Basic Accounting With Basic Corporate Accounting (ACCT 101)

Course instructor: Christine L.
Nifras, CPA, MBA

Contact details: FB messenger: Christine Nifras | Email: c.nifras@usls.edu.ph
Phone: +63 9199112509, 4341530
Basic Accounting with Basic Corporate Accounting (ACCT 101)
Worksheet, Financial Statements and Completing the Accounting

Cycle
The previous chapter presented adjustments that might be needed at the end of each
accounting period. These adjustments were necessary to bring a company’s books and
records current in anticipation of calculating and reporting income and financial position.
This module begins by illustrating how much adjustments would be used to actually
prepare financial statements.
Targeted Course Outcome

Upon completion, students should be able to demonstrate an understanding of
fundamental accounting concepts and principles and the business context where
accounting is applied.
Learning Objectives
At the end of this module, the students will be able: 
1. Describe the flow of accounting information from the unadjusted trial balance into
the adjusted trial balance and finally, into the income statement and balance
sheet columns of the worksheet.
2. Prepare accurately and in good form a ten-column worksheet.
3. Understand and appreciate the usefulness of financial statements.
4. Develop skills in the preparation of financial statements.
5. Explain how the financial statements are interrelated.
6. Explain why temporary accounts are closed each period.
7. Recognize the need for a post-closing trial balance and reversing entries in
particular instances.
8. Prepare the post-closing trial balance
9. T
ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

This document is a property of the University of St. La Salle Module 5 | Page 1
Unauthorized copying and / or editing is prohibited.
ACTIVITY: MY WEALTH
Financial statements are compilations of personal financial data that describe an

individual’s current financial condition.
It presents a summary of assets and liabilities, as well as income and spending.
Instruction: Answer the guide question briefly. How do I determine my wealth given
the following information?
Property and Equipment P13,000,000

Cash 2,000,000
Accounts Receivable 4,000,000
Bank Loan 1,000,000
Unearned Revenues 500,000
Rosanna Rosa owns a landscaping service firm. For the first year of operations,
she earned net profit of 120,000. She incurred total expenses of P60,000. How much
landscaping service revenue did Rosanna Rosa earned during the year?
Landscaping Service Revenues P ?

Less: Expenses 60,000
Net Profit P120,000

THE WORKSHEET
It is multi-column document which provides an efficient way to summarize the data for
financial statements preparation.
Importance of the Worksheet
• It aids in the transfer of data from the unadjusted trial balance to the financial
statement.
• It simplifies the adjusting and closing process.
• It reveals errors.
• It is a summary device that ease the work of the accountant in the preparation of
the financial statements.
Step 5. PREPARING THE WORKSHEET
The steps in the preparation of a worksheet are:
1. Enter the account and balances in the unadjusted trial balance columns and
total the amounts.
a. The account numbers, titles and balances are lifted from the general
ledger to the unadjusted trial balance.
b. The accounts are listed in the worksheet in the order in the general
ledger.
c. Accounts with zero balances are also presented.
d. Total debits and total credits must equal.
2. Enter the adjusting entries in the adjustments columns and total the amounts.
3. Compute each account’s adjusted balance by combining the unadjusted trial

balance and the adjustment figures. Enter the adjusted amounts in the
adjusted trial balance columns.
The adjusted trial balance is prepared by combining horizontally, line by line,

the amount of each account in the unadjusted trial balance columns with the
corresponding amounts in the adjustment columns. The procedure is called
cross-footing.

4. Extend the asset, liability and owner’s equity amounts from the adjusted trial
balance columns to the balance sheet columns. Extend the income and
expense amounts to the income statement columns. Total the columns.
Every account is either a balance sheet account or an income statemen

account. Asset, liability, capital, and withdrawal accounts are extended to the
balance sheet columns. Income and expense accounts are moved to the
income statement columns.
Debits in the adjusted trial balance remain as debits in the statement columns,
while credits as credits. Each account’s adjusted balance should appear in
only one statement column. At this stage, the initial totals of the income
statement and balance sheet columns are not equal.
5. Compute for profit or loss as the difference between total revenues and total
expenses in the income statement. Enter profit or loss as a balancing amount
in the income statement, and in the balance sheet, and compute the final
column totals.
Profit or loss is equal to the difference between the debit and credit columns
of the income statement.
Revenues (Income Statement credit column total) P71,700

