Aklan Catholic College

Roxas Avenue Extension, Andagao

Kalibo, Aklan
LEARNING ACTIVITY SHEET
GRADE 12
FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 2
FIRST QUARTER
Learning Activity No: 4 Date:
Topic: Preparation of Financial Statements Week: 8 & 9
Session/s: 4
Learning Intent: At the end of the Week 8 & 9, the students can have an in depth
understanding of the financial statements by:
1. Preparing financial statements
Value: Accountability - Responsibility.
I. Concept Notes
For Non-Wired

FINANCIAL STATEMENTS

Financial statements are the means by which the information accumulated and
processed in financial accounting is periodically communicated to the users.

Components of Financial Statements

1. Statement of financial position
2. Income statement
3. Statement of comprehensive income
4. Statement of changes in equity
5. Statement of cash flows
6. Notes comprising a summary of significant accounting policies and other
explanatory notes.

Financial statements shall be presented at least annually.

For our discussion, we will only be discussing 3 of the components of the financial
statements, namely: Statement of Financial Position, Income Statement and Statement
of Changes in Equity.

The other components of the financial statements require expertise from higher level
accounting subjects. You will encounter them once you ought to enroll in the B.S.
Accountancy program.

PREPARING THE FINANCIAL STATEMENTS (BASIC COMPONENTS)

As mentioned above, we are only going to prepare for 3 components. Normally, these
components are prepared on the following sequence:
1. Income Statement
 2. Statement of Changes in Equity
3. Statement of Financial Position

Income Statement – showing the performance of the enterprise for a given period of
time. Elements including Income and Expenses are reported in this statement. It
summarizes revenues earned and expenses incurred for that period of time. This
statement provides information about total revenues, total expenses and profit or loss for
the period.

Statement of Changes in Equity – summarizes the changes that occurred in owner’s

equity. Information regarding the Owner’s Equity beginning balance, additional
investments, profit or loss, withdrawals and Owner’s Equity ending balance are provided
by this statement.

Statement of Financial Position – shows the financial position or condition of an entity

by listing the assets, liabilities and owner’s equity as at a specific date. Assets and
Liabilities are classified as Current or Non-current. This statement may also be referred
to as Balance Sheet.

Rules for classification as provided for by Philippine Accounting Standards (PAS) 1 are
as follows:

Asset
 Current assets. PAS 1, paragraph 66, provides than an entity shall classify an
asset as current when:
a. The asset is cash or cash equivalent unless the asset is restricted to settle
a liability for more than twelve months after the reporting period.
b. The entity holds the asset primarily for the purpose of trading.
c. The entity expects to realize the asset within twelve months after the
reporting period.
d. The entity expects to realize the asset or intends to sell or consume it within
the entity’s normal operating cycle.

 Noncurrent assets. PAS 1, paragraph 66, simply states that “an entity shall
classify all other assets not classified as current as noncurrent”. a. Property,
plant and equipment
b. Long-term investments
c. Intangible assets
d. Deferred tax assets
e. Other noncurrent assets

Liabilities
 Current liabilities. PAS 1, paragraph 69, provides that an entity shall classify a
liability as current when:
a. The entity expects to settle the liability within the entity’s normal operating
cycle.
b. The entity holds the liability primarily for the purpose of trading.
 c. The liability is due to be settled within twelve months after the reporting
period.
d. The entity does not have an unconditional right to defer settlement of the
liability for at least twelve months after the reporting period.

 Noncurrent liabilities. PAS 1, paragraph 69, provides that all liabilities not classified
as current are classified as noncurrent.
a. Noncurrent portion of long-term debt.
b. Finance lease liability
c. Deferred tax liability
d. Long-term obligations to company officers
e. Long-term deferred revenue

These classifications are normally discussed on higher accounting subjects.

For illustration, we’ll be using the illustration we used in LAS 3 and the amounts are
provided from the sample worksheet.

