NAME: Brenda A.

Gagatiga PROFESSOR: SIR MANUEL LIM

PROGRAM-YEAR-SECTION: SBIE-2F DATE: FEBRUARY 12, 2022

(Page 55-58)

1.) FINANCIAL STATEMENT are formal records of the financial activities of an entity. It reflects the
information about financial performance and financial position of a business entity.

2-5.)The objective of financial statements is to provide INFORMATION about the financial POSITION,
PERFORMANCE and CHANGES in the financial position of an entity that is useful to a wide range of
users in making economic decisions.

6-10.) A complete set of financial statements include the following components:

a.) BALANCE SHEET
b.) INCOME STATEMENT
c.) STATEMENT OF CHANGES IN EQUITY
d.) CASH FLOW STATEMENT
e.) NOTES TO FINANCIAL STATEMENT

11.) A complete set of financial statement is considered general when it is audited by an independent
external auditor who is a CERTIFIED PUBLIC ACCOUNTANT (CPA)

12.) BALANCE SHEET referred to as Statement of Financial Position, reports on a company’s

assets, liabilities, and owner’s equity at a given point in time.

13.) ASSETS are resources controlled by the entity as a result of past events and from which future
economic benefits are expected to flow to the entity.

14.) CASH includes money and other negotiable instruments (checks and drafts) that are payable in
money and acceptable by the bank for deposit or encashment.

15.) MONEY is the standard medium of exchange. It refers to the currency coins and paper money,
which are legal tender and in circulation.

16.) CASH EQUIVALENTS are short-term and highly liquid investments that readily convertible into
cash and so near their maturity that they present insignificant risk of changes in value because of
changes in interest rates.

17.) An investment is considered highly liquid when it is acquired THREE months before its maturity.

18-21.) Marketable Securities generally refer to an investment in

a.) banker’s debt securities as CERTIFICATE OF TIME DEPOSIT, UNIT INVESTMENT FUND
b.) commercial (corporation’s unsecured debt instrument) such as BONDS;
c.) government securities such as TREASURY BILLS; and d.) investment in equity securities.
22.) Investment in equity securities is investment in STOCKS in a corporation in Stock Exchange.

23.) ACCOUNTS RECEIVABLE represents collectibles for the goods or services provided to
customers on Credit.

24-27.) Investors are assets:

a.) HELD FOR SALE in the ordinary course of business
b.) IN THE PROCESS OF PRODUCTION for such sale, or
c.) in the form of MATERIALS SUPPLIES to be consumed in the production process or in the
rendered services.

28.) DEFFERED EXPENSES these are payments that have been made for good services that are
expected to be used or consumed in the revenue-coming process.

29.) ACCRUED INCOME Incomes that have been earned by the end of the accounting period but will
be collected in the future accounting period.

30.) LIABILITIES are present obligations of the entity arising from past events the settlement of which
is expected to result in an outflow from the entity of embodying economic benefits.

31-36.) Settlement of a present obligations may occur in a number of ways:

a.) PAYMENTOF CASH
b.) TRANSFER OF OTHER ASSETS
c.) PROVISION OF SERVICES
d.) REPLACEMENT OF THAT OBLIGATION or WITH OTHER OBLIGATION
e.) CONVERSION OF OBLIGATION TO EQUITY
An obligation may also be extinguished by other means, such as a creditor OR FORFEITING its
rights.

37.) ACCOUNTS PAYABLE represents unwritten promises to pay a supplier or trade creditors for
assets purchased or services received.

38.) Acquiring assets or services by promising to make payment in the future is referred to as making
a purchase ON ACCOUNT OR ON CREDIT.

39.) ACCRUED EXPENSES these ae unpaid amounts for products or services that are already used
or consumed in the revenue-earning process.

40.) DEFERRED INCOM (UNEARNED INCOME) represents payments received in advance from
customers for products or services to be provided in the future.

41.) EQUITY is the residual interest in the assets of the entity after deducting all its liabilities.
42.) SHARE CAPITAL OR CAPITAL STOCK is the portion of the authorized share capital that has
been full paid.

43.) SUBSCRIBE SHARE CAPITAL is the portion of the authorized share capital that has been
subscribed but not yet fully paid.

44.) SUBSCRIPTION RECEIVABLE is the amount receivable from subscribers for subscribed share
capital.

45.) TREASURY SHARES are shares of stocks which have been issued and fully paid for, but
subsequently reacquired by the issuing corporation by purchase, redemption, donation or through
some other lawful means.

46.) ACCUMULATED PROFITS (LOSSES) refers to the accumulated net profit (loss) less the
amount distributed to the shareholders in the form of a dividend since the company’s inception.

47.) APPROPRIATED ACCUMULATED PROFITS refers to the portion of total accumulated profits
that is set apart or reserved for specific purposes. It is restricted for dividend purposes.

48.) UNAPPROPRIATED ACCUMULATED PROFITS refer to the portion of total accumulated profits
that is free or unrestricted for dividend purposes.

49.) Without a qualifier, Accumulated Profits mean UNAPPROPRIATED ACCUMULATED PROFITS.

50. INCOME STATEMENT reports on a company’s income, expenses, and profits of losses over a
period of time.

51.) INCOME revenue and gains earned by the entity during the accounting process.

52.) EXPENSE represent the amount of resources used up by the entity revenue during the
accounting period.

53.) ADMINISTRATIVE EXPENSE also known as general expenses, include all the incurred by the
administration.

54.) SELLING EXPENSES also known as marketing expenses, include all necessary to sell the
finished product.

55.) GROSS INCOME (GROSS MARGIN) is calculated as revenue minus cost of sales.\

56.) OPERATING INCOME is equal to gross profit minus operating (administrative and selling
expenses). This figure represents the profit a company from its actual operations before paying
income taxes.
57.) NET INCOME generally represents the company’s profit after the required income tax.

58.) STATEMENT OF CHANGES IN EQUITY is a financial statement that shows the items that
change affect the owner’s equity.

59-61.) CASH FLOW STATEMENT is a statement that provides information about cash inflow and
cash outflows during an accounting period. It provides the users of financial statements with a basis
to assess the ability of the entity to GENERATE CASH and the needs to the entity UTILIZE THOSE
CASH FLOWS.

62.) OPERATING ACTIVITIES are the entity’s principal income producing activities and other
activities related to changes in current assets and current liabilities.

63.) INVESTING ACTIVITIES are the entity’s acquisition and disposal of (a) set investments that are
not cash equivalents, (b) productive assets that are expected benefit for long period of time and (c)
lending money to another entity, and collect the principal on the related loans.

64.) FINANCIAL ACTIVITIES are the activities that result in changes in the size composition of the
contributed equity and borrowings of the entity. These are action dealing with the exchange of cash
between the business and its owners and creditors.

65.) NOTES TO FINANCIAL STATEMENTS the additional relevant financial information that follow
the statements which comprise a summary of significant accounting period and other explanatory
notes.

"ALL FOR THE GLORY OF GOD"