Cash - Onhand Available for used in

In bank Operations & in

Cash fund Payment of current liability
Negotiable instruments (checks acceptable for deposit)

Cash equivalent - are highly liquid investment acquired 3months before maturity

Accounting for Petty cash fund:

Entries related to PCF:
Set-up: PCF xx
CIB xx

Expenses: No entry (vouchers)

Replenishment:
Expenses xx
Advances xx
Prepayments xx
CSO xx
CIB xx

AJE:
Expenses xx
Advances xx
Prepayments xx
CSO xx
PCF xx

Increase in fund:
PCF xx
CIB xx

Decrease:
CIB xx
PCF xx

Computation of cash short/over

Count > Accountability = Over
count < Accountability = short

Count - the contents of PC vault, avoid double counting

Accountability - set up, other funds included in PCF, & Prepayments

PCF - Statement of Financial Position

1. Currency & coins excluding other funds
2. Check - replenishment check
- employee check in payment of advances acceptable for deposit
3. Vouchers related to the next accounting period
AJE related to PCF
1. Expenses, advances, prepayments & cash short or over
2. Transactions other than PC shall be adjusted separately
3. Ignore transactions related to the next accounting period

Bank Reconciliation:
Book - represents depositors record ( CIB - asset)
Book Reconciling items:
Transactions originating from the bank, except for bank error, not recognized by the book
1. Credit Memo - items credited or added by the bank not representing deposit made
- collection by the bank on behalf of the depositor
- loans granted, etc.
2. Debit Memo - items deducted by the bank not representing checks issued
- bank charges
- NSF Book - CIB (asset)
- Automatic payment, etc. Dr. + Cr. -
3. Book errors Balance Dr. Memo
CR. Memo Errors
Bank - represent records by the bank (liability) Errors
Bank Reconciling items:
Transactions originating from the book, except for book errors, not recognized by bank
1. Deposit in transit / Undeposited collection
2. Outstanding checks Bank - liability
3. Erroneous bank credit Dr. - Cr. +
4. Erroneous bank debit OC Balance
Erroneous DIT
Pro forma bank reconciliation Erroneous Dr.
Bank Book
Balance per bank statement xx
Balance per book xx
Outstanding checks (xx)
Deposit in transit xx
Credit Memo xx
Debit Memo (xx)
Erroneous bank credit (xx)
Erroneous bank debit xx
Book errors ________ xx (xx)
Adjusted balance xx xx
Trade & Other receivables:
Trade receivables – receivables from clients (AR or NR)
Other receivables – non-trade receivable collectible within a year
- Subscriptions receivable, advances to employees, advances to suppliers,
- Accrued revenues (interest, dividends, commission, etc.)

Initial recognition – face amount or invoice price

Subsequent: NRV allow. For D.A

Gross Receivables xx allow for future sales discount
Less: allowances (xx) allow for future sales return
NRV xx allow for f uture freight

Allowance for Doubtful Accounts

Income statement approach - % of Sales = Doubtful accounts expense

Balance sheet a = Required ending allowance

- % of AR
- Aging of AR

Notes Receivable:
Initial Subsequent
Short-tern: Interest bearin FA FA
Non- interest bearing FA FA

Long-term: Int - bearing (SR = ER) FA FA

(SR<ER) PV Amortized cost PV of NP - payable lumpsum & interest payable annually
Non-Int. PV Amortized cost Prin x PV1 xx
Int. x A1 xx
PV if payable lumpsum PV/CA xx
Face Amount xx
Multiply by PV1 3 yrs at ER of 10%
PV/ Initial CA xx 1.10//=== PV1 0.7513
-1
PV if payable on Installment: /10%
Annual Payment xx A1 2.49
Multiply A1
PV / Initial CA xx

