ABM FABM 2 Q1 Course Guide PDF

Moodle Course Guide
12
QUARTER 1
FUNDAMENTALS
OF
ACCOUNTANCY,
BUSINESS AND
MANAGEMENT 2
FABM 2 – Course Guide
For the Learners:

Great Day Learners! Welcome to your online course in Fundamentals of Accountancy,
Business and Management 2. You are challenged to learn beyond blindly memorizing
formulas and to be able to apply the concepts in real business transactions.
There are eight ( 8 ) lessons in this course:

Lesson 1 - Statement of Financial Position (SFP)
Lesson 2 - Statement of Comprehensive Income (SCI)
Lesson 3 – Statement of Changes in Equity (SCE)
Lesson 4 - Cash Flow Statement (CFS)
Lesson 5 - Analysis and Interpretation of Financial Statements
Lesson 6 - Basic Documents and Transactions related to Bank Deposits
Lesson 7 – Bank Reconciliation Statement
Lesson 8 - Income and Business Taxation
With the lessons above, may all of you have as much fun learning Accounting, to
obtain the knowledge and skills in the analysis of financial statements that will aid the
future entrepreneurs in making sound economic decisions, prepare of basic business
forms, business documents, bank transactions, simple bank reconciliation statement
and integration of information technology in accounting. This course aims to finish
Lessons 1 to 6 for the midterm; and lessons 7 and 8 for the final term of the semester.
About the Creator:

Hello Teachers and Students!
I am Teacher RICHPHER GAGALAC, the content creator of this subject. I am so excited to
meet you and to have you in this subject. We are going to have a fabulous year full of fun
and learning!
If you have questions and other concerns please don't hesitate to contact me to the
following:
Email: [email protected]
Facebook: Richpher Gagalac
Thank you and God bless! :)
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Things to remember!
Moodle Icons
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LESSON 1 – WEEK 1
STATEMENT OF FINANCIAL POSITION (SFP)
In this lesson you will demonstrate an understanding of account titles under the assets,
liabilities, and capital accounts of the Statement of Financial Position, namely, cash,
receivables, inventories, prepaid expenses, property, plant and equipment, payables,
accrued expenses, unearned income, long-term liabilities and capital that will equip
him / her in the preparation of the SFP using the report form and account form.
You shall be able to solve exercises and problems that require preparation of an SFP
for a single proprietorship with proper classification of accounts as current and
noncurrent using the report form and the account form.
We expect that you will demonstrate the following learning outcomes.

1. Identify the elements of the SFP and describe each of them (ABM_FABM12- Ia-b1)
2. Prepare an SFP using the report form and the account form with proper
classification of items as current and noncurrent (ABM_FABM12- Ia-b4)
A. INTRODUCTION
We begin our study of financial statements with the Statement of Financial Position
(SFP). It was previously referred to as Balance Sheet. The Balance Sheet follows
the basic accounting equation (Figure 1)
ASSETS = LIABILITIES + EQUITY
I – Learning Task 1.1 - Review
Do you still remember the following terms?

a. Accounting Equation
b. Assets
c. Liabilities
d. Equity
e. Single / sole Proprietorship Business
Explain and Write your answers here:

a.
b.
c.
d.
e.
4
B. DEVELOPMENT
ELEMENTS OF THE STATEMENT OF FINANCIAL POSITION
The SFP is a report based on the accounting equation (Assets = Liabilities + Equity).
Memory Aid for learners is ALE. It was called “Balance Sheet” because the sum of the
assets must be balance to the sum of the liabilities and equity. The SFP is ‘balance’
as a consequence of double entry accounting.
Assets - is a resource controlled by the enterprise as a result of past events and from
which future economic benefits are expected to flow to the enterprise.
Current Assets – Assets that can be realized (collected, sold, used up) one year after
year-end date. Examples include Cash, Accounts Receivable, Merchandise Inventory,
Prepaid Expense, etc.
Non-current Assets – Assets that cannot be realized (collected, sold, used up) one
year after year-end date. Examples include Property, Plant and Equipment
(equipment, furniture, building, land), Long Term investments, Intangible Assets etc.
Liabilities - are obligations that the company is required to pay.
Current Liabilities – Liabilities that fall due (paid, recognized as revenue) within one
year after yearend date. Examples include Notes Payable, Accounts Payable, Accrued
Expenses (example: Utilities Payable), Unearned Income, etc.
Non-current Liabilities – Liabilities that do not fall due (paid, recognized as revenue)
within one year after year-end date. Examples include Loans Payable, Mortgage
Payable, etc
Equity – is the residual interest after deducting the total liabilities from total assets
Learning Task 1.2 – True or False
Read each sentence carefully and determine whether the statement is TRUE or FALSE.
__________ 1. The SFP provides readers with the information as to the company’s
financial position as of a specified date.
__________ 2. Assets = Liabilities + Owner’s Equity is the governing equation of the SFP.
__________ 3. Assets is an element of the SFP that has a normal balance of credit.
__________ 4. Debit means to increase an account.
__________ 5. The normal balance of unearned income is debit.
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Differentiate the Report Form and Account Form
Report Form – A form of the SFP that shows asset accounts first and then liabilities and
owner’s equity accounts after. (Haddock, Price, & Farina, 2012) The balance sheet shown
earlier is in report form.
Account Form – A form of the 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 of an account.
(Haddock, Price, & Farina, 2012)
a. Emphasize that the two are only formats and will yield the same amount of total
assets, liabilities and equity
b. Emphasize that assets should always be equal to liabilities and equity
Sample Report Form – (Figure 2)
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Sample Account Form – (Figure 3)
Company Name
Statement of Financial Position
As of December 31, 20XX
ASSETS LIABILITIES
Current Assets Current Liabilites

Cash P 1000 Accounts Payable P 300
Accounts Receivable 500 Accrued Payable 200
Notes Receivable 700 Unearned Income 250
Inventories 600 Notes Payable 250
Prepaid Expenses 300 Total Current Liabilities 1,000
Total Current Assets P 3,100
Non Current Liabilities
Non Current Assets Long-term Payable P 1,200
Property, Plant and
P 2,000 Total Non-Current Liabilitites P 1,200
Equipment
Accumulated Depreciation (500)
Total Non-Current Assets P 1,500 EQUITY
Owner, Capital 2,400
TOTAL LIABILITIES AND
TOTAL ASSETS P 4,600
EQUITY P 4,600
Learning Task 1.3 – Answer the following problems by showing your

solutions and computations.
1. Learning is Fun Company had current assets amounting to Php 100,000. Noncurrent
assets for the year totaled Php 76,000. How much is the company’s total assets?
2. Happy Selling’s had the following accounts at year end: Cash-250,000, Accounts
Payable-70,000, Prepaid Expense-15,000. Compute for the company’s current assets.
3. Company’s Total Liabilities and Equity amounted to Php 285,000. Total noncurrent
assets ended at Php 85,000. Cash totaled Php50,000. Inventory amounted to
Php100,000. Assuming the company had no other assets, how much is Accounts
Receivable?
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C. ENGAGEMENT
Learning Task 1.4 – SFP Preparation
Prepare a SFP for ABM Company for this year ended December 31, both in account
and report form using the following information below:
ABM Capital P 21,950 Unearned Revenue P 1,000

Accounts Payable ? Accumulated Depreciation 2,000
Accrued Expense 450 Inventory 39,800
Building 100,000 Cash 32,800
Prepaid Rent 1,000
Note: You can also do this on your accounting or columnar papers.
Rubrics 10 9 8 6
Shows excellent Shows good Shows fair Shows poor
understanding of understanding of understanding of understanding of
Understandability accounting ideas and accounting ideas and accounting ideas and accounting ideas
processes processes processes and processes
Shows the fair or
Shows the good Shows the good
Shows the best different
presentation of the presentation of the
Accuracy presentation of the presentation of the
statements but with statements but there are
statements with no error. statements and with
minimal errors more errors
more errors
D. ASSIMILATION
I - Learning Task 1.5 – Assessment
Quiz 1 – Follow the example provided in the table below.
Account Titles Tell whether Current Account, Non

(ASSET, Current Account or Not
LIABILITY or Applicable
EQUITY)
Example: Cash Asset Current
A. Notes Receivable
B. ABM Capital
C. Accrued Salaries
D. Building
E. Prepaid Supplies
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Quiz 2 – Problem Solving. Show your solutions.
1. Happy Selling Company’s total liabilities amounted Php 10,000. Total equity had an
ending balance of Php 20,000. How much is total assets?
2. Happy Selling’s Accounts Receivable amounted to Php 500,000. Prepaid Expense and
Unearned Income totaled Php 30,000 and Php 10,000 respectively. Cash balance
amounted to Php 100,000 while Accounts Payable and Inventory totaled to Php 20,000 and
Php 10,000 respectively. How much is the company’s current assets? Current liabilities?
3. Total assets amounted to Php575,000. Total equity amounted to Php 250,000. Accounts
Payable amounted to Php 50,000 while Unearned Income totaled Php 85,000. Assuming
there are no other current liabilities, compute for the company’s noncurrent liabilities.
Learning Task 1.6 – Reflection
I learned that
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
I realized that
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
References
a. Fundamentals of Accountancy, Business and Management 2– Win Ballada

b. Fundamentals of Accountancy, Business and Management 2– Dani Rose Salazar
c. Teaching Guide for Senior High School FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 2 - Published by the Commission on Higher Education,
2016
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LESSON 2 – WEEK 2 & 3

