Entrepreneurship-1112 Q2 SLM WK7

11/12
Entrepreneurship
Quarter 2 – Module 7
Financial Statements
1
Entrepreneurship – Grade 12
Alternative Delivery Mode
Quarter 2 – Module 7: Financial Statements
First Edition, 2020
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Published by the Department of Education

Secretary: Leonor Magtolis Briones
Undersecretary: Diosdado M. San Antonio
Development Team of the Module
Writer: Ronquilio G. Daño, LPT

Editors: Felicilda S. Alipe
Management Team: Bianito A. Dagatan EdD, CESO V
Schools Division Superintendent
Casiana P. Caberte PhD

Assistant Schools Division Superintendent
Felix C. Galacio Jr. PhD

EPS, Mathematics
Josephine D. Eronico PhD

EPS, LRMDS
Printed in the Philippines by Schools Division of Bohol

Department of Education – Region VII, Central Visayas
Office Address: 0050 Lino Chatto Drive Barangay Cogon, Tagbilaran City,
Bohol
Telefax: (038) 501 – 7550
Tel Nos. (038) 412 – 4938; (038) 411-2544; (038) 501 – 7550
E-mail Address: depedbohol@deped.gov.ph
2
Lesson 1: Financial Statements
Learning Competencies: Identify where there is a profit or loss for business
At the end of the lesson, you are expected to:

 classify the financial statements
 prepare balance sheet of a company, and
 prepare income statement of a company.
What is it?
The key product of the end product of the accounting process is a set of
documents called financial statements comprised of the following:
1. Statement of Financial Position or Balance Sheet – shows the financial

condition or position of a business as of a given period. It consists of the
assets, liabilities, and owner’s equity.
2. Income Statement or Statement of Comprehensive Income – shows the result
of operations for a given period. It consists of the revenues, cost and
expenses.
3. Statement of Changes in Owner’s Equity or Statement of Owner’s Equity –
shows the changes in the capital or owner’s equity as a result of additional
investment or withdrawals by the owner, plus or minus the net income or
net loss for the year.
4. Statement of Cash Flows – summarizes the cash receipts and cash
disbursements for the accounting period.
What’s more?
Directions:
Pick out from the box to classify the financial statement as described in
each item. Use the answer sheet provided.
a. balance sheet
b. income statement
c. statement of owner’s equity
d. statement of cash flows
1. This summarizes the cash activities of the business by classifying cash

inflows and outflows.
2. These are assets, liabilities, and owner’s equity of the business.
3. This determines the capital and withdrawals of the owner.
4. This shows the results of business operations.
3
Lesson 2: Balance Sheet
What is it?
BALANCE SHEET
These are accounts, namely assets, liabilities, and owner’s equity, are
classified as real or permanent accounts.
ASSETS – economic resources owned by the business expected for future gain like
property and rights of value owned by the business.
LIABILITIES – include debts, obligations to pay, and claims of the creditors on the
assets of the business.
OWNER’S EQUITY or CAPITAL – includes the interest of the owners on the business,
claims of the owners on the assets of the business, and the investment of
the owner plus or minus the results of operations.
THE FUNDAMENTALS OF ACCOUTNING EQUATION
ASSETS = LIABILITIES + OWNER’S EQUITY
Examples:
1. Given liabilities of P50, 000 and the owner’s equity of P150,000, find
the value of assets.
Solution:
Assets = Liabilities + Owner’s Equity
= P50, 000 + P150, 000
= 200, 000
2. Given assets of P180, 000 and the owner’s equity P110, 000, find the
liabilities.
Solution:
Liabilities = Assets – Owner’s Equity
= P180, 000 – P110, 000
= P70, 000
3. Given assets of P250, 000 and the liabilities of P90, 000, find the
owner’s equity.
Solution:
Owner’s Equity = Assets – Liabilities
= P250, 000 – P90, 000
= P160, 000
What’s more?
4
Directions:
Find the missing amounts. Use the answer sheet provided.
ASSETS LIABILITIES OWNER’S EQUITY

650, 000 340, 000 1.
2. 295, 000 305, 000
967, 000 3. 660, 000
845, 000 4. 533, 000
Lesson 3: Income Statement
What is it?
INCOME STATEMENT accounts, namely revenue and expense, are classified as

nominal or temporary accounts.
a. Service income - revenues earned or generated by the business in performing

services for a customer or client.
b. Salaries or wages expense – payment made to employee or workers for
rendering services to a company.
c. Utilities expense – expense related to the use of electricity, fuel, water, and
telecommunication facilities.
d. Supplies expense – covers office supplies used by a business in the conduct
of its daily operations.
e. Insurance expense – the expired portion of premiums paid on insurance
coverage.
f. Depreciation expense – the annual portion of the cost of tangible assets such
as buildings, machineries, and equipment.
g. Uncollectible accounts expense/doubtful account expense/bad debts expense
– the amount of receivables charged as expense for the period because they
are estimated to be doubtful of collection.
h. Interest expense – the amount of money charged to the borrower for the use
of borrowed funds.
Example:
Presented below is the format and accounts taken form the books of Luffy’s
Ship Repair Shop for the month of August 2020. Prepare an income statement from
the given data.
Repairs Revenue P200, 000