Loans Receivable:
Initial PV or Initial cash outflow
Subsequent: Amortized cost
Interest income: CA x ER
Receivable Financing:
Pledging - using receivables as collateral to a loan - continue to recognized the asset
and liability related to the loans; no recognition for gain or loss
Assignment- using receivables as collateral to a loan - continue to recognized the asset
and liability related to the loans; no recognition for gain or loss
Discounting: With recourse - loan agreement, recog. A & L
Without recourse - sale agreement, dercognized the asset and recognized
gain or loss on sale.
Factoring: Without recourse - sale agreement, dercognized the asset and recognized gain or loss
With recourse - loan agreement, recog. A & L
rest payable annually
Inventory - items held for sale or to be use in production of goods for sale

Initial: Cost - cost includes acquisition price + TC + cost to prepare

Transaction cost - freight, insurance, non-refundable taxes, comm., handling, etc.
Cost to prepare - labor & overhead

Subsequent/FS: Cost or NRV whichever is lower

NRV - Estimated SP. - (CS + CC)
Cost - FIFO or Average

Legal title: all inventory where the company has legal title shall be included in inventory

Purchase commitment
Commitment date FS date Delivery date
no entry Loss - recognized loss - recognized
Gain - no recognition gain - recognized up to the loss recognized before

Inventory estimates:
Gross Profit method(Sales - CS = GP)
Beg. Invty. xx
Add: net purchases xx
Available for sale xx
Less: cost of sales (xx)
Estimated Inventory before loss xx
Per count (undamage/damage) (xx)
Loss xx

Gross Profit method - can be used to estimate ending inventory and cost of goods
sold when physical count is not possible.

Under the gross profit method, gross profit is assumed to be relatively

constant from period to period.

Gross profit rate can be expressed as a percentage a) base on sales or b) base on cost
- gross profit based on sales is computed by dividing gross profit by net sales
- gross profit based on cost is computed by dividing gross profit by the
cost of goods sold.

Net Sales - for the purpose of estimating inventory, only sales returns are deducted from
gross sales, the sales discount and allowances are not deducted, because the
sales discounts and allowances do not affect the physical inventory of goods.

It should be noted that when answering CPA board examproblems, an account

described as sales return and discounts or sales returns and allowances
is deducted from gross sales when computing for net sales under the gross
profit and retail methods.
Retail Inventory method:
Average method = Available for sale at cost
Avail. At retail + MU - MD

Conventional(LCM)= Available for sale at cost

Avail. At retail + MU

FIFO = Net purchases at cost

Net purch. At retail +MU-MD

Average:
Cost Retail Average method = Available for sale at cost
Beg. Inventory xx xx Avail. At retail + MU - MD
Purchases xx xx
Purchase return (xx) (xx)
Freight xx
Purchase allowance (xx)
Purch. Discount (xx)
MU xx
MD ________ (xx)
Avail for sale xx xx Cost ratio = avail at cost / avail at retail +MU-MD
Sales (xx)
Sales return xx
Employee discount (xx)
Normal losses (xx)
Ending Invty at retail xx
EI at cost (xx) EI at retail x Cost ratio
CGS xx

Conventional:
Cost Retail
Beg. Inventory xx xx
Purchases xx xx
Freight xx
Purchase return (xx) (xx)
Purchase allowance (xx)
Purch. Discount (xx)
MU xx
Available for sale xx xx Cost ratio
MD (xx)
Sales (xx)
Sales return xx
Employee discount (xx)
Normal losses (xx)
Ending Invty at retail xx
EI at cost (xx) EI at retail x Cost ratio
CGS

FIFO:
Cost Retail
Beg. Inventory xx xx
Purchases xx xx
Freight xx
Purchase return (xx) (xx)
Purchase allowance (xx)
Purchase discount (xx)
MU xx
MD (xx)
Net Purchases xx xx Cost ratio
Available for sale xx xx
Sales (xx)
Sales return xx
Normal losses (xx)
EI at retail xx
EI at cost (xx) EI at retail x Cost ratio
CGS xx

Net Purchases - are computed as the sum of purchases and freight-in less
purchase returns and discounts. Note that purchase discounts
and freight-in affect only the cost column.

Departmental Transfers:
Transfers-in or debit refers to inventory received by a department from
another department. It is added to purchases at cost and at retail
Tranfers-out or credit refers to inventory transferred out by a department
to another department. It is deducted from purchases at cost
and retail.