STATEMENT OF FINANCIAL POSITION (SFP)
In this lesson you will demonstrate an understanding of the service income and operating
expenses of a service business as well as sales, contra sales, purchases, contra purchase
accounts, cost of goods sold and general administrative and selling expenses of a
merchandising business that will equip him / her in the preparation of the SCI for both service
and merchandising businesses
You shall be able to solve exercises and problems that require preparation of SCI for a service
business and a merchandising business
We expect that you will demonstrate the following learning outcomes

1. Identify the elements of the SCI and describe each of these items for a service business
and a merchandising business (ABM_FABM12-Ic-d-5)
2. prepare an SCI for a service business using the single-step approach (ABM_FABM12-Ic-
d-6)
3. prepare an SCI for a merchandising business using the multistep approach
(ABM_FABM12-Ic-d-7)
A. INTRODUCTION
Learning Task 2.1 - REVIEW

Getting Started: Do you remember the following account titles?
*Deferrals – (Prepayments and Unearned Revenue)
*Accruals – (Accrued Income and accrued liabilities)
*Depreciation
*Bad Debts
1) In your own idea, define the account titles above.

2) Give an example of each account title.
Learning Task 2.2 - MY INCOME

Instruction: Write your answer on a piece of paper
Prepare a Personal SCI:

a. Ask the learners to get a ¼ piece of paper (any paper will do if they don’t
have a ¼ sheet)
b. Ask them to write their monthly allowance (computed by daily allowance x
number of days in a month)
c. Ask them to write the amount they spend on food, transportation, phone
load, etc. (make it monthly to match their allowance)
d. Tell learners to deduct the amount they spend from the amount their
allowance
e. Associate allowance with revenue and spending with expense with the net
amount as net income
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1. What did you observe during the activity?

2. How do you feel when you are computing your allowances?
3. Do you have an income or loss?
B. DEVELOPMENT
STATEMENT OF COMPREHENSIVE INCOME
- This account represents the revenues earned by performing services to a client

or customers.
- Also known as the income statement. Contains the results of the company’s
operations for a specific period of time which is called net income if it is a net
positive result; while, a net loss if it is a net negative result. This can be prepared
for a month, a quarter or a year. (Haddock, Price, & Farina, 2012)
TEMPORARY ACCOUNTS – Also known as nominal accounts are the accounts

found under the SCI. They are called such because at the end of the accounting
period, balances under these accounts are transferred to the capital account, thus
having only temporary amounts and resulting to zero beginning balances at the
beginning of the following year.(Haddock, Price, & Farina, 2012). Examples of
temporary accounts include revenues, sales, utilities expense, supplies expense,
salaries expense, depreciation expense, interest expense among others.
Single-step – Called single-step because all revenues are listed down in one
section while all expenses are listed in another. Net income is computed using a
“single-step” which is:
Total Revenues minus Total Expenses. (Haddock, Price, & Farina, 2012).
Multi-step – Called multi-step because there are several steps needed in order to
arrive at the company’s net income. (Haddock, Price, & Farina, 2012).
a. Emphasize that the two are only formats and will yield the same amount of net
income/loss
b. Discuss that single-step SCI is more commonly used by service companies while
multi-step format is more commonly used by merchandising companies.
Sample of a multi-step SCI / SCI in a Merchandising Business
i. First part is sales

This is the total amount of revenue that the company was able to generate from
selling products.
ii. Second part compose of contra revenue – called contra because it is on the
opposite side of the sales account. The sales account is on the credit side while the
reductions to sales accounts are on the debit side. This is “contrary” to the normal
balance of the sales
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or revenue accounts. (Haddock, Price, & Farina, 2012).
ii.i. Sales returns – This account is debited in order to record returns of customers
or allowances for such returns.(Haddock, Price, & Farina, 2012) Sales returns occur
when customers return their products for reasons such as but not limited to defects
or change
of preference.
ii.ii.Sales discount – This is where discounts given to customers who pay early
are recorded. (Haddock, Price, & Farina, 2012) Also known as cash discount. This
is different from trade discounts which are given when customers buy in bulk. Sales
discount is awarded to customers who pay earlier or before the deadline.
iii. Sales less Sales returns and Sales discount is Net Sales
iv. Third part is Cost of Goods Sold – This account represents the actual cost of
merchandise
that the company was able to sell during the year. (Haddock, Price, & Farina, 2012)
iv.i. Beginning inventory – This is the amount of inventory at the beginning of the
accounting
period. This is also the amount of ending inventory from the previous period.
iv.ii.Net Cost of Purchases = Purchases + Freight In
iv.ii.i.Net Purchases = Purchases – (Purchase discount and purchase returns)
iv.ii.i.i.Purchases – amount of goods bought during the current accounting period.
iv.ii.i.ii.Contra Purchases –An account that is credited being “contrary” to the

normal balance of Purchases account.
iv.ii.i.ii.i.Purchase discount – Account used to record early payments by the

company to the suppliers of merchandise. (Haddock, Price, & Farina, 2012)
This is how buyers see a sales discount given to them by a supplier.
iv.ii.i.ii.ii.Purchase returns – Account used to record merchandise returned by the

company to their suppliers. (Haddock, Price, & Farina,2012) This is how
buyers see a sales return recorded by their supplier
iv.ii.ii.Freight In – This account is used to record transportation costs of

merchandise
purchased by the company. (Haddock, Price, & Farina, 2012) Called freight in
because this is recorded when goods are transported into the company.
iv.iii. Add Beginning inventory and Net cost of Purchases to get Cost of Goods
Available for
Sale
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iv.iv.Ending inventory – amount if inventory presented in the Statement of

Financial Position.
Total cost of inventory unsold at the end of the accounting cycle.
v. Sales less Cost of Goods Sold is Gross Profit
vi. Fourth Part is General and Administrative Expenses –These expenses are
not directly
related to the merchandising function of the company but are necessary for the
business to
operate effectively. (Haddock, Price, & Farina, 2012)
vii. Fifth Part is Selling Expenses – These expenses are those that are directly
related to the
main purpose of a merchandising business: the sale and delivery of merchandise.
This does
not include cost of goods sold and contra revenue accounts. (Haddock, Price, &
Farina,
2012)
viii.Gross Profit less General and Administrative Expenses less Selling

Expenses is Net Income for a positive result while Net Loss for a negative result
Learning Task 2.3 – Classification

Tell whether the following transactions below is part of the general and
administrative expenses or selling expenses.
Nena had the following expense accounts for the year ended December 31, 2020:
A. Salaries of admin personnel
B. Salaries of janitors
C. Salaries of sales agents
D. Utilities of home office
E. Rent of office building
F. Depreciation of office equipment
G. Depreciation of delivery van
H. Advertising
I. Cost of merchandise sold during the year
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B.II - DEVELOPMENT
STATEMENT OF COMPREHENSIVE INCOME
- This account represents the revenues earned from by performing services to a client or
customers.
- Also known as the income statement. Contains the results of the company’s operations for
a specific period of time which is called net income if it is a net positive result while a net loss
if it is a net negative result. This can be prepared for a month, a quarter or a year. (Haddock,
Price, & Farina, 2012)
TEMPORARY ACCOUNTS – Also known as nominal accounts are the accounts found under
the SCI. They are called such because at the end of the accounting period, balances under
these accounts are transferred to the capital account, thus having only temporary amounts and
resulting to zero beginning balances at the beginning of the following year.(Haddock, Price, &
Farina, 2012)Examples of temporary accounts include revenues, sales, utilities expense,
supplies expense, salaries expense, depreciation expense, interest expense among others.
Figure 2.1
Single-step – Called single-step because all revenues are listed down in one section while
all expenses are listed in another. Net income is computed using a “single-step” which is
Total Revenues minus Total Expenses. (Haddock, Price, & Farina, 2012)
Multi-step – Called multi-step because there are several steps needed in order to arrive
at the company’s net income. (Haddock, Price, & Farina, 2012) a. Emphasize that the two
are only formats and will yield the same amount of net income/loss b. Discuss that single-
step SCI is more commonly used by service companies while multi-step format is more
commonly used by merchandising companies.
There are two formats for the SCI. The Single step and Multi-step.
SINGLES-STEP - These are closely related to Nature of expense method. This method is
simple to apply in smaller enterprises because no allocation of operating expenses
between classifications is necessary.
SINGLE-STEP STATEMENT OF COMPREHENSIVE INCOME
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ONE PIECE COMPANY

Statement of Comprehensive income
For the year ended December 31, 20XX
Service Revenue P XXX

