Fundamentals of

SHS
Accountancy,
Business, and
Management 2
Grade 12
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The Editors

PIVOT 4A CALABARZON
 FABM 2
Grade 12

Regional Office Management and Development Job S. Zape, Jr.,

Team:
EPS in-Charge, Jhonathan S. Cadavido, Romyr L. Lazo, Fe M. Ong-Ongowan,
Lhovie A. Cauilan, Marissa C. Valle

Schools Division Office Management Team: :

Fundamentals of ABM 2
PIVOT IV-A Learner’s Material
Quarter 1
First Edition, 2020

Published by: Department of Education Region IV-A CALABARZON

Regional Director: Wilfredo E. Cabral
Assistant Regional Director: Ruth L. Fuentes

PIVOT 4A CALABARZON
 Guide in Using PIVOT Learner’s Material

For the Parents/Guardian

This module aims to assist you, dear parents, guardians, or

siblings of the learners, to understand how materials and activities
are used in the new normal. It is designed to provide the information,
activities, and new learning that learners need to work on.

Activities presented in this module are based on the Most

Essential Learning Competencies (MELCs) for Fundamentals of ABM
2 as prescribed by the Department of Education.

Further, this learning resource hopes to engage the learners in

guided and independent learning activities at their own pace and
time. Furthermore, this also aims to help learners acquire the needed
21st century skills while taking into consideration their needs and
circumstances.

You are expected to assist the child in the tasks and ensure the
learner’s mastery of the subject matter. Be reminded that learners
have to answer all the activities in their own notebook.

For the Learners

The module is designed to suit your needs and interests using

the IDEA instructional process. This will help you attain the
prescribed grade-level knowledge, skills, attitude, and values at your
own pace outside the normal classroom setting.

The module is composed of different types of activities that are

arranged according to graduated levels of difficulty—from simple to
complex. You are expected to answer all activities on separate
sheets of paper and submit the outputs to your respective teachers
on the time and date agreed upon.

PIVOT 4A CALABARZON
 PARTS OF PIVOT LEARNER’S MATERIAL

Parts of the LM Description

What I need to
know The teacher utilizes appropriate strategies in presenting
Introduction

the MELC and desired learning outcomes for the day

or week, purpose of the lesson, core content and
relevant samples. This allows teachers to maximize
learners awareness of their own knowledge as regards
content and skills required for the lesson
What is new

The teacher presents activities, tasks , contents of

What I know
Development

value and interest to the learners. This shall expose the

learners on what he/she knew, what he /she does not
know and what she/he wanted to know and learn.
What is in Most of the activities and tasks must simply and
directly revolved around the concepts to develop
and master the skills or the MELC.
What is it

The teacher allows the learners to be engaged in

What is more
various tasks and opportunities in building their KSA’s
to meaningfully connect their learnings after doing the
Engagement

tasks in the D. This part exposes the learner to real life

situations /tasks that shall ignite his/ her interests to
What I can do meet the expectation, make their performance
satisfactory or produce a product or performance
which lead him/ her to understand fully the skills and
What else I can concepts .
do

The teacher brings the learners to a process where

What I have they shall demonstrate ideas, interpretation, mindset or
Assimilation

learned values and create pieces of information that will form

part of their knowledge in reflecting, relating or using it
effectively in any situation or context. This part
encourages learners in creating conceptual structures
What I can
giving them the avenue to integrate new and old
achieve
learnings.

PIVOT 4A CALABARZON
WEEK
1 STATEMENT OF FINANCIAL POSITION

I
This learning material was written for Senior High School Learner (Grade
12) to be used as learning materials for Fundamentals of Accounting, Busi-
ness, and Management 2.
The learning material is all about the different topics to be discussed
during the first week of the session such as the basic financial statements
such as the elements, preparation of statement of financial position using the
report and account form with proper classifications of items as current and
noncurrent.
After going through, learners are expected to: Identify the elements of
the SFP and describe each of them; and prepare an SFP using the report form
and the account form with proper classification of items as current and non-

D
What are financial statements?
• Formal reports on the financial position and results of operations of a busi-
ness organizations;
• End results of the processing of financial information involved in the account-
ing process; and
• Financial Statements are facilitated by the preparation of the Worksheet on
which these financial reports are commonly based.
STATEMENT OF FINANCIAL POSITION (SFP) – Also Known as the balance
sheet. This statement includes the amounts of the company’s total assets, li-
abilities, and owner’s equity which in totally provides the condition of the com-
pany on a specific date (Haddock, Price, & Farina, 2012). It expresses the ac-
counting equation as:
A = L + Capital/Equity.
This statement includes the amounts of the company’s total assets, liabilities,
and owner’s equity which in totality provides the condition of the company on a
specific date.
Permanent accounts – these accounts balances that remain intact from the
accounting period to another. These accounts are retained permanently in the
SFP until their balances become zero. Examples of permanent accounts in-
clude: Cash, accounts receivable, accounts payable, loans payable, and capital
account among others. Basically, assets, liabilities, and equity accounts are
permanent accounts. This is in contrast with the temporary accounts which

PIVOT 4A CALABARZON 6
accounts unlike permanent accounts will zero balances at the end of the ac-
counting period.
Contra Assets - are those accounts that are presented under the assets portion
of the SFP are reductions to the company’s asset. These include Allowance for
Doubtful Accounts and Accumulated Depreciation. Allowance for Doubtful Ac-
counts is a contra asset to Accounts Receivable. This represents the estimated
amount that the company may not be able to collect from delinquent customers.
Accumulated Depreciation is a contra asset to the company’s Property, Plant,
and Equipment. This account represents the total amount of depreciation
booked against the fixed assets of the company.
The elements of the SFP are as follows:
ASSET – are resources controlled by the entity as result of past events and from
which future economic benefits are expected to flow to the entity.
LIABILITIES – are present obligation arising from past events the settlement of
which is expected to result in an outflow from the entity of resources embodying
economic benefits (assets).
EQUITY – simply mean asset minus liabilities. Other terms used for equity are
“capital”, “net assets,” and “net worth.”
The above elements are known as Permanent Accounts.
Two Types of Preparing SFP
Account Form - presents the Assets section on the left side of the statement and
Liabilities and Capital sections are on the right, so that the total Assets is written
on the same line as of the total Liabilities and Capital.
Report Form - enumerates the assets, liabilities and capital one after the other.
Sample Account Form:
LULUSOG KA COMPANY

