Analyzing business

transactions from
source documents
Journalizing and Posting Journalizing business
Reversing Journal Entries transactions

Preparing Post
Closing Trial Balance
THE Posting to the Ledger
ACCOUN
Journalizing and Posting Preparing Trial
Closing Journal Entries TING Balance

Preparing Financial
CYCLE Journalizing and Posting
Statements Adjusting Journal Entries

Preparing Adjusted
Trial Balance
 Preparation
of
FINANCIAL
Statements
Objectives:
• Review on the preparation of
Income Statement , Statement of
Owner's Equity and Statement of
Financial Position
• Define the Statement of Cash
Flows
• Prepare the Statement of Cash
Flows
REVIEW

They are the means by which businesses

communicate to interested users significant
information about the financial position,
financial performance and cash flows of the
business

FINANCIAL
Statements
REVIEW

Statement Statement Statement

Statement
of of of
Comprehensive of Cash
Owner’s Financial
Income Flows
Equity Position

FINANCIAL
Statements
REVIEW
Income Shows the results of operations of the
business by reporting the revenues and
Statement expenses for the specific accounting period
Statement of Owner's Shows changes in equity due to income/loss,
Equity drawings and additional investment by the owner.

Reports the balances of assets, liabilities

Balance Sheet and equity as of a point in time.

Statement of Cash Reports the actual cash inflows and outflows for the period
that are classified into the 3 main business activities
Flows namely, operating, investing and fiancing activites.

Notes to Financial Provides additional information such as company

information, accounting policies used, administrative
Statements requirements by regulators & other relevant info.
REVIEW

Income
Statement
(Statement of
Comprehensive Income)
 Forms of Income Statement

Natural Form

Functional
Form
REVIEW

Statement of
Owner's Equity
 Name of Business
Statement of Owner’s Equity
For the period ended, last day of period

Beh, Capital, Beginning ₱xx

Add: Additional Investments ₱xx
Net Income xx xx
Total ₱ xx
Less: Beh, Drawing xx
Beh, Capital, End ₱xx
 Name of Business
Statement of Owner’s Equity
For the period ended, last day of period

Beh, Capital, Beginning ₱xx

Add: Additional Investments xx
Total ₱xx
Less: Beh, Drawing ₱xx
Net Loss xx xx
Beh, Capital, End ₱xx
REVIEW

Balance
Sheet
(Statement of Financial
Position)
REPORT FORM
Ren Ren Merchandising
Statement of Financial Position
As of December 31, 2016
Assets Note
Current Assets
Cash 1 ₱450,000
Investment in Trading Securities 75,000
Trade and Other Receivables 2 100,000
Merchandise Inventory 90,000
Prepaid Expenses 3 95,000
Total Current Assets ₱810,000
Non-Current Assets
Property, Plant and Equipment 4 700,000
Total Assets ₱1,510,000
Liabilities & Owner's Equity
Current Liabilities
Trade and Other Payables 5 ₱430,000
Non-Current Liabilities
Mortgage Payable ₱300,000
Loan Payable 100,000
Total Non-Current Liabilities 400,000
Total Liabilities ₱830,000
Owner's Equity
Ren, Capital 680,000
Total Liabilities and Owner's Equity ₱1,510,000
ACCOUNT FORM
Ren Ren Merchandising
Statement of Financial Position
As of December 31, 2016

Assets Note Liabilities & Owner's Equity Note

Current Assets Current Liabilities

Cash 1 ₱450,000 Trade and other Payables 5 ₱430,000
Investment in Trading Securities 75,000
Trade and Other Receivables 2 100,000 Non-Current Liabilities
Merchandise Inventory 90,000 Mortgage Payable P300,000
Prepaid Expenses 3 95,000 Loan Payable 100,000 400,000
Total Current Assets ₱810,000 Total Non-Current Loabilities ₱830,000

Non-Current Assets Owner's Equity

Property, Plant and Equipment 4 700,000 Ren, Capital 680,000
Total Assets ₱1,510,000 Total Liabilities and Owner's Equity ₱1,510,00

* Ren, Capital of P680,000 is the ending capital in the Statement of Changes in Owner's Equity.
The Statement of
Cash Flows
Statement of Cash Flows
summarizes the cash activities of
the business by classifying cash
inflows (receipts) and cash
outflows
(payments/disbursements) into
operating, investing and
 Operating Activities
Investing Activities
Financing Activities
Components of the Statement of Cash
ows
Operating Activities- the cash inflows and cash outflows arising
from the normal operations of the business.

