Financial plan:

Balance sheet &

INCOME STATEMENT
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DAY 1
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At the end of the lesson, the students should be able to:

• manifest understanding of starting and operating a

simple business;
• prepare an income statement and a balance sheet;
• compute for the total assets, total liabilities, and total
equity;
• compute for profits;
• compute for the costs; and
• identify a profit or loss in a business.
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Extemporaneous Speaking - GENtrepZ Edition
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Extemporaneous Speaking - GENtrepZ Edition

Guide Questions:
1. Is the accountant's response accurate?
2. Do you believe it is necessary to replace the
printer cartridge?
3. What does it mean to you personally if all of
your financial statements are in RED?
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Financial plan
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Financial Plan
A financial statement refers to a record
that provides an indication of the
organization’s status. It helps in the
evaluation of company’s prospects
and risks for the purpose of making
business decisions.
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Financial Plan
The figures displayed by a financial
statement is the basis of the
entrepreneur’s decisions on financial
matters such as offering credit terms to
customers, applying for a bank loan,
expanding, or selling the business.
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Financial Plan
The following are types of financial statement:
i. Statement of Financial Position (Balance Sheet);
ii. Statement of Comprehensive Income (Income
Statement or Profit/ Loss Statement);
iii. Statement of Changes in Equity; and
iv. Statement of Cash Flows.
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BALANCE SHEET
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Balance Sheet
 It is a core financial statement that
describes the financial position of the
company.
 The Balance Sheet reports the assets,
liabilities, and capital of the
business.
 ECQ Company 12
Balance Sheet
As of December 31, 2019

Cash 939, 460.00

Accounts Receivable 91, 626.00
Inventories 1, 836, 634.00
Prepaid Rent 180, 000.00
Total Current Assets 3, 047, 720.00
Equipment and Fixtures 1, 280, 961.00
(Accumulated Depreciation) (406, 728.00)
Total Noncurrent Assets 874, 233. 00
TOTAL ASSETS 3, 921, 953. 00

Accounts Payable 467, 376.00

Notes Payable 436, 560.00
Utilities Payable 321, 000.00
Total Current Liabilities 1, 224, 936.00
Noncurrent/ Long-term Liabilities 608, 000.00
TOTAL LIABILITIES 1, 832, 936.00
ECQ, Capital 2, 089, 017.00
TOTAL LIABILITIES AND CAPITAL 3, 921, 953.00
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Balance Sheet
 A balance sheet is composed of
three elements: assets,
liabilities, and owner’s equity or
capital.
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Assets
It represent the resources of the
business that are expected to have
future economic value.
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Assets
Assets are divided into current assets and
noncurrent assets.
Current Assets are mostly the liquid
assets that can be exchanged to cash
within one year.
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Balance Sheet
As of December 31, 2019

Cash 939, 460.00

Accounts Receivable 91, 626.00
Inventories 1, 836, 634.00
Prepaid Rent 180, 000.00
Total Current Assets 3, 047, 720.00
Equipment and Fixtures 1, 280, 961.00
(Accumulated Depreciation) (406, 728.00)
Total Noncurrent Assets 874, 233. 00
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Assets
Noncurrent Assets are long-term assets
that can be converted to cash for more
than one year.
 Inventories 1, 836, 634.00 18

Prepaid Rent 180, 000.00

Total Current Assets 3, 047, 720.00
Equipment and Fixtures 1, 280, 961.00
(Accumulated Depreciation) (406, 728.00)
Total Noncurrent Assets 874, 233. 00
TOTAL ASSETS 3, 921, 953. 00
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Accounts Receivable
 Any amount of money owed or
not yet paid by customers for
purchases made or services
delivered.
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Inventory
 The term used for goods
available for sale or raw
materials used to produce goods
available for sale.
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Equipment and Fixtures

 Include machines, furniture, and
fixtures that are expected to be
used for more than a year. These,
however, are subject to
depreciation.
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Equipment and Fixtures

 Depreciation refers to the value
reduction of the noncurrent asset
primarily due to natural wear and
tear and other value-reducing
factors.
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Equipment and Fixtures

