Liling Apparel Fashion House on page 26
25
Liling Apparel Fashion House
Sales P 2,215,200.00
Less: Sales Returns and Allowances P 15,000.00
Sales Discount 200.00 15,200.00
Net Sales 2,200,000.00

Less: Costs of Goods Sold:
Merchandise Inventory, Beginning 554,000.00
Add: Net Cost of Purchases:

Purchases P 1,230,000.00
Add: Freight-in 5,000.00
Total 1,235,000.00
Less: Purchases Discount P 11,360.00
Purchase returns and allow. 12,000.00 23,360.00 1,211,640.00
Total Goods Available for sale 1,765,640.00
Less: Merchandise Inventory, Ending 440,936.00 1,324,704.00
Gross Profit 875,296.00
Less: Operating Expenses:
Selling:
Salary 27,000.00
Rent 5,625.00
Store Supplies 1,200.00
Depreciation - Store Equipment 500.00
Utilities 330.00 34,655.00

Administrative:
Salary 13,000.00
Rent 1,875.00
Office Supplies 510.00
Depreciation - Office Equipment 333.00
Utilities 330.00 16,048.00
Other:
Interest Expense 1,000.00
Loss on Sale of furniture 1,000.00 2,000.00 52,703.00
Net Income P 822,593.00
The above example show the different key features of Statement of Comprehensive Income
as well as the proper presentation of these financial reports.
Key features of Statement of Comprehensive Income
1. The Title
SCI is a financial report. As a financial report, it must be properly identified and dated. An
appropriate comprehensive title or heading includes the name of the entity, the title of the
report and the period it covers.
2. Revenues
The Conceptual Framework for Financial Reporting (International Accounting Standards

Board 2010) defined Revenues as “arise in the course of the ordinary activities of an entity
and is referred to by a variety of different names including sales, fees, interest, dividend,
royalties and rent”.
Revenues earned by the business vary according to the nature of the entity. Smaller and
medium enterprises will have one or two sources of revenues. Larger and more complex
entities, on the other hand, will have multiple sources of revenues, recorded when earned.
Examples for service business: Consultation fees, Service Income, Professional fees,
Medical fees, Dental fees, Laundry Revenue, Salon Services Revenue,
Examples for merchandising business: Sales / Revenues

3. Expenses
26
Expenses as defined by the Conceptual Framework for Financial Reporting (International
Accounting Standards Board 2010): “a rising in the course of the ordinary activities of the
entity include, for an example, cost of sales, wages and depreciation. They usually take the
form of an outflow or depletion of asset such as cash and cash equivalent, inventory,
property, plant and equipment.”
For service business, expenses are usually categorized as cost of service or operating
expenses. In a barber shop, cost of service includes the salaries paid to barbers who render
services to clients in behalf of the barber shop.
Examples of Operating Expenses: Rent Expense, Utilities Expense, Office Supplies
Expense, Representation Expense, Depreciation Expense, Advertising Expense
Classifying expenses for merchandising concern is more complex than in a service concern.
For a merchandising concern, the expenses are classified as cost of sales, selling expenses
and general and administrative (operating) expenses.
To classify the expenses based on function is to answer the question “How are they related
to the normal operations of the business?” The said expense (cost of sale) is match directly
to the related sales.
Examples: Cost of Sales / Cost of Goods Sold
To classify the expenses based on nature is to answer the question “What are theses
expenses?”
Examples of Distribution / Selling Expenses: Store Supplies Expense, Advertising Expense,
Store Salaries Expense, Depreciation Expense -Store Furniture and Fixtures
Examples of General and Administrative Expenses: Office Salaries Expense, Supplies

Expense, Rent Expense, Bad Debts Expense, Utilities Expense, Depreciation Expense
4. Gain and losses

Gains as defined by the Conceptual Framework for Financial Reporting (International
Accounting Standards Board 2010): “represent other items that meet the definition of income
and may or may not, arise in the course of the ordinary activity of an equity.” Gains are
incidental to the operations of the business.
For example, if a laundry services business sells its huge washing machine for P50,000 when
the carrying value amount of the washing machine is P47,000, a gain amounting to P3,000
must be recorded.
Losses, on the other hand, is defined as follows by the Conceptual Framework for Financial
Reporting (International Accounting Standards Board 2010: “represent other items that meet
the definition of expenses and may, or may not, arise in the course of ordinary activities of
the entity.” Generally a loss is not expected to be incurred periodically by business
organization. From the example above, if the washing machine was sold to P40,000, a loss
of P7,000 must be reported.
5. Other Items
Other items included in the computation of the total comprehensive are income taxes and
items of other comprehensive income.
Drill 1. Use your notebook in answering. Now it is your turn to Score Description
identify each element or account title if it can be found on a
service or merchandising business. Complete the table by 20 Very Good
putting a () check mark or (X) cross mark in the corresponding 16 - 19 Good
columns. Fair
6 - 15
Account Titles Service Merchandising Turn to sec.
business business J and work
1. Sales 0-5 on the
2. Professional fees enrichment
3. Purchases activities
4. Cost of Sales
27
5.Inventory
Beginning
6. Referral Revenue
7. Freight-in
8. Purchase
Returns and
Allowances
9. Advertising
Income
10. Service Fees
Now, check your work by turning to page 36

for the key to correction.
How many correct answers did you get? Rate your result using the table above.
If your score is at least 10 out of 20, you may now proceed to next part of the discussion.
Day 2
Steps in preparing and presenting the SCI for a single-step approach:

1. Draft the appropriate heading. (name of the company, name of the statement and the
date of the statement)
2. Determine the Income from services
3. Determine the Expenses of the operation
4. Determine the effect of other items
7. Determine the Net Income
(Note: In presenting SCI, follow the format, alignment, spacing of account titles in good form.)
Heading
HAPPY TALYER Services
Service Revenue P152,000.00

Representation Expense P25,000.00
Salaries Expense 10,000.00
Rent Expense 8,000.00
Utilities Expense 7,000.00
Depreciation Expense 2,000.00 52,000.00 Body
Operating Income P100,000.00
Add: Gain on Sale of Equipment 50,000.00
Income Before Income Tax P150,000.00
Less: Provision for Income Tax 35,000.00
Net Income P115,000.00
============
Steps in preparing and presenting the SCI for a Multi-step approach:

1. Draft the appropriate heading
2. Determine the Sales or Revenue less Contra Revenue
3. Determine the Net Purchases, Cost of Sales/ Cost of Goods Sold and Gross Profit
4. Determine the General and Administrative Expenses
5. Determine the Selling Expenses
6. Determine the effect of other items
7. Determine the Net Income or Net Loss.
28
COST OF GOODS SOLD
Php 250,000.00
Now, do you know how to prepare the Statement of Comprehensive Income for service
business and merchandising concern? I do.
Drill 2: Use your notebook in answering. Let us try to answer first the following statements
if you really know the ideas and concepts of SCI preparation. Write the word “True” if the
29
statement is correct and “False” if it is incorrect. Write the answer on the space provided
before each number.
_________1. Income statement shows the profitability of the business.

_________2. It is customary for service organization industries operated as sole proprietors
to omit the cost of service.
_________3. The difference between freight-in and freight-out charges pertain to the receipt
or purchase of goods.
_________4. Income statement reflects the performance of an entity for a specified time
period
_________5. Freight-out is treated as an administrative expense.
Score Description
for the key to correction. 5 Very Good
How many correct answers did you get? Rate your result using 3-4 Good
the above.
2 Fair
If your score is at least 3 out of 5, you may now proceed to next Turn to sec.
part of the discussion. J and work
0-1 on the
enrichment
activities
Day 3
Activity 1: Word Scramble. Use your notebook in answering.
Description Unscrambled Answer

answer
1. Amounts earned through a company’s SNUREEEV
main activities.
2. A retailer’s revenues SSLEA
3. Costs used up in order to earn revenues SXNEESPE
4.The __________ basis of accounting is URLACAC
better than the cash basis for measuring
profitability in a limited time period.
5. The expense associated with debt. SITTEREN
6. At the end of the accounting year, income ODSLCE
statement accounts are ______________.
7. Sales minus the cost of goods sold is FRTIPO
gross _________.
8. Selling, general and administrative NPATROEIG
(SG&A) expenses are referred to as
_____________ expenses.
9. The heading of the income statement RDIPOE
discloses the _________ of time covered.
10. An accounting year beginning on July 1 LISAFC
and ending on June 30 is referred to as a
_________ year.
11. Earnings per share must be reported on DEDTAR
the income statement when a corporation's
stock is publicly ___________.
12. An increase in net assets from a ANGI
peripheral activity.
13. On a multiple-step income statement, TOREPAINGONN
interest expense is reported as a
_________ or other expense.
30
14. The elimination of an entire subsidiary IOUTSENDCDN
of a corporation will result in reporting an
amount on the income statement described
as __________ operations.
15. If a corporation sells a plant asset for YRRACING
less than its ___________ value, the
difference will be reported as a loss on the
income statement.
16. The income statement is also known as STAINROPEO
the statement of ____________.
17. The largest expense on a retailer's TCSO
income statement is usually its _____ of
goods sold.
18. Accrual accounting requires that DETACHM
expenses be __________ with revenues.
19. Changes in accounting ___________ SEMITATES
such as depreciation are not viewed as
errors.
20. The few gains or losses that are not VISORNEEMECHP
included in net income will be reported as
part of other ___________ income.

Score Description
How many correct answers did you get? Rate your result using 20 Very Good
the table. 15-19 Good
6-14 Fair
If your score is at least 15 out of 20, you may now proceed to
next part of the discussion. Turn to sec.
J and work
0-5 on the
enrichment
activities
Activity 2: Use your notebook in answering. Classify the following whether they are classified
as Revenue or Expenses. Write R for Revenue and E for Expenses.
1. Rent income
2. Salaries expense
3. Utilities expense
4. Administrative expense
5. Income tax expense
6. Delivery Sales
7. Dividend Income
8. Selling expense
9. Bad debts expense
10. Professional fees
Now, check your work by turning to pages 36

Score Description
How many correct answers did you get? Rate your result 10 Very Good
using the table. 6-9 Good
2-5 Fair
If your score is at least 6 out of 10, you may now proceed
to next part of the discussion. Turn to sec. J and
0-1 work on the
31
Activity 3: Use yellow paper in answering and attached it in your notebook.
The following are the accounts of Covid’s Psychiatric Clinic for the year ended December 31,
2019. (Note: arrange the expenses from largest to smallest amount and follow my example
on page 28)
Insurance Expense P 20,000

Salaries Expense 90,000
Utilities Expense 92,000
Rent Expense 110,000
Professional Fees 600,000
Supplies Expense 8,000
Bad Debts Expense 9,800
Depreciation Expense 18,500
Taxes and Licenses Expense 15,000
You are employed by the entity as the bookkeeper in its first year of operations. Prepare the
necessary financial statements for the current year.
Instructions:
a. Determine the net income.
b. Prepare a single-step Statement of Comprehensive Income.
Rubrics in Preparation of Statement of Comprehensive Income for Service Business
Preparation of Income Statement 5 4 3 2
Use of proper terms Expert/Master Proficient Competent Limited
Work meets
Consistent work Your work must
Ruling standards, but
Exemplary work. exceeding improve. You are
there is room for
standards. on probation.
Formatting of the SCI improvement.
Income Statement
Uses appropriate sections of the

Income Statement No error with 3 and more
1 accounts are not 2 accounts are not
properly classified accounts are not
properly classified properly classified
Revenues and Expenses Section accounts properly classifed
with 3 or more
Professionally formatted No error with 1 error with 2 errors
errors
Heading is centered
Date is written in full
With Peso Sign on the top and final
amount
All account titles start with a capital
Totals are preceded with a total line
Balances are on the same line
Balances are double ruled
not total with huge
with one arithmetic with 2 arithmetic
Calculations are correct No error difference to the
error error
answer.
Total Expenses
Total Income
Net Income/ Net loss

Score Description
How many correct answers did you get? Rate your result using 15 Very Good
the table. 8-14 Good
3-7 Fair
If your score is at least 8 out of 15, you may now proceed to
next part of the discussion. Turn to sec.
J and work
0-2 on the
enrichment
activities
32
Activity 4: Use 1 sheet of yellow paper in answering. Use the heading below as your guide.

