Fabm-2 Las Quarter 3

11
FUNDAMENTALS
OF ACCOUNTANCY,
BUSINESS AND
MANAGEMENT 2
THIRD QUARTER
LEARNING ACTIVITY SHEETS
i
COPYRIGHT PAGE
Learning Activity Sheet

Fundamentals of Accountancy, Business and Management 2
Grade 11
Copyright @ 2020
DEPARTMENT OF EDUCATION
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be derived from the material for commercial purposes and profit.
Consultants:
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ii
TABLE OF CONTENTS
Competency Page No.
Identify the Elements of the SFP and

Describe Each of Them and Describe Each of Them……………………………… 2
Prepare an SFP Using the Report and Account Form with

Proper Classification of Current and Noncurrent…………………………………… 2
Identify the Elements of the SCI and Describe Each of These

Elements for a Service Business and a Merchandising Business......................... 10
Prepare an SCI for Service Business Using the Single-Step Approach................. 16

Prepare an SCI for a Merchandising Business Using the Multi-Step Approach.... 20
Prepare an SCE for Single/Sole Proprietorship...................................................... 28
Prepare Cash Flow Statement .............................................................................. 36
Discuss the Components and Structures of Cash Flow Statement........................ 43
Define the Measurement Levels, Namely Liquidity, Solvency,

Stability and Profitability......................................................................................... 51
Perform Vertical and Horizontal Analysis of

Financial Statements of a Single Proprietorship.................................................... 55
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....................................... 62
Identify the Types of Bank Accounts Normally Maintained by a Business............ 77
Prepare Bank Deposit and Withdrawal Slips ........................................................ 81
Identify and Prepare Checks .................................................................................87
Identify and understand the contents of a bank statement....................................91
iii
FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS AND MANAGEMENT 2
Name of Learner: _______________________________Grade Level: _____________
Section: _______________________________________Date: ___________________
LEARNING ACTIVITY SHEET

Statement of Financial Position
1
BACKGROUND INFORMATION FOR LEARNERS
In this first topic of your subject, it is very important for you to understand and analyze the
use of Statement of Financial Position. For the following activities, please be reminded of the
following terms:
• Assets = Liabilities + Owner’s Equity
• Statement of Financial Position
• Permanent Accounts
• Contra Assets
• Report Form
• Account Form
• Current and Non-current Assets
• Current and Non-current Liabilities
LEARNING COMPETENCY
Identify the elements of the SFP and describe each of them and describe each of them
(ABM_FABM12-Ia-b-1)
Prepare an SFP using the report and account form with proper classification of current and
noncurrent
(ABM_FABM12-Ia-b-4)
ACTIVITY 1: WORDHUNT
Let’s start the activities with this simple word hunt. All you have to do is to look for the
terminologies under PERMANENT ACCOUNTS. Encircle your answers.
R C C M O R T G A G E P A Y A B L E
G E F N W Q R B G H T J K C Y J L B
A S T A A D L O R D Y L C F S B C S
C C D A C O M I Y A T R P U A Y V D
C A C H I Y B O H U U N E V U A S I
A E S O O N Y L N E V E I N N B D N
P N C A U C E R D E I E I E S L D V
I A L R N N H D H G C T O L R E I E
T D O D T R T O E E C A S H N A N S
A Y S U S U O S R A E N R S R S V T
L R U L P X C S P D R K K Y E D E M
I R R O A O T T T A B N I N C F N E
C A S H Y N S T V I Y S I O N A T N
D T E E U M O B I L E A D N O S O T
E H L O B S M A T C H I B G G H R S
H E C O I N V E S T M E A L D S Y Y
A C C R U E D E X P E N S E E O A I
A H A L O A N S P A Y A B L E A S O
2
ACTIVITY 2: MATCHING
Let us check if you can still remember your lessons in your previous year level. Match the
corresponding examples found in column B to their respective terminologies in column A.
A B
____1. Accounting Equation a. Accounts payable
____2. Assets b. Capital
____3. Equity c. Cash
____4. Liabilities d. One owner
____5. Sole Proprietorship e.Assets=Liabilitie-Equity
f. Assets=Liabilities+Equity
ACTIVITY 3: CLASSIFICATION
In this activity, you will classify the following terminologies whether it is CURRENT
ASSET, NON-CURRENT ASSET, CURRENT LIABILITY, or NON-CURRENT
LIABILITY.
____________________1. Merchandise Inventory

____________________2. Deferred Revenue
____________________3. Building
____________________4. Furniture
____________________5. Accounts Payable
____________________6. Cash On Hand
____________________7. Land
____________________8.Accrued Income
____________________9. Mortgage Payable
____________________10. Cash In Bank
____________________11. Bonds Payable
____________________12. Accrued Expense
____________________13. Equipment
____________________14. Accounts Receivable
____________________15. Prepaid Expense
ACTIVITY 4: MODIFIED TRUE OR FALSE
In this activity, write TRUE if the statement is valid. If the statement is FALSE, write the
correct word(s) to make it right.
____________________1. Permanent accounts are those accounts that are presented under
the assets portion of the SFP but are reductions to the company’s
assets.
____________________2. This statement includes the amounts of the company’s total assets,
liabilities, and owner’s equity which in totality provides the
3
condition of the company on a specific date is known as
Statement of Financial Position.
____________________3. Income Statement is also known as Balance Sheet.
____________________4. Temporary accounts unlike permanent accounts will have zero

balances at the end of the accounting period.
____________________5. Example of permanent account include Cash.
____________________6. Liabilities that fall due (paid, recognized as revenue) within one
year after yearend date is known as Noncurrent Liabilities.
____________________7. Report Form is 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.
____________________8. Current Assets are assets that cannot be realized (collected, sold,
used up) one year after yearend date.
____________________9. A form of the SFP that shows asset accounts first and then
liabilities and owner’s equity accounts after is known as the
Account Form.
____________________10. Contra Accounts are retained permanently in the SFP until their
balances become zero and their balances remain intact from one
accounting period to another.
ACTIVITY 5: REPORT FORM
In this activity, prepare a Statement of Financial Position(SFP) report form of DEF Trading
for the year ended December 31,2019 using the information below.
Cash – 85,550 Accounts Receivable – 4,700

Prepaid insurance – 3,600 Supplies - 250
Prepaid rent – 1,500 Equipment – 9,000
Accumulated Depreciation (Equipment) – 3,600 Notes Payable – 5,000
Accounts Payable – 1,600 Salaries Payable – 2,000
Income taxes Payable – 3,000 Unearned Service Revenue – 4,400
Dy, Capital -85,000
4
DEF Trading
As of December 31,2019
Assets
Current Assets
Cash P
Accounts Receivable
Supplies
Prepaid Insurance
Prepaid Rent P
Non-Current Assets
Equipment P
Less:Accumulated Depreciation-Equipment
Total Assets P
Total Liabilities and Owners's Equity
Current Liabilities
Accounts Payable P
Notes Payable
Salaries Payable
Unearnered service revenue
Income Taxes Payable P
Dy,Capital
Total Liabilities and Owner's Equity
P
ACTIVITY 6: ACCOUNT FORM
In this activity, prepare a Statement of Financial Position(SFP) account form of DEF Trading
for the year ended December 31,2019 using the information below.
Cash – 85,550 Accounts Receivable – 4,700

Prepaid insurance – 3,600 Supplies - 250
Prepaid rent – 1,500 Equipment – 9,000
Accumulated Depreciation (Equipment) – 3,600 Notes Payable – 5,000
Accounts Payable – 1,600 Salaries Payable – 2,000
Income taxes Payable – 3,000 Unearned Service Revenue – 4,400
Dy, Capital -85,000
5
DEF Trading
Assets Total Liabilities and Owners's Equity
Current Assets P Current Liabilities

Cash Accounts Payable P
Accounts Receivable Notes Payable
Supplies Salaries Payable
Prepaid Insurance Unearnered service revenue
Prepaid Rent P Income Taxes Payable P
Non-Current Assets
Equipment P
Less:Accumulated
Depreciation-
Equipment Dy,Capital
Total Assets P Total Liabilities and Owner's Equity P
REFLECTION
Complete this statement:
In this activity I learned that

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
___________________________
REFERENCES FOR LEARNERS
Anastacio, Ma. Flordeliza. Fundamentals of Financial Management (with Industry

Based Perspective) .( Manila: Rex Book Store, 2011).
Gilbertson, Claudia. Fundamentals of Accounting . 8th ed. (Australia: Cengage

Learning, 2010).
Padillo, Nicanor, Jr. Financial Statements Preparation, Analysis and Interpretation .

(Manila: GIC Enterprises, 2011).
6
Pefianco, Erlinda C. The Accounting Process: Principles and Problems . (Makati:
Goodwill Trading, 1996).
Young, Felina C. Principles of Marketing . (Manila: Rex Book Store, 2008).
ANSWER KEY
ACTIVITY 1. WORDHUNT
R C C M O R T G A G E P A Y A B L E
G E F N W Q R B G H T J K C Y J L B
A S T A A D L O R D Y L C F S B C S
C C D A C O M I Y A T R P U A Y V D
C A C H I Y B O H U U N E V U A S I
A E S O O N Y L N E V E I N N B D N
P N C A U C E R D E I E I E S L D V
I A L R N N H D H G C T O L R E I E
T D O D T R T O E E C A S H N A N S
A Y S U S U O S R A E N R S R S V T
L R U L P X C S P D R K K Y E D E M
I R R O A O T T T A B N I N C F N E
C A S H Y N S T V I Y S I O N A T N
D T E E U M O B I L E A D N O S O T
E H L O B S M A T C H I B G G H R S
H E C O I N V E S T M E A L D S Y Y
A C C R U E D E X P E N S E E O A I
A H A L O A N S P A Y A B L E A S O
ACTIVITY 2. MATCHING
1. F
2. C
3. B
4. A
5. D
ACTIVITY 3. CLASSIFICATION
1. Current Asset 9. Non-current Liability

2. Current Liability 10. Current Asset
3. Non-current Asset 11. Non-current Liability
4. Non-current Asset 12. Current Liability
5. Current Liability 13. Non-current Asset
6. Current Asset 14. Current Asset
7. Non-current Asset 15. Current Asset
8. Current Asset
7
ACTIVITY 4. MODIFIED TRUE OR FALSE
1. Contra Accounts 6. Current Liabilities
2. True 7. Account Form
3. Statement of Financial Position 8. Noncurrent Assets
4. True 9. Report Form
5. True 10. Permanent Accounts
ACTIVITY 4. REPORT FORM

DEF Trading
Assets
Current Assets
Cash ₱85,550
Accounts
Receivable 4,700
Supplies 250
Prepaid Insurance 3,600
Prepaid Rent 1,500 ₱95,600
Non-Current Assets
Equipment 9,000
Less:Accumulated Depreciation-Equipment
3,600 5,400
Total Assets ₱101,000
Total Liabilities and Owners's Equity
Current Liabilities
Accounts Payable ₱1,600
Notes Payable 5,000
Salaries Payable 2,000
Unearnered service revenue
4,400
Income Taxes Payable 3,000 ₱16,000
Dy,Capital 85,000
Total Liabilities and Owner's Equity ₱101,000
8
ACTIVITY 5. ACCOUNT FORM
DEF Trading
Assets Total Liabilities and Owners's Equity
Current Assets Current Liabilities
Cash ₱85,550 Accounts Payable ₱1,600

Accounts Receivable 4,700 Notes Payable 5,000
Supplies 250 Salries Payable 2,000
Prepaid Insurance 3,600 Unearnered service revenue 4,400
Prepaid Rent 1,500 ₱95,600 Income Taxes Payable 3,000 ₱16,000
Non-Current Assets
Equipment ₱9,000
Less:Accumulated
Depreciation-
Equipment 3600 5,400 Dy,Capital 85,000
Total Assets ₱101,000 Total Liabilities and Owner's Equity ₱101,000
9
Section: _______________________________________Date: ___________________

Statement of Comprehensive Income
Background Information for Learners

One of the most important financial statements that a company has to prepare is its
Statement of Comprehensive Income (SCI). The SCI is the statement that provides various
users with information regarding the financial performance of the company over an
accounting period.
The Statement of Comprehensive Income has the following elements: revenues,
expenses, gains, and losses. It includes net income and unrealized income, thereby providing
a holistic view of the company’s income not fully captured on the income statement.
Learning Competency with Code

Identify the elements of the SCI and describe each of these elements for a service business
and a merchandising business. (ABM_FABM12-Ic-d-5)
Activity 1
Directions: Identify whether the following is an element of the Statement of Comprehensive
Income of a service business or of a merchandising business. Put a cross mark (x) on the
column where such is not an element and a check mark ( ⁄ ) on the column where it is an
element. (1 point each for every correct answer)
Service Business Merchandising Business
1. Net Sales
2. Freight in
3. Purchases
4. Tuition Fee
5. Gross Profit
6. Service Income
7. Sales Returns
8. Professional Fee
9. Selling Expenses
10. Cost of Goods Sold
10
Activity 2
Directions: Read the given sentences carefully. Select the best answer from the choices given
below. Write your answer on the space provided before each item. (1 point each)
Gains Gross Profit Professional Fee Net Income
Purchases Sales Discount Operating expenses Sales return
Sales Income Selling expenses Cost of Goods Sold Service Income
_____1. An example of service revenue.