STATEMENT OF FINANCIAL POSITION

AS OF DECEMBER 31, 2016

ASSETS LIABILITIES and OWNER’S EQUITY

Current Assets Current Liabilities

Cash P 10,000 Accounts Payable P 10,000

Accounts Receivable 10,000 Noncurrent Liabilities

Inventory 40,000 Loans Payable 20,000

Prepaid Rent 3,000 Total Liabilities P 30,000

Total Current Assets P 63,000 Owner’s Equity

Noncurrent Assets Capital P 40,000

7 PIVOT 4A CALABARZON
 Sample Report Form:

LULUSOG KA COMPANY
STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 2016

ASSETS

Current Assets
Cash P 10,000
Accounts Receivable 10,000
Inventory 40,000

Prepaid Rent 3,000

Total Current Assets P 63,000
Noncurrent Assets

Furniture 5,000
TOTAL ASSETS P 68,000

LIABILITIES and OWNER’S EQUITY

Current Liabilities

Accounts Payable P 10,000

Noncurrent Liabilities

Loans Payable 20,000

Total Liabilities P 30,000

Owner’s Equity
Capital P 40,000

Drawings 2,000 38,000

TOTAL LIABILITIES AND OWNER’S EQUITY P 68,000

Classification of Account Titles

Current Assets – Assets that can be realized (collected, sold, used up) one year
after year-end date. Examples includes Cash, Accounts Receivable, Merchan-
dise Inventory, Prepaid Expenses, etc.
Current Liabilities – Liabilities that fall due (paid, recognized as revenue)
within one year after year-end date: Examples include Notes Payable, Accounts
Payable, Accrued Expenses (Example: Utilities Payable) Unearned Income, etc.
Noncurrent Assets – Assets that cannot be realized (collected, sold, used up)
one year after year-end date. Examples include Property, Plant and Equipment
(equipment, furniture, building, land) Long Term, investments, Intangible As-
sets, etc.

PIVOT 4A CALABARZON 8
Noncurrent Liabilities – Liabilities that do not fall due (paid, recognized as
revenue) within one year after year-end date. Examples include Loans Payable,
Mortgage Payable, etc.

E
Learning Task 1.1
Please answer the task alone and answer them correctly.
Note: Honesty is the Best Policy.
Directions: Arranged the account titles in their proper order. Number them
from 1-10
Below is the different ledger account of Rich Company as of December 31,
2017:
Accounts Payable; Accrued Expenses; Accumulated Depreciation; Cash; Prop-
erty, plant, and equipment; Accounts Receivable; Inventory; Prepaid expenses;
Owner’s Equity; Loans Payable.

Learning Task 1.2

Directions: Alternate Response. Read each sentence carefully and determine
whether the statement is True or False. Write your answer in a clean sheet of
paper.
1. The elements of SFP are Assets, Liabilities and Owner’s Equity.

2. Permanent accounts become zero at the end of the accounting period.

3. Mortgage Payable is an example of Noncurrent Asset.

4. Intangible assets are example of Current Assets.

5. The owner’s initial investment is also known as capital.

6. Accounts receivables are the amounts to be paid by your clients.

7. Accrued expenses are expenses that have been used but not yet paid.

8. Unearned Income is an example of Current Assets

9.Cash and Cash equivalents may include dated travel checks.

10. Total Asset and Total Liabilities should be equal in preparing SFP.

9 PIVOT 4A CALABARZON
 E
Learning Task 1.3
Directions: Compute for the missing amount and fill the blanks.
1. If assets are P17,000 and owner’s equity id P10,000, liabilities
are_______________
2. At the end of the first month of operations for Leana’s Ice Delivery. The busi-
ness had the following accounts: Accounts Receivable, P1,200; Prepaid Insur-
ance, P500; Equipment, P36,200; and Cash, P40,650. On the same date,
Juana owed the following creditors: Noni Supply Company, P12,000; Maria’s
Equipment, P9,500. The current assets for the Leana’s Delivery Service
are:_______________
3. At the end of the first month of operations for Leana’s Delivery, the business
had the following accounts: Accounts Receivable, P1,200; Prepaid Insurance,
P500; Equipment, P36,200; and Cash, P40,650. On the same date, Leana
owed the following creditors: Noni Supply Company, P12,000 (due in 6
months); Maria’s Equipment, P9,500 (due after 2 years. The current liabilities
for the Leana’s Delivery Service are________
4. If during the year total assets increase by P75,000 and total liabilities de-
crease by P16,000, by how much did owner’s equity increase/decrease?
_____________________
Learning Task 1.4:
Direction: Prepare a Statement of Financial Position using the following ac-
counts: Any form will do.
Cash-5,000; Loans Payable – 77,500; Accounts Receivable – 2,600; Supplies –
2,300; Equipment – 17,000; Owner’s Equity – 40,000; Accounts Payable -
22,400; and Building – 113,000.
You can create your own business name at the end of the current year for the
heading.

PIVOT 4A CALABARZON 10
WEEK
STATEMENT OF COMPREHENSIVE INCOME (SCI)
2 PART 1

I
Learners will be given different simple problems to solve which involved
the Statement of Comprehensive Income.

At the end of the lesson, learners are expected to: identify the elements of
the SCI and describe each of these items for a service business and a merchan-
dising business.

D
ELEMENTS OF THE STATEMENT OF COMPREHENSIVE INCOME

In this part of the lesson, we will be discussing in detail the elements of SCI and
I will introduce the different accounts.

1. Revenue

Service Income -it is generally used to described revenue derived from render-
ing services such as Professional fee, Rental fee, and Tuition fee Revenue. Ser-
vices is recognized when it is rendered already.

Sales – the Sales Revenue account is used when the company derived revenue
from selling of goods. The sales of good is recognized upon delivery.

2. Expenses

Cost of Goods Sold (Cost of Sales) – account used by the company who sells
goods. This accounts comprises the cost of the merchandise sold and include
purchase price of the product, brokerage and shipment cost known as Freight-
in. Cost of sales is part of accounting inventory when it comes to recording –
perpetual and periodic. Perpetual inventory is the inventory of cost of goods
sold account using product ledger and updated upon sale and delivery of the
merchandise while Periodic inventory a year end physical count is done. Under
this method and they do not maintain product ledger.

Operating Expenses – refers to all expenses of the business related to its opera-
tion aside from cost of sales. Among them are salaries and wages of employees,
supplies, utilities (light and power, telephone and water bill). Gas and oil, repre-

11 PIVOT 4A CALABARZON
 Bad debts -operating expense related to accounts receivable. It is an estimated
expense. It Is charge to expense based on the amount deemed uncollectible.

There are 3 approaches in recognizing expense: Matching principles, Principle

of rational allocation and Expenditures

Other Expenses and Other Income- Losses and other expenses including
gains and other income are reported after the operating section of the SCI. Line
items included under this section are interest income from investments of ex-
cess cash, interest expense from borrowings and gain or loss from sale of equip-

E
ment.

Learning Task 2.1

Matching Type: Match Group A and Group B
Group A.
Purchases, Sales Return and Allowances, Cost of Goods of Sold, Cash Discount,
Sales Invoice, Buyer, Selling Expense, Freight-in, Operating Expenses, Sales.
Group B
1. The party liable for the cost of freight under the terms FOB shipping point,
prepaid.
2. This is the group classification of freight out account in the income statement.
3. The account used in periodic inventory system to record acquisition of mer-
chandise.
4. A contra asset account that reduces revenue because of defective items sold.
5. It is calculated by adding net cost of purchases to the beginning inventory.
6. It is a discount provided to customers to encourage prompt payment.
7. The source document for recording the sale of merchandise.
8. An account used for recording the freight charges on merchandise purchased
or held for resale.
9. Operating income will result if gross margin exceeds what?
10. The source of company’s revenue in a merchandising concern.
Learning Task 2.2
Short Problems: Analyze the given independent problem from simple to complex
and answer what is being asked for
1. Kenzo Company generated revenues amounting to P100,000. Expenses for
the year amounted to P76,000. How much is the company’s net income for the

