Mactan Auto Repair Services

Income Statement
For the month ended 31 January 201A

Service Income P 198,500

Less: Operating Expenses
Taxes and Licenses P 5,600
Salaries Expense 40,000
Rent Expense 18,000
Shop Supplies Expense 50,000
Uncollectible Account Expense 1,620
Utilities Expense 15,300
Insurance Expense 1,150
Depreciation Expense 4,500 136,170
Profit before Finance Charges P 62,330
Less: Finance Charges
Interest Expense _____250
Profit for the month P 62,080
 Mactan Auto Repair Services
Statement of Changes in Owners Equity
For the month ended 31 January 201A

B. Pozon, Capital January 1, 20A P 800,000

Add: Profit for the month 62,080
Total P 862,080
Less: Withdrawal 10,000
B. Pozon, Capital January 31, 20A P 852,080
 Mactan Auto Repair Services
Balance Sheet
For the month ended 31 January 201A
Assets
Current Assets:
Cash in Bank P 553,350
Accounts Receivable P 81,000
Estimated Uncollectible Accounts 1,620 79,380
Prepaid Interest 38,150
Total Current Assets P 670,880

Non-Current Assets
Furniture and Fixtures P 280,000
Accumulated Depreciation 4,000 P275,500
Total Assets P 946,380
Liabilities and Owners Equity
Liabilities
Current Liabilities:
Accounts Payable P94,300
Owners Equity
B. Pozon, Capital P852,080
Total Liabilities and Owners Equity P 946,380
 Understandability
Reliability
free from material error
free from bias
Relevance
Comparability
Consistency
 Identifying Various Users
Economic Management
Measuring Information Stockholders
Creditors
Financial analysts
Communicating Government

LO 4
 Internal Users:
Primarily the managers of a company
Involved in the daily affairs of the
business
External Users:
Not directly involved in the
operations of a business
Need information that differs from
that needed by internal users
Outsiders must rely on the
information presented by the
companys management
1.SOLE / SINGLE PROPRIETORSHIP
A form of business is owned by one person;
the simplest, and the most common form of
business organization

It is not separate from the owner. The business and

the owner are inseparable
Advantages of sole/single proprietorship:
The owner keeps all the profits.
The owner makes all the decisions.
It is easy to form and operate.

Disadvantages of sole/single proprietorship.

The life of the business is limited to the life of
the owner. Once the owner dies, the business will
cease to operate under the name of the
proprietor.
The amount of capital is limited only by the
wealth of the proprietor.
 2. PARTNERSHIP

A form of business owned by two or more persons.

The details of the
arrangement between the partners are outlined in a
written document called
articles of partnership.

Profits are divided among partners based on their

agreed sharing.

The owner is called a partner.

Advantages of a partnership
Higher capital because two or more persons will
contribute to the common fund.
It is easy to operate like a sole/single proprietorship

Disadvantages of a partnership
The profits are divided among the partners.
A partner can be held liable for the acts of the other partners.
In a lawsuit, the personal properties of the partners can be
held beyond their
contributions and may be used to answer for any liability of the
partnership.
 3. CORPORATIONS
A corporation is a business organized as a separate legal entity (artificial
person) under the corporation law with ownership
divided into transferable shares of stocks
Emphasize that it is the law (Corporation Code of the Philippines) that
creates a corporation.
The corporation begins its existence from the date the Articles of
Incorporation is approved by the Securities and Exchange
Commission (SEC).
The SEC (Securities and Exchange Commission) is the government agency
primarily tasked to regulate private corporations in
the Philippines.
The owners are called stockholders or shareholders.
The word Corporation/Incorporation/Corp./Inc. appears in the name of the
entity.
The voting rights of a shareholder is generally based on the percentage of
ownership.
The management of the business is delegated by the shareholders to the
Board of Directors
The ownership is divided into shares and the value of one share may be
denominated at a smaller amount, for example at
PHP10 per share.
The proof of ownership is evidenced by a stock certificate.
Advantages of a corporation
Can easily raise additional funds by selling shares
of stocks to the public.
Shareholders are not personally liable for the
debts of the corporation. The extent of their liability
is limited to their equity
(ownership) in the corporation.

Disadvantages of a corporation
It is relatively complicated to set up.
Subject to several legal restrictions as listed in the
Corporation Code of the Philippines
 4. COOPERATIVES

A cooperative is a duly registered association of

persons with a common bond of interest, voluntarily
joining together to
achieve their social, economic and cultural needs.
The owners are called members who contribute
equitably to the capital of the cooperative.
The members are expected to patronize their
products and services.
The word cooperative appears in the name of the
entity.
This form of business organization is regulated by the
Cooperative Development Authority (CDA).
Advantages of a Cooperative
Enjoys certain tax exemption privilege
Promotes the concept of sharing resources

Disadvantages of a Cooperative
Limited distribution of surplus
Requires continuous education programs for
members.
The members have active and direct participation
in the business of the cooperative.