Rent Revenue XXX
Interest Income XXX
Increase in inventory* XXX
Total Revenues PXXX
Net purchases P (YYY)
Depreciation expense (YYY)
Utilities Expense (YYY)
Salaries Expense (YYY)
Interest Expense (YYY)
Insurance Expense (YYY)
Supplies Expense (YYY)
Total Expenses P (YYY)
NET INCOME (NET LOSS) P XXX (YYY)
Figure 2.2
‘* Increase in Inventory = Ending Inventory – Beginning Inventory
MULTI-STEP – also referred as function of expense method or cost of sales method,

classifies expenses according to their function as part of cost of sales, selling, general
and administrative, other operating activities.
MULTI-STEP STATEMENT OF COMPREHENSIVE INCOME
XYZ COMPANY
Statement of Comprehensive income
For the year ended December 31, 20XX
Gross Sales P A
Sales returns and allowances (B)
Sales discounts (C)
Net sales D = A – (B) – (C)
Cost of Goods sold (E)
Gross Profit F = D – (E)
Operating Expenses:
General and administrative expenses G
Selling Expenses H I =G+H
Income from operations J = F- I
Interest Income K
Interest Expense (L)
NET INCOME (NET LOSS) M = J + K – (L)
Figure 2.3
As you can see in multi-step SCI expenses are classified into three categories: cost of
sales, general and administrative expenses, and selling expenses. Expenses are classified
depending on their functions. Example of this are the salaries. Salaries of managers,
secretary or those working in office, they are reported under general and administrative
expenses, while salaries of salesman, production workers, or those working under sales
and production are reported as selling expenses. Some expenses like depreciation,
utilities, insurance and others can be categorize as either general and administrative or
selling expenses, depending on their functions on the business operations.
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NORMAL BALANCES
Memory Aid:
EXPENSE ACCOUNT REVENUE ACCOUNT
+
EXPENSE ACCOUNT
- - REVENUE ACCOUNT
+
1/1 P 2,000 1/15 P 500 1/1 P 500 1/15 P 2000
Ending Balance P 1,500 Ending Balance P1,500
Figure 2.4
COMPREHENSIVE ILLUSTRATIVE EXAMPLE:
On March 1, 2017, Ms. Robin Santos opened a store that sells graham brownies. Robin
wanted to know the results of operation of her store for the year 2017. Robin knew that
you were studying accounting, so she asked for your help. The following information were
taken from the records of Ms. Robin:
Account titles Balance Debit Credit

Sales P315,050
Sales return 3,475
Sales discount 4,525
Purchases 122,030
Purchase return and allowances 1,750
Purchase discount 2,300
Freight In 1,200
Utilities Expense 5,000
Salaries Expense 21,000
Rent Expense 10,000
Depreciation 2,500
Additional information:
a. Physical Inventory reported at the end of the year was P 53,250.
b. Depreciation expenses were: 1,500 for equipment used in baking. And the
remaining amount is for equipment used in the office.
c. Allocate 25% of the utilities to general and administrative expenses.
d. Salaries of the cashier is 1/3 of the total salaries reported.
e. Rent expense were allocated equally to general and administrative and selling
expenses.
Requirements:
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1. Indicate the normal balances of the accounts above by placing the amount as
debit or credit.
2. Prepare for the single-step SCI.
3. Prepare for the multi-step SCI.
Solutions:
Account titles Balance Debit Credit

Sales ₱ 315,050 ₱ 315,050
Sales return 3,475 3,475
Sales discount 4,525 4,525
Purchases 122,030 122,030
Purchase return and allowances 1,750 1,750
Purchase discount 2,300 2,300
Freight In 1,200 1,200
Utilities Expense 5,000 5,000
Salaries Expense 21,000 21,000
Rent Expense 10,000 10,000
Depreciation 2,500 2,500
2. Single-Step SCI
Robin Graham Brownies

Statement of Comprehensive Income
For the year ended December 31, 2017
Account titles Balance

Net Sales ₱ 307,050
Increase in Inventory 53,250 P 360,300
Less: Expenses
Net Purchases 119,180
Utilities Expense 5,000
Salaries Expense 21,000
Rent Expense 10,000
Depreciation 2,500 157,680
Net Income ₱ 202,620
3. Multi-Step SCI
Robin Graham Brownies

Statement of Comprehensive Income
For the year ended December 31, 2017

Cost of Sales (65,930)
Gross Profit 241,120

Less: Operating Expenses
General and administrative 14,250
Selling Expenses 24,250 38,500
Net Income ₱ 202,620
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Net Sales
Sales ₱ 315,050
Sales return (3,475)
Sales discount (4,525)
Cost of Sales
Beginning Inventory ₱ -
Purchases 122,030
Freight In 1,200
Purchase return and allowances (1,750)
Purchase discount (2,300)
Ending Inventory (53,250)
Cost of Sales ₱ 65,930
Operating Expenses
Gen. /
Account Titles balance Admin. Selling
Utilities Expense 5,000 1,250 3,750
Salaries Expense 21,000 7,000 14,000
Rent Expense 10,000 5,000 5,000
Depreciation 2,500 1,000 1,500
Total Expenses ₱ 38,500 ₱ 14,250 ₱ 24,250
Learning Task 2.4 - SCI Preparation

Prepare the nature of expense SCI for the following accounts below:
Account titles Balance Account titles Balance

Sales return P 5,555 Sales P 764,985
Sales discount 13,300 Purchases 469,995
Depreciation Expense 25,000 Purchase return and allowances 5,465
Amortization Expense 10,500 Gain on sale of PPE 5,500
Advertising Expense 35,000 Interest Income 4,256
Purchase discount 8,200 Interest Expense 4,724
Freight In 9,080 Salaries Expense 80,000
Utilities Expense 55,000 Rent Expense 60,000
Increase in Inventory 35,875 Bad Debts 4% of net sales
Share, discuss and explain your answer in this forum.
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Learning Task 2.5 - Problem Solving (optional)

Problem Solving - Show your solutions. Discuss or explain your answers
in the FORUM.
1. During October, a sari-sari store had the following transactions involving revenue
and expenses.
Paid Php1,200 for rent
Provided services for Php2,750 in cash
Paid Php250 for telephone service
Provided services for Php1,900 on credit
Paid salaries of Php1,675 to employees
Paid Php350 for office cleaning service
Did the firm earn a net income or incur a net loss for the period? What was the
amount?
2. Happy Selling’s beginning inventory amounted to 250,000. Net purchases
amounted to 70,000. Freight In totaled 15,000. Compute for the company’s cost of
goods available for sale.
3. Company’s Cost of Goods Sold amounted to Php 285,000. Net cost of purchases
totaled Php 85,000. Beginning inventory amounted to Php 250,000. Sales amounted
to Php 500,000. Compute for the company’s Ending Inventory.
C. ENGAGEMENT
Learning Task 2.6 - Preparing SCI
The following information are available in the book of ABM Company for the calendar
year 2020.
Account titles Balance Account titles Balance

Sales return P 5,555 Sales P 764,985
Sales discount 13,300 Purchases 469,995
Depreciation Expense 25,000 Purchase return and allowances 5,465
Amortization Expense 10,500 Gain on sale of PPE 5,500
Advertising Expense 35,000 Interest Income 4,256
Purchase discount 8,200 Interest Expense 4,724
Freight In 9,080 Salaries Expense 80,000
Utilities Expense 55,000 Rent Expense 60,000
Increase in Inventory 35,875 Bad Debts 4% of net sales
Additional information:
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a) Depreciation of P 5,000 is for computer equipment used in the

administrative office.
b) Amortization is attributed to office leasehold improvements.
c) 30% of salaries are attributed to sales personnel.
d) Utilities for the store represents 35% of utilities expense.
e) Rent for the office space is P20,000
Requirements: Determine the following:

1) Net sales
2) Net Purchases
3) Cost of Goods Sold
4) Bad Debts Expense
5) Function of Step SCI
ALWAYS DO YOUR BEST! GOOD LUCK!
Learning Task 2.7 - Mind Map
Make a mind map of SCI of a Service Business or a Merchandising Business.
You can get some idea in an example as shown in the figure below.
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D. ASSIMILATION
Learning Task 2.8 - Quiz
Prepare a single-step Statement of Comprehensive Income using the

following:
During December, a barber shop had the following transactions involving revenue
and expenses. Did the firm earn a net income or incur a net loss for the period? What
was the amount?
Paid Php4,000 for rent

Provided services for Php21,750 in cash
Paid Php758 for telephone service
Provided services for Php2,750 on credit
Paid salaries of Php12,500 to employees
Paid Php550 for office cleaning services
Express yourself by answering the questions below.
What I have learned?
What I have realized?
Share your answer in this forum.
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References

b. Fundamentals of Accountancy, Business and Management 2– Dani Rose
Salazar
c. Teaching Guide for Senior High School FUNDAMENTALS OF
ACCOUNTANCY, BUSINESS, AND MANAGEMENT 2 - Published by the
Commission on Higher Education, 2016
22
LESSON 3 – WEEK 4
STATEMENT OF CHANGES IN EQUITY (SCI)
In this topic you will demonstrate your understanding of the forms of business organization,
namely, single proprietorship, partnership, and corporation, and the structure of a SCE of a
single proprietorship that will equip him / her in the preparation of the said financial report.
You shall be able to solve exercises and problems that require preparation of an SCE for a
single proprietorship

1. Prepare an SCE for a single proprietorship. (ABM_FABM12-Ie-9)
A. INTRODUCTION
I – Learning Task 3.1

Before we proceed to our lesson, please answer the following questions:
Do you still remember the following terms:

a. Revenues b. Expenses c. Income d. Assets e. Liabilities f. Equity
1. Differentiate one from the others.

