LESSON 1- Financial Statements – Statement of Financial Position

Learning Activity (ies):

Activity 1 – Assets Classification
Essay:
1. When is an asset classified as current?

2. What are long-term investments?

3. What are property, plant and equipment?

Activity 2 – Liabilities Classification

1. What are the classifications of liabilities?

2. When is a liabilities considered current?

Activity 3 – Forms of Financial Position Report

Essay:
1. What are the kinds or forms of statement of financial position? What is their difference?
Activity 4 – Balance Sheet Accounts Classifications
Direction: Below are balance sheet accounts. Classify these accounts by writing them under their proper
columns:
Land Cash Truck
Accounts Payable Building Prepaid Rent
Accounts Receivable Taxes Payable Mortgage Payable
Loan Payable (due in 5 years) Prepaid Insurance Supplies
Note Payable (due this year) Unearned Rent Equipment
Furniture Notes Receivable Utilities Payable
Bonds Payable Accrued Liabilities

Current Assets Current Liabilities

_______________________________________ ______________________________________

_______________________________________ ______________________________________

_______________________________________ ______________________________________

_______________________________________ ______________________________________

_______________________________________ ______________________________________

_______________________________________ ______________________________________

_______________________________________ ______________________________________

Property, Plant and Equipment Non-Current Liabilities

_______________________________________ ______________________________________

_______________________________________ ______________________________________

_______________________________________ ______________________________________

_______________________________________ ______________________________________

_______________________________________ ______________________________________

_______________________________________ ______________________________________

_______________________________________ ______________________________________
Activity 5 – Balance Sheet Accounts/Terms - Identification
Direction: Give the accounting term that describes each statement

_______________________________ 1. Losses due to uncollectible accounts.

_______________________________ 2. Accounts deducted from the related asset accounts.

_______________________________ 3. Represents the expired cost of Property, Plant and Equipment

as a result of usage and passage of time.
_______________________________ 4. Accounts Receivable less Allowance for Bad Debts

_______________________________ 5. Property, Plant and Equipment less the related accumulated

depreciation account.

Activity 6 – Statement of Financial Position – Preparation

Presented below are the balance sheet accounts of Galvez Consultancy Firm. Prepare a report form
balance sheet for the year December 31, 2020 by completing the statement of financial position and the
accompanying notes to financial statement.

Land Php 68,000.00

Building 350,000.00
Furniture and Fixtures 4,500.00
Accumulated Depreciation - Building 50,000.00
Allowance for Bad Debts 6,000.00
Cash 101,000.00
Supplies 700.00
Accounts Receivable 46,500.00
Galvez, Capital 469,200.00
Accounts Payable 5,000.00
Loans Payable 50,000.00
Utilities Payable 500.00
Prepaid Insurance 10,000.00
 Galvez Consultancy Firm
Statement of Financial Position
As of December 31, 2020

Assets Note
Current Assets
Cash Php
Trade and Other Receivable 1
Prepaid Expenses 2
Total Current Assets

Non-Current Assets
Property, Plant and Equipment 3
Total Assets 524,700.00

Liabilities & Owner's Equity

Current Liabilities
Trade and Other Payables 4
Owner's Equity
Galvez, Capital 469,200.00
Total Liabilities and Capital 524,700.00

Notes to Financial Statement

Note 1 - Trade and Other Receivables

Account Receivable Php
Less: Allowance for Bad Debts
Total Php

Note 2 - Prepaid Expenses

Supplies Php
Prepaid Insurance
Total Php

Note 3 - Property, Plant and Equipment

Land Php
Building
Less: Accumulated Depreciaton Php
Furniture and Fixtures
Total Php

Note 4 - Trade and Other Payables

Accounts Payable Php
Loans Payable
Utilities Payable
Total Php
LESSON 2- Financial Statements – Statement of Comprehensive Income
Learning Activity (ies):
Activity 1 – Income Statement Preparation
Direction: Write T if the statement is true and F is the statement is False.
__________________ 1. The income statement shows the results of operations as well as the financial
standing of a company as of a given date.
__________________ 2. In preparing the income statement of a company, management may choose
between the single-step income statement or the multiple-step
income statement based on convenience.
__________________ 3. The cost of sales method of preparing income statement presents expenses
according to nature.
__________________ 4. The single-step income statement is used only in a service type of business.

__________________ 5. The single-step income statement presents expenses according to function.

Activity 2 – Income Statement Accounts/Terms

Direction: State the accounting term that best suits each statement.
_________________ 1. Expenses directly related to the sale of merchandise.

_________________ 2. Represents the cost of merchandise inventory sold by the business to its
customers.
_________________ 3. The main source of revenue in a merchandising business.

_________________ 4. Type of income statement that presents expenses according to nature.

_________________ 5. Expenses necessary in the management of the office.

_________________ 6. Expenses not connected to the operating activities of the business.

_________________ 7. Income derived from sources other than the company’s main line of business.

_________________ 8. Amount of receivables charged as expense for the period because they are
estimated to be doubtful of collection.
_________________ 9. Purchases less purchases returns and allowances and purchase discount

_________________ 10. Sales less cost of goods sold.

Activity 3 – Income Statement Preparation
The following are accounts taken from the books of Wei Long Trading for year ended
December 31, 2017. Complete the income statement based on the given facts.

