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(REVIEWER: Dr. Rodiel C.

Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

*NOTES:
Quick Notes in AFAR To transfer the
the depreciable
depreciable asset, it should
should be in net amount.
amount.
To transfer the accounts receivable to the new book, it should not be in net
I. PARTNER
PARTNER SHIP amount.
₱3000  PURPOSE: To engage other party
PARTNERSHIP FORMATION The juridical personality of
of the partnership
partnership arises from the meeting of minds.
minds.
VALUATION: Partnership by Estoppel  – legally binding the partnership but no formal
agreement
1. Cash  – Face Value Limited Partnership – two or m ore general partners and one or more limited
2. Land, Depreciable
Depreciable Asset, & NCA partners
a. Agreed Value Particular Partnership  – single transaction
b. Fair Value
c. Appraised Value
PARTNERSHIP OPERATION
d. Carrying Value/Book Value
3. Liabilities  – are considered assumed if the problem is silent 1. Salaries
4. Inventory  – Lower of Cost and Net Realizable Value (LCNRV) This could
 could be fractional year
5. Capital Given, regardless
 regardless of the result of operation
5.1. Bonus Method
5.2. Investment/Withdrawal
Investment/Withdrawal Method 2. Interest
This could
could be in
in fractional
fractional year
BONUS METHOD Given, regardless
regardless whether
whether there is profit or
or loss
(*The problem is silent) (*Use the salary/interest ratio if the problem states that the amount to be
1. There would be a transfer of capital. distributed to the partners is up to the extent of profit only or the profit is
2. There is no recognition
recognition of goodwill. distributed based on the priority.)
3. The total asset and capital will remain unchanged.
3. Bonus
INVESTMENT/WITHDRAWAL  This is given ifif there is a profit only
 Bonus is not always
always given
given if there is profit
1. Agreed Capital is more than Unadjusted Capital = Investment 
Unadjusted Capital
2. Agreed Capital is less than Unadjusted Capital = Withdrawal
Unadjusted Capital CASE 1 : Net Income of ₱500000 before salaries of ₱55000, interest of 
₱13000, and bonus of 15%
 ADJUSTING ENTRIES
(*Use contra-asset)
contra-asset)  

B=    
 
1. Building  – Carrying Value: ₱10M, Agreed Value: ₱15M
 Accumulated Depreciation
Depreciation ₱5M 
Capital ₱5M
B=    


2. Accounts Receivable – Cost: ₱10000, NRV: ₱ 9000 B=    


Capital ₱1000
 Allowance for Doubtful Accounts
Accounts ₱1000 B = ₱56, 347.83
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

CASE 2: Net Income of ₱100000 before salaries of ₱5000, interest of ₱3000, and 2. Admission by
by Purchase
Purchase with Revaluation
bonus of 10% Two Steps to be followed:
     Determined the asset
asset revaluation
B=   
   Distribute the interest to the buying
buying partner
  
 TCC TAC Bonus / UVA / OVA
B=    

 *TAC=TCC *TAC>TCC *TAC<TCC
 0 + −
B=   

B = ₱12,000 Purchase Price ₱xx
Divided by: New Interest of New Partner xx
*NOTES:  Advances made by the partnership to a partner are included in capital  Adjusted Capital
Capital xx
interest but shall not affect the capital balance of a partner.  Add: Unadjusted
Unadjusted xx
Undervalued Asset (UVA) xx
PROFIT RATIO LOSS RATIO Multiply: Percentage %
1. Profit Ratio, Loss Ratio   _ xx
2. Profit Ratio, Profit Ratio  x _  Add: Capital xx
3. Original Capital Ratio, Loss ratio x  _ xx
4. Original Capital Ratio, Original Capital Ratio x x _ Multiply: (100% - New Partner %) xx
₱xx
EXAMPLE ON HOW TO COMPUTE THE AVERAGE CAPITAL:
1. 1/1 ₱1000 × 6/12 = ₱ 500 2. ₱500 × 12/12 = ₱500 RETIREMENT
7/1 800 × 3/12 = 200 100 × 9/12 = 75 1. Compute the capital balance
balance before retirement
10/1 1500 × 3/12 = 375 (200) × 3/12 = (50) a. Capital balance
₱1075 ₱525 b. Share in net income/net loss
c. Drawings
*NOTE: d. Additional investment
 P/L = Silent  Original Capital e. Revaluation of UVA
 Interest = Silent  Average Capital f. Revaluation of OVA
 Net income after interest
interest and salary
salary but before
before bonus
bonus g. Condonation of the partnership
partnership liability/receivable
liability/receivable of your
your debtor
Formula: Net Income  – Total Interest  – Total Salary = Bonus
Interest = Bonus to the retiring  partner 
2. Settlement is more than Capital Interest
PARTNERSHIP DISSOLUTION If the Settlement is less than Capital Interest = Bonus to the remaining
 partner 
- Change in numbers of partners.

1. Admission by Purchase without


without Revaluation
Revaluation
PARTNERSHIP LIQUIDATION
  Silent
 Personal transactions 1. Lump-sum Liquidation
Liquidation  – single distribution
 Total asset
asset and capital
capital will remain
remain unchanged
unchanged 2. Installment Liquidation
Liquidation  – “piece meal”
 Purchase price is ignored
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