_____2. The revenue generated from the sale of products.
_____3. It is computed by deducting the cost of sales from net sales.
_____4. It is used to describe revenue derived from the rendering of services.
_____5. A type of income derived from the other activities of the business.
_____6. The account used to report the acquisitions of merchandise for sale.
_____7. It represents the actual cost of inventories that the company was able to sell.
_____8. These are expenses that are directly related to the main purpose of a merchandising
business.
_____9. A contra-sales account that is used to report the amount of discount given to or taken
by the customers.
_____10. It refers to all other expenses related to the operation of the business such as salary
of employees, utility expense and supplies expense.
Activity 3
Choose the letter of the best answer. Write the letter of your choice on the space
provided before each item. Use capital letters. (1 point each)
_____1. Which of the following is an element of a statement of comprehensive income?
a. Cash c. Accounts Receivable
b. Revenues d. Unearned Income
a. Cash equivalents c. Nena, Capital
b. Professional fees d. Magno, Drawing
a. Notes Payable c. Interest Receivable
b. Notes Receivable d. Interest Expense
_____4. Which of the following is not an element of a statement of comprehensive income?
a. Interest Payable c. Interest Expense
11
b. Rent Expense d. Service Fee
a. Accounts Payable c. Interest Payable
b. Interest Receivable d. Gross Profit
_____6. Which of the following is classified as a selling expense?
a. Salaries of salesmen c. Salaries of corporate executives
b. Depreciation of office equipment d.Depreciation of administration building
_____7. Which of the following is classified as general and administrative expenses?
a. Salaries of admin personnel c. Rent for sales office
b. Salaries of sales agents d. Depreciation of delivery van
_____8. What is the resulting figure if inventory is deducted from the cost of goods available
for sale?
a. Gross Profit c. Net Sales
b. Net Purchases d. Cost of Goods Sold
_____9. Which of the following is the correct computation for the cost of goods available for
sale?
a. Net Sales – Cost of Goods Sold c. Beginning Inventory + Net Purchases
b. Sales – Cost of Goods Sold d. Net Purchases – Ending Inventory
_____10. This refers to the shipping cost necessary to bring inventory purchased from the
seller to the premises of the company.
a. Freight -In c. Delivery Expenses
b. Freight – Out d. Travelling Expenses
_____11. Tito Ben is the owner of Jack’s Magic Touch which offers beauty solutions to their
customers. Jen is the nail specialist of the salon. If you are the bookkeeper of the
entity, how would you account the payments received from Jen’s customers?
a. Salaries expense c. Salaries Income
b. Service Income d. None of the above
______12. From the above problem, if Jen receives a salary from Jack’s Magic Touch
amounting to P12,000 for one month, such payment will be treated as
_____________in Jack’s Magic Touch Statement of Comprehensive Income.
a. Salaries expense c. Salaries Income
b. Service Income d. None of the above
______13. The salaries given to the nail specialist in #2 is considered part of
a. Operating income c. General & Administrative Expense
b. Operating Expense d. None of the above
_____14. Pepe is a Senior High School student who works as a part-time cook every week
ends at a certain restaurant near their house and receives a pay of P500 which serves
as his weekly allowance. On Friday night, he counted his money and found out that
12
there’s still P182.50 left from his money after a week-long class. This amount is to
be treated as Gary’s
a. Gross Profit c. Operating Income
b. Net Income d. None of the above
15-20 Agnes is a balut vendor. At the beginning of the day, there were 15 pieces of balut on
hand costing P195.00. During the day, she bought another 7 dozens for P13 per piece.
Agnes was able to sell a total of 70 pieces for the day @ P25/piece. However, Agnes gave a
P2 discount to Violy, a loyal buyer, who bought 15 pieces of balut.
_____15. Agnes’ net sales for the day is
a. P1,750.00 c. P1,720.00
b. P1,092.00 d. P1,287.00
_____16. The total goods available for sale for the day amounts to
a. P1,750.00 c. P1,720.00
b. P1,092.00 d. P1,287.00
_____ 17. Ending inventory for the day is
a. 29 pieces c. 14 pieces
b. 99 pieces d. 84 pieces
_____18. Net purchase for the day amounts to
a. P1,287.00 c. P1,092.00
b. P1,750.00 d. P1,720.00
_____ 19. Agnes’ gross profit for the day is
a. P810.00 c. P628.00
b. P840.00 d. P615.00
_____20. If during the day, Agnes incurred P50.00 in delivering balut products to her
customers, such expense will be treated as
a. Freight-in c. shipping fee
b. Freight-out d. none of the above
Reflection:
In this activity, I learned that____________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
13
References:
Salazar, D. (2017). Fundamentals of accountancy, business and management 2, Sampaloc,
Manila: Rex Book Store, Inc.
Beticon, J., Domingo, J., Yabut, F. (2016). Fundamentals of accountancy, business and
management 2, Quezon City: Vibal Group, Inc.
Answer Key:
Activity 1
Service Business Merchandising Business
1. Net Sales x ⁄
2. Freight in x ⁄
3. Purchases x ⁄
4. Tuition Fee ⁄ x
5. Gross Profit x ⁄
6. Service Income ⁄ x
7. Sales Returns x ⁄
8. Professional Fee ⁄ x
9. Selling Expenses x ⁄
10. Cost of Goods Sold x ⁄
Activity 2
1. Professional Fee
2. Sales Income
3. Gross Profit
4. Service Income
5. Gains
6. Purchases
8. Selling Expenses
9. Sales Discount
10. Operating Expenses
Activity 3
1. B
2. B
3. C
4. A
5. D
6. A
7. A
8. D
14
9. C
10. A
11. B
12. A
13. B
14. B
15. C
16. D
17. A
18. C
19. A
20. B
15
Section: _______________________________________Date: ___________________


Most of the business owners are often confused about what format of the Statement of
Comprehensive Income (SCI) will they use. The single-step Statement of Comprehensive
Income is generally used by small businesses and service businesses because of its simplicity.
It offers a straightforward accounting of the financial activity of a business. It is easy to
understand and relatively easy to prepare as well.
Under the single-step SCI, net income is computed using only one step, deducting
total expenses from total revenues. Revenues and gains are usually presented on one line and
expenses and losses on the other line. In other words, it makes use of the following equation:
Net Income = (Revenues+Gains) – (Expenses+Losses).
Prepare an SCI for a service business using the single-step approach. (ABM_FABM12-Ic-d-
6)
Activity 1
Directions: Prepare a single-step Statement of Comprehensive Income for Sta. Lucia Eye
Care Center for the current year through their accounts December 31, 2019 below:
Professional Fees P 1,800,000.00
Salaries Expense 240,000.00
Supplies Expense 80,000.00
Rent Expense 60,000.00
Utilities Expense 36,000.00
Insurance Expense 10,000.00
Depreciation Expense 20,000.00
16
Activity 2
Directions: Using the accounts of Maria Ana Pediatric Clinic for December 31, 2019 below,
prepare a Statement of Comprehensive Income for it using the single-step format for
December 31, 2019:
Gain on sale of equipment 40,000.00
Activity 3
KarNet Computer Services has the following accounts for December 31, 2019:
Service Income P 875,000.00
Prepare a Statement of Comprehensive Income for KarNet Computer Services using

the single-step format for December 31, 2019.
Rubric for Scoring:

Activity I-III:
A corresponding score based on the level of understanding.
Level of Understanding Score
Shows excellent performance t in preparing an income statement. 16-20
No errors in calculations.
Shows a good understanding in preparing an income statement. 11-15
There are a few errors in calculations.
Shows little understanding of preparing an income statement. Many 6-10
errors were committed.
Evidence of little or no understanding of preparing an income 0-5
statement. Calculations were incorrect.
17
Reflection:
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
References:
Salazar, D. (2017). Fundamentals of accountancy, business and management 2. Sampalok,
https://www.freshbooks.com/hub/accounting/single-step-vs-multi-step-income-
statement#:~:text=A%20single%2Dstep%20income%20statement%20presents%20the%20re
venue%2C%20expenses%20and,)%20%E2%80%93%20(Expenses%20%2B%20Losses)
https://www.rcampus.com/
Answer Key:
Activity 1
STA. LUCIA EYE CARE CENTER
For the period ended December 31, 2019

Less: Operating Expenses
Salaries Expense P 240,000.00
Depreciation Expense 20,000.00 446,000.00
NET INCOME P 1,354,000.00
Activity 2
18
MARIA ANA PEDIATRIC CLINIC

Rent Expense 120,000.00 575,000.00
Gross Profit 1,275,000.00
Other Comprehensive Income
Activity 3
KARNET COMPUTER SERVICES
Service Income P 875,000.00

Rent Expense 60,000.00 408,000.00
Gross Profit 467,000.00
Other Comprehensive Income
NET INCOME P 492,000.00
General &
Selling
Administrative
Amount Expense
Expenses
(SE)
(G&A Exp.)
Salaries Expense P 70,000.00 30% to SE P 21,000.00 P 49,000.00
Utilities Expense 30,000.00 30% to SE 9,000.00 21,000.00
19
Depreciation Expense 3,000.00 30% to SE 900.00 2,100.00
Rent Expense 20,000.00 30% to SE 6,000.00 14,000.00
Advertising Expense 8,000.00 8,000.00
TOTAL P 131,000.00 P 36,900.00 P 94,100.00
Section: _______________________________________Date: ___________________


Multi-step Statement of Comprehensive Income is one of the two-income statement
formats businesses can use to report their profits. It is usually used by large, complex
companies. It presents a company’s revenues, expenses, and over-all profit/loss for a specific
reporting period. It involves many equations to arrive at the company’s net income.
The multi-step approach in preparing Statement of Comprehensive Income(SCI) uses
three different accounting formulas to arrive at the net income:
Gross Profit = Net Sales – Cost of Goods Sold
Operating income = Gross Profit – Operating Expenses.
Lastly, net income is derived by adding non-operating revenues, gains, expenses, and
losses to the computed operating income. One of the advantages of the multi-step SCI is that
it gives greater financial detail about a business that will help financial users especially the
investors and creditors to assess the company’s long-term viability.