2. Give specific account titles for each of the terms above and give examples of
service businesses and merchandising businesses
II – Learning Task 3.2
Compute your personal equity.

a. Write your assets (anything you own)
b. Write all your liabilities (friends, family members, parents - tuition)
c. Then deduct your liabilities from your assets with the net amount computed
designated as equity
Questions:
1. What did you observe about the activity?
2. What is the result after deducting the assets from liabilities?
3. Recall the SALN template, do you know what is networth?
B. DEVELOPMENT
STATEMENT OF CHANGES IN EQUITY

SINGLE/SOLE PROPRIETORSHIP –An entity whose assets, liabilities, income and
expenses are centered or owned by only one person (Haddock, Price, & Farina,
2012).
23
PARTNERSHIP – An entity whose assets, liabilities, income and expenses are

centered or owned by two or more persons (Haddock, Price, & Farina, 2012).
CORPORATION – An entity whose assets, liabilities, income and expenses are

centered or owned by itself being a legally separate entity from its owners. Owners
are called shareholders or stockholders of the company(Haddock, Price, & Farina,
2012).
For Sole Proprietorship – (Figure 1)
For Partnership – (Figure 2)
24
The Statement of Changes in Partners’ Equity is used by a partnerships instead of the

Statement of Changes in Owner’s Equity. The differences between the two are as follows:
a. Title – instead of owner’s, partners’ is used to denote that this is a partnership
b. There are two or more owners in a partnership thus, the changes in the capital account of
each partner is presented
c. The net income is divided between partners (not always equal. Based on the agreement.
Example: 60:40, 40:60, etc.)
For Corporation – (Figure 3)
Learning Task 3.3 – Short Quiz - Answer the following questions:
1. Which form of business organization puts the least risk on its owners?
2. Which form of business organization is owned by only one person?
3. Increases in owner’s equity without additional investment
4. Decreases to owner’s equity apart from net effect of revenues and expenses
5. Beginning owner’s equity amounted to P 300,000. Net loss for the year totaled
P 45,000. No additional investments and withdrawals for the period. Compute for total
increase in equity for the year.
25
6. Ending owner’s equity amounted to P70,000. Additional investments during the year
amounted to P30,000. Withdrawals totaled P50,000. Compute for the company’s net
income for the year assuming beginning equity is P10,000.
C. ENGAGEMENT
Learning Task 3.4 – Problem Solving
The income and expense accounts of Angel B. Montibon Real Estate Agency, which are
listed below, represent the activities for the month of August 2020:

Advertising Expense ₱ 16,300.00
Commission Expense 47,500.00
Office Supplies Expense 2,700.00
Real Estate Revenues 125,000.00
Rent Expense 4,800.00
Salaries Expense 26,400.00
Utilities Expense 4,200.00
Depreciation Expense 500.00
Required:
1. Prepared an income statement for the month ended August 31, 2020
2. On August 1, 2020, Ms. Montibon has a P12,300 capital balance. During the month,
she invested an additional P16,000 in the business and withdrew P25,000. Prepare a
statement of changes in equity for the month ended August 31, 2020.
Rubrics 10 9 8 6
Knowledge accounting ideas accounting ideas and accounting ideas and accounting ideas
and processes processes processes and processes
Shows the fair or

Shows the best Shows the good Shows the good
different
presentation of the presentation of the presentation of the
Accuracy statements with no statements but with statements but there
presentation of the
statements and with
error. minimal errors are more errors
more errors
26
D. ASSIMILATION
Learning Task 3.5 – Problem Solving

Solve the following problems and show your solutions.
1. On February 15, 2020, Evelyn Ferrer opened Cookie Fantasy Bakeshop.

She Invested
P75,000 to purchase an oven and bakery supplies. The business generated a
net income of P37,545 in 2020. Moreover, Evelyn used P15,000 from the
account of Cookie Fantasy to pay the electricity and phone bills of her house.
2. Evelyn invested an additional P13,400 and P17,650 on March 16, 2021 and
August 19, 2021, respectively. Net income for 2021 was reported at
P48,550. Evelyn’s Drawings account has a balance of P20,000 on
December 31, 2021.
Required: Prepare Cookie Fantasy Bakeshop’s Statement of Changes in Equity

for the year ended December 31, 2020 and December 31, 2021.
Share your answer in the FORUM.
References
A. Fundamentals of Accountancy, Business and Management 2– Win Ballada

B. Fundamentals of Accountancy, Business and Management 2– Dani Rose Salazar
C. Teaching Guide for Senior High School FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS, AND MANAGEMENT 2 - Published by the Commission on Higher
Education, 2016
27
LESSON 4 – WEEK 5
STATEMENT OF CASH FLOW (SCF)
In this lesson you will demonstrate your understanding of the components and the structure
of a CFS that will equip you in the preparation of the said financial report.
You shall be able to solve exercises and problems that require preparation of a SCF.

1. Discuss the components and structures of a SCF – (ABM_FABM12-If10)
2. prepare a SCF – (ABM_FABM12-If11)
A. INTRODUCTION
I – Learning Task 4.1 - Review

Before we proceed to our lesson, please define the following terms below:
A. Accrual
B. Depreciation
II – Learning Task 4.2 – My Personal CFS
A. Write your monthly allowance (computed by daily allowance x number of days in a

month) and any liabilities that you got from classmates, friends, family members
B. Write the amount you spend on food, transportation, etc. (make it monthly to
match their allowance)
C. Deduct the amount they spend from the amount their allowance
D. Associate your allowance with inflows and spending with outflows
1) What did you feel or observe while doing the activity?

2) What are cash inflows?
3) What are cash outflows?
B. DEVELOPMENT
CASH FLOW STATEMENT – Provides an analysis of inflows and/or outflows of cash

from/to operating, investing and financing activities (Deloitte Global Services Limited,
2015). This statement shows cash transactions only compared to the SCI which follows
the accrual principle.
Importance: The CFS provides the net change in the cash balance of a company for a
period. This helps owners see if their revenues are actually translated to cash collections
or if they have enough cash inflows in order to pay any maturing liabilities
28
The SCF reports cash flow transactions during the year classified by operating, investing,
and financing activities of the business.
Operating activities are related to the main revenue-producing activities of the business.
Cash transactions related to a acquisition and disposal of long-term assets such as
property, plant and equipments, and intangible assets are classified as investing
activities. Finally, cash transactions with equity owners and creditors are reported as
financing activities.
Cash flows from operating activities are primarily derived from the main revenue-
producing activities of the business. This means that the transactions reported in this
section represents the cash components of the events that enter into the determination of
net income in the SCI.
The following are example of cash flow transactions reported under operating activities:
 a. Cash received from customers (cash receipts from sale of goods and rendering of
services)
 b. Cash received from fees, commissions, and other income
 c. Cash payments to suppliers
 d. Cash payments to employees
 e. Cash payments for other operating expenses
 f. Interest payments
Cash flows from investing activities is the second section of the SCF. Reported within
this classification are cash used for the acquisition of property, plant and equipment,
intangible assets and other long-term assets as well as cash proceeds from the disposals
of such long-term assets. Cash flows from investing activities hints on the company’s
ability to generate cash in the future. A negative cash flows from investing activities implies
that the company used cash to acquire long-term assets intended to generate cash and
revenue in the future. On the other hand, a positive cash flow from investing activities may
indicate that the company is divesting or downsizing.
The following are examples of cash flow transactions reported under investing activities:
 a. Cash payments to acquire property, plant and equipment, intangibles and other
long-term assets.
 b. Cash receipts from sale of property, plant and equipment, intangibles and other
long-term assets.
 c. Cash loans made to other parties (long-term note receivable).
 d. Cash collection on long-term note receivable.
The last section of the SCF is cash flow from financing activities. This section reports
cash received and cash paid to equity owners and long-term creditors. Below are
examples of cash flow transactions reported under financing activities.
Below are examples of cash flow transactions reported under financing activities.
 a. Cash received from issuing common shares (or capital contribution from owners)
 b. Cash received from issuing notes or getting a long-term loan from a bank.
 c. Cash dividends distributed to shareholders.
 d. Cash withdrawals of owners.
 e. Cash payment for principal of long-term loan.
Below is an example of Cash Flow Statement.
29
Learning Task 4.3 – INFLOWS AND OUTFLOWS
Think of a CASH business transactions and write your answers on the table
provided below:
CASH FLOW TRANSACTIONS

INFLOWS OUTFLOWS
Example Example
1. Received cash from customers 1. Purchased goods for cash
2. 2.
3. 3.
4. 4.
5. 5.
30
Answer the following questions:
1. Gain on sale of property and equipment is part of what activity in the CFS?
2. Changes in long term liabilities is part of what activity in the CFS?
3. Net income is part of which Approach in preparing the CFS?
4. The company presented the following in order to aid the accountant in preparing the CFS:
a. Net income: P200,000 b. Depreciation expense : P 25,000 c. Gain on sale of property and
equipment: P100,000 d. Decrease in trade and other receivables: P 70,000 e. Purchase of
property and equipment: P200,000 f. Payment of loan from bank: P150,000. Compute for
the cash generated/used in financing activities
Cash payment to suppliers ₱ 257,500.00
Payment for income taxes 47,000.00