PIVOT 4A CALABARZON 12
2. Kyle Company’s salaries to sales agents amounted to P10,000. Salaries of ac-
countants amounted to P20,000. No other expenses were incurred. How much is
the company’s general and administrative expense?
3. Aeris Company’s beginning inventory amounted to P250,000. Net purchases
amounted to P70,000. Freight in totaled P15,000. Compute the company’s cost of
foods available for sale.
4. Alyssa Company’s sales amounted to P500,000. Sales returns and sales dis-
counts amounted to P30,000 and P10,000 respectively. Purchases of the com-
pany totaled P100,000 while purchase returns and purchase discounts amounted
to P20,000 and P10,000 respectively. How much is the company’s Net Sales? Net
Purchases?
5. Freya’s cost of goods sold amounted to P285,000. Net cost of purchases to-
taled P85,000. Beginning inventory amounted to P250,000. Sales amounted to
P500,000. Compute for the company’s Ending Inventory.
6. Gross profit for Jayden Merchandise amounted to P175,000. Beginning inven-
tory totaled P250,000. Ending inventory amounted to P50,000 while Net Cost of
Purchases totaled P85,000. Compute for Jayden’s Net sales.
Learning Task 2.3
Alaissa had the following expense accounts for the year ended December 31,
20X6:
Salaries of admin personnel Salaries of janitors Salaries of sales agents
Utilities of home office Rent of office building Delivery Expense
Depreciation of office equipment Depreciation of delivery van
Advertising Cost of merchandise sold during the year
Identify if the above account is part of the general and administrative expenses or

A
Learning Task 2.4
Short Problem:
Juana Join, owner of Join Store, sold 3 boxes of ball pens to Mira Pura on ac-
count at a price of P150.00 per box or P15.00 per pen. Juana gave Ms. Pura
two weeks to pay the account. Moreover, Juana told Ms. Pura that she will
deduct 2% discount if she pays within the week.
Ms. Pura returned 5 days later and returned 5 ball pens and took advantage
of the discount.
Determine the amount of: Sales, Sales Return, Sales Discount, and Net Sales

13 PIVOT 4A CALABARZON
 WEEK

Statement of Comprehensive Income (SCI)

Part 2
3
I
This section will discuss how to prepare SCI in two approaches for a mer-
chandising and service business activities using the single and multiple ap-
proach.

It contains the lesson proper plus different activities/task from simple to

complex one. You are required to answer them all using a separate notebook for
the subject.

After going through with this learning material, you are expected to: pre-
pare an SCI for a service business using the single-step approach and prepare

D
Types of Approaches use in Preparing SCI

•Single-Step – where all revenues are listed down in one section while all expenses
are listed in another. Net income is computed using a “single-step” which is Total
Revenues minus Total Expenses (Haddock, Price & Farina, 2012). Usually used by
Service entities

•Multi-Step – where there are several steps needed in order to arrive at the company’s
net income (Haddock, Price & Farina, 2012). Use by Merchandising entities.

Difference of the SCI of a Service Company and of a Merchandising Company

The main difference of the SCI of the two types of business lies on how they gener-
ate their revenue. A service company provides services in order to generate revenue
and the main cost associated with their service is the cost of labor which is presented
under the account Salaries Expense. On the other hand, a merchandising company
sells goods to customers and the main cost is associated with the activity is the cost
of the merchandise which is presented under the line item Cost of Goods Sold.

In presenting these items on the SCI, a service company will separate all revenues
and expenses while a merchandising company will present total sales and cost of
goods sold on the first part of the statement which will net to the company’s gross
profit presenting the other expenses which are classified as either administrative ex-
penses or selling expenses.

PIVOT 4A CALABARZON 14 PIVOT 4A CALABARZON

Different Parts of Multi-Step
1.Sales/Revenue
2.Contra Revenue – contra because it is on the opposite side of the sales ac-
count. This is contrary to the normal balance of the sales or revenue accounts.
2.1 Sales returns – this account is debited in order to record returns of
customers or allowances for such returns. It occurs when customers return
their product for reasons such as but not limited to defects or change of pref-
erence.
2.2 Sales discount – this is were discounts given to customers who pay
early are recorded. It is also known as cash discount. This is different from
trade discounts.
3.Cost of Goods sold – this account represents the actual cost of merchandise
that the company was able to sell during the year .
3.1 Beginning inventory – this is the amount of inventory at the beginning
of the accounting period or the amount of ending inventory from the previous
period.
3.2 Net cost of purchases = Purchases + Freight in
3.2.1 Net Purchases = Purchases – (Purchase discounts and Purchase re-
turns)
3.2.1.1 Purchases – amount of goods bought during the current account-
ing period
3.2.1.2 Contra Purchases – an account that is credited being contrary to
the normal balance of Purchase account.
3.2.1.2.1 Purchase discounts – accounts used to record early pay-
ments by the company to the suppliers of the merchandise. This is how buyers
see a sales discount given to them by their supplier.
3.2.1.2.2 Purchase returns – account used to record merchandise
returned by the company to their suppliers. This is how buyers see a sales
3.2.2 Freight in –this account is used to record transportation cost of mer-
chandise purchased by the company. Called freight in because this is re-
corded when goods are transported into the company.
3.3 Add beginning inventory and net cost of purchase to get COGS.
3.4 Ending inventory – amount of inventory presented in the SFP. Total cost
of inventory unsold at the end of accounting period.
4.Sales less COGS is Gross Profit
5.General Administrative expenses – expenses that are not directly related to
the merchandising function of the company but are necessary for the business
to operate effectively.
6.Selling expenses – these are expenses15 that are directly PIVOT
related4AtoCALABARZON
the main
purpose of a merchandising business: the sale and delivery of the merchan-
dise. This does not include cost of goods sold and contra revenue accounts.
7.Gross profit - general and administrative expenses- selling expenses is NI for
6.Selling expenses – these are expenses that are directly related to the main pur-
pose of a merchandising business: the sale and delivery of the merchandise.
This does not include cost of goods sold and contra revenue accounts.
7.Gross profit - general and administrative expenses- selling expenses is NI for
positive result; NL for negative result

E
Learning Task 3.1
Modified Matching Type: Classify the line accounts on the table as to single-
step/nature of expense or multi-step/function of expense SCIs.
Net sales Rent expense Utilities expense
Net purchases Cost of sales Interest income
Depreciation and Bad debts Interest expense
amortization
General and admin- Selling expense Gain from sale of PPE
istrative expense
Salaries expense Advertising expense Decrease in inventory

PIVOT 4A CALABARZON 16 PIVOT 4A CALABARZON

 Learning Task 3.2
Problem. Single-Step Method
The nominal accounts of MCValle Enterprise on December 31, 2019 have the fol-
lowing balances:
Requirements: Prepare a single-step statement of comprehensive income. Pro-
vide a proper heading for the statement.

Accounts Dr. Cr.