Prepare an SCI for a merchandising business using the multi-step approach.
(ABM_FABM12-Ic-d-7)
Activity 1
Directions: Prepare a multi-step Statement of Comprehensive Income using the following:
Sales P350,000.00
Cost of Goods Sold 135,000.00
General and Administrative Expenses 90,000.00
Selling Expenses 75,000.00
(Note: You can use any business name of your choice and end of the current year for
the heading.)
20
Activity 2
Directions: Using the given data below, prepare a multi-step Statement of Comprehensive
Income for Filomena Merchandising for the year ended December 31, 2019.
The following are the accounts of Filomena Merchandising for the year ended December 31,
2019: (30 points)
Sales P 4,200,000.00
Beginning Inventory 8,750.00
Purchases 212,000.00
Ending Inventory 12,000.00
Sales Discount 575.00
The company hired you as a bookkeeper and you are tasked to prepare the necessary
financial statements for the current year.
Accordingly, 25% of salaries, rent, depreciation, and utility expenses pertain to the
sales office while the rest pertains to the corporate office.
Activity 3
Directions: Prepare a Statement of Comprehensive Income for Pablo and Juancho
Merchandising using the multi-step format for the year ended December 31, 2019.
Pablo and Juancho Merchandising has the following accounts for the year ended
December 31, 2019: (40 points)
Sales P 1,200,000.00
Beginning Inventory 200,000.00
Ending Inventory 80,000.00
Purchases 480,000.00
Freight-in 1,500.00
Purchase Returns ?
Purchase Discounts ?
Sales Returns 1,200.00
Sales Discounts ?
Advertising Expense 8,000.00
Additional Information:
• 30% of all expenses excluding advertising expense is attributable to selling
while the rest pertains to the corporate office.
21
• The owner of Kofun Enterprises, Mr. Jacinto Miguel, who is a regular
customer was given 2% discount on his P100,000.00 worth of purchases.
• Another customer in which the company issued a P90,000 bill also took
advantage of the 2% discount.
• The company availed of the 3% discount on its P80,000.00 account to B&C
Company.
• 3% of the total purchases made by the company were found defective and
were returned to the suppliers.
Guide Questions:
Activity 1
1. What are the elements of a multi-step Statement of Comprehensive Income?
2. How are we going to arrive at the net income under the multi-step SCI?
Activity 2 & 3
1. How are we going to compute for the following under multi-step approach?
a. Net Sales
b. Cost of Goods Sold
c. Gross Profit
d. Net Income
2. How much is the selling expenses and general and administrative expenses?
Rubric for Scoring:
Activity I:
1 point for every correct answer in each line item of the financial statement.
Activity II:
Rubric

Evidence of an excellent performance in preparing an income 24-30
statement. Very few to no errors were committed.
Evidence of a good understanding of preparing an income 16-23
statement. A few errors in calculations.
Evidence of little understanding of preparing an income statement. 9-15
Many errors were committed.
Evidence of little or no understanding in preparing an income 0-8
statement. The calculations were mostly incorrect.
Activity III:
Rubric
.
Evidence of an excellent in preparing an income statement. Very 32-40
few to no errors were committed.
Evidence of a good understanding in preparing an income 22-31
22
statement. A few errors in calculations.
Evidence of little understanding in preparing an income statement. 11-21
Many errors were committed
Evidence of little or no understanding of preparing an income 0-10
statement. Calculations were mostly incorrect.
Reflection:
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
References:
Salazar, D. (2017). Fundamentals of accountancy, business and management 2. Sampalok,
https://www.freshbooks.com/hub/accounting/single-step-vs-multi-step-income-
statement#:~:text=A%20single%2Dstep%20income%20statement%20presents%20the%20re
venue%2C%20expenses%20and,)%20%E2%80%93%20(Expenses%20%2B%20Losses)
https://www.rcampus.com/
https://www.freshbooks.com/hub/accounting/multi-step-income-statement
www.cliffsnotes.com/study-guides
23
Answer Key:
Activity 1
YENA MERCHANDISING
For the year ended December 31, 2019
Sales P 350,000.00
Less: Cost of Goods Sold 135,000.00
Selling Expenses P 75,000.00
General and Administrative Expenses 90,000.00 165,000.00
Activity 2
FILOMENA MERCHANDISING
Net Sales P 4,199,425.00

Gross Profit 3,990,675.00
Notes to Financial Statement

1. Net Sales
Sales P 4,200,000.00
Less: Sales Discount 575.00
Net Sales P 4,199,425.00
24
Beginning Inventory P 8,750.00
Add: Purchases 212,000.00
Total Goods Available for Sale 220,750.00
Less: Ending Inventory 12,000.00
Cost of Goods Sold P 208,750.00
General and
Selling
Administrative
Amount Expense
Expense
(SE)
(G&A Exp.)
Supplies Expense 120,000.00 120,000.00
Depreciation Expense 80,000.00 25% to SE 20,000.00 60,000.00
Insurance Expense 30,000.00 30,000.00
TOTAL P 517,000.00 P 91,750.00 P 425,250.00
Activity 3
PABLO AND JUANCHO MERCHANDISING
Net Sales P 1,196,200.00

25
Notes to Financial Statement
1. Net Sales
Sales P 1,200,000.00
Less: Sales Returns P 1,200.00
*Sales Discount 2,600.00 3,800.00
Net Sales P 1,196,200.00
*Sales Discount:
a. Kofun Enterprises (P100,000.00 x 2%) P 2,000.00
b. Another customer (P30,000.00 x 2%) 600.00
Total Sales Discount P 2,600.00

Beginning Inventory P 200,000.00
Add: Net Purchases
Purchases P 480,000.00
Less: Purchase Returns* P 14,400.00
Less: Purchase Discount** 2,400.00 16,800.00
Net Purchases 463,200.00
Add: Freight-in 1,500.00
Net Cost of Goods Purchased 464,700.00
Total Goods Available for Sale 664,700.00
Less: Ending Inventory 80,000.00
Cost of Goods Sold P 584,700.00
* Purchase Returns:
P480,000.00 x 3% P 14,400.00
** Purchase Discount:
P80,000.00 x 3% P 2,400.00
26
General &
Selling
Administrative
Amount Expense
Expenses
(SE)
(G&A Exp.)
Depreciation Expense 3,000.00 30% to SE 900.00 2,100.00
Advertising Expense 8,000.00 8,000.00
TOTAL P 131,000.00 P 36,900.00 P 94,100.00
27
FUNDAMENTALS OF ACCOUNTANCY
Name of the Learner: ________________________________ Grade Level: _________
Section: ___________________________________________ Date: _______________
Prepare a Statement of Changes in Equity

All changes, whether increases or decreases to the owner’s interest in the company
during the period are reported in the Statement of Changes in Equity. This statement is
prepared before preparation of the Statement of Financial Position (SFP) to be able to obtain
the ending balance of the equity to be used in the SFP.
Learning Competency:
Prepare an SCE for single/sole proprietorship. (ABM_FABM12-Ie-9)
Activity 1
Directions/Instructions:
Compute the missing element for each independent case. Choose your answer in the choices
given and write the correct letter on the box below. Each item is given 1 point.
A. P 150,000 I. P 695,000 O. P 36,000
C. P 492,000 K. P 0 T. P 190,000
G. P 75,000 N. P 80,000 Y. (P 10,500)
Beginning Net Income/ Additional Ending

Withdrawals
Capital (Net Loss) Investment Capital
P 50,000 P 100,000 P 50,000 P 10,000 (1)
P 75,000 P 155,000 (2) P 68,000 P 198,000
P 500,000 126,000 P 110,000 (3) P 656,000
P 30,000 (4) P 25,000 P 10,000 P 34,500
(5) P 150,000 P0 P 30,000 P 310,000
P 356,000 (6) P 100,000 P 25,000 P 581,000
P 65,000 (P 15,000) P 35,000 P 5,000 (7)
(8) P 145,500 P0 P 75,000 P 562,500
P 624,000 P 325,000 (9) P 100,000 P 999,000
P 80,000 (P 24,000) P 45,000 (10) P 101,000
P 60,000 (11) P 40,000 P 5,000 P285,000
P 450,000 P 207,000 P 80,000 P 42,000 (12)
P 240,000 P 88,000 P 60,000 (13) P 352,000
(14) (P 32,000) P 52,000 P0 P 100,000
28
P 100,000 P 53,360 (15) P 50,000 P 178,360
Answer:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Clue: “If you dream big, and put your dream into action, you will indefinitely make mistakes.
But don’t be scared to make mistakes. Just be quick to recognize them and learn from them as
far as you can.”
Guide Question:
1. What are the elements that will increase the owner’s equity?
2. What are the elements that will decrease the owner’s equity?
Activity 2
Analyze and solve each problem. Show your work in the box provided.
1. The beginning owner’s equity amounted to P 500,000. The business incurred a P62,000
net loss for the year. No additional investments and withdrawals for the period. Compute
for a total increase in equity for the year.
2. Ending owner’s equity amounted to P90,000. Additional investments during the year
amounted to P30,000. Withdrawals totaled P10,000. Compute for the company’s net
income for the year assuming beginning equity is P50,000.
3. The beginning capital of Mr. Coco to start his business is P380,000. During the year, Mr.
Coco invested additional P70,000 cash and incurred a net loss of 53,000. How much is the
balance of Mr. Coco’s ending balance at the end of the year?
4. Carlo invested an initial capital amounting P50,000 to put up his buy and sell business.
During the first year of operations (2018), the company had a total net loss of P5,000.
Because of this, Carlo invested additional P50,000 cash in 2019. In the second year
(2019), the company had a net income of P60,000 and Juan withdrew P10,000 for
personal use. Compute for the ending capital balance of Juan for the year 2019.
5. Maria invested P150,000 to start her beauty salon business. During the first year of
operations (2018), the company had a net income of P30,000. Maria invested an
additional P50,000 to grow the business. In 2019, the business earned P75,000. As of
December 31, 2019, Maria’s capital balance is P270,000. How much is Maria’s
withdrawal?
29
Solution Sheet
1. 2.
3. 4.
5.
Rubrics for Scoring:
30
SCORE DESCRIPTION
The calculation was correct with complete solution.
3 Labeled the final answer correctly.
The final answer was correct but with misinterpretation of some
2 parts of the problem.
Labels were incorrect or missing.
1 The final answer was incorrect.
0 No attempt
Activity 3
Analyze each problem. Prepare a statement of changes in owner’s equity in the box provided.
1. In 2019, Marie, the owner of Gatan Law Firm, has a beginning capital balance of
P672,000. During the year, Gatan Law Firm earned a net income of P260,300. Also,
she invested additional cash of P100,000 in the business. Furthermore, Marie got
hospitalized and withdrew P50,000 for the payment of her hospital bill. How much is
the ending capital balance of Gatan Law Firm as of December 31, 2019?
2. OMY Trading is owned by Ms. Dina Catacutan. The beginning capital of Ms.
Catacutan is P520,000. In 2019, OMY Trading earned a P107,000 net income. During
the year, she withdrew P40,000. As of December 31, 2019, her capital balance is
P662,000. How much is the additional investment of Ms. Dina Catacutan in 2019?
31
3. Labanderyo Laundry Shop is owned by Mr. Deryo Laban. Labanderyo Laundry
Shop’s capital balance as of January 2019 is P250,000. Due to cash shortage problem,
he invested additional cash of P160,000. Furthermore, Labanderyo Laundry shop
incurred a net loss of P75,000. His capital balance as of December 31, 2019 is P
320,000. How much is Mr. Laban’s withdrawal for the year?
4. BIG Merchandising is owned and managed by Mrs. Bing Go. During 2019, Mrs. Go
invested additional cash investment of 325,000. Also, she incurred a net loss of
P130,000. She also withdrew P60,000 from BIG Merchandising for her personal use.
Finally, her ending capital balance is P 970,000 as of December 31, 2019. How much
is Mrs. Bing Go’s beginning capital balance (January 1,2019)?
Guide Question:
1. What are the procedures in constructing a statement of changes in owner’s equity
illustrating net income?
2. What are the procedures in constructing a statement of changes in owner’s equity
illustrating net loss?
Rubrics for Scoring:

SCORE DESCRIPTION
The calculation was correct.
5
The procedures and format were complete and correct.
32
Indicated labels such as the peso sign and double rule completely.
Clean/neat solution sheet.
4 The procedures and format were complete and correct.
Indicated labels such as the peso sign and double rule completely.
3 The procedures and format were complete and correct.
Labels were incorrect or missing.
Answer was not mathematically reasonable, or it may be correct with no
2 indication of understanding.
The procedures and format were partially correct or incorrect.
1 The calculation was incorrect.
0 No attempt
Closure:
In this activity, I learned that
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
References:
Haddock, M., Price, J., & Farina, M. (2012). College Accounting: A Contemporary
Approach, Second Edition. New York: McGraw-Hill/Irwin.
Beticon, Domingo & Yabut (2016). Fundamentals of Accountancy, Business and
Management 2. Quezon City: Vibal Group, Inc.
Answer Key
Activity 1
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
T O N Y T A N C A K T I O N G
Activity 2
1. Increase is zero but decrease is P 62,000
2. P 20,000
33
3. P 397,000
4. P 145,000
5. P 35,000
Activity 3
1.
Gatan Law Firm
Statement of Changes in Owner’s Equity
For the Year Ended December 31, 2019
Marie Gatan, Capital, January 1, 2019 P 672,000

