Fundamentals of

SENIOR
Accountancy, Business HIGH
and Management 1 (FABM 1) SCHOOL

Self-Learning

Preparing of Financial Statements Module

of a Merchandising Business
16
666
Quarter 4
Fundamentals of Accountancy, Business and Management 1
Quarter 4 – Self-Learning Module 16: Preparing of Financial Statements of a
Merchandising Business
First Edition, 2020

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 Fundamentals of
SENIOR
Accountancy, Business HIGH
and Management 1 SCHOOL

(FABM 1)

Self-Learning
Module
Preparing of Financial Statements of
16
a Merchandising Business
12
Quarter 4
Introductory Message
For the facilitator:

Welcome to the Senior High School – Fundamentals of Accountancy,

Business, and Management 1 Quarter 4 Self Learning Module on Preparing
Statements of a Merchandising Business!

This Self-Learning Module was collaboratively designed, developed, and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and independent
learning activities at their own pace and time. Further, this also aims to help learners
acquire the needed 21st-century skills especially the 5 Cs, namely: Communication,
Collaboration, Creativity, Critical Thinking, and Character while taking into
consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator, you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them to
manage their learning. Moreover, you are expected to encourage and assist the
learners as they do the tasks included in the module.
For the learner:

Welcome to Senior High School – Fundamentals of Accountancy, Business,

and Management 1 Quarter 4 Self Learning Module on Preparing of Financial
Statements of a Merchandising Business!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an active
learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

After going through this module, you are expected to:

1. define financial statements;

2. enumerate the financial statements and describe each;
3. develop skills in the preparation of financial statements; and
4. compare income statements prepared under the nature of expense and
function of expense methods.
5. understand and appreciate the usefulness of financial statements.

PRETEST

Directions: Write the correct letter of your answer in the space provided.
_____1. If the total sales of the company are Php84,200 while its expenses totaled
Php35,700, and its gross profit if 65% of the total sales how much is the net
income or loss of the company?
A. P19,300
B. P19,030
C. P19,003
D. P19,000
_____2. Based on number 2, what kind of financial statements to be prepared?
A. Statement of Financial Position
B. Statement of Changes in Owner’s Equity
C. Income Statement
D. Cash Flows Statement
_____3. _____________sometimes called Selling Expenses and these are expenses
directly related to the selling activity of the business
A. Contribution Cost
B. Distribution Cost
C. Submission Cost
D. Cost of Goods Sold
_____4. The following are general and administrative expenses except for
A. Office Salaries
B. Depreciation Expense – Office Equipment
C. Delivery expense
D. Taxes Expense
_____ 5. Statement 1: The proper sequence on preparing the financial statements are
as follows: statement of the balance sheet, income statement, and statement of
changes in equity
Statement 2: Financial statements are not important in making business
decisions.
A. Only statement 1 is correct.
B. Only statement 2 is correct.
C. Both statements are correct.
D. Both statements are incorrect
 RECAP

Directions: Identify each item below. Write your answer before the item number.
_____1. A debit column greater than the credit-column total under the Income
Statement portion of the worksheet would mean:
A. There were mistakes made in the preparation of the adjusted trial
balance.
B. The company’s business operations resulted in a profit.
C. The company’s business operations resulted in a loss.
D. None of the above.
_____2. Income Statement debit columns of the worksheet contain
A. Asset account balances
B. Expense account balances
C. Liability account balances
D. Revenue account balances
_____3. The usefulness of the worksheet is in
A. Aiding the preparation of financial statements
B. Identifying the accounts that need to be adjusted.
C. Summarizing the effects of all the transactions of the period
D. All of the above.
_____4. In what columns of the worksheet does net income appear?
A. Income statement (Dr) and Balance Sheet (Cr)
B. Income Statement (Dr) and Balance Sheet (Dr)
C. Income Statement (Cr) and Balance Sheet (Dr)
D. Income Statement (Cr) and Balance Sheet (Cr)
_____5. Which of the following steps comes first in worksheet preparation?
A. Computing the total debits and credits of the unadjusted trial balance.
B. Computing the total debits and credits of the adjusted trial balance.
C. Entering the account balances in the unadjusted trial balance columns.
D. Entering the account balances in the adjustment’s columns.