Subject Teacher: ______________________
This will be graded as part of your performance task.
Use the following information to prepare a multi-step Statement of Comprehensive Income

including the revenue section and cost of goods section, for Quaranto Merchandising for the
year ended December 31,2019. (Note: follow my example on page 26)
Sales P 1,355,000
Sales Returns and allowances 16,300
Sales Discount 8,000
Purchases 880,000
Purchase Returns and allowances 21,600
Purchase Discount 18,900
Freight-in 6,900
Merchandise Inventory, Beginning 265,000
Merchandise Inventory, End 332,500
Salaries Expense - Office 38,000
Salaries Expense – Store 238,000
Supplies Expense - Office 9,000
Supplies Expense - Store 10,500
Utilities Expense 30% Store, 70% Office 70,000
Insurance Expense - Office 10,000
Rubrics in Preparation of Statement of Comprehensive Income for Merchandising Business
Preparation of Income Statement 10 8 6 4
Work meets
there is room for
Formatting of the Income Statement improvement.
Income Statement
Uses appropriate sections of an
Income Statement No error with 1 or 2 accounts are 3 or 4 accounts are 5 and more
properly classified not properly not properly accounts are not
Sales, COGS, Selling and
accounts classified classified properly classifed
Administrative Expenses
with 5 or more
Professionally formatted No error with 1 or 2 errors with 3 or 4 errors
errors
Heading is centered
amount
not total with huge
with one or 2 with 3 or 4
Calculations are correct Perfect/ No Error difference to the
arithmetic errors arithmetic errors
answer.
Net Sales
Cost of Goods Sold
Gross Profit
Total Income
Selling Expenses
Administrative Expenses
Net Income
33
Most of the entrepreneurs or businessmen relies with the bottom figures (Net Profit). Their
main goal is to maximize profit. Henry Sy, SM owner, started out by learning the ropes of the
retail beside his father in the family’s convenience store. Every space in the corners of his
mall has meaningful income. Now, we can gauge that his net worth and income plays a vital
role as being the top list in Forbes Philippines Rich List.
With the Statement of Comprehensive Income, a business owner is able to look at the past
financial performance of their company. With essential report from sales to profits and
operating and non-operating aspects, a business owner will be able to make sound
judgement and better financial decisions.
Like the successful entrepreneurs, having a good income statement means the company is
performing over the course of its existence or it acts a proof of business success.
Through this accurate and up-to-date income statement, it helps prepare a business to file
taxes.
Understanding the Statement of Comprehensive Income with regards to your plans of

becoming a successful businessman is to know the key features of this report and how it can
presented in good form. It is a great challenge for you as student and budding entrepreneur
to deeper knowledge of this financial statement.
Statement of Comprehensive Income / Income Statement / Profit and Loss Statement shows
the result of operations for a given period. Whether a service business or merchandising
business, SCI is presented in accurate and up-to-date form.
Comparison of the Single-step form (for service business) and Multi-step form (for
merchandising business
Single-step (Natural form) Multi-step (Functional form

Income from services Pxxxx Net Sales Pxxxx
Less: Cost of Sales xxxx
Gross: Profit Pxxxx
Less: Operating Expenses xxxx Less: Operating Expenses. xxxx
Net Income / Loss Pxxxx Net Income / Loss. Pxxxx
===== =====
Day 4
Quiz. Use 1 sheet of yellow paper. Use the heading below as your guide.

Name of Teacher: _______________________
Multiple Choice. Choose the letter of the best answer.
1. This is a financial statement that informs the reader about the “performance” and activities
of the company for a certain period.
A. Statement of Comprehensive Income. B. Statement of Financial Position
C. Statement of Changes in Equity D. Statement of Cash Flow
34
2. This is a typically the date of the statement of comprehensive income.
A. “As of December 31, 2019” B. December 31, 2019
C. “For the period ended December 31, 2019” D. None of the above
3. Which of the following is an element of statement of comprehensive income?

A. Accounts Payable B. Notes Receivable
C. Sales D. Equity
4. Which of the following is an element of statement of comprehensive income?

A. Notes Payable B. Interest Receivable
C. Interest Expense D. Office Supplies
5. Which of the following is classified as selling expense?

A. Salaries of the president B. Salaries of sales executives
C. Depreciation of administration building. D. Depreciation of office equipment
Identify each element or account title if it can be found on a service or merchandising

business. Complete the table by putting a () check mark or (X) cross mark in the
corresponding columns. (Use your notebook in answering)
Account Titles Service Merchandising Income/Revenue Expenses

business business
1.Revenue X   X
2.Selling Expenses
3.Administrative
Expenses
4.Service Fees
5.Salaries
Expense -Office
6.Rent Expense-
Store
7.Medical Income
8.Insurance
Expense -Office
9.Subscription
Fees
10. Sales
11.Consultation
Fees
If not, you have to go back to example 1 and try all over again.
Answer key is on page 37.
35
KEY TO CORRECTION
Drill 1 (from page 27-28)
Account Titles Service Merchandising

business business
1. Sales x 
2. Professional fees  x
3. Purchases x 
4. Cost of Sales x 
5.Inventory x 
Beginning
6. Referral Revenue  x
7. Freight-in x 
8. Purchase x 
Returns and
Allowances
9. Advertising  x
Income
10. Service Fees  x
Drill 2 (from page 30)

1. True 2.True 3.True 4. True 5. False
Key to Correction for Section F. Developing Mastery
Activity 1 (from page 30-31)

1. revenues 2.sales 3.expenses 4. accrual 5. interest
6. closed 7. profit 8. operating 9. period 10. fiscal
11. traded 12. gain 13. non 14. discontinued 15. carrying
operating
16. operations 17. cost 18. matched 19. estimates 20.
comprehensive
If not, you have to go back to sections C, D, and E and try all over again.
Activity 2 (from 31)
1. Rent income R
2.Salaries expense E
3.Utilities expense E
4.Administrative expense E
5.Income E
tax expense
6.Delivery Sales R
7.Dividend Income R
8.Selling expense E
9.Bad debts expense E
10. Professional fees R
If not, you have to go back to sections C, D, and E and try all over again.
36
Activity 3 (from page 32)
Covid’s Psychiatric Clinic

Professional Fees P 600,000.00

Rent Expense P110,000.00
Utilities Expense 92,000.00
Salaries Expense 90,000.00
Insurance Expense 20,000.00
Depreciation Expense 18,500.00
Taxes and Licenses Expense 15,000.00
Bad Debts Expense 9,800.00
Supplies Expense 8,000.00. 363,300.00
Net Income 236,700.00
=========
Key Correction for Section J. Additional activities for application or remediation (from page
35 )
Account Titles Service Merchandising Income/Revenue Expenses

business business
1.Revenue X   X
2.Selling Expenses X  X 
3.Administrative X  X 
Expenses
4.Service Fees  X  X
5.Salaries X  X 
Expense -Office
6.Rent Expense- X  X 
Store
7.Medical Income  X  X
8.Insurance X  X 
Expense -Office
9. Subscription  X  X
Fees
10. Sales X   X
11. Consultation  X  X
Fees
Lansangan Carreon for Sir Noy’s account
37
GRADE 12
School Teaching September 7 - 11, 2020

PAMPANGA HIGH SCHOOL Dates/ Week (Week 3)
I. OBJECTIVES
The learner demonstrates an understanding of the forms of business

organization, namely, single proprietorship, partnership, and corporation, and
the structure of a SCE of a single proprietorship that will equip him / her in the
preparation of the said financial report.
The learner is able to solve exercise and problems that require preparation of
an SCE for a single proprietorship.
The learner prepares an SCE for a single proprietorship. (ABM_FABM12-Ic-d-

9)
D. Objectives
1. recall the key features of the Statement of Changes in Equity (SCE); and
2. prepare an SCE for a single proprietorship.
II. CONTENT STATEMENT OF CHANGES IN EQUITY (SCE)
Learning Resources
A. Reference

- Josefina L. Beticon, James Cristopher D. Domingo and Fermin Antonio D.
Yabut , pages 54-58
Ong, Flocer L. (3rd Edition) Textbook pp. 35-36
III. PROCEDURES
Day 1
38
Hello there! How are you? How is your modular learning in the past week? If you
remember in the previous discussion the two financial statements namely Statement
of Financial Position (SFP) and Statement of Comprehensive Income (SCI) was
tackled with the stress on their key features or elements and the different approaches
in preparing them. So what are the components of SFP and SCI? What two
approaches or forms in presenting the two financial statements?
Elements of SFP:
1.Asset Cash, Accounts Receivable, Property, Plant and Equipment
2.Liabilities Accounts Payable, Loan Payable, Mortgage Payable
3. Capital/Equity Carreon, Capital
Two forms of SFP:
1.Account Form – it follows the accounting equation where Assets are listed on
the left-hand column with the Liabilities and Owner’s Equity on the right-hand
columns.
2. Report Form – it shows in one-straight column the Assets, followed by
Liabilities and Owner’s Equity.
Forms of SCI:
1. Natural form or Single-step approach for service business – it follows a single
step of deducting the expenses from revenue to arrive at the net income or net
loss.
2. Functional form or Multi-step approach for merchandising business – it
presents expenses according to function (e.g., cost of sales, selling expenses,
administrative expenses. It shows several activities to arrive at the net income or
net loss.
In your FABM1, you have learned the different business forms of organization.
Single or sole proprietorship is one of the business forms of organization that is
easiest to organize and easy to manage the business capital and funds. The
equity / capital (“bangka”) is being invested by the entrepreneur to gain profits
(“tubo”).
There is a saying: “The only permanent thing in this world is change.” – Toto
What is your opinion about this quote?

What is your perspective about the changes that happened or are happening in
your life especially during the pandemic times?
Businesses are not exempted from changes. What transpire from the business
operation are the changes and effects in your “bangka”. Specifically, the
Statement of Changes in Equity (SCE) reflects changes in the owner’s
interest, equity and capital of the owner(s) of the business.
Do you know the accounts that comprise the owner’s equity section of the
Statement of Financial Position for a single proprietorship? Yes.
Any changes from the owner’s equity section in the SFP comes a financial
report that is Statement of Changes if Equity (SCE).
Let us have an example of Statement of Changes of Equity for a single

proprietorship business. Take a look at the SCE of Liling Laundry Services.
Liling Laundry Services

Statement of Changes in Equity
For the year ended December 31, 2019
39
Liling, Equity, Beginning P300,000.00
Add: Additional investment P50,000.00
Net Income 75,000.00 125,000.00
Total 425,000.00
Less: Liling, Drawings 30,000.00
Liling, Equity, Ending P395,000.00
==========
Key features of Statement of Comprehensive Income
1. The Title
SCE is a financial report. As a financial report, it must be properly identified and
dated. An appropriate title or heading includes the name of the entity, the title of the
report and the period it covers.
Why is the heading of the SCE resembles that of a comprehensive income?

Answer: Because the SCE shows the movement in the capital account of the
owner.
2. Equity-beginning is the opening balance of the owner’s account. This is the

ending balance of the equity account in the previous year.
3. Additional investment pertains to any capital infusion “bakas” made by the

owner for the year.
4. Net Income / net loss pertains to the amount earned / lost by the single
proprietor for the year. This amount is taken from the SCI.
A case of net loss happens when total expenses are greater than revenues.
5. Drawings / withdrawals represent the owner’s returned of investment.
6. Equity-ending represents the balance of the owner’s equity at the end of the
year.
Recall that capital or equity account is a real account. This means that the
balance will carried forward to the succeeding year.
Drill 1: Use your notebook in answering. Now it is your turn to identify each element
or account title if it can be found on SFP, SCI or SCE. Complete the table by putting
a () check mark or (X) cross mark in the corresponding columns.
Account Titles SFP SCI SCE

1. Net Income
2. Sales
3.Briones, Drawings
4. Supplies on Hand
5.Supplies Used
6. Net Loss
7.Additional
Investments
8. Duque, Capital,
beginning
9. Prepaid Expenses
10. Patent
Now, check your work by turning to page 45 for the key to correction.
How many correct answers did you get? Rate your result using the table above.
40
If your score is at least 20 out of 30, you may now proceed to next part of the
discussion.
Day 2
Steps in preparing and presenting the SCE for a single proprietorship

business:
1. Draft the appropriate heading. (name of the company, name of the statement
and the date of the statement)
2. Determine the beginning balance of capital (equity)
3. Determine the amount of investment (initial or additional)
4. Determine the amount of Net Income
5. Determine the balance of the drawing (withdrawal) account
6. Determine the ending balance of the capital or owner’s equity
(Note: In presenting SCI, follow the format, alignment, spacing of account titles in
good form.)
CARREON TALYER Services Heading

Carreon, Capital, beginning P150,000.00

Add: Additional Investment P45,000.00 Body
Net Income 15,000.00 60,000.00
Total 210,000.00
Less: Carreon, Drawings 10,000.00
Carreon, Capital, end P200,000.00
==========
Now, do you know how to prepare the Statement of Changes is Equity for a single
proprietorship? I do.
Drill 2. Use your notebook in answerig. Direction: Fill in the missing blank for an
account title and amount of Statement of Changes in Equity (SCE) for a single
proprietorship.
Noy’s Creation Services

Statement of (1.)_________
Carreon, (2.)___________, Jan. 1, 2019 Php 990,000.00

Add: Investments by Owner P 100,000.00
3.) ________________ (60,000.00) 40,000.00
Total (4.)Php________
Less: Carreon, Withdrawals 50,000.0
Carreon, Capital, Dec. 31, 2019 (5.)Php________
Score Description
How many correct answers did you get? Rate Good
3-4
your result using the table.
2 Fair
If your score is at least 3 out of 5, you may now Turn to sec. J and
proceed to next part of the discussion. 0-1 work on the
41
Activity 1: Yosef’s Café (Use your notebook in answering)
Yosef’s Café is owned by Mr. Yosef Kristof. The balance of Mr. Yosef Kristof’s capital
as of January 1, 2019 is P500,000.00. During the year, he invested an additional
P100,000.00 in the business. Also, Yosef’s Café earned P80,000.00 of net income. Finally,
he withdrew, P50,000.00.
1. How much is the balance of Yosef’s capital balances as of December 31, 2019?
2. Prepare a statement of changes in the owner’s equity for Yosef’s Café. (Please use the
rubric above.)
Rubrics in the Preparation of Statement of Changes in Owner's Equity
Preparation of SCE 10 8 6 4

Consistent work Work meets standards, Your work must
Ruling Exemplary work. exceeding but there is room for improve. You are on
Formatting of the SCE standards. improvement. probation.
Balance Sheet: Proper Classifications
Uses appropriate sections of an SCE: No error with 1 or 2 accounts are 5 and more
3 or 4 accounts are not
Capital, beginning, Additional investment, Net Income, properly classified not properly accounts are not
properly classified
Drawings and Capital, ending accounts classified properly classified
with 5 or more
errors
Heading is centred
With Peso Sign on the top and final amount
not total with huge
with one or 2 with 3 or 4 arithmetic
Calculations are correct : Capital, ending Perfect difference to the
arithmetic error error
correct answer.
Score Description
30 Very Good
for the key to correction. 21-29 Good
How many correct answers did you get? Rate your Fair
result using the table. 16- 20
Turn to
If your score is at least 21 out of 30, you may now pages 7 sec.
proceed to next part of the discussion. J and work
0 - 15
on the
enrichment
activities
Day 3
Activity 2: TY Trading (Use your notebook in answering)
TY Trading is owned by Ms. Tenk Yu. As at January 1, 2019, Ms. Yu’s capital balance is
P 270,000. Ms. Yu also invested additional inventories of P185,000 during the year. TY
Trading earned a net income of P55,000. As of December 31, 2019. Ms. Yu’s capital
balance amounted to P385,500. How much is Ms. Yu’s withdrawal for 2019?
Requirements:
1. How much is the drawing of Ms. Yu in 2019?
2. Prepare a statement of changes in owner’s equity for TY Trading. (Please use the rubric
above.)
42
Now, check your work by turning to page 46 Score Description
How many correct answers did you get? Rate your 21-29 Good
result using the table. 16-20 Fair
Turn to sec.
If your score is at least 21 out of 30, you may now
J and work
proceed to next part of the discussion.
0 - 15 on the
enrichment
activities
Owners like Henry Sy and John Gokongwei have invested in the business to maximize
their wealth and they are interested in knowing how the business’ financial position and
financial performance has affected their vested interest in the business. And this is not
particularly catered neither by Statement of Financial Position nor Statement of
Comprehensive Income.
Hence the Statement of Changes in Equity is important to get all such important
information.
The following are some of the questions that useful in preparing the statement of changes
in equity.
How much is the current profit of the business?