Add: Net Income, 2019 P 260,300
Additional Investment 100,000 360,300
Subtotal 1,032,300
Less: Withdrawals by Proprietor 50,000
Marie Gatan, Capital, December 31, 2019 P 982,300
2.
OMY Trading
Dina Catacutan, Capital, January 1, 2019 P 520,000

Add: Net Income, 2019 P 107,000
Additional Investment 75,000 182,000
Subtotal 702,000
Less: Withdrawals by Proprietor 40,000
Dina Catacutan, Capital, December 31, 2019 P 662,000
3.
Labanderyo Laundry Shop
Deryo Laban, Capital, January 1, 2019 P 250,000

Add: Additional Investment 160,000
Subtotal 410,000
Less: Net Loss for 2019 P 75,000
Withdrawals by Proprietor 15,000 90,000
Deryo Laban, Capital, December 31,34 2019 P 320,000
4.
BIG Merchandising
Bing Go, Capital, January 1, 2019 P 835,000

Add: Additional Investment 325,000
Subtotal 1,160,000
Less: Net Loss for 2019 P 130,000
Withdrawals by Proprietor 60,000 190,000
Bing Go, Capital, December 31, 2019 P 970,000
35
Name of the Learner: ___________________________________Grade Level: _________
Section: ______________________________________________Date:_______________
Components and Structures of Cash Flow Statement

Cash Flow Statement (CFS) presents the sources and utilization of an organization’s
cash and cash equivalents for a period. It has three major sections: operating, financing and
investing. Each section represents the classification of the organization’s cash related
activities.
Discuss the components and structures of Cash Flow Statement. (ABM_FABM12-If-10)
Activity 1
Determine each transaction whether they are operating, investing or financing. Put a check on
the column which identifies the cash related activity. Each item is given 1 point.
Item Transaction Operating Investing Financing
1 Cash collected from customers
2 Cash paid to suppliers for inventory
3 Cash received from bank on a loan
4 Cash paid for interest on a loan
5 Cash paid for wages
6 Cash received from the sale of land
7 Cash paid for property tax
8 Cash received from services rendered
9 Cash paid to purchase machinery
10 Cash paid for repayment of loans
11 Payment for annual rent
12 Purchase of copyrights
13 Proceeds from cash investment of owners
14 Proceeds from sale of vehicles
15 Cash distributions to owners
Guide Question:
1. What is the decision rule in determining classification of cash transaction?
36
Activity 2
Below are the cash transactions of Paloma Trading for December 31, 2019. Show your
computation in the box provided.
Cash receipts from sale of goods P 3,300,000
Cash payments to suppliers P 1,100,000
Withdrawals by the owner Mr. Dalisay P 50,000
Proceeds from bank loans P 800,000
Payment for salaries and wages to the employees P 444,000
Proceeds from cash investment of the owner Mr. Dalisay P 500,000
Payment for acquisition of patents P 320,000
Proceeds from sale of equipment P 76,000
Payments for taxes and licenses P 153,000
Payment for interest P 15,000
Payment for acquisition of delivery van P 800,000
Proceeds from interest P 32,000
Additional cash investments of Mr. Dalisay P 200,000
Payment for utilities expense P 139,000
Cash at the beginning of the year P 628,000
Answer the following questions: (Each item is given 5 points.)

1. How much is the cash flow from operating activities?
2. How much is the cash flow from investing activities?
3. How much is the cash flow from financing activities?
4. How much is the net increase or decrease in cash for the year?
5. How much is the cash as of December 31, 2019?
Answer Sheet
1.
2.
37
3.
4.
5.
Activity 3
Given below is the Statement of Comprehensive Income of Alrarian Company for year 2019.
Alrarian Company
Sales P 2,300,000
Less: Cost of Sales 1,600,000
Gross Profit P 700,000
Less: Selling Expenses P 240,000
General Expenses 210,000 450,000
Net Income P 250,000
Additional information for 2019 are as follows:

Depreciation P 40,000
Increase in Accounts Receivable 60,000
Decrease in Inventory 25,000
Decrease in Prepaid Expense 10,000
Decrease in Accounts Payable 35,000
Sale of equipment 20,000
Purchase of land 370,000
Acquire patents 80,000
Additional investment of the owner Ms. Angel 150,000
Drawing of Ms. Angel 30,000
Cash balance at the beginning of the year 520,000
38
Net decrease in cash 80,000
Reconcile the 2019 net income of P250,000 with the net decrease in cash of P80,000 by
preparing a cash flow statement. Fill in the blanks for the indirect method.
Alrarian Company
Cash Flows Statement
CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments:
Add: __________________________ _________
__________________________ _________
__________________________ _________
Less: __________________________ _________
__________________________ _________
Net Cash Flows from Operating Activities P_________
CASH FLOWS FROM INVESTING ACTIVITIES:

Add: ____________________________ P________
Less: ____________________________ _________
____________________________ _________
Net Cash Flows for Investing Activities __________
CASH FLOWS FROM FINANCING ACTIVITIES:

Add: ____________________________ P________
Less: ____________________________ _________
Net Cash Flows from Financing Activities ___________
NET DECREASE IN CASH ( 80,000)
Add: ________________________________ ___________
CASH BALANCE, DECEMBER 31,2019 P
Guide Question:
3. What are the reasons for the increase or decrease?
4. How much is the cash as of December 31, 2019?
Reflection:
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
39
References:
Stice, Stice, Dkousen(2007). Intermediate Accounting (16th ed.). Thomson Learning Asia
Answer Key
Activity 1
Item Transaction Operating Investing Financing

1 Cash collected from customers
2 Cash paid to suppliers for inventory
3 Cash received from bank on a loan
4 Cash paid for interest on a loan
5 Cash paid for wages
6 Cash received from the sale of land
7 Cash paid for property tax
8 Cash received from services rendered
9 Cash paid to purchase machinery
10 Cash paid for repayment of loans
11 Payment for annual rent
12 Purchase of copyrights
13 Proceeds from cash investment of owners
14 Proceeds from sale of vehicles
15 Cash distributions to owners
Activity 2
1. Cash Flow from Operating Activities:
Cash Inflows:
Cash receipts from sale of goods P 3,300,000
Proceeds from interest 32,000 P 3,332,000
Cash Outflows:
Cash payments to supplier P 1,100,000
Payment of salaries and wages 444,000
Payment for taxes and licenses 153,000
Payment for interest 15,000
Payment of utilities 139,000 1,851,000
Net Cash Flow P 1,481,000
40
2. Cash Flow from Investing Activities:
Cash Inflows:
Proceeds from sale of equipment P 76,000
Cash Outflows:
Payment of acquisition of patents P 320,000
Payment of acquisition of delivery van 800,000 1,120,000
Net Cash Flow (P1,044,000)
3. Cash Flow from Financing Activities:
Cash Inflows:
Proceeds from bank loan P 800,000
Proceeds from cash investments 500,000
Additional cash investment 200,000 P 1,500,000
Cash Outflows:
Withdrawals by the owner 50,000
Net Cash Flow P 1,450,000
4. Net cash flow from operating activities P
1,481,000
Net cash flow from investing activities ( 1,044,000)
Net cash flow from financing activities 1,450,000
Net Increase in Cash P 1,887,000
5. Net Increase in Cash P
1,887,000
Add: Cash balance at the beginning of the year 628,000
Cash Balance, December 31, 2019 P 2,515,000
41
Activity 3
Alrarian Company

Adjustments:
Add: Depreciation 40,000
Decrease in Inventories 25,000
Decrease Prepaid Expenses 10,000
Less: Increase in Accounts Receivable 60,000
Decrease in Accounts Payable 35,000
Net Cash Flows from Operating Activities P 230,000

Add: Cash received from sale of equipment 20,000
Less: Purchase of land 80,000
Acquisition of patents 370,000
Net Cash Flows for Investing Activities ( 430,000)

Add: Additional Investment of the owner P 150,000
Less: Cash withdrawal of the owner 30,000
Net Cash Flows from Financing Activities 120,000
Add: CASH BALANCE, JANUARY 1, 2019 520,000
CASH BALANCE, DECEMBER 31,2019 P 440,000
42
Section: ___________________________________________ Date: _______________
Prepare a Cash Flow Statement

Cash Flow Statement (CFS) provides an analysis of inflows and/or outflows of cash
from/to operating, investing and financing activities. This statement shows cash transactions
only compared to the SCI which follows the accrual principle. It reconciles the cash balance
beginning with the cash balance ending. The information from CFS will aid the organization
in their financing decisions.
Prepare cash flow statement. (ABM_FABM12-If-11)
Activity 1
Given below is the Statement of Comprehensive Income of Trixiah Mielle Company for year
2019. Prepare a statement of cash flows using the direct method. Show your work in the box
provided.
Trixiah Mielle Company

Revenues P 6,600,000
Gross Profit P 3,200,000
Less: Operating Expenses (excluding depreciation) P 1,100,000
Depreciation 150,000 1,250,000
Net Income P 1,950,000
43
The following balances are reported on December 31:
2018 2019_____
Cash P 560,000 P 2,220,000
Accounts Receivable 1,270,000 1,420,000
Inventories 330,000 410,000
Accounts Payable 980,000 950,000
Additional cash transactions for 2019 are as follows:
1. The company has a long-term loan for P2,000,000 from Centro Bank.
2. The company bought equipment for P430,000 cash.
3. The company bought a delivery truck for P1,650,000 cash.
4. Trixiah Mielle withdrew P100,000 for her personal use.
Answer Sheet
Guide Question:
1. How much is the cash from or for operating activities?
44
2. How much is the cash from or for investing activities?
3. How much is the cash from or for financing activities?
Activity 2
Using the information in Activity 1, prepare a statement of cash flows using the indirect
method. Show your work in the box provided
45
Guide Question:
Activity 3
Quarta Merchandising presents the following information from its adjusted general ledgers
for year 2019:
A. Operation
Sales (P1,000,000 not yet collected) P 6,000,000
Cost of Sales (P200,000 not yet paid) 3,800,000
Salaries and Wages 400,000
Office Supplies Expense 60,000
Advertising Expense 100,000
Insurance Expense 150,000
Utilities Expense 120,000
Depreciation Expense 110,000
Taxes and Licenses 200,000
B. Purchase of delivery truck P 1,700,000
C. Purchase of equipment P 400,000
D. Loan from Centro Bank P 1,000,000
E. Cash withdrawn by Macky Quarta 200,000
F. Additional cash invested by Macky Quarta P 500,000
G. Cash balance beginning P 670,000
Required:
Prepare the cash flows statement using:
a. Direct method
b. Indirect method
Guide Question:
5. Did cash change increase or decrease?
6. How much is the net income?
Closure:
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
46
___________________________________________________________________________
___________________________________________________________________________
References:
Stice, Stice, Dkousen(2007). Intermediate Accounting (16th ed.). Thomson Learning Asia
S. Frias(2006). Fundamentals of Accountancy, Business and Management: A textbook in
Basic Accounting 2. Quezon City: The Phoenix Publishing House Inc.
Answer Key
Activity 1


Cash collections from customers
Total Revenues P 6,600,000
Less: Increase in Accounts Receivable 150,000 P 6,450,000
Payment for Cost of Sales

Cost of Sales 3,400,000
Add: Increase in Inventories 80,000
Decrease in Account Payable 30,000 ( 3,510,000)
Payment of Operating Expenses ( 1,100,000)
Net Cash Flows from Operating Activities 1,840,000

Purchase of Equipment P 430,000
Purchase of Delivery truck 1,650,000
Net Cash Flows from Investing Activities ( 2,080,000)

