Fabm2 Dla

ERWIN P.
SAN LUIS
1
F u n d a m e n t a l s o f A c c o u n t i n g , B u s i n e s s & M a n a g e m e n t 2
DYCIan Learning Account No. 1

Accounting Equation
This Learning Account will help you refresh and better understand the
accounting equation that we have studied in our previous subject
“Fundamentals of Accountancy, Business and Management 1” which is pre-
requisite subject that should have been passed before proceeding with DYCIan
Learning Account.
At the end of this Learning Account, you are expected to:

✓ Attain competent Mastery regarding the “Accounting Equation”
✓ Adeptly use the Accounting Equation in solving accounting Problems
✓ Comprehend the essential Elements of the 5 Major Accounts in Accounting
✓ Proficiently Classify accounts as Assets, Liabilities, Owner’s Equity, Revenues &
Expenses
In order for the student to better understand and fully appreciate this module,
students are expected to perform the following;
✓ Review Chapter 5 Basic Accounting Equation of the Fundamentals of

Accountancy, Business and Management 1 (Grade 11 Book)
✓ Watch “FABM2 DYCIM1 – Introduction to FABM2”
✓ View Power Point Presentation “FABM2 DYCI1 – Accounting Equation.ppt”
✓ Participate in “Schoology Discussion Thread on “The Accounting Equation”
✓ Answer Discussion Questions and Do Ain this Module
Pre- Requisites
✓ Must have passed the Subject “Fundamentals of Accountancy, Business
and Management 1”
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Definition of Terms
Instru1: Familiarize yourself and understand the following terms.
Assets – are resources you control that have resulted from past events and can provide you
with future economic Benefits
Liabilities – are your present obligations that have resulted from past events and can require
you to give up resources when settling them
Owner’s Equity – Owner Equity is simply ASSETS minus Liabilities.

Revenues - or Income are increases in economic benefit during the period in form of inflows
or enhancements of assets or decrease in liabilities that result in increase in equity, other than
those relating to investments by the business owners
Expenses – are decrease in economic benefits during the period in form of outflows or
depletion of assets or increase of liabilities that result in decrease in equity, other than those
relating to distributions to the business owners.
Profit – “KITA” or Net Income is the difference between Revenue and Expense if revenue is
higher than expense.
Duality – states that each transaction has a two-fold effect on values – value received and
value parted with.
Equilibrium – requires that the two-fold effects on values on the concept of duality must
always be equal
Separate Economic Entity – States that the business is viewed as a separate person, distinct
from its owner’s
Economic Benefit – Potential for an asset to contribute either directly or indirectly to the flow
of an entity’s cash
View1: View “EPISODE 1” Video or PPT of Episode 1 to understand the BASIC AND
EXPANDED ACCOUNTING EQUATION
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Instru2: Familiarize yourself and understand the following concepts and Formula
regarding the Basic Accounting Equation.
All the process in an accounting system must observe the equality of the accounting
equation, which is basically an algebraic equation. the formula of this Basic
Accounting Equation is as Follows
ASSETS = LIABILTIES + EQUITY
This Equation must “ALWAYS” be balance without any exception

This Equation Properly follows the Concept of Separate Economic Entity in Accounting.
It Represents:
What the Business OWNS vs What Owns the Business
Concepts of Duality and Equilibrium which makes it a two-fold effect on values and
those values must always be balanced
What the Business Owns is Represented by ASSETS
What owns the business is represented either by LIABILITIES if from Third Parties and
EQUITY if from Owners
So if for example you put P5,000 in your business (Your Business should be considered as
another person for accounting purposes) your Accounting equation should look as
follows
P5,000 P5,000
If you don’t have the money and simply borrowed the P5,000 from someone else
(Third Party) like the bank or your mom, the accounting equation should look like this:
P5,000 P 5,000
It can also be a combination of third Party and you as an owner. Like for example you
put P2,500 from you own money and borrowed another P2,500 to be used by your biz.
P5,000 P 2,500 P2,500
<it should always be balance>
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Disc1: Participate in Schoology Discussion Forum “Basic Accounting Equation”
Based on your understanding, what is an Asset?

(explain in a way that a friend who does not know accounting would understand.)
Based on your understanding, what is a Liability?

Is there a Possibility that the Accounting Equation is correct but is not balanced?
Why or Why not?
ACT1: Answer ACTIVITY 1 Online in Schoology for a short assessment of your newly
found accounting knowledge
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ACTIVITY 1 (OFFLINE): BASIC ACCOUNTING EQUATION
Instruction: Compute for the missing accounts
ASSETS LIABILITIES EQUITY

350,000 290,000 1.)
530,000 2.) 270,000

3.) 790,000 130,000
820,000 4.) 320,000
220,000 80,000 5.)
6.) Your Business has total assets of 10M, total liabilities of 6M and total equity of 4M. This
means that out of the total 10M resources your business own, 6M were provided by you.
Is the statement true or false? If false, why?
7.) Total Asset is 10M Total Liabilities is 6M. Therefore, Total Equity is 16M.
Is the statement true or false? If false, why or by how much?
8.) Your Business’ Asset account has increased but there were no transactions involving equity
and its owner during the period. Which is the most valid reason for this to happen?
a. Your Business Obtained a Loan
b. Your Business Paid a maturing Loan
c. Your Business Purchased an Asset by Paying Cash
d. Magic!!!
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Instru3: Familiarize yourself and understand the Essential Elements of an Asset.
Definition of Asset
“Assets are the resources you control that have resulted from past
events and can provide you with future economic Benefits”
What are the key essential elements in the definition of Asset?
CONTROL
MUST RESULT FROM PAST EVENTS
WILL PROVIDE YOU ECONOMIC BENEFITS IN THE FUTURE
Having Control over the resources does not necessarily mean ownership of the
resources or property
CASE 1
If you are the owner of an apartment house that you rent to various tenants, but you
are not able to collect the rents because your dad is the one who collects the rent
and enjoys the benefit of the apartment.
In this case, you are the owner of the apartment but you do not have the control as to
whether you can benefit through the rentals or through selling the asset itself as the
one who have ultimate control of the property is your DAD
No Control over the resources = NO ASSET

Apartment is considered an ASSET to your Dad but not you
CASE 2
If you bought a house worth 1M and you only paid the required down payment of
100,000 so that you can now live in the house today.
In this case although you have not receive the title of the house yet because you have
not paid it in full hence no transfer of ownership was done. You are the one who has
control over the benefits of the house.
With Control over the house even not yet owner = ASSET
House is already considered your asset even if it is not fully Paid
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However, Control over a resource Must Have Resulted from Past Events or transaction.
Therefore, resources which control is yet to be obtained in the future do not qualify as
an asset.
Case 1 – continued
You confronted your Dad regarding the issue, your Dad then agreed to give you
control over the property next year after your 18 th Birthday.
Control over the resources in the FUTURE = NOT an ASSET

Apartment is still considered an ASSET to your Dad but not you, you have to wait till
your 18th Birthday to be able to consider it as your asset.
There must be a future economic benefit you will gain from the resource.
Case 2 - Continued
After 1 year of staying in your house, it was ravaged by fire, your house was burned
down with no value what so ever remain. You are now not able to use the house nor
sell it as the land was not yours
No Future Economic BENEFIT over the resources = NOT an ASSET

Although you currently consider it an asset, it has to be revaluated as to how much
benefit you will still be able to get from the asset. And in this case there is none, so
you have to remove it from your list of Assets
Disc2: Participate in Schoology Discussion Forum “Key Elements of Assets”
If you put your cash in the bank, you now have no physical possession of your cash, will
your cash in bank still be considered an asset? Why or why not?
Give another real life example where a resource you own would not be considered as
an Asset. Explain the reason for this consideration.
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Instru4: Familiarize yourself and understand the essential elements of Liabilities.
Definition of Liabilities
“Liabilities are your present obligation that have resulted from past
events & can require you to give up resources when settling them”
What are the key essential elements in the definition of Liabilities?
PRESENT OBLIGATION
REQUIRE YOU TO GIVE UP RESOURCES upon Settlement
Present Obligation means right now you have to pay someone because the obligating
event has already transpired. Future Obligations are not yet considered as Liability as
long as the obligating event has not yet transpired
Give up Resources – or outflow of economic Benefits means that settling an obligation

would require you to pay cash, to transfer other assets or to render service.
Definition of Equity
“Equity is simply Assets Minus Liabilities”
Other Terms for Equity includes Capital, Net Assets and Net Worth
Disc3: Participate in Schoology Discussion Forum “Key Elements of Liabilities”
Give an example based on your personal experience, when you settle an obligation
that resulted from past event that would require you to pay cash. (bayad utang). That
Utang na hangang ngayon di mo pa binabayaran is definitely called a Liability.
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Instru5: Familiarize yourself and understand illustrative example on the application of the
concepts you learned in a business transaction.
Case Illustration of Basic Accounting Equation.
You put a barbeque stand and have an estimate that you will be needing P2,000 as start-up
capital. You then went to your closet and broke Mr. Piggy Bank which you have been saving for
quite some time now. Alas! You have only P800. You went to your Mama and ask her to give you
P1,200 but she told you that she has been feeding you for far too long.
Your Updated Accounting Equation as of this point is as follows
Assets Liabilities Equity

P800 0 P800
Why do you think that Liabilities is still 0, when you already asked your mom for P1,200?
After some time, you found Mr. Bombay and after the hasty negotiation, you were able to
borrow P1,200 from Mr. Bombay for 20% interest per month (otherwise referred to as five six)
Now, Your Updated Accounting Equation as of this point is as follows

P2,000 P1,200 P800
How did this happen? Why did your Assets increase together with your liability?
Now in order to start your business, you bought a Barbeque Griller worth P1,000 using the cash
you now have.
Now, Your Updated Accounting Equation as of this point remains as follows

P2,000 P1,200 P800
Why do you think your Assets did not change when you purchased the Griller?
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Instru6: Familiarize yourself and understand concepts and formulas regarding the
expanded accounting equation.
EXPANDED ACCOUNTING EQUATION
We can expand the Basic Accounting equation by including two more elements –
revenue and expense.
ASSETS = LIABILTIES + EQUITY + REVENUE - EXPENSE
The Difference Between revenue and expense is either PROFIT (KITA) if revenue is more
than expense, or LOSS (LUGI) if Expense is more than Revenue
Variation of the expanded accounting equation is then as follows
ASSETS = LIABILTIES + EQUITY + [PROFIT]

or – [LOSS]
PROFIT or LOSS is eventually closed to Equity at the end of the accounting period after
adjustments and eventually updating the Equity account. Thus we would be backed
to our updated basic accounting equation
Beginning EQUITY + PROFIT = Ending EQUITY
ASSETS = LIABILTIES + UPDATED EQUITY
The ending equity is the updated equity that is presented in the accounting equation
after all the revenue and expense accounts have been closed.
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Disc4: Participate in Schoology Discussion Forum “Expanded Accounting Equation”
Based on your understanding from this module, what is a Revenue or Income?

Based on your understanding from this module, what is an Expense?