Net markups - is markups les markup cancellations.

Net markdowns - is markdown less markdown cancellations.

Employee discounts - are special discounts accounts that are not recorded in the
sales discount account but rather treated as direct deductions from selling price.
Employee discounts are added back to sales because these discounts
decreases sales but do not affect physical inventory.

Sales discounts & allowance - should be ignored or not deducted from sales.

Normal spoilage/Loss - is charge to cost of goods sold, thus it is added to sales when
computing for net sales. Normal spoilage usually arise from shrinkage
or breakage.

Abnormal spoilage/loss - should be deducted from both cost and retail columns before
 the calculations of cost ratio(part of available for sale), as abnormal spoilage
could distort the cost ratio. Abnormal spoilage is reported as loss, separate
from cost of goods sold. Adnormal spoilages usually arise from theft
or casualty.

Markup - refers to increase above the original selling price.

Markup cancellation - decrease in selling price that does not reduce the selling price
below the original retail.

Markdown - refers to decrease in selling price below the original selling price.

Markdown cancellations - refers to increase in selling price that does not raise the
selling price above the original retail price.
 In transit Title
FOB shipping point Buyer Unpon shipment
FOB destination Seller transferred to the buyer upon receipt of invty

Consigment
Title Seller - consignor

recognized before
INVESTMENT

Financial asset -cash, equity investment, and contractual right to receive cash from another party(invest in debt securities

Equity investment: Investment in stocks

FA at FVPL FA at FVOCI Cost
(Trading) (non-trading)-AFS
Initial FV FV + TC Acq. Cost + TC
FV FV Cost
BS/Subsequent
P or L OCI N/A
Unrealize gain(loss)
Cash/Prop. Div. Cash/Prop. Div. Cash/Prop. Div.
Income
S.P.(net) xx S.P. xx S.P. xx
Realize gain (loss)
CA (lastMV) (xx) -CA(Orig. cost) (xx) -CA(cost) (xx)
Gain (loss) xx Retained Earnings xx Gain (loss) xx
Not an income -memo Not an income -memo Not an income -memo
Share Dividend/split
Unrealize gain(loss), Dividend income Div.Income & gain
Profit or Loss
dividend income, gain (loss) on sale
or loss on sale

Unrealized gain(loss) on FA at FVPL:(Trading)

1st year FV 12/31/1 XX

ORIG. CA (FV) (XX)
Unrealize gain loss xx

2nd & after FV 12/31/2 XX

FV 12/31/1 ( XX)
Unreal. Gain(loss) xx

Unrealized gain(loss) on FA at FVOCI

COMPREHENSIVE INCO SHE
1st year FV 12/31/1 xx FV 12/31/1 xx
Orig. cost(FV+TC) (xx) Orig. cost(FV+TC) (xx)
Unreal. Gain(loss) xx Unreal. Gain(loss) xx

2nd & after FV 12/31/2 XX FV 12/31/2 xx

FV 12/31/1 ( XX)Orig. cost(FV+TC) (xx)
Unreal. Gain(loss) xx Cumm. Gain(loss) xx
INVESTMENT IN DEBT SECURITIES: to collect int & sell to collect interest & prin
FA at FVPL (Trading) FA at FVOCI (non-tradin FA at AMORTIZED COST/ Held to maturity
Initial FV FV + TC Acq. Cost + TC / PV
BS/subsequent FV FV Amort. Cost
Unreal. Gain (loss) P or L OCI (FV - amort cost) N/A
Interest income FA x SR CA X ER CA x ER
Sale S.P. xx S.P. xx S.P. xx
CA(last MV) (xx) CA (xx) CA(amort. cost) (xx)
Gain (loss) xx Gain (loss) xx Gain (loss) xx
P or L Unreal. Gain(loss), Int. Interest income, gain or Int. income
income, gain or loss on loss on sale & gain or loss on sale
sale

