CELCO - AIS Final Requirement

Republic of the Philippines
BATANGAS STATE UNIVERSITY

COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS, AND
INTERNATIONAL HOSPITALITY MANAGEMENT
Pablo Borbon Main I, Rizal Avenue, Batangas City
CAMOTES ELECTRIC COOPERATIVE INC.
Final Requirement in ACC207

Accounting Information System
Submitted by:
Atienza, Rasmin
Cueto, Karla B.
Evangelista, Cindy B.
Fernandez, Janelle Ann Marie M.

Lacsamana, Ronella H.
Maala, Edsel J.
Noche, Mary Angelle C.
Vergara, Janice Ann B.
BSA - 2203
Mr. Aljohn S. Calapatia, MBA, CPA

ACC207 Instructor
May 2020
REQUIREMENT 1:
What are your observations with the statement of financial position (balance
sheet) as of December 31, 2017 of CELCO? (What are the deviations of it from the
IFRS/PFRS?)
Upon scrutinizing the given statement of financial position, they have observed that
its format is different from the usual and accustomed way of presenting balance sheet in
school context. Accounts are not arranged according to its liquidity and instead present
non-current assets before assets, equity before liabilities, and non-current liabilities
before current liabilities. Moreover, the face of the statement of financial position
includes accounts that are components of required line items by PFRS and are typically
presented in the notes to balance sheet.
With these observations from CELCO’s balance sheet report, the group has inferred
that it does not deviate or non-conform to the IFRS/PFRS notwithstanding of the above
remarks, for the reason that the standard does not prescribe the sequence or format in
which items are to be presented in the statement of financial position. The said
standard-setting body rather suggests only presenting the balance sheet based on
liquidity and classifying separately the current and noncurrent assets and liabilities. In
addition to that, the standard does not restrict an entity in presenting the statement
financial position in its preferred way provided that it is reliable, relevant and
understandable.
REQUIREMENT 2:
If you will be given the chance to present the Statement of financial position of
CELCO in accordance with IFRS/PFRS how will you present/rearrange it? Please
use spreadsheet for this. How would it affect its chart of accounts?
- Answer in Excel
REQUIREMENT 3:
If you were to audit the books of accounts of CELCO, based on its trial balance,
what are the accounts that you think have an abnormal balances and why.
Expound your answer.
An account balance is abnormal when the reported balance does not comply with
the normal debit or credit balance established in the general ledger chart of accounts.
After analyzing and auditing the accounts of Camotes Electric Company, Inc. as of
2017, based on its trial balance, there are no abnormal balances found in the General
Ledger. Here are the accounts with abnormal balances in the Subsidiary Ledger:
(a) Cash in Bank – GF – Savings - Catmon ₱ 30.42

Under the accounts of Cash – General, the abnormal balance of Cash in Bank –
GF – Savings – Catmon, ₱ 30.42 is credited. This happens when an amount is
deducted from the bank balances. Assets must be debited, unless it’s contra-
assets.
(b) Non-operating Margins ₱ 23,206,810.81
Under the accounts of Other Margins & Equities having a normal balance of
debit, ₱ 23,206,810.81 is credited to Non-Operating Margins.
(c) A/P – NEA - Power Subsidy ₱ 15,500.00
Under the accounts of Accounts Payable, A/P – NEA - Power Subsidy is debited.
This happens when a payable is either paid or just an error in the book.
(d) Interest Payable – Loan E(HQ) ₱ 1,522.00
Under the accounts of Interest Payable, the abnormal balance is ₱1,522.00
where Interest Payable – Loan E(HQ) is debited. Like the previous, payables are
liabilities, therefore they are always credited.
(e) Accrued Employees Leave Credits ₱ 387,915.49
Under the accounts of Miscellaneous Current & Accrued Liabilities, its normal
balance should be credit, but the account of Accrued Employees Leave Credits was
debited ₱ 387,915.49.
REQUIREMENT 4:
Prepare the closing entries for nominal accounts of CELCO for the period ending
December 31, 2017.
REQUIREMENT 5:
Using the spreadsheet, prepare the statement of operations (Income Statement)

