SAMPLE: Financial Statements for a service business*

Statement of Profit or Loss (Natural form)

Aim High Services Notes to Financial Statements
Statement of Profit or Loss 1 Rent Income ₱60,000
for the year ended December 31, 2023 Interest Income 2,500
Other income ₱62,500
Note
Income 2 Depreciation Expense - Building ₱30,000
Service Income ₱1,320,000 Depreciation Expense - Office Furniture 15,000
Other income** 1 62,500 ₱1,382,500 Depreciation Expense - Office Equipment 8,100
Depreciation Expense ₱53,100
Costs and expenses***
Salaries Expense ₱600,000 * This sample is intended to assist learners in the presentation of financial statements for a service business.
Utilities Expense 480,000 The accounts included are not exhaustive.
Transportation and Travel Expense 81,000 ** Other income includes revenue which is not from main line of business.
Interest Expense 80,000 *** Expenses, except for Miscellaneous Expenses and Interest Expense, are normally listed according to magnitude,
Depreciation Expense 2 53,100 i.e., from highest to lowest amount.
Doubtful Accounts Expense 45,000 **** If net loss, then show as negative amount.
Office Supplies Expense 5,500
Interest Expense 1,000
Miscelaneous Expense 6,000 (1,351,600)
Net income**** ₱30,900

Statement of Changes in Owner's Equity: with net income Statement of Changes in Owner's Equity: with net loss
Aim High Services Aim High Services
Statement of Changes in Owner's Equity Statement of Changes in Owner's Equity
for the year ended December 31, 2023 for the year ended December 31, 2023

A. Cruz, Capital, January 1, 2023 ₱1,455,100 A. Cruz, Capital, January 1, 2023 ₱xxx
Net income 30,900 A. Cruz, Drawing ₱xxx
Sub-total ₱1,486,000 Net loss xxx (₱xxx)
A. Cruz, Drawing (40,000) A. Cruz, Capital, December 31, 2023 ₱xxx
A. Cruz, Capital, December 31, 2023 ₱1,446,000
Statement of Financial Position (Report form) Notes to Financial Statements (continued)
Aim High Services 3 Accounts Receivable ₱400,000
Statement of Financial Position Allowance for Doubtful Accounts (60,000) ₱340,000
as of December 31, 2023 Notes Receivable 50,000
Interest Receivable 1,000
Note Trade and other receivables ₱391,000
Assets
Current Assets* 4 Prepaid Insurance Expense ₱72,000
Cash ₱663,600 Office Supplies 16,000
Trade and other receivables 3 391,000 Prepaid expenses ₱88,000
Prepaid expenses** 4 88,000 ₱1,142,600
5 Land ₱500,000
Non-Current Assets Building ₱1,000,000
Property, plant, and equipment*** 5 1,487,400 Accumulated Depreciation - Building (90,000) 910,000
Total assets ₱2,630,000 Office Furniture ₱75,000
Accumulated Depreciation - Office Furniture (22,500) 52,500
Liabilities**** and Owner's Equity Office Equipment ₱45,000
Current Liabilities Accumulated Depreciation - Office Equipment (20,100) 24,900
Trade and other payables 6 ₱304,000 Property, plant, and equipment ₱1,487,400
Unearned Service Income***** 180,000
Loans Payable - current portion 100,000 ₱584,000 6 Accounts Payable ₱94,000
Salaries Payable 100,000
Non-Current Liabilities Utilities Payable 40,000
Loans Payable - Non-current portion ₱400,000 Interest Payable 70,000
Long Term Notes Payable 200,000 600,000 Trade and other payables ₱304,000
Total Liabilities ₱1,184,000
* Current Assets are listed in order of liquidity, its nearness to cash.
Owner's Equity ** Prepayments that are expected to be used within the next 12 months should be classified as Current Assets.
A. Cruz, Capital 1,446,000 Prepayments that are expected to be used beyond one year should be classified as Non-Current Assets.
Total liabilities and owner's equity ₱2,630,000 *** PPE items are listed in order of estimated useful life, with the longest life first.
**** Liabilities are listed in order of due dates, if can be provided.
***** Precollections that are expected to be earned within the next 12 months should be classified as Current Liabilities.
Precollections that are expected to be earned beyond one year should be classified as Non-Current Liabilities.
Statement of Cash Flows (Direct method )
Aim High Services
Statement of Cash Flows
for the year ended December 31, 2023

Cash flows from operating activities

Receipts
For services rendered ₱1,200,000
For interest on client's note receivable 1,500
From garage rental to other companies 60,000 ₱1,261,500
Disbursements
For utilities, salaries, insurance, miscellaneous expense ₱1,048,000
For interest on loan* 10,000
For purchase of office supplies 9,500 (1,067,500)
Net cash flows provided by operating activities ₱194,000

Cash flows from investing activities:

Receipt
Sale of used office equipment ₱15,000
Disbursement
Purchase of office furniture (37,500)
Net cash flows used in investing activities (22,500)

Cash flows from financing activities

Receipt
From owner as additional investment ₱90,000
Disbursements
For installment on principal of loan ₱100,000
For withdrawal made by owner 40,000 (140,000)
Net cash flows used in operating activities (50,000)
Net increase (decrease) in cash ₱121,500
Cash balance, January 1, 2023 542,100
Cash balance, December 31, 2023 ₱663,600

* Interest paid may be classified as operating cash flow because it enters into the determination of profit or loss.
Alternatively, interest paid may be classified as financing cash flow because it is a cost of obtaining financial resources.
For uniformity in answers, include interest expense under operating activities.