Proceeds from bank loan P 2,000,000
Cash withdrawal of the owner ( 100,000)
Net Cash Flows from Financing Activities 1,900,000
NET INCREASE IN CASH 1,660,000
CASH BALANCE, DECEMBER 31,2019 P 2,220,000
47
Activity 2


Adjustments:
Increase in Accounts Receivable ( 150,000)
Increase in Inventories ( 80,000)
Decrease in Accounts Payable ( 30,000)
Net Cash Flows from Operating Activities 1,840,000

Net Cash Flows for Investing Activities ( 2,080,000)

Cash withdrawal by the owner ( 100,000)
NET INCREASE IN CASH 1,660,000
CASH BALANCE, DECEMBER 31,2019 P 2,220,000
48
Activity 3
a. Direct Method
Quarta Merchandising

Cash collections from customers
Total Sales P 6,000,000
Less: Increase in Accounts Receivable 1,000,000 P 5,000,000
Payment for Cost of Sales

Cost of Sales 3,800,000
Less: Increase in Account Payable 200,000 ( 3,600,000)
Payment of Operating Expenses ( 1,030,000)
Net Cash Flows from Operating Activities 370,000


Additional cash invested by the owner 500,000
49
b. Indirect Method
Quarta Merchandising

Net Income *** P 1,060,000
Adjustments:
Increase in Accounts Payable 200,000
Increase in Accounts Receivable ( 1,000,000)
Net Cash Flows from Operating Activities 370,000


Additional cash invested by the owner 500,000
***Net Income:
Net Sales P 6,000,000
Gross Profit 2,200,000
Salaries and Wages Expense P 400,000
Office Supplies Expense 60,000
Advertising Expense 100,000
Insurance Expense 150,000
Utilities Expense 120,000
Taxes and Licenses 200,000
Depreciation Expense 110,000 1,140,000
50
,BUSINESS AND MANAGEMENT 2
Section: ___________________________________________ Date: _______________

Financial Ratios
After learning how to prepare the financial statements, now is the time to analyze and
interpret it. Financial statement analysis is the process of evaluating and understanding the
financial results from different periods and calculating ratios to determine the past, present
and prospective performance of the company. This is to understand the strengths and
weaknesses of the organization to help management in decision making.
This learning activity focuses on the four types of financial ratios: liquidity, solvency,
profitability and stability of the business.
Learning Competency: Define the measurement levels, namely, liquidity, solvency,

stability and profitability. ABM_FABM12-Ig-h-12
Exercise 1
Directions/Instructions: Determine the measurement level used in the following formula.
Identify whether it is Profitability, Liquidity or Solvency.
___________1. Operating Income/Sales

___________2. Gross profit/Sale
___________3. Current Assets/Current Liability
___________4. Net Income/Sales
___________5. (Cash + Marketable Securities + Receivables)/Current Liabilities
___________6. Current Assets - Current Liabilities
___________7. Total liabilities/Total Equity
___________8. Net Income/Average Equity
___________9. Total equity/ total assets
___________10. Total liabilities /Total Owner’s equity
51
Exercise 2
Directions/Instructions: Choose the correct financial ratio in the box that corresponds to the
statements in each number. Write your answer from the space provided.
Current Ratio Acid Test/Quick Ratio Debt/Equity Ratio
Equity Ratio Cash Ratio Debt Ratio
Gross Profit ratio Operating Ratio Return on Assets
Working Capital
______________________1. It indicates the ability to pay current obligations.

______________________2 It measures the company’s ability to pay of its current liabilities
if immediate payment were demanded.
______________________3. Indicates the ability to pay current obligations from the more
liquid current assets.
______________________4. This measures the proportion of borrowed capital to invested
Capital.
______________________5. Shows how much of the total company assets are owned
outright by the investors
______________________6. Indicates what portion of total assets is provided by the
creditors.
______________________7. It shows the remaining amount of current assets that can be
used in the operation.
______________________8. Indicates what portion of sales is absorbed by operating costs
______________________9. It computes the gross margin per peso of sales. Use in
determining the adequacy of gross margin to cover operating
expenses and desired profit.
______________________10. Measures how efficiently a company manage its assets to
produce profits during the period
Exercise 3
Directions/Instructions: Define the following:
1. Profitability
_______________________________________________________________
__________________________________________________________________
_____________________________________________
2. Solvency
_______________________________________________________________
__________________________________________________________________
_____________________________________________
52
3. Liquidity
_______________________________________________________________
__________________________________________________________________
_____________________________________________
4. Financial Analysis
_______________________________________________________________
__________________________________________________________________
____________________________________________
Reflection:
What did you learn from this activity?

___________________________________________________________________________
___________________________________________________________________________
__________________________________________________
References:
Nenita D. Mejorada : Business Finance

Dr. Maria Veronica Joy M. Binuya: Fundamentals of Accountancy, Business and
Management (book 2)
Solita A. Frias, MBA, BBA, CPA: Business Finance
Benedick G. Manalaysay : Fundamentals of Accountancy, Business and Management 2
Feme M. Palencia, Hannah P. Cabunag, Cyrisse Ann P. Cabunag : Fundamentals of
Accountancy, Business and Management 2
ANSWER KEY
Exercise 1
1. Profitability
2. Profitability
3. Liquidity
4. Profitability
5. Liquidity
6. Liquidity
7. Solvency
8. Profitability
9. Solvency
10. Solvency
Exercise 2
1. Current Ratio
2. Cash Ratio
3. Acid Test Ratio
53
4. Debt to Equity Ratio
5. Equity Ratio
6. Debt Ratio
7. Working Capital
8. Operating Ratio
9. Gross profit ratio
10. Return on assets
Exercise 3
1. Liquidity
➢ Pertains to the company’s ability to meet its currently maturing
obligations. In short, it is the capability to pay for short-term debts.
2. Solvency
➢ Pertains to the company’s ability to meet its long-term obligations. It
provides measures on whether the company’s assets are enough to cover
for their liabilities.
3. Profitability
➢ Provide information on the performance of the business as regards its
success in generating income. It indicates management’s ability to convert
sales into profit and cash flows.
4. Financial Analysis
➢ Is the process of selecting, evaluating, and interpreting financial data,
along with other pertinent information, in order to formulate an assessment
of company’s present and future financial condition and performance.
54
Section: ___________________________________________ Date: _______________
Vertical and Horizontal analysis
There are various methods of analyzing financial statements. Two of which are the
most basic tools that could be used. These are horizontal analysis and vertical analysis.
The horizontal analysis also referred to as Trend Analysis is an analysis that

captures the difference between the current and prior year amount. The difference shows the
increase or the decrease of account balances and their corresponding percentages.
The vertical analysis is also known as the common-size analysis is one wherein
each item is expressed in terms of a percentage of a base account. In the case of Statement of
financial position, Total Assets, Total Liabilities and Owner’s Equity will be the base amount
while Net sales will be the base amount for Income Statement.
Perform vertical and horizontal analysis of financial statements of a single proprietorship.
ABM_FABM12-Ig-h-13
Exercise 1
Directions/Instructions: Using the information of Cedes General Merchandise, prepare a
financial analysis using Horizontal Analysis.
Cedes General Merchandise

Income Statement
For the years 2018 and 2019
Increase (Decrease)
2019 2018 Amount Percentage
Net Sales ₱ 1,350,000 ₱ 1,025,000 ________ ________

Less: Cost of Sales 850,000 650,000 ________ ________
Gross Profit 500,000 375,000 ________ ________
Less: Selling Expenses 45,000 50,000 ________ ________
Administrative Expenses 100,000 90,000 ________ ________
55
Total Operating Expense 145,000 140,000 ________ ________
Net Income ₱ 355,000 ₱ 235,000 ________ ________
Exercise 2
Directions/Instructions: Using the information of Rodrich Auto Supply, prepare a financial
analysis using Vertical Analysis.
Rodrich Auto Supply

Income Statement
For the year 2018 and 2019
2019 Percentage 2018 Percentage
Net Sales ₱ 4,200,000 ₱ 3,500,000

Less: Cost of Sales 1,296,000 1,280,000
Gross Profit 2,904,000 2,220,000
Less: Selling Expense 120,000 115,000
Administrative Expenses 255,000 250,000
Total Operating Expense 375,000 365,000
Net Operating Income 2,529,000 1,855,000
Less: Other Expenses 8,500 7,000
Income Before Income Tax 2,520,500 1,848,000
Less: Income Tax Expense 856,970 498,960
Net Income ₱ 1,663,530 ₱ 1,349,040
Exercise 3
Directions/Instructions: Perform a Horizontal analysis and Vertical analysis using the

Statement of financial position of Kesha Trading.
HORIZONTAL ANALYSIS
Kesha Trading
STATEMENT OF FINANCIAL POSITION
December 31,2018, and 2019
` Increase (Decrease)
Current Asset 2019 2018 Amount Percent
Cash ₱ 110,000 90,000

Accounts Receivable, net 145,000 150,000
56
Total Assets 450,000 458,500
Non- Current Assets
Land 500,000 500,000
Building, net 315,000 325,000
Equipment, net 180,000 190,000
Total Non-Current Assets 995,000 1,015,000
Total Assets ₱ 1,445,000 ₱ 1,475,000
LIABILITIES & OWNERS EQUITY

Current Liabilities
Notes Payable 235,000 240,000
Mortgage Payable 160,000 170,000
Total Liabilities 625,000 645,000
Owner’s Equity
Kesha, Capital 820,000 830,000
Total Owners Equity 820,000 830,000
Total Liabilities and Owner's Equity ₱ 1,445,000 ₱ 1,475,000
57
VERTICAL ANALYSIS
Kesha Trading
For the Year 2018 and 2019
ASSETS 2019 Percentage 2018 Percentage

Current Asset
Cash ₱ 110,000 ₱ 90,000
Accounts Receivable, net 145,000 150,000
Total Assets 450,000 460,000
Non- Current Assets
Land 500,000 500,000
Building, net 315,000 325,000
Equipment, net 180,000 190,000
Total Non-Current Assets 995,000 1,015,000
₱ ₱
Total Assets 1,445,000 1,475,000
LIABILITIES & OWNERS

EQUITY
Current Liabilities
Notes Payable 235,000 240,000
Mortgage Payable 160,000 170,000
Total Liabilities 625,000 645,000
Owner’s Equity
Kesha, Capital 820,000 830,000
Total Owners Equity 820,000 830,000
Total Liabilities and Owner's
Equity ₱ 1,445,000 ₱ 1,475,000
References
Nenita D. Mejorada (2006: Business Finance and Philippine Business Firms Published by
Goodwill Trading Co., Inc.
Dr. Maria Veronica Joy M. Binuya (2016): Fundamentals of Accountancy, Business and
Management (book 2). JFS Publishing Services
Solita A. Frias, MBA, BBA, CPA (2012): Business Finance. JREN Print enterprises
Benedick G. Manalaysay (2017): Fundamentals of Accountancy, Business and Management
2. Anvil Publishing Inc.
Feme M. Palencia, Hannah P. Cabunag, Cyrisse Ann P. Cabunag (2017): Fundamentals of
Accountancy, Business and Management 2 Fastbooks Educational Supply, Inc.
58
Reflection:
In this activity, I learned that in the preparation of Vertical and Horizontal

analysis____________________________________________________________________
___________________________________________________________________________
____________________________________________________
Answer Key
Exercise 1
Cedes General Merchandise
Income Statement
Increase (Decrease)
2019 2018 Amount Percent
Net Sales ₱ 1,350,000 ₱ 1,025,000 ₱ 325,000 32%
Less:Cost of Sales 850,000 650,000 200,000 31%
Gross Profit 500,000 375,000 125,000 33%
Less: Selling Expense 45,000 50,000 - 5,000 -10%
Administrative Expense 100,000 90,000 10,000 11%
Total Operating Expense 145,000 140,000 5,000 4%
Net Income ₱ 355,000 ₱ 235,000 ₱ 120,000 51%
Exercise 2
Rodrich Auto Supply