STEPS IN LUMP SUM LIQUIDATION  If A received ₱35500, how much was given to J?
1. Realization of Non-cash Asset (Profit/Loss)
2. Payment of liabilities and liquidation expense  A G J Total
Priority 1 ₱  -0- ₱30000 ₱ -0- ₱ 30000
Liability ₱xx Capital ₱xx Priority 2 -0- 10000 15000 25000
Cash ₱xx Cash ₱xx NPP 35500 14200 21300 71000
₱35500 ₱54200 ₱36300 ₱126000
3. Elimination of deficiencies
4. Distribution
SAFE PAYMENTS Capital Beginning ₱xx
1. Determine the capital interest Gain/Loss +/- xx
INSTALLMENT LIQUIDATION
2. Deduct the Maximum Possible Maximum Possible Loss - xx
Cash beginning ₱xx Loss Elimination Deficiency - xx
 Add: Proceed xx 3. Absorb deficiency Condonation +/- xx
Minus: Liabilities xx Total  4. Distribute Cash Distribution ₱xx
Liquidation Expense xx Total 
Distribution ₱xx
II. CORPOR ATE LIQUIDATION
Maximum Possible Loss (MPL):  Three (3) years to liquidate
 The extinguishment of juridical personality happens in dissolution
1. Unsold Non- cash Asset ₱xx
2. Anticipated Liquidation Expense (future LE) xx Unpaid
VALUATION:
₱xx
1. Asset  – Fair Value
2. Liabilities  – Maturity Value (Principal + Interest)
CASH PRIORITY PROGRAM
*(Receive cash-given)
CLASSIFICATION (Statement of Affairs):
1. Determine the capital interest 1. ASSETS
2. Compute loss absorption balance (LAB): Capital Interest ÷ P/L Ratio Assets Pledge with Fully Secured Creditors
3. Equalize the LAB  – deduct the second highest from the highest until equal Assets Pledge with Partially Secured Creditors
4. Distribution: Difference in LAB × P/L Ratio Free Assets  assets that are not originally pledge to any liabilities
When to use Cash Priority Program? 2. LIABILITIES
- When the problem says, what amount should be distributed to the partners  Fully Secured Liabilities
 Partially Secured Liabilities
EXAMPLE:  Unsecured Liabilities with Priority
* Salaries
 A G J * Taxes
Capital Interest ₱100000 ₱  80000 ₱  75000 * Administrative Expense (Liquidation Expense)
P/L % ÷ 50% ÷ 20% ÷ 30% * Customer Deposit
LAB ₱200000 ₱400000 ₱250000
 Unsecured Liabilities without Priority (no collateral)
Priority 1 _______ 150000 _______
₱200000 ₱250000 ₱250000   
Priority 2 _______ 50000 50000 Percentage of Recovery (POR) =
₱200000 ₱200000 ₱200000     
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

3. OWNER’S EQUITY DEFICIENCY / CAPITAL  A = L + C SHE, beginning ₱xx


  Capital

 Cash, end
   LNL    SHE, end Net (loss) / Profit xx
Estate Equity ₱xx
 ANR

NET FREE ASSETS TOTAL UNSECURED CREDITORS
(NFA) WITHOUT PRIORITY (TULi-w/o)
1. Excess of APTFSL ₱xx 1. Excess of PSL ₱xx III. INSTALLMENT SALE S
over PSL xx ₱xx over APTPSL xx ₱xx
2. Free Asset xx 2. UL w/o Priority xx TYPES OF SALES
TFA xx TULi w/o ₱xx
3. Loss UL with Priority xx 1. REGULAR SALES 2. INSTALLMENT SALES
Net Free Asset ₱xx Cash Sales
  Cost Recovery
Credit Sales
  Gross Profit Realization
ESTIMATED DEFICIENCY (ED):  Use the accrual  Installment Method
ED = TULi  – NFA or ED = TULi w/o × (1  – POR) method *all are prescribed by the standard

ED:  A = L + C GP from Sale of Repossessed Merchandise* ₱xx


SHE beginning ₱xx GP on Regular Sales (Regular Sales  – Cost of Regular Sales) xx
Estimated net loss (xx) RGP on Installment Sales:
 Accrued interest (xx) 2017 2017
Liquidation expense (xx) 2015 DGP to RGP xx
EED ₱ xx  +/− 2017 2016
2016 (Collection × GPR) xx
*NOTE:  Statement of Realization   no cash 2017 (Collection × GPR) xx
Total RGP ₱xx
STATEMENT OF REALIZATION AND LIQUIDATION Less: Expenses (Loss on Repossession and
1. Assets to be realized (ATBR) 3. Assets realized (AR) Loss/Expense from write-off) (xx)
 Noncash Assets, beginning   PPE – net proceeds
 NET INCOME 2017 ₱xx
2. Assets acquired (AA) / ↑ on Asset   Receivables  – collection

 Interest Receivable   Inventory  – cost of sales



*Sales ₱ xx
 Accounts Receivable 4. Assets not realized (ANR) Less: Cost of Sales:
7. Liabilities liquidated (LL)  Noncash Asset, ending Fair Value of Repossessed Merchandise ₱xx
8. Liabilities not liquidated (LNL) 5. Liabilities to be liquidated (LTBL) Reconditioning Cost xx (xx)
 Ending balance of the liabilities 6. Liabilities assumed (LA) / ↑ in Liabilities GP from Sale of Repossessed Merchandise ₱ xx
9. Supplementary charges / Expenses  Accrued Expenses
 Cost of Sales  Accounts Payable Fair Value of Repossessed Merchandise ₱xx
 Accrued Expenses 10. Supplementary credits / Revenue Reconditioning Cost xx
  Sales
 Net Purchases xx
11. NET INCOME / GAIN  Accrued Interest Income Estimated Selling Price ₱xx
12. NET LOSS / LOSS (*If silent, after)
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

Installment Sales ₱xx Beginning Inventory ₱xx


Cost of Sales (xx) Net Purchases xx
Deferred Gross Profit ₱xx Freight-in xx
Repossessed Merchandise xx
Installment Accounts Receivable ₱xx Reconditioning Cost xx
Unsecured Cost xx TGAS ₱xx
Deferred Gross Profit ₱xx Ending Inventory (New + Unsold RM + RC) xx
Cost of Sales (Regular/Installment/Repossessed Merchandise) ₱xx
EXAMPLE:
Fair Value of Repossessed Merchandise* ₱70 TRADE-IN & SALE OF REPOSSESSED MERCHANDISE:
Less: Unrecovered Cost: Down payment – Cash ₱xx
IAR/Repossessed Account Down payment – FV of Trade-in xx
(Receivable Defaulted/Unpaid Balance) ₱100 Collection, net of interest xx
Less: Deferred Gross Profit (20) (80) Collection ₱xx
LOSS (UC > FV of R eposs ess ed Merchandise) ₱(10) Multiply: Gross Profit Ratio xx
Realized Gross Profit ₱xx
ENTRIES: Gross Profit from Sale of Repossessed Merchandise xx
1. Reposs. Mdse. – FV ₱70 3. Cash ₱___  Total Realized Gross Profit ₱xx
DGP 20 IAR ₱___  Loss (FV of Reposs. Mdse. – Unrecovered Cost) (xx)
NET INCOME ₱xx
Loss 10
IAR ₱100 4. DGP ₱___ 
RGP ₱___  TRADE-IN:
2. Expenses ₱80
Installment Sales ₱xx
DGP (20%) 20 *Gain/Loss  P/L Fair Value of Trade-in xx
IAR ₱200 **DGP  Contra receivable account Trade-in Allowance (xx)
write-off
 Adjusted Installment Sales ₱xx
Cost of Sales (xx)
(20%) IAR 2016 DGP 2016 GROSS PROFIT ₱xx
Beginning ₱100  Collection ₱50 RGP ₱10 Beginning ₱20
RA 30 DGP on RA 6  Adjusted Installment Sales ₱xx
WO 5 DGP on WO 1 Down payment – Cash (xx)
End ₱ 15 End ₱ 3 Fair Value of Trade-in (xx)
CV of Receivable ₱xx
IAR 2017 DGP 2017
 AIS ₱___   Collection ₱ ___ RGP ₱__  Beginning ₱__  Installment Sales ₱xx
RA ___ DGP on RA __ Trade-in Allowance (xx)
WO ___ DGP on WO __ Collectibles ₱xx
End ₱ ___ End ₱ _
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

