Quick Notes in AFAR
Quick Notes in AFAR
I. PARTN
I. PARTNER
ER SHIP
SHIP
PARTNERSHIP FORMATION PARTNERSHIP FORMATION VALUATION:
VALUATION: 1. Cash
1. Cash – – Face Value Face Value 2.
2. Land, DeprLand, Depreciable eciable Asset, & Asset, & NCANCA a.
a. Agreed Agreed ValueValue b.
b. Fair Fair ValueValue c.
c. Appraised Appraised ValueValue d.
d. Carrying Carrying Value/Book Value/Book ValueValue 3. Liabilities
3. Liabilities – – are considered assumed if the are considered assumed if the problem is silentproblem is silent 4. Inventory
4. Inventory – – Lower of Cost and Net Realizable Value (LCNRV) Lower of Cost and Net Realizable Value (LCNRV) 5. Capital
5. Capital 5.1.
5.1. Bonus Bonus MethodMethod 5.2.
5.2. Investment/WithdraInvestment/Withdrawal wal MethodMethod BONUS METHOD
BONUS METHOD (*The problem is silent) (*The problem is silent) 1. There would be a
1. There would be a transfer of capital.transfer of capital. 2. There is no
2. There is no recognitiorecognition of goodwill.n of goodwill. 3. The total asset and
3. The total asset and capital will remain unchanged.capital will remain unchanged. INVESTMENT/WITHDRAWAL
INVESTMENT/WITHDRAWAL 1.
1. Agreed Capital Agreed Capital is more than Uis more than Unadjusted Capnadjusted Capital =ital = Investment Investment 2.
2. Agreed Capital Agreed Capital is less than Uis less than Unadjusted Capnadjusted Capital =ital = WithdrawalWithdrawal ADJUSTING
ADJUSTING ENTRIESENTRIES (*Use
(*Use contra-assecontra-asset)t) 1. Building
1. Building – – Carrying Value: ₱10M, Agreed Value: ₱15MCarrying Value: ₱10M, Agreed Value: ₱15M
Accumulated De
Accumulated Depreciationpreciation ₱5M₱5M
Capital
Capital ₱5M₱5M
2.
2. Accounts Accounts ReceivableReceivable – – Cost: ₱10000, NRV: ₱Cost: ₱10000, NRV: ₱90009000 Capital
Capital ₱1000₱1000
Allowance
Allowance for Doubtful Acfor Doubtful Accountscounts ₱1000₱1000
**NOTES:NOTES:
To transfer thTo transfer the depreciable depreciable asset, it shoue asset, it should be in net ald be in net amount.mount.
To transfer the accounts To transfer the accounts receivable to the new receivable to the new book, it should not book, it should not be in be in netnet
amount. amount.
₱₱30003000 PURPOSE: To engage other party PURPOSE: To engage other party
The juridical The juridical personality opersonality of the partnershf the partnership arises from ip arises from the meeting of mindthe meeting of minds.s.
Partnership by Estoppel
Partnership by Estoppel – – legally binding the partnership but no formal legally binding the partnership but no formal agreement
agreement Limited
Limited PartnershipPartnership – – two or m two or m ore general partners and one or more limitedore general partners and one or more limited partners
partners
Particular Partnership
Particular Partnership – – single single transactiontransaction PARTNERSHIP OPERATION
PARTNERSHIP OPERATION 1. Salaries
1. Salaries
This coThis could be uld be fractional fractional yearyear
Given, regaGiven, regardless of rdless of the result the result of operationof operation
2. Interest 2. Interest
This coulThis could be id be in fractionn fractional yearal year
Given, regaGiven, regardless wherdless whether there ther there is profit ois profit or lossr loss
(*Use the salary/interest ratio if the problem states that the amount to (*Use the salary/interest ratio if the problem states that the amount to bebe distributed to the partners is up to
distributed to the partners is up to the extent of profit only or the extent of profit only or the profit isthe profit is distributed based on the priority.)
distributed based on the priority.) 3. Bonus
3. Bonus
This is This is given igiven if there f there is a is a profit profit onlyonly
Bonus is Bonus is not alwnot always givays given if en if there is there is profitprofit
CASE 1
CASE 1: Net Income of ₱500000 before salaries of ₱55000, interest of : Net Income of ₱500000 before salaries of ₱55000, interest of ₱
₱13000, and bonus of 15%13000, and bonus of 15% B = B =
B = B =
B = B =
B = ₱ B = ₱56, 347.8356, 347.83CASE 2:
CASE 2:Net Income of ₱100000 before salaries of Net Income of ₱100000 before salaries of ₱5000, interest of ₱3000, and₱5000, interest of ₱3000, and
bonus of 10% bonus of 10% B = B =
B = B =
B = B =
B = ₱ B = ₱12,00012,000**NOTES:NOTES: Advances made by the partnership to a partner are included in capital Advances made by the partnership to a partner are included in capital interest but shall not affect the capital balance of
interest but shall not affect the capital balance of a partner.a partner. PROFIT
PROFIT RATIO RATIO LOSS LOSS RATIORATIO 1.
1. Profit Profit Ratio, Ratio, Loss Loss RatioRatio __
2.
2. Profit Profit Ratio, Ratio, Profit Profit RatioRatio x x __
3.
3. Original Original Capital Capital Ratio, Ratio, Loss Loss ratio ratio xx __ 4.
4. Original Original Capital Capital Ratio, Ratio, Original Original Capital Capital Ratio Ratio x x x x __
EXAMPLE ON HOW TO COMPUTE THE AVERAGE CAPITAL: EXAMPLE ON HOW TO COMPUTE THE AVERAGE CAPITAL: 1. 1. 1/1 1/1 ₱1000 ₱1000 × × 6/12 6/12 = ₱ 500= ₱ 500 7/1 7/1 800 800 × × 3/12 3/12 = = 200200 10/1 10/1 1500 1500 × × 3/12 3/12 = = 375375 ₱ ₱10751075 2. 2. ₱₱500 × 500 × 12/12 =12/12 = ₱₱500500 100 100 × 9/12 × 9/12 = = 7575 (200) (200) × × 3/12 3/12 = = (50)(50) ₱ ₱525525 *NOTE: *NOTE:
P/L P/L = = SilentSilent Original Capital Original Capital
Interest Interest = = SilentSilent Average Capital Average Capital
Net income Net income after intereafter interest and salast and salary but bery but before bonufore bonuss
Formula: Net Income
Formula: Net Income – – Total Interest Total Interest – – Total Salary = Bonus Total Salary = Bonus PARTNERSHIP DISSOLUTION
PARTNERSHIP DISSOLUTION
-- Change Change in in numbers numbers of of partners.partners. 1.