LESSON

As an owner of the business, there are questions you regularly ask – Is my

business performs well? What is the snapshot of my company’s assets, liabilities,
and net assets? Where did my cash go?

The financial statements are means to answer all of your questions. Thus,
accounting is the language of business because it communicates vital information to
intended users.

After adjustments and adjusted trial, balance is prepared the next is step is
the preparation of financial statements.
 The preparation of financial statements of a merchandising business is the
same as with the service business.

THE COMPLETE SETS OF FINANCIAL STATEMENTS AND THEIR MEANING

Per revised PAS No. 1, a complete set of financial statements comprises:

1. Statement of Financial Position

2. Statement of Comprehensive Income
3. Statement of Changes in Owner’s Equity
4. Statement of Cash Flow
5. Notes, comprising a summary of significant accounting policies and other
explanatory information; and
6. Statement of Financial Position as at the beginning of the earliest comparative
period

For this competency, only three financial statements are prepared. The income
statement is prepared first followed by the statement of changes in owner’s equity
and lastly the balance sheet. The result of operations in the income statement is
added to the statement of changes in equity and the ending capital later is the
amount to be used in preparing the balance sheet.

For the illustration, let have your answers to the problem given to you in your
previous module 3. Figure 16.1 is shown below and from this figure, we will prepare
our financial statements.
 REGAL SALES COMPANY
Worksheet
DECEMBER 31, 2018
Trial Adjusted Trial Income Balance
Adjustments
Account Titles Balance Balance Statement Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
1 Cash 50 5 7 5 - 50 5 7 5 - 50 5 7 5 -
2 Accounts Receivable 18 5 0 0 - 18 5 0 0 - 18 5 0 0 -
3 Allowance for Doubtful Accounts 1 2 0 0- (1) 6 5 0- 1 8 5 0 - 1 8 5 0-
4 Merchandise Inventory 27 2 5 0 - 27 2 5 0 - 27 2 5 0 -
5 Unused Supplies 7 5 0- (2) 5 0 0- 2 5 0- 2 5 0-
6 Furnitures and Fixtures 27 0 0 0 - 27 0 0 0 - 27 0 0 0 -
7 Accum. Depreciation- Furn. & Fix. 2 7 0 0- (3) 2 7 0 0- 5 4 0 0 - 5 4 0 0-
8 Office Equipment 15 0 0 0 - 15 0 0 0 - 15 0 0 0 -
9 Accum. Depreciation - Office Equip't. 1 9 0 0 - (4) 2 4 0 0- 4 3 0 0 - 4 3 0 0 -
10 Notes Payable 20 0 0 0 - 20 0 0 0 - 20 0 0 0 -
11 Accounts Payable 5 7 7 0 - 5 7 7 0 - 5 7 7 0 -
12 Withholding Taxes Payable 8 7 5 - 8 7 5 - 8 7 5 -
13 SSS Premium Payable 5 2 5 - 5 2 5 - 5 2 5 -
14 Philhealth Premiums Payable 3 5 0 - 3 5 0 - 3 5 0 -
15 Casas, Capital 117 0 1 0 - 117 0 1 0 - 117 0 1 0 -
16 Casas, Drawings 1 0 0 0- 1 0 0 0- 1 0 0 0-
17 Sales 120 5 0 0 - 120 5 0 0 - 120 5 0 0 -
18 Sales Returns and Allowances 2 5 0 0 - 2 5 0 0- 2 5 0 0 -
19 Sales Discounts 1 5 0 0 - 1 5 0 0- 1 5 0 0 -
20 Purchases 75 1 4 5 - 75 1 4 5 - 75 1 4 5 -
21 Freight In 1 8 9 0 - 1 8 9 0- 1 8 9 0 -
22 Purchases Return and Allowances 4 7 5- 4 7 5 - 4 7 5-
23 Purchase Discounts 3 0 5- 3 0 5 - 3 0 5-
24 Freight Out 2 9 0 0 - 2 9 0 0- 2 9 0 0 -
25 Salaries Expense 17 5 0 0 - (6) 2 5 0 0- 20 0 0 0 - 20 0 0 0 -
26 Advertising Expense 3 0 0 0 - (7) 5 0 0- 2 5 0 0- 2 5 0 0 -
27 Utility Expense 6 6 0 0 - 6 6 0 0- 6 6 0 0 -
28 Rent Expense 20 0 0 0 - 20 0 0 0 - 20 0 0 0 -
29 Taxes Expense 2 0 0 0 - (8) 3 0 0- 2 3 0 0- 2 3 0 0 -
30 Rent Income 1 5 0 0 - (9) 3 7 5- 1 1 2 5 - 1 1 2 5-
31 Totals 273 1 1 0 - 273 1 1 0 -
32 Doubtful Accounts Expense (1) 6 5 0 - 6 5 0 - 6 5 0 -
33 Supplies Expense (2) 5 0 0 - 5 0 0 - 5 0 0 -
34 Depn. Expense- Furn. & Fixtures (3) 2 7 0 0 - 2 7 0 0 - 2 7 0 0 -
35 Depn. Expense- Office Equipment (4) 2 4 0 0 - 2 4 0 0 - 2 4 0 0 -
36 Interest Expense (5) 7 0 - 7 0 - 7 0 -
37 Interest Payable (5) 7 0- 7 0- 7 0-
38 Salaries Payable (6) 2 5 0 0- 2 5 0 0- 2 5 0 0-
39 Prepaid Advertising (7) 5 0 0- 5 0 0- 5 0 0-
40 Taxes Payable (8) 3 0 0- 3 0 0- 3 0 0-