Income Statement
For the Years 2018 and 2019
2019 Percent 2018 Percent

Net Sales ₱ 4,200,000 100.00% ₱ 3,500,000 100.00%
Less: Cost of Sales 1,296,000 30.86% 1,280,000 36.57%
Gross Profit 2,904,000 69.14% 2,220,000 63.43%
Less: Selling Expense 120,000 2.86% 115,000 3.29%
Administrative Expenses 255,000 6.07% 250,000 7.14%
Total Operating Expense 375,000 8.93% 365,000 10.43%
Net Operating Income 2,529,000 60.21% 1,855,000 53.00%
Less: Other Expenses 8,500 0.20% 7,000 0.20%
Income Before Income Tax 2,520,500 60.01% 1,848,000 52.80%
Less: Tax Expense 856,970 20.40% 498,960 14.26%
Net Income ₱ 1,663,530 39.61% ₱ 1,349,040 38.54%
59
Exercise 3-Horizontal Analysis
Kesha Trading
Increase (Decrease)
ASSETS 2019 2018 Amount Percent
Current Asset
Cash ₱110,000 ₱ 90,000 20,000 22%
Accounts Receivable, net 145,000 150,000 - 5,000 -3%
Inventories 195,000 220,000 - 25,000 -11%
Total Assets 450,000 460,000 - 10,000 -2%
Non- Current Assets
Land 500,000 500,000 - 0%
Building, net 315,000 325,000 - 10,000 -3%
Equipment, net 180,000 190,000 - 10,000 -5%
Total Non-Current Assets 995,000 1,015,000 - 20,000 -2%
Total Assets ₱ 1,445,000 ₱ 1,475,000 - 30,000 -2%

Current Liabilities
Accounts Payable 230,000 235,000 - 5,000 -2%
Notes Payable 235,000 240,000 - 5,000 -2%
Mortgage Payable 160,000 170,000 - 10,000 -6%
Total Liabilities 625,000 645,000 - 20,000 -3%
Owner’s Equity
Kesha, Capital 820,000 830,000 - 10,000 -1%
Total Owners Equity 820,000 830,000 - 10,000 -1%
Total Liabilities and Shareholder's
Equity ₱ 1,445,000 ₱ 1,475,000 - 30,000 -2%
60
Exercise 3-Vertical Analysis
Kesha Trading
ASSETS 2019 Percent 2018 Percent

Current Asset
Cash ₱ 110,000 7.61% ₱ 90,000 6.10%
Accounts Receivable, net 145,000 10.03% 150,000 10.17%
Inventories 195,000 13.49% 220,000 14.92%
Total Current Assets 450,000 31.14% 460,000 31.19%
Non- Current Assets
Land 500,000 34.60% 500,000 33.90%
Building, net 315,000 21.80% 325,000 22.03%
Equipment, net 180,000 12.46% 190,000 12.88%
Total Non-Current Assets 995,000 68.86% 1,015,000 68.81%
Total Assets 1,445,000 100.00% 1,475,000 100.00%

Current Liabilities
Accounts Payable 230,000 15.92% 235,000 15.93%
Notes Payable 235,000 16.26% 240,000 16.27%
Mortgage Payable 160,000 11.07% 170,000 11.53%
Total Liabilities 625,000 43.25% 645,000 43.73%
Owner’s Equity
Kesha, Capital 820,000 56.75% 830,000 56.27%
Total Owners Equity 820,000 56.75% 830,000 56.27%
Total Liabilities and Owner's Equity ₱ 1,445,000 100.00% ₱ 1,475,000 100.00%
61
Section: ___________________________________________ Date: _______________
Compute and Interpret Financial Ratios
Accomplishing financial statements is not the end of the accountant task. Computation
of financial ratios and interpretation follows. It is of great importance as the management
goes through decision making using the information gathered. Financial statement analysis is
used to predict a company’s future profitability and cash flows from its past performance and
to evaluate the performance of a company to identify problem areas. The information
gathered in the financial ratios is greatly enhanced when they are compared with past values
and with values for other firms in the same industry.
This learning activity will help you deepen your knowledge on how to compute and
analyze the entity's financial statement that will help you forecast/estimate its future
performance.
Learning Competency: 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-h-14)
ACTIVITY 1. MULTIPLE CHOICE

Directions: Encircle the letter of the correct answer.
1. MCL Company has a total quick asset of P100,000.00 and quick ratio of 10. How
much is the current liabilities of the entity?
a. P1,000,000.00 c. P900,000.00
b. P1,100,000.00 d. P10,000.00
2. If the company’s net sales is P250,000.00 and the average accounts receivable is
P50,000.00, what is the A/R turnover ratio?
a. 5 c. P200,000.00
b. 1/5 d. P300,000.00
3. From a current ratio of 4 in 2018, the current ratio of the company is 5 in 2019.
a. This is something good from a liquidity standpoint.
b. This is something bad from a liquidity standpoint
c. This data has no implication on the liquidity status of the company.
d. All of the above.
62
4. If average inventory is P40,000.00 and the inventory turnover ratio is 20, how much is
the cost of goods sold by the company?
a. .0005 c. P40,020.00
b. P2,000.00 d. P800,000.00
5. From a working capital of P550,000.00 in 2019, the working capital of the company
went up to P 600,000.00 in 2020.
b. This something bad from a liquidity standpoint.
d. All of the above.
6. Leo’s Tailoring performed a net income after tax amounting to P 2,000,000, starting
balance of assets is P250,000.00 and ending balance assets is P350,000.00. Compute
for the return on assets.
a. 8 c. 6.6667
b. 5.71 d. 3.3333
7. From 60 days in 2018, the number of days in the operating cycle went up to 65 days.
Interpret it.
b. This is something bad from a liquidity standpoint.
d. This is something good from a profitability standpoint.
8. How do you interpret the financial ratio of the company, when the time interest earned
ratio for 2018 is 10 and it went up to 12 during 2019.
a. This is something good from solvency standpoint.
b. This is something bad from a solvency standpoint.
c. This data has no implication on the solvency status of the company.
d. This is something good from liquidity standpoint.
9. How do you find the liquidity of the company when their current asset is higher than
their current liabilities?
a. The company is capable of paying its current obligation.
b. The company is not capable of paying its current obligation
c. The company is at risk.
d. Cannot be determined.
10. Compute the gross profit ratio if the company has for the years’ net sales of
P900,000.00 and the cost of goods sold is P400,000.00.
a. .444 c. 1.8
b. 2.25 d. .5555
63
Exercise 2
Directions/Instructions: Compute the financial ratio given below using the information of
Ching Financial statement.
a) Current Ratio f.) Gross profit ratio

b) Acid Test Ratio g.) Net profit ratio
c) Working Capital h.) Operating ratio
d) Debt ratio i.) Cash Ratio
e) Equity ratio j.) Debt to equity ratio
Ching Enterprises
Statement of Financial Performance
For the years ended December 31, 2019
ASSETS
Current Asset
Cash ₱ 185,000.00
Accounts Receivable 125,000.00
Inventory 53,000.00
Prepaid Expenses 22,000.00
Total Current Asset 385,000.00
Non- Current Assets
Land 730,000.00
Building, net 450,000.00
Equipment, net 285,000.00
Total Non-Current Asset 1,465,000.00
Total Assets ₱ 1,850,000.00
LIABILITIES & OWNER'S EQUITY
Current Liabilities
Accounts Payable 185,000.00
Notes Payable 132,000.00
Total Liabilities 317,000.00
Owner’s Equity
Ching, Capital 1,605,000.00
Total Owners Equity 1,533,000.00
Total Liabilities and Shareholder's Equity ₱ 1,850,000.00
64
Ching Enterprises
Statement of Financial Performance
For the years ended December 31, 2019
Net Sales ₱ 250,000

Less: Cost of Sales 150,000
Gross Profit 100,000
Selling Expense 30,000
Administrative Expense 12,000 42,000
Net Income ₱ 58,000
Formula Computations Answer
a.) Current Ratio
=
b.) Quick Ratio
c.)Working Capital
d.) Debt Ratio
e.) Equity Ratio
f.)Gross Profit Ratio
g.) Net profit ratio
h.) Cash Ratio
i.)Operating ratio
j.) Debt to Equity Ratio
65
EXERCISE 3
Directions: Compute and analyze the financial ratios of Labasa General Services for 2018 and 2019.
This activity requires you to recall your knowledge in the interpretation
of financial statement.
Labasa General Services

COMPARATIVE STATEMENT OF FINANCIAL POSITION
For the Year 2018 & 2019
2018 2019
ASSETS
Cash 280,000.00 390,000.00
Accounts Receivable 110,000.00 90,000.00
Trading Securities 30,000.00 10,000.00
Inventories 50.000.00 70,000.00
Supplies 10,000.00 12,000.00
Prepaid Insurance 5,000.00 7,000.00
Total Current Assets 485,000.00 579,000.00
Total Non-Current Assets 190,000.00 300,000.00
TOTAL ASSETS 675,000.00 879,000.00
LIABILITIES
Total Current Liabilities 90,000.00 45,000.00
Total Non-current Liabilities 340,000.00 420,000.00
TOTAL LIABILITIES 430,000.00 465,000.00
OWNER’S EQUITY
Total Owner’s Equity 245,000.00 414,000.00
TOTAL LIABILITES &

675,000.00 879,000.00
OWNER’S EQUITY
66
Labasa General Services
COMPARATIVE STATEMENT OF COMPREHENSIVE INCOME
For the Year 2018 & 2019
2018 2019
Net Sales 490,000.00 600,000.00

Less: Cost of Goods Sold (75,000.00) (90,000.00)
Gross Profit 415,000.00 510,000.00
Less: Operating Expenses (120,000.00) (45,000.00)
Earnings Before Interest and taxes 295,000.00 465,000.00
Less: Interest expense (40,000.00) (10,000.00)

Net Income before tax 255,000.00 455,000.00
Less: Income Tax (35,000.00) (108,000.00)
Net Income 220,000.00 347,000.00
2018 2019 Interpretation

1. Working
Capital
2. Current
Ratio
3. Quick Ratio
67
4. A/R
Turnover
Ratio
5. Average
Collection
Period
6. Inventory
Turnover
Ratio
7. Average
Days
Inventory
8. Number of
days in the
operating
cycle
9. Debt to Total
Asset Ratio
68
10. Debt to
Equity Ratio
11. Time Interest

Earned Ratio
12. Gross Profit

Ratio
13. Profit
Margin Ratio
14. Return on
Assets
69
15. Return on
Equity
16. Asset
turnover
Ratio
Reflection:
In this activity, I learned that computing the financial ratios

______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
References
Nenita D. Mejorada (2006: Business Finance and Philippine Business Firms

Published by Goodwill Trading Co., Inc.
Dr. Maria Veronica Joy M. Binuya (2016): Fundamentals of Accountancy,
Business and Management (book 2) JFS Publishing Services
Solita A. Frias, MBA, BBA, CPA (2012): Business Finance JREN Print enterprises
Benedick G. Manalaysay (2017): Fundamentals of Accountancy, Business and Management 2
Anvil Publishing Inc.
Feme M. Palencia, Hannah P. Cabunag, Cyrisse Ann P. Cabunag (2017):
Fastbooks Educational Supply, Inc.
70
Josefina L. Beticon,James Christopher D. Domingo, Fermin Antonio D Yabut:
Answer Key
Exercise 1
1. A
2. A
3. A
4. D
5. A
6. C
7. B
8. A
9. A
10. A
Exercise 2
Formula Computations Answer
Current Assets = 385,000 = 1.21 : 1

a.) Current Ratio
Current Liabilities 317,000
Cash+Marketable
securities + Accounts
b.) Quick Ratio
receivable = 310,000 = .98:1
Total Current Asset - = P 385,0000 - =
c.)Working Capital ₱ 68,000
Total Current Liabilities 317,000
Total Liabilities = 317,000 = .17

d.) Debt Ratio
Total Assets 1,850,000
Total Owner's Equity = 1,533,000 = .83

e.) Equity Ratio
Total Assets 1,850,000
Gross Profit = 100,000 = .40
f.)Gross Profit Ratio
Net Sales 250,000
Net profit = 58,000 = .23
g.) Net profit ratio
Net sales 250,000
Cash = 185,000 = 0.58
h.) Cash Ratio
71
Cost of sales + Operating
i.)Operating ratio expenses = 192,000 = .77
Net sales 250,000
j.) Debt to Equity Total Liabilities = 317,000 = .21
Ratio Total Owner's Equity 1,533,000
Exercise 3
2018 2019 Interpretation
1. Working =CA-CL The company has a