Service fees P696,000

Interest income 48,000
Gain on sale of equip- 16,000
ment P240,000
Salaries expense 24,000
Rent expense 16,000
Utilities expense 8,000
Supplies expense 32,000
Depreciation expense 56,000
Taxes and licenses 6,400
Bad debts expense 1,600
Interest expense 800
Miscellaneous expense
Totals P384,000 P760,000

A
Learning Task 3.3
Problem: The Prospere Bookstore
The Prospere Bookstore sells the books used in classed such as workbooks
and coloring books. All the enrolled learners (150 learners) purchased the 3 pre-
scribed books at P500 each. The books costs P200 each. Also, sales of various
school supplies amounted to P500,000. Costs of these school supplies amounted
to P250,000.
The monthly salary of the bookstore manager is P20,000. The store is
manned by one clerk with monthly salary of P6,000. Utilities expense for the
year totals P80,000. Of this, 25% is for the small office at the back of the book-
store. Depreciation for store fixtures amounted to P50,000.

Requirement: Prepare the multi-step income for the year ended December 31
for Prospere Bookstore.

17 PIVOT 4A CALABARZON
 WEEK

Statement of Changes in Equity

(SCE)
4
I
In this section, you will study all about Statement of Changes in Equity
(SCE), its components and how to prepare it.
It contains the lesson proper plus different activities/task from simple to
complex one. You are required to answer them all using a separate notebook for
the subject.
After going through with this learning material, you are expected to pre-
pare SCE for a single-proprietorship.

D
Statement of Changes of Equity
-Reports the changes in each component of shareholders’ equity during a period
of time
-Shows the changes in each component of shareholders’ equity for the period
-Share capital
–Amounts contributed by shareholders
–May include common and preferred classes
-Retained earnings / deficit
–Cumulative profit retained in the company
–Less dividends paid to shareholders
-Other shareholders’ accounts
The forms of business organization determines the equity accounts reported
on the financial statements.

Sole Proprietorship. The SFP and SCE will present one capital account because
there is only one owner. The owner’s capital account follows this naming conven-
tion Owner’s name. Capital. If the name of the sole proprietor is Juan Dela Cruz,
then the name of the account is Juan Dela Cruz, Capital, where it has a normal
credit balance. The Drawing’s account follows the naming convention for Capital:

follows the naming convention for Capital: Owner’s Name, Drawings. Entries to
this account decreases equity. It is a nominal account with a normal debit bal-
ance. The owner’s capital account tracks the following transactions of the owner:
1) Capital contributions; 2) withdrawals; and 3) net income or net loss generated
by the business

PIVOT 4A CALABARZON 18 PIVO

The SCE is the summary of owner’s capital account.
DEF Company
Statement of Changes in Equity
For the Year Ended December 31, 2017
Owner, Capital, January 1, 2016 P 100,000
Add: Net Income for the year, 2016 P 50,000
Additional Investment 25,000 75,000
Sub-total P175,000
Less: Withdrawal for the year 30,000
Owner, Capital, December 31, 2017 P145,000

Partnership. The number of capital accounts that will be reported on the SCE
and the SFP is equal to the number of partners. Same with the capital account
used in Sole proprietorships, each partner’s capital account will track his contri-
butions to the business, his share in the net income and his drawings. A Drawing
account is also maintained for each partner. The naming convention for both
capital and drawings accounts is the same as in sole proprietorship.

Determining the amount of net income closed to each partner’s capital account is
called allocation of net income. Net income is allocated based on the profit and
loss sharing agreement stipulated in the partnership contract. Allocation of net
income is unique only to partnership.

DEF Partnership
Statement of Changes in Equity
For the year ended December 31, 20X1

D, Capital E, Capital F, Capital Total

Balance, P 25,600 P 43,800 P 37,655 P107,055

January 1,
20X1
Add: 15,000 10,000 10,000 35,000
Partner’s Con-
tributions 22,695 30,260 22,695 75,650
Net Income
Less: ( 12,000) ( 15,000) ( 14,000) ( 41,000)
Drawings

Balance, De- P 51,295 P 69,060 P 56,350 P176,705

cember 31,
20X1

19 PIVOT 4A CALABARZON
Corporation. It is owned by many stockholders that could number to thousands.
Moreover, the ease of transferring ownership in corporation results in fast turnover of
owners. There are 3 new equity accounts used by corporation: 1) capital stock; 2) ad-
ditional paid-in capital; and 3) retained earnings.

The stockholder’s equity of a corporation is divided into 2 parts: paid in capital and
retained earnings. Paid-in capital is the amount of contribution s given or will be
given to the corporation in exchange for its common stocks.

Paid-in capital is composed of capital stock and additional paid-in capital. The bal-
ance of Capital Stock reflects the par value of the issued common shares. Par value
is the minimum price by which corporations can issue stocks to shareholders. When
the corporations generally issue stocks in exchange for an amount greater than par,
the excess of the issue price over the par is reported as Additional Paid-in Capital.

The second half of the stockholder’s equity is the Retained Earnings. This account
reports the undistributed earnings of the corporation. The balance of retained earn-
ings is computed as follows: net income minus losses and dividends from the date of
the incorporation up to the cut-off or date of SFP. Dividends are distributions stock-
holders, similar to owner’s drawings in sole proprietorship and partnership. Dividends
are deducted from retained earnings because dividends are taken from income gener-
ated by the corporation (Corporation Code).

DEF Corporation
Statement of Changes in Equity
For the year ended December 31, 20X1

Capital Additional Retained Total

Stock Paid-in Earnings
Capital

Balance, P 100,000 P 100,000 P 56,785 P 256,785

January 1,
20X1
Add: 10,000 15,000 25,000
Issuance of
shares 65,870 65,780
Net Income
Less: ( 21,500) (21,500)
Dividends
Balance, De-
cember 31, P 110,000 P 115,000 P 101,155 P 326,153
20X1

PIVOT 4A CALABARZON 20
 E
Learning Task 4.1
SCE Making
Direction: Create sample proforma of SCE and Identify each part.
Required: Single Proprietorship
Learning Task 4.2
Simple Problem:
You are applying for work as an Accounting Clerk at Aeris Boutique Shop. Apart
from the interview, the company gives exam and one of them is the preparation of
a simple SCE given the following data:
The owner’s equity of Aeris Boutique Shop is a well-known company in Angono,
Rizal when it comes to apparel. The owner’s equity of Aeris has a balance of
P750,000 on January 1, 20x1. Transactions affecting equity during 20x1 are as
follows:
a. Aeris, the sole proprietor, provided additional investment of P250,000 to the
business.
b. Aeris’s drawings during the period totaled P50,000.
c. The business incurred an income of P450,000.

A
Learning Task 4.3 Multiple Choice
1. The first line in the SCE is
a. Profit of loss b. Additional contributions
c . Beginning capital d. Drawings
2. Which of the following shows a correct effect on equity?
Transaction Effect on equity
a. Additional investment Decrease
b. Withdrawals Increase
c. Profit Decrease
d. Loss Decrease
3. The amount of profit or loss appears in which of the following financial state-
ments?
a. Statement of financial position b. Statement of comprehensive income
c. Statement of changes in equity d. b & c

21 PIVOT 4A CALABARZON
4. The heading of a financial statement most likely will not include
a. The name of the reporting entity
b. The title of the financial statement
c. The date of the financial statement
d. The name (s) of the business owner( s)
5. The statement of changes in equity is dated
a. As of a point in time c. After some time
b. For a period of time d. Not dated

PIVOT 4A CALABARZON 22 PIVOT 4A CALABARZON

 WEEK

Cash Flow Statement

5
I
This section of your Learning Material will include the Cash Flow State-
ment including their components and structures as well as on how to prepare
the cash flow statement.
It contains the lesson proper plus different activities/task from simple to
complex one. You are required to answer them all using a separate notebook for
the subject.
After going through with this learning material, you are expected to dis-
cuss the components and structures of a CFS, and prepare a CFS.

