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Accounting 2 Week 1 4 LP
Accounting 2 Week 1 4 LP
Department of Education
REGION IV-A
SCHOOLS DIVISION OFFICE OF CAVITE PROVINCE
TANZA NATIONAL COMPREHENSIVE HIGH SCHOOL
SENIOR HIGH SCHOOL
DAANG AMAYA II, TANZA, CAVITE
Grade 12
Fundamentals of Accountancy,
Business and Management 2
Learner’s Packet
First Semester
1st Quarter, 2020-2021
1. Use the learning packet with care. Do not put unnecessary mark/s on any part of the
learning packet. Use a separate sheet of short bond paper in answering the exercises,
activities including the application and assessment.
2. Do not forget to answer each part before moving on to the other activities included in
the learning packet.
5. Observe honesty and integrity in doing the tasks and checking your answers.
6. Use the answer keys provided at the back of the learning packet in checking your
activities and exercises.
7. Return the answer sheet of exercises, activities, application and assessment on the
submission date.
If you encounter any difficulty in answering the tasks in this module, do not hesitate to
consult your subject teacher or adviser. Always bear in mind that you are not alone.
We hope that through this material, you will experience meaningful learning and gain deep
understanding of the relevant competencies. You can do it!
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
The learners
Most Essential Learning 1. identify the elements of the SFP and describe each item
Competencies (MELC’s) 2. prepare an SFP using the report form and account form with
proper classification of items as current and noncurrent
1. Describe the elements of the SFP
2. Enumerate the basic elements of the Statement of
Financial Position
Specific Learning 3. Determine the normal balances of each elements of the
Outcomes SFP.
4. Describe current and noncurrent accounts
5. Differentiate account form from report form of SFP
6. Prepare a Statement of Financial Position
Content Statement of Financial Position (SFP)
Commission on Higher Education (2016). Teaching Guide
Learner’s Materials for Senior High School. Fundamentals of Accountancy,
Pages Business and Management 2 pp. 2-18
Textbook Pages Salazar, D. (2016). Fundamentals of Accountancy, Business
and Management 2. Rex Publishing Inc. pp. 1-29
Learning Resources N/A
INTRODUCTION
In this second accounting subject, the first four chapters shall deal with the
preparation of the basic financial statements and their analysis and interpretation. The
bookkeeper starts with the (1) analysis of business transactions and economic events,
followed by (2) recording in the general journal and special journals, and (3) calssiying
in the general ledgers. The general ledger accounts are summarized as assets,
liabilities, owner’s equity, revenue, cost and expenses. Financial statements are
prepared from these summarized accounts
The financial statements are:
• Statement of Financial Posiition or Balance Sheet
• Statement of Income or Statement of Financial Performance
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
DEVELOPMENT
PERMANENT ACCOUNTS
• As the name suggests, these accounts are permanent in a sense that their balances
remain intact from one accounting period to another. (Haddock, Price, & Farina,
2012)
• Examples of permanent account include
ASSETS
• Cash - money owns by the company whether cash in bank or cash on hand
• Receivables – the company’s right to collect or claim payment
• Inventory – the cost of unsold merchandise
• Prepaid Expenses – future expenses that the company had paid for in
advance.
• Property, plant and equipment – long-term assets that are used in the
operation of the business
• Intangible Assets – patent, brand name, and trademark
LIABILITIES
• Payables – it is the obligation to pay (accounts payable, notes payable)
• Accrued Expenses – unpaid expenses of the company
• Unearned Income – advance payment/deposits by the customers
• Long-Term Liabilities – obligations with due dates that fall more than one year
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
EQUITY
• Capital – reflects all transactions of the business with its owner in is capacity
as the owner. This account will reflect the balance of the owner’s investments
in the business such as cash contributions
CONTRA ASSETS
• Those accounts that are presented under the assets portion of the SFP but are
reductions to the company’s assets.
• These include Allowance for Doubtful Accounts and Accumulated Depreciation.
NORMAL BALANCES
Debit and credit refers to the sides of the T-account. A debit entry means that the amount
should be placed on left side of the T-account. A credit side means that the amount should
be placed on the right side of the T-account. The normal balance of asset account is debit
while the normal balance of liability and equity is credit.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
• Account Form – 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. (Haddock, Price, & Farina, 2012)
• Emphasize that the two are only formats and will yield the same
amount of total assets, liabilities, and equity
• Emphasize that assets should always be equal to liabilities and equity
• Current Liabilities – Liabilities that fall due (paid, recognized as revenue) within one
year after yearend date.