Capital positive working
=485,000-90,000 =579,000-45,000 capital. The company
=395,000 =534,000 has a better liquidity
position in 2019 than
in 2018.
2. Current Ratio =CA/CL Each period has a

positive current ratio.
=485,000/90,000 =579,000/45,000 This means that the
=5.39 =12.87 company is capable of
paying its current
obligation
3. Quick Ratio =QA/CL The company has the

capability to pay its
=(280,000+ =(390,000+ currently maturing
110,000.00+ 90,000+ obligations through
quick assets.
30,000)/90,000 10,000)/45,000 Comparing both
years, the company
=420,000/90,000 =490,000/45,000
has better off in 2019.
=4.67 =10.89
72
4. A/R =Net Sales/Ave. AR The company has
Turnover better performance in
Ratio =490,000/110,000 collection for year
=4.45 times =600,000/100,000 2019 than 2018.
=6 times
*Ave. A/R=
(110,000/90,000)/2
=100,000
5. Average = 365/AR Turnover Since the company

Collection ratio has a shorter
Period collection period in
=365/4.45 2019, it means that the
=365/6
=82 days collection department
=60 days has increased its effort
to collect the
receivables as they
fall due
6. Inventory =CGS/Ave. Since the inventory

Turnover Inventory turnover ratio does not
Ratio change, this means
=75,000/50,000
=90,000/60,000* that the sales
1.5 times department sold same
=1.5 times as previous year to
customers.
Ave. Inventory=
(50,000+70,000)/2
=60,000
7. Average =365/Inventory This means that the

Days turnover turnover of inventory
Inventory does not change.
=365/1.5
=365/1.5
=243 days
=243 days
73
8. Number of = Collection Period It shows that there
days in the + Average Age of was an improvement
operating Inventory of 21 days in the
cycle operating cycle. It
=82.02+243.33 means that the
=325 days =60.83+243.33 company improved in
transforming its
=304 days
inventory into cash.
9. Debt to Total =Total Liabilities The slight decrease

Asset Ratio /Total Assets shows that the
company was more
=430,000/675,000 solvent in 2019 than
=0.64 in 2018.
=465,000/879,000
=0.52
10. Debt to =Total Liab. / Total Comparing the two

Equity Ratio Owners Equity period, it shows that
the company was
=430,00/245,000 more solvent in 2019
=465,000/414,000
=1.76 than in 2018.
=1.12
11. Time Interest =EBIT/Interest The Time interest

Earned Ratio Expense earned went up from
7.38 to 46.5, this
=295,000/40,000 means that this is
=465,000/10,000
=7.38 something positive
=46.5 when it comes to the
solvency of the
company.
12. Gross Profit =Gross Profit/Net The slight increase in

Ratio Sales the gross profit has a
=510,000/600,000 positive impact in the
=415,000/490,000 performance of the
=85%
=84.69% company.
74
13. Profit Margin =NIAT/Net Sales The increase of the
Ratio company’s ratio in
=220,000/490,000 =347,000/600,000 2019 can be attributed
=44.90% =57.83% to increase in NIAT
and sales.
Note:
Net Income after

tax(NIAT)
14. Return on =Net Income/Ave. The increase of ratio

Assets Total Asset in year 2019 means
something positive in
=220,000/675000 the company.
=347,000/777,000*
=.326 Meaning, more assets
=.447 were used to generate
higher income.
*Ave. Total
Asset=(Beg. + End)/2
=(675,000+879,000)/2
=777,000
15. Return on =NI/Ave. Owner’s The computation

Equity Equity shows that the
company has a
=220,000/245,000
=347,000/329,500* positive increase in
=0.898 ratio which is
=1.055 attributed to a higher
net income after tax
for year 2019.
Ave. Owner’s Equity *=
(Beg. + End)/2
=(245,000+414,000)/2
=329,500
75
16. Asset =Net Sales/Ave. There is a positive
turnover Total Asset increase in ratio. This
Ratio can be attributed to a
=490,000/675,000
=600,000/777,000 bigger sale generated
=0.724 for the year.
=0.772
76
Section: ___________________________________________ Date: _______________
Learning Activity Sheet

Types of Bank Account
Background Information for Learners:

Business usually maintains two types of account:
(1) A savings account is an interest-bearing deposit held at a bank. Though this account
pays a modest interest rate, their safety and reliability make them a great option for
parking cash you want for short term needs.
(2) A checking account is a deposit account held at a financial institution/bank that allows
withdrawals and deposits. It is also known as demand accounts or transactional
accounts. Checking accounts can be accessed using checks, automated teller machines
and electronic debits. Banks usually allows numerous withdrawals and deposits.
Checking accounts can also include personal checking account, commercial
checking, and joint account. A commercial checking account is used by businesses
and property of the business.
Aside from savings and current account, there are another type of account that is popularly
known nowadays is an ATM (Automatic Teller Machine) account wherein withdrawals can
be made through the designated machine. This a 24hour teller machine and funds can be
withdrawn anytime.
A time deposit account is an interest-bearing bank account that has a pre-set date of maturity.
The money must remain in the account for the fixed term to earn the stated interest rate.
Learning Competency with code:
Identify the types of bank accounts normally maintained by a business. (ABM_FABM12-IIc-
5)
Activity I. Multiple Choice
Directions: Choose and encircle the letter of the correct answer from the options given in
each item.
1. It is issued by bank to the depositor which can be used to withdraw cash anytime.
a. ATM card c. Personal Check
b. Passbook d. Withdrawal Slip
2. What is the amount of money required to keep your bank account open?
a. Maximum Balance c. Minimum Deposit
77
b. Minimum Balance d. Maximum Deposit
3. The amount of money in your bank account.
a. Deposit c. Peso
b. Balance d. Dollars
4. __________ is the annual percentage paid on an interest-bearing bank account.
a. Service Charge c. Service Fee
b. Interest rate d. Penalty
5. Money held in this account can be withdrawn thru issuance of a check.
a. Savings Account c. Time Deposit Certificate
b. ATM d. Checking account
6. It is a type of savings account that is held for a fixed term and can be withdrawn only
after the lapse of agreed period.
a. Checking Account c. ATM
b. Time Deposit Account d. Savings Account
7. The _________ refers to the amount of money in your bank account at a specific
moment in time according to your bank.
a. Minimum Balance c. Service Charge
b. Account Balance d. Withdrawals
8. It intended to provide an incentive for the depositor to save money in which
transactions are logged in a small booklet that the depositor keeps.
a. Time Deposit Account c. Current Account
b. Saving Account d. Bank Draft
9. The depositor’s book in which the bank records the depositor’s deposits and
withdrawals.
a. Passbook c. Ledger
b. Checkbook d. Record Book
10. The money the bank pays for saving your money.
a. Interest c. Loan
b. Service fee d. Penalty
Activity II
Directions: Identify the famous ‘tagline” of Banks in the Philippines from the choices given
below. Write your answer on the space provided.
a. We Find Ways f. Ready Today. Ready Tomorrow
b. Citi Never Sleeps g. You’Re In Good Hands
c. Ang Bangkong May Damdamin Bayan h. The Name You Can Bank Upon
d. The Bank For All Filipinos i. You Deserve Better
f. Your Success Is Our Business j. Moving Forward
1. BDO________________________________________________________________
2. BPI_________________________________________________________________
3. LBP_________________________________________________________________
4. DBP_________________________________________________________________
5. Chinabank____________________________________________________________
6. Metrobank____________________________________________________________
78
7. Security Bank_________________________________________________________
8. RCBC _______________________________________________________________
9. PNB_________________________________________________________________
10. Citibank_____________________________________________________________
Activity III
Directions: Answer what is being asked.
Differentiate savings account from checking account.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Give at least three reasons why do we need to save?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Reflections:
What have you learned from the activity?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Did the activity help you understand the importance of knowing the different types of
account? How?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
79
References:
1. Investopedia.com
2. Fundamentals of Accountancy, Business and Management by Dani Rose Salazar
Answer Key:
Activity I
1. a 2. b 3. b 4. b 5. d
6. b 7. b 8. B 9. a 10. a
Activity II:
1. We Find Ways
2. Ready Today. Ready Tomorrow.
3. Ang Bangkong May Damdaming Bayan
4. The Bank For All Filipinos
5. You Are In Good Hands
6. Your Success Is Our Business
7. You Deserve Better.
8. Moving Forward
9. The Name You Can Bank Upon
10. Citi Never Sleeps
Activity III
A Savings Account is basically a deposit account held at a bank or other financial institution
that provides principal security and a modest interest rate while checking account is a
transactional deposit account held at a financial institution that allows for withdrawals and
deposits. Money held in a checking account is very liquid and can be withdrawn using
checks, automated cash machines and electronic debits, among other methods.
Activity IV
1. Emergency fund
2. Retirement
3. Unforeseen expenses
4. You could lose your job or get sick
5. To have a good life
6. Become financially independent
7. Save for vacation, travel, buy a car, house
8. For education
9. Provides financial security
10. You can take calculated risks
80
Section: ___________________________________________ Date: _______________

Preparation of Bank Deposit and Withdrawal Slips
Withdrawal slips and deposit slips are written orders to the bank. These slips are used to take
out money or to put money in the bank.
Bank deposit slips are used when you deposit money and checks into your account. The
required pieces of information in a deposit slip are account name, account number, date of
deposit, type of account, currency, amount in words, amount in figures and signature of the
depositor.
A withdrawal slip is a slip with you want to withdraw cash from your bank. Without a
withdrawal slip, the bank will not allow you to get money from your account. The required
information in the withdrawal slips are: account name, account number, date of withdrawal,
type of account, currency, amount to be withdrawn (the amount of words and figures are
indicated) and signature of the depositor which is the most important part in a withdrawal
slip. The signature is a proof that the depositor is authorizing the withdrawal.

Prepare bank deposit and withdrawal slips. (ABM_FABM12-IIc-7)
Activity I
Multiple Choice: Choose the correct answer from the options given below. Encircle the letter
of the best answer.
1. To take out money on your account.
A. Withdrawal
B. Deposit
C. Trust
D. Steal
2. It is a proof that the depositor is authorizing the bank to get money from his/her
account.
A. Name of Account
B. Type of Account
C. Signature of the depositor
81
D. Currency
3. The unique identifier given by the bank for every account maintained.
A. Account Number
B. Type of Account
C. Currency
D. Date of deposit/withdrawal
4. A __________ is money that is placed into an account at financial institution for

safekeeping.
A. Deposit
B. Withdrawal
C. Transfers
D. Payment of Loans
5. A ___________ is any financial event that occurs, examples include deposits,

withdrawal, transfers, loan payment, etc.
A. Deposit
B. Withdrawal
C. Transaction
D. Debit
6. Whenever you withdraw money from a bank account, the bank considers this a
_________ because their liability to you decreases.
A. Debit
B. Credit
C. Service Fee
D. Interest
7. A card you use to withdraw money at an ATM or to pay at store.

A. Credit Card
B. ID Card
C. Debit/ATM Card
D. Withdrawal Slip
8. Whenever you deposit money into a bank account the bank considers this a
___________ because their liability to you increases.
A. Credit
B. Debit
C. Loan Payment
D. Fund Transfer
9. Putting money into a bank is called ________________.

