Financial Management Part 2-1

7/28/2019 Financial Management Part 2-1

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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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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 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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FINANCIAL POSITION

Report form -

this form set forth the major

sections in a downward

sequence of assets, liabilitiesand equity


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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


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


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


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


December 31, 2013

Documents

Financial Management Part 2-1