financial management part 2-1
TRANSCRIPT
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FINANCIAL
MANAGEMENT(IE 210)
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FINANCIAL STATEMENTS
(F/S)- Definitions
The means by which the
information accumulated andprocessed in financial accounting
is periodically communicated to
the users
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FINANCIAL STATEMENTS (F/S) -
Definitions
The end product or main output
of the financial accountingprocess
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FINANCIAL STATEMENTS (F/S) -
Definitions
A structured financial
representation of the financialposition and financial
performance of an entity.
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COMPONENTS OF F/S
1. Statement ofFinancial Position orformerly Balance Sheet
2. Income Statement
3. Statement of Comprehensive
Income
4. Statement of Changes in Equity
5. Statement of Cash Flows
6. Notes, comprising a summary of
significant accounting policies and
other explanatory notes
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OBJECTIVES OF F/S
To provide information about the
financial position, financial
performance and cash flows of an
entity that is useful to a wide
range ofusers in making economicdecisions
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OBJECTIVES OF F/S
F/S also shows the results
of the managementsstewardship of the
resources entrusted to it.
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OBJECTIVES OF F/S
Thus, F/S provide info about anentitys:
Assets
Liabilities
Equity
Income and expenses, includinggains and losses
Contributions by and distributions toowners in their capacity as owners
Cash flows
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F/S FREQUENCY OF REPORTING
Financial statements shall be
presented at least annually.
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STATEMENT OF FINANCIAL POSITION (
(or B/S)
A formal statement showing the
three elements comprising
financial position, namely
Assets, Liabilities, and Equity.
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STATEMENT OF FINANCIAL POSITION (
(or B/S)
Users such as Investors, Creditors,and Other statement Users analyze
this F/S to evaluate the entitys
Liquidity
Solvency
Financial Structure, and
Capacity for Adaptation
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ASSETS
Resources controlled by the entity as
a result of past transactions and
events and from which futureeconomic benefits are expected to
flow to the entity.
Can be measured reliably.
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ASSETS CLASSIFICATION
CURRENT
ASSETS NON-CURRENT
ASSETS
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OPERATING CYCLE of an entity
The time between the acquisition ofassets for processing and theirrealization in cash or cash equivalents.
When the entitys operating cycle is
not clearly identifiable, its duration isassumed to be twelve months.
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CURRENT ASSETS
Cash and cash equivalents
Held for trading
Realizable within twelve months after
the reporting period
Entity intends to sell or consume it
with the entitys normal operatingcycle.
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CURRENT ASSETS - Presentation
Presented in the order of Liquidity
Line items are:
o Cash and cash equivalents
o
Financial assets: Trading securities,available for sale securities, and other
marketable financial assets.
o Trade and other receivableso Inventories
o Prepaid expenses
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NONCURRENT ASSETS
All other assets not classified as
current assets
O C SS S
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NONCURRENT ASSETS
Include the following
Property, plant and equipment
Long-term investments
Intangible assts
Other noncurrent assets
NONCURRENT ASSETS
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NONCURRENT ASSETS
Property, plant and equipment
Tangible assets which are held by an
entity for use in production or supplyof goods and services, for rental to
others, or for administrative
purposes, and are expected to beused during more than one period.
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NONCURRENT ASSETS
LandBuilding
Machinery
Equipment
Furniture
Fixtures Patterns
Dies
Molds
Plant, Property and Equipment
NONCURRENT ASSETS
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NONCURRENT ASSETS
Long-term Investments
An investment is an asset held by an
entity for the accretion of wealth
through capital distribution(interest, royalties, dividends andrentals), for capital appreciation or
for other benefits to the investingentity such as those obtainedthrough trading relationship.
NONCURRENT ASSETS
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NONCURRENT ASSETS
Intangible Assets
Identifiable nonmonetary asset
without physical substance.Examples:
Patent, Franchise, Copyright, Lease
rights, Trademark and Computer
Software
NONCURRENT ASSETS
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NONCURRENT ASSETS
Intangible Assets
Example of unidentifiable intangible
asset:
Goodwill
OTHER NONCURRENT ASSETS
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OTHER NONCURRENT ASSETS
Those which do not fit into the
definition of the previouslymentioned noncurrent assets.