C. ENGAGEMENT
Cash receipts from customers 502,500.00
Proceeds from bank loans 100,000.00

Learning Task 4.4 – Preparing CFS
Payment to owners 68,000.00
Below are the cash transactions of ABM Trading for December 31, 2020
Cash investments from owners 75,000.00
Cash payment to suppliers ₱ 257,500.00 Dividends received 27,500.00
Payment for income taxes 47,000.00 Payment for acquistion of Equipment 31,250.00
Cash receipts from customers 502,500.00 Cash receipts from sale of equipment 15,750.00
Proceeds from bank loans 100,000.00 Payment of interest 15,250.00
Payment to owners 68,000.00 Payment of Salaries 103,750.00
Cash investments from owners 75,000.00 Cash balance - January 1, 2020 107,500.00
Dividends received 27,500.00

Instructions:
Prepare
Payment for the
acquistion of statement
Equipment of cash flows using indirect method. After which, answer the
31,250.00
following questions and write it on every line provided below: (1 point in each item)
Cash receipts from sale of equipment 15,750.00
1. How much is the cash flow from operating activities? ___________
Payment
2. ofHow
interest
much is the cash flow from 15,250.00
investing activities? ___________
3. How much
Payment of Salaries
is the cash flow from financing
103,750.00
activities? ___________
4. How much is the net increase or decrease in cash for the year? ___________
5. How
Cash balance much 1,
- January is 2020
the cash as of 107,500.00
December 31, 2015? ___________
Rubrics 10 9 8 6
Knowledge
accounting ideas and accounting ideas and accounting ideas and accounting ideas and
processes processes processes processes
Shows the complete Shows the incomplete Show some accounting has a little accounting
Completeness accounting information, accounting information, information, computations information, computations
computations and reports computations or reports or reports. or reports.
31
D. ASSIMILATION
I - Learning Task 4.5 - Quiz
Problem: ABM Company
The cash account of ABM Company has a beginning balance of P129,937.50. Its
year-end balance stands at P254,925.00. The table below show the summarized
transactions from the cash account of ABM Company.
Cash received from Customers ₱ 725,175.00
Payments to suppliers 300,547.50
Payments for other operating expenses 58,850.00
Salaries Paid 19,992.50
Purchase of Equipment 253,000.00
Sale of Delivery equipment (motorcycle) 6,875.00
Proceeds from sale of computer equipment 42,762.50
Withdrawals of owners 229,350.00
Proceeds from bank loans 82,500.00
Contributions of owners 137,500.00
Interest Paid 8,085.00
1. Prepare the operating section of ABM’s Statement of Cash Flow.
2. Prepare the investing section of ABM’s Statement of Cash Flow.
3. Prepare the financing section of ABM’s Statement of Cash Flow.
4. What is the amount of net in increase (decrease) in cash? (Bonus - 2 pts)
Share your answer in the FORUM.
32
References
A. Fundamentals of Accountancy, Business and Management 2– Win Ballada

B. Fundamentals of Accountancy, Business and Management 2– Dani Rose Salazar
C. Teaching Guide for Senior High School FUNDAMENTALS OF ACCOUNTANCY,
Education, 2016
33
LESSON 5: WEEK 6
ANALYSIS AND INTERPRETATION OF FINANCIAL

STATEMENT – PART 1
In this topic you demonstrate an understanding of the methods or tools of analysis of financial
statements to include horizontal analysis, vertical analysis, and financial ratios to test the level
of liquidity, solvency, profitability, and stability of the business
You shall be able to solve exercises and problems that require computation and interpretation
using horizontal analysis, vertical analysis, and various financial ratios
Using the downloaded sample financial statements, he / she performs horizontal and vertical
analysis, computes various financial ratios and interprets the level of liquidity, solvency,
stability, and profitability of the business.

1. perform vertical and horizontal analyses of financial statements of a single proprietorship
(ABM_FABM12-Ig-h13)
A. INTRODUCTION
Learning Task 5.1 – Let’s have a review!

Give the meaning of the following abbreviations below and define each term.
1. SFP________________________________________________________________
___________________________________________________________________
2. SCI________________________________________________________________
______________________________________________________________
3. SCE________________________________________________________________
___________________________________________________________________
4. SCF________________________________________________________________
___________________________________________________________________
Learning Task 5.2 - Eleven Annual Report 2019
Please read and observe all the figures and accounting information on
Consolidated Financial Statements section of the “7-Eleven Annual
Report 2019”.
https://r4a-
1.lms.deped.gov.ph/moodle/pluginfile.php/1063007/mod_resource/content/2/711AR2019.pdf
34
After you have read the statements, please answer the following questions:
1. How much is the total assets of the company in 2019?
Answer: __________________________________________________
2. Did the assets increase from 2018 to 2019? By what amount?

_________________
_________________________________________
3. How much liabilities are due to be paid in 2018? _____________________

4. How much is the profit of 7-11 in 2018? 2019?
Did the income increase(decrease) in one year? By how much?
______________________________________________________________
______________________________________________________________
5. Assume that you are the owner of Company, and you have these reports,
what do you want to ask in your accountant? Or what do you what to know in
your financial statements?
______________________________________________________________
______________________________________________________________
______________________________________________________________
B. DEVELOPMENT
Financial statement (FS) analysisis 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 (White et.al 1998).
There are three kinds of FS analysis techniques:

- Horizontal analysis
- Vertical analysis Financial ratios
- Financial ratios
Horizontal analysis
■ is also known as trend analysis. It is a techniques that involves the
comparison of a line item (account) over a number of periods.
Horizontal Analysis uses financial statements of two or more periods.
Horizontal analysis may be performed on all financial statements, specifically
for both the SFP and SCI. Changes can be expressed in monetary value
(peso) or percentages computed by using the following formulas:
■ Peso change = Balance of Current Year – Balance of Prior Year

■ Percentage change = Peso Change / Balance of Prior Year
35
✓This is evaluated as follows: Sales increased by P75,000. This represents growth

of 42.86% from 2013 levels.
Vertical analysis
It is the preparation of common-size financial statements. It is a technique that

expresses each financial statement line item as a percentage of a base amount. For
the SFP, the base amount used is total assets. On the other hand, sales or net sales
is used as base amount for the SCI.
A common-size SFP shows each line accounts as a percentage of total assets. From
the asset side, we can infer the composition of assets. On the other side, we can
determine the company’s financing mix – the percentage of asset financed by liability
and equity.
A common-size SCI expresses each line as a percentage of sales. This way, we can
see how sales is “used up” by various expenses. Effectively, net income is the
portion of sales not eaten up by expenses.
Example:
✓The above may be evaluated as follows: The largest component of asset is

Equipment at 39.3%. Cash is the smallest component at 14%. On the other hand,
50% of assets are financed by debt and the other half is financed by equity.
36
✓The above may be evaluated as follows:

• The cost of goods sold is 44% of sales. The company has a gross profit rate of
55.5%.
• Operating expenses is 22% of sales.
• The company earns income of P 0.33 for every peso of sales. Gross profit generated
for every peso of sale is P 0.555
The use of common-size financial statements allows the comparison of two companies of
different sizes. This is because the SFP and SCI comparative information are standardized
as a percentage of assets and sales, respectively.
Learning Task 5.3 – Analyzing the Financial Statements
Write your answers in the right corner of each amount. Answers only no need to show the
computations.
1. Prepare a horizontal analysis