Expenses (Income Statement debit column total) 36,700
Profit P35,000
The profit or loss should always be the amount by which the debit and credit
columns for income statement, and the debit and credit columns for the
balance sheet differ. The profit figure is entered in debit column of the
income statement and credit column of the balance sheet. After completion,
total debits and total credits in the income statement and balance sheet
columns must equal.
The profit figure is extended to the credit column of the balance sheet
because profit increases owner’s equity and increases in owner’s equity are
recorded as credits. Profit must be added and withdrawals subtracted to
arrive at the ending capital balance; this is done when the statement of
changes in equity is prepared.

Exhibit 5-1 – Unadjusted Trial Balance

Exhibit 5-2 Adjustments

Exhibit 5-3 Adjusted Trial Balance

Exhibit 5-4 Income Statement and Balance Sheet Columns, and
Computation of Profit
ESSENCE OF FINANCIAL STATEMENTS
• It is the means by which the information accumulated and processed in

financial accounting is periodically communicated to the users.
• Sound economic decisions are based from the accounting information

embodied in the financial statement.
• It provides information about the financial position, financial performance,

and cash flows of an entity.

COMPLETE SET OF FINANCIAL STATEMENTS
Per revised Philippine Accounting Standards (PAS) No. 1, a complete set of

financial statements comprises:
1. Statement of financial position as at the end of the period;
2. Statement of comprehensive income for the period;
3. Statement of changes in equity for the period;
4. Statement of cash flows for the period;
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 earlier

comparative period when an entity applies an accounting policy
retrospective restatement of items in its financial statements or
when it reclassifies items in its financial statements.
In a nutshell,
• Statement of Financial Position (or Balance Sheet) lists all the assets,
liabilities and equity of an entity as at a specific date.
• Statement of Financial Performance (or Income Statement) presents a

summary of revenues and expenses of an entity for a specific period.
• Statement of Changes in Equity presents a summary of the changes in

capital such as investments, profit or loss, and withdrawals.
• Statement of Cash Flows reports the amount cash received and disbursed
during the period.
• Notes to Financial Statements provide narrative descriptions or

disaggregation of items presented in the statement and information about
them that do not qualify for recognition in the statements.
Step 6. PREPARING THE FINANCIAL STATEMENTS
Statement of Financial Performance
An entity can present all items of income and expenses recognized in a period:
• In a single statement of comprehensive income, or

• In two statements:
✓ A statement displaying components of profit or loss (separate
income statemen), and
✓ A second statement beginning with profit or loss and displaying
components of other comprehensive income.
The 2018 Conceptual Framework does not specify whether the statement(s) of
financial performance comprise(s) a single statement or two statements.

The discussion will zero in on the separate income statement portion because the
other line items comprising the statement
of comprehensive income will be tackled in higher accounting because of their
complexity.
The income statement is a formal statement showing the performance of the

enterprise for a given period of time. It
summarizes the revenues earned and expenses incurred for that period of time.
The income statement for Weddings “R” Us is prepared directly from the income
statement columns of the worksheet in Exhibit 5-4.
Exhibit 5-5 Income Statement
Weddings “R’ Us
Income Statement
For the Month Ended May 31, 2019
Revenues
Consulting Revenues P67,700
Referral Revenues 4,000
Total P71,700
Expenses
Salaries Expense P15,600
Utilities Expense 4,400
Rent Expense 4,000
Depreciation Expense-Service Vehicle 4,000
Depreciation Expense-Office Equipment 1,000
Supplies Expense 3,000
Insurance Expense 1,200
Interest Expense 3,500
Total 36,700
Profit P35,000
Information about the performance of an enterprise, in particular its profitability,

is required to assess potential changes in the economic resources that is likely to
be controlled in the future. It is also useful in predicting the capacity of the
enterprise to generate cash flows from its existing resource base.
Statement of Changes in Equity
The statement of changes in equity summarizes the changes that occurred in

owner’s equity. This statement is now a required statement (per revised
Philippine Accounting Standards (PAS) No. 1). Changes in an enterprise’s equity
between two balance sheet dates reflect the increase or decrease in its net
assets during the period.
In the case of sole proprietorships, increases in owner’s equity arise from