Initial:
Acq. price
Transactioncost 0
Initial CA

Subsequent valuation: amortized cost

Date FA x SR 4.5% CA x ER 4% Amort

1/10/2022
1/4/2023
1/10/2023

Interest income: CA x ER
Oct - Dec. 8,400 x 3/6 =

Sub./BS: Amort. Cost

CA. 10/1/22
Less amort. Oct - Dec
(600 x 3/6)
Amort. Cost 12/31/22 0

UNREALIZED GAIN:
TRADING/AFS (FVA ACOUNT)
UNREAL. GAIN

UNREAL. LOSS:
UNREAL. LOSS
TRADING/AFS (FVA - account)
FA at FVPL = TRADING
FA at FVOCI = AFS/non-trading
her party(invest in debt securities

Invest in Asso.(equity method of accounting)

(Influence) 20% or more of the outs. Shares
Acq. Cost + TC
Investment in Asso - Equity method
Carrying Amount
Acq Div
Income Amort
N/A
loss
sale
Share in NI
Share in NI
S.P. xx
less: amort. Of excess payment
-CA (xx) Investment income
Gain (loss) xx
Not an income -memo

Share in NI, gain

(loss) on sale & gain (loss)
on reclassification

V+TC) (xx)

V+TC) (xx)
terest & prin
RTIZED COST/ Held to maturity

Carrying amount
sso - Equity method
cash/invest
Income/Invest

xx
(xx)
xx
 Property, plant, and equipment - is defined as tangible assets that are held for use in production
or supply of goods and services, for rentals to others, or for administrative purposes;
they are expected to be used during more than one period.

Initial Valuation: Cost: cash price + TC to acquire + Cost to prepare + PV of Demolition cost
Subsequent Valuation: Cost / FV model

Transaction cost to acquire(TC):

· Freight & insurance
· Non-refundable taxes
· Commission
· Legal fees
· Liability assumed

Cost to Prepare (CP):

· Testing & Installation
· Repairs & Remodelling

Acquisition by issuing shares (PS,OS & TS)

asset acquired shall be recorded based on:
1. FV of asset received
2. FV of shares issued
3. Par value of shares issued

Self-constructed assets: Cost - material, labor & overhead

Acquisition by exhange( with commercial substance)

1. FV given + cash payment - cash received
2. FV received
3. CA given + cash payment - cash received

Recognize gain on Exchange:

FV given xx
CA given (xx)
Gain (loss) on exchange xx

Exchange lacks commercial substance

1. CA given + cash payment - cash receipts
- no recognition for gain or loss on exchange

Acquisition by Trade In
1. Cash price w/o trade in
2. FV given + Cash payment
· Recognized gain or loss on exchange
FV given xx
CA given (xx)
Gain (loss) xx
Donation / Government grant : FV received
 · Income shall be recognized by matching to expense
Acquired on deferred payment contract : cash price/PV + TC + CP + PV of Demo.

Subsequent Expenditure:
Capitalized - when there is future benefits, make the asset productive, efficient & economical

Expense - if criteria for capitalization is not met

Interest cost capitalized - construction of qualifying assets for use may be capitalized

Capitalized - actual interest or Avoidable which ever is lower

Avoidable interest - the amount of interest that could have been avoided if expenditures for the asset had not been made.

Actual Interest:
Interest on specific borrowings xx
Interest on general borrowings xx
Total actual interest xx

Avoidable is base on average expenditures:

Ave. expenditures xx
Specific borrowings xx
General bor(Ave. exp. - SB) xx
Avoidable xx

Ave. Interest on general borrowings = Total interest on gene

Total general borrowings

Change in estimate:( change in depreciation, life & residual value)

- shall be accounted for in the current and prospective periods
1. compute for the remaining CA before the change
2. compute for the revised depreciation

Revised Depreciation = Remaining CA - Revised SV

Remaining life

Impairment Loss = CA(Cost - AD) - Recoverable (the higher of FV-CS and VIU)
After Impairment:
1. Recoverable is the new CA
2. Depreciation = recoverable - residual value
remaining life
3. Recovery - maximum gain shall be the difference between the CA with Impairment and CA w/o consideration for impairment
w/o recog. Impairment.

