FIN 014- P1 EXAM

what product lines have performed well compared with competitors?

Managers and employees

categorize if non/current assets or non/current liabilities Machinery used in production

Non-current assets

categorize if non/current assets or non/current liabilities Shares in Chilanga Cement Plc, intended to be held on long term

Non-current assets

A large entity decides that whenever asset has a cost of less than P10,000, the cost will be deducted to owner's equity

Offsetting

Income Statement is also known as

Statement of financial performance or Profit and Loss Statement

Notes to financial statements is also known as

footnotes

present obligation of the entity arising from past events

liabilities

refers to an enterprise's ability to pay short term obligations; capability to sell assets quickly raise cash

liquidity

(3) elements of income statement

revenues, expenses, other income/expenses

contains revenue generated by operating the business, costs spent to generate revenue and income which is the excess of revenue over costs

statement of comprehensive income

shows the result of operations for one reporting meaning

statement of comprehensive income or income statement

Is company management demonstrating good stewardship of the resources that have been entrusted to it?

stockholders and directors

Balance sheet can be reported in two different formats:

(1) account form (2) report form

(8) General features of financial statements

(1) fair presentation and compliance (2) Going Concern (3) Accrual Basis (4) Materiality and aggregation (5) Offsetting (6) Frequency of reporting (7) Comparative Information (8) Consistency of presentation

The word balance sheet in accounting means two things

(a) having two sides equal (b) value of an item remaining

Happy Selling Company's total liabilties amounted 10,000. Total Equity had an ending balance of 20,000. How much is total assets?

30,000

An entity simultaneously recorded its revenue whenever a sale takes place What general features of financial statements is this?

Accrual Basis

Compute for the cost of good sold sales 15 000 purchases 2 000 purchase return 200 purchase discount - 200 freight in - 100 beginning inventory - 1 000 ending inventory 500

Answer: Beginning Inventory - 1 000 Add: Freight In - 100 Add; Net Purchases - 1 600 ( 2,000 - 200 - 200) Goods Available for sale - 2 700 Less Ending Inventory - 500 COST OF GOOD SOLD - 2 200

During October, a sari-sari store had the following transactions involving revenue and expenses. Did the firm earn a net income or incur a net loss for the period? What was the amount? Paid Php1,200 for rent Provided services for Php2,750 in cash Paid Php 250 for telephone service Provided services for Php 1,900 on credit Paid salaries of Php1,675 to employees Paid Php350 for office cleaning service,

Answer: Service Revenue 4650 (2750 + 1900) Less: rent exp. 1,200 Less: utilities exp. 600 (250 + 350) less: salaries exp. 1675 net income 1,175

1. at the end of the first month of operations for Juan's service company, the business had the following accounts; cash 19 000, prepaid rent 500, equipment 5 000, accounts payable 2000, By the end of the month, Jackson's had earned 20 000 of revenues, 1 000 of utilities expenses, and 1 500 .of salaries expenses. calculate the net income reported by the company for the first month

Answer: sales revenue 20 000 less: utilities exp. 1 000 less: salaries exp. 1 500 net income 17 500

Company ABC uses FIFO or average method of recording their inventories, depending on which is higher for a particular period What general features of financial statements is this?

Consistency of presentation

Happy Selling's Accounts Receivable amounted to Php 500,000. Prepaid Expense and Unearned Income totaled Php 30,000 and Php10,000 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?

Current Assets = P640,000 (Sum up Accounts Receivable = P500,000, Prepaid Expense = P30,000, Cash = P100,000 and Inventory = P10,000 Current Liabilities = P30,000 (Sum up Unearned Income = P10,000 and Accounts Payable = P20,000)

Mr. Dela Cruz accountant of PLDT presents their financial statements up to the nearest centavo What general features of financial statements is this?

Materiality and aggregation

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.

P190,000 (From the total assets of P575,000 deduct total equity worth P250,000 the difference will be equal to total liabilities of P325,000. Deduct current liabilities of P50,000 Accounts Payable and P85,000 Unearned Income from the total liabilities of P325,000 and you will get a difference of

Happy Selling's had the following accounts at year end: Cash-250,000, Accounts Payable-70,000, and Prepaid Expense-15,000. Compute for the company's current assets.