Examples:
• Notes Payable
• Accounts Payable
• Accrued Expenses (example: Utilities Payable)
• Unearned Income
Note: Current Assets are arranged based on which asset can be realized first
(liquidity). Current assets and current liabilities are also called short term assets
and shot term liabilities
• Noncurrent Assets – Assets that cannot be realized (collected, sold, used up) one
year after yearend date.
Examples:
• Property, Plant and Equipment (equipment, furniture, building, land)
• Long Term investments
• Intangible Assets
• Noncurrent Liabilities – Liabilities that do not fall due (paid, recognized as revenue)
within one year after year-end date.
Examples:
• Loans Payable
• Mortgage Payable
Note: Noncurrent assets and noncurrent liabilities are also called long- term assets
and long-term liabilities.
Statement of Financial Position of a Service Company and of a Merchandising
Company
• The main difference of the Statements of the two types of business lies on the
inventory account. A service company has supplies inventory classified under the
current assets of the company.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
• While a merchandising company also has supplies, inventory classified under the
current assets of the company, the business has another inventory account under its
current assets which is the Merchandise Inventory, Ending.
Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation
(emphasis on the
wording – “as of”)
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wording – “as of”)
ENGAGEMENT
It’s time to check your understanding! Answer the following activities in a separate
sheet of paper.
ACTIVITY 1
Determine the following accounts if ASSET, LIABILITY or EQUITY. If your answer is
ASSET or LIABILITY, identify if CURRENT or NONCURRENT.
______________1. Notes Payable _______________6. Capital
______________2. Unearned Rent Income _______________7. Prepaid Supplies
______________3. Trademark _______________8. Furniture and Fixture
______________4. Account Receivable _______________9. Accrued Salaries
______________5. Land _______________10. Allowance for Bad Debts
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
ACTIVITY 2
Easy
1. Learning is Fun Company had current assets amounting to Php 100,000. Noncurrent
assets for the year totaled Php 76,000. How much is the company’s total assets?
2. Happy Selling Company’s total liabilities amounted Php 10,000. Total equity had an
ending balance of Php 20,000. How much is total assets?
Average
1. Happy Selling’s had the following accounts at year end: Cash-250,000, Accounts
Payable-70,000, Prepaid Expense-15,000. Compute for the company’s current assets.
2. Happy Selling’s Accounts Receivable amounted to Php 500,000. Prepaid Expense and
Unearned Income totaled Php 30,000 and Php 10,000 respectively. Cash balance
amounted to Php 100,000 while Accounts Payable and Inventory totaled to Php 20,000
and Php 10,000 respectively. How much is the company’s current assets? Current
liabilities?
Difficult
1. Company’s Total Liabilities and Equity amounted to Php 285,000. Total noncurrent
assets ended at Php 85,000. Cash totaled Php50,000. Inventory amounted to
Php100,000. Assuming the company had no other assets, how much is Accounts
Receivable?
2. Total assets amounted to Php575,000. Total equity amounted to Php 250,000.
Accounts Payable amounted to Php 50,000 while Unearned Income totaled Php
85,000. Assuming there are no other current liabilities, compute for the company’s
noncurrent liabilities.
ASSIMILATION
ABM Company
POST – CLOSING TRIAL BALANCE
Dec. 31, 2016
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
Requirement 1: Compute the accounting equation for the above post-closing trial balance of
Pinklane Company as of Dec. 31, 2016.
A. Account Form
B. Report Form
ASSESSMENT
Directions: Read carefully each item. Use a separate sheet for your answers. Write
only the letter of the best answer for each test item.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
9. What are these various materials which remain unused at the end of the accounting
period?
A. Accounts Receivable C. Prepaid Supplies
B. Accounts Payable D. Withdrawal Account
10. What pro forma of the SFP that presents its elements in horizontal order following the
accounting equation?