Revaluation surplus = Sound Value - CA

 Sound Value - is the Fair Value of the asset in the absence use depreciated replacement cost
After Revaluation:
1. Sound Value is the new CA
2. Depreciation = Sound Value / Remaining life
3. Impairment - shall be charge to revaluation surplus if not enough to P or L
4. Realize Surplus = Revaluation surplus / RL

Government grant - (sometimes called subsidies, subventions, or premiums) are

assistance received from the government in the form of transfers of
resources in exchange for compliance with certain conditions.

Recognition
Government grants are recognized if there is reasonable assurance that:
a. The attached conditions will be complied with; and
b. The grant will be received.

Types of government grants according to attached condition

1. Grants related to assets - grants whose primary condition is that the recepient
entity should acquire or construct long-term assets.
2. Grants related to income - grants other than those related to assets.

Government grants are recognized in the profit or loss on a systematic basis over the
periods in which the entity recognizes as expenses the related cost
for which the grants are intended to compensate.

In other words, the accounting for government grat uses matching concept such that,
if related expense is not yet recognized, the income from government grant is
also not yet recognized. Accordingly:
a. Grants related to depreciable assets are "recognized in profit or loss in proportion
to depreciation expense of the said assets recognized."
b. Grants related to non-depreciable assets are recognized in profit or loss when cost
of fulfilling the attached condition are incurred. For example, a grant of land
conditioned on the construction of a building on it is recognized over
the periods that constructed bldg. is depreciated.
c. Grant received as financial aid for expenses or losses already icurred are recognized
immediately in profit or loss when the grant becomes receivable (because
related cost have already been expense).
t been made.

o consideration for impairment

ement cost
Intangibles - an identifiable non-monetary asset without physical substance.
Initial valuation: Cost - cash acquisition price/PV + TC (comm., non-ref. taxes & legal fees)
Subsequent: Cost model or FV model

Cost model:
CA = Cost - Amortization-impairment

FV model: FV on FS date

P or L Amortization
Legal fees to defend intangibles
Royalty
R&D
Impairment loss
Interest expense if acquired on deferred payment basis.

Amortization:
Limited life - amortized over the life or benefits whichever is shorter
Indefinite life - no amortization, test for impairment

Amortization = Cost - SV
life/benefits
SV/RV - is presume to be zero, unless there is an existing market, or offer to acquire the intangibles

Legal fees - to defend the intangible succesful or not, should be expense

- to register shall be capitalized to the said intangibles
Investment property is property (land or a building or part of a building or both) held (by the owner or by the lessee

Examples of investment property:

land held for long-term capital appreciation
land held for a currently undetermined future use
building leased out under an operating lease
vacant building held to be leased out under an operating lease
property that is being constructed or developed for future use as investment property

Property held under an operating lease. A property interest that is held by a lessee under an operating lease may
the rest of the definition of investment property is met
the operating lease is accounted for as if it were a finance lease in accordance with PAS 17 Leases
the lessee uses the fair value model set out in this Standard for the asset recog­nised

An entity may make the foregoing classification on a property by property basis.

Partial own use. If the owner uses part of the property for its own use, and part
to earn rentals or for capital ap­pre­ci­a­tion, and the portions can be sold
or leased out sep­a­rately, they are accounted for sep­a­rately. Therefore
the part that is rented out is in­vest­ment property. If the portions cannot be sold
or leased out sep­a­rately, the property is in­vest­ment property only if
the owner-oc­cu­pied portion is in­signif­i­cant. [PAS 40.10]

Ancillary services. If the entity provides ancillary services to the occupants of a property
held by the entity, the appropriateness of classification as investment property is determined
by the significance of the services provided. If those services are a relatively insignificant ***
component of the arrangement as a whole (for instance, the building owner supplies
security and maintenance services to the lessees), then the entity may treat the property as
investment property. Where the services provided are more significant (such as in the
case of an owner-managed hotel), the property should be clas­si­fied as owner-oc­cu­pied.

Initial measurement : Cost + TC

Sub­se­quent measurement
PAS 40 permits entities to choose between:
a fair value model, and
a cost model.