1. Admission by Admission by Purchase wPurchase without Revaithout Revaluationluation
Silent Silent
Personal Personal transactionstransactions
Total asseTotal asset and capit and capital will retal will remain unchangemain unchangedd
Purchase price is ignoredPurchase price is ignored
2.
2. Admission bAdmission by Purchay Purchase with se with RevaluationRevaluation Two Steps to be followed:
Two Steps to be followed:
Determined Determined the athe asset sset revaluationrevaluation
Distribute the Distribute the interest to interest to the buyinthe buying partnerg partner TCC
TCC TAC TAC Bonus Bonus / / UVA UVA / / OVAOVA *TAC=TCC *TAC>TCC *TAC<TCC *TAC=TCC *TAC>TCC *TAC<TCC
0
0 + + −−
Purchase
Purchase Price Price ₱xx₱xx
Divided
Divided by: by: New New Interest Interest of of New New Partner Partner xxxx Adjusted Capi
Adjusted Capital tal xxxx Add: Unadjuste
Add: Unadjusted d xxxx
Undervalued
Undervalued Asset Asset (UVA) (UVA) xxxx Multiply:
Multiply: Percentage Percentage %% xx xx Add: Capital Add: Capital xxxx xx xx Multiply:
Multiply: (100% (100% - - New New Partner Partner %) %) xxxx
₱ ₱xxxx
RETIREMENT RETIREMENT
1.
1. Compute the Compute the capital balacapital balance before nce before retirementretirement a.
a. Capital Capital balancebalance b.
b. Share Share in net in net income/net income/net lossloss c. Drawings
c. Drawings d.
d. Additional Additional investmentinvestment e.
e. Revaluation Revaluation of of UVAUVA f.
f. Revaluation Revaluation of of OVAOVA g.
g. Condonation Condonation of the partnerof the partnership liability/rship liability/receivable of yoeceivable of your debtorur debtor 2.
2. Settlement is Settlement is more than more than Capital InterCapital Interest =est = Bonus to theBonus to theretiringretiring partner partner
If the Settlement is less
If the Settlement is less than Capital Interest =than Capital Interest = Bonus to theBonus to theremainingremaining
partner partner
PARTNERSHIP LIQUIDATION PARTNERSHIP LIQUIDATION
1.
1. Lump-sum LiquiLump-sum Liquidationdation – – single distribution single distribution 2.
STEPS IN LUMP SUM LIQUIDATION 1. Realization of Non-cash Asset (Profit/Loss) 2. Payment of liabilities and liquidation expense
Liability ₱xx Capital ₱xx Cash ₱xx Cash ₱xx 3. Elimination of deficiencies 4. Distribution INSTALLMENT LIQUIDATION Cash beginning ₱xx Add: Proceed xx
Minus: Liabilities xxTotal
Liquidation Expense xx Total
Distribution ₱xx
Maximum Possible Loss (MPL):
1. Unsold Non-cash Asset ₱xx
2. Anticipated Liquidation Expense (future LE) xx Unpaid
₱xx CASH PRIORITY PROGRAM
*(Receive cash-given)
1. Determine the capital interest
2. Compute loss absorption balance (LAB): Capital Interest ÷ P/L Ratio 3. Equalize the LAB – deduct the second highest from the highest until equal 4. Distribution: Difference in LAB × P/L Ratio
When to use Cash Priority Program?
- When the problem says, what amount should be distributed to the partners
EXAMPLE: A G J Capital Interest ₱100000 ₱ 80000 ₱ 75000 P/L % ÷ 50% ÷ 20% ÷ 30% LAB ₱200000 ₱400000 ₱250000 Priority 1 _______ 150000 _______ ₱200000 ₱250000 ₱250000 Priority 2 _______ 50000 50000 ₱200000 ₱200000 ₱200000
If A received ₱35500, how much was given to J?
A G J Total Priority 1 ₱ -0- ₱30000 ₱ -0- ₱ 30000 Priority 2 -0- 10000 15000 25000 NPP 35500 14200 21300 71000 ₱35500 ₱54200 ₱36300 ₱126000 SAFE PAYMENTS
1. Determine the capital interest 2. Deduct the Maximum Possible
Loss
3. Absorb deficiency 4. Distribute
Capital Beginning ₱xx
Gain/Loss +/- xx Maximum Possible Loss - xx Elimination Deficiency - xx Condonation +/- xx
Cash Distribution ₱xx
II. CORPOR ATE LIQUIDATION
Three (3) years to liquidate The extinguishment of juridical personality happens in dissolution
VALUATION:
1. Asset – Fair Value
2. Liabilities – Maturity Value (Principal + Interest) CLASSIFICATION (Statement of Affairs): 1. ASSETS
Assets Pledge with Fully Secured Creditors Assets Pledge with Partially Secured Creditors
Free Assets assets that are not originally pledge to any liabilities
2. LIABILITIES
Fully Secured Liabilities Partially Secured Liabilities Unsecured Liabilities with Priority
* Salaries * Taxes
* Administrative Expense (Liquidation Expense) * Customer Deposit
Unsecured Liabilities without Priority (no collateral)
Percentage of Recovery (POR) =
3. OWNER’S EQUITY DEFICIENCY / CAPITAL
Capital
NET FREE ASSETS (NFA)
TOTAL UNSECURED CREDITORS WITHOUT PRIORITY (TULi-w/o) 1. Excess of APTFSL ₱xx 1. Excess of PSL ₱xx
over PSL xx ₱xx over APTPSL xx ₱xx
2. Free Asset xx 2. UL w/o Priority xx
TFA xx TULi w/o ₱xx
3. Loss UL with Priority xx Net Free Asset ₱xx ESTIMATED DEFICIENCY (ED):
ED = TULi – NFA or ED = TULi w/o × (1 – POR)
ED: A = L + C
SHE beginning ₱xx
Estimated net loss (xx) Accrued interest (xx) Liquidation expense (xx)
EED ₱ xx +/−
*NOTE: Statement of Realization no cash
STATEMENT OF REALIZATION AND LIQUIDATION