D
Before going through with this learning material, please answer the
initial activity for your pre-assessment.
Learning Task 5.1
True or False
1.Information on the sources and utilization of cash during the period is pro-
vided by the statement of changes in equity.
2.The statement of cash flows provides information on cash inflows and cash
outflows during the period.
3.Cash inflows and outflows during the period are presented in the state-
ment of cash flows into 4 types of activities.
4.Cash flows from operating activities result primarily from the acquisition
and disposal of long-term assets.
5.Cash flows from investing activities result primarily from transactions that
affect income and expenses.
The Statement of Cash Flows
-translates earnings in the Income Statement into cash inflows.
-provides the net change in the cash balance of a company for a period.
-shows how good is the firm in realizing adequate cash from its main operat-
ing business.
-it helps owners see if their revenues are actually translated to cash collec-
tions or if they have enough cash inflows in order to pay any maturing li-
abilities
-reveals if firm needs to look outside for other sources of finance.

23 PIVOT 4A CALABARZON
In the Statement of Cash Flows
- definition of cash includes both cash AND
- cash equivalents. Which are Short term highly liquid instruments maturing in
not more than 90 days.
Treasury Bills ( T-Bills), Short Term Certificates of Deposits (CDs), and Com-
mercial Paper (CPs)
The Statement of Cash Flow or Cash flow Statement provides information on the
sources and utilization of cash during the period. Simply stated as it provides
information on cash inflows and cash outflows during the period.
The Statement of Cash Flows is used by investors and creditors to :
•Evaluate management’s abilities to manage cash now and in the future.
•Assess the company’s ability to pay dividends and to pay creditors.
•Convert actual net income reported on income statement to a cash basis figure.
The Different Parts of Cash Flow Statement
•Operating Activities – Activities that are directly related to the main revenue-
producing activities of the company such as from customers and cash paid to
suppliers/employees.
•Investing Activities – Cash transactions related to purchase or sales of non-
current assets.
•Financing Activities – Cash transactions related to changes in equity and bor-
rowing.
•Net change in cash or net cash flow (increase/decrease) – the net amount of
change in cash whether it is an increase or decrease for the current period. The
total change brought by operating, investing and financing activities.
•Beginning Cash Balance – the balance of the cash account at the beginning of
the accounting period.
•Ending Cash Balance – The balance of the cash account at the end of the ac-
counting period compute using the beginning balance plus the net change in
cash for the current period.
Without the SCF/CFS, the company will not know if it can pay its upcoming li-
abilities or continue operations due to some expenses having no credit terms,
thus cash is needed before a transaction can occur.
Methods of Preparing Cash Flow Statement
Direct Method: which provides information regarding the actual cash transac-
tions generated/used in operations.
Indirect Method –provides information regarding non-cash transactions during
the year and shows the difference between the net income/loss of the company
and the cash generated/used in operations.
PIVOT 4A CALABARZON 24 PIV
” The only difference between the two methods is, how cash flows from op-
erating activities are calculated.”
The Statement of Cash Flows is prepared by using
“Cash flows from investing and financing activities are calculated identically in
both methods.
The net cash inflow from operating activities is the same whether statement pre-
pared by direct or indirect method.
Direct Method. Converts each item on the income statement to a cash flow i.e.
sales are converted toc ash receipts from sales etc.
The operating cash flow section of the CFS under this method would show each
major class of gross cash receipts and gross cash payments.
HAPPY LEARNING COMPANY
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 20X1
Cash flows from Operating Activities
Receipts from Customers P 1,000,000
Payments to Suppliers and Employees (700,000)
Net Cash generated by Operating Activities P 300,000
Cash flows from Investing Activities
Purchases of Property and Equipment P (150,000)
Net Cash used by Investing Activities P (150,000)
Cash flows from Financing Activities
Long term loan from a bank P 300,000
Additional investment from owner 100,000
Withdrawals by owner ( 80,000)
Net cash generated by Financing Activities P 320,000
Net increase in cash and cash equivalents P 470,000
Cash, January 1, 20X1 100,000
Cash, December 31, 2016 P 570,000
Indirect Method is derived from the following formula:
Cash Balance Beginning + Collections—Payments = Cash Balance Ending
Where: Collections = Beginning Trade and Other Receivables + Net Sales or Net
Revenues—Ending Trade Receivables and Other Receivables
Where: Net Sales 0r Net Revenues is already included in the Net Income
Thus: Collections = Beginning Trade and Other Receivables—Ending Trade and
Other Receivables

25 PIVOT 4A CALABARZON
A positive result means beginning is greater than ending and there is a decrease
in the balance of the receivable because of the cash collections while a negative
results means ending is greater than beginning and there is an increase in the
balance of the receivables because of more sales on account.
Where: Payments = Beginning Trade and Other Payables + Expenses—Ending
Trade and Other Payables
Where: Expenses is already included in the Net Income
Thus: Payments = Beginning Trade and Other Payables—Ending Trade and
Other Payables
Beginning Trade and Other Payables—Ending Trade and Other Payables = In-
crease/Decrease in Trade and Other Payables
A positive result means beginning is greater than ending and there is a decrease
in the balance of the payable because of the cash payments while a negative re-
sult means ending is greater than beginning and there is an increase in the bal-
ance of the payables because of more expenses on account.
HAPPY LEARNING COMPANY
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 20X1
Cash flows from Operating Activities
Net Income P 250,000
Add back: Depreciation 20,000
Loss on sale of property and equipment 10,000
P 280,000
(Increase)/Decrease in Trade and Other Receivables—Net ( 40,000)
(Increase/(Decrease) in Trade and Other Payables 60,000
Net cash generated by Operating Activities P 300,000
Cash flows from Investing Activities
Purchases of Property and Equipment ( P 150,000)
Sale of Office Equipment 30,000
Net Cash generated from Investing Activities (P 120,000)
Cash flows from Financing Activities
Long term loan from a bank P 300,000
Additional investment from owner 100,000
Withdrawals by owner (80,000)

PIVOT 4A CALABARZON 26
Net increase in cash and cash equivalents P 500,000
Cash, January 1, 20X1 100,000
Cash, December 31, 20X1 P 600,000
Steps in Indirect Method.
1. Begin with Net Income as reported on the income statement.
2. Add back Depreciation, Depletion and Amortization.
( as these are non-cash expenses added back to income )
3. Subtract gain on disposal of fixed assets.
( These are reported in investing section of the statement)
4. Add back Loss on disposal of fixed assets.
5. Adjust for changes in current asset and current liability.
6. Arrive at Net Cash Inflow ( or Outflow) from Operating Activities.
Adjust for changes in current asset and current liability as under :
1. An increase in current assets is deducted from net income.
2. An increase in current liabilities is added to net income.
3. A decrease in current assets is added to net income.
4. A decrease in current liabilities is deducted from net income.

