Professional Documents
Culture Documents
Financial Management
Financial Management
Financial Management
INTENDED LEARNING OUTCOME: At the end of this module, the student must be able to:
INTRODUCTION
In the operations of every business, people with many different skills and backgrounds
were working together toward common goals. Financial experts play a major role in the
achievement of the entity’s goal and decision-makers rely on their competencies in order to
know the status of the business operation. While accounting provides them with the information
to make choices to control their activities, financial manager apply financial tools to solve real
business problems by taking actions that generate benefits in excess of costs. Without proper
recording of transactions, a business couldn’t function optimally, whether it’s making profit or
not, and it wouldn’t know its financial situation; with such financial managers can create value
in their own right.
A. ACTIVITIES
i. Conduct an interview with the five (5) people you know who have a financial
management background, ask them of what is the best word of phrase that best define the
word “FINANCIAL MANAGEMENT”.
Financial
Management
ii. Given the financial manager’s five principal functions in the matrix below, write a
sentence that best explain them.
External Financing
Capital Budgeting
Financial
Management
Corporate
Governance
Risk Management
iii. Fill-out word/group of words which serves as the definition of the word
ACCOUNTING.
ACCOUNTING
iv. Define or describe the elements of financial statements in the table below.
Asset
Liability
Equity
Income
Expense
s
v. Given the following account titles below, classify if they belong to Statement of Financial
Position or in the Income Statement by filling up the squares below .
10. Inventories 11. Unearned Revenues 12. Intangible Assets 13. Withdrawals
14. Supplies Expense 15. Service Income 16. Mortgage Payable 17. Rent Expense
18. Property, Plant & Equipment 19. Interest Expense 20. Income Summary
Case 2:
The following are transactions for Weddings “R” Us during the month of May. A worksheet
was prepared to reflect the result of transactions recorded (please see attached Annex A). Using
the data from the Worksheet, prepare the Statement of Financial Position (Balance Sheet),
Statement of Financial Performance (Income Statement) and Statement of Changes in Equity and
Statement of Cash Flows of Weddings “R” Us in the space provided below.
May 1 Mary Manalo is a social entrepreneur and decided to organize her wedding consultancy.
She invested P250,000 into this entity.
May 1 Rented office space and paid two months’ rent in advance, P8,000
May 2 Mary Manalo issued a promissory note for a P210,000 loan from Metrobank. This
availment will be used for the acquisition of a service vehicle. The note carries a 20%
interest per annum. The arrangement with the bank is that both the interest and the
principal are payable in full in one year.
May 4 Acquired service vehicle for P420,000.
May 4 Paid Prudential Guarantee and Assurance, Inc. P14,400 for a one-year comprehensive
insurance coverage on the service vehicle.
May 5 Acquired office equipment from Fair Emporium for P60,000; paying P15,000 in cash and
the balance next month.
May 8 Purchased supplies on credit for P18,000 from Sans Merchandising.
May 9 Paid Sans Merchandising P 10,000 of the amount owed.
May 10 Coordinated and finalized simple bridal arrangements for three couples and collected fees
of P8,800 per couple. Services include prospecting and selecting church & reception
location, caterer, flowers, souvenirs and invitations.
May 13 Paid salaries, P6,600.
May 15 The entity is earning additional revenues by referring consulting clients to friendly hotels,
caterers, and couturiers. Received P 10,000 advance fees for three clients.
May 19 Coordinated and finalized elaborate bridal arrangements for three couples and billed fees
of P12,000 per couple.
May 25 Manalo withdrew P14,000 for personal expenses.
May 27 Paid salaries, P7,200.
May 30 Received P24,000 from two clients for services billed last May 19.
May 31 Settled the electricity bill of P3,000 for the month.
Note:
*At the end of the accounting period, Perez-Manalo makes a careful physical inventory of the
supplies. The inventory count showed that supplies costing P15, 000 are still on hand.
* Suppose that Weddings “R” Us estimated that the service vehicle, which was bought on May 4, will
last for seven years (eighty-four months) and with a salvage value of P84,000. The office equipment
that was acquired on May 5 will have a useful life of five years (sixty months) and will be worthless
at that time. Substitution of the pertinent amounts into the basic formula will yield depreciation for
service vehicle and office equipment for the month as P 4,000 [(P420,000 – P 84,000) / 84 months]
and P1,000 (P60,000/60 months), respectively.
* Suppose that Weddings “R” Us agreed to arrange a rush but simple civil wedding for a madly-in-
love couple in the afternoon of May 31. The entity intended to change fees of P5,300 for the services,
which is earned but unbilled.
Weddings “R” Us
Income Statement
For the Month Ended May 31, 2018
Weddings “R” Us
Balance Sheet
May 31, 2018
Weddings “R” Us
Statement of Changes in Equity
For the Month Ended May 31, 2018
Weddings “R” Us
Statement of Cash Flows
For the Month Ended May 31, 2018
C. ABSTRACTION
- It involves managing firm’s operating cash flows as efficiently and profitably as possible.
- Concerned with the proper specification of financial goals of the firm as well as the
measurement of performance relative to the achievement of these objectives.
- Focused on risk-return relationships and the maximization of return for a given level of risk.
The appropriate risk-return trade-off must be determined to maximize the market value of the
firm for its shareholders.
Accounting
Accounting is the art of recording, classifying and summarizing in a significant manner
and in terms of money, transactions and events which are, in part at least, of a financial
character, and interpreting the results thereof.
Note that the assets are on the left side of the equation opposite the liabilities and owner’s equity.
This explains why increases and decreases in assets are recorded in the opposite manner (“mirror
image”) as liabilities and owner’s equity are recorded. The equation also explains why liabilities
and owner’s equity follow the same rules of debit and credit.
Once the worksheet is completed, it is easy to prepare the financial statements for the account
balances have been extended to the appropriate income statement and balance sheet columns.
Most of the information needed to prepare the income statement, statement of changes in equity
and balance sheet are available from the worksheet. Note that financial statements shall be
presented at least annually (per revised PAS No. 1).
D. APPLICATION
Preparing the Financial Statements
The accounts for the balance sheet, statement of changes in equity, and income statement of
Alfred Cesar Quinsay, CPA are as follows:
Accounts Payable P 63,500
Accounts Receivable 198,000
Accumulated Depreciation-Building 110,000
Accumulated Depreciation-Office Equipment 120,000
Auditing Revenues 1,361,500
Building 750,000
Cash 118,500
Depreciation Expense-Building 55,000
Depreciation Expense-Office Equipment 60,000
Quinsay, Capital, 1/1/2018 1,193,500
Quinsay, Withdrawals 165,000
Land 75,000
Notes Receivable 60,000
Office Equipment 362,500
Office Supplies Expense 96,000
Office Supplies 28,000
Professional Development Expense 86,500
Rent Expense 52,500
Salaries Expense 735,000
Salaries Payable 30,500
Travel Expense 41,000
Utilities Expense 18,000
Required:
Prepare the income statement, statement of changes in equity and balance sheet.
E. EVALUATION
After learning subject matter, write an essay of your reflection and the things appreciated about the
topic in this module.
Be guided by the rubric prepared as to how you will be rated with your essay.
Indicator 5 4 3 2 1
Reflection Cited
Things appreciated
Organization and Grammar
Total 15 Points
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