GROUP 9
NOTES TO
FINANCIAL
STATEMENTS
Bago, Cristel Liane M.
De Vera, Maria Lyncy Mae C.
Juan, Nicholas Stephen
Llanes, Kristia Denise I.
Niez, Hyacenth Jules J.
GROUP 9
General Information The basis of Preparation:
Basis of Presentation: These Accrual Accounting: Revenues are
Financial Statements adhere to recognized when earned and
Generally Accepted Accounting realizable, and expenses are
Principles (GAAP), the standard recognized when incurred and
match with revenues, regardless of
Framework for financial reporting. the timing of cash flows.
Historical Cost Convention: Unless
Company Formation: (Company otherwise specified, assets and
Name) was legally established on liabilities are measured at their
historical cost (original transaction
(Date).
value). This approach does not
reflect current market values.
Business Operations: The Adherence to GAAP: These financial
company’s core activities involve statements have been prepared in
(Elaborating the nature of business accordance with Generally
Accepted Accounting Principles
if possible). (GAAP)
Example of General Information
https://www.sec.gov/Archives/edgar/data/789019/000095017023035122/msft-
20230630.htm
Example of Basis of Preparation
https://www.sec.gov/Archives/edgar/data/789019/000095017023035122/msft-
20230630.htm
REVENUE
Check your account
statements
Revenue is recognized
when it is both earned Categorize your
and the amount is expenses
reasonably certain to be
collected (realizable). Build your budget
INVENTORY
Inventory is valued at the lower of its Check your account
original cost or its net realizable value
statements
(NRV).
Net Realizable Value (NRV): NRV is Categorize your
the estimated selling price in the expenses
ordinary course of business less any
estimated costs of completion and
the estimated costs necessary to Build your budget
make the sale.
Property, Plant, &
Equipment (PPE):
01
Initial Measurement: PPE is initially recorded
at its historical cost. This includes the
purchase price and any costs directly
attributable to bringing the asset to its
intended use (e.g., installation, freight).
Depreciation Method: PPE is depreciated
using the straight-line method.
Straight-Line Depreciation: This method
allocates an equal amount of the asset's
cost as depreciation expense over its
estimated useful life.
OTHER ACCOUNTING POLICIES
Impairment: Assets reviewed when signs of loss in value
appear.
Foreign Currency: Transactions translated using
exchange rate at the time.
Cash & Equivalents: Includes cash, bank, and liquid
investments.
Impairment of Assets
Under IAS 36, an asset is considered impaired when its
carrying amount exceeds its recoverable amount. The
recoverable
01 amount is defined as the higher of:
Fair value less costs of disposal, and
Value in use (the present value of future cash flows
expected from the asset).
Indicators of impairment include significant declines in
market value, adverse changes in technology or market
conditions, or evidence of obsolescence. When such
indicators are identified, entities must assess the asset for
impairment and recognize any loss by reducing the
asset’s carrying amount to its recoverable amount.
Foreign Currency Transactions Cash and Cash Equivalents
According to IAS 21, foreign currency IAS 7 defines cash and cash equivalents
transactions should be recorded using as short-term, highly liquid investments
the exchange rate at the date of the that are readily convertible to known
transaction. Subsequent changes in amounts of cash and subject to an
exchange rates may result in exchange
insignificant risk of changes in value.
differences, which are recognized in profit
Examples include:
or loss in the period in which they arise.
For example, if a company purchases Cash: Physical currency, bank
goods denominated in a foreign balances, and demand deposits.
currency, the transaction is initially Cash equivalents: Short-term
recorded at the spot exchange rate on investments with original maturities
the purchase date. If payment is made in of three months or less, such as
a later period and the exchange rate has treasury bills, commercial paper,
changed, the difference is recognized as and money market funds.
a foreign exchange gain or loss in that
period.
Receivables Series 1 Series 2
Represents amounts owed to the company by 20
customers or other parties.
15
Trade Receivables – From sales made on
credit.
10
Other Receivables – Includes advances, tax
refunds, or employee loans. 5
Allowance for Doubtful Accounts – A reserve
for potential uncollectible amounts based on 0
Item 1 Item 2 Item 3
aging or risk assessment.
Payables & Accrued Expenses
Represents amounts the company owes Item 1 Item 2 Item 3
Item 1
for goods or services already received. 11.1%
Accounts Payable – Amounts due to
suppliers or vendors.
Item 2
29.6%
Accrued Expenses – Incurred but Item 3
59.3%
unpaid costs such as salaries, utilities,
rent, or interest.
Loans Payable
Obligations from borrowed funds, to be repaid with interest. Series 1 Series 2
Item 1
Principal Amount – Total loan received.
20
15
Interest Rate – Annual or periodic rate charged on the 10
loan. 5
0
Maturity Date – When the loan is due in full.
Payment Terms – Frequency and amount of payments Item 3 Item 2
(e.g., monthly amortization, lump sum at maturity).
Equity
Equity represents the owners’ claim after all liabilities are
paid. It includes capital stock (money invested by
owners), retained earnings (profits kept in the business),
and other equity reserves.
Income Taxes
This section details the taxes a company paid or still
owes, including current tax (based on this year’s profit)
and deferred tax (future tax based on timing differences).
Contingent Liabilities and Commitments
These are possible obligations that depend on future events,
or commitments the company agreed to but hasn’t paid yet.
Related Party Transactions
These are transactions with people or companies related
to the business, like directors, officers, or family members.
Events After the Reporting Period
Events that happen after the end of the financial year but
before the financial statements are finalized.
GROUP 9
Thank You
Notes to financial Statements
HT203ITM