P265,000 (Sum up all Current Assets, Cash =P 250,000 and Prepaid Expense = P15,000; Accounts Payable = P70,000 is reported in the Current Liabilities)

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?

P50,000. (Total Liabilities and Equity of P285,000 is equal to total assets. Total assets of P285,000 minus total non-current asset P85,000 will be equal to Current Assets totaling P200,000. From the P200,000 deduct other Current Assets given which is cash and inventory worth P50,000 and P100,000 respectively, from there you will come up to the receivable balance of P50,000).

consist of two columns displaying assets on the left column and liabilities and equity on the left column

account form

account identifies money owed to the business but has yet to be collected

account receivable

Inventory when sold becomes

account receivable / cash

ressources controlled by the firm

assets

(3) elements of balance sheet

assets, liabilities, equity

comprises the assets, liabilities and equity of an entity at point in time

balance sheet

enables users to assess the financial health of an entity by looking at the state of its assets and compare them with its liabilities

balance sheet

is one of the essential financial reports that comprise the full set of financial statement

balance sheet

accounts receivable upon collection becomes

cash

provides the basis for users to assess the ability of an entity to generate cash and cash equivalents and the needs of the entity to utilize them

cash flow statement

reports all changes in equity except for shareholder transactions (e.g issuing stocks, paying dividends)

comprehensive income

Is the company in compliance with the contrctual terms of is existing loan covenants?

creditors and suppliers

categorize if non/current assets or non/current liabilities accrued income to the business

current asset

categorize if non/current assets or non/current liabilities advances to salepersons

current asset

categorize if non/current assets or non/current liabilities checking account

current asset

categorize if non/current assets or non/current liabilities good displayed in the retail store

current asset

categorize if non/current assets or non/current liabilities land held for sale

current asset

categorize if non/current assets or non/current liabilities payroll cash fund

current asset

categorize if non/current assets or non/current liabilities trade receivables

current asset

categorize if non/current assets or non/current liabilities accrued revenue on short term investment

current asset

categorize if non/current assets or non/current liabilities finished goods inventory

current asset

categorize if non/current assets or non/current liabilities factory building retired from use and held for sale

current assets

categorize if non/current assets or non/current liabilities inventory - good for resale

current assets

categorize if non/current assets or non/current liabilities accrued expenses by the business

current liability

categorize if non/current assets or non/current liabilities bank overdraft

current liability

categorize if non/current assets or non/current liabilities employees payroll deductions

current liability

categorize if non/current assets or non/current liabilities rent paid in advance by the business

current liability

categorize if non/current assets or non/current liabilities trade payables

current liability

categorize if non/current assets or non/current liabilities bank overdraft

current liability

categorize if non/current assets or non/current liabilities rent revenue collected in advance

current liability

Is the strategic partnership providing reasonable returns to both parties?

customers and strategic partneres

How are assets displayed in the assets sections of balance sheet?

descending order of liquidity

are transactions that decrease assets and/or increase liabilities leading to decrease in equity resulting from the operations of the business and not because of distributions to owners.

expenses

outflows from firm's ordinary course of business

expenses

are structured representation of the financial position and financial performance.

financial statement

refers to a transaction that increases asset and/or decreases liabilities leading to increase in equity resulting from the operations of the business and not the owner's contribution

income

to provide users with the basis for measuring performance of an entity over a financial accounting period.

income statement

cash buys inputs produce

inventory

what expectations about a company's future profit and cash flow should we use as input into pricing its stock>?

investment analyst and information intermediaries

the excess of assets over liabilities

net worth

categorize if non/current assets or non/current liabilities mortgage loan

non - current liability

categorize if non/current assets or non/current liabilities good will

non-current asset

important information about accountng methods, estimates and assumptions is disclosed. information about items that are not reported on the basic statements but are still important for users in their decision

notes to financial statements

(3) elements of cash flow statement

operating activities, investing activities, financing activities

gains/losses that may or may not arise in ordinary course of business

other income / expenses

residual interest in net assets

owner's equity

what regulated price is appropriate given the company's financial condition?

regulators and tax agencies

only has one column form is more of a traditional reeport that is issued by companies

report form

inflows from firm's ordinary course of business

revenue

refers to an enterprise's capactity to pay its long term financial commitment

solvency

shows the factors and sources of changes in equity owners investment in the firm over a period of time

statement of changes in equity