1. Assets to be realized (ATBR)
Noncash Assets, beginning
2. Assets acquired (AA) / ↑ on Asset
Interest Receivable Accounts Receivable
7. Liabilities liquidated (LL) 8. Liabilities not liquidated (LNL)
Ending balance of the liabilities
9. Supplementary charges / Expenses
Cost of Sales Accrued Expenses
11. NET INCOME / GAIN
3. Assets realized (AR)
PPE – net proceeds Receivables – collection Inventory – cost of sales
4. Assets not realized (ANR)
Noncash Asset, ending
5. Liabilities to be liquidated (LTBL) 6. Liabilities assumed (LA) / ↑in Liabilities
Accrued Expenses Accounts Payable
10. Supplementary credits / Revenue
Sales
Accrued Interest Income
12. NET LOSS / LOSS
A Cash, end ANR = L LNL + C SHE, end SHE, beginning ₱xx Net (loss) / Profit xx Estate Equity ₱xx
III. INSTALLMENT SALE S
TYPES OF SALES
1. REGULAR SALES
Cash Sales Credit Sales Use the accrual
method
2. INSTALLMENT SALES
Cost Recovery
Gross Profit Realization Installment Method
*all are prescribed by the standard GP from Sale of Repossessed Merchandise* ₱xx GP on Regular Sales (Regular Sales – Cost of Regular Sales) xx RGP on Installment Sales: 2017 2017 2015 DGP to RGP xx 2017 2016 2016 (Collection × GPR) xx 2017 (Collection × GPR) xx Total RGP ₱xx
Less: Expenses (Loss on Repossession and
Loss/Expense from write-off) (xx)
NET INCOME 2017 ₱xx
*Sales ₱ xx
Less: Cost of Sales:
Fair Value of Repossessed Merchandise ₱xx
Reconditioning Cost xx (xx) GP from Sale of Repossessed Merchandise ₱ xx Fair Value of Repossessed Merchandise ₱xx
Reconditioning Cost xx
Net Purchases xx
Estimated Selling Price ₱xx
Installment Sales ₱xx
Cost of Sales (xx)
Deferred Gross Profit ₱xx
Installment Accounts Receivable ₱xx
Unsecured Cost xx
Deferred Gross Profit ₱xx
EXAMPLE:
Fair Value of Repossessed Merchandise* ₱70 Less: Unrecovered Cost:
IAR/Repossessed Account
(Receivable Defaulted/Unpaid Balance) ₱100
Less: Deferred Gross Profit (20) (80) LOSS(UC > FV of R eposs ess ed Merchandise) ₱(10) ENTRIES: 1. Reposs. Mdse. – FV ₱70 DGP 20 Loss 10 IAR ₱100 2. Expenses ₱80 DGP (20%) 20 IAR ₱200 write-off 3. Cash ₱___ IAR ₱___ 4. DGP ₱___ RGP ₱___ *Gain/Loss P/L
**DGP Contra receivable account
(20%) IAR 2016 Beginning ₱100 Collection ₱50 RA 30 WO 5 End ₱ 15 DGP 2016 RGP ₱10 DGP on RA 6 DGP on WO 1 Beginning ₱20 End ₱ 3 IAR 2017 AIS ₱___ Collection ₱ ___ RA ___ WO ___ End ₱ ___ DGP 2017 RGP ₱__ DGP on RA __ DGP on WO __ Beginning ₱__ End ₱ _ Beginning Inventory ₱xx Net Purchases xx Freight-in xx Repossessed Merchandise xx Reconditioning Cost xx TGAS ₱xx
Ending Inventory (New + Unsold RM + RC) xx Cost of Sales (Regular/Installment/Repossessed Merchandise) ₱xx TRADE-IN & SALE OF REPOSSESSED MERCHANDISE:
Down payment – Cash
Down payment – FV of Trade-in Collection, net of interest Collection
Multiply: Gross Profit Ratio Realized Gross Profit
Gross Profit from Sale of Repossessed Merchandise Total Realized Gross Profit
Loss (FV of Reposs. Mdse. – Unrecovered Cost) NET INCOME ₱xx xx xx ₱xx xx ₱xx xx ₱xx (xx) ₱xx TRADE-IN: Installment Sales ₱xx
Fair Value of Trade-in xx
Trade-in Allowance (xx)
Adjusted Installment Sales ₱xx
Cost of Sales (xx)
GROSS PROFIT ₱xx
Adjusted Installment Sales ₱xx
Down payment – Cash (xx)
Fair Value of Trade-in (xx)
CV of Receivable ₱xx
Installment Sales ₱xx
Trade-in Allowance (xx)
IV. LONG TE RM CONSTRUCTION CONTRACTS (IAS 11)
1. PERCENTAGE OF COMPLETION METHOD - outcome can be estimated reliably - if the problem is silent
1.1. INPUT MEASURE (Cost to Cost)
Cost Incurred To Date ÷ Total Cost
1.2. OUTPUT MEASURE
Total Units Prod. ÷ Total Units Expected Prod.
2. COST RECOVERY METHOD
- outcome cannot be estimated reliably CONTRACT RETENTION
receivables
does not the an income element reduces collection
PRO-FORMA ENTRY:
Cash ₱xx
Contract Retention xx
Accounts Receivable ₱xx
UPON COMPLETION OF PROJECT:
Cash ₱xx Contract Retention ₱xx MOBILIZATION FEE no income element PRO-FORMA ENTRY: Cash ₱xx
Advances from Customers ₱xx
COMPUTATION OF COST INCURRRED TO DATE (CITD):
(1.) Direct Materials ₱xx
+ (2.) Direct Labor xx
+ (3.) Overhead xx
+ (4.) Depreciation of Construction Equipment(*Idle = Expense) xx
+ (5.) Any reimbursable Cost xx
+ (6.) xx
+ (7.) Borrowing Cost(Qualifying Asset) xx *Specific = IE – II; **General = (AI × C) × CR
+ (8.) Unused Supplies / Materials without Alternative Use xx + (9.) Incidental Income from Sale excess over Scrap Materials xx
COST INCURRED TO DATE ₱xx
COMPUTATION OF ADJUSTED PRICE BILLING (APB):
Contract Price ₱xx
+ EC (↑in certain cost) xx
− DC (↓in certain cost) xx
− Penalty Clause (due to late turnover) xx + IP (due to early turnover) xx
+/− Modification / Change Order / Variation xx
ADJUSTED PRICE BILLING (CP = APB) ₱xx
CITD + PTD-LTD
CIP
− APB
(Due to)/Due from
↓ ↓ Liability Asset YEAR 1 ₱xx xx ₱xx xx ₱xx YEAR 2 ₱xx xx ₱xx xx ₱xx YEAR 3 ₱xx xx ₱xx xx ₱xx = 0→ CIP @
the end of the year of contract.