• additional investments by the owner, and
• profit during the period.
While decreases in owner’s equity result from:

• withdrawals of the owner, and
• loss for the period.
The beginning balance and additional investments are taken from the owner’s
capital account in the general ledger. The profit or loss figure comes directly from

the income statement while withdrawals from the balance sheet columns in the
worksheet.
Exhibit 5-6 Statement of Changes in Equity
Weddings “R’ Us
Statement of Changes in Equity
For the Month Ended May 31, 2019
Perez-Manalo, Owner’s Equity, 5/1/2019 P250,000

Add: Additional investments by Perez-Manalo P 0
Profit 35,000 35,000
Total P285,000
Less: Withdrawals 14,000
Perez-Manalo, Owner’s Equity, 5/31/2019 P271,000
Statement of Financial Position
The statement of financial position is a statement that shows the financial position
or condition of an entity by listing the assets, liabilities and owner’s equity as at a
specific date. The information needed for the balance sheet items are the net
balances at the end of the period, rather than the total for the period as in the
income statement. This statement is also called the balance sheet.
Users of financial statements analyze the balance sheet to evaluate an entity’s

liquidity, its financial flexibility, and its ability to generate profits, and its solvency.
• Liquidity refers to the availability of cash in the near future after

taking into account the financial commitments over this period.
• Financial flexibility is the ability to take effective actions to alter

the amounts and timings of cash flows so that it can respond to
unexpected needs and opportunities. This includes the ability to
raise new capital or tap into unused lines of credit.
• Solvency refers to the availability of cash over the longer terms to

meet financial commitments as they fall due.
In preparing the balance sheet, it may be necessary to make further analysis of

the data. The needed data ae the balances of asset, liability, and owner’s equity
accounts, are available from the balance sheet columns of the worksheet.
However, the interim balance for owner’s equity must be revised to include profit
or loss and owner’s withdrawals for the accounting period. The adjusted amount
for ending owner’s equity is shown in the statement of changes in equity.
Format
The balance sheet can be presented in either of the following:
• Report format simply lists the assets, followed by the liabilities then
by the owner’s equity in vertical sequence.
• Account format lists the assets on the left and the liabilities and
owner’s equity on the right.
Either balance sheet format is acceptable.

Classification
The revised PAS No. 1 does not prescribe the order or format in which an entity
presents items in the statement of financial position; what is required is the
current and non-current distinction for assets and liabilities. Assets can be
presented current then non-current or vice versa. Liabilities and equity can be
presented current then non-current liabilities then equity, or vice-versa.
a
It is proper to present a classified balance sheet: that is, the assets and liabilities
are separated into various categories. Assets are sub-classified as current assets
and non-current assets; while liabilities as current liabilities and non-current
liabilities. At this point, it is advisable to review the definitions of the foregoing
(refer to Module 2). Classifying a balance sheet aids in the analysis of financial
statements data.
When presentation based on liquidity provides accounting information that is

reliable and more relevant to decision-makers then an entity shall present all
assets and liabilities in order of liquidity. For example,
• Assets are classified and presented in decreasing order of liquidity.
Cash is the most liquid. Assets that are least likely to be converted to cash
are listed last.
• Liabilities are generally classified and presented based on time of maturity
such that obligations which are currently due are listed first.
It can be observed in Exhibit 5-7 below that the total assets of P546,700 in the
balance sheet does not tally with the total debits of P565,700 in the balance sheet
columns of the worksheet in Exhibit 5-4. Likewise, the total liabilities and owner’s
equity do not equal to the total credits in the same exhibit. The reason for these
differences is that accumulated depreciation and withdrawals are subtracted from
their related accounts in the balance sheet but added in their respective columns
in the worksheet. The classified balance sheet of Weddings “R” Us in report
format is:

Exhibit 5-7 Statement of Financial Position
Statement of Cash Flows
The statement of cash flows provides information about the cash receipts and
cash payments of an entity during a period. It is a formal statement that
classifies cash receipts (inflows) and cash payments (outflows) into operating,
investing and financing activities. This statement shows the net increase or
decrease in cash during the period and the cash balance at the end of the period;
it also helps project the future net cash flows of the entity. Statement of Changes
in Equity will be discussed in higher accounting.
RELATIONSHIPS AMONG THE FINANCIAL STATEMENTS
The financial statements are based on the same underlying data and are
fundamentally related. The following shows the basic interrelationships among financial
statements:

1. The income statement reports all income and expenses during the period.
The profit or loss is the final figure in this statement.
2. The statement of changes in equity considers the profit or loss figure from the
income statement as one of the determining factors that explain the changes
in owner’s equity.
3. The statement of financial position reports the ending owner’s equity, taken
directly from the statement of changes in equity.
4. The statement of cash flows reports the net increase or decrease in cash
during the period and ends with the cash balance reported in the balance
sheet. This statement is prepared on information from the income statement
and the balance sheet.
Step 7. ADJUSTMENTS ARE JOURNALIZED AND POSTED
The adjustment process is a key element of accrual basis accounting. The

worksheet helps in the identification of the accounts that need adjustments. The
adjusting entries are directly entered in the worksheet. Most accountant prepare
the financial statements immediately after completing the worksheet. The
adjustments are journalized and posted as the closing entries are made. This
step in the accounting cycle brings, the ledger into agreement with the data
reported in the financial statements.
Illustration: The adjustments pertinent to Weddings “R” Us follow:

Step 8. CLOSING ENTRIES ARE JOURNALIZED AND POSTED
Income, expense and withdrawal accounts are temporary accounts that

accumulate
information related to a specific accounting period. These temporary accounts
facilitate income statement preparation. At the end of each year, the balances of these
temporary accounts are transferred to the capital account. Thus, the balance of the
owner’s capital account represents the cumulative net result of income, expense and
withdrawal transactions. This phase of the cycle is called the closing procedure.
A temporary account is said to be closed when an entry is made such that its
balance becomes zero. Closing simply transfers the balance of one account to another
account.
In this case, the balances of the temporary accounts are transferred to the capital
account. A summary account, Income Summary is used to close the income and
expense accounts. The steps in closing the accounts of an entity will be illustrated using
the Weddings “R” Us case.
1. Close the income accounts
Income accounts have credit balances before the closing entries are posted.
For this reason, an entry debiting each revenue account in the amount of its
balance is needed to close the account. The credit is made to the income
summary account. The entry to close the income accounts for the Weddings
“R” Us is as follows:
The dual effect of the entry is to make the balances of the income accounts
equal to zero, and to transfer the balances in total to the credit side of the
income summary account. Note that the data for closing the income accounts
can be found in the credit side of the income statement columns of the
worksheet in Exhibit 5-4.
2. Close the expense accounts
Expense accounts have debit balances before the closing entries are posted.
For this reason, a compound entry is needed crediting each expense account
for its balance and debiting the income summary for the total. These data can
be found in the debit side of the income statement columns of the worksheet.

The effect of posting the closing entry is to reduce the expense account
balances to zero and to transfer the total of the account balances to the debit
side of the income summary.
3. Close the income summary account
After posting the closing entries involving income and expense accounts, the
balance of the income summary account will be equal to the profit or loss for
the period. A profit is indicated by a credit balance and a loss by the debit
balance. The income summary account, regardless of the nature of its
balance, must be closed to the capital account. For Weddings “R” Us, the
entry is as follows:
The effect of posting this closing entry is to close the income summary
account balance and to transfer the balance to Perez-Manalo’s capital account for the
profit.
4. Close the withdrawal account
The withdrawal account shows the amount by which capital is reduced during
the period by withdrawals of cash or other assets of the business by the
owner for personal use.
For this reason, the debit balance of the withdrawal account must be closed to
the capital account as follows:
The effect of posting this closing entry is to close the withdrawal account and
to transfer the balance to the balance to the capital account.