2. Prepare vertical analysis
37
Questions:
1. What can you say about the activity?
2. What hindered you to do the activity?
3. How did you do the horizontal analysis? What about vertical analysis?
C. ENGAGEMENT
Learning Task 5.4 – Vertical or Horizontal
ABM COMPANY
Comparative Statement of Comprehensive Income
For the period ended 12/31/2020 12/31/2021
Gross Sales ₱ 1,652,355 ₱ 1,817,591
Sales Discount (15,471) (16,245)
Sales Returns (4,181) (4,391)
Net Sales ₱ 1,632,703 ₱ 1,796,955
Less: Cost of Goods Sold (565,696) (599,638)
Gross Profit ₱ 1,067,007 ₱ 1,197,317
Less: Expenses
General and Administrative
Office Salaries 216,000 226,800
Mandatory Contributions 49,560 52,038
Depreciation - Office Furnitures and Fixtures 4,200 4,200
Depreciation - Office Equipment 5,000 5,000
Utilities - Office 27,527 28,903
Office Supplies 7,057 7,271
Rent Expense 180,000 180,000
Selling Expenses
Sales Salaries 276,000 289,795
Depreciation - Store Furnitures and Fixtures 4,200 4,200
Depreciation - Store Equipment 5,000 5,000
Utilities - Sales 27,527 28,903
Advertising 8,000 8,456
Store Supplies 7,683 7,914
Total Expenses ₱ 892,314 ₱ 926,767
Net Income ₱ 174,693 ₱ 270,550
38
ABM COMPANY
STATEMENT OF FINANCIAL POSITION
As of 12/31/2020 12/31/2021
ASSETS
Current Assets
Cash ₱ 46,857 ₱ 81,250
Lease Deposits 20,000 20,000
Accounts Receivable 21,257 43,750
Merchandise Inventory 15,751 21,324
Total Current Assets ₱ 103,865 ₱ 166,324
Non-Current Assents
FURNITURE & FIXTURES 42,000 42,000
Furniture and Fixtures - Accumulated Depreciation (8,400) (16,800)
MACHINERIES AND EQUIPMENT 50,000 50,000
MACHINERIES AND EQUIPMENT - Accumulated Depreciation (10,000) (20,000)
Total Non-Current Assets 73,600 55,200
TOTAL ASSETS ₱ 177,465 ₱ 221,524
LIABILITIES AND OWNER'S EQUITY
Current Liabilities
Accounts Payable ₱ 9,080 ₱ 12,175
Salaries Payable 31,000 32,550
Utilitites Payable 4,982 5,675
SSS Contributions Payable 6,120 6,421
Pag-Ibig Contributions Payable 1,900 2,021
PhilHealth Contributions Payable 1,625 1,723
Income Tax Payable 7,134 7,562
TOTAL LIABILITIES ₱ 61,841 ₱ 68,127
ABM Capital 115,624 153,397
Total Equity ₱ 115,624 ₱ 153,397
TOTAL LIABILITIES AND OWNER'S EQUITY ₱ 177,465 ₱ 221,524
Use the figures above and choose one (1) in any of the following tasks:
1) Horizontal Analysis of the Consolidated Statement of Financial Position
2) Horizontal Analysis of the Consolidated Statement of Comprehensive Income
3) Vertical Analysis of the Consolidated Statement of Financial Position 2020
4) Vertical Analysis of the Consolidated Statement of Financial Position 2021
Rubrics 10 9 8 6

Knowledge accounting ideas and accounting ideas and accounting ideas and accounting ideas and
Shows the incomplete Show some

has a little accounting
Shows the complete accounting accounting
information,
Completeness accounting information, information, information,
computations, or
computations, and reports computations, or computations, or
reports.
reports reports.
39
D. ASSIMILATION
I - Learning Task 5.5 – Problem Solving: Show your solutions.
Instruction: Compute for the following percentages using horizontal and vertical
analysis.
Your answers are guided per item as provided in the table below.
ABM Company
Comparative Statement of Financial Position
2020 % 2019 %
Current Assets ₱ 201,535.00 1) ₱ 225,125.00 6)
Equipment, Net 1,450,750.00 2) 1,300,500.00 7)
Total Assets ₱ 1,652,285.00 ₱ 1,525,625.00
Current Liabilities ₱ 125,000.00 3) ₱ 143,500.00 8)

Long-term Liabilities 675,600.00 4) 575,800.00 9)
Owner's Capital 851,685.00 5) 806,325.00 10)
Total Liabilities and Equity ₱ 1,652,285.00 ₱ 1,525,625.00
For Questions 1 to 5 – use vertical analysis method

For Questions 6 to 10 – use horizontal analysis method
I learned that
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
I realized that
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
References

Education, 2016
d. Link: https://www.7-eleven.com.ph/corporate/company-disclosures/sec-filings/annual-
reports/
40
LESSON 6: WEEK 7
ANALYSIS AND INTERPRETATION OF FINANCIAL

STATEMENT – PART 2
In this topic you demonstrate an understanding of the methods or tools of analysis of financial
statements to include horizontal analysis, vertical analysis, and financial ratios to test the level
of liquidity, solvency, profitability, and stability of the business
You shall be able to solve exercises and problems that require computation and interpretation
using horizontal analysis, vertical analysis, and various financial ratios
Using the downloaded sample financial statements, he / she performs horizontal and vertical
analysis, computes various financial ratios and interprets the level of liquidity, solvency,
stability, and profitability of the business.

3. compute and interpret financial ratios such as current ratio, working capital, gross profit
ratio, net profit ratio, receivable turnover, inventory turnover, debt-to-equity ratio, and the like
(ABM_FABM12-Ig-h14)
A. INTRODUCTION
Learning Task 6.1 – Review of Financial Statements

Give the meaning of the following abbreviations below and define each term.
1. SFP__________________________________________________________
______________________________________________________________
2. SCI___________________________________________________________
______________________________________________________________
3. SCE__________________________________________________________
___________________________________________________________________
4. SCF__________________________________________________________
______________________________________________________________
Learning Task 2 – 6.2 – Checking of Annual Report
Please read and observe all the figures and accounting information on
Consolidated Financial Statements section of the “7-Eleven Annual
Report 2019”.
https://r4a-
1.lms.deped.gov.ph/moodle/pluginfile.php/1063007/mod_resource/content/2/711AR2019.pdf
41
After you have read the statements, please answer the following questions:
1. How much is the total assets of the company in 2019?
Answer: __________________________________________________
2. Did the assets increase from 2018 to 2019? By what amount?

_________________
_________________________________________
3. How much liabilities are due to be paid in 2018?

_____________________
4. How much is the profit of 7-11 in 2018? 2019?
Did the income increase(decrease) in one year? By how much?
______________________________________________________________
______________________________________________________________
5. Assume that you are the owner of Company, and you have these reports,
what do you want to ask in your accountant? Or what do you what to know
in your financial statements?
______________________________________________________________
______________________________________________________________
______________________________________________________________
B. DEVELOPMENT
Financial Ratios
Ratio analysis expresses the relationship among selected items of financial statement data.
The relationship is expressed in terms of a percentage, a rate, or a simple proportion
(Weygandtet.al. 2013).
A financial ratio is composed of a numerator and a denominator. For example, a ratio that
divides sales by assets will find the peso amount of sales generated by every peso of asset
invested. This is an important ratio because it tells us the efficiency of invested asset to
create revenue. This ratio is called asset turnover. There are many ratios used in business.
These ratios are generally grouped into three categories: (a) profitability, (b) efficiency, and
(c) financial health.
(a). Profitability ratios measure the ability of the company to generate income from the
use of its assets and invested capital as well as control its cost.
The following are the commonly used profitability ratios:
■ Gross profit ratio reports the peso value of the gross profit earned for every peso of
sales. We can infer the average pricing policy from the gross profit margin.
■ Operating income ratio expresses operating income as a percentage of sales. It

measures the percentage of profit earned from each peso of sales in the company’s
core business operations (Horngren et.al. 2013). A company with a high operating
42
income ratio may imply a lean operation and have low operating expenses. Maximizing
operating income depends on keeping operating costs as low as possible (Horngren
et.al. 2013).
■ Net profit ratio relates the peso value of the net income earned to every peso of sales.
This shows how much profit will go to the owner for every peso of sales made.
■ Return on asset (ROA) measures the peso value of income generated by employing
the company’s assets. It is viewed as an interest rate or a form of yield on asset
investment. The numerator of ROA is net income. However, net income is profit for the
shareholders. On the other hand, asset is allocated to both creditors and shareholders.
Some analyst prefers to use earnings before interest and taxes instead of net income.
There are also two acceptable denominators for ROA – ending balance of total assets
or average of total assets. Average assets is computed as beginning balance + ending
balance divided by 2.
■ Return on equity (ROE) measures the return (net income) generated by the owner’s
capital invested in the business. Similar to ROA, the denominator of ROE may also be
total equity or average equity.
(b) Operational efficiency ratio measures the ability of the company to utilize its assets.
Operational efficiency is measured based on the company’s ability to generate sales from
the utilization of its assets, as a whole or individually. The turnover ratios are primarily used
to measure operational efficiency.
■ Asset Turnoveris an indicator of the efficiency with which the company is utilizing all
of its assets. It measures the peso value of sales generated for every peso of the
company’s assets. The higher the turnover rate, the more efficient the company is in
using its assets.
■ Fixed Assets Turnover.This is similar to asset turnover, except that it is focused on

fixed assets only. Fixed assets is composed of property, plant and equipment. It is an
indicator of the efficiency of fixed assets in generating sales.
■ Inventory Turnover is measured based on cost of goods sold and not sales. This is
because inventory, upon sale, is transferred to cost of goods sold. It makes both the
numerator and denominator measured at cost. This ratio is an indicator of how fast
the company sell its inventory.
■ Days in Inventory. This ratio computes the average number of days that inventories
are held until sold. Days in inventory can be easily derived from inventory turnover by
multiplying 365 days by 1/inventory turnover.
■ Accounts Receivable Turnover / Days in Receivable