E
Learning Task 5.2
Problem ;
The company presented the following in order to aid the accountant in
preparing the CFS:
a. Net income: P200,00
b. Depreciation expense: P25,000
c. Gain on sale of property and equipment: P100,00
d. Decrease in trade and other receivables: P70,000
e. Purchase of property and equipment: P200,000
f. Payment of loan from bank: P150,000
g. Ending balance of cash is P700,000
Compute for the cash generated/used in financing activities.

27 PIVOT 4A CALABARZON
 A
Learning Task 5.3
Modified Matching Type: Classify the line items as to operating, investing and
financing activities.
1. Cash received from customers
2. Salaries paid
3. Interest paid
4. Utilities paid
5. Cash contribution from owners
6. Payment for acquisition of equipment
7. Payment to suppliers
8. Depreciation
9. Principal payments for bank loans
10. Cash received from sale of land

PIVOT 4A CALABARZON 28 PIVOT 4A CALABARZON

WEEK
Analysis and interpretation of

6 I
Financial Statements Part 1

This section of your Learning Material will discuss Vertical and Horizontal
Analysis of Financial Statements
It contains the lesson proper plus different activities/task from simple to
complex one. You are required to answer them all using a separate notebook
for the subject.
After going through with this learning material, you are expected to per-
form vertical and horizontal analyses of financial statements of a single proprie-
torship.

D
Financial analysis is a process of selecting, evaluating, and interpreting finan-
cial data, along with other pertinent information, in order to formulate an as-
sessment of a company’s present and future financial condition and perform-
ance.
Importance of Financial Statement Analysis
1.Holding of Share 2.Decisions and Plans
3.Extension of Credit 4.Investment Decision
Following are the comparison standards that can be used by entities:
1. Intracomparability – it is a kind of comparison where a company’s financial
statement for the current period are being compared with the financial state-
ments of prior or earlier periods. Increases in the total net income, decreases in
the total liabilities or increases in total assets are possible indicators that could
be used by the entity. This kind of comparison will point out the areas for im-
provements and may be used as performance evaluation tools for employees.
Example: 2017 FS of ABC company’s financial performance compared to that of
2016 FS of ABC company.
2. Intercomparability – deals with the comparative analysis of the company’s
financial statements against a direct competitor. This is a very valuable tool
especially for companies that do not have the monopoly of the market.
Example: FS of Smart Telecoms compared to Globe Telecoms
3. Industry Standard – where there many players involved, it would be more
prudent for some to compare their company’s financial statements with the
standard average for that certain industry.
Example: FS of Globe telecoms compared to industry standard of telecom indus-

29 PIVOT 4A CALABARZON
Common analysis
1.Horizontal Analysis Using comparative financial statements to calculate per-
centage changes in a financial statement item from one period to the next. Useful
when comparing growth of different accounts over time. It is also called as Trend
Analysis.
Example: 2014 2015
Sales P 250,000 P 175,000
Peso Change = P250,000-P175,000= P 75,000
Percentage Change = (P250,000)-P175,000)/P175,000 = 42.86
Evaluated as follows: Sales increased by 75% which repre-
sents decreased of 42.86 % from 2014 level

2.Vertical Analysis uses the aggregate value in a financial statement for a given
year as the base, and each account’s amount is restated as a percentage of the
aggregate. Also known as common size analysis.
Balance sheet: Aggregate amount is total assets.
Income statement: Aggregate amount is revenues or sales.

Percentage of Assets
Cash P 200,000 200,000/1,400,00 = 14.3%

Accounts Receivables 400,000 400,000/1,400,000 = 28.6%

Inventory 250,000 250,000/1,400,000 = 17.9%
Equipment 550,000 550,000/1,400,000 = 39.3%

Total Assets P1,400,000 Sum of the components is

100%
Accounts Payable P 300,000 300,000/1,400,000 = 21.4%

Notes Payable 400,000 400,000/1,400,000 = 28.6%

Owner, Capital 700,000 700,000/1,400,000 = 50.0%

Total Liabilities and Eq- P1,400,000 Sum of the components is

Evaluated as follows: The largest component of asset is Equipment at 39.3%.

Cash is the smallest component of asset. On the other hand, 50% of assets
are financed by debt and the other half is financed by equity.

PIVOT 4A CALABARZON 30
 E
Learning Task 6.1
True or False
1. Financial statements are useless to a person who does not know how to in-
terpret the information contained in the report.
2. When making business decisions, an entrepreneur will need various
sources of information. A major source of information is the financial state-
ments.
3. A comparison of information from one period to another is called vertical
analysis.
4. An analysis of the interrelationship of information in a single period, ex-
pressed as percentages of a common denominator, is called horizontal analysis.
5. Entity A reported inventory balances of P100 and P50 in 20X1 and 20X0,
respectively. In a horizontal analysis, a financial statement user would con-
clude that Entity A’s inventory has increased by 50% from 20X0 to 20X1.
Learning Task 6.2
Problem: The Statement of Comprehensive Income of Aeris Company is repro-
duced below:
Required: Perform horizontal analysis for Aeris Company.

12/31/20M3 12/31/20M4
Net sales P 1,939,500 P 1,674,675
Cost of goods sold 900,000 843,975
Gross Profit 1,039,500 830,700
Selling and General expenses 445,500 409,725
Other expenses 37,500 30,825
Net Income P 556,425 P 390,150

Learning Task 6.3

Using the information on Learning 6.2 prepare a common-size SCI for 20M4
and 20M3 for Aeris Company

31 PIVOT 4A CALABARZON
 A
Learning Task 6.4
Multiple Choice Problems:
(For numbers 1 to 5) The financial statements of Pierre Trading are given below:
2014 2013
Cash and Cash Equivalents 12,250 10,470
Receivables 9,065 8,055
Inventory 6,620 5,300
Prepaid Expenses 8,545 10,600
Total Current Assets 36,480 34,425
Other Assets 92,500 78,685
Total Assets 128,980 113,110
Total current liabilities 36,150 42,335
Long-term Liabilities 23,990 18,960
Alain Pierre, Capital 68,840 51,815
Total Liabilities and Equity 128,980 113,110
2014
Sales P 104,705
Cost of sales 32,275
Gross profit 69,430
Selling expenses 35,325
Administrative expenses 12,815
Operating income 1,290
Interest expense 1,050
Net income P 20,240
1. Horizontal analysis of 2014 Pierre’s SFP would report
a. Cash as 9,50% of total assets b. 17% increase in Prepaid expense
c. 19% increase in cash d. All of the above
2. Vertical analysis of 2014 Pierre’s SFP report
a. Cash as 9,50% of total assets b. 17% increase in Prepaid expense
c. 19% increase in cash d. All of the above
A common-size SCI for Pierre would report (amounts rounded
a. Net income of 19% b. Sales of 100%
c. Cost of sales at 34% d. All of the above
4. A common-size SFP for Pierre would report (amounts rounded)
a. Current liabilities as 28% of total assets
b. Owner’s capital is 53% of total liabilities and equity
c. Receivables is 7% of total liabilities and equity d. All of the above
5. Trend analysis will show which of the following?
A. 15% increase in Current liabilities B. 33% increase in Owner’s capital
PIVOTC.4A 19%
CALABARZON
increase in Long term liabilities 32d. All of the above PIVO
 WEEK

