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Week 12 Entrepreneurship

You're right. Accumulated depreciation is an accounting entry and not a source of funds. The sources and uses of funds statement should be adjusted as follows: Sources of Funds: Decrease in Receivables ₱ 10,000 Increase in Accounts payable 10,000 Increase in Owners’ equity 30,000 (Reduced by ₱20,000 accumulated depreciation) Total Sources of Funds: ₱ 50,000 Uses of Funds: Increase in Cash ₱ 10,000 Increase in Inventory 20,000 Increase in Fixed assets 20,000 Decrease in Bank loan 20,000

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Marcel Baring Imperial
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39 views

Week 12 Entrepreneurship

You're right. Accumulated depreciation is an accounting entry and not a source of funds. The sources and uses of funds statement should be adjusted as follows: Sources of Funds: Decrease in Receivables ₱ 10,000 Increase in Accounts payable 10,000 Increase in Owners’ equity 30,000 (Reduced by ₱20,000 accumulated depreciation) Total Sources of Funds: ₱ 50,000 Uses of Funds: Increase in Cash ₱ 10,000 Increase in Inventory 20,000 Increase in Fixed assets 20,000 Decrease in Bank loan 20,000

Uploaded by

Marcel Baring Imperial
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 7

Republic of the Philippines

Division of Davao City


TOYOZU TECHNICAL SCHOOL FOUNDATION INC.
#25 Dacudao Avenue Agdao, Davao City

ENTREPRENEURSHIP

SENIOR HIGH SCHOOL


(Grade 11 - Second Quarter)
WEEK 5
(January 18, 2021 – January 22, 2021)

Mr. Marcel B. Imperial


MODULE 5
S.Y. 2020 - 2021
Entrepreneurship
Lesson 14: Income Statement and Balance Sheet

Specific Learning Outcomes


At the end of this lesson, the learners will be able to:
1. Interpret financial statements (balance sheet, income statement, cash flow
projections, and summary of sales and cash receipts

ABSTRACTION

Five hundred years ago, the merchants of Venice invented accounting; they wanted
to record all their business transactions as they imported goods from Asia and exported
goods from Europe. Today accounting has come a very long way. Professional
organizations have established generally accepted accounting principles.

What is financial statement?


Financial statements are written records that convey the business activities and the
financial performance of a company. Financial statements are often audited by government
agencies, accountants, firms, etc. to ensure accuracy and for tax, financing, or investing
purposes.

What is income statement?


Income statement presents financial record of a company’s revenues and expenses
and profits over a period of time. It also gives firm’s financial performance in terms of
revenues, expenses and profits over a given time period. It focuses on revenues and costs
associated with revenues.
The operating section of an income statement includes revenue and expenses. The none-
operating section includes revenues and gains from non-primary business activities also
expenses that are either unusual or infrequent, finance costs like interest expense and
income tax expense.
Why income statement?
The income statement is one of the major financial statements used by accountants
and business owners. It shows the profitability of a company during the interval specified in
its heading. It helps in identifying risks and opportunities and forecast future performance
for:
Owners
Investors
Creditors
Competitors

Usefulness of Income Statement


 Evaluate past performance
 Predicting future performance
 Help assess the risk or uncertainty of achieving future cash flows.
Limitations of Income Statement
 Companies omit items that cannot be measured reliably.
 Income is affected by the accounting methods employed.
 Income measurement involves judgment.

What is balance sheet?


It is financial statement that summarizes a company’s assets, liabilities and
shareholders’ equity at a specific point in time. The accounting balance sheet is one of the
major financial statements used by accountants and business owners. It is also referred to
as the statement of financial position.

Components of Balance Sheet


 Assets – its anything tangible or intangible which is owned or leased by a business.
 Liability – its any obligation which a company owes to another business entity.
 Owner’s equity – all claims of the proprietor, partners or stockholders against the
assets of a firm, equal to the excess of assets over liabilities.
 Basic accounting equation – relationship that states that assets equal liabilities plus
owner’s equity.
ASSETS = LIABILITIES + OWNERS’ EQUITY
Sources and Use of Funds
Sources of Funds
Decrease in Receivables ₱ 10,000
Increase in Accounts payable 10,000
Increase in Owners’ equity 50,000
Total Sources of Funds: ₱ 70,000

Uses of Funds
Increase in Cash ₱ 10,000
Increase in Inventory 20,000
Increase in Fixed assets 20,000
Decrease in Bank loan 20,000
Total Uses of Funds ₱ 70,000
Why balance sheet?
 A balance sheet offers a way to look inside your business and outline what it is really
worth. A balance sheet is different from a measure of profit and loss.
 It’s a list of assets and liabilities. Any good balance sheet includes some basics:
1. What the business owns (real estate, vehicles, office equipment, etc)
2. Revenue you expect to take in (accounts receivable)
3. Expenses you expect to pay out (accounts payable)
4. The balance sheet is used to assess the value of your business at any given
point
5. It helps to keep track of finances
6. It helps for showing it to investors and Bank Managers
7. It is also useful for annual accounts too
Activity 14.0
Direction: Answer the following question given.
1. Accumulated Depreciation is not a source of funds. It is just an accounting entry. So
the Sources of Funds should be reduced by P20,000 Accumulated Depreciation. In
the uses of funds, the Cost of Goods Sold contains the P20,000 depreciation. This
should be subtracted also. Thus, the Sources and Uses of Funds should be adjusted
as depicted.

Sources and Use of Funds


Sources of Funds
Increase in Owners’ Equity (Paid-in-
capital)
Increase in Owners’ Equity (Sales)
Increase in suppliers’ credit
Increase in bank loan
Decrease in cash (all cash
disbursements)
Decrease in raw materials inventory
Decrease in work-in-process inventory
Decrease in finished goods
Total Sources of Funds: ₱ 20,0000

Uses of Funds
Increase in cash (all cash receipts)
Increase in raw materials inventory
Increase in work-in-process inventory
Increase in finished goods inventory
Decrease in owners’ equity (cost of
goods sold)
Decrease in owners’ equity (salaries)
Decrease in owners’ equity (interest
expenses)
Decrease in suppliers’ credit
Decrease in bank loan
Total Uses of Funds ₱ 20,0000

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