The Difference between income and expense represents profit or loss? (Net Income or
Net Loss) If Income is greater than expense the difference is called?
The Difference between income and expense represents profit or loss? (Net Income or
Net Loss) If Expense is greater than Income the difference is called?
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Instru7: Familiarize yourself and understand illustrative example on the application of the
concepts you learned in a business transaction.
Case Illustration of Expanded Accounting Equation.
As we continue the story of your barbeque stand business. Let’s say 1 month after you have
started, you earned P5,000 from selling barbeques, you also spent a lot money to buy BBQ,
Sauce, Charcoal, etc. all of which cost you P4,000.
Did you earn or lose money? (kumita ka ba o nalugi?) By How much?

Owner’s
Assets Liabilities Revenue Expense
Equity
P3,000 P1,200 P800 P5,000 P4,000
Notice that when you earned P1,000 your Assets also increased by P1,000? Why do you think
happened? What is the reason for this? (aside from magic!)
Since it has already been 1 month. Mr. Bombay came knocking on your door and asked you to
pay for your “Five6 utang” however he became friends with your father a just a while ago and
decided to let you pay just half of your loan and not charge you interest for this month.

Owner’s
Assets Liabilities Revenue Expense
Equity
P2,400 P600 P400 P5,000 P4,000
Notice that when you pay half of your debts (liabilities) Your Asset also decreased? Why do you
think happened? What is the reason for this? (aside from magic!)
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ACT2: Answer ACTIVITY 2 Online in Schoology for a short assessment of your newly
found accounting knowledge
ACTIVITY 2 (OFFLINE): EXPANDED ACCOUNTING EQUATION
Instruction: Compute for the missing accounts
ASSETS LIABILITIES EQUITY REVENUES EXPENSES

290,000 110,000 20,000 240,000 1.)
780,000 310,000 240,000 2.) 150,000
980,000 120,000 3.) 600,000 190,000
640,000 4.) 170,000 900,000 860,000
5.) 880,000 470,000 680,000 490,000
6.) Your Business has total assets of 10M, total liabilities of 6M and total equity of 4M. This
means that out of the total 10M resources your business own, During the year your business
earned 3M revenues and incurred 2M Expense. Your computation for your profit in this year is
5M. Is your computation correct? If not, why?
7.) Your Business’ Asset account and Equity Account has both increased but there were no
transactions involving your Liabilities Account during the period. If your Revenues and Expense
are eventually closed (the Net amount transferred to) Equity Account. Which is the most valid
reason for this to happen?
a. Your Business Obtained a Loan
b. Your Business Earned Profit
c. Your Business Incurred Loss
d. Aliens!!!
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Proposed
CODE ACTIVITY MILESTONES TIME
Instru1 Familiarize yourself and understand the following terms. 15 mins
View “EPISODE 1” Video or PPT of Episode 1 to understand the Your own

View1
BASIC AND EXPANDED ACCOUNTING EQUATION Time
Familiarize yourself and understand the following concepts and
Instru2: 15 mins
Formula regarding the Basic Accounting Equation.
Participate in Schoology Discussion Forum “Basic Accounting
Disc1 20 mins
Equation”
Answer ACTIVITY 1 Online in Schoology for a short assessment of
ACT1: 30 mins
your newly found accounting knowledge
Familiarize yourself and understand the Essential Elements of an
Instru3: 15 mins
Asset.
Participate in Schoology Discussion Forum “Key Elements of
DISC2: 20 mins
Assets”
Familiarize yourself and understand the essential elements of

Instru4: 15 mins
Liabilities.
Participate in Schoology Discussion Forum “Key Elements of

Disc3: 20 mins
Liabilities”
Familiarize yourself and understand illustrative example on the
Instru5: 15mins
application of the concepts you learned in a business transaction
Familiarize yourself and understand concepts and formulas
Instru6: 15 mins
regarding the expanded accounting equation.
Participate in Schoology Discussion Forum “Expanded Accounting
Disc4: 20 mins
Equation”
Familiarize yourself and understand illustrative example on the
Instru7 15 mins
application of the concepts you learned in a business transaction.
Answer ACTIVITY 2 Online in Schoology for a short assessment of
Act2: 30 mins
your newly found accounting knowledge
TOTAL 4 Hours
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STATEMENT OF FINANCIAL POSITION
This Learning Account will help you develop an understanding of account titles under the assets,
liabilities, and capital accounts of the statement of financial position and classify them as current and
non-current to equip you in preparing the Statement of Financial Position (SFP).
Requirements before proceeding with these modules
✓ Have a significant Mastery of DLA 1: Accounting Equation

✓ Watch FABM2 Episode 2: Statement of Financial Position
✓ Read Chapter 1: Statement of Financial Position on the Book “Fundamentals of
Accounting, Business and Management 2 by Dani Rose C. Salazar First Edition”
At the end of this Learning Account, you are expected to be able to:
✓ Understand the importance of the SFP

✓ Identify the elements of the SFP and describe each of these items for a single proprietorship
✓ Classify the account in SFP as current or non-current items
✓ Prepare an SFP using Report and Account Form
Definition of Terms
Instru1: Familiarize yourself and understand the following terms that are mostly used in
regards to the Preparation of Financial Statements.
Statement of Financial Position also known as balance sheet. 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 or Real Accounts/Balance Sheet accounts. Permanent accounts in the

sense that their balances remain intact from one accounting period to another. They are
retained permanently in the SFP until their balances become ZERO
Temporary Accounts also known as Nominal Accounts. Accounts found in Statement of

Comprehensive Income. These accounts will have zero balances at the end of the accounting
period
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Contra Assets or contra valuation to asset accounts. Presented under the asset portion of the
SFP but are reductions to the company's Assets. Examples: Allowance for Doubtful Accounts and
Accumulated Depreciation.
Allowance for Doubtful Accounts also known as allowance for bad debts is a contra asset to
Accounts Receivable. It represents the estimated amount that the company may not be able to
collect from delinquent customers.
Accumulated Depreciation - Contra Asset to Property, Plant, and Equipment accounts. It

represents the total amount of depreciation booked against the fixed asset of the company.
Depreciation is the wear and tear portion of Property, Plant, and Equipment of the company.
Report Form is a form of SFP that shows asset accounts first then the liabilities and owner's
equity after.
Account Form is a form of SFP that shows assets on the left side and liabilities and owner's
equity on the right side just like the debit and credit balances on accounts.
Current Assets also known as short-term assets. Assets that can be realized (collected, sold,
used up) one year after the year-end date.
Current Liabilities also known as short-term liabilities. Liabilities that fall due (paid, recognized
as revenue) within one year after the year-end date.
*Current assets and current liabilities are arranged according to liquidity (which will be realized
or will due first).
*Cash is the most liquid asset of a company.
Noncurrent Assets also known as long-term assets. Assets that cannot be realized one year after
the end date.
Noncurrent Liabilities also known as long-term liabilities. Liabilities that do not fall due within
one year after the end date
Rea1: Read and understand more terms and concepts in Chapter 1 Pages 2 – 18
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PRESENTATION OF FINANCIAL STATEMENT

Instru2: Familiarize yourself with following formats that are used in the Statement of
Financial Position
SFP TITLE FORMAT

<Company Name>
Statement of Financial Position
AS OF <Last Day of Accounting Period>
i. Name of the company

ii. Name of the Financial Statement
iii. Date of preparation (“AS OF”)
Take note of the 3rd line item uses the terms "AS OF", this represents that you are Presenting
the line item of these Financial Statements as of this moment of time.
Analogy of “AS OF”
You are watching the video of your 18 th birthday Party which was recorded last year.
This represents the whole thing that happened at that party. You are then watching the
part where you are about to dance with your long time high school crush, so you paused
the video to see how you look.
That PAUSED video is a PICTURE that represents how you looked like “AS OF” that moment
in that point in time. This to you is what SFP is to a Business, it represents how the business
looks like (Their Position) “AS OF” the end of their reporting year (Annual Report) or
whenever they are required to report it (Interim Report).
Disc1: Participate in Schoology Discussion Forum “Analogy of AS OF” and give your
own example or explanation of analogy of “AS OF”
Example of SFP Title Format

HAPPY SELLING COMPANY
AS OF DECEMBER 31, 2019
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REPORT FORM
This is how presenting your SFP in Report Form would look like (PRO-FORMA):
❖ xxx represents the amounts of values in Pesos

❖ You simply input the amounts from your Adjusted Trial Balance to the SFP amounts
except for the Owner's Equity Portion where you have to compute the owner's
capital by preparing the statement of Changes in Equity.
❖ Only the Permanent accounts are included in the SFP.
View1: View "EPISODE 2" Video or PPT of Episode 2 to understand the classification of
accounts as current or non-current.
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ACCOUNT FORM
This is how presenting your SFP in account form would look like (PRO-FORMA)
❖ While report form presents the accounts in a straight list of items, the account form shows
Assets on the left side and liabilities and owner's equity on the right side just like the
Debit and Credit balances of the Accounts
❖ It should be noted that using REPORT form or ACCOUNT form should yield the SAME
amount of Total Assets, Liabilities, and Equity
❖ Accounts like Trade and other receivables have multiple line items in one account so
“Notes to Financial Statements” must be made in other to show the content of the Trade
and Other Receivable accounts.
Disc2: Participate in Schoology Discussion Forum “Account Form or Report Form?”
What is your preferred way of preparing the Statement of Financial Position? How about if reading or
analyzing the SFP? Why?
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Notes to Financial Statements
This is how presenting your Notes to Financial Statements would look like (PRO-FORMA)
❖ Some accounts like Trade and other receivables are showed with actual amounts for you to
better understand the way to compute them.
ACT1: Answer Activity 1, Activity 2 online Schoology for a short assessment of your newly
found knowledge.
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Sample Problems and Illustrations
Read2: Read and Follow through the Comprehensive Illustrative Problem: Mira's Store found
in Chapter 1, Pages 23 - 27.
View2: Check out the actual Financial Statements of Jollibee Foods Corporation in their 2013
Annual Report (Open: File name: JFC-Annual-Report-2013.pdf). Proceed to page 37 to view
their actual Statement of Financial Position.
Disc3: Participate in Schoology Discussion Forum “Jollibee AFS”
How did you find Jollibee Foods Corporation's Consolidated Statement of Financial Position?
Please do note that it is a consolidated FS of an Audited Annual Report. All of which would be
discussed in higher accounting subjects. Do you think these reports would help investors decide
on whether or not to invest in the company? Why do you think so?
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Name: _____________________________________________ Rating: ______________
Grade and Section: _____________ Subject Teacher: __________________________

Due of Submission: _____________________________
DLA No. 2
Statement of Financial Position
ACT3: Answer Chapter Test of Chapter 1 from the Book
Mandatory Activities
❖ True or False (Page 29)
❖ Modified Matching Type (Page 29 – 30) number 1 and 2 only
❖ PROBLEM 3 (Page 31)
Optional Activities
❖ To Further enhanced your understanding regarding this Lesson you can answer all
other activities in Chapter 1 of the Book
23
Proposed
Familiarize yourself and understand the following terms that are
Instru1 15 mins
mostly used in regards to the Preparation of Financial Statements.
Read and understand more terms and concepts in Chapter 1, Your own
Rea1
pages 2 – 18. Time
Familiarize yourself with the following formats that are used in
Instru2: 25 mins
the Statement of Financial Position.
Participate in the Schoology Discussion Forum "Analogy of AS OF"
Disc1 10 mins
and give your own example or explanation of analogy of "AS OF".
View "EPISODE 2" Video or PPT of Episode 2 to understand the
View1: 20 mins
classification of accounts as current or non-current.
Participate in Schoology Discussion Forum “Account Form or
Disc2: 10 mins
Report Form?”
Answer Activity 1, Activity 2 online Schoology for a short
ACT1: 40 mins
assessment of your newly found knowledge.
Read and Follow through the Comprehensive Illustrative Problem:

Rea2: 40 mins
Mira’s Store found in Chapter 1, Pages 23 – 27.
Check out the actual Financial Statements of Jollibee Foods
View2: 10 mins
Corporation in their 2013 Annual Report.
Disc3: Participate in Schoology Discussion Forum "Jollibee AFS". 10 mins
ACT3: Answer Chapter Test of Chapter 1 from the Book. 60 mins
TOTAL 4 Hours
24

STATEMENT OF COMPREHENSIVE INCOME
This Learning Account will help you develop an understanding of account titles under the assets,
liabilities, and capital accounts of the statement of financial position and classify them as current and
non-current that will equip you to prepare Statement of Financial Position (SFP).
Requirements before proceeding with this Learning Account:
✓ Have a significant Mastery of DLA 1: Accounting Equation

✓ Watch FABM2 Episode 2: Statement of Financial Position
✓ Read Chapter 2: Statement of Comprehensive on the Book “Fundamentals of Accounting,
Business and Management 2 by Dani Rose C. Salazar First Edition”
✓ Understand the importance of SCI.