CONSTRUCTION IN PROGRESS:
(1) If Profit:Contract Price × Percentage of Completion = CIP (2) If Loss: [(C P × PO C ) – LTD × (1 − POC)] = CIP
(3) [(T C × PO C ) – LTD] = CIP ENTRIES: 1.) Construction in Progress Various Accounts ₱xx ₱xx 2.) Accounts Receivable Progress Billings ₱xx ₱xx 3.) Cash Accounts Receivable ₱xx ₱xx 4.) COC Construction in Progress Construction Revenue ₱xx xx ₱xx 5.) Accounts Receivable Progress Billings ₱xx ₱xx 6.) Progress Billings Construction in Progress ₱xx ₱xx
COMPUTATION OF ADJUSTED CONTRACT PRICE:
Contract Price ₱xx
Variable Price xx
Bonus xx
Adjusted Contract Price ₱xx
COMPUTATION OF CIP:
Cost Incurred to Date ₱xx
Realized Gross Profit –to date xx
Construction in Progress ₱xx
COMPUTATION OF REALIZED GROSS PROFIT – CURRENT YEAR: Contract Price
CITD (Prior Year + Current Year) Estimated Costs
Total Costs
Total Estimated Gross Profit Multiply: Percentage of Completion Total Realized Gross Profit – To Date Realized Gross Profit – Prior Year(+/−) Realized Gross Profit – Current Year
1ST YEAR ₱xx ₱xx xx (₱xx) ₱xx % ₱xx xx ₱xx 2ND YEAR ₱xx ₱xx xx (₱xx) ₱xx % ₱xx xx ₱xx LAST YEAR ₱xx ₱xx xx (₱xx) ₱xx % ₱xx xx ₱xx
COMPUTATION OF CIP, net of PB (ZPM/CRM): Cost Incurred To Date
Total Estimated Gross Profit Multiply: Percentage of Completion Total Realized Gross Profit – To Date Progress Billings (PY + CY)
Construction in Progress, net of PB
₱xx X -_ ₱ -0-₱xx (xx) ₱+/− ₱xx (₱xx) 100% (₱xx) ₱xx (xx) ₱+/− ₱xx (₱xx) 100% (₱xx) ₱xx (xx) ₱ -0-RECOGNITION OF REVENUE over time at a point in time
COMPUTATION OF DUE FROM / (DUE TO) CUSTOMER – Y2: Year 1 Billings
Year 2 Billings Mobilization Fee
Year 1 Collection [(Y1B × customer payment % of amount billed) × (100% - Retention Fee %)]
Year 2 Collection [(Y2B × customer payment % of amount billed) × (100% - Retention Fee %)]
Due from / (Due to) Customers – Y2
₱xx xx (xx) (xx) (xx) ₱xx
V. IAS 18
–
REVENUE
CRITERIA TO RECOGNIZE REVENUE: 1. Receivables(*silent)
- reasonably assured 2. Cash as Down Payment (*silent)
- nonrefundable 3. Franchise Revenue
- substantial performance NOTE:
These conditions shall meet to recognize revenue.
IFRS 15 Contingent Franchise Fee = IAS 18 Continuing Franchise Fee
R C F CASE 1 IFF = Revenue CASE 2 x IFF = Deferred Revenue CASE 3 x Cash ₱xx NR xx Discount ₱xx Franchise Revenue xx Deferred Revenue xx
EXCEPTION TO THE RULE:
Down payment still considered as revenue if the DP is nonrefundable and
CASE 1
R – Interest Bearing(Accrual Method)
C F Revenue (IFF)
Cost of Sales (Direct Cost for Initial Services) Gross Profit
Continuing Franchise Fee (Sales × %)
Interest Income (Face Amount × Interest Rate × ?/12) Expense (IC for IS + IC for CS + DC for SC)
NET INCOME ₱xx (xx) ₱xx xx xx (xx) ₱xx CASE 2
R x – Non-interest Bearing(Installment Method)
C F Down Payment – Cash Collection during the period Total Collection
Multiply: Gross Profit Ratio (GP ÷ Revenue)*REVENUE = IFF Realized Gross Profit
Continuing Franchise Fee Interest Income Expenses NET INCOME ₱xx xx ₱xx % ₱xx xx xx (xx) ₱xx CASE 3 R –Non-interest Bearing C F Revenue (DP + PV) Cost of Sales Gross Profit
Continuing Franchise Fee Interest Income (PV × IR × ?/12) Expenses NET INCOME ₱xx (xx) ₱xx xx xx (xx) ₱xx CASE 4 R x –Non-interest Bearing C F Down Payment
Collection, net of interest income Total Collection
Multiply: Gross Profit Ratio (GP ÷ Revenue)*REVENUE = DP + PV Realized Gross Profit
Continuing Franchise Fee Interest Income (PV × IR × ?/12) Expenses NET INCOME ₱xx xx ₱xx % ₱xx xx xx (xx) ₱xx TOTAL REVENUE OF THE FRANCHISOR
Down payment ₱xx
Collection xx
CFF xx
Interest Income xx
TR-F ₱xx
TOTAL REVENUE FROM F.F.
Down payment ₱xx
Collection xx
CFF xx
TR from FF ₱xx
VI. HOME OFFICE A ND BR ANCH AC COUNTING
BP − Cost = AFOBI Beginning Inventory: Home Office* Outsider Shipment, net* Purchases (NP) Freight in
Total Goods Available for Sale Ending Inventory:
Home Office* Outsider Cost of Goods Sold
₱xx xx SFHO xx xx ₱xx (xx) (xx) ₱xx ₱xx xx STB xx xx ₱xx (xx) (xx) ₱xx ₱xx -xx --_ ₱xx (xx) (xx) ₱xx (GPR-PY) (GPR-CY) R G P
*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
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 Net Income reported by the branch
Unrecorded expenses of branch:
Depreciation Allocation of expense
Net Income that should have reported Realized Gross Profit
True Net Income
₱xx (xx) (xx) ₱xx xx ₱xx EXAMPLE ₱ 87 (5) (2) ₱ 80 20 ₱100 *ENTRIES #11 #12 FREIGHT PREPAID FREIGHT COLLECT
BP (Reported) Cost (True/Correct)
Sales
Cost of Goods Sales Gross Profit Expenses Net Income ₱xx (xx) ₱xx (xx) ₱xx ₱xx (xx) ₱xx (xx) ₱xx AFOBI RGP Beginning Shipment End HO 1. 100 – 80 = 20 2. 100 × 20% = 20 3. 100 × 25/125 = 20 4. 80 × 25% = 20
VII. BUSINESS COMBINATION (IFRS 3) & CONSOLIDATED
F.S. (IFR S 10)
BUSINESS COMBINATION
is a transaction where the acquirer obtains control over the net assets of
the acquiree.