How much total capital is invested by owners?
Will I put another investment to my business?
How much profit withdrawn?
Is the capital sufficient to sustain the day-to-day operation?
The Statement of Changes in Equity tells a specific story about the owner’s stake in the
company. The SCE tells the reader about beginning stake in the company (beginning
capital), and additional investment, withdrawal of resources, and share in net income or
net loss.
The possible changes in owner’s in equity are the following:
Capital Increases
a) net income for the period
b) additional investment
Capital Decreases
a) net loss for the period
b) withdrawal
Day 4
I. Evaluating Learning

Subject Teacher: _______________________
Part I Multiple Choice. Write the letter of the best answer.
43
1. How many people can own a sole proprietorship?
A. One B. More than one
C. Two but not more than five D. Five or more
2. What is a financial statement that tells a specific story about the owner’s stake in the
company?
A. Statement of Financial Position B. Statement of Comprehensive Income
C. Statement of Changes in Equity D. Statement of Cash Flow
3. The beginning capital of Jaicar’s Trading is P 728,000. during the year the owner made
an additional investment of P 20,000 and withdrew P 35,000 for personal use. Net income
during the year amounted to P 45,000. How much is the ending capital of Jaicar’s Trading?
A. 718,000 B. 728,000
C. 738,000ve D. 758,000
4. It is an account bearing the name of the owner representing the original and additional
investment of the owner of business.
A. Assets B. Liabilities
C. Capital D. Income
5. What is the effect of the withdrawals in the statement of changes in equity?

A. Increases B. Decreases
C. No effect D. Zero
Part II. Preparation of SCE
Requirements:
1 How much is the drawing of Ms. Jade in 2018.
2. Prepare a Statement of changes in owner’s equity for Jade Trading
Jade Trading is owned by Ms. Jaden Ocampo. As at January 1, 2018, Ms. Jaden’s capital
balance is P 350,000. Ms. Jaden also invested additional inventories of P235,000 during
the year. Jade Trading earned a net loss of P105,000. As of December 31, 2018. Ms.
Jaden’s capital balance amounted to 550,000. How much is Ms. Jaden’’s withdrawal for
2018?
Day 5
Use you notebook in answering.
Canada Foods is owned by Mr. C. Anada. Mr. C. Anada’s capital balance as of January
1, 2019 is P300,000. During the year, Mr. Anada infused additional capital of P37,500.
Also Canada foods incurred a net loss of P30,000. Furthermore, Mr. Anada withdrew
P124,500 during 2019.
Requirements:
1. How much is the balance of Mr. C. Anada’s capital balance as of December 31, 2019?
2. Prepare a statement of changes in owner’s equity for Canada Foods. (Please use the
rubric above.)
You may proceed to the next part of the discussion if your score is at least 21
out of 30.
KEY TO CORRECTION
Drill 1 (from pages 40)
44
Account Titles SFP SCI SCE
1. Net Income X  
2. Sales X  X
3.Briones, Drawings X X 
4. Supplies on Hand   X
5.Supplies Used X  X
6. Net Loss X  
7.Additional Investments X X 
8. Duque, Capital, beginning X X 

9. Prepaid Expenses  X X
10. Patent  X X
out of 30.
Noy’s Creation Services

Statement of (1.) Changes in Equity
Carreon, (2.) Capital, January. 1, 2019 Php 990,000.00

Add: Investments by Owner P 100,000.00
3.) Net Loss (60,000.00) 40,000.00
Total (4.)Php1,030,000.00
Less: Carreon, Withdrawals 50,000.00
Carreon, Capital, Dec. 31, 2019 (5.)Php 980,000.00
Activity 1 (from page 42 )
Yosef’s Café
Statement of Changes In Equity
Kristof, Capital, January 1, 2019 P 500,000.00

Add: Additional Investment P 100,000.00
Net Income 80,000.00 180,000.00
Total 680,000.00
Less: Kristof, Drawings 50,000.00
Kristof, Capital, December 31, 2019 P 630,000.00
=========
out of 30.
If not, you have to go back the activity and try all over again.
45
TY Trading
Yu, Capital, January 1, 2019 P 270,000.00

Add: Additional Investment P 185,000.00
Net Income 55,000.00 240,000.00
Total 510,000.00
Less: Yu, Drawings 124,500.00
Yu, Capital, December 31, 2019 P 385,500.00
=========
out of 30.
Key Correction for Section J. Additional activities for application or

remediation (from page 44 )
Canada Foods
Anada, Capital, January 1, 2019 P 300,000.00

Add: Additional Investment 37,500.00
Total 337,500.00
Less: Yu, Drawings P 124,500.00
Net Loss 30,000.00 154,500.00
Yu, Capital, December 31, 2019 P 183,000.00
=========
If you need more help, you may reach me at CP No. 09189030109 or send a
private message thru facebook account Arnold Lansangan Carreon or CP No.
09451144098 or private message thru facebook account dhitegozunbaluyut.
46
GRADE 12
School Teaching Dates/ September 14 – 18, 2020

I. OBJECTIVES
The learner demonstrates an understanding the components and structure of a CFS that will
equip him / her in the preparation of the said financial report.
The learner is able to solve exercises and problems that require preparation of a CFS.
The learner discusses the components and structures of a CFS (ABM_FABM12-If-10) and
prepares a CFS, (ABM_FABM12-IF-11)
D. Objectives
1. know the different components that comprise the statement of cash flows (SCF);
and
2. prepare the statement of cash flows.
II. CONTENT STATEMENT OF CASH FLOWS (SCF)
Learning Resources
A. Reference

Josefina L. Beticon, James Cristopher D. Domingo and Fermin Antonio D.
Yabut , pages 90-98
Ong, Flocer L. (3rd Edition) Textbook pp. 50-61
III. PROCEDURES
Day 1
47
Hello there! How are you? How is your modular learning in the past week? If you remember in
the previous discussion the three financial statements namely Statement of Financial Position
(SFP), Statement of Comprehensive Income (SCI) and Statement of Changes in Equity (SCE)
Last week, we discussed the 3rd financial statement that is SCE for a single proprietorship.
You came across with the formula and the way you prepared the said report.
Capital beginning + additional investment + net income -drawings – net loss= Capital
ending
The 4th financial statement is the Statement of Cash Flows (SCF). This report summarizes the
cash receipts (“deng linub a pera”) and cash disbursements (“deng linwal a pera”) for the
accounting period.
A statement of cash flows has three major sections: operating, financing and investing. Each
section represents the classification of organization’s cash related activities.
Investing
Operating
Financing
Organization’s Cash Related

Activities
Why is Statement of Cash Flow important?
The Statement of Cash Flow is important because it informs the reader or the interested user
of the business cash position. For a business to be successful, the following must be taken into
consideration: 1) It must have sufficient cash at all times; 2) It needs cash to pay its expenses,
to pay bank loans, to pay taxes and to purchase new assets.
Having cash is a key requirement for a business to stay solvent. When a business has no
longer enough cash to pay its dues, it is often declared bankrupt.
Below is an example of a Statement of Cash Flows.
Mini-Talyer Services
Statement of Cash Flows
CASH FLOW FROM OPERATING ACTIVITIES

Cash receipts from rendering of services P 207,500.00
Cash payments to supplier of goods and services (158,000.00)
Net cashflow from operating activities 49,500.00
CASH FLOW FROM INVESTING ACTIVITIES

Purchase of property plant and equipment (36,000.00)
CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from cash investment of owners 500,000.00
Proceeds from bank loans 100,000.00
48
Payment to owners (25,000.00)
Net cashflows from financing activities 575,000.00
NET INCREASE IN CASH 588,500.00

CASH, BEGINNING OF THE PERIOD 50,000.00
CASH AT THE END OF THE PERIOD P 638,500.00
Day 2

Three Components of the Statement of Cash Flows classified according to activities
1. Operating Activities - the cash inflows (receipts) and the cash outflows (payments) arising
from the normal operations of the business.
Examples:
 Cash receipts from sale of goods and rendering of services (+)
 Cash receipts from royalties, fees, commission and other revenue (+)
 Interest received (+)
 Dividends received (+)
 Cash payments to suppliers of goods and services (-)
 Cash payments to employees (-)
 Cash payments to income taxes (-)
 Interest paid (-)
2. Investing activities - generally result from acquisition and disposal of non- current assets.
Examples:
 Cash receipts from sale of Property, Plant and Equipment (+)

 Cash receipts from sale of intangible assets (+)
 Cash receipts from sale of long-term assets (+)
 Cash payments to acquire Property, Plant and Equipment (-)
 Cash payments to acquire intangible asset (-)
3. Financing activities - usually arise from changes in non-current liabilities and owner’s
equity of a business organizations.
Examples:
 Proceeds from cash investment of owners (+)

 Proceeds from bank loans (+)
 Payment to owners or creditors (-)
 Payment of long-term debt (-)
 Cash withdrawal of owners (-)
Drill 1: Use your notebook in answering. For each item, determine whether it will affect the
operating, financing or investing activity in the Statement of Cash Flow. Choose the letter of the
best answer and put it on the space provided each number.
A. Operating Activities B. Investing Activities C. Financing Activities
____ 1. Gains on the sale of automobile formerly used in the business.

____ 2. The purchase of a new delivery truck to be used in the business.
____ 3. An increase in bonds payable.
____ 4. Additional investment of the owner.
____ 5. A decrease in the current liability income taxes payable.
49
Score Description
Now, check your work by turning to page 58 Very Good
for the key to correction. 5
How many correct answers did you get? Rate your result using 3-4 Good
the table above. 2 Fair
If your score is at least 3 out of 5, you may now proceed to next Turn to sec.
part of the discussion. J and work
0-1 on the
E. Discussing new concepts and practicing new skills #2 enrichment
activities
Steps in preparing and presenting the SCE for a single proprietorship business:
1. Draft the appropriate heading. (name of the company, name of the statement and the date
of the statement)
2. Analyze the cash transactions.
3. Prepare the operating activity section.
4. Prepare the investing activity section.
5. Prepare the financing activity section.
6. Determine the Ending Cash balance
(Note: In presenting SCF, follow the format, alignment, spacing of account titles in good form.)
Mini-Talyer Services Heading


Cash receipts from rendering of services P 207,500.00
Cash payments to supplier of goods and services (158,000.00)

Purchase of property plant and equipment (36,000.00)
CASH FLOW FROM FINANCING ACTIVITIES Body

Proceeds from cash investment of owners 500,000.00

CASH AT THE END OF THE PERIOD P 638,500.00
Drill 2. Preparation of SCF (with attached rubrics in presenting the Statement of Cash
Flow). Use your notebook in answering. Score Description
Now, check your work by turning to page 58 15 Very Good
How many correct answers did you get? Rate your result
using the table. 7-10 Fair
Turn to sec. J and
If your score is at least 11 out of 15, you may now proceed 0-6 work on the
to next part of the discussion. enrichment activities
50
Cash at the beginning is P300,000
Rubrics in Preparation of Statement of Cash Flow
Preparation of Statement of Cash Flows 5 4 3 2
Work meets
there is room for
Formatting of the SCF improvement.
Uses appropriate sections of Statement

of Cash Flows No error with 1 or 2 accounts are 3 or 4 accounts are 5 and more
properly classified not properly not properly accounts are not
Operating, Investing and Financing
accounts classified classified properly classifed
Activities
with 5 or more
errors
Heading is centered
amount
Proper Phrasing of Activities
Alignment of amount
not total with huge
with one or 2 with 3 or 4
Calculations are correct No error difference to the
arithmetic errors arithmetic errors
answer.
Net cash flow from Operating Activities
Net Cash flow from Investiong Actitiies
Net Cash flow from Financing Activities
Net Increase in Cash
Cash at the end of the Period
Day 3
Activity 1 Classification of Concepts: Use your notebook in answering. Classify each