✓ Identify the elements of the SCI and describe these items for a service business and a
merchandising business.
✓ Classify expenses as to whether it is part of cost of goods sold, general and administrative
expense or selling expense.
✓ Prepare SCI for a service business using a single-step approach.
✓ Prepare SCI for a merchandising business using the multi-step approach.
Definition of Terms
regards to the Preparation of the Statement Comprehensive Income.
Statement of Comprehensive Income also known as balance sheet. 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.
Nominal Accounts also known as Temporary Accounts. Accounts found in Statement of

Comprehensive Income. These accounts will have zero balances after the books are closed for
the period
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REVENUES:
Service Revenue or Professional Fees whichever account is used in the Adjusted Trial
Balance, is the revenue account used in Service type of business.
SALES or Gross Sales is the revenue account used in a merchandising company that
represents the value of the products that are already sold.
Other Income/Revenues or Other Possible Revenues by the business.
Interest Income is the income earned from interest usually from lending money.
Dividends Income is the income earned from dividends from investments.
EXPENSES:
COST OF SALES or Cost of Goods Sold is the expense presented by the cost of the merchandise
inventory that was already sold.
PURCHASES is the Expense account used when buying the product of the company.
FREIGHT IN is the cost of shipping the product to the company.
OPERATING EXPENSE is the total expenses related to the normal operating cycle of the
business.
SELLING EXPENSE is all the expenses related to selling of the product.
FREIGHT OUT is the cost of shipping the product out to the buyer and is always part
of the Selling Expense.
GENERAL AND ADMINISTRATIVE EXPENSE is all the other expenses in the ordinary
operating cycle of the business that is not part of the Cost of Sales or Selling Expense.
MISCELLANEOUS EXPENSE is the total amount of small expenses that are not
worthy to be categorized in a separate account, it is always part of the General and
Administrative Expense.
INTEREST EXPENSE is the expenses incurred from the interest of the borrowed money.
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CONTRA REVENUES:
Sales Discount - Service Revenue or Professional Fees whichever account is used in the
Adjusted Trial Balance, this is the revenue account used in Service type of business.
Sales Return & Allowances - Revenue account used in a merchandising company that
represents the value of the products that are already sold.
CONTRA EXPENSES:
Purchase Discount – Total expenses related to the normal operating cycle of the business.
Purchase Return & Allowances – Cost of Goods Sold is the expense presented by the cost of
the merchandise inventory that was already sold.
W/ FORMULAS:
Net Sales = Gross Sales – Sales Discount – Sales Return & Allowances
Net Purchases = Purchases – Purchase Return & Allowances – Purchase Discounts + Freight in
Cost Goods Available for Sale = Beginning Inventory + Net Purchases
Cost of Goods Sold = Cost Goods Available for Sale – Ending Inventory
Gross Profit = Net Sales – Cost of Goods Sold
Operating Income = Gross Profit + Other Income
Operating Expense = General & Administrative Expense + Selling Expense
NET INCOME = Operating Income – Operating Expense – Interest Expense
*Please note that the Net income indicated in this module is a simple operating income
without incorporating other accounting concepts like taxes and income and expense that is
not sourced from normal operations.
View1: View "EPISODE 2" Video or PPT of Episode 2 to understand the classification of
accounts as current or non-current.
27

Instru2: Familiarize yourself with following formats that are used in the Statement of
Comprehensive Income
SCI TITLE FORMAT

<Company Name>
Statement of Comprehensive Income
For the Year Ended <Last Day of Accounting Period>
iv. Name of the company

v. Name of the Financial Statement
vi. Date of preparation (“For the Year Ended”)
The 3rd line item uses the terms "For the Year Ended". This represents that you are
presenting the line item of these Financial Statements as of this moment of time.
Analogy of “FOR THE YEAR ENDED”
You are watching the 20-minute recap video of your 18th birthday Party which was
recorded last year. This represents the whole thing that happened at that party. The
whole 20-minute duration of that video represents everything that happened until THE
END of that party.
The whole 20-minute duration of the video enabled you to have a recap of your
performance during the whole party. This, to you, is what SCI is to a business. It represents
how the business performed FOR THE whole YEAR which ENDED on the last day of that
year (Annual Report) or the last day of the term they want report it (Interim Report).
Disc1: Participate in the Schoology Discussion Forum "Analogy of FOR THE YEAR
ENDED" and give your example or explanation of analogy of "for the year ended".

FOR THE YEAR DECEMBER 31, 2019
28

Instru3: Familiarize yourself with the single step approach in preparing the statement of
Comprehensive Income.
SINGLE STEP APPROACH

This is how presenting your SCI using single step approach would look like (PRO-FORMA)
ABC Company
For The Year Ended <MONTH YEAR>
REVENUES
Service Revenue P xxx
Interest Income xxx P XXX
EXPENSES
Salaries Expense yyy
Interest Expense yyy
Miscellaneous Expense P yyy YYY
Net Income P XXX – YYY
ABC Company
Service Revenue P xxx

Rental Income xxx
Interest Income xxx
Total Revenues and Income XXX
Salaries Expense yyy

Interest Expense yyy
Miscellaneous Expense yyy
Total Expense YYY
Net Income P XXX - YYY
29

Instru4: Familiarize yourself with the multi step approach in preparing the statement of
Comprehensive Income
MULTI-STEP APPROACH
This is how presenting your SCI using a multi-step approach would look like (PRO-FORMA)
ABC Company
Sales PXXX
Cost of goods sold (YYY)
Gross profit XXX-YYY
Operating expense
Selling expenses zzz
General & administrative expense zzz (ZZZ)
Interest Expense (VVV)
Net Income P OOO
❖ xxx represents the amounts of values in Pesos

❖ Both approaches should arrive at
❖ SINGLE-STEP – all revenues are listed down in one section while all expenses are listed in
another. Commonly used by service type of business
❖ MULT-STEP – several steps are needed to arrive at the company's net income. As for this PRO-
FORMA of the SCI cannot stand alone as a Financial Statement. It would require a supporting
schedule that would be found in the NOTES to Financial Statements.
❖ Notes to FS to support this approach are located on the next page of this module.
30

Instru5: Familiarize yourself in preparing the supporting schedule for the statement of
comprehensive income
This is how presenting your Notes to Financial Statements would look like (PRO-FORMA)
ABC Company
Supporting Schedule
NOTE 1
Sales xxx
Sales Return & Allowances yyy
Sales Discount yyy
NET SALES xxx - yyy
NOTE 2
Inventory (January 1) xxx
Net Purchases (Note 2) xxx
Cost of Sales Available for Sale XXX
Inventory (December 31) (yyy)
Cost of Goods Sold XXX-yyy
NOTE 3
PURCHASES xxx
Purchase Return & Allowances (yyy)
Purchase Discount (yyy)
Freight in xxx
Net Purchases xxx - yyy
Note 4
Freight out xxx
Other Selling Expense items xxx
Total Selling Expense XXX
Note 5
Other Expenses xxx
Miscellaneous Expense xxx
Total Gen & Admin Expense XXX
31
Sample Illustration – Multi-Step Approach
ABC Company
For the Year Ended Dec 31, 2019
Sales P 500,000
Cost of goods sold (Note 1) (200,000)
Gross profit 300,000
Operating expense
Selling expenses (Note 3) 50,000
General & administrative exp. (Note 4) 100,000 (150,000)
Interest Expense (30,000)
Net Income P 120,000
ABC Company
Supporting Schedule
NOTE 1
Inventory (January 1) P 100,000
Net Purchases (Note 2) 250,000
Cost of Sales Available for Sale 350,000
Inventory (December 31) (150,000)
Cost of Goods Sold P 200,000
NOTE 2
PURCHASES P 450,000
Purchase Return & Allowances (150,000)
Purchase Discount (100,000)
Freight in 50,000
Net Purchases P 250,000
Note 4
Freight out P 35,000
Other Selling Expense items 15,000
Total Selling Expense P 50,000
Note 5
Other Expenses P 90,000
Miscellaneous Expense 10,000
Total Gen & Admin Expense P 100,000
32
Rea2: Read and Follow through the Comprehensive Illustrative Problem: Mira’s Store found
in Chapter 1, Pages 48 - 50.
Annual Report (Open: File name: JFC-Annual-Report-2013.pdf) Proceed to page 38 to view
their actual Statement of Comprehensive Income.
How did you find Jollibee Foods Corporation’s Consolidated Statement of Comprehensive
Income? Please do note that it is a consolidated FS of an Audited Annual Report. All of which
would be discussed in higher accounting subjects. Do you think these reports would help
investors decide on whether or not to invest in the company? Why do you think so?
33
Name: _____________________________________________ Rating: ______________

DLA no. 3
❖ True or False (Page 52 - 53)
❖ PROBLEM 5 (Page 55 - 56)
Optional Activities
34
Proposed
Instru1 mostly used in regards to the Preparation of the Statement 15 mins
Read and understand more terms and concepts in Chapter 2,
Rea1 15 mins
pages 34 – 47.
View1 20 mins
Instru2 20 mins
the Statement of Comprehensive Income.
Participate in the Schoology Discussion Forum "Analogy of FOR
Disc1 THE YEAR ENDED" and give your own example or explanation of 20 mins
analogy of "for the year ended".
Familiarize yourself with the single step approach in preparing the
Instru3 20 mins
statement of Comprehensive Income.
Familiarize yourself with the multi-step approach in preparing the
Instru4 20 mins
Familiarize yourself in preparing the supporting schedule for the

Instru5 20 mins

Rea2: 15 mins
Mira’s Store found in Chapter 1, Pages 48 - 50.
View2: 20 mins
Disc2: Participate in Schoology Discussion Forum “Jollibee AFS”. 15 mins
Act1 Answer Chapter Test of Chapter 2 from the book. 40 mins
TOTAL 4 Hours
35