IV. LONG TE RM CONSTRUCTION CONTRACTS (IAS 11) COMPUTATION OF ADJUSTED PRICE BILLING (APB):
Contract Price ₱xx
1. PERCENTAGE OF COMPLETION METHOD + EC (↑ in certain cost) xx
- outcome can be estimated reliably − DC (↓ in certain cost) xx
- if the problem is silent − Penalty Clause (due to late turnover) xx
1.1. INPUT MEASURE (Cost to Cost) + IP (due to early turnover) xx
Cost Incurred To Date ÷ Total Cost +/− Modification / Change Order / Variation xx
1.2. OUTPUT MEASURE ADJUSTED PRICE BILLING (CP = APB) ₱xx
Total Units Prod. ÷ Total Units Expected Prod.
2. COST RECOVERY METHOD YEAR 1 YEAR 2 YEAR 3
- outcome cannot be estimated reliably CITD ₱xx ₱xx ₱xx
+ PTD-LTD xx xx xx
CONTRACT RETENTION CIP ₱xx ₱xx ₱xx
  receivables
 − APB xx xx xx
does not the an income element
 (Due to)/Due from ₱xx ₱xx ₱xx = 0 → CIP @
reduces collection
 ↓ ↓ the end of the
 PRO-FORMA ENTRY: Liability   Asset  year of contract.
Cash ₱xx
Contract Retention xx CONSTRUCTION IN PROGRESS:
 Accounts Receivable ₱xx
(1) If Profit: Contract Price × Percentage of Completion = CIP
 UPON COMPLETION OF PROJECT: (2) If Loss: [(C P × PO C ) – LTD × (1 − POC)] = CIP 
Cash ₱xx (3) [(T C × PO C ) – LTD] = CIP
Contract Retention ₱xx

MOBILIZATION FEE ENTRIES:


no income element 1.) Construction in Progress ₱xx
 PRO-FORMA ENTRY:
Various Accounts ₱xx
Cash ₱xx
 Advances from Customers ₱xx 2.) Accounts Receivable ₱xx
Progress Billings ₱xx
COMPUTATION OF COST INCURRRED TO DATE (CITD):
(1.) Direct Materials ₱xx 3.) Cash ₱xx
+ (2.) Direct Labor xx  Accounts Receivable ₱xx
+ (3.) Overhead xx 4.) COC ₱xx
+ (4.) Depreciation of Construction Equipment (*Idle = Expense) xx Construction in Progress xx
+ (5.) Any reimbursable Cost xx Construction Revenue ₱xx
+ (6.) xx
+ (7.) Borrowing Cost (Qualifying Asset) xx 5.) Accounts Receivable ₱xx
*Specific = IE  – II; **General = (AI × C) × CR Progress Billings ₱xx
+ (8.) Unused Supplies / Materials without Alternative Use xx 6.) Progress Billings ₱xx
+ (9.) Incidental Income from Sale excess over Scrap Materials xx Construction in Progress ₱xx
COST INCURRED TO DATE ₱xx
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

COMPUTATION OF ADJUSTED CONTRACT PRICE: COMPUTATION OF DUE FROM / (DUE TO) CUSTOMER  – Y2:
Contract Price ₱xx Year 1 Billings ₱xx
Variable Price xx Year 2 Billings xx
Bonus xx Mobilization Fee (xx)
Adjusted Contract Price ₱xx Year 1 Collection [(Y1B × customer payment % of amount billed) ×
(100% - Retention Fee %)] (xx)
COMPUTATION OF CIP: Year 2 Collection [(Y2B × customer payment % of amount billed) ×
(100% - Retention Fee %)] (xx)
Cost Incurred to Date ₱xx Due from / (Due to) Customers  – Y2 ₱xx
Realized Gross Profit  – to date xx
Construction in Progress ₱xx
V. IAS 18 – REVENUE
COMPUTATION OF REALIZED GROSS PROFIT  – CURRENT YEAR: CRITERIA TO RECOGNIZE REVENUE:
1ST YEAR 2ND YEAR LAST YEAR 1. Receivables (*silent)
Contract Price ₱xx ₱xx ₱xx - reasonably assured
CITD (Prior Year + Current Year) ₱xx ₱xx ₱xx
Estimated Costs xx xx xx 2. Cash as Down Payment (*silent)
Total Costs (₱xx) (₱xx) (₱xx) -  nonrefundable
Total Estimated Gross Profit ₱xx ₱xx ₱xx
Multiply: Percentage of Completion % % % 3. Franchise Revenue
Total Realized Gross Profit  – To Date ₱xx ₱xx ₱xx - substantial performance
Realized Gross Profit  – Prior Year (+/−) xx xx xx
Realized Gross Profit  – Current Year ₱xx ₱xx ₱xx NOTE:
 These conditions shall meet to recognize revenue.
 IFRS 15 Contingent Franchise Fee = IAS 18 Continuing Franchise Fee
COMPUTATION OF CIP, net of PB (ZPM/CRM):
CASE 1 CASE 2 CASE 3
Cost Incurred To Date ₱xx ₱xx ₱xx
R x
Total Estimated Gross Profit X (₱xx) (₱xx)
C x
Multiply: Percentage of Completion -_ 100% 100%
F
Total Realized Gross Profit  – To Date ₱-0- (₱xx) (₱xx)
₱xx ₱xx ₱xx
IFF = Revenue IFF = Deferred Cash ₱xx
Progress Billings (PY + CY) (xx) (xx) (xx)
Revenue NR xx
Construction in Progress, net of PB ₱+/− ₱+/− ₱-0-
Discount ₱xx
Franchise Revenue xx
Deferred Revenue xx
RECOGNITION OF REVENUE
 over time EXCEPTION TO THE RULE:
 at a point in time
 Down payment still considered as revenue if the DP is nonrefundable and
DP represents fair measure of services already rendered.
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