transaction whether they are operating, investing or financing. Then, indicate the reason for
each classification. Finally indicate the effect of the transactions to cash flows
51
Transaction Activity Effect
1. Payment to supplier of goods Operating Decreases cash
2. Payment to supplier of goods
3. Payment to supplier of services
4. Receipts from goods sold
5. Payment to employees
6. Purchase of equipment
7. Purchase of fixtures
8. Purchase of patents
9. Purchase of copy rights
10. Cash investment from owners
11. Repayment of bank loans
Score Description
10 Very Good
How many correct answers did you get? Rate your result Fair
3-5
using the table.
Turn to sec.
If your score is at least 6 out of 10, you may now proceed J and work
to next part of the discussion. 0-2 on the
enrichment
activities
Activity 2 Scrambled: Use your notebook in answering. Arrange the unscrambled words.
1. The first section of the statement of cash flows reports the cash
ETGNORIPA
flows from ___________ activities.
2. The second section of the statement of cash flows reports the cash
IGNSVTIEN
flows from __________ activities.
3. The third section of the statement of cash flows reports the cash
AGNIFNICN
flows from ___________ activities.
4. Under the indirect method, an increase in __________ assets
other than cash will cause a decrease in cash from operating NRCETRU
activities.
5. Under the indirect method, a decrease in current ____________
BILASITILEI
will cause a decrease in cash from operating activities.
6. The cash __________ from the sale of a long-term asset will be
reported in the investing activities section of the statement of cash COPESRED
flows.
7. A corporation's ___________ on its stock will appear as a
deduction in the financing activities section of the statement of cash DDINSIDVE
flows.
52
8. Capital _______________ are a significant deductions in the
XDESNETRIEPU
investing activities section of the statement of cash flows.
9. The purchase of ____________ stock will cause a negative
amount in the financing activities section of the statement of cash ERYRSATU
flows.
10. The __________ of bonds payable will be reported as a negative
amount in the financing activities section of the statement of cash NEETITMRRE
flows.
Score Description
10 Very Good
How many correct answers did you get? Rate your result using
3-5 Fair
the table.
Turn to sec.
If your score is at least 6 out of 10, you may now proceed to next J and work
part of the discussion. 0-2 on the
enrichment
activities
Activity 3: Write letter “T” if the statement is True and “F” if False in the space provided before
each number. Use your notebook in answering.
Score Description
Now, check your work by turning to page 59 5 Very Good
3-4 Good
for the key to correction. Fair
How many correct answers did you get? Rate your result using 2
the table. Turn to sec.
J and work
If your score is at least 3 out of 5, you may now proceed to next 0 -1 on the
part of the discussion. enrichment
activities
_______1. There is an outflow of funds in depreciation.
_______2. The statement of cash flow is divided into three required categories: operating,
investing and financing activities.
_______3. The purchase of land is classified in the statement of cash flows of operating
activities.
_______4. Selling a piece of equipment below cost is an example of investing activity.
_______5. Paying dividends to investors creates a cash outflow from financing activities.
Day 4
Activity 4: Preparation of Statement of Cash Flow (use the above rubrics). Use your
notebook in answering.
53
Score Description
How many correct answers did you get? Rate your result Good
using the table. 11-14
7-10 Fair
If your score is at least 11 out of 15, you may now proceed Turn to sec. J and
to next part of the discussion. 0-6 work on the
As a student, you can make your own journal by doing the following: 1.) Writing your monthly
allowance (computed by daily allowance x number of days in a month) and any liabilities that
you got from classmates, friends, family members; 2.) Writing the amount you spend on food,
transportation, etc. (make it monthly to match your allowance); and 3) Deducting the amount
you spend from the amount of your allowance.
Small businesses rarely produce a cash flow report, as profit and loss report is sufficient for
their needs. It is unlikely that a small business such as a sari-sari store will involve complex non
cash transactions that would warrant such information. Therefore, it is considered a waste of
time and money to have an accountant prepare a report that would be of little use to anyone!
On the other hand, for large entities such as Jollibee, Metrobank, Google Philippines, and
Microsoft, having a cash flow report is imperative. Such companies will often have a significant
amount of non-cash transactions, sometimes even billions of pesos in revenue that is simply
owed to them but hasn’t been received in cash yet.
54
Statement of Cash Flows show the net increase or decrease of cash in a given period and the
cash balance at the end of the period. This allows management to assess the ability of the
business to generate cash and project future cash flows.
Decision Rule in Determining Classifications of Cash Transactions
 Operating Revenue and Expenses

 Investing Non-Current assets
 Financing Equity and Non-Current Liabilities
Day 5
I. Evaluating Learning

Subject Teacher: _______________________
Multiple Choice. Write the letter of the best answer. Use Capital letter.
1. Which of the following events increases cash balance?

A. Bank not granting loan
B. Debtors paying to the company
C. Loan repayment to creditors
D. Sales of stock on account
2. Which of the following events reduces cash balance?

A. Purchase of fixed assets
B. Acquired assets on credit
C. Purchase of stock on account
D. Creditors grant loans
3. Which of the following is false?

A. A profitable business will never run out of cash
B. Companies undergoing expansion can sometimes face a cash shortage
C. In cash outflows exceed cash inflows on an ongoing basis, the business will eventually run
of cash.
D. Cash is the lifeblood of a business and without it the business will eventually die.
4. What is the effect of paying loan principal on cash flow and profits?
A. On profit – Decrease; On cash – Decrease
B. On profit – Decrease; On cash – None
C. On profit – Increase; On cash – Decrease
D. On profit – None; On cash – Decrease
55
5. Which one of the following is not a category of cash flows required to be shown on the
statement of cash flows?
A. Cash flows from operating activities
B. Cash flows from investing activities
C. Cash flows from financing activities
D. Cash flows from taxation
6. Which one of the following is a category of cash flows from investing activities?
A. Increase in inventory
B. Proceeds of a loan
C. Proceeds from the sale of Property, Plant and Equipment
D. Dividends paid
7. Which of the following would reduce the cash balances and not reduce the profit?
A. Distribution costs
B. Dividends paid
C. Interest paid
D. Wages paid
8. Which of the following reduces the cash balances of a business?

A. Cash inflow from interest income
B. Cash inflow from dividend income
C. Cash outflow to acquire fixed assets
D. All of the above
9. Which of the following is a cash flow from a financing activity?

A. Cash payments to acquire intangible asset
B. Cash receipts from sale of tangible assets
C. Cash proceeds from bank loans
D. Cash payments to acquire Property, Plant and Equipment
10. Which of the following is not a cash outflow for the business?
A. Depreciation
B. Dividends
C. Interest payments
D. Taxes
Part II
Prepare Statement of Cash flow (15 points. See rubrics on page 51)
56
Activity 5 Classification of Concepts: Use your notebook in answering. Classify each

transaction whether they are operating, investing or financing. Then, indicate the reason for
each classification. Finally indicate the effect of the transactions to cash flows

2. Payment to owners
3. Receipt from owners
4. Payment of income taxes
5. Payment from long-term debt
6. Proceeds from long-term debt
7. Proceeds from sale of vehicles
8. Purchase of Goodwill
9. Receipts from sale of trademarks
10. Payment of rental
11. Payment of VAT
Activity 6: Write letter “T” if the statement is True and “F” if False in the space provided before
each number. Use your notebook in answering
________1. The primary purpose of the statement of cash flow is to provide cash-basis
information about the company’s operating, investing and financing activities.
57
________2. The first in the preparation of statement of cash flow is to determine the net cash
flow from operating activities.
________3. Companies report the cash flows from the purchases and sales of trading activities
as cash flows from operating activities.
________4. Financing activities generally result from acquisition and disposal of non-current
assets.
________5. The issuance of stock dividends is entered on the cash flow worksheet, but is not
reported in the statement of cash flows.
KEY TO CORRECTION
1. B 2. B 3. C 4. C 5. A
Drill 2 (from pages 50)
Juan to Go Sales
Statement of Flows

Cash sales P 50,000.00
Paid rent for the month (3,000.00)
Paid utilities for the month (8,000.00)
Purchased office supplies (2,000.00)
Paid insurance for the year (20,000.00)
Paid employee salaries (65,000.00)
Net cashflow from operating activities ( 48,000.00)

Purchase transportation equipment (120,000.00)

Additional investment of Mr. Juan 200,000.00
Paid loan to the Philippine Bank (30,000.00)
Cash withdrawal of Mr. Juan (15,000.00)
NET DECREASE IN CASH (13,000.00)

CASH AT THE END OF THE PERIOD P287,000.00
=========
58
Activity 1 (from page 51-52 )
Activity 1 Classification of Concepts: Classify each transaction whether they are operating,
investing or financing. Then, indicate the reason for each classification. Finally indicate the
effect of the transactions to cash flows

2. Payment to traders Operating Decreases cash
3. Payment to supplier of services Operating Decreases cash
4. Receipts from goods sold Operating Increases cash
5. Payment to employees Operating Decreases cash
6. Purchase of equipment Investing Decreases cash
7. Purchase of fixtures Investing Decreases cash
8. Purchase of patents Investing Decreases cash
9. Purchase of copyrights Investing Decreases cash
10. Cash investment from owners Financing Increase cash
11. Repayment of bank loans Financing Decreases cash
Activity 2 (from pages 52-53 )
1. OPERATING 6. PROCEEDS
2.INVESTING 7. DIVIDENDS
3.FINANCING 8. EXPENDITURE
4.CURRENT 9.TREASURY
5.LIABILITIES 10.RETIREMENT
Activity 3 (from pages 53)
1. F 2. T 3. F 4. T 5. T
If not, you have to go back the activity and try all over again.
59
California Trading
Statement of Flows

Cash receipts from rendering services P125,000.00
Cash payment to suppliers of goods and
series (62,500.00)

Payment of acquisition of equipment (250,000.00)

Proceeds from cash investment of own 287,500.00

CASH, BEGINNING OF THE PERIOD 2,500,000.00
CASH AT END OF THE PERIOD P2,650,000.00
============
If not, you have to go back to the activity try all over again.
Key Correction for Section J. (additional activities for remediation from page 57)
Activity 5 Classification of Concepts:

2. Payment to owners Financing Decreases cash
3. Receipt from owners Financing Increases cash
4. Payment of income taxes Operating Decreases cash
5. Payment from long-term debt Financing Decreases cash
6. Proceeds from long-term debt Financing Increases cash
7. Proceeds from sale of vehicles Investing Increases cash
8. Purchase of Goodwill Investing Decreases cash
9. Receipts from sale of trademarks Investing Increases cash
10. Payment of rental Operating Decreases cash
11. Payment of VAT Operating Decreases cash
Activity 6 (from pages 57-58)

1. T 2. F 3. T 4. F 5. T
60
GRADE 12
School Teaching September 21 – 25,

PAMPANGA HIGH Dates/ Week 2020 (Week 5)
SCHOOL
I. OBJECTIVES
The learners demonstrate an understanding of the methods or tools

of analysis of financial statements to include horizontal analysis, vertical
analysis, and financial ratios to test the level of liquidity, solvency,
profitability and stability of the business.
The learner shall be ble to solve exercises and problems that require
computation and interpretation using horizontal analysis, vertical analysis
and various financial ratios. Using the downloaded sample financial
statements, he/she performs horizontal and vertical analysis, compute
various financial ratios and interprets the level of liquidity, solvency,
stability and profitability of the business.
The learners perform vertical and horizontal analysis of a single

proprietorship. (ABM_FABM12-Ig-h13)
D. Objectives
1. Perform horizontal analysis of a single proprietorship

2. Perform vertical analysis of a single proprietorship
II. CONTENT
ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS
Learning Resources
A. Reference
Fundamentals of Accountancy, Business and Management 2

Fundamentals of Accountancy, Business and Management 2 for SHS

Ong, Flocer L. and Gomendoza, Janelle L. (2017) pp. 64-74
III. PROCEDURES
61
Day 1
In the previous lessons, you were introduced to the different financial statements
that are prepared by an entity. Could you name these financial statements?
The financial statements which are prepared on a periodic basis are composed of
the following:
a. Statement of Comprehensive Income
b. Statement of Changes in Owner’s Equity
c. Statement of Financial Statement
d. Statement of Cash Flows
e. The Notes to Financial Statements - discussed the nature of the
company’s operations, its accounting policies, basis for estimates,
components of the accounts and significant transactions.
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. A company’s financial statements provide
important information about a business enterprise.
The analysis helps the user make an informed decision or judgment rather than
rely on guesses and intuition in the process of decision making by effectively and
systematically using the financial data. It lessens the uncertainty of outcomes with
every decision made because of the analytical tools.
Financial statement are analyzed to evaluate a company’s present financial

position and operating performance in relation to its past.
One of the qualitative characteristics of a good financial statement is comparability.

This is the ability of the financial statement to create a basis and allow the
identifications of similarities and differences between the statements being
compared.
The tools and techniques in analyzing the financial data are

1. Horizontal Analysis
2. Vertical analysis
3. Financial Ratio Analysis
Horizontal Analysis
➢ The company will compare their own financial statements for the
current period with their financial statements from the prior period.
The prior period amount normally serves as the basis or the starting
point of the comparison. Increase and decrease are being taken and
such will be measured in percentages.
Steps in Performing Horizontal Analysis
1. Prepare comparative financial statements of two consecutive years.
62
2. Add a third column for the increase or decrease in amount and a fourth
column for the percentage of the increase or decrease.
3. Get the percentage of increase or decrease for each account.
a. Choose a base year which is the prior period or the initial year of
analysis
b. Deduct the amount of the current year from the base year.
c. Divide the difference above by the amount of the base year
d. Multiply the quotient by 100 to get the percentage of change.
e.
Step 1. Prepare comparative financial statements of two consecutive years.
Fidel Merchandising
As of December 31
ASSETS 2016 2015

Current Assets
Cash 500,000.00 420,000.00
Accounts Receivable (net) 80,000.00 100,000.00
Inventory 60,000.00 35,000.00
Total Current Assets 640,000.00 555,000.00
Non Current Assets
Land 700,000.00 625,000.00
Patent 90,000.00 50,000.00
Total Non-Current Assets 790,000.00 675,000.00
TOTAL ASSETS 1,430,000.00 1,230,000.00
LIABILITIES AND OWNER'S EQUITY
Current Liabilities
Accounts Payable 400,000.00 330,000.00
Notes Payable 250,000.00 200,000.00
Total Liabilities 650,000.00 530,000.00
Owner's Equity
Fidel, Capital 780,000.00 700,000.00
TOTAL LIABILITIES & OWNERS EQUITY 1,430,000.00 1,230,000.00
Step 2. Add a third column for the increase or decrease in amount and a
fourth column for the percentage of the increase or decrease
63
Step 3. Get the percentage of increase or decrease for each account.
Fidel Merchandiding
As of December 31
% of
Increase increase
ASSETS 2016 2015 (Decrease) (decrease)
Current Assets
Cash 500,000.00 420,000.00 80,000.00 19.05%
Accounts Receivable (net) 80,000.00 100,000.00 (20,000.00) (0.20)
Inventory 60,000.00 35,000.00 25,000.00 71.43%
Total Current Assets 640,000.00 555,000.00 85,000.00 15.32%
Non Current Assets
Land 700,000.00 625,000.00 75,000.00 12.00%
Patent 90,000.00 50,000.00 40,000.00 80.00%
Total Non-Current Assets 790,000.00 675,000.00 115,000.00 17.04%
TOTAL ASSETS 1,430,000.00 1,230,000.00 200,000.00 16.26%
Current Liabilities
Accounts Payable 400,000.00 330,000.00 70,000.00 21.21%
Notes Payable 250,000.00 200,000.00 50,000.00 25.00%
Total Liabilities 650,000.00 530,000.00 120,000.00 22.64%
Owner's Equity
Fidel, Capital 780,000.00 700,000.00 80,000.00 11.43%
TOTAL LIABILITIES & OWNERS EQUITY 1,430,000.00 1,230,000.00 200,000.00 16.26%
Note:
A. Choose a base year which is the prior period or the initial year of
analysis.
2016 is the current year while 2015 is the base year or prior year.
B. Deduct the amount of the current year from the base year.
2016 cash balance of 500,000 less 2015 cash balance of P420,000 =
P80,000. The increase of P80,000 was reflected in the third column for
cash account.
C. Divide the difference above by the amount of the base year.