STATEMENT OF CHANGES IN EQUITY
This Learning Account will help you develop an understanding of the line items under
the Statement of Changes in Equity (SCE) for a Sole Proprietorship, Partnership, and
Corporation type of business that will equip you in preparing the Statement of Changes in
Equity for these types of business.
Requirements before proceeding with this Learning Account
1. Have a significant Mastery of the Following;

a. DLA 2: Statement of Financial Position
b. DLA 3: Statement of Comprehensive Income.
2. Watch FABM2 Episode 4: Statement of Changes in Equity
3. Read Chapter 3: Statement of Changes in Equity on the Book "Fundamentals of Accounting,
Business and Management 2" by Dani Rose C. Salazar First Edition
1. Understand the purpose of Statement of Changes in Equity

2. Identify the key elements of Statement of Changes in Equity
3. Prepare a Statement of Changes in Equity
Definition of Terms
regards to the Preparation of the Statement Changes in Equity.
Statement of Changes in Equity – This statement reports all changes, whether increases or
decreases to the owner's interest in the company during the period.
Sole Proprietorship – The simplest form of business organization where there is only one owner
referred to as sole proprietor. The business has no legal personality separate from its owner.
36
Partnership - A business owned by two or more owners (partners). Their agreement is

stated in the contract of partnership specifically how they will share profit and loss. It has a
legal personality separate from its owners however unlike corporations, creditors may
extend to the partners' personal assets.
Corporation - The most complex form of business organization. A corporation is owned by

many owners called stockholders or shareholders. Ownership is divided depending on the
share of stock the shareholder owns.
Initial Investment - The very first Investment of the owner to the company.
Owner’s Drawing - Decreases to the owner’s equity by withdrawing assets by the owner.
Distribution of Income – Applicable for Corporations, instead of the owner’s withdrawing

assets from the company, the corporation distributes the income to the shareholders based
on the number of shares that they have through “Dividends".
Percentage of Ownership – The magnitude of control or ownership of a stockholder to a

corporation represented by the number of the shares of stock they owned compared to the
total shares the company has issued.
Additional Investment – Increases to the owner’s equity by adding investments by the

owner.
Retained Earnings – Applicable only corporations, this is the amount of “accumulated net
income” of the corporation that remains for the business after dividends were distributed to
its shareholders.
Rea1: Read and understand more terms and concepts in Chapter 3, pages 57 – 59.
View1: View “EPISODE 4” Video or PPT of Episode 4.
37

Instru2: Familiarize yourself with the preparation of Statement of Changes in Equity.
SCE TITLE FORMAT

<Company Name>
Statement of Changes in Equity
vii. Name of the Company

viii. Name of the Financial Statement
ix. Date of Preparation ("For the Year Ended")
Take note of the 3rd line item uses the terms "For the Year Ended", this represents that you
are presenting the line item of these Financial Statements as of this moment of time.
This is the same format used for preparing the STATEMENT OF COMPREHENSIVE INCOME.
SCE PREPARATION SEQUENCE
Statement of Changes in Equity is prepared after the Statement of Comprehensive in Income

but before the Statement of Financial Position or Balance Sheet.
This is because the Net Income from Statement of Comprehensive Income is one of the line
items that is required to be able to prepare the Statement of Changes in Equity.
On the other hand, The Statement of Financial Position is prepared after the Statement of
Changes in Equity so that the equity portion in the SFP can be updated or reviewed.
Disc1: Participate in Schoology Discussion Forum “Is it Possible for SCE to be prepared
before SCI and after SFP? Why? Or Why not?
Example of SCE Title Format

SOLO OWNER COMPANY
STATEMENT OF CHANGES IN EQUITY
38
SCE for “SOLE PROPRIETORSHIP”
Rea2: Read and understand Preparation of Statement of Changes in Equity for a Sole
Proprietorship in Chapter 3, pages 59 – 61.
Pro-Forma Statement of Changes Equity for Sole Proprietorship can be found in Chapter 3,
page 60.
This is how presenting your SCE of a Sole Proprietorship would look like (Sample-Format)
A Company
For The Year Ended December 31, 2019
A, CAPITAL - Jan 1 2019 P 1,000,000

Net Income (Loss) 500,000
A, Drawings
Feb 14 100,000
Jun 10 100,000
Jul 7 200,000
Dec 25 300,000 (700,000)
A, CAPITAL - Dec 1 2019 P 800,000
This Net Income (Loss) amounting to 500,000 should be the same amount that is
reported as the Net Income (Loss) on Statement of Comprehensive Income.
This A, Capital amounting to 800,000 will be the amount that will be shown in the
Owner's Equity portion of the Statement of Financial Position.
39
SCE for “PARTNERSHIP”

Rea3: Read and understand Preparation of Statement of Changes in Equity for a Sole
Proprietorship in Chapter 3, pages 61 - 64.
Pro-Forma Statement of Changes Equity for Partnership can be found in Chapter 3, page 63.
This is how presenting your SCE of a Partnership would look like (Sample-Format)
AB Partnership
For The Year Ended December 31, 2019
50% 50% 100%

Partner A Partner B Total
Partner’s, CAPITAL - Jan 1 2019 400,000 600,000 1,000,000
Share in Net Income (Loss) 500,000 500,000 1,000,000
Additional Investment 100,000 50,000 150,000
Withdrawals (50,000) (100,000) (150,000)
A, CAPITAL - Dec 1 2019 950,000 1,050,000 2,000,000
Supporting Schedule is required to be able to show how the share in net income is distributed.
This is how presenting your Supporting Schedule would look like (Sample – Format)
AB Partnership
Supporting Schedule
50% 50% 100%

Partner A Partner B Total
Salary 100,000 100,000
Interest in Partnership 100,000 100,000
Bonus 50,000 50,000 100,000
Remainder 350,000 350,000 700,000
Share in Net Income (Loss) 500,000 500,000 1,000,000
40
SCE for “Corporation”

Rea4: Read and understand Preparation of Statement of Changes in Equity for Corporation in
Chapter 3, pages 64 - 66.
Pro-Forma Statement of Changes Equity for Corporation can be found in Chapter 3, page 65.
This is how presenting your SCE of a Corporation would look like (Sample-Format)
ABC Corporation
For the year ended December 31, 2019
Common Additional Retained Total

Stock Paid in Earnings
Capital
Balance, January 1 1,000,000 5,000,000 2,000,000 8,000,000
Add:
Net Income 1,000,000 1,000,000
Issuance of new stocks 200,000 800,000 1,000,000
Less:
Dividends (500,000) (500,000)
Balance, December 31 1,200,000 5,800,000 2,500,000 9,500,000
Alternatively, this is how the Statement of Financial Position’s Shareholder’s Equity would be
presented;
Shareholder’s Equity
Common Stock 1,200,000
Additional Paid in Capital 5,800,000
Retained Earnings 2,500,000
Total Shareholder’s Equity 9,500,000
41
SCE for “Sole Proprietorship”
in Chapter 3, Pages 67.
Annual Report (Open: File name: JFC-Annual-Report-2013.pdf) Proceed to page 37 to view
their actual Statement of Comprehensive Income.
Disc2: Participate in Schoology Discussion Forum “Jollibee AFS 3”

How did you find Jollibee Foods Corporation's Consolidated Statement of Changes in Equity?
Please do note that it is a consolidated FS of an Audited Annual Report. All of which would be
discussed in higher accounting subjects. Do you think this report would help investors decide on
whether or not to invest in the company? Why do you think so?
42
Name: _____________________________________________ Rating: ______________

DLA no. 4
ACT1: Answer Chapter Test of Chapter 3 from the book.
❖ True or False (Page 68 - 69)
❖ PROBLEM 6 (Page 70 - 71)
Optional Activities
❖ To further enhance your understanding regarding this lesson, you can answer all other
activities in Chapter 3 of the Book
43
Proposed
Familiarize yourself and understand the following terms that are mostly
Instru1 15 mins
used in regards to the Preparation of the Statement Changes in Equity.
Read and understand more terms and concepts in Chapter 3, pages 57 – At your own
Rea1
59. time
View 1 View "EPISODE 4" Video or PPT of Episode 4. 20 mins
Familiarize yourself with the preparation of Statement of Changes in

Instru2: 15 mins
Equity.
Participate in Schoology Discussion Forum “Is it Possible for SCE to be At your own
Disc1
prepared before SCI and after SFP? Why? Or Why not? time
Read and understand Preparation of Statement of Changes in Equity for

Rea2 20 mins
a Sole Proprietorship in Chapter 3 Pages 59 – 61’
Participate in Schoology Discussion Forum “Account Form or Report At your own

Disc2:
Form?” time
Answer Activity 1, Activity 2 online Schoology for a short assessment of

ACT1: 20 mins
your newly found knowledge

Rea2: 20 mins
Mira’s Store found in Chapter 1, Pages 23 – 27

Rea3: 20 mins
a Sole Proprietorship in Chapter 3 Pages 61 - 64’
Rea4: 20 mins
Corporation in Chapter 3 Pages 64 - 66’
Rea5: 20 mins
Mira’s Store found in Chapter 3, Pages 67
Check out the actual Financial Statements of Jollibee Foods Corporation
View2 20 mins
in their 2013 Annual Report
Disc2 Participate in Schoology Discussion Forum “Jollibee AFS 3” 10 mins
Act1 Answer Chapter Test of Chapter 3 from the Book 40 mins
Total 4 Hours
44

STATEMENT OF CASHFLOW
This Learning Account will help you develop an understanding of the line items
under the Cashflow from Operating Activities, Cashflow from Investing Activities,
and Cashflow from Financing Activities of the Statement of Cashflow (SCF) that will
equip you to prepare Statement of Cashflow.
• Have a significant Mastery of the following;

o DLA 2: Statement of Financial Position
o DLA 3: Statement of Comprehensive Income
• Watch FABM2 Episode 4: Statement of Cashflows
• Read Chapter 4: Statement of Cashflow on the book "Fundamentals of Accounting,
Business and Management 2" by Dani Rose C. Salazar First Edition
• Understand the importance of the SCF

• Identify the elements of the SCI and describe these items for a service business
and a merchandising business.
• Properly Classify expenses as to whether it is part of the cost of goods sold,
general, and administrative expense or selling expense.
• Prepare SCI for a service business using the single-step approach.
• Prepare SCI for a merchandising business using the multi-step approach.
45
Definition of Terms
regards to the Preparation of the Statement of Cashflow.
Statement of Cashflow – This statement provides an analysis of inflows and/or outflows of

cash from/to operating, investing, and financing activities. It shows cash transactions only
compared to the SCI which follows the accrual principle.
Direct Approach – Under this method, the operating cashflow section of the statement of
cashflow would show each major class of gross cash receipt and gross cash payments.
Indirect Approach – Under this method, the operating cashflow section of the Statement of
Cashflow will reconcile the net income/ loss of the company with the total cash
generated/used in operating activities by adjusting net income/loss for the effects of non-
cash transactions.
Operating Activities – Activities that are directly related to the main revenue-producing
activities of the company such as cash from customers and cash paid to suppliers/employees.
Investing Activities – Cash transactions related to the purchase or sale of non-current

assets.
Financing Activities – Cash transactions related to changes in equity and borrowings.
Net Cashflow – Also, "Net Change in Cash" is 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 cash account at the beginning of the accounting
period.
Ending Cash Balance – The balance of the cash account at the end of the accounting period
computed using the beginning cash balance plus the net change in cash for the current
period.
View1: Watch Episode 4 Statement of Cashflow & Review PPT for notes.
46

Instru2: Familiarize yourself with the following formats that are used in the Statement of
Cashflows.
SCI TITLE FORMAT

<Company Name>
Statement of Cashflow
x. Name of the company

xi. Name of the Financial Statement
xii. Date of preparation (“For the Year Ended”)
Take note of the 3rd line item, it uses the term "For the Year Ended", this represents that you
are presenting the line item of these Financial Statements as of this moment of time.
Analogy of “CASH BASIS Vs ACCRUAL BASIS”
You are watching the 20-minute recap video of your 18th birthday Party which was
recorded last year. This represents the whole thing that happened at that party. The
whole 20-minute duration of that video represents FOR everything that happened until
THE END of that party
The whole 20-minutes duration of the video enabled you to have a recap of your
performance during the whole party. This, to you, is what SCI is to a business, it represents
how the business performed FOR THE whole YEAR which ENDED on the last day of that
year (Annual Report) or the last day of the term they want to report it (Interim Report).
Disc1: Participate in the Schoology Discussion Forum "Analogy of Cash Basis vs

Accrual Basis" and give your own example on the difference.