Sales Php 450,000.00

Purchases 284,000.00
Inventory, Jan. 1 80,000.00
Sales Returns and Allowances 18,000.00
Sales Discount 12,000.00
Purchase Returns and Allowances 14,000.00
Purchase Discount 12,000.00
Freight-in 6,000.00
Inventory, Dec. 31 88,000.00
Advertising Expense 18,000.00
Sales Salaries 74,000.00
Freight-out 14,200.00
Utilities Expense - Store 2,800.00
Store Supplies 6,000.00
Offi ce Salaries 22,000.00
Utilities Expense - Offi ce 4,800.00
Offi ce Supplies 2,400.00
Doubtful Accounts Expense 7,200.00
Dividends Income 50,000.00
Rent Income 40,000.00
Interest Expense 16,000.00
Discount Lost 1,600.00

Wei Long Trading

Income Statement
For the month ended May 31, 2017

Note
Net Sales 1 Php
Cost of Sales 2
Gross Profit Php
Other Income 3
Total Income Php
Operating Expenses
Distribution Expenses 4 Php
Administrative Expenses 5
Other Expenses 6
Finance Cost 7
Net Income Php
Note 1 - Net Sales
Gross Sales Php
Less: Sales Returns and Allowances Php
Sales Discount
Net Sales Php

Note 2 - Cost of Sales

Merchandise Inventory, Beginning Php
Add: Purchases Php
Freight-in
Cost of Goods Delivered Php
Less: Purchase Returns & Allowances Php
Purchase Discount
Goods Available for Sale Php
Less: Merchandise Inventory, End
Cost of Sales Php

Note 3 - Other Income

Dividends Income Php
Rent Income
Total Php

Note 4 - Distribution Expenses

Sales Salaries Expense Php
Advertising Expense
Freight-out
Store Supplies
Utilities Expense - Store
Total Php

Note 5 - Administrative Expenses

Offi ce Salaries Expense Php
Doubtful Accounts Expense
Utilities Expense - Offi ce
Offi ce Supplies
Total Php
Note 6 - Other Expenses
Discount Lost Php

Note 7 - Finance Cost

Interest Expense Php

LESSON 3- Financial Statements – Statement of Changes in Owner’s Equity

Learning Activity (ies):

Activity 1 – Statement of Changes Preparation

On January 1, 2017, the capital of Ms. Ann Sungit is P102,500. During the year made an additional
investment of P25,000 and withdrew assets worth P78,000 for personal use. Net income during the year
amounted to P91,500. Prepare the statement of changes in owner’s equity for year ended December 31,
2017.

Activity 2 –
Refer to activity 1, assume that instead of a net income of P91,500, the business incurred a net loss in
the amount of P35,000. Prepare the statement of changes in owner’s equity.
Activity 3
Comprehensive Problem - Financial Statement (Service Concern Business)

Presented is the trial balance of Niko Ong Art Gallery. From the information given,
prepare the following by completing the incomplete statements and the accompanying
notes to financial statements:
1. Income Statement 3. Statement of Changes in Owner's Equity
2. Statement of Financial Position

Niko Ong Art Gallery

Trial Balance
31-Dec-14

Cash Php 840,500.00

Accounts Receivable 50,000.00
Art Supplies 12,000.00
Prepaid Rent 30,000.00
Prepaid Insurance 18,000.00
Transportation Equipment 300,000.00
Offi ce Equipment 50,000.00
Accounts Payable Php 37,000.00
Notes Payable 200,000.00
Utilities Payable 900.00
Unearned Painting Revenue 250,000.00
Ong, Capital 500,000.00
Ong, Drawing 30,000.00
Painting Revenue 350,000.00
Salaries Expense 2,500.00
Utilities Expense 4,900.00
Total Php 1,337,900.00 Php 1,337,900.00

Niko Ong Art Gallery

Income Statement
For Year Ended December 31, 2020

Painting Revenue Php

Expenses:
Utilities Php
Salaries
Net Income Php
 Niko Ong Art Gallery
Statement of Financial Position
As of December 31, 2020

Assets Note
Current Assets
Cash Php
Accounts Receivable
Prepaid Expenses 1
Total Current Assets Php
Non-Current Assets
Property, Plant and Equipment 2
Total Assets Php

Liabilities
Current Liabilities
Trade and Other Payables 3 Php

Owner's Equity
Ong, Capital
Total Liabilities and Owner's Equity Php

Niko Ong Art Gallery

Statement of Changes in Owner's Equity
For Year Ended December 31, 2020

Ong, Capital Php

Add: Net Income
Sub-Total Php
Less: Drawings
Total Owner's Equity Php
Notes to Financial Statements

Note 1 - Prepaid Expenses

Art Supplies Php
Prepaid Rent
Prepaid Insurance
Total Php

Note 2 - Property, Plant and Equipment

Transportation Equipment Php
Offi ce Equipment
Total Php

Note 3 - Trade and Other Payables

Accounts Payable Php
Notes Payable
Utilities Payable
Unearned Painting Revenuee
Total Php