P80,000/420,000 = 0.19047
D. Multiply the quotient by 100 to get the percentage of change.

▪ 0.19047 x 100 = 19.05% reflected in the fourth column
▪ We round-off our answer into 2 decimal places.
▪ Comparing the two financial statement for cash account balance, we
can see that the cash balance increased by 19.05% in 2016.
▪ Same method of computation for the rest of the accounts.
Drill 1. Compute for the horizontal analysis on the Statement of

Comprehensive Income of Fidel Merchandising. Use your notebook in
answering.
64
Fidel Merchandising
For the Year Ended December 31
Increase % of increase
2016 2015 (Decrease) (decrease)
Net Sales 950,000.00 880,000.00

Less Cost of Goods Sold 180,000.00 260,000.00
Gross Profit 770,000.00 620,000.00
Less Operating Expenses 180,000.00 140,000.00
Operating Income 590,000.00 480,000.00
Less Interest Expense 25,000.00 65,000.00
Net Income before tax 565,000.00 415,000.00
Income Tax Expense 180,000.00 124,500.00
Net Income after Tax 385,000.00 290,500.00
*To check your work, turn to page 71 for the key to correction.
Day 2
The second tool used in analyzing financial statements is the vertical analysis.
Vertical Analysis
➢ Also known as Common Ratio Analysis.

➢ It analyzes financial statement through finding out the relationship
between accounts within a particular period.
➢ Computes the percentage of each account with a base amount for
each accounting period.
It helps the management answer certain questions as follows in the SFP.
1. Of the total assets, what percent is classified as current? Non-

current?
2. Of the total assets, what percent is accounts receivable?
Merchandise Inventory?
3. Of the total liabilities, what percent is classified as current? Non-
Current?
4. Of the total liabilities and owner’s equity, what percent is liabilities?
What percent is owner’s equity?
It helps the management answer certain questions as follows in the SCI.
1. What percentage of net sales is cost of goods sold? Gross Profit?

Operating Expenses?
2. If operating expenses were divided between selling and administrative
expenses, what percentage of net sales is absorbed by selling
expenses? Administrative expenses?
3. What is the percentage of net income to sales?
Steps in Performing Vertical 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 automatically 100% and total liabilities and owner’s
65
equity automatically 100%. Each item is converted to percent by dividing it by total
assets
4. For the comparative statement of comprehensive income, express each
account as a percentage of net sales. Net sales is automatically 100%. Each item
is converted to percent by dividing it by net sales.
Step 1. Prepare comparative financial statements of two consecutive years
Step 2. Add one additional column on the right side of each year.
Fidel Merchandiding
As of December 31
ASSETS 2016 2015

Current Assets
Cash 500,000.00 420,000.00
Inventory 60,000.00 35,000.00
Non Current Assets
Land 700,000.00 625,000.00
Patent 90,000.00 50,000.00
Total Non-Current Assets 790,000.00 675,000.00
TOTAL ASSETS 1,430,000.00 1,230,000.00
Current Liabilities
Notes Payable 250,000.00 200,000.00
Owner's Equity
Fidel, Capital 780,000.00 700,000.00
Step 3. For the comparative statement of financial position, express each

account as a percentage of the total assets automatically 100% and total
liabilities and owner’s equity automatically 100%. Each item is converted to
percent by dividing it by total assets.
66
Fidel Merchandiding
As of December 31
ASSETS 2016 2015

Current Assets
Cash 500,000.00 34.97 420,000.00 34.15
Accounts Receivable (net) 80,000.00 5.59 100,000.00 8.13
Inventory 60,000.00 4.20 35,000.00 2.85
Total Current Assets 640,000.00 44.76 555,000.00 45.12
Non Current Assets
Land 700,000.00 48.95 625,000.00 50.81
Patent 90,000.00 6.29 50,000.00 4.07
Total Non-Current Assets 790,000.00 55.24 675,000.00 54.88
TOTAL ASSETS 1,430,000.00 100% 1,230,000.00 100%
Current Liabilities
Accounts Payable 400,000.00 27.97 330,000.00 26.83
Notes Payable 250,000.00 17.48 200,000.00 16.26
Total Liabilities 650,000.00 45.45 530,000.00 43.09
Owner's Equity
Fidel, Capital 780,000.00 54.55 700,000.00 56.91
TOTAL LIABILITIES & OWNERS EQUITY 1,430,000.00 100% 1,230,000.00 100%
Note:
2016 Vertical Analysis
▪ Total Assets and Total Liabilities and Owner’s Equity are

automatically 100%
▪ Cash 500,000/1,430,000 x 100 = 34.97%
▪ AR 80,000/1,430,000 x 100 = 5.59%
▪ Same method of computation for the rest of the account
▪ Total Assets and Total Liabilities and Owner’s Equity are automatically
100%
▪ Cash 420,000/1,230,000 x 100 = 34.15%
▪ AR 100,000/1,230,000 x 100 = 8.13%
Step 4. For the comparative statement of comprehensive income, express

each account as a percentage of net sales. Net sales is automatically 100%.
Each item is converted to percent by dividing it by net sales.
67
Note:
▪ Net Sales is automatically 100%

▪ Cost of Goods Sold 180,000/950,000 x 100 = 18.95%
▪ Gross Profit 770,000/950,000 x 100 = 81.05%
▪ Net Sales is automatically 100%

▪ Cost of Goods Sold 260,000/880,000 x 100 = 29.55%
▪ Gross Profit 620,000/880,000 x 100 = 70.45%
Day 3
Activity 1: Use your notebook in answering. Correct entry per row = 1 point.
Compute the horizontal and vertical analysis of the Statement of Financial
Position and Statement of Comprehensive Income of Krisha Shoe Store.
Krisha Shoe Store

Comparative Statement of Financial Position
As of December 31
2016 2015
Cash 11,250.00 7,875.00

Inventory 30,750.00 28,500.00
Property, plant and equipment (Net) 51,615.00 56,250.00
TOTAL ASSETS 110,115.00 105,000.00

Notes Payable 37,500.00 33,750.00
Krisha, Capital 55,365.00 52,500.00
TOTAL LIABILITIES & EQUITY 110,115.00 105,000.00
Krisha Shoe Store

Comparative Statement of Comprehensive Income
2016 2015
Net Sales 150,000.00 146,250.00

Less Cost of Goods Sold 91,875.00 82,500.00
Gross Profit 58,125.00 63,750.00
Less Operating Expenses 48,135.00 50,100.00
Net Income 9,990.00 13,650.00
68
*To check your work, turn to pages 71 & 72 for the key to correction.
Here are ways horizontal analysis get into our daily life. Getting the percentage
increase or decrease by:
1. Comparing your current allowance from your previous allowance.

2. Comparing your 2020 savings from your 2019 savings.
3. Comparing your current weight during this pandemic from your previous weight
before this pandemic.
4. Comparing your February expenses from your June expenses.
5. Comparing your last year electricity bill from your current electricity bill.
Here are ways vertical analysis get into our daily life.
1. Of your total school allowance, what percent of it goes to savings, food and
supplies expenses?
2. Of your total time in a day, how much time is allotted to eating, studying, watching
tv and surfing the net?
3. Of your total groceries, how much is allotted for frozen food, paper goods, canned
goods, bread/bakery and personal care?
Understanding horizontal and vertical analysis is essential for business especially in

management accounting, because these tools of analyses are useful to the users of
accounting information both internal and external users to assess company’s
performance and to make an informed decision or judgment.
If analysis resulted in unexpected differences in its financial statements, the

management and accounting staff of the company should isolate the reasons and
take actions to fix the problems.
Day 4
Name: _________________________________Grade & Section: __________

Subject : FABM2 Week 5 Parent’s Signature: ________
Subject Teacher: ___________________
Perform a Horizontal and Vertical Analysis for 2016 only on the Financial Statement
of Macy and Macy.
69
Day 5
Perform the vertical and horizontal analysis of ABM Company. Use your notebook
in answering.
*To check your work, turn to page 72 & 73 for the key to correction.
70
KEY TO CORRECTION
Drill 1 – Section D
Note:
Correct entry per row for horizontal analysis = 1 point
You should get a score of at least 5 out of 9 to proceed to the next discussion. If not,
you have to go back to the activity and start over again.
KEY TO CORRECTION (SECTION F)
Note:
Correct entry per row for vertical analysis = 1 point
Total Score = 25 points
Krisha Shoe Store

As of December 31
VERTICAL ANALYSIS HORIZONTAL ANALYSIS

% OF
INCREASE INCREASE
2016 2015 (DECREASE) (DECREASE)
Cash 11,250.00 10.22% 7,875.00 7.50% 3,375 42.86%

Accounts Receivable (net) 16,500.00 14.98% 12,375.00 11.79% 4,125 33.33%
Inventory 30,750.00 27.93% 28,500.00 27.14% 2,250 7.89%
Property, plant and equipment (Net) 51,615.00 46.87% 56,250.00 53.57% -4,635.00 -8.24%
TOTAL ASSETS 110,115.00 100.00% 105,000.00 100.00% 5,115.00 4.87%
Accounts Payable 17,250.00 15.67% 18,750.00 17.86% -1,500.00 -8.00%

Notes Payable 37,500.00 34.06% 33,750.00 32.14% 3,750.00 11.11%
Krisha, Capital 55,365.00 50.28% 52,500.00 50.00% 2,865.00 5.46%
TOTAL LIABILITIES & EQUITY 110,115.00 100.00% 105,000.00 100.00% 5,115.00 4.87%
71
Krisha Shoe Store
VERTICAL ANALYSIS HORIZONTAL ANALYSIS
Increase % of increase
2016 Percent 2015 Percent
(decrease) (decrease)
Net Sales 150,000.00 100.00% 146,250.00 100.00% 3,750.00 2.56%

Less Cost of Goods Sold 91,875.00 61.25% 82,500.00 56.41% 9,375.00 11.36%
Gross Profit 58,125.00 38.75% 63,750.00 43.59% (5,625.00) -8.82%
Less Operating Expenses 48,135.00 32.09% 50,100.00 34.26% (1,965.00) -3.92%
Net Income 9,990.00 6.66% 13,650.00 9.33% (3,660.00) -26.81%
You should get a score of at least 15 out of 25 to proceed to the next discussion. If
not, you have to go back to the activity and start over again.
KEY TO CORRECTION (SECTION J)
Note:
Correct entry per row for vertical analysis = 1 point
Total Score = 45 points
ABM COMPANY
As of December 31, 2016 and 2015
VERICAL ANALYSIS HORIZONTAL ANALYSIS

INCREASE % OF INCREASE
2015 % 2016 % (DECREASE) (DECREASE)
Cash 290,000.00 40.28 400,000.00 43.48 110,000.00 37.93%

Accounts Receivable 120,000.00 16.67 100,000.00 10.87 (20,000.00) -16.67%
Trading Securities 40,000.00 5.56 20,000.00 2.17 (20,000.00) -50.00%
Inventories 60,000.00 8.33 80,000.00 8.70 20,000.00 33.33%
Prepaid Expenses 10,000.00 1.39 20,000.00 2.17 10,000.00 100.00%
Total Current Assets 520,000.00 72.22 620,000.00 67.39 100,000.00 19.23%
Property, plant & Equipment 189,000.00 26.25 193,050.00 20.98 4,050.00 2.14%
Patent 11,000.00 1.53 106,950.00 11.63 95,950.00 872.27%
Total Non Current Assets 200,000.00 27.78 300,000.00 32.61 100,000.00 50.00%
Total Assets 720,000.00 100.00 920,000.00 100.00 200,000.00 27.78%
Current Liabilities 100,000.00 13.89 50,000.00 5.43 (50,000.00) -50.00%

Non Current Liabilities 300,000.00 41.67 450,000.00 48.91 150,000.00 50.00%
ABM, Capital 320,000.00 44.44 420,000.00 45.65 100,000.00 31.25%
Total Liabilities and Capital 720,000.00 100.00 920,000.00 100.00 200,000.00 27.78%
72
ABM COMPANY
For the Year Endend December 31, 2016 and 2015
VERICAL ANALYSIS HORIZONTAL ANALYSIS

INCREASE % OF INCREASE
2015 % 2016 % (DECREASE) (DECREASE)
Net Sales 700,000.00 100.00 900,000.00 100.00 200,000.00 28.57%

Less Cost of Goods Sold 100,000.00 14.29 80,000.00 8.89 (20,000.00) -20.00%
Gross profit 600,000.00 85.71 820,000.00 91.11 220,000.00 36.67%
Less Operating Expenses 50,000.00 7.14 120,000.00 13.33 70,000.00 140.00%
Earning Before Interest and Taxes 550,000.00 78.57 700,000.00 77.78 150,000.00 27.27%
Interest Expense 10,000.00 1.43 50,000.00 5.56 40,000.00 400.00%
Net income before tax 540,000.00 77.14 650,000.00 72.22 110,000.00 20.37%
Income Tax 162,000.00 23.14 195,000.00 21.67 33,000.00 20.37%
Net Income 378,000.00 54.00 455,000.00 50.56 77,000.00 20.37%
You should get a score of at least 25 out of 45. If not, you have to go back to the
activity and start over again.
If you need more help, you may reach me at CP No. 09189030109 or send a private
message thru facebook account Arnold Lansangan Carreon or CP No.
09451144098 or private message thru facebook account dhitegozunbaluyut
73
GRADE 12
School Teaching Dates/ September 28- October

PAMPANGA HIGH SCHOOL Week 2, 2020 (Week 6)
Teacher
Aphrodite G. Baluyut
Quarter First
Arnold L. Carreon
I. OBJECTIVES
The learners demonstrate an understanding of the methods or tools of analysis

of financial statements to include horizontal analysis, vertical analysis, and financial
ratios to test the level of liquidity, solvency, profitability and stability of the business.
The learner shall be able to solve exercises and problems that require computation
and interpretation using horizontal analysis, vertical analysis and various financial
ratios. Using the downloaded sample financial statements, he/she performs horizontal
and vertical analysis, compute various financial ratios and interprets the level of
liquidity, solvency, stability and profitability of the business.
The learners 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. (ABM_FABM12-Ig-h14)
D. Objectives
1. Compute and interpret liquidity ratio.