47

Instru3: Familiarize yourself in using the direct approach in presenting the Statement of
Cashflow.
DIRECT APPROACH
This is how presenting your SCF using Direct approach would look like (PRO-FORMA)
ABC Company
Cashflows from Operating Activities

Cash Transactions (related to SCI / CA / CL)
Net Cash from operating activities xxx
Cash flows from Investing Activities
Cash Transactions (related to NCA)
Net Cash from Investing activities xxx
Cash flows from Financing Activities
Cash Transactions (related to NCL / O.E.)
Net Cash from Financing activities xxx
Net Cashflow xxx

Cash at the Beginning of the Year (xxx)
Cash at the End of the Year xxx
Should I add to cash or Deduct it from Cash?

If you see the terms:
Cash IN (add to cash) – Received, Collected, Receipts, Proceeds, Collection,
Contribution from owners
Cash OUT (deduct from cash) – Payments, Paid, Loaned, Distributed, Withdrawal
from owners
Under which activity should I add or deduct it?
If the transaction is related to:
Operating Activities – Current Assets / Current Liabilities / SCI
Investing Activities – Noncurrent Assets
Financing Activities – Noncurrent Liabilities / Owner’s Equity
48
Sample Illustration
Below are the cash transactions of ABC company for December 31, 2019
Cash Payment to suppliers of goods and services 100,000

Cash Receipts from rendering services 500,000
Payment to owners 50,000
Proceeds from bank loans 200,000
Proceeds from cash investments of owners 100,000
Payment for Income Taxes 30,000
Payment for interest 20,000
Proceeds for dividends of investment 50,000
Payment for acquisition of equipment 300,000
Cash of the beginning of the year 1,000,000
Prepare the statement of Cash Flow using the Direct Method.
SOLUTION
STEP 1: Assess Transactions
ADD/DEDUCT ACTIVITY
Cash Payment to suppliers of goods and services - Operating
Cash Receipts from rendering services + Operating
Payment to owners - Financing
Proceeds from bank loans + Financing
Proceeds from cash investments of owners + Financing
Payment for Income Taxes - Operating
Payment for interest - Operating
Proceeds for dividends of investment + Operating
Payment for acquisition of equipment - Investing
Cash of the beginning of the year na na
Analyze whether it should be added or deducted to cash. Use the keywords that were discussed earlier
Then identify which Activity should it be added or deducted to, use the activities which affect the major
accounts as key identifiers.
49
Sample Illustration
STEP 2: Prepare the SCF
ABC Company
For the year ended December 31 2019

Cash Payment to Suppliers (100,000)
Cash Receipts from rendering services 500,000
Payment for income taxes (30,000)
Payment for interest (20,000)
Proceeds from dividend investments 50,000
NET CASH FROM OPERATING ACTIVITIES 300,000
Cashflows from Investing Activities
Payment for acquisition of equipment (300,000)
NET CASH FROM INVESTING ACTIVITIES (300,000)
Cashflows from Financing Activities
Payment to owners (50,000)
Proceeds from bank loans 200,000
Proceeds from cash investments of owners 100,000
NET CASH FROM FINANCING ACTIVITIES 250,000
NET CASHFLOW 250,000

Cash at the Beginning of the Year 1,000,000
Cash at the End of the Year 1,250,000
Cash Receipts from Customers = Beginning AR + NET SALES – Ending AR
Payments to Suppliers = Beginning AP + NET PURCHASES – Ending AP
Payments to X = Beginning Payable + X Expense – Ending Payable
50
Sample Illustration
Below are the cash transactions of ABC company for December 31, 2019
Cash Payment to suppliers of goods and services

Cash Receipts from rendering services
Payment to owners
Proceeds from bank loans
Proceeds from cash investments of owners
Payment for Income Taxes
Payment for interest
Proceeds for dividends of investment
Payment for acquisition of equipment
Cash of the beginning of the year
Prepare the statement of Cash Flow using the Direct Method.
STEP 1: Assess Transactions

ADD/DEDUCT ACTIVITY
Cash Payment to suppliers of goods and services - Operating
Cash Receipts from rendering services + Operating
Payment to owners - Financing
Proceeds from bank loans + Financing
Proceeds from cash investments of owners + Financing
Payment for Income Taxes - Operating
Payment for interest - Operating
Proceeds for dividends of investment + Operating
Payment for acquisition of equipment - Investing
Cash of the beginning of the year
51
Name: _____________________________________________ Rating: ______________
Grade and Section:_____________ Subject Teacher:__________________________

DLA no. 5
Statement of Cashflows
Activities
❖ Modified Matching Type (Page 90-91)
❖ Problem 1 (Page 91 – 92)
52

Instru4: Familiarize yourself using the indirect approach in presenting the Statement of
Cashflow.
INDIRECT APPROACH
This is how presenting your SCF using Indirect approach would look like (PRO-FORMA)
ABC Company

NET INCOME xxx
Add back: Depreciation Expense
Loss on Sale of Equipment
Increase in AR
Decrease in AP
Less:
Gain on Sale of Equipment
Decrease in AR
Increase in AP
Net Cash from Operating Activities Xxx
Cash flows from Investing Activities
Cash Transactions (related to NCA)
Net Cash from Investing activities Xxx
Cash flows from Financing Activities
Cash Transactions (related to NCL / O.E.)
Net Cash from Financing activities Xxx
Net Cashflow Xxx

Cash at the Beginning of the Year (xxx)
Cash at the End of the Year Xxx
It's the same concept with Direct Approach except that Cashflow from operating activities is
derived from SCI and SFP which is computed as above
53
in Chapter 4, Pages 83 – 88
Annual Report (Open: File name: JFC-Annual-Report-2013.pdf) Proceed to page 40 - 41 to view
their actual Statement of Cashflows.)
How did you find Jollibee Foods Corporation's Statement of Cashflow? Please do note that it is a
consolidated FS of an Audited Annual Report. All of which would be discussed in higher
accounting subjects. Do you think this report would help investors decide on whether or not to
invest in the company? Why do you think so?
54
Name: _____________________________________________ Rating: ______________

DLA no. 5
Statement of Cashflows
Optional Activities
55
Synch
Proposed
Instru1 15 mins
mostly used in the preparation of the Statement of Cashflow.
Rea1
View1: Watch Episode 4 Statement of Cashflow & Review PPT for notes. 25 mins
Intru2 20 mins
the Statement of Cashflows.
Participate in the Schoology Discussion Forum "Analogy of Cash
Disc1 Basis vs Accrual Basis" and give your own example on the 20 mins
difference.
Familiarize yourself using the direct approach in presenting the
Intru3 20 mins
Statement of Cashflow.
Rea2 20 mins
pages 77 – 80.
Act1 Answer Chapter Test of Chapter 4 from the book. 30 mins
Familiarize yourself using the indirect approach in presenting the

Instru4 10 mins
Statement of Cashflow.
Rea3 10 mins
pages 80 – 82.
Rea4 10 mins
Mira's Store found in Chapter 4, pages 83 – 88.
View2 15 mins
Disc3 Participate in Schoology Discussion Forum "Jollibee AFS". 15 mins
Act 2 Answer Chapter Test of Chapter 4 from the book. 30 mins
TOTAL 4 Hours
56

Financial Statement Analysis 1
This Learning Account will help you in analyzing and comparing Financial
Statements of a company using %Peso Change Analysis (Horizontal Analysis), &
Common-size Analysis (Vertical Analysis).

• Have a significant Mastery of the following:
o DLA 4: Statement of Changes in Equity.
• Watch FABM2 Episode 6: Financial Statement Analysis 1
• Read Chapter 5: Financial Statement Analysis 1 on the book "Fundamentals of
Accounting, Business and Management 2" by Dani Rose C. Salazar First Edition
• Compute for peso and percentage changes in account balances.

• Analyze Financial Statement using Horizontal Analysis Approach.
• Prepare a Common-size Financial Statement.
• Analyze Financial Statement using Vertical Analysis Approach.
57
Definition of Terms
regards to the Preparation of the Statement Comprehensive Income.
Financial Statement Analysis – The process of evaluating risks, performance, financial

health, and future prospects of a business by subjecting financial statement data to
computational and analytical techniques with the objective of making economic
decisions.
Horizontal Analysis – Also called trend analysis, is a technique for evaluating a series of
financial statement over a period of time with the purpose of determining the increase or
decrease that has taken place. This will reveal the behavior of the account over time. Is it
increasing, decreasing, or not moving? What is the magnitude of the change? Also, what
is the relative change in the balances of the account over time?
Vertical Analysis – Also called common-size analysis, is a technique that expresses each
financial statement item as a percentage of a base amount.
Prior Year – The year before the current year (Previous Year or Last Year).
Current Year – The year the FS is currently dated (Most Recent Year).
Base Year – The year the % computation is based on (usually Prior Year).
Based Amount – The amount of the account the common-size FS is based on; Total
Assets for Statement of Financial Position and Total Net Sales for Statement of
View1: Watch Episode 6 Financial Statement Analysis 1 & Review PPT for notes.
58
FINANCIAL STATEMENT ANALYSIS

Instru2: Familiarize yourself with the computations used in Analyzing Financial
Statements using Horizontal Analysis.
HORIZONTAL Analysis
Objectives:
1. To find out about the behavior of the account over time. (Growth or Decline)
2. To find out the scale of the change (Growth or Decline) in terms of percentage of the
account being analyzed over time.
How to compute:
1. PESO Change Increase (Decrease):
= Balance This Year (Current year) – Balance last Year (Base Year)
2. % Change Increase (Decrease):
= Peso Change Increase (Decrease) / Balance last Year (Base Year)
Increase
Account 2019 2018 %
(Decrease)
Sales 650,000 500,000 150,000 30%
Cash 800,000 1,000,000 (200,000) (20%)
In this figure,
• Sales increase by 150,000 which is computed by deducting 2019 amount of 650,000 from
the 2018 amount [650,000 – 500,000].
• The percent change of sales is 30% which is computed by dividing the Peso Increase in
Sales of 150,000 by the amount of Sales from 2018 (Last year) which amounts to 500,000.
[150,000 / 500,000]
• Cash, on the other hand, was decreased by 200,000. [1,000 – 800,000] which is 20% lower
than last year [ (200,000) / 1,000,000]
59
Sample Illustration
Rea1: Read and understand illustration on how to do Horizontal Analysis in Chapter 5
Pages 96 – 97
Disc1: Participate in Schoology Discussion Forum “Horizontal Analysis”