of CELCO for the period ending December 31, 2017.
- Answer in Excel
REQUIREMENT 6:
How much is the Net Income of the CELCO for the period ending December 31,
2017?
- The compute net loss of CELCO is ₱8,700,138.19.
REQUIREMENT 7:
Some subsidiary accounts were mistakenly deleted by the accounting staff. What
detective control are you going to perform to validate this incident? Identify how
much and what subsidiary accounts are those.
A general ledger reconciliation should be performed, in order to validate said

errors regarding the missing subsidiary accounts. The general ledger pertains to the
financial record of every transaction of a company, and commonly referred to as the
entity’s books. The general ledger reconciliation, on the other hand, refers to the
process of ensuring the accuracy and reliability of the information presented in the said
ledger.
From the detective control performed, it was concluded that there were missing
subsidiary accounts under the following control accounts: operating revenues,
maintenance and depreciation expense-SFP.
The table below presents the control accounts, its respective subsidiary accounts
and the total amounts. Through this given information, the amounts of the missing
subsidiary accounts were computed.
In conclusion, the missing subsidiary accounts were public building under the
operating revenues control account, line transformers under the maintenance control
account and meter under the depreciation expense-SFP control account, costing
₱8,096,052.88, ₱110,090 and ₱1,601.76 respectively.
REQUIREMENT 8:
How is the computed net income for the period ending December 31, 2017 will be
presented in the statement of financial position of CELCO?
In a cooperative, net income is presented as net surplus that is allocated in

accordance with the Cooperative Code or the cooperative’s bylaws. The primary
purpose of a cooperative is to provide services to its members. Since CELCO has a net
loss the computed net loss for the period ending December 31, 2017 shall be presented
as a part of unappropriated margin in the statement of financial position. The
unappropriated margin is made up of the net income/ loss of the current year and the
prior years that will be debited to liabilities and will help to compute the total equities and
margins. A net loss account refers to temporary account to record losses in operations
incurred during the reporting period. The net loss shall be charged against reserve fund,
subject to provision of Article 86 of RA 9520.
According to Article 86 of RA 9520 the reserve fund shall be used for the stability of
the cooperative and to meet net losses in its operations. The general assembly may
decrease the amount allocated to the reserve fund when the reserve fund already
exceeds the share capital. Any sum recovered on items previously charged to the
reserve fund shall be credited to such fund.
According to Article 85 of RA 9520, Net Surplus, notwithstanding the provisions of

existing laws, the net surplus of cooperatives shall be determined in accordance with its
bylaws. Every cooperative shall determine its net surplus at the close of every fiscal
year and at such other times as may be prescribed by the bylaws.
REQUIREMENT 9:
Compute for the following and narrate the computed financial ratios:
a. Quick Ratio
b. Current Ratio
c. Debt Ratio
d. Equity Ratio
e. Debt Service Coverage Ratio
a. Quick Ratio
If the company had a large amount of quick assets, it would be able to pay
its debts much faster than if it had to sell off long-term assets. This calculation is
measured by the quick ratio. The quick ratio is a liquidity ratio that compares quick
assets to current liabilities. This gives investors and creditors insight as to how liquid
the company is. In other words, investors and creditors can see how easily current
liabilities can be paid. It may be computed as follows:
Quick ratio = Quick Assets ÷ Current liabilities
Quick ratio = ₱ 28,915,904.22

₱ 55,759,794.85
Quick Ratio = 0.52
In conclusion, we can say that Camotes Electric Cooperative Inc. may not be
able to fully settle its current liabilities in the short-term because a quick ratio
resulting to 0.52 simply indicates that the said cooperative may not be considered as
fully equipped with enough assets to be instantly liquidated to settle its current
liabilities.
b. Current Ratio
The current ratio refers to the ratio of current assets to current liabilities. It is
the most common measure of liquidity. The current ratio determines whether the
company has enough short-term assets to pay for short-term liabilities. It may be
computed as follows:
Current Ratio = Total Current Asset / Total Current Liabilities
Current Ratio = ₱ 52,477,790.33
₱ 55,759,794.85
Current Ratio = 0.94
With regards to current ratio, which measures an entity’s financial