CASE 1 CASE 4
R   – Interest Bearing (Accrual Method) R x  – Non-interest Bearing
C  C 
F  F 
Revenue (IFF) ₱xx Down Payment ₱xx
Cost of Sales (Direct Cost for Initial Services) (xx) Collection, net of interest income xx
Gross Profit ₱xx Total Collection ₱xx
Continuing Franchise Fee (Sales × %) xx Multiply: Gross Profit Ratio (GP ÷ Revenue) *REVENUE = DP + PV  %
Interest Income (Face Amount × Interest Rate × ?/12) xx Realized Gross Profit ₱xx
Expense (IC for IS + IC for CS + DC for SC) (xx) Continuing Franchise Fee xx
NET INCOME ₱xx Interest Income (PV × IR × ?/12) xx
Expenses (xx)
CASE 2 NET INCOME ₱xx
R x  – Non-interest Bearing (Installment Method)
C  TOTAL REVENUE OF THE FRANCHISOR
F  Down payment ₱xx
Collection xx
Down Payment  – Cash ₱xx
CFF xx
Collection during the period xx Interest Income xx
Total Collection ₱xx TR-F ₱xx
Multiply: Gross Profit Ratio (GP ÷ Revenue) *REVENUE = IFF  %
Realized Gross Profit ₱xx TOTAL REVENUE FROM F.F.
Continuing Franchise Fee xx Down payment ₱xx
Collection xx
Interest Income xx
CFF xx
Expenses (xx) TR from FF ₱xx
NET INCOME ₱xx

CASE 3 VI. HOME OFFICE A ND BR ANCH AC COUNTING


R   – Non-interest Bearing BP − Cost = AFOBI
C  Beginning Inventory:
F  Home Office* ₱xx ₱xx ₱xx (GPR-PY)
Outsider xx xx -
Revenue (DP + PV) ₱xx
Shipment, net* SFHO STB xx (GPR-CY)
Cost of Sales (xx) Purchases (NP) xx xx -
Gross Profit ₱xx Freight in xx xx -_
Continuing Franchise Fee xx Total Goods Available for Sale ₱xx ₱xx ₱xx
Ending Inventory:
Interest Income (PV × IR × ?/12) xx
Home Office* (xx) (xx) (xx)
Expenses (xx) Outsider (xx) (xx) (xx)
NET INCOME ₱xx Cost of Goods Sold ₱xx ₱xx ₱xx RGP
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

*NOTE:
 Beginning Inventory  – HO
(a) In transit  – prior year
(b) Freight Charges
 Ending Inventory – HO
(a) In transit  – current year (SFHO is < its true amount)
(b) Freight Charges

FREIGHT FREIGHT
PREPAID COLLECT

EXAMPLE:
Freight Charges
Home Office to Branch 1 ₱10
Branch 1 to Branch 2 5
Home Office to Branch 2 (4)
(Excess Freight)  Expenses ₱11

 Net Income @ Billed Price  Reported Net Income (Branch)


 Net Income @ Cost  True Net Income (Home Office)
 COGS @ BP  – COGS @ Cost + Net Income @ BP = Realized Gross Profit
EXAMPLE *ENTRIES
Net Income reported by the branch ₱xx ₱ 87
Unrecorded expenses of branch:
   Depreciation (xx) (5)
 Allocation of expense (xx) (2)
Net Income that should have reported ₱xx ₱ 80 #11
Realized Gross Profit xx 20 #12
True Net Income ₱xx ₱100
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

EQUITY METHOD – CV P/L


BP (Reported) Cost (True/Correct)
Purchase Price ₱xx Investment Income ₱+
Sales ₱xx ₱xx
Transaction Cost xx Impairment Loss ( −)
Cost of Goods Sales (xx) (xx)
Investment Income xx P/L ₱xx
Gross Profit ₱xx ₱xx
Dividend xx
Expenses (xx) (xx)
Impairment Loss (xx)
Net Income ₱xx ₱xx
CV of Investment ₱xx
AFOBI HO
*NOTE:  The fair value method is applicable only for trading securities.
RGP Beginning 1. 100 – 80 = 20
Shipment 2. 100 × 20% = 20
End 3. 100 × 25/125 = 20 TYPES OF BUSINESS COMBINATION
4. 80 × 25% = 20
1.  ASSET ACQUISITION (100% Ownership)
1.1. Statutory Merger  A + B = A /B
VII. BUSINESS COMBINATION (IFRS 3) & CONSOLIDATED 1.2. Statutory Consolidation  A + B = C
F.S. (IFR S 10)
2. STOCK ACQUISITION  A + B = AB (Parent  – Subsidiary)
BUSINESS COMBINATION 2.1. Fully Owned
 is a transaction where the acquirer obtains control over the net assets of 2.2. Partially Owned
the acquiree.

OWNERSHIP ACCOUNT TITLE METHOD ACCOUNTING METHOD


51% to 100% Investment in Subsidiary Cost / Equity / Fair Value  IFRS 3  – Acquisition Method ( *OLD Purchase Method)
20% to 50% Investment in Associate Equity
1% to 19% FA @ FVPL/FVOCI Cost / FV Disclose the following:
1) Determine the acquirer
COST METHOD – CV P/L 2) Determine the acquisition date
Purchase Price ₱xx Impairment Loss ₱(−)  The acquisition date is the measurement date, and you have within
Transaction Cost xx Dividend Income + 1 year from the balance sheet date to adjust the fair value of those
Impairment Loss (xx) P/L ₱xx assets and liabilities
 The net assets of the subsidiary can be adjusted within 1 year from
CV of Investment ₱xx
the acquisition date
FAIR VALUE METHOD – CV P/L 3) Recognize and measure identifiable assets, identifiable liabilities, and
non-controlling interest (*The pre-existing goodwill of subsidiary is
Purchase Price ₱xx Unrealized Gain ₱+
ignored.)
Unrealized Gain xx Unrealized Loss ( −)
Unrealized Loss (xx) Dividend Income + 4) Measure and recognize goodwill or gain
CV of Investment ₱xx Transaction Co ( −)
P/L ₱xx
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

FORMULAS EXAMPLE:
Share Premium from issuance ₱ 50
Share Premium from original issuance 30
CTIR 100

ENTRY:
Share Premium ₱50
Share Premium 30
SIC 20
Cash /Payable ₱100

PRESENTATION OF NCI
  
* × PHI% = ₱xx 1. FV of NCI / Full Goodwill
    
 If the fair value is unknown compute the implied fair value
FORMULA:
EXAMPLE:     
     