Step 9. PREPARATION OF THE POST-CLOSING TRIAL BALANCE
It is possible to commit an error in posting the adjustments and closing entries to

the ledger accounts; thus, it is necessary to test the equality of the accounts by
preparing a new trial balance. This final trial balance is called a post-closing trial
balance.
• The post-closing trial balance verifies that all the debits equal the credits in
the trial balance.
• The trial balance contains only balance sheet items such as assets,
liabilities, and ending capital because all income and expense accounts ,
as well as withdrawal account, have zero balances.
Notice that only the balance sheet accounts have balances because at this point,
all the income statement accounts have been closed.
Step 10. REVERSING ENTRIES
Preparing the post-closing trial balance may not be the last step in the accounting
cycle. Some entities elect to reverse certain end-of-period adjustments on the first
day of the new period. A reversing entry is a journal entry which is the exact
opposite of a related adjusting entry made at the end of the period. It is basically
a bookkeeping technique made to simplify the recording of regular transactions in
the next accounting period.
It should be emphasized that reversing entries are optional. Also, the act of
reversing a previously recorded adjusting entry should not lead us to the
conclusion that the entries reversed are unnecessary or inaccurate.
Even when an entity follows the policy of making reversing entries, not all
adjusting entries should be reversed. Generally, a reversing entry should be
made for any adjusting entry that increased an asset or a liability account.
Therefore, all accruals are reversed but only deferrals initially recorded in income
statement, income or expenses accounts are reversed.
After analyzing the rest of the adjusting entries, the adjustments that can be
reversed are as follows: prepaid expenses (expense method), unearned revenues
(income method), accrued expenses and accrued expenses.

Illustration. To show how reversing entries can be helpful, consider the
adjusting entry made in the records of Weddings “R” Us to accrue salaries expense:
When the employees are paid on the next regular payday, the entry would be:
Note that when the payment is made, without a prior reversing entry, the
accountant Must look into the records to find out how much of the P7,200 applies to the
current accounting period and how much was accrued at the beginning of the period.
This step may appear easy in this simple case, but think of the problems that may
arise If the company has many employees, especially if some of them are paid on
different time schedules such as weekly or monthly. A reversing entry is an accounting
procedure that helps to solve this difficult problem. As noted above, a reversing entry is
exactly what its name implies. It is a reversal of the adjusting entry made. For example,
observe the following sequence of transactions and their effects on the ledger account,
salaries expense:
1. Adjusting Entry
2. Closing Entry

3. Reversing Entry
4. Payment Entry
These transactions had the following effects on salaries expense:
a. Adjusted salaries expense to accrue P1,800 in the proper accounting period.

b. Closed the P15,600 in total salaries expense for May to income summary.
c. Established a credit balance of P1,800 on June 1 in salaries expense equal to
the expense recognized through the adjusting entry on May 31. The liability
account salaries payable was reduced to a zero balance.
d. Recorded the P7,200 payment of two weeks’ salaries in the usual manner.
The reversing entry has the effect of leaving a balance of P5,400 (7,200 –
P1,800) in the salaries expense account. This P5,400 balance represented
the salaries for the nine workdays in June.
Making the payment entry was simplified by the reversing entry. Reversing
entries apply to all accrued expenses or revenues.
Worksheet in Worksheet
https://www.youtube.com/watch?v=B02hG5B38Hk
Elaborate 5.1 Preparation of Income Statement and Statement of Changes
in Equity
The income and expense accounts of Nora Santos Real Estate Agency, which
was listed below, represent the activities for the month of July, 2020:
Advertising Expense P 163,000

Commission Expense 475,000
Office Supplies Expense 27,000
Real Estate Revenues 1,250,000
Rent Expense 48,000
Salaries Expense 264,000
Utilities Expense 42,000
Depreciation Expense 5,000

Required:
1. Prepare an income statement for the month ended July 31, 2020.
2. On July 1, 2020, Santos has a P123,000 capital balance. During the
month, Santos invested an additional P16,000 in the business and
withdrew P250,000. Prepare a statement of changes in equity for the
month of July 31, 2020.
Elaborate 5.2 Preparing the Financial Statements
The accounts for the balance sheet, statement of changes in equity, and income
statement of Archi Lacson, CPA are as follows:
During the year, Lacson invested additional P22,000 in the business.
Required: Prepare the income statement, statement of changes in equity and

balance sheet
Elaborate 5.3 Comprehensive Problem
Elsa Fox, a tax consultant, began her practice on Dec. 1, 2019. The transactions
of the firm for the month are as follows:
Dec. 1 Fox invested P150,000 in the firm.