capability to cover its overall liabilities with its overall assets, the computed
current ratio of Camotes Electric Cooperative Inc. which resulted to 0.94, It
indicates that even though that the cooperative current ratio is near to 1 it doesn’t
mean that it can cover it’s all short term obligation. This means there are not
enough current assets to cover all the payments that are due on the company’s
current liabilities.
c. Debt Ratio
Debt ratio is a solvency ratio that measures a firm’s total liabilities as a

percentage of its total assets. In a sense, the debt ratio shows a company’s
ability to pay off its liabilities with its assets. In other words, this shows how many
assets the company must sell in order to pay off all of its liabilities. It may be
Debt Ratio = Total Liabilities/Total Assets
Debt Ratio = ₱ 55,759,794.85
₱ 200,478,993.61
Debt Ratio = 0.29
Through the use of resulting 0.29 debt ratio of the Camotes Electric
Cooperative Inc. we, the group, can say that the said cooperative has a number
assets greater than debt, and these assets are funded more of by equity rather than
obligations and it does not indicate a more leveraged cooperative, which implies a
greater financial risk.
d. Equity Ratio
The equity ratio is a financial metric that measures the amount of leverage
used by a company. It uses investments in assets and the amount of equity to
determine how well a company manages its debts and funds its asset requirements.
It may be computed as follows:
Equity Ratio = Total Equity / Total Assets
Equity Ratio = ₱144,719,198.76
₱ 200,478,993.61
Equity Ratio = .72
An equity ratio of 0.72 is completely favorable for Camotes Electric Cooperative Inc.
because it simply implies that investments are funding more of its assets rather than by
liability. It also shows that 67% of the assets are owned by the members of the
cooperative and not by its creditors.
e. Debt Service Coverage Ratio
The debt service coverage ratio measures the ability of a revenue-producing

property to pay for the cost of all related mortgage payments. In essence, it
compares cash flows to debt service payments. A positive debt service ratio
indicates that a property’s cash flows can cover all offsetting loan payments. It is
DSCR = Net operating Income/Debt Services
DSCR = ₱ -8,256,539.5
₱ 20,062,316.55
DSCR = -0.41
A debt service coverage ratio of -0.41 of the company indicates that the
company owners must contribute additional funds to pay for the annual loan
payments. The company has not enough revenue to cover annual debt payments.
REQUIREMENT 10:
Do you think that the financial condition of CELCO is stable? Why?
The purpose of most businesses is to earn profit but it is also important to keep
the business financially stable as it relates to the ability to pay overhead expenses, cut
down debt and return capital to investors. It is beneficial in a way that lenders, investors
and employees are more willing to deal with financially stable businesses upon
favorable terms. The use of financial mix ratio analysis is an analytic tool employing the
ratio proportion of the certain items in the financial statements. The focus of the
evaluation is to determine the tendencies of the company’s liquidity, solvency,
profitability and efficiency of management performance. It helps to identify deficiencies

and appropriate actions to improve the operating performance.
Based on the computed financial ratios wherein the quick ratio and the current
ratio measure the ability of the company to pay for their short-term obligations or simply
the liquidity ratio of the company. In the case of CELCO Inc. were the ratios are lower
than it should have be, it shows that the cooperative might have difficulty meeting their
obligations and may not be able to take advantage of opportunities that require quick
cash. However, low values do not indicate a critical problem. If the cooperative has
good long-term prospects, it may be able to borrow against those prospects to meet
current obligations.
Debt ratio and Equity ratio are part of the solvency ratio that measures the ability
of the business to settle its financial obligation when they mature and to remain still
financial stable. According to the computed ratios, it showed that the cooperative have a
lower debt ratio that means the cooperative is safe but they should be able to make
payments even during economic downturns. A lower debt ratio usually implies a more
stable business with the potential of longevity because a company with lower ratio also
has lower overall debt. While the equity ratio of CECLO Inc. is favorable from the
perspective of the creditors, there is a great possibility that creditors and banks will
extend financial assistance when immediate needs arise from the business. While in the
computation of the debt service coverage ratio shows large net losses without any
material add-backs. It means is that the company does not generate enough cash flow
to cover any of its debt and would have to rely upon its liquidity and capital to make
payments.
In conclusion, the Camotes Electric Cooperative Inc. is not stable and it is shown
both in the result of ratios analysis and in its income statement that they have net loss,
that their expenses is greater than their assets and equity. This proves that the
cooperative is not liquid to pay all their short term debts.
REFERENCES:
Book:
Aduana, N. (2017). Business Finance in the Philippine Setting for senior High School.
Quezon City: C&E Publishing Inc.
Websites:
Accounting Verse. (2020). Current Ratio - Formula, Example, and Interpretation.
Retrieved May 25, 2020, from https://www.accountingverse.com/managerial-