What do you think is the purpose of computing the increase or decrease in value as well as their
respective % in analyzing the accounts in the Financial Statements? Expound!
60
Name: _____________________________________________ Rating: ______________

DLA No. 6
Financial Statement Analysis 1 (A)
Perform Horizontal Analysis (Only)

61

Instru3: Familiarize yourself with the computations used in Analyzing Financial
Statements using Vertical Analysis
VERTICAL Analysis
Objective:
• Expresses the amount of the accounts in the financial statement into the percentage of
the base amount for it to show the standardized or relative amount so that you would be
able to compare the financial statement of the company you are analyzing against other
companies under the same industry or against the industry standard itself.
Which Base Account should be used?
Financial Statement Base Account

Statement of Financial Position Total Assets
Total Revenues
or Net Sales
Balance Sheet Income Statement
Cash 300,000 30% Sales 1,000,000 100%

Inventories 200,000 20% Cost of Sales 600,000 60%
PPE 500,000 50% Gross Profit 400,000 40%
Total Assets 1,000,000 100% Operating Expense 180,000 18%
Liabilities 400,000 40% Interest Expense 20,000 2%
Owner’s Equity 600,000 60% Net Income 200,000 20%
In this figure,
• The 300,000 Cash is 30% of Total Asset 1,000,000 [300,000 / 1,000,000].
• The 200,000 Inventory is 20% of Total Asset 1,000,000 [200,000 / 1,000,000].
• The 500,000 PPE is 50% of Total Asset 1,000,000 [500,000 / 1,000,000].
• The 400,000 Liabilities is 40% of Total Asset 1,000,000 [300,000 / 1,000,000].
• The 600,000 Owner’s Equity is 30% of Total Asset 1,000,000 [300,000 / 1,000,000].
• The 600,000 Cost of Sales is 60% of Total Sales 1,000,000 [600,000 / 1,000,000].
• The 400,000 Gross Profit is 40% of Total Sales 1,000,000 [400,000 / 1,000,000].
• The 180,000 Operating Expense is 18% of Total Sales 1,000,000 [180,000 / 1,000,000].
• The 20,000 Interest Expense is 2% of Total Sales 1,000,000 [20,000 / 1,000,000].
• The 200,000 Net Income is 20% of Total Sales 1,000,000 [200,000 / 1,000,000].
62
Sample Illustrations
Rea1: Read and understand illustration on how to do Horizontal Analysis in Chapter 5,
pages 98 – 100.
Disc2: Participate in Schoology Discussion Forum “Vertical Analysis".

What do you think is the purpose of computing and preparing a common-size financial
statement in analyzing the Financial Statements of the company? Expound!
63
Name: _____________________________________________ Rating: ______________

DLA No. 6
Financial Statemen Analysis 1 (B)

Perform Vertical Analysis (Only)
64
Proposed
Instru1 15 mins
mostly used in regards to the Preparation of Financial Statements.
View1
Instru2: 25 mins
the Statement of Financial Position.
Participate in the Schoology Discussion Forum "Analogy of AS OF"
Rea1 10 mins
and give your own example or explanation of analogy of "AS OF".
Disc1: 20 mins
Participate in Schoology Discussion Forum “Account Form or
Act1: 10 mins
Report Form?”
Answer Activity 1, Activity 2 online Schoology for a short
Intru3: 40 mins
assessment of your newly found knowledge.

Rea2: 40 mins
Mira's Store found in Chapter 1, pages 23 – 27.

Disc2: 10 mins
Act2: Participate in Schoology Discussion Forum "Jollibee AFS". 10 mins
TOTAL 4 Hours
65

This Learning Account will help you analyze and compare Financial Statements
of a company using Financial Ratios.
Requirements before proceeding with this module

• Have a significant Mastery of the following:
o DLA 4: Statement of Changes in Equity
o DLA 6: Financial Statement Analysis 1
• Watch FABM2 Episode 7: Financial Statement Analysis 2
• Read Chapter 6: Financial Statement Analysis 2 on the book "Fundamentals of
Accounting, Business and Management 2" by Dani Rose C. Salazar First Edition
• Analyze Financial Statement Using Ratio Analysis.

• Have a competent understanding of the uses and computation of each ratio
in the Profitability Ratios
• , Operational Efficiency Ratios
• , and Financial Health Ratios.
66
Definition of Terms
Instru1: Familiarize yourself and understand the following terms that are mostly used
in regards to the Financial Statement Analysis
Financial Statement Analysis - The Process of evaluating risks, performance,

financial health, and future prospects of a business by subjecting financial
statement data to computational and analytical techniques with the objective of
making economic decisions.
Ratio Analysis – Expresses the relationship among selected items of financial

statement data which is in terms of percentage, rate, or simple proportion.
Profitability Ratio – Measures the ability of the company to generate income from
the use of its assets and invested capital as well as control its cost.
Efficiency Ratio – Measures the ability of the company to utilize its assets.
Financial Health Ratio – Looks into the company's solvency and liquidity ratios.
Solvency – Measures the company's capacity to pay its long-term debts.
Liquidity – Measures the company's ability to pay the debts that are coming
due (short-term debts).
LIMITATIONS TO FINANCIAL STATEMENT ANALYSIS
FS Analysis is used to support business decisions that will have an effect on

the future period. It can be used for forecasting data as well as a tool for comparison
or benchmarking with other companies with the same industry. However, this is
based on historical performance hence, would not ensure future performance
View1: Watch Episode 6 Financial Statement Analysis 1 & Review PPT for notes.
67

Instru2: Familiarize yourself with the Formulas and uses of the Profitability Ratios.
PROFITABILITY RATIOS
Rea1: Read and understand the explanation of the use of each of these ratios and their
corresponding illustrative problems in Chapter 6, pages 106 – 108.
Disc1: Participate in Schoology Discussion Forum “PROFITABILITY RATIOS”

How do you think the Profitability Ratio would help the management make sound decision
making for the company? Give a situational example.
68

Instru3: Familiarize yourself on the Formulas and uses of the Efficiency Ratios
OPERATIONAL EFFICIENCY RATIOS
Rea2: Read and understand the explanation of the use of each of these ratios and their
corresponding illustrative problems in Chapter 6, pages 109 – 111.
Disc2: Participate in Schoology Discussion Forum “EFFICIENCY RATIOS".

How do you think the Operational Efficiency Ratio would help the management make sound
decision making for the company? Give a situational example.
69

Instru4: Familiarize yourself on the Formulas and uses of the Financial Healthy Ratios
FINANCIAL HEALTH RATIOS
Rea3: Read and understand the explanation of the use of each of these ratios
And their corresponding illustrative problems in Chapter 6 Pages 111 – 113
Disc3: Participate in Schoology Discussion Forum “FINANCIAL HEALTH RATIO”

How do you think FINANCIAL HEALTH would help the management make sound decision making
for the company? Give a situational example.
70
Sample Illustration
Instru5: Run-through this sample illustrative problem to solidify your learnings

Assets
Current Assets 2019 2018
CASH P 500,000 P300,000
Short Term Investment 100,000 50,000
Accounts Receivable 400,000 200,000
Merchandise Inventory 350,000 250,000
Prepaid Expense 150,000 50,000
Total Current Assets 1,500,000 850,000
Noncurrent Assets
PROPERTIES PLANT AND EQUIPMENT 500,000 400,000
INTANGIBLE ASSETS 200,000 100,000
INVESTMENT IN PROPERTIES 300,000 150,000
Total Noncurrent Assets 1,000,000 650,000
Total Assets 2,500,000 1,500,000
LIABILITIES AND OWNER’S EQUITY

Current Liabilities
Accounts Payable 400,000 200,000
Current Portion of Long-Term Debts 100,000 50,000
Total current Liabilities 500,000 250,000
Noncurrent Liabilities
Long-term Debts 1,000,000 750,000
Total noncurrent Liabilities 1,000,000 750,000
Total Liabilities 1,500,000 1,000,000
Owner’s Equity 1,000,000 500,000
Total Liabilities and Owner’s Equity P 2,500,000 P 1,500,000
71
Sample Illustration

FOR THE YEAR ENDED OF DECEMBER 31, 2018
NET SALES P 1,500,000
LESS: COST OF SALES (900,000)
GROSS PROFIT 600,000
OPERATING EXPENSE
SELLING EXPENSE 110,000
GENERAL AND ADMINISTRATIVE EXPENSE 150,000 (260,000)
OPERATING PROFIT 340,000
INTEREST EXPENSE (15,000)
NET INCOME P 325,000
Required: Compute for all of the Financial Ratios Previously Discussed for the year 2019.
PROFITABILITY RATIO
GROSS PROFIT RATIO

GPR = GROSS PROFIT / NET SALES
GPR = 600,000 / 1,500,000 x 100%
GPR = 40 %
OPERATING INCOME RATIO
OPEIR = OPERATING INCOME / NET SALES
OPEIR = 340,000 / 1,500,000 x 100%
OPEIR = 22.67%
NET PROFIT RATIO
NPR = NET INCOME / NET SALES
NPR = 325,000 / 1,500,000 x 100%
NPR = 21.67%
RETURN ON ASSETS
ROA = NET INCOME / AVE. TOTAL ASSETS AVE Assets = (Asset1 + Asset2) / 2
ROA = 325,000 / Ave Total Assets AVE Assets = (2.5M + 1.5M) / 2
ROA = 325,000 / 2,000,000 x 100%
ROA = 16.25%
RETURN ON EQUITY
ROE = NET INCOME / AVE. TOTAL EQUITY AVE Equity = (Equity1 + Equity2) / 2
ROE = 325,000 / Ave Total Equity AVE Equity = (1M + 5ook) / 2
ROE = 325,000 / 750,000 x 100%
ROE = 43.33%
72
Sample Illustration
EFFICIENCY RATIO
ASSET TURNOVER RATIO