2. Compute and interpret solvency ratio.
3. Compute and interpret profitability ratio.
II. CONTENT
ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS
Learning Resources
A. Reference


Fundamentals of Accountacy, Business and Management 2

Binuya, Maria Veronica Joy M. (2016) pp. 51-67
https://www.inc.com/encyclopedia/financial-ratios.html
74
III. PROCEDURES
Day 1
In the previous lessons, we perform the vertical and horizontal analysis of financial
statements of a single proprietorship. Can you please recall the steps in performing horizontal
analysis?
1. Choose a base year which is the prior period or the initial year of analysis
2. Deduct the amount of the current year from the base year.
3. Divide the difference above by the amount of the base year
4. Multiply the quotient by 100 to get the percentage of change.
What is the steps in performing the vertical 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 automatically 100% and total liabilities and owner’s equity automatically
100%. Each item is converted to percent by dividing it by total assets.
4. For the comparative statement of comprehensive income, express each account as a
percentage of net sales. Net sales is automatically 100%. Each item is converted to
percent by dividing it by net sales
The next tool and technique in analyzing financial data is the financial ratio. Financial
ratios offer entrepreneurs a way to evaluate their company’s performance and compare it to other
similar businesses in their industry. Ratios measure the relationship between two or more
components of financial statements.
The financial statements are analyzed in an effort to find the answers to the following
questions, among others:
1. Does the firm possess the ability to pay its currently maturing obligations?
2. Does the firm possess enough current assets to pay its current liabilities?
3. Does the firm provide enough security to the investment of its investors?
4. Does the firm invest in inventory or other assets excessively?
5. Does the firm provide satisfactorily earnings for its investors?
6. Does the firm possess the ability to meet long-term obligations as they fall due?
They are used most effectively when results over several period are compared.
Financial Ratios can be broken downs into 3 main categories.
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Aside from memorizing the different formulas. You are expected to interpret the results
and apply it to specific scenarios.
The financial Statement for 2016 of Equal Company will be used as illustration.
1. Liquidity Ratio
Liquidity ratios demonstrate a company's ability to pay its current obligations. In other words, they
relate to the availability of cash and other assets to cover accounts payable, short-term debt, and
other liabilities.
Some of the best-known measures of a company's liquidity include:
A. Working Capital – Is the excess of current assets after covering the current liabilities.
Formula: Working Capital = Current Asset less Current Liabilities.
Computation: 375,000 – 105,000 = 270,000 (refer to the illustration above.)
Interpretation: This means that the company has 270,000 pesos free current assets
that they can use for the operation of the business.
B. Current Ratio – Tests the ability of the company to pay for its current obligations. A general
rule of thumb is that it should be at least 2:1. A lower current ratio means that the company may
not be able to pay its bills on time, while a higher ratio means that the company has money in
cash or safe investments that could be put to better use in the business.
Formula: Current Ratio = Current Asset / Current Liabilities
Computation: 375,000 / 105,000 = 3.57
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Interpretation: This means that every 1 peso current liabilities of the company, they
have approximately 3.57 current assets to pay for it.
C. Acid Test Ratio or Quick Ratio – A more strict test of the company’s ability to pay current
obligations. Inventory and prepaid assets are removed from the equation.
Formula: Acid Test Ratio = (Cash, Marketable Securities, And Receivables)/Current

Liabilities 0R (Current Asset - Prepaid – Inventory)/Current
Liabilities
Computation: 312,000 /105,000 = 2.97
Interpretation: This means that even if the inventory and prepaid assets are removed.
The company is still able to meet their current obligations. For every 1 peso
current liabilities of the company, they have an estimated amount of 2.97
pesos to cover for it.
D. Receivable Turnover Ratio (RTR) – Test the efficiency of managements’ collection of

receivables. A high number reflects a short lapse of time between sales and the collection of cash,
while a low number means collections take longer.
Formula: RTR = Net Sales / Average Receivable (Net)
Note: Allowance for doubtful accounts should be deducted from the accounts receivable
account to get the net amount. To get the average receivable, add up the beginning
balance and ending balance of the accounts receivable divide by 2. Another way is to
add up the prior year accounts receivable (net) and current year account receivable
(net) then divide the total by 2, to get the average receivable.
Computation: 120,000 /102,000 = 1.18 times

Interpretation: The low receivable turnover indicates the inefficiency of the company
in collecting their receivables. This maybe because of poor credit
and collection policy. A higher ratio would be more favorable.
E. 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 receivable.
Formula: Average Collection Period = 365 or 360 days / Receivable Turnover Ratio
Note: The company makes use of either 360 or 365 days. This would depend on the
policy of the company. For our examples we are going to make use of 365 days.
Computation: 365 / 1.18 = 309.32 days.

Interpretation: This means that it takes an average of 309 days before accounts
receivables are collected. A shorter average collection period ratio would be more
favorable.
F. Inventory Turnover Ratio – measures the number of times the company was able to sell
its entire inventory to customers during the year. Higher ratios—over six or seven times per
year—are generally thought to be better, although extremely high inventory turnover may
indicate a narrow selection and possibly lost sales. A low inventory turnover rate, on the other
hand, means that the company is paying to keep a large inventory, and may be overstocking or
carrying obsolete items.
Formula: Inventory Turnover Ratio = Cost Of Goods Sold / Average Inventory
Note:. To get the average inventory, add up the beginning balance and ending balance
of the inventory account divided by 2. Another way is to add up the prior year inventory
and current year inventory then divide the total by 2, to get the average inventory.
Computation: 60,000/55,000 = 1.09 times
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Interpretation: The low inventory turnover indicates the inefficiency of the
management in managing inventory. This could indicate that the company is storing too
much inventory. Takes about 1.09 times replenishment of inventory in order to satisfy
sales.
G. Average Days In Inventory - This ratio states the number of days that it would take before
a group of inventory will be entirely sold by the company.
Formula: Average Days in Inventory = 365 or 360 days / Inventory Turnover Ratio
Computation: 365 / 1.09 = 334.86 days.

Interpretation: This means that it takes an average of 335 days before the
commodities are sold to the customers. A shorter average days in inventory would be
more favorable.
H. Number Of Days In Operating Cycle - This is the measure of how long it would take for the
company to transform its inventory back to cash.
Formula: Number Of Days In Operating Cycle = Average Collection Period Add

Average Days in Inventory
Computation: 309.32 days + 334.86 days = 644.18 days

Interpretation: This means that it takes an average 644.18 days to realize its inventory
into cash. A shorter number would be more favorable.
Drill 1: Use your notebook in answering. Compute the liquidity ratios. Use the 2016
financial statements of Fidel Merchandising. Fidel Merchandising makes use of 360 days
in its computation for some ratios. Round off your answers into 2 decimal places.
Fidel Merchandiding Fidel Merchandising

As of December 31
ASSETS 2016 2015
Current Assets
Cash 500,000.00 420,000.00 2016 2015
Inventory 60,000.00 35,000.00
Net Sales 950,000.00 880,000.00
Non Current Assets Less Cost of Goods Sold 180,000.00 260,000.00
Land 700,000.00 625,000.00 Gross Profit 770,000.00 620,000.00
Patent 90,000.00 50,000.00
Total Non-Current Assets 790,000.00 675,000.00 Less Operating Expenses 180,000.00 140,000.00
TOTAL ASSETS 1,430,000.00 1,230,000.00 Operating Income 590,000.00 480,000.00
Less Interest Expense 25,000.00 65,000.00
Net Income before tax 565,000.00 415,000.00
Current Liabilities Income Tax Expense 180,000.00 124,500.00
Net Income after Tax 385,000.00 290,500.00
Notes Payable 250,000.00 200,000.00
Owner's Equity
Fidel, Capital 780,000.00 700,000.00
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Day 2
Let’s discuss the second category under financial ratio which is the Solvency Ratio.
2. Solvency Ratio
is a key metric used to measure an enterprise’s ability to meet its obligations and is used often
by prospective business lenders. The solvency ratio indicates whether a company’s cash flow
is sufficient to meet its long-term liabilities. These ratios are expressed as percentages.
A. Debt Ratio - Shows proportion of all assets that are financed with liabilities. A debt ratio
greater than 1.0 means the company has negative net worth, and is technically bankrupt. This
ratio is similar, and can easily be converted to, the debt to equity ratio. A higher ratio indicates
that the company is highly indebted.
Formula: Debt Ratio = Total Liabilities / Total Assets
Computation: 295,000/2,121,000 = 13.91%

Interpretation: This means 13.91% is provided by the creditors for every 1 peso total
assets. Also, this can be interpreted as 13.91% of the company’s
assets are being financed by creditors.
B. Debt To Equity Ratio - Otherwise known as financial leverage ratio. Measures the financing
provided by the creditors against those provided by the owner.
Formula: Debt to Equity Ratio = Total Liabilities / Total Equity
Computation: 295,000/1,826,000 = 16.16%

Interpretation: This means 16.16% worth of liabilities for every 1 peso worth of capital.
Also, this means that compared to the total equity, the liabilities
represents only 16.16% of the company’s capital.
C. Equity Ratio - Measures the percentage of total assets financed by the owner’s investment
Formula: Equity Ratio = Total Equity / Total Assets
Computation: 1,826,000 / 2,121,000 = 86.09%

Interpretation: This means 86.09% is provided by the owner for every 1 peso total
assets. Also, this means that 86.09% of the company’s assets are being
financed by the company’s own capital.
D. Times Interest Earned Ratio - Measures the company’s ability to pay the interest charged
to the company for its outstanding liabilities.
Formula: Times Interest Earned Ratio = Earning Before Interest and Taxes / Interest
Expense
Computation: 44,000 / 2,000 = 22 times

Interpretation: This means that Equal interest is 22 times of its income before interest
and taxes. The higher the number of times the operating can cover
interest expense the more favorable it is for the creditors because it
means the company is not struggling to pay its interests from loans.
Drill 2: Use your notebook in answering. Compute the solvency ratios. Use the 2016
in its computation for some ratios.
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*To check your work, turn to pages 84 -85 for the key to correction.
Day 3
The last category under financial ratio is the profitability ratio.
3. Profitability Ratios
Provide information about management's performance in using the resources of the small
business. Many entrepreneurs decide to start their own businesses in order to earn a better return
on their money than would be available through a bank or other low-risk investments. If profitability
ratios demonstrate that this is not occurring—particularly once a small business has moved
beyond the start-up phase—then entrepreneurs for whom a return on their money is the foremost
concern may wish to sell the business and reinvest their money elsewhere. There are at least six
profitability ratios that can be used and are expressed as percentages.
A Gross Profit Ratio - Measures the margin on sales the company is achieving. It can be an
indication of manufacturing efficiency, or marketing effectiveness.
Formula: Gross Profit Ratio = Gross Profit / Net Sales
Computation: 60,000/120,000 = 0.5 or 50%
Interpretation: This means that after deducting cost of goods sold, 50% of the net sales
is left and is available for other expenses. It only makes sense that
higher ratios are more favorable.
B. Net Profit Ratio - Shows what percentage of sales are left over after all expenses are paid
by the business. It also measures the overall profitability of the company, or how much is being
brought to the bottom line. Strong gross profitability combined with weak net profitability may
indicate a problem with indirect operating expenses or non-operating items, such as interest
expense. In general terms, net profitability shows the effectiveness of management.
Formula: Net Profit Ratio = Net Income / Net Sales
Computation: 37,000/120,000 = 30.83%
Interpretation: This means 30.83% return for every peso sales made. Higher ratios are
more favorable. Higher ratios mean the company is selling their inventory
at a higher profit percentage
C. Operating Expenses To Sales Ratio – Helps define the company’s financial health and its
ability to scale operations up or down. The smaller the ratio, the better the chances are that the
company has to generate profits, even if the revenues go down.
Formula: Operating Expenses To Sales Ratio = Operating Expenses / Net Sales
Computation: 16,000/120,000 = 13.33%
Interpretation: This means that 13.33% of operating expenses is needed to generate