 Depreciation is recorded in the
balance sheet as a deduction to the
fair market value of the property,
plant and equipment (PPE), the
result of which is their book value.
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Which of these two assets is

more important in a
business:
human resources or non-
human resources? Why?
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Liabilities
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Liabilities
 These are what the business owes
to another person, a financial
institution, or any creditor.
 Liabilities are divided into current
liabilities and noncurrent liabilities.
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Liabilities
 Short-term or Current liabilities
are financial obligations of a
company that are due for one year
or less.
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Liabilities
 Accounts payable represents a
company’s obligation to pay off a
short-term debt to its creditors or
suppliers.
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Liabilities
Utilities payable represents the amounts
owed to utility companies for electricity,
gas, water, phone as of the date of the
balance sheet.
Oftentimes, instead of using a separate
account for utilities payable, the amounts
owed are included in accounts payable.
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Liabilities
Long-term or Noncurrent liabilities
are financial obligations of a
company that are due more than one
year in the future.
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Owner’s equity
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Owner’s Equity/ Capital

 The funds allocated by the

entrepreneur to run the business.
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Owner’s Equity/ Capital

 An increase in the owner’s equity is a
sign of good business health. It shows
that the company is relying less on debt
to fund its operations.
 Conversely, a decrease in the owner’s
equity shows the opposite, a bad
business health.
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Owner’s Equity/ Capital

It is important to note that in the
Balance Sheet, the total assets must
always be “balanced” or of the same
amount with the total liabilities and
capital.
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ACCOUNTING EQUATION

ASSETS = LIABILITIES + OWNER’S EQUITY

A = L + OE
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With the global inflation,

how can you help your
family in effectively
handling finances?
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DAY 2
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“Lazy hands make for poverty,

but diligent hands bring
wealth.”
- Proverbs 10:4
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INCOME STATEMENT
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Income Statement

 The Income Statement reports on

a company’s income, expenses,
and profit(loss) over a period of
time.
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XY Company
Income Statement
For the year ended December 31, 2022

Sales 7, 457, 736.00

Less: Cost of Goods Sold (6, 228, 552.00)

Gross Profit 1, 229, 184.00

Less: Operating Expenses (886, 177.00)

Operating Income 343, 007. 00

Less: Other Expenses (74, 208.00)

Net Income 268, 799.00

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KEY COMPONENTS OF AN
INCOME STATEMENT
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Key Components of an Income Statement

Sales (or revenue - term used

for servicing businesses) is
money earned from a
company’s normal business
operations.
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Key Components of an Income Statement

Expenses are the costs

associated with earning the
sales or revenue.
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Key Components of an Income Statement

Here are the common business startup costs: 1)
business registration fees to be paid to the
municipality or city hall; 2) business name
registration with the Department of Trade and
Industry; 3) accountant or lawyer fees for their
assistance in establishing the business, in some
cases; 4) cost of machines/ equipment for
manufacturing business.
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Key Components of an Income Statement

 Cost of goods sold (COGS), also referred to as
“cost of sales”, pertains to the costs directly
related to the production of goods sold by an
entity.

 All raw materials or ingredients directly used

to produce your chosen product will fall under
your COGS. COGS excludes indirect costs such
as overhead and sales and marketing.
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Key Components of an Income Statement

 Gross profit is the profit a company makes
after deducting the costs directly associated in
the production of goods from the sales.

 On the other hand, for a servicing business,

gross profit is the profit a company makes
after deducting the costs directly related with
the provision of service from the revenue.
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Key Components of an Income Statement

Operating expense is an expense a

business incurs through its normal
business operations.
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Key Components of an Income Statement

 Other expenses include

administrative expenses, salaries,
utilities, and taxes.
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Key Components of an Income Statement

 Net income is only realized when all

expenses have already been deducted
from the gross revenue.
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 What measures can you

take to improve
profitability based on the
income statement?
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“Having loads of money doesn’t

make you a better person.
Spending it smart does.”
- Peter L. Bernstein
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DAY 3
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 PETA 2