Figure 16.1 Worksheet from the previous module 15 to be used in preparing the F/S
41 Unearned Rent (9) 3 7 5- 3 7 5- 3 7 5-
42 Merchandise Inventory (10) 47 7 5 5 - 47 7 5 5 - 47 7 5 5 -
43 Income and Expense Summary (10) 47 7 5 5 - 47 7 5 5 - 47 7 5 5 -
44 Totals 57 7 5 0 - 57 7 5 0 - 329 4 8 5 - 329 4 8 5 - 168 9 0 5 - 160 5 8 0 - 159 3 2 5 -
170 1 6 0 -
45 1 2 5 5- 1 2 5 5-
46 170 1 6 0 - 170 1 6 0 - 160 5 8 0 - 160 5 8 0 -
INCOME STATEMENT – summary of the revenue and expenses for a specific period,
such as a month or a year.

The income statement for a merchandising business reports sales, cost of

merchandise sold, and gross profit. Merchandising businesses may use different
formats of the income statement. Two formats are shown below:

a) The function of Expense or the Multiple Step Income Statement

Net Sales P xxx

Cost of
Sales (xxx)
Gross Profit P xxx
Other Income xxx
Distribution Cost (xxx)
Administrative Expenses (xxx)
Other Expenses (xxx)
Finance Costs (Interest Expense) (xxx)
Net Income P xxx

b) Nature of expense method

Net Sales P xxx

Other Income xxx
Total Revenue P xxx
Changes in merchandise Inventory (xxx)
Net Purchases (xxx)
Operating Expenses (xxx)
Finance Costs (xxx)
Net Income P xxx

An income statement by function is the one in which expenses are disclosed

according to their functions such as the cost of goods sold, selling expenses,
administrative expenses, other expenses/losses, etc. This method allows us to
calculate gross profit and operating profit within the income statement and therefore
it is usually used in the multi-step format of the income statement. Most large and
medium-sized businesses use the function method of expense disclosure.

The use of the function method to disclose expenses still requires us to

disclose the individual expenses by nature method under each function either on the
face of the income statement or in the notes to the income statement.
 REGAL SALES COMPANY
INCOME STATEMENT
For the Year Ended December 31, 2018

Net Sales
Gross Sales ₱ 120,500
Less: Sales Returns & Allowances ₱ 2,500
Sales Discounts 1,500 4,000
Net Sales ₱ 116,500
Cost of Sales
Merchandise Inventory, Jan. 1 ₱ 27,250
Purchases ₱ 75,145
Less: Purchases Returns & Allowances ₱ 475
Puchase Discounts 305 780
Net Purchases ₱ 74,365
Freight In 1,890
Net Cost of Purchases 76,255
Goods available for sale ₱ 103,505
Less: Merchandise Inventory, Dec. 31 47,755
Cost of Sales 55,750
Gross Profit ₱ 60,750
Add: Other Income - Rent Income 1,125
Total 61,875
Operating Expense
Selling Expenses
Sales Salaries ₱ 15,000
Store Rent 14,000
Store Utilities 4,950
Freight Out 2,900
Depreciation Expense- Store Furn. & Fix 2,700
Advertising 2,500
Store Supplies 375
Total Selling Expenses ₱ 42,425
Administrative Expenses
Office Rent ₱ 6,000
Office Salaries 5,000
Depreciation Expense- Office Equipment 2,400
Office Utilities 1,650
Doubtful Accounts 650
Taxes Expense 2,300
Office Supplies 125
Total Administrative Expenses 18,125
Total Operating Expenses 60,550
Less: Interest Expense 70
Operating Profit ₱ 1,255