Purchase Price ₱1000 NA@BV – 12/31 ₱xx  
NA@BV (SHE) (700) Net Income (xx)
Excess ₱ 300 Dividend xx 2. Proportionate Share / Relevant Share / Interest in the Net Asset of Subsidiary
OVA (50) NA@BV – BC ₱xx (INAS)
UVA (100) FORMULA:
Goodwill ₱  250 FV of Net Assets × NCI% = INAS

Purchase Price ₱1000 NA@BV – BC ₱700 CONTROL PREMIUM (CP)


NA@FV (squeezed) (750) UVA 100 1. It must be included in the purchase price
2. Excluded in computing NCI
Goodwill ₱ 250 OVA (50)
3. It affects goodwill or gain
NA@FV ₱750
CONTINGENT CONSIDERATION PAYABLE (CCP)
ACQUISITION RELATED COST 1. If the information existed already as of the acquisition date, any adjustment to
1. Direct Cost  expense fair value would affect the goodwill or gain.
2. Indirect Cost  expense CTIR Keywords: 2. If the information is related to target profit or target market price, any
3. Cost to Issue or Register (CTIR)   SEC adjustment goes to P/L and it does not affect the goodwill or gain.
B ased on priority:   Stock
3.1. Share Premium from   Share NOTE: Adjustment to goodwill should be applied retrospectively.
issuance; *SME
 Documentary Stamp Tax
3.2. Share Premium from − Direct Cost is capitalized  / capitalizable
original issuance; − NCI is measured using proportionate
3.3. Debit to Stock Issuance − Goodwill goes to parent
Cost − Goodwill is subject to amortization (10 years)
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

EXAMPLE: Case 4 [CP of ₱300000 is included] 


(100%) (80%) (20%)
Case 1
TOTAL Purchase Price NCI
(100%) (80%) (20%)
Fair Value of Subsidiary ₱1200000 ₱1000000 ₱ 200000
TOTAL Purchase Price NCI
Net Assets @ FV (1000000) (800000) (200000)
Fair Value of Subsidiary ₱1700000 ₱1300000 ₱ 400000 FV
Goodwill ₱  200000 ₱  200000 ₱  -0-
Net Assets @ FV (1000000) (800000) (200000)
Goodwill ₱  700000 ₱  500000 ₱ 200000
₱200000   
vs.      
Impairment Loss ₱50000 ₱35714 (5/7) ₱14286 (2/7) 
*If the problem is silent, use the F V.
Case 5
The FV of NCI should not lower of INAS.
(100%) (80%) (20%)
FV INAS TOTAL Purchase Price NCI
₱400000 vs.  Fair Value of Subsidiary ₱  900000 ₱  700000 ₱ 250000
      Net Assets @ FV (1000000) (800000) (200000)
 Goodwill ₱(100000) ₱ (100000) ₱  -0-

Case 2 [CP = ₱300000]  NOTE: Gain is never allocated. It goes to Parent.


(100%) (80%) (20%)
TOTAL Purchase Price NCI 01/01/17 12/31/17
Fair Value of Subsidiary ₱1550000 ₱1300000 ₱ 250000 Purchase Price ₱1000000 ₱1000000
Net Assets @ FV (1000000) (800000) (200000) Net Assets @ Fair Value (700000) (800000)
Goodwill ₱  550000 ₱  500000 ₱  50000 Goodwill ₱  300000 ₱  200000
Goodwill on December 31, 2017 = ₱200000
₱200000    Goodwill on January 1, 2017 = ₱200000
vs.    


Case 3 CONSOLIDATED FINANCIAL STATEMENT (*At the date of business


(100%) (80%) (20%) combination)
TOTAL Purchase Price NCI
Fair Value of Subsidiary ₱1250000 ₱1000000 ₱ 250000 TOTAL ASSETS:
Net Assets @ FV (1000000) (800000) (200000) Total Assets of Parent @ BV ₱xx
Goodwill ₱  250000 ₱  200000 ₱  50000 Total Assets of Subsidiary @ FV xx
Goodwill xx
Purchase Price (Cash/NCA) (xx)
₱200000 vs. 
     Direct Cost (xx)
 *If, paid Indirect Cost (xx)
CTIR (xx)
Total Assets ₱xx
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

TOTAL LIABILITIES: 2. SUBSIDIARY – SHE


Ordinary Share – Subsidiary ₱xx
Total Liabilities of Parent @ BV ₱xx
Share Premium – Subsidiary xx
Total Liabilities of Subsidiary @ FV xx
Retained Earnings – Subsidiary xx
CPP xx
Investment in Subsidiary ₱xx
Purchase Price (Liabilities) xx
NCI xx
Direct Cost xx
*If, unpaid Indirect Cost xx 3. OVA, UVA, & GOODWILL
CTIR xx Equipment ₱xx
Total Liabilities ₱xx Inventory xx
Goodwill xx
TOTAL SHAREHOLDER’S EQUITY : Investment in Subsidiary ₱xx
SHE of Parent @ BV ₱xx NCI xx
NCI xx 4. AMORTIZATION OF IMPAIRMENT LOSS
on BPO ₱xx Operating Expense ₱xx
Gain  on PHI xx PPE, net ₱xx
on CCP xx xx
Purchase Price (Stocks @FV) xx Impairment Loss ₱xx
Direct Cost (xx) Goodwill ₱xx
*Paid/ Indirect Cost (xx)
Unpaid CTIR (xx) Cost of Sales ₱xx
Total Assets ₱xx Inventory ₱xx

CONTROL PREMIUM 5. INTERCOMPANY SALES & PURCHASES


 Additional investment Sales ₱xx
 Part of purchase price Cost of Sales ₱xx
 Affects goodwill/(gain)
6. UPEI
 Ignored in computing NCI
Cost of Sales ₱xx
PURCHASE PRICE
Inventory ₱xx
 
 Cash
 
 Noncash 7. RPBI
 
 Liability Retained Earnings – Parent ₱xx
 
 Stock NCI (up) xx
Cost of Sales ₱xx
WORKING PAPER ELIMINATING ENTRIES
1. DIVIDEND RECEIVED *Ending Inventory ₱xx NOTE:
Dividend Income ₱xx Multiply: GPR of Seller % CONSO COS NI INVENTORY
UPEI – 20x6 ₱xx UPEI + − −
NCI (partially) xx RPBI – 20x7 ₱xx RPBI − +  Ignored
Dividend Declare – Subsidiary ₱xx
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

EXAMPLE: Intercompany Sale of Equipment


Sales ₱ 70
CV [₱90-(₱90/10) ×3)] (63)
Gain ₱ 7

SELLER BUYER W.P.E.E.