OWNERSHIP ACCOUNT TITLE METHOD 51% to 100% 20% to 50% 1% to 19% Investment in Subsidiary Investment in Associate FA @ FVPL/FVOCI
Cost / Equity / Fair Value Equity Cost / FV COST METHOD – CV P/L Purchase Price ₱xx Transaction Cost xx Impairment Loss (xx) CV of Investment ₱xx Impairment Loss ₱(−) Dividend Income + P/L ₱xx
FAIR VALUE METHOD – CV P/L
Purchase Price ₱xx Unrealized Gain xx Unrealized Loss (xx) CV of Investment ₱xx Unrealized Gain ₱ + Unrealized Loss (−) Dividend Income + Transaction Co (−) P/L ₱xx EQUITY METHOD – CV P/L Purchase Price ₱xx Transaction Cost xx Investment Income xx Dividend xx Impairment Loss (xx) CV of Investment ₱xx Investment Income ₱ + Impairment Loss (−) P/L ₱xx
*NOTE: The fair value method is applicable only for trading securities. TYPES OF BUSINESS COMBINATION
1. ASSET ACQUISITION (100% Ownership)
1.1. Statutory Merger A+B= A /B
1.2. Statutory Consolidation A+ B=C
2. STOCK ACQUISITION A+B= AB (Parent – Subsidiary)
2.1. Fully Owned
2.2. Partially Owned
ACCOUNTING METHOD
IFRS 3 – Acquisition Method (*OLD Purchase Method)
Disclose the following:
1) Determine the acquirer 2) Determine the acquisition date
The acquisition date is the measurement date, and you have within
1 year from the balance sheet date to adjust the fair value of those assets and liabilities
The net assets of the subsidiary can be adjusted within 1 year from
the acquisition date
3) Recognize and measure identifiable assets, identifiable liabilities, and non-controlling interest (*The pre-existing goodwill of subsidiary is ignored.)
FORMULAS
*
× PHI% = ₱xx
EXAMPLE: Purchase Price ₱1000 NA@BV (SHE) (700) Excess ₱ 300 OVA (50) UVA (100) Goodwill ₱ 250 NA@BV – 12/31 ₱xx Net Income (xx) Dividend xx NA@BV – BC ₱xx Purchase Price ₱1000 NA@FV (squeezed) (750) Goodwill ₱ 250 NA@BV – BC ₱700 UVA 100 OVA (50) NA@FV ₱750ACQUISITION RELATED COST 1.Direct Costexpense
2.Indirect Costexpense
3.Cost to Issue or Register (CTIR)
B ased on priority:
3.1. Share Premium from issuance;
3.2. Share Premium from original issuance; 3.3. Debit to Stock Issuance
Cost
CTIR Keywords:
SEC Stock Share
Documentary Stamp Tax
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
1.FV of NCI /Full Goodwill
If the fair value is unknown compute the implied fair value
FORMULA:
2. Proportionate Share / Relevant Share / Interest in the Net Asset of Subsidiary (INAS)
FORMULA:
FV of Net Assets × NCI% = INAS
CONTROL PREMIUM (CP)
1.It must be included in the purchase price
2.Excluded in computing NCI
3. It affects goodwill or gain
CONTINGENT CONSIDERATION PAYABLE(CCP)
1.If the information existed already as of the acquisition date, any adjustment to fair value would affect the goodwill or gain.
2.If the information is related to target profit or target market price, any adjustment goes to P/L and it does not affect the goodwill or gain. NOTE: Adjustment to goodwill should be applied retrospectively.
*SME
− Direct Cost is capitalized /capitalizable
− NCI is measured using proportionate
− Goodwill goes to parent
EXAMPLE: Case 1
(100%) (80%) (20%) TOTAL Purchase Price NCI Fair Value of Subsidiary
Net Assets @ FV Goodwill ₱1700000 (1000000) ₱ 700000 ₱1300000 (800000) ₱ 500000 ₱ 400000FV (200000) ₱ 200000 Impairment Loss ₱50000 ₱35714 (5/7) ₱14286 (2/7)
*If the problem is silent, use the F V. The FV of NCI should not lower of INAS.
FV ₱400000 vs. INAS Case 2 [CP = ₱300000] (100%) (80%) (20%) TOTAL Purchase Price NCI Fair Value of Subsidiary
Net Assets @ FV Goodwill ₱1550000 (1000000) ₱ 550000 ₱1300000 (800000) ₱ 500000 ₱ 250000 (200000) ₱ 50000 ₱200000 vs. Case 3 (100%) (80%) (20%) TOTAL Purchase Price NCI Fair Value of Subsidiary
Net Assets @ FV Goodwill ₱1250000 (1000000) ₱ 250000 ₱1000000 (800000) ₱ 200000 ₱ 250000 (200000) ₱ 50000 ₱200000 vs. Case 4 [CP of ₱300000 is included] (100%) (80%) (20%) TOTAL Purchase Price NCI Fair Value of Subsidiary
Net Assets @ FV Goodwill ₱1200000 (1000000) ₱ 200000 ₱1000000 (800000) ₱ 200000 ₱ 200000 (200000) ₱ -0-₱200000 vs. Case 5 (100%) (80%) (20%) TOTAL Purchase Price NCI Fair Value of Subsidiary
Net Assets @ FV Goodwill ₱ 900000 (1000000) ₱(100000) ₱ 700000 (800000) ₱ (100000) ₱ 250000 (200000) ₱ -0-NOTE: Gain is never allocated. It goes to Parent.