ATR = NET SALES / AVE. TOTAL ASSETS
ATR = 1,500,000 / 2,000,000
ATR = 0.75
FIXED ASSET TURNOVER RATIO
FATR = NET SALES / AVE. TOTAL FIXED ASSETS Ave. Total Fixed Asset = (PPE1+PPE2) / 2
FATR = 1,500,000 / Ave Total Fixed Assets Ave. Total Fixed Asset = (500k+400k) / 2
FATR = 1,500,000 / 450,000
FATR = 3.33
INVENTORY TURNOVER RATIO
ITO = COST OF SALES / AVE. INVENTORY Ave. Inv = (Inventory1 + Inventory2) / 2
ITO = 900,000 / Ave. Inv. Ave. Inv = (350k + 250k) / 2
ITO = 900,000 / 300,000
ITO = 3
AVERAGE DAYS IN INVENTORY
Ave Days in Inventory = 365 / INVENTORY TURNOVER RATIO
ADI = 365 / ITO
ADI = 365 / 3
ADI = 121.67 or 122 Days
ADI should be rounded to the nearest day
ACCOUNTS RECEIVABLE TURNOVER RATIO
ARTO = Net Sales / AVE. ACCOUNTS RECEIVABLE Ave. AR = (A.Rec.1 + A.Rec2) / 2
ARTO = 1,500,000 / Ave. AR Ave. AR = (400k + 200k) / 2
ARTO = 1,500,000 / 300,000
ARTO = 5
AVERAGE COLLECTION PERIOD
Ave. Collection Period = 365 / ACCOUNTS RECEIVABLE TURNOVER RATIO
ACP = 365 / ARTO
ACP = 365 / 5
ACP = 73 days
ACP should be rounded to the nearest day
*OPERATING CYCLE
OPERATING CYCLE = Ave. Days in Inventory + Ave. Collection Period
OPERATING CYCLE = 122 Days + 73 Days
OPERATING CYCLE = 195 Days
73
Sample Illustration
FINANCIAL HEALTH RATIO
SOLVENCY
Debt to Equity Ratio

DER = TOTAL LIABILTIES / TOTAL EQUITY
DER = 1,500,000 / 1,000.000
DER = 1.5
Debt to Asset Ratio or simply debt ratio
DAR = TOTAL LIABILTIES / TOTAL ASSETS
DAR = 1,500,000 / 2,500,000
DAR = 0.6
*Equity Ratio
OER = TOTAL EQUITY / TOTAL ASSETS
OER = 1,000,000 /2,500,000
OER = 0.4
Times interest Earned or Interest Coverage Ratio
TIER = OPERATING INCOME / INTEREST EXPENSE
TIER = 340,000 / 15,000
TIER = 22.67x
LIQUIDITY
*WORKING CAPITAL
WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES
WC = 1,500,000 – 500, 000
WC = 1,000,000
CURRENT RATIO
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILTIES
CR = 1,500,000 / 500,000
CR = 3
*QUICK ASSETS
QUICK ASSETS = CASH + ACCOUNTS RECEIVABLE + SHORT TERM INVESTMENTS
Quick Assets = 500,000 + 400,000 + 100,000
Quick Assets = 1,000,000
QUICK RATIO – aka Acid Test Ratio
QUICK RATIO = QUICK ASSETS / CURRENT LIABILITIES
QR = 1,000,000 / 500,000
QR = 2
CASH RATIO
CASH RATIO = CASH / CURRENT LIABILTIES
CASR = 500,000 / 500,000
CASR = 1
74
Name: _____________________________________________ Rating: ______________

DLA No. 7
CHAPTER TEST
❖ Matching Type (Page 117)
❖ PROBLEM 1-3 (Page 118)
75
Proposed
Instru1 15 mins
mostly used in regards to the Financial Statement Analysis.
Watch Episode 6 Financial Statement Analysis 1 & Review PPT for
View1 20 mins
notes.
Familiarize yourself with the Formulas and uses of the Profitability
Instru2: 10 mins
Ratios.
Read and understand the explanation of the use of each of these
Rea1 ratios and their corresponding illustrative problems in Chapter 6, 15 mins
pages 106 – 108.
Participate in Schoology Discussion Forum "PROFITABILITY
Disc1: 10 mins
RATIOS".
Familiarize yourself on the formulas and uses of the Efficiency

Intru3: 10 mins.
Ratios
Rea2: ratios and their corresponding illustrative problems in Chapter 6, 15 mins
pages 109 – 111.
Disc2: Participate in Schoology Discussion Forum "EFFICIENCY RATIOS". 10 mins
Familiarize yourself on the formulas and uses of the Financial

Intru4: 10 mins
Healthy Ratios.
Rea3: ratios and their corresponding illustrative problems in Chapter 6. 15 mins
pages 111 – 113.
Participate in Schoology Discussion Forum "FINANCIAL HEALTH
Disc3: 10 mins
RATIO".
Run-through this sample illustrative problem to solidify your
Instru5: 40 mins
learnings.
Act1: Answer Chapter Test of Chapter 6 from the book. 60 min
TOTAL 4 Hours
76

BUSINESS FORMS
This Learning Account will help you develop an understanding of the different
external and internal business forms used in business and accounting.
Requirements before proceeding with these Learning Account

• Watch FABM2 Episode 8: Business Forms
• Read Chapter 7: Business Forms on the Book "Fundamentals of Accounting,
Business, and Management 2" by Dani Rose C. Salazar First Edition
• Google search for examples (images) of the following Business Forms:
o Purchase Request
o Purchase Order
o Check Voucher
o Delivery Receipts
o Sales Invoice
o Provisional Receipts
o Official Receipts
o Statement of Account
• Understand the purpose of business forms in accounting.

• Differentiate internal and external business forms.
• Identify the different kinds of internal
• and external business forms.
• Understand the revenue and expenditure flows using business forms.
77
Definition of Terms
Instru1: Familiarize yourself and understand the following terms that are mostly used
in regards to the Business Forms.
Business Forms - Used to document business transactions. They serve as

evidence which contains details of the occurrence of a transaction.
Internal Business Forms – Forms used only within the company.
Purchase Request – It documents the processes performed before an order

is communicated to the supplier.
Receiving Report – It documents the quality and quantity of items received.
Check Voucher– It documents the preparation, verification, and authorization

of check payments.
External Business Forms – Forms used both inside and outside the company.
Purchase Order – Used by the Company to communicate the exact orders to

the Supplier.
Delivery Receipt – The evidence of delivery issued by the supplier which

contains the information on the quality and quantity of items delivered.
Sales Invoice – Used by sellers to communicate to the buyer which

documents the amount of payment the seller is claiming.
Provisional and Official Receipt – The evidence of payment that the buyer
has already paid the seller.
Statement of Account or Billing Statement – Prepared by the seller and

submitted to the buyer which contains a list of transactions between the seller
and the buyer over a specific period of time. It includes the amount of payment
that the buyer is required to pay to the seller.
View1: Watch Episode 7 BUSINESS FORMS & Review PPT for notes.
78
BUSINESS FORMS
Instru2: Familiarize yourself with Internal Business Forms.
Internal Business Forms
Purchase Request
Rea1: Read and understand the use of Purchase Request and study a sample of it in
Chapter 7 Pages 122 – 124
Disc1: Participate in Schoology Discussion Forum “PROFITABILITY RATIOS".

Receiving Report
Rea2: Read and understand the use of Receiving Report and study a sample of it in
Chapter 7, pages 124– 125.
Check Voucher
Rea3: Read and understand the use of Check Voucher and study a sample of it in
Disc2: Participate in Schoology Discussion Forum “PROFITABILITY RATIOS".

79
BUSINESS FORMS
Instru3: Familiarize yourself with the External Business Forms.
External Business Forms
Purchase Order (PO)
Rea4: Read and understand the use of Purchase Request and study a sample of it in
Chapter 7, pages 127 – 128.
Disc3: Participate in Schoology Discussion Forum “PO VS PR".

What are the key differences between the Purchase Order and Purchase Request?
Delivery Receipt (DR)
Rea5: Read and understand the use of DELIVERY RECEIPT and study a sample of it in
Disc4: Participate in Schoology Discussion Forum “DR VS RR".

What are the key differences between the Delivery Receipt and Receiving Report?
SALES INVOICE (SI)
Rea6: Read and understand the use of SALES INVOICE and study a sample of it in
Chapter 7, pages 129–130.
80
PROVISIONAL RECEIPT AN OFFICIAL RECEIPT (OR)
Rea7: Read and understand the use of OFFICIAL RECEIPT and study a sample of it in
Chapter 7, pages 130 – 131.
Disc5: Participate in Schoology Discussion Forum “OFFICIAL RECEIPT".

What are the key differences between the Official Receipt and Sales Invoice? When do you issue
Sales Invoice? How about Official Receipt?
Billing Statement or Statement of Account (SOA)
Rea5: Read and understand the use of STATEMENT OF ACCOUNT and study a sample of
it in Chapter 7, pages 128– 129.
Disc4: Participate in Schoology Discussion Forum “STATEMENT OF ACCOUNT".

If you are to analyze your Family's MERALCO SOA (Electricity Bill) what are the key elements
involved in that SOA? How would it help you transact with MERALCO Better?
81
Sample Illustration
Instru4: Run-through these sample Business Forms.
INTERNAL BUSINESS FORMS
82
Sample Illustration
EXTERNAL BUSINESS FORMS
83
Name: _____________________________________________ Rating: ______________

DLA No. 8
BUSINESS FORMS
CHAPTER TEST
❖ True or False (Pages 135-136)
❖ PROBLEM 1-8 (Pages 137 - 148)
84

ACCOUNTING BOOKS
Requirements before proceeding with these Learning Account

• Watch FABM2 Episode 9: ACCOUNTING BOOKS
• Read Chapter 8: Accounting Books – Journal and Ledgers on the Book
"Fundamentals of Accounting, Business and Management 2" by Dani Rose C.
Salazar First Edition
• Identify two kinds of accounting books.

• Understand the purpose of the journal and the ledger.
• Differentiate a journal from a ledger.
• Determine the Normal Balance of an Account.
• Use Special Journals.
• Use Account Receivable and Account Payable Subsidiary Ledgers
• Use the General Journal for Adjusting Entries.
85
Definition of Terms
Instru1: Familiarize yourself and understand the following terms related to accounting
books.
ACCOUNTING BOOKS – Columnar notebooks used for recording transactions.

There are two basic accounting books – journal and ledger.
JOURNAL – Book of original entry, diary of the business which contains the entries
of important events that are recorded chronologically.
JOURNAL ENTRY – Format used to write on the Journal. The act of writing
journal entry to the journal is called JOURNALIZING.
SPECIAL JOURNALS – Journal which was specially made for recording

similar highly repeated transactions.
Sales journal – Records Credit Sales or sales on account.
Purchase journal – Records Purchases of inventory made on account.
Cash receipt journal – Records all receipts of cash.
Cash disbursement journal – Records all payments of cash.
General Journal (GJ) – Records transactions that are beyond the

scope of special journals such as adjusting and closing entries. If there
are no special journals, only GJ is being kept.
GENERAL LEDGER – Book of Accounts which comprises the total balance of each
account that is referred from Journals or is Subsidiary Ledgers.
POSTING – Act of writing on Ledger. Journal Entries are posted on a Ledger.
SUBSIDIARY LEDGER– Supports the General Ledger. Contains further

details of each account like total balance for an individual customer or supplier.
View1: Watch Episode 8 ACCOUNTING BOOKS & Review PPT for notes.
86
ACCOUNTING BOOKS - JOURNAL

Instru2: Familiarize yourself with Accounting Books - Journal.
JOURNAL ENTRY
Jan 1 Accounts Receivable xxx
Sales xxx
# To Record sale of merchandise
Rea1: Read and understand how to do a basic journal entry and study a sample of it in
Chapter 7 Pages 151 – 154
Disc1: Participate in Schoology Discussion Forum “Account Balances”

For you to be able to journalize transactions effectively, a mastery regarding account balance is
required. In your own way, how would you explain or teach someone who does not know
accounting how to journalize a transaction? How would they know which to debit and which to
credit?
SPECIAL JOURNALS
SALES JOURNAL
Rea2: Read and understand how to do a journal entry on the SALES JOURNAL and study
a sample of it in Chapter 7, pages 155.
Disc2: Participate in Schoology Discussion Forum “Sales Journal".