Cash ₱70 Equipment ₱70 Gain ₱7
 Acc. Dep. 27 Cash ₱70 Equipment 20
Equipment ₱90  Acc. Dep. ₱27
Gain 7
Dep. Exp. ₱9 Dep. Exp. ₱10  Acc. Dep. ₱1
 Acc. Dep. ₱9  Acc. Dep. ₱10 Dep. Exp. ₱1
*(₱70/7=₱10) *(RG thru amortization:
₱7/7=₱1)

UNREALIZED GAIN
Gain ₱7
Equipment ₱7
*(it depends upon the Selling Price)

YEAR 2 YEAR 3
Unrealized RE ₱7
NO ENTRY
Gain Equipment ₱7
Realized  Acc. Dep. ₱2 RE ₱5
EXAMPLE: Intercompany Sale of Inventory Gain Dep. Exp. ₱1 Dep. Exp. ₱1
Sales ₱1000 Ending Inventory (1000 ×50%) ₱500 RE 1 Gain 4
Cost of Sales (700) GPR × 30%
Gross Profit ₱300 UPEI (12/31/16) ₱150
Ending Inventory % × 50% EXAMPLE: Intercompany Sale of Land
UPEI ₱150 RPBI (01/01/17) ₱150 Land (selling price) - ₱100
CL - 80
Working Paper Eliminating Entries Sale to third party - 150
DOWN UP
UPEI: COS ₱xx COS ₱xx
Inventory ₱xx Inventory ₱xx YEAR 1 YEAR 2 YEAR 3 Recorded  – Subsidiary ₱50
UG ₱(20) -0- -0- Not yet recorded 20
RPBI: RE, beg. ₱xx RE, beg. ₱xx RG -0- -0- ₱20 ₱70
COS ₱xx NCI xx
COS ₱xx
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

FORMULAS: Gross Profit – Parent ₱xx


Gross Profit – Subsidiary xx
Non-controlling Interest, beginning ₱xx Unrealized Profit in Ending Inventory (UPEI) (xx)
Non-controlling Interest – Net Income xx Realized Profit in Beginning Inventory (RPBI) xx
Dividend Share (xx)  Amortization of Undervalued Assets (xx)
Non-controlling Interest, end ₱xx  Amortization of Overvalued Assets xx
Consolidated Gross Profit ₱xx
Retained Earnings – Parent ₱xx
Consolidated Net Income – Parent xx Operating Expense – Parent ₱xx
Dividend – Parent (xx) Operating Expense – Subsidiary xx
Consolidated Retained Earnings ₱xx Realized Loss (thru depreciation/amortization) xx
Realized Gain (thru depreciation/amortization) (xx)
Ordinary Share – Parent ₱xx
Impairment Loss xx
Share Premium – Parent xx  Amortization of Undervalued Assets xx
Consolidated Retained Earnings xx
 Amortization of Overvalued Assets (xx)
Non-controlling Interest xx
Consolidated Operating Expense ₱xx
Consolidated Shareholder’s Equity ₱xx
Inventory – Parent @ BV ₱xx
Shareholder’s Equity, end ₱xx
Inventory – Subsidiary @ BV xx
Net Income of Subsidiary (xx)
Undervalued Inventory xx
Dividend of Subsidiary xx
Overvalued Inventory (xx)
Shareholder’s Equity at book value ₱xx
 Amortization of Undervalued Assets – Inventory (xx)
Overvalued Assets (OVA) (xx)
 Amortization of Overvalued Assets – Inventory xx
Undervalued Assets (UVA) xx Unrealized Profit in Ending Inventory (UPEI) (xx)
Net Assets at fair value ₱xx
Consolidated Inventory ₱xx
Sales – Parent ₱xx
Consolidated Net Income attributable to Parent ₱xx
Sales – Subsidiary xx
Non-controlling Interest in Net Income xx
Intercompany Sales & Purchases at Selling Price (xx) Consolidated Net Income ₱xx
Consolidated Sales ₱xx
Cost of Sales  – Parent ₱xx
Cost of Sales  – Subsidiary xx VIII. J OB ORDER COSTING
Intercompany Sales & Purchases at Selling Price (xx)
Unrealized Profit in Ending Inventory (UPEI) xx Predetermine OH Rate = Based on BUDGETED
Realized Profit in Beginning Inventory (RPBI) (xx) Spoilage vs. Defect
 Amortization of Undervalued Assets xx no use can be reworked
 Amortization of Overvalued Assets (xx)
Consolidated Cost of Sales ₱xx
*Charged to all
Consolidated Sales ₱xx - add allowance (unit cost) Loss – add – FOH control account
Consolidated Cost of Sales (xx) *Charged to specific job (actual)
Consolidated Gross Profit ₱xx - deduct allowance
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

ALLOCATION OF COST IX. JUST IN TIME


 DIRECT METHOD
TRIGGER POINTS:
Service Provided to Machining  Assembly   Purchase 
by   Production
Quality Control 262500 87500   Completion 
Maintenance 120000 80000   Sale 
382500 167500
GOALS:
   STEP-DOWN 1. Eliminating any production process that does not add value
2.
*Benefit provided ranking table (Company Policy)
*Based on the service department which has the highest cost
JOURNAL ENTRIES:
QC Maintenance Machining Assembly
 Purchase
350000 200000 400000 300000
QC (350000) 70000 210000 70000 Raw and In Process ₱xx
Maintenance  ___-___ (270000) 162000 108000  Accounts Payable ₱xx
-0- -0- 772000 478000 Conversion Cost ₱xx
*Once the OH cost of the service department becomes exhausted, do not Various Accounts ₱xx
allocate other cost to the service department
 Completion
 RECIPROCAL METHOD Finished Goods ₱xx
Raw and In Process ₱xx
QC Maintenance Machining Assembly
Conversion Cost xx
Quality Control - 20% 60% 20%
Maintenance 25% - 45% 30%  Sales

Quality Control = 350000 + 0.25M Cost of Sales ₱xx


Maintenance = 200000 + 0.20QC Substitute Finished Goods ₱xx
QC = 350000 + 71053 = 421053 Cost of Sales ₱xx
M = 200000 + 0.20(421053) = 284211 Raw and In Process ₱xx
Conversion Cost xx
QC Maintenance Machining Assembly
 75% were sold
350000 200000 400000 300000
(421053) 84211 252632 84211 Cost of Sales ₱xx
71053 (284211) 127894 85263 Finished Goods xx
-0- -0- 780527 469474 Conversion Cost ₱xx
Raw and In Process xx
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