accounting/fs-analysis/current-ratio.html
Accounting Verse. (2020). Quick Ratio - Formula, Example, and Interpretation.
Retrieved May 25, 2020, from https://www.accountingverse.com/managerial-

accounting/fs-analysis/quick-ratio.html
Bragg, S. (2018, November 25). Debt service coverage ratio. Retrieved May 25, 2020,
from https://www.accountingtools.com/articles/2017/5/5/debt-service-coverage-
ratio
Bofah, K. (2019, February 11). Why Is Financial Stability Important in Business?
Retrieved May 25, 2020, from https://bizfluent.com/facts-5890927-financial-

stability-important-business-.html
CFI Education, Inc. (2020, January 7). Equity Ratio - Definition, How To Calculate,
Importance. Retrieved May 25, 2020, from

https://corporatefinanceinstitute.com/resources/knowledge/finance/equity-ratio/
Cooperative Development Authority. (2009, February 17). REPUBLIC ACT 9520.
Retrieved May 25, 2020, from

https://www.cda.gov.ph/resources/issuances/philippine-cooperative-code-of-
2008/republic-act-9520
My Accounting Course. (2020). Debt Ratio: Formula: Analysis: Example. Retrieved May
25, 2020, from https://www.myaccountingcourse.com/financial-ratios/debt-ratio

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Republic of the Philippines

BATANGAS STATE UNIVERSITY

CAMOTES ELECTRIC COOPERATIVE INC.

Final Requirement in ACC207

Fernandez, Janelle Ann Marie M.

Mr. Aljohn S. Calapatia, MBA, CPA

(a) Cash in Bank – GF – Savings - Catmon ₱ 30.42

Using the spreadsheet, prepare the statement of operations (Income Statement)

- The compute net loss of CELCO is ₱8,700,138.19.

A general ledger reconciliation should be performed, in order to validate said

In a cooperative, net income is presented as net surplus that is allocated in

According to Article 85 of RA 9520, Net Surplus, notwithstanding the provisions of

Quick ratio = Quick Assets ÷ Current liabilities

Quick ratio = ₱ 28,915,904.22

Current Ratio = Total Current Asset / Total Current Liabilities

Current Ratio = ₱ 52,477,790.33

With regards to current ratio, which measures an entity’s financial

Debt ratio is a solvency ratio that measures a firm’s total liabilities as a

Debt Ratio = Total Liabilities/Total Assets

Debt Ratio = ₱ 55,759,794.85

Debt Ratio = 0.29

Equity Ratio = Total Equity / Total Assets

Equity Ratio = ₱144,719,198.76

Equity Ratio = .72

e. Debt Service Coverage Ratio

The debt service coverage ratio measures the ability of a revenue-producing

DSCR = Net operating Income/Debt Services

Do you think that the financial condition of CELCO is stable? Why?

profitability and efficiency of management performance. It helps to identify deficiencies

Quezon City: C&E Publishing Inc.

Retrieved May 25, 2020, from https://www.accountingverse.com/managerial-

Retrieved May 25, 2020, from https://www.accountingverse.com/managerial-

Retrieved May 25, 2020, from https://bizfluent.com/facts-5890927-financial-

Importance. Retrieved May 25, 2020, from

Retrieved May 25, 2020, from

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