A. Account Form B. Direct Method C. Indirect Method D. Report Form
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
The learners
1. identify the elements of the SCI and describe each of these
Most Essential Learning
items for a service business and a merchandising business
Competencies (MELC’s)
2. prepare an SCI for a service business using the single-step
approach
7. Describe purpose of the SCI
Specific Learning 8. Explain the elements of SCI
Outcomes 9. Describe the nature and parts of the single-step SCI
10. Prepare a single-step SCI
Elements of Statement of Comprehensive Income (SCI)
Content
Prepare a single-step SCI
Commission on Higher Education (2016). Teaching Guide
Learner’s Materials for Senior High School. Fundamentals of Accountancy,
Pages Business and Management 2 pp. 19-35
Textbook Pages Salazar, D. (2016). Fundamentals of Accountancy, Business
and Management 2. Rex Publishing Inc. pp. 33-53
Learning Resources N/A
INTRODUCTION
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
DEVELOPMENT
TEMPORARY ACCOUNTS
• Also known as nominal accounts are the accounts found under the SCI. They are
called such because at the end of the accounting period, balances under these
accounts are transferred to the capital account, thus having only temporary amounts
and resulting to zero beginning balances at the beginning of the following
year.(Haddock, Price, & Farina, 2012).
Examples
• revenues, sales
• utilities expense, supplies expense
• salaries expense, depreciation expense, interest expense among others.
• The income statement shows the business’s income, expenses, gains, and losses.
The end product of these transactions is net income or loss. Some also call the income
statement a statement of profit and loss, or P&L.
• Generally accepted accounting practices (GAAP) also refer to this report as statement
of income because the income statement shows not only income and expenses from
continuing operations (which basically is revenue minus expenses), but also income
from myriad sources, such as the gain or loss that results when a company sells an
asset.
• Revenue: Gross receipts earned by the company selling its goods or services
• Gains: Income from non-business-related transactions, such as selling a company
asset
• Expenses: The costs to the company to earn the gross receipts
• Losses: The flip side of gains, such as losing money when selling the company
car
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
• The major revenue for a service business called Service Revenue comes from
rendering services to clients for a fee while the major revenue for a merchandising
business called Sales comes from selling goods or merchandise.
• Merchandise represents the stocks of goods bought by the merchandiser for resale to
its customers.
• Cost of Sales is a major expense of a merchandiser which represents the cost of
buying the merchandise which were sold to obtain a revenue.
• Gross Income on Sales or Gross Profit is the mark-up or margin of profit in selling the
goods to the customers and would be a good basis for determining whether the
company’s pricing policy is adequate’
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
• As you can see, all of the expenses are added up and totaled into one number. This is
great for simplicity’s sake, but it doesn’t give the external users of the financial
statements much information about the company operations.
• Typically, public companies are required to issue a multi-step statement to the public.
Private companies are often required by banks and other creditors to either issue a
multi-step statement or develop a detailed schedule listing specific expenses in order
to get financing.
• Although the single step income statement lacks detail, it is relatively easy to prepare
and easy to analyze. That is why it’s most often used for internal purposes.
Management prepares single step statements for single departments as well as
company divisions to analyze the performance during a period and set budget goals
for the next period.
• Some managers use a combination single-multi step statement for internal uses.
These combination statements typically include slightly more detail than the single
step but less detail than a true multi step statement.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
ENGAGEMENT
It’s time to check your understanding! Answer the following activities in a separate
sheet of paper.
ACTIVITY 1
ABM Nursery School
The ABM Nursery School is a preparatory school for children three to five years
old. Students are enrolled for a schoolyear. Parents can pay the full tuition fee of
P70,000 at the start of the school year (June). There is also an option to pay two
installments of P37,000 each at the start of every semester (June 1 and November 1).
Of the 150 students enrolled, 80 are paid in full at the start of the year. The remaining
students are on installment basis. One school year runs from June 1 to March 31.
Determine the tuition fee revenue for the period December 31. This is
the first year of ABM Nursery School operations.
ACTIVITY 2
The ABM Nursery School is a preparatory school for children three to five years
old. There are 10 teachers employed by ABM Nursery School, 5 senior teachers with
a salary of P30,000 each per month and 5 junior teachers at P18,000 each per month.
There are also 4 administrators with average monthly salary of P35,000 each. Annual
depreciation for furniture and fixtures amounted to P100,000. Utilities expense for the
year totals to P200,000.