It measures the number of times the company can convert account receivable to cash
during the year. Basically, the ratio asks how many times the company was able to
collect on its average accounts receivable during the year.
(c) Financial Health Ratios look into the company’s solvency and liquidity ratios. Solvency
refers to the company’s capacity to pay their long term liabilities. On the other hand,
43
liquidity ratio intends to measure the company’s ability to pay debts that are coming due
(short term debt).
■ Debt ratio indicates the percentage of the company’s assets that are financed by debt.
A high debt to asset ratio implies a high level of debt.
■ Equity ratio indicates the percentage of the company’s assets that are financed by
capital. A high equity to asset ratio implies a high level of capital.
■ Debt to equity ratio indicates the company’s reliance to debt or liability as a source of
financing relative to equity. A high ratio suggests a high level of debt that may result in
high interest expense.
■ Interest coverage ratio measures the company’s ability to cover the interest expense
on its liability with its operating income. Creditors prefer a high coverage ratio to give
them protection that interest due to them can be paid.
■ Current ratio is used to evaluate the company’s liquidity. It seeks to measure whether
there are sufficient current assets to pay for current liabilities. Creditors normally prefer
a current ratio of
■ Quick ratio is a stricter measure of liquidity. It does not consider all the current assets,
only those that are easier to liquidate such as cash and accounts receivable that are
referred to as quick assets.
44
45
Learning Task 6.3 – Let’s Solve some Problems!
46
Using the financial statement above compute for the following ratios:
1. Gross Profit Margin 6. Asset Turnover
2. Operating Income Margin 7. Inventory Turnover
3. Net Profit Margin 8. Debt Ratio
4. Return on Assets 9. Current Ratio
5. Return on Equity 10. Quick Ratio
C. ENGAGEMENT
Learning Task 6.4 – Computing Financial Ratios
ABM COMPANY
Comparative Statement of Comprehensive Income
For the period ended 12/31/2020 12/31/2021
Gross Sales ₱ 1,652,355 ₱ 1,817,591
Sales Discount (15,471) (16,245)
Sales Returns (4,181) (4,391)
Net Sales ₱ 1,632,703 ₱ 1,796,955
Less: Cost of Goods Sold (565,696) (599,638)
Gross Profit ₱ 1,067,007 ₱ 1,197,317
Less: Expenses
General and Administrative
Office Salaries 216,000 226,800
Depreciation - Office Furnitures and Fixtures 4,200 4,200
Depreciation - Office Equipment 5,000 5,000
Utilities - Office 27,527 28,903
Office Supplies 7,057 7,271
Rent Expense 180,000 180,000
Selling Expenses
Sales Salaries 276,000 289,795
Depreciation - Store Furnitures and Fixtures 4,200 4,200
Depreciation - Store Equipment 5,000 5,000
Utilities - Sales 27,527 28,903
Advertising 8,000 8,456
Store Supplies 7,683 7,914
Total Expenses ₱ 892,314 ₱ 926,767
Net Income ₱ 174,693 ₱ 270,550
47
ABM COMPANY
STATEMENT OF FINANCIAL POSITION
As of 12/31/2020 12/31/2021
ASSETS
Current Assets
Cash ₱ 46,857 ₱ 81,250
Lease Deposits 20,000 20,000
Accounts Receivable 21,257 43,750
Merchandise Inventory 15,751 21,324
Total Current Assets ₱ 103,865 ₱ 166,324
Non-Current Assents
FURNITURE & FIXTURES 42,000 42,000
Furniture and Fixtures - Accumulated Depreciation (8,400) (16,800)
MACHINERIES AND EQUIPMENT 50,000 50,000
MACHINERIES AND EQUIPMENT - Accumulated Depreciation (10,000) (20,000)
Total Non-Current Assets 73,600 55,200
TOTAL ASSETS ₱ 177,465 ₱ 221,524
LIABILITIES AND OWNER'S EQUITY
Current Liabilities
Accounts Payable ₱ 9,080 ₱ 12,175
Salaries Payable 31,000 32,550
Utilitites Payable 4,982 5,675
SSS Contributions Payable 6,120 6,421
Pag-Ibig Contributions Payable 1,900 2,021
PhilHealth Contributions Payable 1,625 1,723
Income Tax Payable 7,134 7,562
TOTAL LIABILITIES ₱ 61,841 ₱ 68,127
ABM Capital 115,624 153,397
Total Equity ₱ 115,624 ₱ 153,397
TOTAL LIABILITIES AND OWNER'S EQUITY ₱ 177,465 ₱ 221,524
Instructions.
1. Please refer to the attached excel file of the Financial Statements of ABM
Company as a basis for your computations.
2. Proceed to the excel sheet where you can find the table that you need to fill out
completely.
3. After you fill out the table please save the excel sheet in PDF file (note: only the
answer sheet part). Save it like this LASTNAME.LT6.4 (GAGALAC.LT6.4)
4. Last, please attach or upload your answer in the quiz question.
Great luck and God bless!
48
Rubrics 10 9 8 6

Knowledge accounting ideas and accounting ideas and accounting ideas and accounting ideas and
Shows the incomplete Show some

has a little accounting
Shows the complete accounting accounting
information,
Completeness accounting information, information, information,
computations, or
computations, and reports computations, or computations, or
reports.
reports reports.
D. ASSIMILATION
I - Learning Task 6.5 – Encircle the answers of your choice.
1. Which statement best describes Merdana Trading Ltd.’s acid test ratio?
A. Greater than 1 C. Less than 1
B. Equal to 1 D. None of the Above
49
2. Merdana Trading Ltd.’s inventory turnover during 2014 was (amounts

rounded)
A. 6 times. C. 8 times.
B. 7 times D. Not determinable from the data
given.
3. During 2014, Merdana Trading Ltd.’s days’ sales in receivables ratio was
(amounts rounded)
A. 34 days C. 32 days
B. 30 days D. 28 days
4. Which measure expresses Merdana Trading Ltd.’s times-interest-earned

ratio?
(amounts rounded)
A. 54.7% C. 34 times
B. 20 times D. 32 times
5. Merdana Trading Ltd.’s rate of return on equity can be described as

A. 33.55% C. 35.29%
B. 16.72% D. None of the above
I learned that
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
I realized that
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
References

Education, 2016
d. Link:https://www.7-eleven.com.ph/corporate/company-disclosures/sec-filings/annual-
reports/
50
LESSON 7: WEEK 8 - 9
BASIC DOCUMENTS AND TRANSACTIONS

RELATED TO BANK DEPOSITS
In this lesson you will demonstrate an understanding of the types of bank accounts,
basic transactions, and documents related to bank deposits and withdrawals.
You shall be able to share samples of bank account forms and documents in class
and discuss their uses and importance.

1. identify the types of bank accounts normally maintained by a business
(ABM_FABM12- IIc-5)
2. prepare bank deposit and withdrawal slips (ABM_FABM12- IIc-7)
3. identify and prepare checks (ABM_FABM12- IIc-8)
4. identify and understand the contents of a bank statement (ABM_FABM12- IIc-9)
A. INTRODUCTION
Learning Task 7.1 – All about money!
Answer the following questions:

1. What is the most important asset?
2. What is the most liquid asset?
3. Do you save money in the bank?
4. What is the importance of money being deposited in the bank?
II – Learning Task 7.2 – Bank Documents
Bring any bank documents or ask your parents if they know a bank document:
1. What is the bank document that you have?
2. What are the parts of the bank document? Can you please specify them.
51
B. DEVELOPMENT
Basic Documents and Transaction Related to Bank Deposits
The following are the different kinds of bank accounts:
a. Savings account. It earns minimal interest and may have minimum balance
requirement. Some savings account come with passbooks, ATM or debit cards.
• These are intended to provide an incentive for the depositor to save money.
• The depositor can make deposits and withdrawals using the form provided by the bank.
• Banks usually pay an interest rate that is higher than a checking account or a current
account.
• Some savings accounts have a passbook, in which transactions are logged in a small
booklet that the depositor keep.
• Some savings accounts charge a fee if the balance falls below a specified minimum.
b. A checking account is like savings account that allows withdrawals through issuance
of bank checks.
• Money held under a checking account can be withdrawn through issuance of a check
• Banks usually allows numerous withdrawals and unlimited deposit under this type of
account.
• The interest rate for checking account is usually lower as compared to a savings account.
• The account holder or depositor of a checking account is normally provided at the end of
the
month a bank statement showing all the deposits made, checks paid by the bank, and the
balance of the account.
• The depositor is given easy access to the funds as compared to a savings account.
c. Time deposit accounts are investment placement wherein the depositor agrees not
to withdraw the funds over the contracted period in exchange for fixed interest rates which
are higher than deposit rates.
d. Unit investment trust funds (UITF) allows investors to indirectly invest in stocks
and bonds.
Preparation of bank deposit and withdrawal slips
A withdrawal slip and deposit slip are written orders to the bank. These slips are used to
take out money or to put in money to the depositors account.
Withdrawal Slip
Without a withdrawal slip, the bank will not allow you to get money from your account. The
required information in the withdrawal slip are:
• Account Name - the name of the depositor