Analysis and interpretation of 7

I Financial Statements Part 2

This section of your Learning Material will discuss about Financial

Ratio Analysis.
It contains the lesson proper plus different activities/task from sim-
ple to complex one. You are required to answer them all using a separate
notebook for the subject.
After going through with this learning material, you are expected to
define the measurement levels namely: liquidity. Solvency, stability, and
profitability; and compute and interpret financial ratios such as current
ratio, working capital, gross profit ratio, net profit ratio, receivable turn-

D
Financial Ratio— is a quantity of many aspects of business and are an inte-
gral part of the financial statement analysis. Financial ratios are categorized
according to the financial aspect of the business which the ratio measures. Fi-
nancial ratio is composed of a numerator and a denominator. It expresses the
relationship between specific financial statement data. The resulting ratio may
be interpreted as a percentage, a rate or a proportion.
Classification of Financial Ratios
Liquidity Ratios – is the capacity of the company to pay its currently maturing
obligations which require a good amount of cash and other liquid assets such
as Accounts receivable, Inventory, Trading Securities and Prepaid Assets.
Liquidity Ratios:
1. Working Capital = Current Asset – Current Liabilities
2. Current Ratio = Current Assets/Current Liabilities
3. Acid Test Ratio = Quick Assets/Current Liabilities
4. Accounts Receivable Turnover = Net Sales/Average Accounts Receivable
5. Average Collection Period = 365 days/ARTO
6. Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
7. Average Days in Inventory = 365 days/Inventory Turnover Ratio
8. Number of Days in Operating Cycle = Collection Period/Average age/days of
Inventory
Solvency Ratios – measure the capability of an entity to pay long-term obliga-
tions as they fall due.
1. Debt to Total Assets Ratio = Total Liabilities/Total Asset

33 PIVOT 4A CALABARZON
2. Debt to Equity Ratio = Total Liabilities/Total Shareholder’s Equity
3. Times Interest Earned Ratio = Earnings Before Income Tax/Interest Expense
Profitability Ratios -measure the ability of the company to generate income from
the use of its assets and invested capital. The company’s ability to control its cost
is also inferred from profitability ratio.
1. Gross Profit Ratio = Gross Profit/Net Sales
2. Profit Margin Ratio = Net Income After Tax/Net Sales
3. Operating Expenses to Sales Ratio = Operating Expenses/Net Sales
4. Return on Investment Ratio
a. Return on Assets = Profit/Average Total Assets
b. Return on Equity = Profit/Average Stockholder’s Equity
5. Asset Turnover Ratio = Net Sales/Average Total Asset

E
Learning Task 7.1
Entity A
Statement of Financial Position
As of December 31, 20X1
ASSETS
Cash and cash equivalents P 159,600
Trade and other receivables 320,400
Inventory 306,000
Prepaid assets 48,000
Total current assets 834,000
Property, plant & equipment 1,886,000
Total noncurrent assets 1,886,000
TOTAL ASSETS P 2,720,000
LIABILITIES
Trade and other payables P 556,200
Total current liabilities 556,200
Notes payable 1,120,000
Total noncurrent liabilities 1,120,000
TOTAL LIABILITIES 1,676,200
EQUITY
A, Capital 1,043,800
TOTAL LIABILITIES 7 EQUITY P2,720.000

PIVOT 4A CALABARZON 34 PIVOT 4A CALABARZON

 Entity A
Statement of Profit or Loss
For the year ended December 31, 20X1

Sales P2,296,000
Cost of Sales (1,010,240)
Gross Profit 1,285,760
Salaries expense ( 943,400)
Depreciation expense ( 66,010)
Bad debts expense ( 16,020)
Interest expense ( 112,000)
Profit for the year P 148,330
Requirement: Answer the True or False questions below:
1. Entity A has more current resources than noncurrent
2. A larger portion of Entity A’s resources pertain to the owner
3. Entity A uses leverage to finance its operations more than equity financing.
4. After cost of sales, the next largest expenditure of Entity A pertains to its em-
ployees.
5. Assuming all other income and expenses remain constant, if Entity A employs

Learning Task 7.2 Entity A

Statement of Financial Position

As of December 31, 20x1

ASSETS 20x1 20x0

Cash and cash equivalents 440,000 200,000
Accounts receivable 130,000 120,000
Inventory 120,000 480,000
Prepaid assets 40,000 160,000
Total current assets 730,000 960,000
Property, plant & equipment 760,000 440,000
Total noncurrent assets 760,000 440,000
TOTAL ASSETS 1,490,000 1,400,000
LIABILITIES
Trade and other payables 620,000 560,000
EQUITY
Owner’s capital 870,000 840,000
TOTAL LIABILITIES & EQUITY 1,490,000 1,400,000
35 PIVOT 4A CALABARZON
 Entity A
Statement of Comprehensive Income
For the year ended December 31, 20X1

Sales P 1,000,000
Cost of sales ( 600,000)
GROSS PROFIT P 400,000
Rent income (150,000)
Depreciation expense (240,000)
Insurance expense (120,000)
Bad debts expense ( 30,000)
Lost on sale of equipment ( 40,000)
PROFIT OF THE YEAR P 120,000
Other comprehensive income ---
COMPREHENSIVE INCOME FOR THE YEAR P 120,000
Requirement:
Compute for the following financial ratios for the year 20X1: (round-off answers
to two decimal places)
1. Current ratio 8. Debt Ratio 14. Return on Equity
2. Quick (acid-test) ratio 9. Equity Ratio
3. Working capital 10. Gross Profit Ratio
4. Inventory turnover 11. Debt to Equity Ratio
5. Days of inventory (use 365 days) 12. Net Profit Ratio
6. Accounts receivable turnover (assume all sales are on credit)

A
Learning Task 7.3
Multiple Choice
1. Current assets minus current liabilities is
A. Current ratio c. Debt ratio
B. Working capital d. Quick ratio
2. Current assets divided by current liabilities is
a. Current ratio c. Debt ratio
b. Working capital d. Quick ratio

PIVOT 4A CALABARZON 36
3. It is much stricter version of the current ratio wherein the numerator in-
cludes only cash, accounts receivable and marketable securities
a. Current ratio c. Strict ratio
b. Working capital d. Quick ratio
4. Cost of sales divided by Average inventory
a. Debt ratio c. Debt ratio
b. Average inventory d. Inventory turnover
5. Credit sales divided by Average Accounts receivable is
a. Accounts receivable turnover c. Debt ratio
b. Days of receivable d. Equity ratio
6. Profit or loss divided by Total Assets is
a. Return on assets c. Gross profit ratio
b. Net profit ratio d. Debt-to-equity ratio
7. Gross profit over Net Sales is
a. Return on assets c. Gross profit ratio
b. Net profit ratio d. Debt-to-equity ratio
8. Total Equity over Total Assets is
a. Return on equity c. Debt-to-asset ratio
b. Equity ratio d. Debt-to-equity ratio
9. Total Liabilities divided by Total Equity
a. Return on assets c. Equity ratio
b. Return on equity d. Debt-to-equity ratio
10. 365 days in a year divided by accounts receivable turnover
a. Average Accounts receivable c. Return on asset
b. Net profit ratio d. Days of receivable

37 PIVOT 4A CALABARZON
WEEK

8-9 Basic Documents and Transactions Related to

Bank Deposits

I
This section of your Learning Material will discuss all about types of bank
accounts and documents.