sales for the period. This ratio should be minimized as much as possible.
The goal is to generate as much sales with the minimum possible
operating expenses.
D. Return On Assets - Otherwise called Return on investment. Measures the company’s

efficiency in using its level of investment in assets in order to generate income.
Formula: Return On Assets = Net Income / Average Total Assets
Note: Average Total Assets = Prior year total assets add current year total assets
divide by 2
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Computation: 37,000/2,121,000 = 1.74%
Interpretation: A higher ratio is more favorable because it shows that the company is
more effectively managing its assets to produce greater amounts of net income.
E. Return On Equity - This measures the extent of profits generated through the use of the
capital provided by the owners.
Formula: Return On Equity = Net Income / Average Owner’s Equity
Note: Average Owner’s Equity = Prior year equity add current year equity divide by 2
Computation: 37,000/1,826,000 = 2.03%
Interpretation: This means 2.03% return to the owner’s investment in the business. A
higher ratio is more favorable to investors/owners because it indicates
how well the company utilized the investment contributed by its owners.
F. Asset Turnover Ratio - measures a company's ability to generate sales from its assets by
comparing net sales with average total assets. In other words, this ratio shows how efficiently a
company can use its assets to generate sales.
Formula: Asset Turnover Ratio = Net Sales / Average Total Assets
Computation: 120,000/2,121,000 = 5.66%
Interpretation: This ratio measures how efficiently a firm uses its assets to generate
sales, so a higher ratio is always more favorable. Higher turnover ratios
mean the company is using its assets more efficiently. Lower ratios mean
that the company isn't using its assets efficiently and most likely have
management or production problems.
Drill 3: Use your notebook in answering. Compute the profitability ratios. Use the 2016
in its computation for some ratios.
Day 4
Activity 1. Use your notebook in answering. Compute and interpret the liquidity, solvency
and profitability ratios of the financial statements of Krisha Shoe Store for 2016. Use 360
days.
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*To check your work, turn to page 86-88 for the key to correction.
In business terms, application of ratios enable business owners to examine the

relationships between items and measure that relationship. They are simple to calculate, easy to
use, and provide business owners with insight into what is happening within their business,
insights that are not always apparent upon review of the financial statements alone. Ratios are
aids to judgment and cannot take the place of experience. But experience with reading ratios and
tracking them over time will make any manager a better manager. Ratios can help to pinpoint
areas that need attention before the looming problem within the area is easily visible. In reality,
however, small business owners and managers only need to be concerned with a small set of
ratios in order to identify where improvements are needed.
The business conveys or relays message through the accounting information. The
financial statements provide the necessary accounting information for the benefit of the users like
investors, creditors, owners, government and many others. The methods and techniques of
financial statements are several and varied, but more common ones include horizontal, vertical
and ratio analysis. All these three methods and techniques can review the past performance and
project possible trends in the future.
Financial ratio makes use of ratios. These ratios may determine the liquidity, solvency,
profitability and stability of a given entity. With the available ratios, the ones that may be utilized
are highly dependent on the very purpose for which the review of the financial statement is being
conducted.
Day 5

Subject Teacher: ___________________
I. Identification
1. Measures the ability of the company to settle its currently maturing obligations.
2. It is the excess of current assets after covering the current liabilities.
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3. Measures rate of return on resources provided by owners
4. Shows proportion of all assets that are financed with liabilities.
5. A more strict test of the company’s ability to pay current obligations.
II. True or False
1. Profitability is the entity’s ability to meet long term obligations

2. Short term creditors are concerned with the firm’s profitability than its liquidity.
3. If current liability total P100,000 and the quick ratio is 2, one would expect that quick
assets are P200,000.
4. From an A/R turnover ratio of 22 in 2018 , the ratio went down to 19 in 2019. This is
something good from a liquidity standpoint.
5. From a debt ratio of .50 during 2018, it went up to .80 during 2019. This is something
bad from a solvency standpoint?
III. Compute and Interpret the following ratios for 2016 of Macy and Macy. Use 365
days.
1. Quick ratio 6. Average Days in inventory

2. Current ratio 7. Debt ratio
3. Accounts Receivable Turnover Ratio 8. Debt to equity ratio
4. Average Collection Period 9. Gross Profit
5. Inventory turnover ratio 10. Return on equity
Compute the financial statements of ABM Company for 2016 using financial ratios. Use 365 days.
Use your notebook in answering.
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*To check your work, turn to pages 88-89 for the key to correction.
KEY TO CORRECTION
Drill 1 – Section C
Liquidity Ratios
1) Working Capital

Solution: 640,000 – 650,000 = (10,000)
2) Current Ratio

Solution: 640,000 / 650,000 = .98
3) Acid Test/Quick Ratio

Liabilities
Solution: 580,000 / 650,000 = .89
4) Accounts Receivable Turnover Ratio

Solution: 950,000 / (80,000+100,000)/2 = 10.56 times
5) Average Collection Period
Formula: Average Collection Period = 360 days / Receivable Turnover Ratio

Solution: 360 / 10.56 times = 34.09 days
6) Inventory turnover ratio

Solution: 180,000/(60,000+35,000)/2 = 3.79 times
7) Average Days in inventory
Formula: Average Days in Inventory = 360 days / Inventory Turnover Ratio

8) Number of Days in operating cycle

Solution: 34.09 days + 94.99 days = 129.08 days
You should get a score of at least 5 out of 8 to proceed to the next discussion. If not, you
have to go back to the drill and start over again.
Drill 2 – Section D
Solvency Ratios
1) Debt to Total Assets Ratio

Solution: 650,000 / 1,430,000 = 45.45%
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2) Debt to Equity Ratio

Solution: 650,000 / 780,000 = 83.33%
3) Equity Ratio

Solution: 780,000 / 1,430,000 =54.55%
4) Times Interest Earned Ratio

Formula: Times Interest Earned Ratio = Earning Before Interest and Taxes / Interest
Expense
Solution: 590,000 / 25,000 = 23.60 times
Drill 3 – Section E
Profitability Ratios
1) Gross Profit Ratio

Solution: 770,000 / 950,000 = 81.05%
2) Profit Margin Ratio

Solution: 385,000 / 950,000 = 40.53%
3) Operating Expenses to Sales Ratio

Solution: 180,000 / 950,000 = 18.95%
4) Return on Assets

Solution: 385,000 / (1,430,000 + 1,230,000)/2 = 28.95%
5) Return on Equity

Solution: 385,000 / (780,000 + 700,000)/2 = 52.02%
6) Asset Turnover Ratio

Solution: 950,000 / (1,430,000 + 1,230,000)/2 = 71.42%
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KEY TO CORRECTION FOR SECTION F – Krisha Shoe Store
Activity 1
Liquidity Ratios
1) Working Capital

Solution: 58,500 – 54,750 = 3,750
Interpretation: This means that the company has 3,750 pesos free current assets
that they can use for the operation of the business.
2) Current Ratio

Solution: 58,500 / 54,750 = 1.07
Interpretation: This means that every 1 peso current liabilities of the company, they
have approximately 1.07 current assets to pay for it.

Liabilities
Solution: 27,750 / 54,750 = .51
Interpretation: This means that even if the inventory and prepaid assets are removed.
The company is still able to meet their current obligations. For every 1 peso
current liabilities of the company, they have an estimated amount of .51
pesos to cover for it.

Solution: 150,000 / 14,437.50 = 10.39 times
Interpretation: The high receivable turnover indicates the efficiency of the company
in collecting their receivables.

Interpretation: This means that it takes an average of 35 days before accounts
receivables are collected.

Solution: 91,875/29,625 = 3.10 times
Interpretation: Takes about 3.10 times replenishment of inventory in order to satisfy
sales.

Interpretation: This means that it takes an average of 116 days before the
commodities are sold to the customers.

Solution: 34.65 days + 116.13 days = 150.78 days
Interpretation: This means that it takes an average 151 days to realize its inventory into
cash.
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Solvency Ratios

Solution: 54,750 / 110,115 = 49.72%
Interpretation: This means 49.72% is provided by the creditors for every 1 peso total
assets. Also, this can be interpreted as 49.72% of the company’s
assets are being financed by creditors.

Solution: 54,750 / 55,365 = 98.89%
Interpretation: This means 98.89% worth of liabilities for every 1 peso worth of capital.
Also, this means that compared to the total equity, the liabilities
represents only 98.89% of the company’s capital.
11) Equity Ratio

Solution: 55,365 / 110,115 = 50.28%
Interpretation: This means 50.28% is provided by the owner for every 1 peso total
assets. Also, this means that 50.28% of the company’s assets are being
financed by the company’s own capital.
12) Times Interest Earned Ratio
No answer

Solution: 58,125 / 150,000 = 38.75%
Interpretation: This means that after deducting cost of goods sold, 38.75% of the net
sales is left and is available for other expenses.

Solution: 9,990 / 150,000 = 6.66%
Interpretation: This means 6.66% return for every peso sales made

Solution: 48,135 / 150,000 = 32.09%
Interpretation: This means that 32.09% of operating expenses is needed to generate
sales for the period.
16) Return on Assets

Solution: 9,990 / 107,557.50 = 9.29%
Interpretation: This mean that only 9.29% a company earn in relation to its overall
resources.
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17) Return on Equity

Solution: 9,990 / 53,932.50 = 18.52%
Interpretation: This means that 18.52% return to the owner’s investment in the
business..

Solution: 150,000 / 107,557.50 = 139.46%
Interpretation: This means that the company is efficiently uses its assets to generate
sales.
You should get a score of at least 10 out of 18 to proceed to the next discussion. If not,
you have to go back to the activity and start over again.
KEY TO CORRECTION – SECTION J (ABM Company)
Liquidity Ratios
1) Working Capital

Solution: 620,000 –50,000 = 570,000
2) Current Ratio

Solution: 620,000 / 50,000 = 12.4

Liabilities
Solution: 520,000 / 50,000 = 10.4

Solution: 900,000 / (120,000+100,000)/2 = 8.18 times


Solution: 80,000/(60,000+80,000)/2 = 1.14 times

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Solution: 44.62 days + 320.18 = 364.80 days
Solvency Ratios

Solution: 500,000 / 920,000 = 54.35%

Solution: 500,000 / 420,000 = 119.05%
3) Equity Ratio

Solution: 420,000 / 920,000 = 45.65%
4) Times Interest Earned Ratio (TIER)
Formula: TIER = Earning Before Interest and Taxes / Interest Expense

Solution: 700,000 / 50,000 = 14 times

Solution: 820,000 / 900,000 = 91.11%

Solution: 455,000 / 900,000 = 50.56%

Solution: 120,000 / 900,000 = 13.33%
4) Return on Assets

Solution: 455,000 / (720,000 + 920,000)/2 = 55.49%
5) Return on Equity

Solution: 455,000 / (320,000 + 420,000)/2 = 122.97%

Solution: 900,000 / (720,000 + 920,000)/2 = 109.76%
You should get a score of at least 10 out of 18. If not, you have to go back to the activity
and start over again.
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GRADE 12
School Teaching Dates/ October 6-9, 2020

PAMPANGA HIGH SCHOOL Week October 12-13, 2020
Week 7 & Week 8
I. OBJECTIVES
The learners demonstrate an understanding of the types of bank accounts, basic

transactions, and documents related to bank deposits and withdrawals.
The learner shall be able to share samples of bank account forms and documents
in class and discuss their uses and importance.
The learners…
1. Identify the types of bank accounts normally maintained by a business.
(ABM_FABM12-IIc-5)
2. Differentiate a savings account from a current or checking account (ABM_FABM12-
IIc-6)
3. Prepare bank deposit and withdrawal slips (ABM_FABM12-IIc-7)
4. Identify and prepare checks (ABM_FABM12-IIc-8
5. Identify and understand the contents of a bank statement (ABM_FABM12-IIc-9)
D. Objectives
1. Identify the types of bank accounts normally maintained by a business.