01/01/17 12/31/17 Purchase Price
Net Assets @ Fair Value Goodwill ₱1000000 (700000) ₱ 300000 ₱1000000 (800000) ₱ 200000 Goodwill on December 31, 2017 = ₱200000 Goodwill on January 1, 2017 = ₱200000
CONSOLIDATED FINANCIAL STATEMENT (*At the date of business combination)
TOTAL ASSETS:
*If, paid
Total Assets of Parent @ BV Total Assets of Subsidiary @ FV Goodwill
Purchase Price (Cash/NCA) Direct Cost Indirect Cost CTIR Total Assets ₱xx xx xx (xx) (xx) (xx) (xx) ₱xx
TOTAL LIABILITIES:
*If, unpaid
Total Liabilities of Parent @ BV Total Liabilities of Subsidiary @ FV CPP
Purchase Price (Liabilities) Direct Cost Indirect Cost CTIR Total Liabilities ₱xx xx xx xx xx xx xx ₱xx TOTAL SHAREHOLDER’S EQUITY:
*Paid/ Unpaid SHE of Parent @ BV NCI on BPO ₱xx Gainon PHI xx on CCP xx
Purchase Price (Stocks @FV) Direct Cost Indirect Cost CTIR Total Assets ₱xx xx xx xx (xx) (xx) (xx) ₱xx CONTROL PREMIUM Additional investment Part of purchase price Affects goodwill/(gain) Ignored in computing NCI
PURCHASE PRICE
Cash Noncash Liability Stock
WORKING PAPER ELIMINATING ENTRIES 1.DIVIDEND RECEIVED Dividend Income ₱xx NCI (partially) xx Dividend Declare – Subsidiary ₱xx 2.SUBSIDIARY – SHE Ordinary Share – Subsidiary ₱xx Share Premium – Subsidiary xx Retained Earnings – Subsidiary xx
Investment in Subsidiary ₱xx
NCI xx
3.OVA, UVA, & GOODWILL
Equipment ₱xx
Inventory xx
Goodwill xx
Investment in Subsidiary ₱xx
NCI xx
4. AMORTIZATION OF IMPAIRMENT LOSS
Operating Expense ₱xx PPE, net ₱xx Impairment Loss ₱xx Goodwill ₱xx Cost of Sales ₱xx Inventory ₱xx
5. INTERCOMPANY SALES & PURCHASES
Sales ₱xx Cost of Sales ₱xx 6.UPEI Cost of Sales ₱xx Inventory ₱xx 7.RPBI Retained Earnings – Parent ₱xx NCI (up) xx Cost of Sales ₱xx *Ending Inventory ₱xx Multiply: GPR of Seller % UPEI – 20x6 ₱xx RPBI – 20x7 ₱xx NOTE:
CONSO COS NI INVENTORY
UPEI + − −
EXAMPLE: Intercompany Sale of Inventory Sales ₱1000 Cost of Sales (700) Gross Profit ₱300 Ending Inventory % × 50% UPEI ₱150 Ending Inventory (1000×50%) ₱500 GPR × 30% UPEI (12/31/16) ₱150 RPBI (01/01/17) ₱150
Working Paper Eliminating Entries
DOWN UP
UPEI: COS ₱xx
Inventory ₱xx
COS ₱xx
Inventory ₱xx
RPBI: RE, beg. ₱xx
COS ₱xx
RE, beg. ₱xx
NCI xx
COS ₱xx
EXAMPLE: Intercompany Sale of Equipment
Sales ₱ 70
CV [₱90-(₱90/10) ×3)] (63)
Gain ₱ 7
SELLER BUYER W.P.E.E.
Cash ₱70 Acc. Dep. 27 Equipment ₱90 Gain 7 Equipment ₱70 Cash ₱70 Gain ₱ 7 Equipment 20 Acc. Dep. ₱27 Dep. Exp. ₱ 9 Acc. Dep. ₱ 9 Dep. Exp. ₱10 Acc. Dep. ₱10 *(₱70/7=₱10) Acc. Dep. ₱ 1 Dep. Exp. ₱ 1 *(RG thru amortization: ₱7/7=₱1) UNREALIZED GAIN Gain ₱ 7 Equipment ₱ 7
*(it depends upon the Selling Price)
YEAR 2 YEAR 3 Unrealized Gain RE ₱7 Equipment ₱7 NO ENTRY Realized Gain Acc. Dep. ₱2 Dep. Exp. ₱1 RE 1 RE ₱5 Dep. Exp. ₱1 Gain 4
EXAMPLE: Intercompany Sale of Land Land (selling price) - ₱100
CL - 80
Sale to third party - 150
YEAR 1 YEAR 2 YEAR 3 Recorded – Subsidiary ₱50 UG ₱(20) -0- -0- Not yet recorded 20
FORMULAS:
Non-controlling Interest, beginning Non-controlling Interest – Net Income Dividend Share
Non-controlling Interest, end
₱xx xx (xx) ₱xx Retained Earnings – Parent
Consolidated Net Income – Parent Dividend – Parent
Consolidated Retained Earnings
₱xx xx (xx) ₱xx Ordinary Share – Parent Share Premium – Parent Consolidated Retained Earnings Non-controlling Interest
Consolidated Shareholder’s Equity
₱xx xx xx xx ₱xx Shareholder’sEquity, end
Net Income of Subsidiary Dividend of Subsidiary
Shareholder’s Equity at book value Overvalued Assets (OVA)
Undervalued Assets (UVA) Net Assets at fair value
₱xx (xx) xx ₱xx (xx) xx ₱xx Sales – Parent Sales – Subsidiary
Intercompany Sales & Purchases at Selling Price Consolidated Sales ₱xx xx (xx) ₱xx Cost of Sales – Parent Cost of Sales – Subsidiary
Intercompany Sales & Purchases at Selling Price Unrealized Profit in Ending Inventory (UPEI) Realized Profit in Beginning Inventory (RPBI) Amortization of Undervalued Assets
Amortization of Overvalued Assets Consolidated Cost of Sales
₱xx xx (xx) xx (xx) xx (xx) ₱xx Consolidated Sales
Consolidated Cost of Sales Consolidated Gross Profit
₱xx (xx) ₱xx
Gross Profit – Parent Gross Profit – Subsidiary
Unrealized Profit in Ending Inventory (UPEI) Realized Profit in Beginning Inventory (RPBI) Amortization of Undervalued Assets
Amortization of Overvalued Assets Consolidated Gross Profit
₱xx xx (xx) xx (xx) xx ₱xx Operating Expense – Parent Operating Expense – Subsidiary
Realized Loss (thru depreciation/amortization) Realized Gain (thru depreciation/amortization) Impairment Loss
Amortization of Undervalued Assets Amortization of Overvalued Assets
Consolidated Operating Expense
₱xx xx xx (xx) xx xx (xx) ₱xx Inventory – Parent @ BV Inventory – Subsidiary @ BV Undervalued Inventory Overvalued Inventory
Amortization of Undervalued Assets – Inventory Amortization of Overvalued Assets – Inventory
Unrealized Profit in Ending Inventory (UPEI) Consolidated Inventory ₱xx xx xx (xx) (xx) xx (xx) ₱xx Consolidated Net Income attributable to Parent
Non-controlling Interest in Net Income Consolidated Net Income
₱xx xx ₱xx
VIII. J OB ORDER COSTING
Predetermine OH Rate = Based on BUDGETED
Spoilage vs. Defect
no use can be reworked
*Charged to all
- add allowance (unit cost) *Charged to specific job
- deduct allowance
Loss – add – FOH control account (actual)
ALLOCATION OF COST DIRECT METHOD Service Provided by Quality Control Maintenance to Machining 262500 120000 382500 Assembly 87500 80000 167500 STEP-DOWN
*Benefit provided ranking table (Company Policy)
*Based on the service department which has the highest cost
QC Maintenance QC 350000 (350000) ___-___ -0-Maintenance 200000 70000 (270000) -0-Machining 400000 210000 162000 772000 Assembly 300000 70000 108000 478000 *Once the OH cost of the service department becomes exhausted, do not allocate other cost to the service department
RECIPROCAL METHOD Quality Control Maintenance QC -25% Maintenance 20% -Machining 60% 45% Assembly 20% 30% Quality Control = 350000 + 0.25M Maintenance = 200000 + 0.20QC QC = 350000 + 71053 = 421053 M = 200000 + 0.20(421053) = 284211 QC 350000 (421053) 71053 -0-Maintenance 200000 84211 (284211) -0-Machining 400000 252632 127894 780527 Assembly 300000 84211 85263 469474
IX. JUST IN TIME
TRIGGER POINTS: Purchase Production Completion Sale GOALS:
1. Eliminating any production process that does not add value 2.
JOURNAL ENTRIES:
Purchase
Raw and In Process ₱xx
Accounts Payable ₱xx
Conversion Cost ₱xx
Various Accounts ₱xx
Completion
Finished Goods ₱xx
Raw and In Process ₱xx
Conversion Cost xx
Sales
Cost of Sales ₱xx
Finished Goods ₱xx
Cost of Sales ₱xx
Raw and In Process ₱xx
Conversion Cost xx
75% were sold
Cost of Sales ₱xx
Finished Goods xx
Conversion Cost ₱xx
Raw and In Process xx
X. J OINT C OS TING
Joint Cost
Less: NRV of By-product Remaining Joint Cost
₱xx (xx) ₱xx if, inventoriable/ material TREATMENT OF BY-PRODUCT
1. Upon sale or realization
- recorded as other income, if the by-product is immaterial. 2. Upon production or inventoriable
- the NRV of by-product is deducted from the total joint cost ALLOCATION OF REMAINING
1.PHYSICAL
1.1. Physical measure such as gallon/kilogram 1.2. Units produce
1.3. Weighted average units produce 2.MONETARY
2.1.Sales value at split-off also known as relative market value 2.2. Net realizable value at split-off
2.3.Hypothetical/approximated/estimated at split-off also known as adjusted market value
TWO TYPES OF COST FOR THE JOINT PRODUCT 1.Joint Cost Share or Allocated Joint Cost
2. Traceable Cost or Additional Processing Cost
XI. S TA ND AR D C OS TING
Purchased Used DM AQAP AQSP AQSP SQSP DMPV DMUV Rate Efficiency DL AHAR AHSR AHSR SHSR DLRV DLEVXII. F OR E IG N E XC HA NG E (I AS )
1. Foreign Currency Transaction 2. Foreign Exchange Translation 3. Hedging of FOREX Risk
EXCHANGE RATE – This is the ratio of exchange between two currencies. SPOT RATE – Rate for immediate delivery.
CLOSING RATE – This is the spot rate at Balance Sheet date.
FUNCTIONAL CURRENCY – Currency of primary economic environment
in which the entity operates.
What is the primary driver of functional currency? – SALES
Assets & Liabilities Closing Rate Shareholder’sEquity Historical Rate
Revenue & Expenses Average [Computation: (B+E)/2 ] Spot Rate (Theory)
FOREX TRANSACTION: Importation (Hedge Item)
BUYING OF INVENTORY 1. ER↑ = Forex Loss [100] 2. ER↓ = Forex Gain
(Hedging Instrument) BUYING OF F.C.
3. FR↑ = Forex Gain [80] = [20] 4. FR↓ = Forex Loss
FOREX TRANSACTION: Exportation SELLER OF MERCHANDISE
5.ER↑ = Forex Gain 6.ER↓ = Forex Loss
SELLER OF F.C. 7.FR↑ = Forex Loss 8. FR↓ = Forex Gain
ENTRIES: BUYING OF INVENTORY Purchases ₱xx Accounts Payable ₱xx Forex Loss ₱xx Accounts Payable ₱xx Accounts Payable ₱xx Forex Gain ₱xx Accounts Payable ₱xx Cash ₱xx BUYING OF F.C. FCR ₱xx FCP(fixed) ₱xx FCR ₱xx Forex Gain ₱xx Forex Loss ₱xx FCR ₱xx FCP(fixed) ₱xx Cash xx FCR ₱xx SELLER OF MERCHANDISE Accounts Receivable ₱xx Sales ₱xx Accounts Receivable ₱xx Forex Gain ₱xx Forex Loss ₱xx Accounts Receivable ₱xx SELLER OF F.C. FCR(fixed) ₱xx FCR ₱xx Forex Loss ₱xx FCP ₱xx FCP ₱xx Cash xx FCR(fixed) ₱xx FOREX TRANSLATION
only reflected in consolidated FS
an Other Comprehensive Income component
OCI:
1. Forex Translation (IAS 21)
2. Effective Portion of Cash Flow Hedge (IFRS 7/9) 3. Revaluation Surplus (IAS 16)
4. Remeasurement G/L related to employee benefit (IAS 19R) 5. Estimated Unrealized G/L on FA at FVTOCI (IFRS 7/9) 6. Risk G/L on credit risk for financial liability designated to P/L
RECLASSIFIED TO P/L: 1.Forex Translation
2.Effective portion of Cash Flow Hedge
A $ 10M × ₱1 ₱ 10M $ 10M × ₱1 ₱ 10M = = = L $ 8M × ₱1 ₱ 8M $ 8M × ₱1 ₱ 8M + + + C $ 2M × ₱0.5 ₱ 1M $ 2M × ₱2 ₱ 4M + + ₱ 1M ₱ 2M Translation Adjustment Credit Translation Adjustment Debit
NA, ending @ CR > NA, ending @ RF = Translation Adjustment Credit NA, ending @ CR < NA, ending @ RF = Translation Adjustment Debit NA, beg. OS × HR
RE, beg. Net Income @ Average Dividend @ SR NA, end @ RF ₱xx xx xx (xx) ₱xx (translated amount) QUOTATION:
1. DIRECT – Foreign Currency to Philippine Peso 2. INDIRECT – Philippine Peso to Foreign Currency SPOT RATE:
1. BUYER – Selling Spot Rate / Offer Rate / Asking 2. SELLER – Buying Spot Rate / Bid Rate
FIRM COMMITMENT
(1) The hedge is perfect when the company acquired a forward contract for the same amount of the same currency in which the firm commitment is (2) Under perfect hedging, the amount of forex gain from hedging instrument
is equal to firm commitment as liability
(3) The amount of forex loss from hedging instrument is equal to firm commitment as asset
(4) TYPES OF FIRM COMMITMENT 4.1. Sales Commitment
4.2. Purchase Commitment
(5) The asset sold or purchased is recorded at the date of settlement based on the forward rate on the date of commitment
THREE HEDGE RELATIONSHIP (1) Fair Value Hedge
- Hedges of exposure to the changes in value of a recognized asset/liability or unrecognized firm commitment
- If the problem is silent, use the FVH (2) Cash Flow Hedge
- Hedges of probable forecasted transactions or the variability in the cash flow of a recognized asset or liability
(3) Net Investment Hedge
- Hedges of the net investment in a foreign operation OPTIONS
Contracts that are right and not obligation to buy or sell commodities at a certain price
This is always favorable on the part of the holder If it is gain orin the money, exercise the option If it isout of the money, do not exercise the option