 X. J OINT C OS TING DL


 AHAR
Joint Cost ₱xx Rate DLRV
Less: NRV of By-product (xx)  if, inventoriable/  AHSR
Remaining Joint Cost ₱xx material
 AHSR
TREATMENT OF BY-PRODUCT Efficiency DLEV
SHSR
1. Upon sale or realization
- recorded as other income, if the by-product is immaterial.
2. Upon production or inventoriable  XII. F OR E IG N E XC HA NG E (I AS )
- the NRV of by-product is deducted from the total joint cost
1. Foreign Currency Transaction
ALLOCATION OF REMAINING 2. Foreign Exchange Translation
1. PHYSICAL 3. Hedging of FOREX Risk
1.1. Physical measure such as gallon/kilogram
1.2. Units produce  EXCHANGE RATE  – This is the ratio of exchange between two currencies.
1.3. Weighted average units produce  SPOT RATE – Rate for immediate delivery.
2. MONETARY  CLOSING RATE – This is the spot rate at Balance Sheet date.
2.1. Sales value at split-off also known as relative market value
 FUNCTIONAL CURRENCY – Currency of primary economic environment
2.2. Net realizable value at split-off 
in which the entity operates.
2.3. Hypothetical/approximated/estimated at split-off also known as
 What is the primary driver of functional currency? – SALES
adjusted market value
Assets & Liabilities Closing Rate
TWO TYPES OF COST FOR THE JOINT PRODUCT
Shareholder’s Equity Historical Rate
1. Joint Cost Share or Allocated Joint Cost
Revenue & Expenses Average [Computation: (B+E)/2 ] 
2. Traceable Cost or Additional Processing Cost
Spot Rate (Theory)

 XI. S TA ND AR D C OS TING FOREX TRANSACTION: Importation


DM (Hedge Item) (Hedging Instrument)
BUYING OF INVENTORY BUYING OF F.C.
 AQAP
1. ER↑ = Forex Loss [100] 3. FR↑ = Forex Gain[80] = [20]
Purchased DMPV
2. ER↓ = Forex Gain 4. FR↓ = Forex Loss
 AQSP
FOREX TRANSACTION: Exportation
 AQSP
Used DMUV SELLER OF MERCHANDISE SELLER OF F.C.
SQSP 5. ER↑ = Forex Gain 7. FR↑ = Forex Loss
6. ER↓ = Forex Loss 8. FR↓ = Forex Gain
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

ENTRIES:  A = L + C
$ 10M $ 8M $ 2M
BUYING OF INVENTORY BUYING OF F.C.
× ₱1 × ₱1 × ₱0.5
Purchases ₱xx FCR ₱xx ₱ 10M = ₱ 8M + ₱ 1M + ₱ 1M Translation Adjustment
 Accounts Payable ₱xx FCP (fixed) ₱xx
Credit
$ 10M $ 8M $ 2M
Forex Loss ₱xx FCR ₱xx
× ₱1 × ₱1 × ₱2
 Accounts Payable ₱xx Forex Gain ₱xx
₱ 10M = ₱ 8M + ₱ 4M + ₱ 2M Translation Adjustment
 Accounts Payable ₱xx Forex Loss ₱xx Debit
Forex Gain ₱xx FCR ₱xx
NA, ending @ CR > NA, ending @ RF = Translation Adjustment Credit
 Accounts Payable ₱xx FCP (fixed) ₱xx NA, ending @ CR < NA, ending @ RF = Translation Adjustment Debit
Cash ₱xx Cash xx
FCR ₱xx NA, beg. OS × HR ₱xx
RE, beg. xx (translated amount)
SELLER OF MERCHANDISE SELLER OF F.C.
Net Income @ Average xx
 Accounts Receivable ₱xx FCR (fixed) ₱xx Dividend @ SR (xx)
Sales ₱xx FCR ₱xx NA, end @ RF ₱xx
 Accounts Receivable ₱xx Forex Loss ₱xx QUOTATION:
Forex Gain ₱xx FCP ₱xx
1. DIRECT – Foreign Currency to Philippine Peso
2. INDIRECT  – Philippine Peso to Foreign Currency
Forex Loss ₱xx FCP ₱xx
 Accounts Receivable ₱xx Cash xx
SPOT RATE:
FCR (fixed) ₱xx
1. BUYER – Selling Spot Rate / Offer Rate / Asking
2. SELLER – Buying Spot Rate / Bid Rate
FOREX TRANSLATION
 only reflected in consolidated FS
FIRM COMMITMENT
 an Other Comprehensive Income component
(1) The hedge is perfect when the company acquired a forward contract for
OCI:
the same amount of the same currency in which the firm commitment is
1. Forex Translation (IAS 21)
(2) Under perfect hedging, the amount of forex gain from hedging instrument
2. Effective Portion of Cash Flow Hedge (IFRS 7/9)
is equal to firm commitment as liability
3. Revaluation Surplus (IAS 16)
(3) The amount of forex loss from hedging instrument is equal to firm
4. Remeasurement G/L related to employee benefit (IAS 19R)
commitment as asset
5. Estimated Unrealized G/L on FA at FVTOCI (IFRS 7/9) (4) TYPES OF FIRM COMMITMENT
6. Risk  G/L on credit risk for financial liability designated to P/L 4.1. Sales Commitment
4.2. Purchase Commitment
RECLASSIFIED TO P/L:
(5) The asset sold or purchased is recorded at the date of settlement based
1. Forex Translation
on the forward rate on the date of commitment
2. Effective portion of Cash Flow Hedge
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

THREE HEDGE RELATIONSHIP  XIII. ACCOUNTING OF N PO (A IC PA)


(1) Fair Value Hedge
- Hedges of exposure to the changes in value of a recognized asset/liability or COMPUTATION:
unrecognized firm commitment
- If the problem is silent, use the FVH Gross Patient Service Revenue ₱xx
Charity Care (xx)
(2) Cash Flow Hedge  Amount Charge / Billed to Customers ₱xx
- Hedges of probable forecasted transactions or the variability in the cash flow Contractual Adjustment (PHILHEALTH, MEDICARE) (xx)
of a recognized asset or liability Discount to Hospital Employees (xx)
(3) Net Investment Hedge Net Patient Service Revenue ₱xx
- Hedges of the net investment in a foreign operation
STATEMENT OF ACTIVITIES
OPTIONS
 Contracts that are right and not obligation to buy or sell commodities at a
 Shows contractual adjustment
certain price  This is collectible at third party payor
 This is always favorable on the part of the holder (1) For Hospitals (contra-revenue account)