Fair value model

Investment property is remeasured at fair value, which is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. [PAS 40.5]

Gains or losses arising from changes in the fair value of investment property must be
included in net profit or loss for the period in which it arises. [PAS 40.35]

Cost model FV model

P or L Depreciation Gain(loss) from FVC
Deprn Cost - SV No depreciation
Life

FV model : Gain(loss) from fair value chang

1st yr. FV 13/31/1 xx

Initial CA (xx)
Gain(loss) xx

2nd yr. & after: FV 1 xx

FV (xx)
Gain (loss) xx

Reclasification - change in use

FV model:
Origin Reclassified to Initial CA FVC - Fair value changes
Investment property PPE or Invty. FV on reclass date P or L - gain(loss) from reclassification
Inventory PPE or Inestment Pro FV on reclass date P or L - gain(loss) from reclassification
PPE Invest. Prop. Or Invty FV on reclass date OCI - Revaluation Surplus

Gain or loss from reclassification: If orig. category is PPE:

FV on reclassification date xx FV on reclassification date xx
CA before reclassification (xx) CA before reclassification (xx)
Gain (loss) from reclassification xx Revaluation surplus xx
y the owner or by the lessee under a finance lease) to earn rentals or for capital ap­pre­ci­a­tion or both. [PAS 40.5]

nder an operating lease may be clas­si­fied and accounted for as in­vest­ment property provided that: [PAS 40.6]

S 17 Leases
h. [PAS 40.5]
Classification as Held for Sale
A noncurrent asset (or disposal group) is classified as held for sale or held for
distribution to owners if its carrying amount will be recovered principally
through sale transaction rather than through continuing use.

Assets classified as noncurrent in accordance with PAS1 are classified as current only
if they meet the criteria to be classified as held for sale under PFRS 5.

Held-for-sale classification
In general, the following conditions must be met for an asset (or 'disposal group') to be clas­si­fied as held for sale:
- man­age­ment is committed to a plan to sell **
- the asset is available for immediate sale **
- an active programme to locate a buyer is initia
- the sale is highly probable, within 12 months of clas­si­fi­ca­tion as held for sale (subject to limited ex­cep­tions)
- the asset is being actively marketed for sale at a sales price rea­son­able in relation to its fair value
- actions required to complete the plan indicate that it is unlikely that plan will be sig­nif­i­cantly changed or withdrawn

Exception to the one-year requirement

An asset classified as held for sale, that is not sold within 1 year is continued to be classified as held for sale if the fo
a. The delay is caused by events beyond the entity’s control; and
b. There is sufficient evidence that the entity remains committed on selling the asset (or disposal group).

Measurement
Held for sale assets are initially and subsequently measured at the lower of
carrying amount and fair value less cost to sell.

Changes in fair value less cost to sell

Subsequent changes in fair value less cost to sell are recognized in profit or loss,
and impairment losses or gains on reversal of impairment. However, gain on reversal
of impairment is recognized only to the extent of cumulative impairment losses previously recognized.

Depreciation and amortization

Held for sale assets are not depreciated or amortized while they are classifies as held for sale.

Changes to a plan to sell

The asset that ceases to be classified as held for sale is measured at the lower of asset’s
a. Carrying amount before it was classified as held for sale, adjusted for any depreciation, amortization or re
b. Recoverable amount – the higher of fair value less cost of disposal and its value in use, at the date of subsequ

FV model:
Initial and subsequent measurement : (Recoverable amount) FV - CS

Changes in fair value less cost to sell

Subsequent changes in fair value less cost to sell are recognized in profit or loss,
and impairment losses or gains on reversal of impairment. However, gain on reversal
of impairment is recognized only to the extent of cumulative impairment losses previously recognized.
las­si­fied as held for sale:

to limited ex­cep­tions)
its fair value
cantly changed or withdrawn

ified as held for sale if the following conditions are met:

r disposal group).

reciation, amortization or revaluation that would have been recognized had the asset not been classified as held for sale; or
use, at the date of subsequent decision not to sell.
ssified as held for sale; or