2 Paid rent for December to Tux Realtors, P8,000.
3 Purchased supplies on account, P7,200.
4 Acquired P75,000 of office equipment, paying P37,000.
8 Paid P7,200 on account for office supplies purchased.
14 Paid assistant’s salaries for two weeks, P6,000.
20 Performed consulting services for cash, P20,000.
28 Paid assistant’s salaries for two weeks, P6,000.
30 Billed clients for December consulting services, P48,000.
31 Fox withdrew P12,000 from the business.

Required:
1. Open the following general ledger accounts, using the account
numbers shown:
Assets Owner’s Equity
110 Cash 310 Fox, Capital
120 Accounts Receivable 320 Fox, Withdrawals

130 Fees Receivable 330 Income Summary
140 Supplies
150 Office Equipment Income
155 Accumulated Depreciation 410 Consulting Revenues
Liabilities Expenses
210 Accounts Payable 510 Salaries Expense

220 Salaries Payable 520 Supplies Expense
530 Rent Expense
540 Depreciation Expense
2. Journalize the December transactions and post to the ledger.

3. Prepare and complete the worksheet using the following information:
a. Supplies on hand at Dec. 31 amounted to P4,700.
b. Salaries of P1,800 have accrued at month-end.
c. Depreciation is P800 for December.
d. Fox has spent 20 hours on a tax case during December. When
completed in January, her work will be billed at P500 per hour.
Note: The firm uses the account Fees Receivable to reflect the
amounts earned but not yet billed.
4. Prepare an income statement, statement of changes in equity, and
balance sheet.
5. Journalize and post adjusting and closing entries.
6. Prepare a post-closing trial balance.
7. Journalize and post the reversing entries.
Formative-assessment:
Multiple Choice. Shade the letter of the best answer to the questions.
1. Accounting data flow from the

a. Balance sheet to the income statement
b. Income statement to the statement of owner’s equity
c. Statement of owner’s equity to the balance sheet
d. Both b and c are correct.

2. Which part of the accounting cycle provides information to help business decided
whether to expand its operation?
a. Post-closing trial balance
b. Adjusting entries
c. Closing entries
d. Financial statements
3. The statement of changes in equity would not show

a. The entity’s revenues and expenses
b. The owner’s ending capital balance.
c. The owner’s additional investments.
d. The owner’s withdrawals for the period.
4. Which of the following comes first in the accounting process?

a. Journalizing external transactions
b. Preparation of unadjusted trial balance
c. Preparation of adjustments
d. Worksheet preparation
5. Which of following is not a closing entry?

a. Dr. Income Summary; Cr. Insurance Expense
b. Dr. Owner’s, Capital; Cr. Owner’s Withdrawal
c. Dr. Salaries Payable; Cr. Income Summary
d. Dr. Service Revenues; Cr. Income Summary
6. The primary objective of reversing entries is to

a. correct errors.
b. simplify the bookkeeping associated with the accruals from the prior
period.
c. transfer the balance of the expense accounts to the Owner’s Capital
account
and set the accounts equal to zero.
d. place the expenses for the current period in the period accounts.
7. Which of the following could not possibly be a closing entry?

a. Debit Income Summary and credit Owner’s Capital
b. Debit Owner’s Capital and credit Owner’s Withdrawal
c. Debit Income Summary and credit Owner’s Withdrawals
d. Debit Owner’s Capital and credit Income Summary
8. Which of the following accounting cycle steps comes before the others?
a. The financial statements are prepared.
b. Closing entries are recorded and posted.
c. Source documents are analyzed.
d. Adjusting entries are recorded and posted.
9. In which financial statement does Income Summary appear?

a. Income Statement
b. Statement of Changes in Equity
c. Statement of Financial Position
d. It does not appear in any financial statement.
10. Probably the last account to be listed on a post-closing

a. Salaries Payable.
b. Salaries Expense.
c. Owner’s Capital.
d. Income Summary.