Call option is on the part of the buyer Put option is on the part of the seller
CALL OPTION:
Market Price = Strike Price AT THE MONEY
Market Price > Strike Price IN THE MONEY (UG)
Market Price < Strike Price OUT OF THE MONEY PUT OPTION:
Market Price = Strike Price AT THE MONEY
Market Price > Strike Price IN THE MONEY
Market Price < Strike Price OUT OF THE MONEY
CFH FVH
CFH FVH
SPLIT ACCOUNTING
Intrinsic Value – Unrealized Gain Time Value – Gain/Loss Intrinsic Value – Unrealized Gain
Time Value – Gain/Loss
NON-SPLIT ACCOUNTING
Intrinsic Value – Unrealized Gain Intrinsic Value – Unrealized Gain
OCI P/L P/L P/L OCI P/L
XIII. ACCOUNTING OF N PO (A IC PA)
COMPUTATION:
Gross Patient Service Revenue Charity Care
Amount Charge / Billed to Customers
Contractual Adjustment (PHILHEALTH, MEDICARE) Discount to Hospital Employees
Net Patient Service Revenue
₱xx (xx) ₱xx (xx) (xx) ₱xx STATEMENT OF ACTIVITIES
Shows contractual adjustment This is collectible at third party payor
(1) For Hospitals (contra-revenue account)
Contractual Adjustment ₱xx Accounts Receivable ₱xx (2) For Schools (contra-revenue account)
Expenditure for student ₱xx Accounts Receivable ₱xx
CONTRIBUTED MATERIALS, SERVICES, & FACILITIES − Unrestricted funds (1) Inventory ₱xx Contribution Revenue ₱xx (2) Salaries ₱xx Contribution Revenue ₱xx (3) Rent Expense ₱xx Contribution Revenue ₱xx OTHER OPERATING REVENUE
− Unrestricted funds
Cash ₱xx
Other Operating Revenue* ₱xx * EXAMPLE OF OTHER OPERATING REVENUE
Proceeds from cafeteria
FINANCIAL STATEMENTS (1) STATEMENT OF ACTIVITIES
Amount of changes in each of the three classes of net assets
(a) Changes in Unrestricted Net Assets
(b) Changes in Temporary Restricted Net Assets (c) Changes in Permanently Restricted Net Assets (2) BALANCE SHEET
Assets, Liabilities, Net Assets Three types of Net Assets:
(a) Unrestricted Net Assets
(b) Temporary Restricted Net Assets (c) Permanently Restricted Net Assets
The restricted cash and investment are prescribed separately All securities are valued at fair value
(3) STATEMENT OF CASH FLOW
Restricted whether temporary/permanent (FINANCING) Quasi-endowment unrestricted (OPERATING)
Receipts of donation to purchase PPE (Inflow: INVESTING) Cash outflow to purchase PPE (FINANCING)
Term endowment Temporary (FINANCING) Pure endowment Permanent (FINANCING)
(4) STATEMENT OF FUNCTIONAL EXPENDITURE
Specifically for Voluntary Health and Welfare Organization (NGOs)
XIV. G OVE R NME NT A CCOUNTING
PHASES OF BUDGETARY PROCEDURE 1.PREPARATION AND PRESENTATION
− Submission of budget of the expenditure 2.BUDGET AUTHORIZATION
− Enactment by the congress of the General Appropriation Act 3.BUDGET EXECUTION AND OPERATION
− Release of revenue allotment 4.BUDGET ACCOUNTABILITY
− Liquidation of expenditure and audit conducted by Commission on Audit
GOVERNMENT ACCOUNTING MANUAL (GAM)
Under GAM, entity shall not maintain regular agency book and national government book
GAM supersedes NGAS effective January 1, 2016 implemented in 2002
Commission on Audit has exclusive authority to define the scope of audit
COMPONENTS OF GENERAL PURPOSE FINANCIAL STATEMENTS (1) Statement of Financial Position
(2) Statement of Financial Performance
(3) Statement of Changes in Net Assets / Equity (4) Statement of Cash Flow
(5) Statement of Comparison of Budget and Actual Amounts
(6) Notes to the financial statements, comprising a summary of significant accounting policies and other explanatory notes
BOOKS OF ACCOUNTS & REGISTRIES 1.JOURNALS
a.General Journal b.Cash Receipts Journal c.Cash Disbursement Journal d.Check Disbursement Journal 2.LEDGERS
a.General Ledgers b.Subsidiary Ledgers REGISTRIES
(1) RROR – Registries of Revenue and Other Receipts (2) RAPAL – Registry of Appropriation and Allotments
(3) RAOD – Registries of Allotments, Obligation and Disbursements (4) RBUD – Registries of Budget, Utilization and Disbursements CLASSIFICATION OF RAOD & RBUD
PS – Personnel Services
MOE – Maintenance and Other Operating Expenses
FE – Financial Expenses
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
2. Payable to Officers and Employees and to set up salary deductions Salaries and Wages – Regular ₱xx
PERA xx
Due to BIR ₱xx
Due to GSIS xx
Due to Pag-IBIG xx
Due to PhilHealth xx
Due to Officers and Employees xx
3. Remittance of Salary Deductions
Due to GSIS ₱xx
Due to Pag-IBIG xx
Due to PhilHealth xx
Cash – MDS, Regular ₱xx
4. Liquidation of Advances for Payroll
Due to Officer and Employees ₱xx
Advances for Payroll ₱xx
MESSAGE TO THE READERS
Magandang buhay sa inyo mga ka-reviewee!
Ang notes na ito ay hango sa m ga itinuro ni Sir Ferrer (*one of my fave reviewer ). Kung sakaling may mapansin man kayo na kulang o mali ay kayo na lang ang magkusang magtama nito. Hindi naman perpekto ang pagkaka-type nito, tulad ko (*ansabe!?).
Nawa ay makatulong ito sa inyong pag-aaral. Fighting! Ipaglaban natin ang ating pangarap. May the odds be in our favor. God bless us a ll! ^_^ Sincerely,
LFA
“For whatever is born of God overcomes the world.
And this is the victory that has overcome the world – our FAITH.” 1 JOHN 5:4