2. Differentiate a savings account from a current or checking account
3. Identify and understand the contents of a bank statement
4. Prepare bank deposit and withdrawal slips
5. Identify and prepare checks
II. CONTENT
BASIC DOCUMENTS AND TRANSACTIONS RELATED TO BANK DEPOSITS
Learning Resources
A. Reference

Other Learning Resources
https://www.thebalance.com/types-of-bank-accounts-315458
Sample BDO. East West Bank. Union Bank deposit, withdrawal slip and checks
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III. PROCEDURES
Day 1
Let’s play LOGO LOCO. Identify the complete name of the logo posted. Use your notebook.
1. ____________________ 4. ___________________
2. ____________________ 5. __________________
3. __________________ 6. _________________
Turn to page 101 for the key to correction.
Do you have any bank account? If yes, what is the purpose of your account or why did
you chose a certain bank? I think, the reason are for safety purposes, forced to save to be used
in case of emergency, for your college fund and a gift from your parents.
Do you know that different types of bank accounts serve different needs? It’s wise to put
money into the best account type for your financial goals so you get access to the right tools for
spending and savings. Doing so allows you to maximize the return form your bank, minimize fees
and manage your money conveniently.
The four exits of senior high school are higher education (going to college), middle skills
development, employment (finding a job) and entrepreneurship (building a business). If you want
to be an entrepreneur/to create a business after senior high school. It is good to know the different
types of bank account maintained by the business for your reference. Let’s first define what a
bank account is?
Bank Account
➢ Is a record of bank's client set up by the bank.
➢ It permits the clients to deposit and withdraw money from the bank.
Requirements in applying for bank accounts. (new accounts)

➢ Information sheet containing details about the clients. Client’s name, address, contact no,
date of birth, occupation, family details (if any).
➢ Identification card with picture and signature.
➢ 2 pictures ( 2x2)
➢ Signature Card use for record purposes
Types of Bank Acounts Normally Maintained by the Business.
1. Savings Accounts
➢ Savings accounts are typically the first official bank account anyone opens.
➢ Usually requires a lower initial deposit as low as P100 or P500
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➢ These are intended to provide an incentive for the depositor to save money.
➢ The depositor can make deposits and withdrawals using the form provided by the bank.
➢ Banks usually pay an interest rate that is higher than a checking account or a current
account.
➢ Some savings accounts have a passbook (see sample and content below) in which
transactions are logged in a small booklet that the depositor keep.
➢ Some savings accounts charge a fee if the balance falls below a specified minimum.
Sample Passbook
Passbook - record all the deposits

and withdrawals made by the client.
It also shows the interest earned on
the depositor's account.
Types of Savings Account
A. Time deposit account
➢ otherwise called Certificate of Deposit

➢ type of a savings account that is held for a fixed-term and yield high interest.
➢ it has a holding period or maturity date
➢ there is a penalty if the fund is withdrawn before maturity date.
Sample Time Deposit Account
B. ATM (Automated Teller Machine)
➢ a savings account wherein withdrawals can be made through designated

machines (see pictures below)
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➢ this is a 24 hour teller machine and the funds can be withdrawn anytime
➢ the advantage of this account is that even if the bank are closed, you can
withdraw your funds.
2. Checking or Current Accounts
➢ Money held under a checking account can be withdrawn through issuance of a check.
➢ Higher initial deposit for opening a current account ranging from P5,000 to P10,000.
➢ Banks usually allows numerous withdrawals and unlimited deposit under this type of
account
➢ The interest rate for checking account is usually lower as compared to a savings account
or sometimes no interest at all.
➢ The account holder or depositor of a checking account is normally provided at the end of
month a bank statement (see sample and content below) showing all the deposits made,
checks paid by the bank, and the balance of the account.
➢ The depositor is given easy access to the funds as compared to a savings account.
Bank Statement
➢ A bank statement is a list of all transactions provide by the bank at the end of each
month. Also known as an account statement.
➢ The statement contains the date column indicate the date the transaction was made.
The check number indicates the details of the check paid by the bank. The transaction
code is normally a bank code for the transactions. The Debit column represents all
charges or deduction made by the bank to your account. The Credit column represents
the deposits or additions to your account that was made by the bank. The Balance
column is the running balance after considering the effect of the transaction to your
account.
➢ Account-holders generally review their bank statements every month to help keep track
of expenses and spending, as well as monitor for any fraudulent charges or mistakes.
date of the
transaction
Note: As part of control, the bank statement received from the

bank is compared with the accounting records of the business.
This process is called bank reconciliation. Bank reconciliation
will be discussed in the succeeding lesson. Together with the
bank statements, the banks will include the copies of checks
cleared or paid by the bank for that particular month.
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Let’s Differentiate! Use your notebook in answering.
Basis for Difference Savings Account Current Account

1. Meaning
2. Objective
3. Interest
4. Withdrawal
5. Opening Balance
6. Records of transaction
*To check your work, kindly turn to page 102 for the key to correction.
Day 2
What are the basic transactions you do in a bank? A bank transaction is a record of money that
has moved in and out of your bank account. If you want to place or get your money in a bank
you need to use a particular bank document to that transaction.
Bank Documents
1. The Deposit Slip
➢ Is a bank document used by a bank client or depositor if he/she wants to put money in
the bank for safe keeping.
➢ It shows the deposit date, the depositor’s name, the depositor’s account number , and
the amount of check, bills or coins to be deposited.
➢ The bank teller usually verifies the amount received against the amount listed in the
deposit slip before recording the deposit in the depositor’s bank book.
Sample of Deposit Slip
How to fill-up a deposit slip
1. Write the date of deposit

2. Write the account number
3. Write the name of the account holder
4. Write the amount of check/checks or cash to be deposited
5. Sign the deposit slip (optional, depend on the bank form)
94
Filled-up deposit slip
Drill 1 (photocopy the deposit slip provided below in answering this drill)
Fill up the deposit slip based on the following assumption.

1. Assume you are the account holder
2. Use the date October 5, 2020
3. Your savings account number is 000-123-456-780
4. Amount of deposit is P51,700
Drill 2 (photocopy the deposit slip provided below in answering this drill)
Fill up the deposit slip based on the following assumption.

1. Assume you are Juan A. Dela Cruz
2. The date today is October 7, 2020
3. Your current account number is 156-223-445-760
4. You deposit a BPI check - Dolores Branch with check no. 0052376 amount P93,458.25
95
2. Withdrawal Slip
➢ Is a bank document used by a bank client if he/she wants to withdraw or get cash from
his/her bank account.
➢ It shows the withdrawal date, the client’s name, the client’s account number and the
amount and to be withdrawn.
Sample Withdrawal Slip
How to fill-up a withdrawal slip
1. Write the date of withdrawal

2. Write the account number
3. Write the name of the account holder
4. Write the amount of cash to be withdrawn
5. Sign the withdrawal slip
96
Filled-up withdrawal slip
Drill 3 (photocopy the withdrawal slip provided below in answering this drill)
Fill up the withdrawal slip based on the following assumption.

1. Assume you are the Savings account holder
2. The date today is September 26, 2020
3. Your account number is 100-123-456-789
4. Amount of withdrawal is P17,250.00
THE CHECK
➢ Is an instrument issued by a person in payment for goods and services acquired.

➢ Is a written order signed by the depositor directing the bank to pay a specified sum of
money to a designated recipient. (see sample below)
97
Day 3
Type of Checks
Crossed Check
It is marked to specify an instruction about the way it is to be redeemed. A common instruction is
to specify that it must be deposited directly into an account of the payee. It is usually done by
writing two parallel lines on the upper left portion of the check. A crossed check cannot be
encashed over the counter by the payee. It should be deposited to the payees account.
Stale Check
A check is considered to be stale when the issue date or the date of check is outstanding for a
period of six months or more. A bank is not obligated to pay a stale check.
A postdated check is a check with a future date written on it.
The following are the parties involved in a transaction that uses check as medium of exchange:
• Drawer, the person or entity who makes the check

• Payee, the recipient of the money
• Drawee, the bank or other financial institution where the check can be presented for payment.
How to write a check
1. On the line on the upper right beside the word date, write the date of the check
2. Write the complete name of the payee or recipient on the line beside the words “Pay to
the order of”.
3. Write the exact amount of the check beside the peso sign.
4. Write the exact amount of the check in words. Write the word “only” after the amount so
that nothing can be written after the amount.
5. Sign the check on the line at the bottom right corner.
Drill 4 – Prepare a check – (photocopy the check provided below in answering this drill)
1. You are Tailor Sweep, a customer of Home Depot

2. The date today is July 15, 2020
3. You are purchasing a cabinet from Home Depot in the Amount of P 50,750.45
4. You are going to issue a check dated today in payment for the cabinet you just purchased.
98
Day 4
* Photocopy pages 99 and 100 in answering. To be graded as part of your performance

task
Name____________________________ Subject: _____________________ Week 7
Grade and Section ____________________Teacher: ____________________
Assuming you are Pepita G. Manaloto.
On October 11, 2018, Pepita G. Manaloto deposits a BPI check - Sta. Cruz Branch with
check no. 0052376 amounting to P393,458.25 in her current account. The following day, she
buys a painting from Amorsolo Art Gallery and issues a check in the amount of P75,380.25 as
payment for the painting. On October 23, Pepita is scheduled to go to Davao City so she goes
to the bank on October 19 to withdraw P130,000.00 for her Davao staycation.
Prepare deposit slip, withdrawal slip and check. (Note: the account number of the
depositor is written on the check)
Rubrics:
1. Complete and properly filled-up of documents

Deposit slip 5 pts
Withdrawal slip 5 pts
Check 5 pts
Total 15 pts
2. Minus 1 point for every erasure and missing entry.
99
100
Day 1
Just in case, the type of bank account you want to open depends on your needs. For
example you might not have a fixed income, but you want to save money to buy a laptop, so a
savings account would be the most appropriate for your needs as a student. You can deposit
and withdraw money using the deposit slip and withdrawal slip respectively, which now I believe
you know how to fill them up.
If you want to open a business someday having frequent transactions, unlimited

withdrawal and you want a range of access of everyday banking services like paying bills, a
current account is best for you.
The different types of bank accounts cater to different needs and budget. Before you
open an account, carefully consider which bank account type will work best for you. The factors
you need to consider are: initial deposit, maintaining balance, required balance to incur interest,
interest rates, accessibility online banking services.
Use 1 sheet of yellow paper. Copy the heading below.

Teacher: ___________________
Identification (10 points)

__________1. An instrument written by person in payment of goods and services acquired
directing the person’s bank to pay a certain amount of money to be drawn against the person’s
checking account.
__________2. A record of the bank’s client set up by the bank
__________3. A bank document used by a bank client to get cash from his/her bank account.
__________4. Amount of money placed in a bank or financial institution with fixed interest rate
and maturity date.
__________5. They are intended for money to be paid in but not often withdrawn. Amount of
money placed in a bank with modest interest and with no holding period.
__________6. Furnished by the bank to the depositor at the end of the month showing the
movement of the account.
__________7. Transactions can be withdrawn through issuance of checks in this type of

account.
__________8. The person who writes the check.
__________9. It is usually done by writing two parallel lines on the upper left portion of the
check and cannot encashed over the counter by the payee. It should be
deposited to the payees account.
__________10. It is also called certificate of deposit.
101
Day 2
Study Bank Reconciliation
KEY TO CORRECTION
LOGO LOCOb(Section A)
1. Philippine National Bank 4. Rizal Commercial Banking Corporation

2. East West Bank 5. Maybank
3. Land Bank of the Philippines 6. Security Bank
Let’s Differentiate! (Section C)
Basis for Difference Savings Account Current Account

1. Meaning Savings account is used to Money held under a checking
save money for meeting account can be withdrawn
short-term or long- term through issuance of a check.
financial needs, not intended No limit on the number of
for daily use. deposits and withdrawals.
2. Objective To encourage savings of a To support frequent and

person. regular transactions.
3. Interest Low/modest Lower or none
4. Withdrawal Limited Unlimited
5. Opening Balance Less amount is required to High amount is required for

open a savings bank account opening a current account
6. Records of transaction Passbook Bank Statement
Note: You may proceed to the next discussion if your score is at least 8 out of 12. If not,
you have to go back to the activity and try again.
Drill 1 (Section D)
102
Note: You may proceed to the next discussion if you got 1 mistake. If not, you have to go
back to the activity and try again.
Drill 2 (Section D)
Note: You may proceed to the next discussion if you got 1 mistake. If not, you have to go
Drill 3 (Section D)
Note:You may proceed to the next discussion if you got 1 mistake. If not, you have to go
103
Drill 4 (Section E)
Note:You may proceed to the next discussion if you got 1 mistake. If not, you have to go
If you need more help, you may reach us at CP No. 09189030109 or send a private message
thru facebook account Arnold Lansangan Carreon or CP No. 09451144098 or private
message thru facebook account dhitegozunbaluyut
Prepared and Submitted by: Noted:
APHRODITE G. BALUYUT IMELDA E. SIMBULAN

Subject Teacher/MT-II Head Teacher VI
ARNOLD L. CARREON
Subject Teacher/ T-III
104

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DEPARTMENT OF EDUCATION

Mrs. Aphrodite G. Baluyut

Week Contents Page

2 Statement of Comprehensive Income (SCI) 23

3 Statement of Changes in Equity (SCE) 38

4 Statement of Cash Flows (SCF) 47

Analysis and Interpretation of Financial

Analysis and Interpretation of Financial

School Teaching Dates/ August 24-28, 2020

Teacher Aphrodite G. Baluyut Quarter First

1. Identify the elements of the SFP and describe each of them

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

1. Identify the elements of the SFP and describe each of them;

STATEMENT OF FINANCIAL POSITION (SFP)

Fundamentals of Accounting, Business and Management 2

B. Other Learning Resources

A. Reviewing previous lesson or presenting the new lesson

B. Establishing a purpose for the lesson

How do businesses generate financial statements? It produces its financial

1. Analysis of Business Transactions

What is a Financial Statement?

➢ Represents a formal record of the financial activities of an entity.

Purpose of Financial Statements is to communicate

Four (4) Types of Financial Statements

C. Presenting examples/instances of the new lesson

In reality, the Statement of Comprehensive Income is the first to be prepared,

Statement of Financial Position (SFP)

➢ Also known as the Balance Sheet / Statement of Financial Condition

Flexibility – shows insight as to the capacity of the company to adapt to various

D. Discussing new concepts and practicing new skills #1

Let’s discussed the Elements of the SFP.

Assets: Something a business owns or controls

Liabilities: Something a business owes to someone

1. Allowance for Doubtful Accounts

E. Discussing new concepts and practicing new skills #2

1.1. Current Assets

a. Cash and cash equivalents

1.2. Non-Current Assets

a. Property, plant and equipment (buildings, furniture and fixtures, office

2.1. Current Liabilities

Sample of Statement of Financial Position

Activity 1 (Write the answers in your notebook)

Fill in the missing figure in order to satisfy the accounting equation

Activity 2 (Use your notebook in answering)

Compute the amount of the missing account the accounting equation.

Activity 3 (Use your notebook in answering)

Account Element Classification

H. Making generalizations and abstractions about the lesson

Name: ____________________________________ Grade & Section: _________

Account Element Classification

J. Additional activities for application or remediation

Activity 1.1 (Use your notebook in answering)

Fill in the missing figure in order to satisfy the accounting equation.

Activity 2.2 (Use your notebook in answering)

Compute the amount of the missing account the accounting equation.

1. Wash Your Problem has assets of P40,650 and liabilities of P30,000

Activity 3.3 (Use your notebook in answering)

Account Element Classification

KEY TO CORRECTION for the Enrichment (Section J)

Name: ____________________________ Grade & Section: _

Name: _________________________ Grade & Section: _