Requirement:
1. List down the expenses of ABM Nursery School following the nature of
expense.
2. Prepare a single-step SCI (CY December 31) for ABM Nursery School. Use
the Revenue information from Activity 1.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
ASSIMILATION
Here is the adjusted trial balance of Rey Lantin Services for the calendar year 20X1.
Make a single-step statement of income for the year.
ASSESSMENT
TRUE OR FALSE: Read each sentence carefully and determine whether the statement
is True or False. Write your answers in the space provided before the number.
.
__________ 1. The SCI is a picture of the results of operations of the company as of the
cut-off-date.
__________ 2. The major elements of the SCI are income and expenses.
__________ 3. Cost of sales is computed as cost of goods available for sale less ending
inventory.
__________ 4. Expense recognition strictly requires the matching of expenses against
revenue.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
Comprehensive Problem
At the end of the first month of operations for Juan’s Service Company, the business had the
following accounts: Cash, Php19,000; Prepaid Rent, Php500; Equipment, Php5,000 and
Accounts Payable Php2,000. By the end of the month, Jackson's had earned Php20,000 of
Revenues, Php1,000 of Utilities Expenses and Php1,500 of Salaries Expenses.
Calculate the net income to be reported by the company for this first month. Prepare a
single-step income statement
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
Most Essential Learning The learners prepare an SCI for a service business using the
Competencies (MELC’s) multi-step approach
1. Describe the nature and parts of the multi-step SCI
Specific Learning 2. Differentiate selling expense from gen. administrative
Outcomes expense
3. Prepare a multi-step SCI
Preparing Multi-Step Statement of Comprehensive Income
Content
(SCI)
Commission on Higher Education (2016). Teaching Guide
Learner’s Materials
for Senior High School. Fundamentals of Accountancy,
Pages
Business and Management 2 pp. 19-35
Textbook Pages Salazar, D. (2016). Fundamentals of Accountancy,
Business and Management 2. Rex Publishing Inc. pp. 33-53
Learning Resources N/A
INTRODUCTION
Multi-step income statements are one of the two income statement formats businesses
can use to report their profits. A multi-step income statement reports a company’s revenues,
expenses and overall profit or loss for a specific reporting period. It is a more detailed
alternative to the single-step income statement and uses multiple equations to calculate a
business’s net income. An income statement, also called a profit and loss statement, is one of
three major financial statements that all businesses should prepare as part of their financial
accounting, along with a balance sheet and a cash flow statement.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
DEVELOPMENT
Multi-Step SCI
• Called multi-step because there are several steps needed in order to arrive at the
company’s net income. (Haddock, Price, & Farina, 2012)
• Emphasize that the two are only formats and will yield the same amount of net
income/loss
• Discuss that single-step SCI is more commonly used by service companies
while multi-step format is more commonly used by merchandising companies
• Multi-step income statements are one of the two income statement formats businesses
can use to report their profits.
• A multi-step income statement reports a company’s revenues, expenses and overall
profit or loss for a specific reporting period.
• It is a more detailed alternative to the single-step income statement and uses multiple
equations to calculate a business’s net income.
• An income statement, also called a profit and loss statement, is one of three major
financial statements that all businesses should prepare as part of their financial
accounting, along with a balance sheet and a cash flow statement.
• The multi-step income statement details the gains or losses of a business, in a specific
reporting period. It offers an in-depth analysis of a business’s financial performance.
Its format separates a company’s operating revenue and operating expenses from its
non-operating revenue and non-operating expenses.
• By differentiating between a business’s operating and non-operating accounting, the
multi-step income statement gives insight into how a company’s primary business
activities generate income and affect costs, as compared to the performance of its non-
essential activities.
• A multi-step income statement also differs from an income statement in the way that it
calculates net income. A single-step income statement includes just one calculation to
arrive at net income.
• Multi-step income statements, on the other hand, use multiple equations to calculate
net income. In doing so, they also calculate gross profit and operating income, which
aren’t included on a single-step income statement. In comparison, a single-step
income statement gives a simple record of financial activity.
There are three formulas you need to use for this method of calculating net income.
To calculate gross profit on your income statement, you use the formula:
Gross Profit = Net Sales – Cost of Goods Sold
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
• ii.ii. Sales discount – This is where discounts given to customers who pay early
are recorded. (Haddock, Price, & Farina, 2012) Also known as cash discount.