Under what instances are you going to record transactions in the Sales Journal? How does it
help in preparing financial reports versus writing all transactions under the general journal?
87
PURCHASE JOURNAL
Rea3: Read and understand how to do a journal entry on the PURCHASE JOURNAL and
study a sample of it in Chapter 7, pages 155 - 156.
Disc3: Participate in Schoology Discussion Forum “Purchase Journal".

Under what instances are you going to record transactions in the Purchase Journal? How does it
help in preparing financial reports versus writing all transactions under the general journal?
CASH RECEIPT JOURNAL
Rea4: Read and understand how to do a journal entry on the CASH RECEIPT JOURNAL
and study a sample of it in Chapter 7, pages 155 - 156.
Disc4: Participate in Schoology Discussion Forum “Cash Receipt Journal".

Under what instances are you going to record transactions in the Cash Receipt Journal? How
does it help in preparing financial reports versus writing all transactions under the general
journal?
CASH DISBURSEMENT JOURNAL
Rea5: Read and understand how to do a journal entry on the CASH DISBURSEMENT
JOURNAL and study a sample of it in Chapter 7, pages 155 - 156.
Disc5: Participate in Schoology Discussion Forum “Cash Disbursement Journal".

Under what instances are you going to record transactions in the Cash Disbursement Journal?
How does it help in preparing financial reports versus writing all transactions under the general
journal?
88
ACCOUNTING BOOKS - LEDGER

Instru3: Familiarize yourself with Accounting Books - LEDGER.
GENERAL LEDGER – Control Account
SUBSIDIARY LEDGER – Supports the General Ledger Total Balances
GENERAL Ledger shows the total account balances per account while the subsidiary ledger
shows the total account balance per customer or supplier.
Rea6: Read and understand how to do a GENERAL AND SUBSIDIARY LEDGERS and
study a sample of it in Chapter 7, pages 159 - 160.
Disc6: Participate in Schoology Discussion Forum “General and Subsidiary Ledgers".

What is the connection between General Ledger and Subsidiary Ledger? Is it possible that
subsidiary ledgers are not even prepared? Why do you think so?
89
Sample Illustration
Instru4: Run-through these Sample entries on Special Journals.
SAMPLE JOURNAL ENTRIES ON SPECIAL JOURNALS
90
Name: _____________________________________________ Rating: ______________

DLA No. 9
ACCOUNTING BOOKS
CHAPTER TEST
❖ True or False (Pages 161-162)
❖ Matching Type (Page 162 - 163)
❖ PROBLEM 1-2 (Pages 163 - 172)
91
DYCIan Learning Account no. 10

The Bank Account
Requirements before proceeding with this Module:

• Watch FABM2 Episode 9: ACCOUNTING BOOKS
• Read Chapter 8: Accounting Books – Journal and Ledgers on the Book
"Fundamentals of Accounting, Business and Management 2" by Dani Rose C.
Salazar First Edition
• Identify the types of bank accounts normally maintained by a business.

• Differentiate a savings account from a checking account.
• Prepare bank deposit and withdrawal slips.
• Identify and prepare checks.
• Identify and understand the contents of a bank statement.
• Describe the nature of bank reconciliation statement.
• Identify common reconciling items and describe each one of them.
• Analyze the effect of the identified reconciling item.
• Prepare Bank Reconciliation Statement.
92
Definition of Terms
Instru1: Familiarize yourself and understand the following terms related to accounting
books.
SAVINGS ACCOUNT – Basic account for safekeeping of money in the bank.
CHECKING ACCOUNT– An account with a feature where the account holder will
be able to issue checks.
TIME DEPOSIT AND OTHER INVESTMENT ACCOUNTS – Accounts for

investment placements where the money earns or grows more than basic accounts.
More earnings usually limit account holders regarding the withdrawal of their money.
Deposit Slip – A form filled up by the account holder which indicates the account
and amount they would Deposit from the bank.
Withdrawal Slips – A form filled up by the account holder which indicates the
account and amount they would withdraw from the bank.
Bank Check – A form filled up by the account holder instructing the bank to pay the
payee indicated on the check.
Bank Statement – Detailed Transaction history of an account issued by the bank to

its depositors over the reporting period.
Bank Reconciliation – Reconciles cash balance in the book with the cash balance
in the bank statement.
Deposit in Transit – Cash that is supposedly already deposited in the bank but is
still in transit or on the way to the bank as of the end of the reporting period.
Outstanding Checks – Checks already issued and is recorded in books as released

but was not yet encashed in the bank as of the end of the reporting period.
Debit Memo – Transactions deducted in the bank account.
Credit Memo – Transactions added in the bank account.
View1: Watch Episode 9 Bank Accounts & Review PPT for notes.
93
BANK ACCOUNTS
Rea1: Read and understand better each of the Bank accounts in Chapter 9, page 174.
SAVINGS ACCOUNT
CHECKING ACCOUNT
TIME DEPOSIT and Other Investments
Disc1: Participate in Schoology Discussion Forum “Bank Accounts".

What are the key differences between Savings Account, Checking Account, Time Deposit, and
Other Investments? Which account would you prefer to have if you are saving money for the
long term?
Disc2: Participate in Schoology Discussion Forum “ATM CARD".

What is the difference between the ATM Card and Debit cards? Which do you think is more
useful for you, an ATM Card Account or Passbook Account.
Disc3: Participate in Schoology Discussion Forum “Checks".

What is the difference between Ordinary Check, a Crossed Check, and Manager's Check?
94
BANK FORMS
Rea2: Read and understand better each of these Bank Forms in Chapter 9, pages 175 -
182.
DEPOSIT SLIP
WITHDRAWAL SLIP
BANK CHECK
BANK STATEMENT
Disc4: Participate in Schoology Discussion Forum “BANK SLIPS".

What are the key differences between Cash Deposit Slip, Check Deposit Slip, and Withdrawal
Slip?
Disc5: Participate in Schoology Discussion Forum “TALBOG CHEKE".

What does BOUNCING or BOUNCED Check means? (Tumalbog yung cheke.)
Disc6: Participate in Schoology Discussion Forum “Bank Statement".

How will Reading Bank Statements help the business?
95
Sample Illustration
BANK FORMS
96
Instru3: Familiarize yourself with Accounting Books - Journal.
BANK RECONCILIATION
ADJUSTED BALANCE Per Bank and ADJUSTED BALANCE Per Book should be EQUAL after book or
bank errors have been corrected because otherwise, the difference in amount would indicate
missing cash.
Rea3: Read and understand how to Reconcile Cash per Bank with Cash Per book in
Chapter 9, pages 182 - 189.
Disc7: Participate in Schoology Discussion Forum “BANK RECON".

How would Bank Reconciliation help businesses to monitor and secure their cash? Explain in
detail or give an actual real-life situation.
97
Sample Illustration
98
Name: _____________________________________________ Rating: ______________

DLA No. 10
BANK FORMS
CHAPTER TEST
❖ True or False (Pages 190 - 192)
❖ PROBLEM 1 (Pages 192 - 194)
❖ PROBLEM 2, 3, 4 (Page 194)
99
References
Florendo, J. G. (2016). Teaching Guide for Senior Highschool Fundamentals of Accountancy,
Business and Management 2. Commission on Higher Education.
Millan, Z. V. (2018). FInancial Accounting & Reporting (Fundamentals). Bandolin Enterprise.
Salazar, D. R. (2017). FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 2 First
Edition. Rex Bookstore, Inc.
100

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ERWIN P.

DYCIan Learning Account No. 1

At the end of this Learning Account, you are expected to:

✓ Review Chapter 5 Basic Accounting Equation of the Fundamentals of

Owner’s Equity – Owner Equity is simply ASSETS minus Liabilities.

ASSETS = LIABILTIES + EQUITY

This Equation must “ALWAYS” be balance without any exception

What the Business OWNS vs What Owns the Business

Disc1: Participate in Schoology Discussion Forum “Basic Accounting Equation”

Based on your understanding, what is an Asset?

Based on your understanding, what is a Liability?

ACTIVITY 1 (OFFLINE): BASIC ACCOUNTING EQUATION

Instruction: Compute for the missing accounts

ASSETS LIABILITIES EQUITY

530,000 2.) 270,000

Instru3: Familiarize yourself and understand the Essential Elements of an Asset.

What are the key essential elements in the definition of Asset?

No Control over the resources = NO ASSET

Control over the resources in the FUTURE = NOT an ASSET

No Future Economic BENEFIT over the resources = NOT an ASSET

Disc2: Participate in Schoology Discussion Forum “Key Elements of Assets”

Instru4: Familiarize yourself and understand the essential elements of Liabilities.

What are the key essential elements in the definition of Liabilities?

Give up Resources – or outflow of economic Benefits means that settling an obligation

“Equity is simply Assets Minus Liabilities”

Disc3: Participate in Schoology Discussion Forum “Key Elements of Liabilities”

Case Illustration of Basic Accounting Equation.

Your Updated Accounting Equation as of this point is as follows

Assets Liabilities Equity

Now, Your Updated Accounting Equation as of this point is as follows

Now, Your Updated Accounting Equation as of this point remains as follows

EXPANDED ACCOUNTING EQUATION

ASSETS = LIABILTIES + EQUITY + REVENUE - EXPENSE

ASSETS = LIABILTIES + EQUITY + [PROFIT]

Beginning EQUITY + PROFIT = Ending EQUITY

ASSETS = LIABILTIES + UPDATED EQUITY

Disc4: Participate in Schoology Discussion Forum “Expanded Accounting Equation”

Based on your understanding from this module, what is a Revenue or Income?

Based on your understanding from this module, what is an Expense?

Case Illustration of Expanded Accounting Equation.

Did you earn or lose money? (kumita ka ba o nalugi?) By How much?

Now, Your Updated Accounting Equation as of this point is as follows

Now, Your Updated Accounting Equation as of this point is as follows

ACTIVITY 2 (OFFLINE): EXPANDED ACCOUNTING EQUATION

Instruction: Compute for the missing accounts

ASSETS LIABILITIES EQUITY REVENUES EXPENSES

Instru1 Familiarize yourself and understand the following terms. 15 mins

View “EPISODE 1” Video or PPT of Episode 1 to understand the Your own

Familiarize yourself and understand the essential elements of

Participate in Schoology Discussion Forum “Key Elements of

DYCIan Learning Account No. 2

Requirements before proceeding with these modules

✓ Have a significant Mastery of DLA 1: Accounting Equation

✓ Understand the importance of the SFP

Permanent Accounts or Real Accounts/Balance Sheet accounts. Permanent accounts in the

Temporary Accounts also known as Nominal Accounts. Accounts found in Statement of

Accumulated Depreciation - Contra Asset to Property, Plant, and Equipment accounts. It

*Cash is the most liquid asset of a company.

PRESENTATION OF FINANCIAL STATEMENT

Name: _______________________________ Rating:

Grade and Section: _ Subject Teacher: ______________

Name: _______________________________ Rating:

Grade and Section: _ Subject Teacher: ______________