Figure 16.2 Function of Expense or Multiple Step Income Statement of Regal Sales Company

Regal Sales Company

Income Statement
For the Year Ended December 31, 2018

Revenue from Sales, Net P 116,500

Add: Other Income - Rent Income 1,125
Figure 16.3 Nature of
Total Revenue P 117,625
Expense Method of Regal
Add (less):
Sales Company
Increase in Merchandise Inventory 20,505
Net Purchases - 76,255
Operating Expenses - 60,550
Finance Cost - 70
Net Income P 1,255
 Other income or non-operating revenue or other revenue are revenues not
related to the sale of merchandise such as interest income that a business earns on
its notes receivable from customers.

Operating Expenses of a merchandising company are those expenses other

than the cost of goods sold incurred in the normal course of business. They are
ordinary and necessary expenses incurred in the day-to-day transactions of the
business.

3 Classifications of Operating Expenses:

1. Distribution costs (sometimes called Selling Expenses)

2. General and administrative expenses
3. Other operating expenses

Distribution costs (sometimes called Selling Expenses) are expenses directly

related to the selling activity of the business such as sales salaries, commission,
delivery expense, and advertising.

General and Administrative expenses are expenses incurred in the general

operations of the business such as office salaries, office supplies, and depreciation
of office equipment and property.

STATEMENT OF CHANGES IN OWNER’S EQUITY

❖ It is another report that the accountants prepared which explains the

activities for a period that caused the owner’s equity to change. Four
activities affect the owner’s equity: investment or contribution,
withdrawal, profit, and loss.

❖ Similarly, it is prepared before the balance sheet, since the amount of

owner’s equity at the end of the period must be reported on the balance
sheet. Because of this, the statement of owner’s equity is often viewed
as the connecting link between the income statement and balance
sheet. Beginning, Capital xxx
Add: Additional Investment xxx
Net Income xxx xxx
Less: Drawing xxx
Net Loss (if loss) xxx
Ending Capital xxx
Figure 16.4 Formula on how to compute the ending capital

Regal Sales Company

Statement of Changes in Equity
For the Year Ended December 31, 2018

Casas Capital, January 1 P 117,010

Add: Net Income 1,255
Total P 118,265
Less: Casas Drawing 1,000
Casas Capital, December 31 117,265
 Figure 16.5 Statement of Changes in Equity of Regal Sales Company
STATEMENT OF FINANCIAL POSITION

❖ Also known as the balance sheet, shows the financial condition of the
business entity at any given time.

❖ Conveys information about the business entity’s liquidity, solvency,

stability, capital structure, and financial flexibility.

❖ Also starts with the heading comprised of the following:

Name of the business (who?

Name of the statement (what?)

Date of the statement (when?)

❖ Observe that the date of the business starts with the words “as of”. This
means that the SFP can be prepared anytime even if the operation of
the business has not started yet. As long as the business has assets
contributed by owners or creditors, the SFP can be prepared.

PRESENTATION OF STATEMENT OF FINANCIAL POSITION

1. ACCOUNT FORM – presents its elements in horizontal order following

the accounting equation, assets = liabilities + capital.