This is different from trade discounts which are given when customers buy in
bulk. Sales discount is awarded to customers who pay earlier or before the
deadline.
iii. Sales less Sales returns and Sales discount is Net Sales
iv. Third part is Cost of Goods Sold – This account represents the actual cost of
merchandise that the company was able to sell during the year. (Haddock, Price, &
Farina, 2012)
iv.i. Beginning inventory – This is the amount of inventory at the beginning of
the accounting period. This is also the amount of
ending inventory from the previous period.
iv.ii. Net Cost of Purchases = Purchases + Freight In
iv.ii.i. Net Purchases = Purchases – (Purchase discount and purchase
returns)
iv.ii.i.i. Purchases – amount of goods bought during the current
accounting period.
iv.ii.i.ii. Contra Purchases –An account that is credited being
“contrary” to the normal balance of Purchases account.
iv.ii.i.ii.i. Purchase discount – Account used to record early
payments by the company to the suppliers of
merchandise. (Haddock, Price, & Farina,2012). This is
how buyers see a sales discount given to them by a
supplier.
iv.ii.i.ii.ii. Purchase returns – Account used to record
merchandise returned by the company to their suppliers.
(Haddock, Price, & Farina,2012) . This is how buyers see
a sales return recorded by their supplier.
iv.ii.ii. Freight In – This account is used to record transportation costs
of merchandise purchased by the company.
(Haddock, Price, & Farina, 2012) Called freight in
because this is recorded when goods are
transported into the company.
iv.iii. Add Beginning inventory and Net cost of Purchases to get Cost of Goods
Available for Sale
iv.iv. Ending inventory – amount if inventory presented in the Statement of
Financial Position. Total cost of inventory unsold at the end of
the accounting cycle.
v. Sales less Cost of Goods Sold is Gross Profit
vi. Fourth Part is General and Administrative Expenses –These expenses are not directly
related to the merchandising function of the company but are necessary
for the business to operate effectively. (Haddock, Price, & Farina, 2012)
vii. Fifth Part is Selling Expenses – These expenses are those that are directly related to the
main purpose of a merchandising business: the sale and delivery of
merchandise. This does not include cost of goods sold and contra revenue
accounts. (Haddock, Price, & Farina, 2012)
viii. Gross Profit less General and Administrative Expenses less Selling Expenses is Net
Income for a positive result while Net Loss for a negative result
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
ENGAGEMENT
It’s time to check your understanding! Answer the following activities in a separate
sheet of paper.
ACTIVITY 1
Easy
Medium
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
Difficult
1. Company’s Cost of Goods Sold amounted to Php 285,000. Net cost of purchases
totaled Php 85,000. Beginning inventory amounted to Php 250,000. Sales amounted
to Php 500,000. Compute for the company’s Ending Inventory.
2. Gross profit of Happy Selling amounted to Php 175,000. Beginning Inventory totaled
Php 250,000. Ending Inventory amounted to Php 50,000 while Net Cost of Purchases
totaled Php 85,000. Compute for Happy’s Net Sales.
ACTIVITY 2
A. Compute for the Cost of Goods Sold using the following:
Sales – 15,000 Purchases – 2,000
Purchase returns – 200 Purchase discounts – 200
Freight in – 100 Beginning inventory – 1,000
Ending inventory – 500
ASSIMILATION
Accounts obtained from the books of accounts LMN Trading Company on December
31, 20X1 will enable you to make a multi-step statement of income.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
ASSESSMENT
The following are taken from the record of ABM Company for the year ended December 31,
20X2:
DEBIT CREDIT
Sales P764,985
Purchase Discount 8,200
Purchase Returns and allowances 5,465
Purchases 459,990
Freight-in 9,180
Sales discount 13,300
Sales returns and allowances 5,455
Depreciation Expense 25,000
Amortization expense 10,000
Salaries Expense 80,000
Utilities Expense 55,000
Advertising Expense 35,000
Rent Expense 60,000
Interest Income 5,444
Interest Expense 5,677
Gain on sale of PPE 5,465
Bad Debts Expense ???