• Account Number – the unique identifier given by the bank for every account maintained
• Date of the withdrawal
• Type of account - savings or current
52
• Currency
• Amount to be withdrawn - the amount that the depositor wishes to withdraw from his
account. The amounts in words and in figures are indicated.
• Signature of the Depositor – this is the most important part in the withdrawal slip. The
signature is a proof that the depositor is authorizing the bank to get money from his
account. Usually, the bank compares the signature in the withdrawal slip against the
signature in the bank records submitted during the opening of the account.
There are instances that the depositor cannot attend personally to withdraw the funds, he
may authorize a representative by indicating the name of the representative in the space
provided and the representative must sign. There is a need for the representative to bring a
valid identification card upon withdrawal otherwise the bank will not approval the
withdrawal.
Deposit Slip
The bank provides deposit slip that the depositor will fill up every time the depositor will put
in money to his account. The usually required information in a deposit slip are:
• Account Name – this is the complete name of the depositor that is reflected in the records
of the bank. If it has a pass book, the account name is indicated on first page inside the
passbook.
• Account Number – this is a unique identifier of the account maintained by the depositor.
• Date of Deposit
• Type of Account
• Currency
• Amount in words and in figures – the amount that the depositor wishes to put into his
account. The amount to be deposited maybe in form of cash or check. If it is a cash
deposit, the breakdown of the cash is usually listed in the deposit slip if it is a check
deposit, the details of the checks are indicated in the deposit slip, for example: Issuing
Bank, Address of the Issuing Bank, date of the check and the amount.
A check is a document that orders a bank to pay a specific amount of money from a
person's account to the person in whose name the cheque has been issued. The
person writing the cheque, the drawer, has a transaction banking account where his money
is held. The drawer writes the various details including the monetary amount, date, and a
payee on the cheque, and signs it, ordering his bank, known as the drawee, to pay that
person or company the amount of money stated. Checks are a type of bill of exchange and
were developed as a way to make payments without the need to carry large amounts of
money. The check number is usually indicated in the upper right portion of the check.
The following are the parties involved in a transaction that uses check as medium of
exchange:
• Drawer, the person or entity who makes the check
• Payee, the recipient of the money
• Drawee, the bank or other financial institution where the cheque can be presented for
payment.
Identify and understand the contents of a bank statement
At the end of every month, the bank furnishes a statement to the depositor showing the
movement of the account. It contains all the withdrawals, deposits and balance of your
53
account after every transaction. It may also indicate bank charges that were deducted by the
bank automatically. Also, interest earned by the account is likewise reflected.
The date column indicate the date the transaction was made. The check number indicates
the details of the check paid by the bank. The transaction code is normally a bank code for
the transactions. The Debit column represents all charges or deduction made by the bank
to your account. The Credit column represents the deposits or additions to your account
that was made by the bank. The Balance column is the running balance after considering
the effect of the transaction to your account.
Samples of Debit transaction

• Bank service charge - monthly fee charged by the bank for its services (Ex. cost of
printing checks writing funds to other locations and other fees)
• NSF - (Not Sufficient Fund) – Banks also use a debit memorandum when a deposited
check from a customer “bounces” because of insufficient funds. Nowadays bank refer to
this as DAIF (Drawn Against Insufficient Fund) or DAUD (Drawn Against Uncleared
Deposits)
Samples of Credit transactions

• Collection of cash proceeds from notes receivables.
• Interest income earned by the deposit.
As part of control, the bank statement received from the bank is compared with the
accounting records of the business. This process is called bank reconciliation. Bank
reconciliation will be discussed in the succeeding chapters.
Together with the bank statements, the banks will include the copies of checks cleared or
paid by the bank for that particular month.
54
Learning Task 7.3 – Bank Forms
Please see the attached bank forms.
Deposit to checking account number 000123456789. The deposits are

composed of the following:
1. Cash deposit of P145,670 – composed of 100 pieces of P1,000 bills, 80

pieces of P500 bills, 25 pieces of P200 bills, 6 pieces of P100 bills, 1 piece
each of P50 bill and P20 bill.
2. Check deposit of P567,890 – composed of 3 checks.

a. BPI-Katipunan branch with chk no. 00056743 for P235,670
b. Union Bank – Ortigas Branch with chk no. 00087654 for P125,688
c. BDO – Greenhills branch with chk no. 00056799 for P206,532
3. Prepare a withdrawal slip from bank account # 000123566792 for the

amount of P555,000. This will be used to pay the employee payroll for March
31.
4. Prepare a bank check for P23,553.50 payable to Meralco for the electricbill.
5. Prepare a bank check for 15,000 for Mr. Santos for April rent.
Required: Use the details above to fill up your bank forms.
C. ENGAGEMENT
Learning Task 7.4 – “Flowchart of Bank Transactions.
Draw a flowchart of which you will apply the banking transactions with the
help of your bank documents. You can get some idea in an example as
shown in the figure below.
55
Rubrics 10 9 8 6
Good Some Not organized,
Organized, flow
Organization organization flow organization flow makes no
for the most part
and Layout is logical and flows slightly sense and is not
is clear
easy to follow unclear clear
Details are
Details are Some details are Unable to find
Quality and somewhat
relevant to not relevant to specific details
ambiguous
Accuracy of process and process and and/or details
and/or
Information chart contain chart contains a are mostly
somewhat
accuracies few inaccuracies inaccurate
inaccurate
56
D. ASSIMILATION
Learning Task 7.5 – Evaluation
Use your deposit slips, withdrawal slips and bank checks templates for the following
transactions.
Deposit to checking account number 000123456789. The deposits are composed of

the following:
1. Cash deposit of P117,300 – composed of 75 pieces of P1,000 bills, 60 pieces of

P500 bills, 45 pieces of P200 bills, 26 pieces of P100 bills, 10 pieces each of P50 bill
and P20 bill.
2. Check deposit of P731,950 – composed of 3 checks.
a. BPI-Dasma Bayan branch with chk no. 0005786457 for P321,055
b. China Bank – Dasmariñas Cavite Branch with chk no. 0001675401 for P145,758
c. BDO – Greenhills branch with chk no. 0010567099 for P265,137
3. Prepare a withdrawal slip from bank account # 0011223348 for the amount of
P545,750. This will be used to pay the employee payroll for March 31.
4. Prepare a bank check for P22,750.37 payable to Meralco for the electric bill.
5. Prepare a bank check for 16,500 for Mr. Santos for April rent.
I learned that
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
I realized that
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
57
References

b. Fundamentals of Accountancy, Business and Management 2– Dani Rose
Salazar
c. Teaching Guide for Senior High School FUNDAMENTALS OF
ACCOUNTANCY, BUSINESS, AND MANAGEMENT 2 - Published by the
Commission on Higher Education, 2016
Links:
http://informationsystem2014.blogspot.com/2014/11/transaction-processing-system-
tps-in.html
https://www.smartdraw.com/flowchart/flowchart-symbols.htm
https://www.coursehero.com/
58

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Moodle Course Guide

For the Learners:

There are eight ( 8 ) lessons in this course:

About the Creator:

We expect that you will demonstrate the following learning outcomes.

ASSETS = LIABILITIES + EQUITY

I – Learning Task 1.1 - Review

Do you still remember the following terms?

Explain and Write your answers here:

Liabilities - are obligations that the company is required to pay.

Learning Task 1.2 – True or False

Differentiate the Report Form and Account Form

Sample Report Form – (Figure 2)

Sample Account Form – (Figure 3)

Current Assets Current Liabilites

Learning Task 1.3 – Answer the following problems by showing your

ABM Capital P 21,950 Unearned Revenue P 1,000

Note: You can also do this on your accounting or columnar papers.

Account Titles Tell whether Current Account, Non

Quiz 2 – Problem Solving. Show your solutions.

Learning Task 1.6 – Reflection

a. Fundamentals of Accountancy, Business and Management 2– Win Ballada

LESSON 2 – WEEK 2 & 3

We expect that you will demonstrate the following learning outcomes

Learning Task 2.1 - REVIEW

1) In your own idea, define the account titles above.

Learning Task 2.2 - MY INCOME

Prepare a Personal SCI:

1. What did you observe during the activity?

STATEMENT OF COMPREHENSIVE INCOME

- This account represents the revenues earned by performing services to a client

TEMPORARY ACCOUNTS – Also known as nominal accounts are the accounts

Sample of a multi-step SCI / SCI in a Merchandising Business

i. First part is sales

or revenue accounts. (Haddock, Price, & Farina, 2012).

iv.ii.Net Cost of Purchases = Purchases + Freight In

iv.ii.i.Net Purchases = Purchases – (Purchase discount and purchase returns)

iv.ii.i.i.Purchases – amount of goods bought during the current accounting period.

iv.ii.i.ii.Contra Purchases –An account that is credited being “contrary” to the

iv.ii.i.ii.i.Purchase discount – Account used to record early payments by the

iv.ii.i.ii.ii.Purchase returns – Account used to record merchandise returned by the

iv.ii.ii.Freight In – This account is used to record transportation costs of

iv.iv.Ending inventory – amount if inventory presented in the Statement of

v. Sales less Cost of Goods Sold is Gross Profit

viii.Gross Profit less General and Administrative Expenses less Selling

Learning Task 2.3 – Classification

STATEMENT OF COMPREHENSIVE INCOME

SINGLE-STEP STATEMENT OF COMPREHENSIVE INCOME

ONE PIECE COMPANY

Service Revenue P XXX

‘* Increase in Inventory = Ending Inventory – Beginning Inventory

MULTI-STEP – also referred as function of expense method or cost of sales method,

MULTI-STEP STATEMENT OF COMPREHENSIVE INCOME

EXPENSE ACCOUNT REVENUE ACCOUNT

COMPREHENSIVE ILLUSTRATIVE EXAMPLE:

Account titles Balance Debit Credit

Account titles Balance Debit Credit

Robin Graham Brownies

Account titles Balance