REGAL SALES COMPANY

Statement of Financial Position
As of December 31, 2018

ASSETS LIABILITIES AND OWNER'S EQUITY

Current Assets Current Liabilities
Cash ₱50,575 Notes Payable ₱ 20,000
Accounts Receivable ₱ 18,500 Accounts Payable 5,770
Allowance for Doubtful Accounts 1,850 16,650 Salaries Payable 2,500
Merchandise Inventory 47,755 Taxes Payable 300
Unused Supplies 750 Withholding Tax Payable 875
Total Current Assets ₱ 115,730 SSS Premium Payable 525
Philhealth Premiums Payable 350
Non-Current Assets Interest Payable 70
Furniture and Fixtures ₱ 27,000 Unearned Rent Income 375
Accumulated Depreciation - Furn. & Fix 5,400 ₱21,600 Total Non-Current Assets ₱ 30,765
Office Equipment ₱ 15,000 Owner's Capital
Accumulated Depreciation - Furn. & Fix 4,300 10,700 Casas, Capital 117,265
Total Non-Current Assets 32,300 TOTAL LIABILITIES AND OWNER'S CAPITAL 148,030
TOTAL ASSETS ₱ 148,030
 2. REPORT FORM – presents its elements in horizontal order following
the accounting equation, assets = liabilities + capital.

REGAL SALES COMPANY

Statement of Financial Position
As of December 31, 2018

ASSETS
Current Assets
Cash ₱50,575
Accounts Receivable ₱ 18,500
Allowance for Doubtful Accounts 1,850 16,650
Merchandise Inventory 47,755
Unused Supplies 750
Total Current Assets ₱ 115,730

Non-Current Assets
Furniture and Fixtures ₱ 27,000
Accumulated Depreciation - Furn. & Fix 5,400 ₱21,600
Office Equipment ₱ 15,000
Accumulated Depreciation - Furn. & Fix 4,300 10,700
Total Non-Current Assets 32,300
TOTAL ASSETS ₱ 148,030

LIABILITIES AND OWNER'S EQUITY

Current Liabilities
Notes Payable ₱20,000
Accounts Payable 5,770
Salaries Payable 2,500
Taxes Payable 300
Withholding Tax Payable 875
SSS Premium Payable 525
Philhealth Premiums Payable 350
Interest Payable 70
Unearned Rent Income 375
Total Non-Current Assets ₱ 30,765
Owner's Capital
Casas, Capital 117,265
TOTAL LIABILITIES AND OWNER'S CAPITAL 148,030
 As you can notice, the amount of Net Income is added to the Statement of Changes
in Owner’s Equity and the ending capital in the said statement is the amount to be used
in the Owner’s Equity section of the Statement of Financial Position.

Thus, the
statement of Regal Sales Company
owner’s equity is Statement of Changes in Equity
often viewed as For the Year Ended December 31, 2018
the connecting
link between the Casas Capital, January 1 P 117,010
income Add: Net Income 1,255
Total P 118,265
statement and
Less: Casas Drawing 1,000
balance sheet. Casas Capital, December 31 117,265

REGAL SALES COMPANY

Statement of Financial Position
As of December 31, 2018

ASSETS
Current Assets
Cash ₱50,575
Accounts Receivable ₱ 18,500
Allowance for Doubtful Accounts 1,850 16,650
Merchandise Inventory 47,755
Unused Supplies 750
Total Current Assets ₱ 115,730

Non-Current Assets
Furniture and Fixtures ₱ 27,000
Accumulated Depreciation - Furn. & Fix 5,400 ₱21,600
Office Equipment ₱ 15,000
Accumulated Depreciation - Furn. & Fix 4,300 10,700
Total Non-Current Assets 32,300
TOTAL ASSETS ₱ 148,030

LIABILITIES AND OWNER'S EQUITY

Current Liabilities
Notes Payable ₱20,000
Accounts Payable 5,770
Salaries Payable 2,500
Taxes Payable 300
Withholding Tax Payable 875
SSS Premium Payable 525
Philhealth Premiums Payable 350
Interest Payable 70
Unearned Rent Income 375
Total Non-Current Assets ₱ 30,765
Owner's Capital
Casas, Capital 117,265
TOTAL LIABILITIES AND OWNER'S CAPITAL 148,030
 ACTIVITIES

Activity 1 Prepare for the following financial statements:

a. Income Statement (10 points)
b. Statement of Changes in Owner’s Equity (10 points)
c. Balance Sheet (20 points)