• Bad debts expense is 4% of net sales. Classify the bad debt expense as
general and administrative expense.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
Most Essential Learning The learners prepare an SCE for a single proprietorship .
Competencies (MELC’s)
11. Identify the purpose and elements of the Statement of
Specific Learning Changes in Equity
Outcomes 12. Prepare a Statement of Changes in Equity (SCE)
13. Appreciate the importance of preparing SCE
Content Statement of Changes in Equity (SCE)
Commission on Higher Education (2016). Teaching Guide
Learner’s Materials for Senior High School. Fundamentals of Accountancy,
Pages Business and Management 2 pp. 36-45
Textbook Pages Salazar, D. (2016). Fundamentals of Accountancy, Business
and Management 2. Rex Publishing Inc. pp. 57-70
Learning Resources N/A
INTRODUCTION
The financial statements form a set of interrelated reports. The Statement of Financial
Positon (SFP) was discussed in Lesson 1. In Lesson 2, we studied the Statement of
Comprehensive Income (SCI). The third part of the set, which will we will discuss in this
lesson, is the Statement of Changes in Equity (SoCE).
Recall that the SFP is a report on the company’s assets, liablities, and equity. The
equity component of the SFP shows the claim of the owners on the company’s assets. This
is the reason why equity accounts are of particular interest to the readers of the financial
statements. The SoCE is prepared to meet the requirements of the readers to understand the
transactios that caused the movements in equity accounts.
DEVELOPMENT
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
• A Statement of Owner's Equity shows the changes in the capital account due to
contributions, withdrawals, and net income or net loss.
• Capital is increased by owner contributions and income, and decreased
by withdrawals and expenses.
• The Statement of Owner's Equity, which is prepared for the sole proprietorship type of
business, shows the movement in capital as a result of those four elements.
• Initial Investment – The very first investment of the owner to the company.
• Additional Investment – Increases to owner’s equity by adding investments by the
owner (Haddock, Price, & Farina, 2012).
• Withdrawals –Decreases to owner’s equity by withdrawing assets by the owner
(Haddock, Price, & Farina, 2012).
• *Distribution of Income – When a company is organized as a corporation, owners
(called shareholders) do not decrease equity by way of withdrawal. Instead, the
corporation distributes the income to the shareholders based on the shares that they
have (percentage of ownership of the company)
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
a. Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation
(emphasis on the wording
– “for the”)
b. Increases to Equity
i. Net income for the year
ii. Additional investment
c. Decreases to Equity
i. Net loss for the year
ii. Withdrawals by the owner
Statement of Changes in
Partners’ Equity is used by a
partnership instead of the
Statement of Changes in
Owner’s Equity. The differences
between the two are as follows:
a. Title – instead of owner’s,
partners’ is used to denote
that this is a partnership
b. There are two or more
owners in a partnership
thus, the changes in the
capital account of each
partner is presented
c. The net income is divided
between partners (not
always equal. Based on
the agreement. Example:
60:40, 40:60, etc.)
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
d) Instead of additional investment, share issuances (happens when shares are sold to
shareholders) increases the share capital of a corporation
e) Instead of withdrawals, distribution of net income to shareholders decreases the
Capital of the corporation
ENGAGEMENT
It’s time to check your understanding! Answer the following activities in a separate
sheet of paper.
ACTIVITY 1
Easy
1. Which form of business organization puts the least risk on its owners?
2. Which form of business organization is owned by only one person?
Average
Difficult
1. Beginning owner’s equity amounted to P 300,000. Net loss for the year totaled P 45,000.
No additional investments and withdrawals for the period. Compute for total increase in
equity for the year.
2. Ending owner’s equity amounted to P70,000. Additional investments during the year
amounted to P30,000. Withdrawals totaled P50,000. Compute for the company’s net
income for the year assuming beginning equity is P10,000.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
ACTIVITY 2
A.
On February 15, 20X1, Ian Espineli opened ABM Fantasy Bakeshop. He invested
P75,000 to purchase an oven and bakery supplies. The business generated a net income of
P37,545 in 20X1. Moreover, Ian used P15,000 from the account of ABM Fantasy to pay the
electricity and phone bills of his house. Ian invested an additional P13,400 and P17,650 on
March 16, 20X2 and August 19, 20X2, respectively. Net income for 20X2 was reported at
P48,950. Ian’s Drawings account has a balance of P20,000 on December 31, 20X2.