Part II. Problem. Prepare worksheet and financial statements.
The unadjusted trial balance of Claro Consulting Services for the year ended December
31, 2019 is presented below:
Claro Consulting Services

Unadjusted Trial Balance
Dec. 31, 2019
110 Cash P1,052,000

105 Cash Equivalent 2,992,000
120 Accounts Receivable 913,000
130 Prepaid Rent 360,000
140 Office Supplies 63,000
150 Furniture and Equipment 2,800,000
155 Accumulated Depreciation-Furniture & Equipment P 560,000
160 Service Vehicle 1,550,000
165 Accumulated Depreciation-Service Vehicle 310,000
210 Notes Payable 500,000
220 Accounts Payable 585,000
230 Salaries Payable
240 Interest Payable
310 Claro, Capital 3,360,000
320 Claro, Withdrawal 1,200,000
410 Consulting Revenues 13,250,000
510 Salaries Expense 7,542,000
520 Rent Expense
530 Office Supplies Expense
540 Depreciation Expense
550 Interest Expense
560 Miscellaneous Expense 93,000
Total P18,565,000 P 18,565,000

.
Information pertaining to Claro’s accounts is as follows:
a. On Nov. 1, 2019, Claro paid Recto Realtors P360,000 for six months rent on the
office building commencing that date.
b. Office supplies on hand at Dec. 31, 2019 amounted to P36,000.
c. Depreciation expense for the furniture and equipment is P560,000 for the year.
d. Depreciation expense for service vehicle for the year amounted to P310,000.
e. As at Dec. 31, 2019, P210,000 salaries have accrued.
f. The P500,000 note payable was issued on 12%.

Requirements:
1. Prepare a worksheet with the columns: Unadjusted Trial Balance, Adjustments,
Adjusted Trial Balance up to financial statements.
2. Prepare the adjusting entries.
3. Compute the adjusted balances and reflect it in the adjusted trial balance
4. Prepare an income statement, statement of changes in equity, and a balance
sheet.
5. Prepare closing entries.
6. Prepare posting closing-trial balance


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Course instructor: Christine L.

Nifras, CPA, MBA

Basic Accounting with Basic Corporate Accounting (ACCT 101)

Worksheet, Financial Statements and Completing the Accounting

Targeted Course Outcome

At the end of this module, the students will be able:

ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

Financial statements are compilations of personal financial data that describe an

Property and Equipment P13,000,000

Landscaping Service Revenues P ?

Net Profit P120,000

ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

Importance of the Worksheet

• It simplifies the adjusting and closing process.

Step 5. PREPARING THE WORKSHEET

The steps in the preparation of a worksheet are:

c. Accounts with zero balances are also presented.

d. Total debits and total credits must equal.

3. Compute each account’s adjusted balance by combining the unadjusted trial

The adjusted trial balance is prepared by combining horizontally, line by line,

ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

Every account is either a balance sheet account or an income statemen

Revenues (Income Statement credit column total) P71,700

ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

ESSENCE OF FINANCIAL STATEMENTS

• It is the means by which the information accumulated and processed in

• Sound economic decisions are based from the accounting information

• It provides information about the financial position, financial performance,

ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

Per revised Philippine Accounting Standards (PAS) No. 1, a complete set of

1. Statement of financial position as at the end of the period;

2. Statement of comprehensive income for the period;

3. Statement of changes in equity for the period;

4. Statement of cash flows for the period;

5. Notes, comprising a summary of significant accounting policies and

6. Statement of financial position as at the beginning of the earlier

• Statement of Financial Performance (or Income Statement) presents a

• Statement of Changes in Equity presents a summary of the changes in

• Notes to Financial Statements provide narrative descriptions or

Step 6. PREPARING THE FINANCIAL STATEMENTS

Statement of Financial Performance

• In a single statement of comprehensive income, or

ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

The income statement is a formal statement showing the performance of the

Exhibit 5-5 Income Statement

Information about the performance of an enterprise, in particular its profitability,

Statement of Changes in Equity

The statement of changes in equity summarizes the changes that occurred in

In the case of sole proprietorships, increases in owner’s equity arise from

While decreases in owner’s equity result from:

ACCT101 – Basic Accounting with Basic Corporate Accounting Nifras, C.

Exhibit 5-6 Statement of Changes in Equity

Perez-Manalo, Owner’s Equity, 5/1/2019 P250,000

Statement of Financial Position

Users of financial statements analyze the balance sheet to evaluate an entity’s

At the end of this module, the students will be able: 