LAURA TAYLOR WHOLESALE DISTRIBUTORS

Worksheet
December 31, 2020
Trial Adjusted Income Balance
Balance Adjustments Trial Balance Statement Sheet
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
Cash ₱ 25,400 ₱ 25,400 ₱ 25,400
Accounts Receivable 37,600 37,600 37,600
Inventory 90,000 (3b) 88,900 (3a) 90,000 88,900 88,900
Land 92,000 92,000 92,000
Buildings 197,000 197,000 197,000
Accumulated Depreciatioon- Buildings ₱ 54,000 (1a) 10,000 ₱ 64,000 ₱ 64,000
Equipment 83,500 83,500 83,500
Accumulated Depreciation- Equipment 42,400 (1b) 9,000 51,400 51,400
Accounts Payable 39,000 39,000 39,000
Notes Payable 50,000 50,000 50,000
L. Taylor, Capital 267,800 267,800 267,800
L. Taylor, Drawings 10,000 10,000 10,000
Sales 904,100 904,100 904,100
Sales Discounts 6,100 6,100 6,100
Cost of Sales 709,900 709,900 709,900
Salaries Expense 69,800 69,800 69,800
Utilities Expense 19,400 19,400 19,400
Repair Expense 5,900 5,900 5,900
Petrol Expense 7,200 7,200 7,200
Insurance Expense 3,500 3,500 3,500

Depreciation Expense- Buildings (1a) 10,000 10,000 10,000

Depreciation Expense- Equipment (1b) 9,000 9,000 9,000
Interest Expense (2) 5,000 5,000 5,000
Interest Payable (2) 5,000 5,000 5,000
Income Summary (3a) 90,000 (3b) 88,900 1,100 1,100
202,900 202,900 1,381,300 1,381,300 846,900 904,100 534,400 477,200
NET INCOME 57,200 57,200
- 904,100 904,100 534,400 534,400
Activity 2 Complete the table below:

Income Statement Company X Company Y

Net Sales 1,982,904 185,046
COGS 1. Php _____ 8. Php _____
Gross Profit 1,590,140 124,801
Opex 606,070 50,187
Net Income (Loss) Php 984,070 9. Php _____

Statement of Changes in Owner's Equity

Beginning Capital 0 10. Php _____
Additional Investment 10,000 15,000
Drawing 6,700 3,800
Net Income (Loss) 2. Php _____ 11. Php _____
Ending Capital 3. Php _____ 129,847

Balance Sheet
Current Assets 544,419 12. Php 48% of TA
Non-current Assets 4. Php _____ 13. Php 52% of TA
Total Assets 1,684,923 186,543
Current Liabilities 185,300 14. Php _____
Non-current Liabilities 5. Php _____ 19,883
Total Liabilities 6. Php _____ 15. Php _____
Owner's Equity 7. Php _____ 16. Php _____
 WRAP-UP
To summarize what you have learned in the lesson, answer the following questions:
1. give the three main financial statements;
2. describe each financial statement; and
3. why it is important to prepare the financial statements?

VALUING

Reflect on this!

1. What do you mean by the above quotation?

2. How will you able to apply this in your life as a student?

POSTTEST

Directions: Identify each item below. Write your answer before the item number.

For numbers 1 and 2.

Write true if the statement is correct and if the statement is false, write the
correct word or phrase to make the statement correct.
_____1. The statement of owner’s equity is often viewed as the connecting link
between the income statement and the balance sheet.
_____2. Financial statements are vital in business because contribute to the decision-
making of a business.
_____3. In the accounting cycle, which of the following is considered the output
document?
A. Financial Statements
B. Journal
C. Ledger
D. Worksheet
The following information pertains to the R. Novo Company;

Purchase Discounts ₱ 215,000

Purchase Returns and Allowances 129,000
Purchases 4,300,000
Merchandise Inventory, Dec. 31, 2018 1,900,000
Merchandise Inventory, Jan. 1, 2018 1,200,000
Transportation In 172,000

_____4. What is the cost of goods sold?

A. P3,428,000
B. P3,528,000
C. P3,628,000
D. P3,728,000
_____ 5. Based on number 4, what kind of financial statement to be prepared?
A. Balance Sheet or Statement of Financial Position
B. Income Statement
C. Statement of Cash Flow
D. Statement of Changes in Owner’s Equity
 KEY TO CORRECTION

5. D C 5.
4. C A 4. 5. B
3. B D 3. 4. A
B 2. 3. A
2. C
C 1. 2. TRUE
1. B 1. TRUE
RECAP
PRETEST POSTTEST

References

Ballada, W. 2017. Fundamentals of Accountancy, Business, and Management 1.

VDomDane Publishers.

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