Sample Income Statement

Weddings “R” Us
Income Statement
For the Month Ended May 31, 2020

Revenues
Consulting Revenues P67,700
Referral Revenues 4,000
Total P71,7
00
Expenses
Salaries Expense P15,600
Utilities Expense 4,400
Rent Expense 4,000
Depreciation Expense – Service Vehicle 4,000
Depreciation Expense – Office 1,000
Equipment
Interest Expense 3,500
Supplies Expense 3,000
Insurance Expense 1,200
Total 36,7
00
Profit P35,0
00
Sample Statement of Changes in Equity

Weddings “R” Us
Statement of Changes in Equity
For the Month Ended May 31, 2020

Diaz,Owner’s Equity, 0 P250,0

5/1/202 00
Add: Additional P 0
Investment
Profit 35,000 35,0
00
Total P285,0
00
Less: Withdrawals 14,0
00
Diaz,Owner’s Equity, 20 P271,0
5/31/20 00

Sample of Statement Financial Position

Weddings “R” Us
Statement of Financial Position
As of the Month Ending May 31, 2020

ASSETS

Current Assets
Cash P22,200
Accounts Receivable 17,300
Supplies 15,000
Prepaid Rent 4,000
Prepaid Insurance 13,200
Total Current Assets P71,70
Property and Equipment (Net) 0
Service Vehicles P420,000
Less: Accumulated Depreciation 4,000 P416,000
Office Equipment P60,000
Less: Accumulated Depreciation 1,000 59,000 475,0
00
 Total Assets P546,7
00

LIABILITIE
Current Liabilities S

Notes Payable P210,000

Accounts Payable 53,000
Salaries Payable 1,800
Utilities Payable 1,400
Interest Payable 3,500
Unearned Referral 6,000
Revenues
Total Current Liabilities P275,7
00
Noncurrent Liabilities 0
.
Total Liabilities P275,7
00
OWNER’S EQUITY

Diaz, Capital, 5/31/2020 P271,0

00
Total Liabilities and Owner’s P546,7
Equity 00

Notable points:
1. The amount of profit in the Income Statement is reflected in the Statement of
Changes in Equity.
2. Withdrawals account is a contra-equity account and is deducted from the Capital
to arrive at the Capital – ending balance.
3. The amount of Diaz, Capital – ending is reflected in the Statement of Financial
Position owner’s equity section.
4. The amount of Total Asset should equal the amount of Total Liabilities and
Owner’s Equity, which is why it is also referred to as Balance Sheet. This is
reflective of the accounting equation.
5. Accumulated depreciation is a contra-asset account and is deducted from the
Property and Equipment to arrive at the book value or carrying amount (PE, net).
II. Checking for Understanding

The accounts for the balance sheet, statement of changes in equity, and income
statement of Marife Sarmiento, CPA, are as follows:

Accounts Payable P 63,500

Accounts Receivable 198,000
Accumulated Depreciation-Building 110,000
Accumulated Depreciation-Office Equipment 120,000
Auditing Revenues 1,361,500
Building 750,000
Cash 96,500
Depreciation Expense-Building 55,000
Depreciation Expense-Office Equipment 60,000
Sarmiento, Capital 1/1/2020 1,193,500
Sarmiento, Withdrawals 165,000
Land 75,000
Notes Receivable 60,000
Office Equipment 362,500
Office Supplies Expense 96,000
Office Supplies 28,000
Professional Development Expense 86,500
Rent Expense 52,500
Salaries Expense 735,000
Salaries Payable 30,500
Travel Expense 41,000
Utilities Expense 18,000

Required: Prepare an income statement, statement of changes in equity and balance

sheet.

III. ANALYSIS

Directions: Answer the following questions below, but limit your answer to three
sentences only.

1. If you happened to prepare an unbalanced Balance Sheet, what would be your

action to resolve the problem?
If that instance occurs, I believe that the thing to do is to look back at the adjusted trial balance
columns to see where I went wrong, because it is the basis of which the Balance Sheet has been
prepared. I am going to check whether I have included all the ledger balances in the Trial
Balance, and if I have summed everything all up accurately.

2. Give one possible action you can do to minimize the chances of preparing an
unbalanced Balance Sheet?
 As what as I always say, it’s all about having sharp focus and a keen eye on every detail of the
process because with just one lacking operation, or misplacement of amount in other columns,
everything could go wrong. But this time for the balance sheet, I am going to highlight the
importance of really ensuring the accuracy of the adjusted trial balance because it is the basis of
which we prepare our balance sheet. And lastly, is to always double check for every account
transaction done, to ensure accuracy.

IV. INTERGRATION

Directions: Using the 3 – 2 – 1 chart below, supply your answers in the space provided.

1. Give 3 most significant learnings about the topic.

a. I have learned how to classify assets and liabilities accounts into current
and non-current.
b. I have learned the use of the three main components of financial
statements.
c. I have learned how to analyze the three financial statements.
2. Give 2 things you would like to clarify regarding the topic.
a. I can replace the word ‘profit’ with loss if there’s really a loss within a
specific period right?
b. In the statement of changes in equity, if I have a loss instead of profit, I
should minus it from the equity right?
3. Give 1 question you would like to be enlightened.
a. I think I have no more questions left. Thank you.