Receipts of Cash

• collections from customers for the performance of services or sale of goods.

• royalties, fees, commissions received
• interest, dividends and other income received

Payments of Cash

• to suppliers for services and goods acquired

• employees salaries
• government licenses and taxes
• interest expense
• other operating expenses
Investing Activities- cash activities related to Non-Current
Assets
Receipts of Cash

• sale of property and equipment

• collection of the principal amount of the money loaned

Payments of Cash

• purchase of property and equipment

• investment in debt or trading securities
• lending money
Financing Activities- the cash inflows and the cash outflows
from the owners and creditors of the business. Cash activities related
to Non-Current Liabilities and Owner’s Equity
Receipts of Cash

• original and additional investments by owner

• proceeds of loan

Payments of Cash

• cash withdrawal by owner

• payment for the principal balance of loan
Additional investment of the owner, ₱22,200

Financing
Proceeds of sale of equipment, ₱15,000

Investing
Collection of interest, ₱9,000

Operating
Operating

Collection from customers, ₱315,800

 Financing

Proceeds of bank loan, ₱200,000

Proceeds from sale of furniture, ₱8,000

Investing
Cash withdrawal of owner, ₱30,000

Financing
 Payment of bank loan, ₱150,000
Financing
 DRILL ( Uy Law Office)
Prepare a Statement of Cash Flows
 General Ledger
Cash
Date Items Ref Debit Date Items Ref Credit

Dec 1 Initial Investment 1 ₱500,000 Dec 1 Payment of permits & licenses 1 ₱10,000

1 Proceeds from bank loan 1 100,000 1 Payment of rent 1 120,000

8 Rendered services 1 37,500 2 Purchased office supplies 1 5,000

15 Received payment from Mercury Co. 1 135,000 8 Purchased laptop 36,000

22 Received advance payment from 2 35,000 17 Withdrawal 1 25,000

Jupiter Co.
31 Paid salaries and utilities for the 2 23,000
month
807,500 219,000
31 Balance ₱588,500
Transaction Activity

Initial Investment, ₱500,000 Financing

Proceeds from bank loan, ₱100,000 Financing
Rendered services, ₱37,500 Operating
Received payment from Mercury Co. , ₱135,000 Operating
Received advance payment from Jupiter Co., ₱35,000 Operating
Payment of permits & licenses,₱10,000 Operating
Payment of rent, ₱120,000 Operating
Purchased office supplies, ₱5,000 Operating
Purchased laptop, ₱36,000 Investing
Withdrawal, ₱25,000 Financing
Paid salaries and utilities for the month, ₱23,000 Operating
 Uy Law Office
Statement of Cash Flows
For Year Ended December 31, 2019

Cash Flows from Operating Activities

Receipts
Rendered services for cash ₱ 37,500
Received payment from Mercury Co. 135,000
Received advance payment from Jupiter Co. 35,000
Payments
Payment of permits and licenses (10,000)
Payment of rent (120,000)
Payment of office supplies (5,000)
Payment of salaries and utilities (23,000)
Net Cash from Operating Activities ₱ 49,500
Cash Flows fom Investing Activities
Payments
Purchase of laptop ₱(36,000)
Net Cash from Investing Activities (36,000)
Cash Flows from Financing Activities
Receipts
Initial investment from owner ₱500,000
Proceeds from bank loan 100,000
Payments
Cash withdrawal of owner (25,000)
Net Cash from Financing Activities 575,000
Net Increase/ Decrease in Cash ₱588,500
Cash Balance, January 1 0
Cash Balance, December 31 ₱588,500
 DRILL (By group)
Prepare a Statement of Cash Flows
DRILL : Sana All Merchandising started business last October 2020. The following are its cash transactions.

Transaction Activity
a. Additional investment in the business, ₱22,200 ?
b. Proceeds of sale of equipment, ₱15,000 ?
c. Collection of interest, ₱9,000 ?
d. Collection from customers, ₱315,800 ?
e. Proceeds of bank loan, ₱200,000 ?
f. Proceeds from sale of furniture, ₱8,000 ?
g. Payment of operating expenses, ₱145,000 ?
h. Collection of dividends, ₱12,000 ?
i. Cash withdrawal of owner, ₱30,000 ?
j. Payment of interest, ₱6,000 ?
k. Collection of rent, ₱30,000 ?
l. Purchase of furniture, ₱31,000 ?
m. Payment of bank loan, ₱150,000 ?
Identify the type of cash activities above then prepare the Statement of Cash Flows for Sana All Merchandising for
the year ended December 31, 2020.