A. Interest
B. Withdrawal
C. Deposit
D. Cashier’s Check
10. The piece of paper you need to deposit cash to add money to your account is
__________.
A. Check
B. Deposit Slip
82
C. Withdrawal Slip
D. A lien
Activity II
Directions: Do what is being ask.
Assuming you are depositing the

following amount today in your
checking account with account
number 040869195125, ten pieces
of one thousand pesos bill, five
pieces of five hundred pesos bill,
three pieces of one hundred pesos
bill, six pieces of fifty pesos bill,
two pieces of twenty pesos bill and
ten pieces of one peso coins.
Cheque from PNB-Aparri with
check number 51100 amounting to
one thousand five hundred fifty
pesos. Fill out the deposit slip.
1
PRODUCERS SAVINGS BANK CORPORATION DEPOSIT SLIP
83
Assuming you are taking out
P20,750.00 today from your
saving account with account
number 201920202021123. Fill
out the withdrawal slip.
Activity III
Directions: Answer what is being ask.
What is the purpose of a bank deposit slip?
What does withdrawal slip mean?
2
PRODUCERS SAVINGS BANK CORPORATION WITHDRAWAL SLIP
84
Reflections:
How do you find the activity?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
What was the most challenging or least interesting about the activity?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
References:
1. Investopedia.com
2. Fundamentals of Accounting, Business, and Management by Dani Rose Salazar
3. Fundamentals of Accounting, Business, and Management SHS Teaching Guide
Answer Key:
Activity I
1. A 6. A
2. C 7. C
3. A 8. A
4. A 9. C
5. C 10.B
85
Activity II:
3 4
Activity III
1. Deposit slips offer protection for both the bank ant the customer. Banks use them to help
maintain a written ledger of funds deposited and to ensure that no deposits are unaccounted.
2. A withdrawal slips is a printed piece of paper used in Bank to withdraw money in cash
from account.
3
PRODUCERS SAVINGS BANK CORPORATION DEPOSIT SLIP FORM
4
PRODUCERS SAVINGS BANK CORPORATION WITHDAWAL SLIP FORM
86
Section: ___________________________________________ Date: _______________

Identify and Prepare Checks

A check is a legal document that orders a bank to pay specific amount of money from
a person’s account to the person whose the check has been issued. The parties involved in a
transaction that uses check as a medium of exchange are drawer (the person who makes the
check), payee (the recipient of the money) and the drawee (the bank where the cheque can be
presented for payment). It was developed as a way to make payments without the need to
carry a large amount of money.
Sample Check

Identify and prepare checks (ABM_FABM12-IIc-8)
5
east west banking corporation
87
Activity I
Directions: Answer what is being ask. Write your answer on the space provided
A. Why do companies issue check?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
B. Who are the parties involved in a transaction that uses check as medium of exchange?
Describe the role of each party.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Activity II
Directions: Encircle the letter of the correct answer from the options given in each item.
1. If you write a check for P10,000.00 but you only have P12,000.00 in your account,
what will you do?
A. Withdraw P5,000.00 from your account.
B. Make deposit before the check comes to the bank
C. Closed your account.
D. Nothing
2. Taking more money out of your account than its available balance is called?
A. Overdraw
B. Deposit
C. Withdraw
D. Balance
3. What is the name of legal documents that functions like cash?

A. Check
B. ATM
C. PIN
D. Deposit slip
4. If you make an error on a check, what should you do?

A. Void the check and write a new one.
B. Make corrections and initial the change
C. Use whiteout to fix the error
D. Throw the check away and write a new one.
88
5. What mathematical operation is used in the check register when a withdrawal is
made?
A. Addition
B. Subtraction
C. Division
D. Multiplication
Activity III
Directions: From the illustration below, answer what is being ask. Write your answer on the
space provided.
1. Drawee______________________________________________________________
2. Payee________________________________________________________________
3. Drawer_______________________________________________________________
4. Check Number_________________________________________________________
5. Check’s amount in words _____________________________________________
6. What does cross check mean?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
Reflections:
Directions: Write your brief description about your experiences by answering the following
questions.
1. How do you find the activity?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
2. What are the challenges encountered in the activities?
89
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
References:
1. investopedia.com
2. Fundamentals of Accounting, Business and Management Teaching guide for SHS
3. Fundamentals of Accounting, Business and Management by Dani Rose Torres
Answer Key
Activity I
A. Reasons why companies’ issue check:
1.Paper trail -Each check creates a paper document that details who receive the payment.
2. Security- Checks offer the advantage of added security for mailed payments. Only the
name of the recipient can present the check to the bank. You can use check as payment
especially when big amount of money is involved.
3. Control- Checks provide the business the ability to control the payment made.
B. The parties involved in a transaction that uses check as a medium of exchange are the
following:
Drawer, the person, or entity who makes the check
Payee, the recipient of the money.
Drawee, the bank where the check can be presented for payment.
Activity II
1. B
2. A
3. A
4. A
5. B
Activity III
1. East West Bank
2. Elijah Yechezkel
3. ABC Company
4. 0000026840
5. Five thousand four hundred pesos.
6. Cross check is marked to specify an instruction about the way to be redeemed. It is
done by writing two parallel lines on the upper left portion of the check. A cross
check cannot be encashed over the counter by the payee. It should be deposited to the
payees’ account.
90
Section: ___________________________________________ Date: _______________

Contents of a Bank Statement

Bank statements are report released by banks that list deposits, withdrawals, checks paid,
interest earned, and service charges or penalties incurred on an account. At the end of every
month, the bank furnishes a statement to the depositor showing the movement of the account.
Sample of a Bank Statement
BANK STATEMENT
June 1-30,2020
Angelina Katipunan CA# 1031193775
Bacani St., Poblacion 2
Tumauini, Isabela
Date CHECK NO. TRANS CODE DEBIT CREDIT BALANCE

6/1/2020 Balance Forwarded 64,800.00
6/5/2020 12345 CHK ENC 5,200 59,600.00
6/8/2020 CSH DEP 20,300.00 79,900.00
6/10/2020 DM CB 700 79,200.00
6/15/2020 INT. 396 79,596.00
6/15/2020 WTX 79.2 79,516.80
6/30/2020 12346 CHK ENC 19,500.00 60,016.80
•The date column indicates the date of 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.
•Debit columns represent all charges or deductions made by the bank to your account.
• The credit account represents the deposits to your account.
•The balance column is the running balance after considering all the effects of the transaction
to your account.
91
Learning Competencies with Code
Identify and understand the contents of bank statements. (ABM_FABM12-IIc-9)
Activity I
Directions: Identify whether the following are Debit Transaction(D) or Credit Transaction(C)
in your bank account. Write your answer on the space provided.
_________1. Bank service charges
_________2. Withholding tax
_________3. Check deposits by the account holder
_________4. Cash deposits by the account holder
_________5. Interest income
_________6. DAIF (Drawn Against Insufficient Fund)
_________7. Checkbook order
_________8. Collection of cash proceeds
_________9. Withdrawal
_________10. Check Encashment
Activity II
Directions: Answer the question in the box below.
What is the importance of a bank statement to a depositor?
Activity III
Directions: Analyze the situation below and do what is being asked.
Lucia Cruz is requesting EYM Bank for her Bank Statement for the period May 1-31,2020.
Her account balance as of April 30, 2020 was P286,500.50.
The transactions from May 1-31,2020 are as follows:
May 5----deposited P20,500.00
May 8--- EYM Bank debited P700 for the printing of checkbook
92
May 10—Encashment of check #3456 amounting P18,586.50
May 20—Encashment of check #3457 amounting P58,750.00
May 25--Deposited P75,000 cash proceeds from receivables
May 31- Interest income of P258.00 was credited to Lucia’s account
May 31 -Withholding tax 51.60 for interest income was debited to Lucia’s account
Provide for the missing information of Lucia Cruz bank statement for the period May 1-
31,2020.
BANK STATEMENT
May 1-31,2020
Lucia
CA# 1031193775
Cruz
Tumauini, Isabela
CHECK TRANS
Date DEBIT CREDIT BALANCE
NO. CODE
5/1/2020 Beg Bal 286,500.00
cshdep 20,500.00
5/5/2020 307,000.00
dmchkb
5/10/2020 700.00 306,300.00
18,586.5
3456 ench
5/18/2020 0 287,713.50
5/20/2020 58,750.0
3457 ench
0 228,963.50
5/25/2020
dep 75,000.00
303,963.50
5/31/2020
int 258.00
304,221.50
5/31/2020 wtx 51.6 304,169.90
Reflections:
What was the challenging or least interesting about this activity?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
_______________
93
References:
1. investopedia.com
2. Fundamentals of Accounting, Business and Management Teaching guide for SHS
3. Fundamentals of Accounting, Business and Management by Dani Rose Torres
Answer Key:
Activity I
1. D 2. D 3. C 4. C 5. C
6. D 7. D 8. C 9. D 10. D
Activity II
The bank statement shows the beginning balance, additions, deductions, and the balance at
the end of the period. Bank statement helps the depositor to monitor the movement of his/her
account. The bank statement is issued by the bank to all its depositors and usually done on a
monthly basis.
Activity III
BANK STATEMENT
May 1-31,2020
Lucia
CA# 1031193775
Cruz
Tumauini, Isabela
CHECK TRANS
Date DEBIT CREDIT BALANCE
NO. CODE
5/1/2020 Beg Bal 286,500.00
20,500.00
cshdep
5/5/2020 307,000.00
dmchkb
5/10/2020 700.00 306,300.00
3456 ench 18,586.50
5/18/2020 287,713.50
5/20/2020
3457 ench 58,750.00
228,963.50
5/25/2020
dep 303,963.50
75,000.00
5/31/2020
int
258.00 304,221.50
5/31/2020 wtx 51.6 304169.90
94

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11

LEARNING ACTIVITY SHEETS

Learning Activity Sheet

Printed by DepEd Regional Office No. 02

Competency Page No.

Identify the Elements of the SFP and

Prepare an SFP Using the Report and Account Form with

Identify the Elements of the SCI and Describe Each of These

Prepare an SCI for Service Business Using the Single-Step Approach................. 16

Prepare Cash Flow Statement .............................................................................. 36

Discuss the Components and Structures of Cash Flow Statement........................ 43

Define the Measurement Levels, Namely Liquidity, Solvency,

Perform Vertical and Horizontal Analysis of

Compute and Interpret Financial Ratios Such as Current Ratio,

Identify the Types of Bank Accounts Normally Maintained by a Business............ 77

Prepare Bank Deposit and Withdrawal Slips ........................................................ 81

Identify and Prepare Checks .................................................................................87

Identify and understand the contents of a bank statement....................................91

LEARNING ACTIVITY SHEET

____________________1. Merchandise Inventory

ACTIVITY 4: MODIFIED TRUE OR FALSE

____________________3. Income Statement is also known as Balance Sheet.

____________________4. Temporary accounts unlike permanent accounts will have zero

____________________5. Example of permanent account include Cash.

ACTIVITY 5: REPORT FORM

Cash – 85,550 Accounts Receivable – 4,700

Total Liabilities and Owners's Equity

ACTIVITY 6: ACCOUNT FORM

Cash – 85,550 Accounts Receivable – 4,700

Assets Total Liabilities and Owners's Equity

Current Assets P Current Liabilities

Complete this statement:

In this activity I learned that

REFERENCES FOR LEARNERS

Anastacio, Ma. Flordeliza. Fundamentals of Financial Management (with Industry

Gilbertson, Claudia. Fundamentals of Accounting . 8th ed. (Australia: Cengage

Padillo, Nicanor, Jr. Financial Statements Preparation, Analysis and Interpretation .

Young, Felina C. Principles of Marketing . (Manila: Rex Book Store, 2008).

1. Current Asset 9. Non-current Liability

ACTIVITY 4. REPORT FORM

Total Assets ₱101,000

Total Liabilities and Owners's Equity

Assets Total Liabilities and Owners's Equity

Current Assets Current Liabilities

Cash ₱85,550 Accounts Payable ₱1,600

LEARNING ACTIVITY SHEET

Background Information for Learners

Learning Competency with Code

_____1. An example of service revenue.

LEARNING ACTIVITY SHEET

Background Information for Learners

Prepare a Statement of Comprehensive Income for KarNet Computer Services using

Rubric for Scoring:

Professional Fees P 1,800,000.00

Professional Fees P 1,850,000.00

Service Income P 875,000.00

LEARNING ACTIVITY SHEET

Background Information for Learners

Learning Competency with Code

Level of Understanding Score

Net Sales P 4,199,425.00

Notes to Financial Statement

2. Cost of Goods Sold

Net Sales P 1,196,200.00

Net Sales ₱ 1,350,000 ₱ 1,025,000