Examples:
o Long-term advances to officers,directors, shareholders andemployees
o Abandoned property
o Long-term refundable deposit
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LIABILITIES
Present obligations of an entity
arising from past transactions or
events, the settlement of which isexpected to result in an outflow
from the entity of resources
embodying economic benefits.
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LIABILITIES CLASSIFICATION
CURRENT
LIABILITIES NON-CURRENT
LIABILITIES
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CURRENT LIABILITIES The entity expects to settle within
normal operating cycle.
Entity holds the liability primarily for
the purpose of trading. Due to be settled within twelve
months after the reporting period.
Entity does not have an unconditionalright to defer settlement for at leasttwelve months after the reportingperiod.s
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CURRENT LIABILITIES - Line itemsa. Trade and other payables
b. Current provisions
c. Short-term borrowing
d. Current portion of long-term debt
e. Current tax liability
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NONCURRENT LIABILITIES
All liabilities not classified as
current
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NONCURRENT LIABILITIES - Lineitemsa. Noncurrent portion of long-term debt
b. Finance lease liability
c. Deferred tax liability
d. Long-term obligations to company
officers
e. Long-term deferred revenue
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EQUITY
The residual interest in the assets
of the entity after deducting all ofits liabilities.
Net assets or total assets minusliabilities.
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EQUITY
The term equity may simply be
used for all business entities
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EQUITY
a. Owners equity in a
proprietorship businessb. Owners equity in a partnership
c. Stockholders equity or
shareholders equity in acorporation
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SHAREHOLDERS EQUITY
PHILIPPINE TERM
Capital stock
Subscribed capital stock
Preferred stock
Common stock
Additional paid capital
Retained earnings (deficit)
Retained earnings
appropriated
Revaluation surplus
Treasury Stock
IAS TERM
Share capital
Subscribed share capital
Preference share capital
Ordinary share capital
Share premium
Accumulated profits (loss)
Appropriation reserve
Revaluation reserve
Treasury share
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NOTES TO FINANCIAL STATEMENT
Provide narrative description ordisaggregation of items presentedin the financial statements and
information about items that donot qualify for recognition.
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NOTES TO FINANCIAL STATEMENT
Contain information in addition tothat presented in the statement of
financial position, income statement,
statement of changers in equity andstatement of cash flows.
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NOTES TO FINANCIAL STATEMENT
Notes are used to report informationthat does not fit into the body of the
statements in order to enhance the
understanding of the statements.
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FORMS OF STATEMENT OF
FINANCIAL POSITION
a. Report form
b. Account form
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FORMS OF STATEMENT OF
FINANCIAL POSITION
Report form -
this form set forth the major
sections in a downward
sequence of assets, liabilitiesand equity
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FORMS OF STATEMENT OF
FINANCIAL POSITIONAccount form -
The presentation follows that ofaccount, meaning the assets areshown on the left side and theliabilities and equity on the right
side of the statement of financialposition.