It contains the lesson proper plus different activities/task from simple to

complex one. You are required to answer them all using a separate notebook for
the subject.

After going through with this learning material, you are expected to iden-
tify the types of bank accounts normally maintained by a business, and prepare
bank deposits and withdrawals.

D
Bank account is a financial account maintained by a financial institution for a
customer. A bank account can be a deposit account, a credit card account, or
any other type of account offered by a financial institution, and represents the
funds that a customer has entrusted to the financial institution and from which
the customer can make withdrawals. Alternatively, accounts may be loan ac-
counts in which case the customer owes money to the financial institution.
(https://en.wikipedia.org/wiki/Bank_account)
Types of bank accounts
Banks have two basic types of accounts:

• Savings Account. Give the bank notice before making a withdrawal or incur
a penalty. Savings accounts, also known as Deposit accounts, are intended
for money to be paid in but not often withdrawn. Some allow instant access
to your money but others require that you. Each bank may have its own
names for types of accounts within these categories but the basic principles
remain the same.
1. Intended to provide incentive for the depositor to save money.
2. Depositors can make deposits and withdrawals using the form provided
by the bank.
3. Pay interest for the money deposited by their client
4. Savings account provides passbook, where all the transaction are being
recorded.
5. Some bank may charge penalty if if the balance is below the minimum
required balance.

PIVOT 4A CALABARZON 38
• Current accounts are used for day-to-day transactions with money coming
in, such as wages, and money going out such as cash withdrawals, bill pay-
ments, debit card transactions, cheques etc.
1. Money can be withdrawn through issuance of checks.
2. Banks usually allows numerous withdrawals and unlimited deposits.
3. Interest rate are lower compared to savings account, other bank do not
provide interest for this type of account.
4. Monthly bank statement is being provided by the bank to the depositor
where all bank transactions recoded.
5. Easy access of funds for the depositor compared to a savings account.
Another type of savings accounts that is popularly used is an ATM (Automated
Teller Machine) account where withdrawals can be made through designated
machines. This is a 24 hour teller machine, and the funds can be withdrawn
anytime, anywhere. Advantage of this account, you can withdraw your funds
even if the bank is closed

Preparation of bank deposit and withdrawal slips

Bank Deposit Slips—This form is provided by the bank which the depositor will
fill up every time the depositor will put money in his/her account. The usually
required information in a deposit slip are:
• Account Name—complete name of the depositor
• Account number—unique identifier of the account given by the bank
• Date of Deposit
• Type of Account Currency
• Amount in words and in figures—the amount that the depositor wishes to
put in her/his account. The amount to be deposited maybe in the form of

39 PIVOT 4A CALABARZON
Withdrawal slip—the form provided by the bank filled by the depositor every
time withdrawal is being done. Without this form, the bank will not allow you
to get money from your account. The required information in the withdrawal
slip are:

• Account name—complete name of the depositor

• Account number—unique identifier account given by the bank
• Date of the withdrawal
• Currency
• Amount to be withdrawn
• Signature of the depositor
There are instances withdrawal is done by the depositor’s representative to
withdraw the money. The representative must bring identification card as well
as withdrawal slip duly signed by the owner of the account.

E
Learning Task 8-9.1
Alternate Response: Write T if the statement is correct and F if the statement
is wrong. Erasures means wrong.
1.All cash receipts should be deposited in the bank at the end of the day.
2.Simplest bank account is the savings account.
3.Time deposit accounts are investment placements wherein the depositor agree
not to withdraw the funds over the contracted period.

PIVOT 4A CALABARZON 40
4.Deposit slip is a bank form filled up by the depositor to document a deposit
transaction.
5. Account number is the number identifier provided by the bank to clients
Learning Task 8-9.2
Deposit Slip Preparation
Today, July 16, 2020, you are going to deposit to the bank account of Juana
Dela Cruz with an account number of 396-1-355860217 with the following de-
nomination: 2 pcs P1000; 1 pc P200; 3 pcs P100; 2pcs. P50 and 1pc. P20. Use
the provided slip below.

Learning Task 8-9.3

Today, July 16, 2020, you are going to withdraw P8,000 from your Banco De
Oro (BDO) savings account with bank account number 780234566 by filling up
the provided form below:

41 PIVOT 4A CALABARZON
 A
Learning Task 8-9.4
Multiple choice
1. You want to monitor the cash disbursements of your business. Accordingly,
you made a policy that all cash disbursements must be made through checks.
Which of the following types of bank accounts would most certainly help you im-
plement the business policy?
A. Savings account c. Time deposit
B. Current account d. Cash disbursement journal
2. Your business maintains a current account. You want to open a personal
account where in you can deposit your drawings from the business. You do not
intend to write checks from the personal account. Instead, you will be using a
debit card to pay your personal shopping needs. Your personal account would
most likely be a
A. Savings account c. time deposit
B. Current account d. shopping account
3. Your business has excess cash. You do not expect to use the excess cash in
the next 12 months. You also do not have any other investment opportunities.
To earn more interest on the excess cash, it is a good idea to deposit it in a
A. Savings account c. time deposit
B. Current account d. piggy bank
4. Yesterday afternoon, you told your secretary to deposit money to your bank
account, Last night, you checked your account online and the money was not
there. You will not get mad if
A. The secretary shows you a deposit slip dated today and explains that she
was not able to reach the bank on time yesterday because of an alien invasion.
B. The secretary shows the withdrawal slip from your account and says,
“Thank you.”
C. The secretary looks at you with a devilish smile and then runs away very
fast.
D. The secretary gives you a note with “LOL,” written on it.
5. It is a bank account wherein the depositor can write checks.
A. Current account c. checking account
B. Savings account d. a and c

PIVOT 4A CALABARZON 42
Answer

43 PIVOT 4A CALABARZON
 References

Beticon, H., Domingo, J.C. D. & Yabut, F. A. D. (2016). Fundamentals of Ac-

countancy, Business and Management 2. 1st Edition. Vibal Publishing.
Ferrer, R., & Millan, Z.V. (2017). Fundamentals of Accountancy, Business and
Management Part 2. 1st Edition.
Haddock, M., Price, J., & Farina, M. (2012) College Accounting: A Contempo-
rary Approach, Second Edition, New York: McGraw-Hill/Irwin.
Salazar, D.R. C. (2017). Fundamentals of Accountancy, Business and Manage-
ment Part 2. 1st Edition. Rex Bookstore.
Valencia, E.G., & Roxas, G.F (2014). Basic Accounting (4th Edition), Baguio
City, Philippines: Valencia Educational Supply.
Teaching Guide in Senior High School Fundamentals of Accountancy, Business
and Management 2, donated by the Commission on Higher Education in Col-

PIVOT 4A CALABARZON 44 PIVOT 4A CALABARZON

Para sa mga katanungan o puna, sumulat o tumawag sa:

Department of Education Region 4A CALABARZON

Office Address: Gate 2 Karangalan Village, Cainta Rizal

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