Rent Income 10, 000
Salaries and Wages 35, 000
Utilities Expense 14, 000
Supplies Expense 11, 000
Depreciation Expense 2, 000
Miscellaneous Expense 3, 000
Luffy’s Ship Repair Shop

Income Statement
5
For the Month Ended August 31, 2020
Repairs Revenue P200, 000

Other Income 10, 000
Total Income P210, 000
Expenses
Salaries and Wages P35, 000
Supplies Expense 11, 000
Miscellaneous Expense 3, 000 (65, 000)
Net Income P 145, 000
What’s more?
Directions:
The following are accounts taken from the books of Kay Dy-Lim Detective
Services for the month of June 2020. Prepare an income statement form
the given data and use the answer sheet provided.
Detective Services Income P200, 000

Other Income 12, 000
Salaries Expense 40, 000
Rent Expense 30, 000
Bad Debts Expense 2, 000
Assessment
6
Direction:
Read each item carefully and write the letter of your choice on your
answer sheet.
1. This summarizes the cash receipts and cash disbursements for the
accounting period.
A. statement of owner’s equity C. income statement
B. statement of cash flows D. balance sheet
2. This shows the result of operations for a given period.
A. income statement C. statement of owner’s equity
B. balance sheet D. statement of cash flows
3. This shows the financial condition or position of a business as of a given
period.
A. statement of cash flows C. statement of owner’s equity
B. income statement D. balance sheet
4. This refers to economic resources owned by the business expected for future
gain like property and rights of value owned by the business.
A. assets C. owner’s equity
B. liabilities D. capital
5. This includes the interest of the owners on the business, claims of the
owners on the assets of the business, and the investment of the owner plus
or minus the results of operations.
A. owner’s equity C. capital
B. assets D. liabilities
6. This refers to the payment made to employee or workers for rendering
services to a company.
A. salaries expense C. insurance expense
B. supplies expense D. interest expense
7. This refers to an expense related to the use of electricity, fuel, water, and
telecommunication facilities.
A. interest expense C. salaries expense
B. utilities expense D. supplies expense
8. This refers to the expired portion of premiums paid on insurance coverage.
A. insurance expense C. supplies expense
B. interest expense D. salaries expense
9. This is an expense that refers to the annual portion of the cost of tangible
assets such as buildings, machineries, and equipment.
A. doubtful accounts expense C. depreciation expense
B. bad debts expense D. supplies expense
10. This refers to the amount of money charged to the borrower for the use
of borrowed funds.
A. salaries expense C. depreciation expense
B. interest expense D. supplies expense
Answer Sheet
7
Name: __________________________________________________________
Grade & Section: ________________ Score: _______
Quarter 2 – Module 7
Lesson 1
What’s more?
1. 2. 3. 4.
Lesson 2
What’s more?
ASSETS LIABILITIES OWNER’S EQUITY

650, 000 340, 000 1.
2. 295, 000 305, 000
967, 000 3. 660, 000
845, 000 4. 533, 000
Lesson 3
What’s more?
Kay Dy-Lim Detective Services
Income Statement
For the Month of June 30, 2020
Detective Services Income P

Other Income
Total Income
Expenses
Salaries
Utilities
Rent
Depreciation
Bad Debts
Net Income
Assessment
1. 2. 3. 4. 5. 6. 7.
8. 9. 10.
References
Dr. Marife Agustin-Acierto (2017). Entrepreneurship. Room 215 ICP Building,

CabildoSt., Intramuros Manila: Unlimited Books Library Services and Publishing, Inc.

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What are the main components of financial statements?

What are the main components of financial statements?

What information does the balance sheet provide?

What information does the balance sheet provide?

11/12

First Edition, 2020

Published by the Department of Education

Development Team of the Module

Writer: Ronquilio G. Daño, LPT

Casiana P. Caberte PhD

Felix C. Galacio Jr. PhD

Josephine D. Eronico PhD

Printed in the Philippines by Schools Division of Bohol

Learning Competencies: Identify where there is a profit or loss for business

At the end of the lesson, you are expected to:

1. Statement of Financial Position or Balance Sheet – shows the financial

1. This summarizes the cash activities of the business by classifying cash

THE FUNDAMENTALS OF ACCOUTNING EQUATION

ASSETS = LIABILITIES + OWNER’S EQUITY

ASSETS LIABILITIES OWNER’S EQUITY

Lesson 3: Income Statement

INCOME STATEMENT accounts, namely revenue and expense, are classified as

a. Service income - revenues earned or generated by the business in performing

Repairs Revenue P200, 000

Luffy’s Ship Repair Shop

Repairs Revenue P200, 000

Detective Services Income P200, 000

ASSETS LIABILITIES OWNER’S EQUITY

Detective Services Income P

Dr. Marife Agustin-Acierto (2017). Entrepreneurship. Room 215 ICP Building,

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