Reviewer in Accounting 2

Reviewer in Accounting 2
CASH FLOW STATEMENT

presents the sources and utilization of an organization's cash and cash equivalents.
information contained in this statement is useful in predicting future cash outflows and
inflows of the organization.
aid the organization in their financing decision.
Three major sections:
1. OPERATING ACTIVITIES- the baseline cash activities of the entity related to its
normal operating cycle. Activities are related to the primary revenue-producing activity
of the entity. Such transactions will be related to profit determination.
Examples: Cash receipts from the sale of goods and rendering of services (+), Cash
receipts from royalties, fees, commission, and other revenue (+), Cash payments to
suppliers of goods and services (-), Cash payments to employees (-), Cash payments to
income taxes (-), Interest paid (-), Interest received (+), Dividends received (+)
2. OPERATING ACTIVITIES- generally result from the acquisition and disposal of non-
current assets
Examples: Cash payments to acquire property, plant, and equipment (-), Cash payments
to acquire intangible assets (-), Cash receipts from the sale of property, plant and
equipment (+), Cash receipts from the sale of intangible assets (-), Cash receipts from
sale of other long-term assets (-)
3. FINANCING ACTIVITIES- usually arise from changes in non-current liabilities and

owner's equity of the business organization.
Examples: Cash investments from owners (+), Cash proceeds from bank loans (+), Cash
distributions to owners (-), Repayments of bank loans (-)
Summary of the Decision

1. Operating - Profit or Loss
2. Investing - Non-current Asset
3. Financing - Equity and Non-current Liability
Preparing the Statement of Cash Flows

1. Determine the Heading
2. Analyze the cash transactions
3. Prepare the Operating Activities Section
4. Prepare the Investing Activities Section
5. Prepare the Financing Activities Section
6. Determine the Ending Cash Balance
Statement of Changes in Equity

BUSINESS ENTITY EQUITY- prevailing assumption in accounting. It states that the
transactions of the business (as a separate entity) must be distinguished and differentiated from
the transactions of the owners.
TYPES OF BUSINESS ORGANIZATION
3 Major Types in the Philippines:
1. SOLE PROPRIETORSHIP- One person, General Manager
Business registration
Department of Trade and Industry
Local clearances: Barangay clearance and Mayor's permit
Bureau of Internal Revenue, Social Security System and Philippine Health
Insurance Corporation
Disadvantages:
1. Limited source of capital
2. Proprietor's unlimited liability
3. Business entity's limited existence
Common examples of sole proprietorship
1. Franchise enterprises like food stalls
2. Professional services including lawyers, physicians, dentists, and accountants
Statement of Changes in Equity for Sole Proprietorship

The elements of an SCE for a sole proprietorship include the beginning capital, additional
income, net income, and withdrawals.
3. PARTNERSHIP- a contract where two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention
of dividing the profits among themselves.
4. CORPORATION- Artificial being created by operation of law, having the
right of succession and the powers, attributes, and properties expressly
authorized by law or incident to its existence
Corporation as Artificial Beings

In the eyes of the law, a corporation is a being independent of its owners. A corporation
will have a name and a "birth" date (incorporation date just like a normal person. As an
artificial being, a corporation will have rights, powers and attributes.
Stocks and Stock Certificates

A corporation's unit of ownership is called a stock. The stock or unit of corporate ownership
is represented by a stock certificate
A stock certificate is a piece of paper representing the ownership of one stock of the
corporation.
Oftentimes, a stock certificate will have an amount on its face called par value. Par value is
synonymous to the amount of money printed in the Philippine bills.
ACCOUNTING FOR CASH AND CASH TRANSACTION

CASH- is one of the most important assets of a company. It can be used in the day to day
operations and can be used to pay the liabilities of the company
COMPONENTS OF CASH ITEMS

1. CASH ON HAND- (undeposited cash collections) These are paper bills and metal coins
issued by the Bangko Sentral ng Pilipinas of BSP.
2. CASH IN BANKS- (unrestricted as to withdrawal)
3. CASH IN WORKING FUNDS- -(change fund, dividend fund, payroll fund, petty cash
fund)
TYPES OF BANK ACCOUNTS
1. SAVING ACCOUNTS- the usual and regular savings account that earns interest. The
bank depositor is usually issued a passbook for over the counter withdrawals and
deposits.
-A basic type of account maintained in the bank that allows the account owner to deposit
money and entrust the money in the bank to keep it safe.
2. CHECKING ACCOUNTS- a type of account maintained in the bank and also allows the
owner to deposit and withdraw money, but also allows writing of check to use the money
deposited.
3. TIME DEPOSIT- a time deposit is an interest-bearing bank account that has a pre -set
date of maturity. The money must remain in the account for the fixed term in order to earn the
stated interest rate.
4. BANK ACCOUNTS IN FOREIGN CURRENCY-
These are cash items deposited in foreign countries and are denominated in different foreign
currencies. Following the monetary unit concept, all items in the financial statements should be
stated in one currency only
CHECK- an instrument that is written,dated and signed by the issuer that commands a bank to
pay a specific amount of money to the holder of a check.
PAYOR- person with writing the checks
PAYEE- Person holding the checks
TAXATION- is the process by which our government, through our lawmakers raises income
to pay its necessary expenses. Taxation is the inherent power of the state to demand
contributions for public purposes. Taxes are the enforced contributions from persons and
property levied by the lawmaking body of the state by virtue of its sovereignty for the
support of the government and all public needs.
Taxation in the Philippines
Bureau of Internal Revenue shall be under the supervision and control of the Department
of Finance and its powers therewith and duties shall comprehend the assessment and
collection of allnational internal revenue taxes, fees ans charges and the enforcement of all
forfeitures, penalties and fines connected therewith, including the execution of judgements in
all cases decided in its favor by the Court of Tax Appeals and the Ordinary courts. The
Bureau shall give effect to and administer the supervisory and police powers conferred to
itby the internal revenue code or other laws.
BIR Commissioner 2022- Lilia Catris Guillermo

BIR Chief Commissioner 2023- Romeo Lumagui
Income Taxation- Individual Income Tax and Corporate Income Tax
KINDS OF INCOME
1. Compensation Income - The income being received by employees working for different
companies. This is usually in the fom of salaries,bonuses and allowances.
2. Business or Professional Income - the income generated by entrepreneurs or by
different professionals like lawyers, doctors, and accountants (professional income)
3. Passive Income - income generated by different investments made by the individual For
purposes of compensation income, taken together will be called as Gross Income
Formula:
Gross Income - Allowable deductions = Taxable Income

Reviewer in Accounting 2

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Reviewer in Accounting 2

CASH FLOW STATEMENT

3. FINANCING ACTIVITIES- usually arise from changes in non-current liabilities and

Summary of the Decision

Preparing the Statement of Cash Flows

Statement of Changes in Equity

Statement of Changes in Equity for Sole Proprietorship

Corporation as Artificial Beings

Stocks and Stock Certificates

ACCOUNTING FOR CASH AND CASH TRANSACTION

COMPONENTS OF CASH ITEMS

BIR Commissioner 2022- Lilia Catris Guillermo

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