V. INDEPENDENT PRACTICE

Dellosa Cleaners uses fiscal year ending June 30. Its Trial balance as of May 31, 2020
are as follows:

Dellosa Cleaners
Trial Balance
May 31, 2020

111 Cash P 58,940

112 Accounts Receivable 132,470
115 Prepaid Insurance 17,000
116 Cleaning Supplies 36,870
141 Land 90,000
142 Building 810,000
143 Accumulated Depreciation - Building P202,000
144 Delivery Truck 115,000
145 Accumulated Depreciation – Delivery Truck 26,000
212 Accounts Payable 102,000
221 Unearned Cleaning Revenues 8,000
231 Mortgage Payable 600,000
 311 Dellosa, Capital 282,800
312 Dellosa, Withdrawals 100,000
411 Dry Cleaning Revenues 601,670
412 Laundry Revenues 186,500
511 Plant Wages Expense 325,600
512 Sales and Delivery Wages Expense 181,050
513 Cleaning Equipment Rent Expense 30,000
520 Delivery Truck Expense 21,870
530 Interest Expense 55,000
580 Other Expenses 35,170 .
P2,008,970 P2,008,970

The following pertain to transactions for the month of June 2020:

June
2 Collected from Adinatha County Inn the amount of P67,690 for laundry services
rendered on account in the previous month.
3 Acquired cleaning supplies on credit amounting to P12,050.
5 Paid P2,500 for the rental of cleaning equipment.
6 Billed Marzon Hotel amounting to P25,770 for dry cleaning services provided this
month.
7 Paid P1,500 to the local government of Kalibo for business permit.
9 Entered into a contract with Tumbukon Memorial Hospital to provide laundry
service for P12,000 per month. The service will commence on July 1, 2020 and
Tumbukon paid in advance equivalent to 6 months.
12 Dellosa, the owner, withdrew an amount of P12,720 for her personal use.
15 Paid semi-monthly salary of P18,760 for plant wages and P8,940 for sales and
delivery wages.
17 Acquired cleaning supplies on cash, paying the amount of P8,610.
18 Received from Metro Hotel the amount of P15,670 for laundry services
performed.
20 Paid to Bureau of Internal Revenue the amount of P500 for annual registration.
25 Paid suppliers the amount of P23,560 for cleaning supplies acquired last
month.
27 The owner withdrew P5,620 for her personal use.
28 Received from Ati-atihan Festival Hostel P34,390 for laundry services rendered.
30 Paid semi-monthly salary of P18,760 for plant wages and P8,940 for sales and
delivery wages.

Required:
1. Open the ledger accounts and post the beginning balances for each account in the
trial balance, in addition to the following: Wages Payable (213); Interest Payable
(214); Utilities Payable (215); Insurance Expense (515); Cleaning Supplies Expense
(516); Utilities Expense (517) Depreciation Expense – Building (518); and
Depreciation Expense - Delivery Truck (519).
2. Prepare the journal entries for the month of June 2020 on the General Journal.
3. Post the entries on the General Ledger.
 4. Prepare an Unadjusted Trial Balance as of .
5. Prepare the necessary adjusting entries. The following information for fiscal year-end
adjustments are as follows:

a. A review of insurance policies showed that the policy was acquired on April 1,
2020 and covers a 1 year period.
b. An inventory of cleaning supplies showed P6,220 on hand.
c. Annual depreciation is P43,000 on the building and P21,000 on the delivery
truck.
d. The mortgage was taken on December 1, 2019 and carries an annual interest
rate of 10%.
e. On March 31, the company signed a contract with St. Jude Hospital to dry clean,
for a fixed monthly charge of P2,000, the uniforms used by doctors in surgery.
The hospital paid for four months service in advance.
f. Unpaid plant wages totaled P9,820 and P2,400 for sales and delivery wages.
g. On June 30, right before the store closed, a billed from Akelco was received
amounting to P5,400. This bill is to be paid the next day, July 1.

6. Prepare a 10 column worksheet.

7. Prepare an Income Statement, Statement of Changes in Equity and Balance Sheet.

VI. RESOURCES

Ballada, W. and Ballada S., (2015). Accounting Fundamentals. Domdane Publishers

Prepared by: Checked by: Approved by:

AURELIO C. LOPEZ JR. NIMFA M. TAYCO REY V. DE LOS REYES

Fund. of ABM Teacher Asst. Principal SHS Principal
09387770402
Aurelio768@gmail.com