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Proprietorship Account Form
Cash P 232,500 Accounts Payable P 37,500Supplies 6,000 Loans Payable 250,000Prepaid Rent 75,000 Total Liability 287,500Equipment 230,000Store Renovation 80,000 Owner's capital 336,000
Total Assets P 623,500 P 623,500
ASSETS LIABILITIES & OWNER'S EQUITY
JERICHO HEALTH FITNESS WORLDStatement of Financial Condition
March 31, 2013
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Proprietorship Account Form
Cash P 232,500 Accounts Payable P 37,500Supplies 6,000 Loans Payable 250,000Prepaid Rent 75,000 Total Liability 287,500Equipment 230,000Store Renovation 80,000 Owner's capital 336,000
Total Assets P 623,500 P 623,500
ASSETS LIABILITIES & OWNER'S EQUITY
JERICHO HEALTH FITNESS WORLDStatement of Financial Position
March 31, 2013
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Proprietorship Report Form
Cash P 232,500Supplies 6,000Prepaid Rent 75,000Equipment 230,000Store Renovation 80,000Total Assets 623,500
Accounts Payable P 37,500Loans Payable 250,000
Total Liability 287,500Owner's capital 336,000
P 623,500
LIABILITIES & OW NER'S EQU ITY
ASSETS
Jericho Health Fitness World
Statement of Financial Position
31-Mar-13
SAMPLAR COMPANY
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Note
Current assets:
Cash and cash equivalents (1) 500,000
Financial assets at fair value 200,000
Trade and other receivables (2) 700,000
Inventories (3) 900,000Prepaid expenses (4) 50,000
Total current assets 2,350,000
Noncurrent assets:
Property, plant and equipment (5) 5,000,000
Investment in associate, at equity 1,000,000Long-term investments (6) 5,100,000
Intangible assets (7) 2,000,000
Other noncurrent assets (8) 100,000
Total noncurrent assets 13,200,000
Total assets 15,550,000
SAMPLAR COMPANY
Statement of Financial Position
December 31, 2013
ASSETS
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Current liabilities:
Trade and other payables (9) 750,000
Note payable - short-term debt 400,000
Current portion of bonds payable 200,000
Warranty liability 50,000
Total current liabilities 1,400,000
Noncurrent liabilities:
Bonds payable - remaining portion 1,800,000
Note payable - short-term debt 600,000
Deferred tax liability 100,000
Total noncurrent liabilities 2,500,000
Shareholders' equity
Share capital, P100 par 5,000,000
Reserves (10) 3,000,000
Retained earnings 3,650,000
Total shareholders' equity 11,650,000
Total liabilities and shareholders' equity 15,550,000
LIABILITIES AND SHAREHOLDERS' EQUITY
SAMPLAR COMPANY
Statement of Financial Position
December 31, 2013
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Note 1 - Cash and cash equivalents
Cash on hand 40,000
Cash in bank 300,000
Petty cash fund 10,000
BSP Treasury bill, purchased on December 1, 2013
and due March 1, 2014 150,000Total cash and cash equivalents 500,000
Note 2 - Trade and other receivables
Accounts receivable 580,000
Allowance for doubtful accounts (20,000)Notes receivable 100,000
Accrued interest on notes receivable 10,000
Advances to employees, collectible currently 30,000
Total trade and other receivables 700,000
SAMPLAR COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2013
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Note 3 - Inventories
Finished goods 300,000
Goods in process 400,000Raw materials 150,000
Manufacturing supplies 50,000
Total inventories 900,000
Note 4 - Prepaid expenses
Office supplies unused 30,000
Prepaid insurance 20,000
Total prepaid expenses 50,000
Note 5 - Property, plant and equipment
Land 1,500,000
Building 4,500,000
Machinery and equipment 1,000,000
Furniture and fixtures 300,000
Patterns, molds, dies and tools, net 100,000
Total 7,400,000
Accumulated depreciation (2,400,000)Carrying amount 5,000,000
Accumulated depreciation
Building 1,900,000
Machinery and equipment 350,000
Furniture and fixtures 150,000
Total accumulated depreciation 2,400,000
SAMPLAR COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2013
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Note 6 - Long term investments
Plant expansion fund 2,000,000
Investment in bonds 3,000,000
Cash surrender value 100,000
Total other long-term investments 5,100,000
Note 7 - Intangible assets
Patent 500,000
Franchise 1,500,000
Total intangible assets 2,000,000
Note 8 - Other noncurrent assets
Long-term refundable deposit 20,000Long-term advances to officers 80,000
Total other noncurrent assets 100,000
Note 9 - Trade and other payables
Accounts payable 350,000
Notes payable 150,000
Accrued interest on note payable 15,000
Income tax payable 50,000
Dividends payable 100,000Accrued expenses 85,000
Total trade and other payables 750,000
Note 10 - Reserves
Share premium 2,000,000
Retained earnings appropriated for contingen 1,000,000
Total reserves 3,000,000
SAMPLAR COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 2013