 If it is gain or in the money,  exercise the option Contractual Adjustment ₱xx


 If it is out of the money,  do not exercise the option  Accounts Receivable ₱xx
 Call option is on the part of the buyer
 Put option is on the part of the seller (2) For Schools (contra-revenue account)
Expenditure for student ₱xx
CALL OPTION:
 Accounts Receivable ₱xx
Market Price = Strike Price  AT THE MONEY
Market Price > Strike Price  IN THE MONEY (UG) CONTRIBUTED MATERIALS, SERVICES, & FACILITIES
Market Price < Strike Price  OUT OF THE MONEY − Unrestricted funds
PUT OPTION: (1) Inventory ₱xx
Market Price = Strike Price  AT THE MONEY Contribution Revenue ₱xx
Market Price > Strike Price  IN THE MONEY
Market Price < Strike Price  OUT OF THE MONEY (2) Salaries ₱xx
Contribution Revenue ₱xx
SPLIT ACCOUNTING
CFH Intrinsic Value  – Unrealized Gain OCI (3) Rent Expense ₱xx
Time Value  – Gain/Loss P/L Contribution Revenue ₱xx

FVH Intrinsic Value  – Unrealized Gain P/L OTHER OPERATING REVENUE


Time Value  – Gain/Loss P/L − Unrestricted funds
Cash ₱xx
NON-SPLIT ACCOUNTING
Other Operating Revenue* ₱xx
CFH Intrinsic Value  – Unrealized Gain OCI
* EXAMPLE OF OTHER OPERATING REVENUE
FVH Intrinsic Value  – Unrealized Gain P/L  Proceeds from cafeteria
 Proceeds from parking lots
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

FINANCIAL STATEMENTS GOVERNMENT ACCOUNTING MANUAL  (GAM)


(1) STATEMENT OF ACTIVITIES  Under GAM, entity shall not maintain regular agency book and national
Amount of changes in each of the three classes of net assets government book
(a) Changes in Unrestricted Net Assets  GAM supersedes NGAS effective January 1, 2016
(b) Changes in Temporary Restricted Net Assets implemented in 2002
(c) Changes in Permanently Restricted Net Assets  Commission on Audit has exclusive authority to define the scope of audit

(2) BALANCE SHEET


COMPONENTS OF GENERAL PURPOSE FINANCIAL STATEMENTS
Assets, Liabilities, Net Assets
Three types of Net Assets: (1) Statement of Financial Position
(a) Unrestricted Net Assets (2) Statement of Financial Performance
(b) Temporary Restricted Net Assets (3) Statement of Changes in Net Assets / Equity
(c) Permanently Restricted Net Assets (4) Statement of Cash Flow
The restricted cash and investment are prescribed separately (5) Statement of Comparison of Budget and Actual Amounts
All securities are valued at fair value (6) Notes to the financial statements, comprising a summary of significant
accounting policies and other explanatory notes
(3) STATEMENT OF CASH FLOW
 Restricted whether temporary/permanent (FINANCING) BOOKS OF ACCOUNTS & REGISTRIES
  Quasi-endowment  unrestricted (OPERATING)

1. JOURNALS
 Receipts of donation to purchase PPE (Inflow: INVESTING)
a. General Journal
 Cash outflow to purchase PPE (FINANCING) b. Cash Receipts Journal
 Term endowment  Temporary (FINANCING) c. Cash Disbursement Journal
 Pure endowment  Permanent (FINANCING) d. Check Disbursement Journal
(4) STATEMENT OF FUNCTIONAL EXPENDITURE 2. LEDGERS
 Specifically for Voluntary Health and Welfare Organization (NGOs) a. General Ledgers
b. Subsidiary Ledgers
 XIV. G OVE R NME NT A CCOUNTING
REGISTRIES
PHASES OF BUDGETARY PROCEDURE
(1) RROR – Registries of Revenue and Other Receipts
1. PREPARATION AND PRESENTATION (2) RAPAL – Registry of Appropriation and Allotments
− Submission of budget of the expenditure (3) RAOD – Registries of Allotments, Obligation and Disbursements
(4) RBUD – Registries of Budget, Utilization and Disbursements
2. BUDGET AUTHORIZATION
− Enactment by the congress of the General Appropriation Act
CLASSIFICATION OF RAOD & RBUD
3. BUDGET EXECUTION AND OPERATION
− Release of revenue allotment  PS – Personnel Services
  MOE – Maintenance and Other Operating Expenses
4. BUDGET ACCOUNTABILITY  FE – Financial Expenses
− Liquidation of expenditure and audit conducted by Commission on Audit  CO – Capital Outlay
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)

NOTICE OF CASH ALLOCATION (NCA)


 Issued by Department of Budget and Management (DBM) to an agency
authorizing the latter to disburse by checks

(1) RECEIPT OF NCA


Cash – MDS, Regular ₱xx
Subsidy from National Government ₱xx
* Net of 5% final VAT and 1% creditable income tax

(2) UNUSED NCA


Subsidy from National Government ₱xx
Cash – MDS, Regular ₱xx

ACCOUNTING FOR DISBURSEMENTS


1. Net Payroll Advances to Disbursing Officer
 Advances for Payroll ₱xx
Cash – MDS, Regular ₱xx MESSAGE TO THE READERS
 2. Payable to Officers and Employees and to set up salary deductions Magandang buhay sa inyo mga ka-reviewee!
Salaries and Wages – Regular ₱xx
PERA xx  Ang notes na ito ay hango sa m ga itinuro ni Sir Ferrer (*one of my fave
Due to BIR ₱xx reviewer ). Kung sakaling may mapansin man kayo na kulang o mali ay kayo
Due to GSIS xx na lang ang magkusang magtama nito. Hindi naman perpekto ang pagkaka-
type nito, tulad ko (*ansabe!?).
Due to Pag-IBIG xx
Due to PhilHealth xx Nawa ay makatulong ito sa inyong pag-aaral. Fighting! Ipaglaban natin
Due to Officers and Employees xx ang ating pangarap. May the odds be in our favor. God bless us a ll! ^_^
 3. Remittance of Salary Deductions Sincerely,
Due to GSIS ₱xx LFA
Due to Pag-IBIG xx
Due to PhilHealth xx “For whatever is born of God overcomes the world.
Cash – MDS, Regular ₱xx  And this is the victory that has overcome the world – our FAITH.”
1 JOHN 5:4
4. Liquidation of Advances for Payroll
Due to Officer and Employees ₱xx
 Advances for Payroll ₱xx

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