Required: Prepare ABM Fantasy Bakeshop’s Statement of Changes in Equity for the
year ended December 31, 20X2.
B.
The ABM Playdate Kiddie Gym is owned and managed by RJ Abad. The balance of
RJ Abad, Capital is P765,430 and P857,340 on December 31, 20X1 and December 31, 20X2,
respectively. Net income for 20X2 is P115,465. RJ did not make additional contribution to
the business in 20X2. Determine the balance of the RJ Abad, Drawings account on
December 31, 20X2.
ASSIMILATION
1. Compute the owner’s equity for Norman Gonzales on Dec. 31, 20X1 based on the
following data:
2.
IMERLDA SERVICES
ADJUSTED TRIAL BALANCE
May 31, 2016
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
ASSESSMENT
TRUE OR FALSE: Read each sentence carefully and determine whether the statement
is True or False. Write your answers in the space provided before the number.
1. The SoCE is dated “as of the year ended”.
2. There are two equity accounts reported on the SoCE of a sole proprietorship, namely,
Owner Capital, and Owner, Drawings.
3. The number of capital accounts presented in SoCE of partnership is equal to the
number of partners.
4. The Drawings account is used for sole proprietorship, partnership and corporation.
5. The partnership net income is allocated to each partner’s capital using the profit and
loss sharing agreement stated in the contract of partnership.
6. Paid-in capital is the amount of contributions given to the corporation in exchange for
the shares of stocks.
7. All equity accounts have normal credit balances.
8. The capital stock account reports the proceeds from the issuance of the stocks.
9. The SoCE of a corporation presents the reconciliation from the beginning to the ending
balances of all the equity accounts.
10. Dividends distributed by corporation are credited against retained earnings.
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Learner’s Packet FABM2 Grade 12 First Semester 1st Quarter
Comprehensive Problem
On February 15, 20X1, Evelyn Ferrer opened Cookie Fantasy Bakeshop. She
invested 75,000 to purchase an oven and bakery supplies. The business generated a
net income of 37,545 in 20X1. Moreover, used 15,000 from the account of Cookie
Fantasy to pay the electricity and phone bills of her house.
Evelyn invested an additional 13,400 and 17,650 on March 16, 20X1 and August 19,
20X1, respectively. Net income for 20X2 reported at 48,950. Evelyn’s Drawings
account has a balance of 20,000 on December 31, 20X2.
Required:
Prepare Cookie Fantasy Bakeshop’s Statement of Changes in Equity for the year
ended Dec. 31, 20X1 and Dec. 31, 20X2.
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WEEK 1
Activity 1
1. Liability – Current 6. Equity
2. Liability – Current 7. Asset – Current
3. Asset – Noncurrent 8. Asset – Noncurrent
4. Asset – Current 9. Liability – Current
5. Asset – Noncurrent 10. Asset - Current
Activity 2
Easy Average Difficult
1. 176,000 1. 265,000 1. 50,000
2. 30,000 2. 640,000 & 30,000 2. 190,000
WEEK 2
Activity 1
1. Tuition Fee Revenue = 10,780,000
Activity 2
1. Salaries and Wages Expense = 380,000 2. Tuition Fee Revenue = 10,780,000
Depreciation Expense – Furnitute = 100,000 Less: Expenses = (680,000)
Utilities Expense = 200,000 Net Income – 10,100,000
TOTAL = 680,000
WEEK 3
Activity 1
Easy Medium Difficult
1. 24,000 1. 315,000 1. 50,000
2. 20,000 2. Net Sales 460,000 / 2. 460,000
Net Purchase = 70,000
Activity 2
1. Net Income = 4,000
WEEK 4
Activity 1
Easy Medium Difficult
1. Corporation 1. Net Income 1. Increase is zero but decrease is 45,000
2. Sole Proprietorship 2. Withdrawal /Distribution of Income 2. 80,000
Activity 2
1. Beginning Capital (20x2) = 97,545 2. Drawings = 23,555
Additional Investment = 31,050
Add Net Income = 48,950
Less Drawings = (20,000)
Ending Capital (20x2) = 157,545
ANSWER KEY
First Semester 1st Quarter Grade 12 FABM2 Learner’s Packet