Download - Quick Notes in AFAR NOTES - 1 File Download
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 1 CPA Review School of the Philippines – Batch 82
Quick Notes in AFAR
I. PARTNERSHIP
PARTNERSHIP FORMATION
VALUATION:
1. Cash – Face Value 2. Land, Depreciable Asset, & NCA
a. Agreed Value b. Fair Value c. Appraised Value d. Carrying Value/Book Value
3. Liabilities – are considered assumed if the problem is silent 4. Inventory – Lower of Cost and Net Realizable Value (LCNRV) 5. Capital
5.1. Bonus Method 5.2. Investment/Withdrawal Method
BONUS METHOD
(*The problem is silent) 1. There would be a transfer of capital. 2. There is no recognition of goodwill. 3. The total asset and capital will remain unchanged.
INVESTMENT/WITHDRAWAL
1. Agreed Capital is more than Unadjusted Capital = Investment 2. Agreed Capital is less than Unadjusted Capital = Withdrawal
ADJUSTING ENTRIES (*Use contra-asset)
1. Building – Carrying Value: ₱10M, Agreed Value: ₱15M Accumulated Depreciation ₱5M Capital ₱5M
2. Accounts Receivable – Cost: ₱10000, NRV: ₱9000
Capital ₱1000 Allowance for Doubtful Accounts ₱1000
*NOTES:
To transfer the depreciable asset, it should be in net amount.
To transfer the accounts receivable to the new book, it should not be in net amount.
₱3000 PURPOSE: To engage other party
The juridical personality of the partnership arises from the meeting of minds.
Partnership by Estoppel – legally binding the partnership but no formal agreement Limited Partnership – two or more general partners and one or more limited partners Particular Partnership – single transaction
PARTNERSHIP OPERATION
1. Salaries
This could be fractional year
Given, regardless of the result of operation
2. Interest
This could be in fractional year
Given, regardless whether there is profit or loss (*Use the salary/interest ratio if the problem states that the amount to be distributed to the partners is up to the extent of profit only or the profit is distributed based on the priority.)
3. Bonus
This is given if there is a profit only
Bonus is not always given if there is profit
CASE 1: Net Income of ₱500000 before salaries of ₱55000, interest of ₱13000, and bonus of 15%
B =
B =
B =
B = ₱56, 347.83
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 2 CPA Review School of the Philippines – Batch 82
CASE 2: Net Income of ₱100000 before salaries of ₱5000, interest of ₱3000, and bonus of 10%
B =
B =
B =
B = ₱12,000
*NOTES: Advances made by the partnership to a partner are included in capital interest but shall not affect the capital balance of a partner.
PROFIT RATIO LOSS RATIO 1. Profit Ratio, Loss Ratio _ 2. Profit Ratio, Profit Ratio x _ 3. Original Capital Ratio, Loss ratio x _ 4. Original Capital Ratio, Original Capital Ratio x x _
EXAMPLE ON HOW TO COMPUTE THE AVERAGE CAPITAL:
1. 1/1 ₱1000 × 6/12 = ₱ 500 7/1 800 × 3/12 = 200 10/1 1500 × 3/12 = 375
₱1075
2. ₱500 × 12/12 = ₱500 100 × 9/12 = 75 (200) × 3/12 = (50)
₱525 *NOTE:
P/L = Silent Original Capital
Interest = Silent Average Capital
Net income after interest and salary but before bonus Formula: Net Income – Total Interest – Total Salary = Bonus
PARTNERSHIP DISSOLUTION - Change in numbers of partners.
1. Admission by Purchase without Revaluation
Silent Personal transactions Total asset and capital will remain unchanged Purchase price is ignored
2. Admission by Purchase with Revaluation Two Steps to be followed:
Determined the asset revaluation Distribute the interest to the buying partner
TCC TAC Bonus / UVA / OVA
*TAC=TCC *TAC>TCC *TAC<TCC 0 + −
Purchase Price ₱xx Divided by: New Interest of New Partner xx Adjusted Capital xx Add: Unadjusted xx Undervalued Asset (UVA) xx Multiply: Percentage %
xx Add: Capital xx
xx Multiply: (100% - New Partner %) xx
₱xx
RETIREMENT
1. Compute the capital balance before retirement a. Capital balance b. Share in net income/net loss c. Drawings d. Additional investment e. Revaluation of UVA f. Revaluation of OVA g. Condonation of the partnership liability/receivable of your debtor
2. Settlement is more than Capital Interest = Bonus to the retiring partner
If the Settlement is less than Capital Interest = Bonus to the remaining partner
PARTNERSHIP LIQUIDATION
1. Lump-sum Liquidation – single distribution 2. Installment Liquidation – “piece meal”
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 3 CPA Review School of the Philippines – Batch 82
STEPS IN LUMP SUM LIQUIDATION
1. Realization of Non-cash Asset (Profit/Loss) 2. Payment of liabilities and liquidation expense
Liability ₱xx Capital ₱xx
Cash ₱xx Cash ₱xx
3. Elimination of deficiencies 4. Distribution
INSTALLMENT LIQUIDATION
Cash beginning ₱xx Add: Proceed xx Minus: Liabilities xx Total
Liquidation Expense xx Total Distribution ₱xx
Maximum Possible Loss (MPL):
1. Unsold Non-cash Asset ₱xx 2. Anticipated Liquidation Expense (future LE) xx Unpaid
₱xx
CASH PRIORITY PROGRAM *(Receive cash-given)
1. Determine the capital interest 2. Compute loss absorption balance (LAB): Capital Interest ÷ P/L Ratio 3. Equalize the LAB – deduct the second highest from the highest until equal 4. Distribution: Difference in LAB × P/L Ratio
When to use Cash Priority Program?
- When the problem says, what amount should be distributed to the partners
EXAMPLE:
A G J Capital Interest ₱100000 ₱ 80000 ₱ 75000 P/L % ÷ 50% ÷ 20% ÷ 30% LAB ₱200000 ₱400000 ₱250000 Priority 1 _______ 150000 _______ ₱200000 ₱250000 ₱250000 Priority 2 _______ 50000 50000 ₱200000 ₱200000 ₱200000
If A received ₱35500, how much was given to J? A G J Total Priority 1 ₱ -0- ₱30000 ₱ -0- ₱ 30000 Priority 2 -0- 10000 15000 25000 NPP 35500 14200 21300 71000 ₱35500 ₱54200 ₱36300 ₱126000
SAFE PAYMENTS 1. Determine the capital interest 2. Deduct the Maximum Possible
Loss 3. Absorb deficiency 4. Distribute
Capital Beginning ₱xx Gain/Loss +/- xx Maximum Possible Loss - xx Elimination Deficiency - xx Condonation +/- xx Cash Distribution ₱xx
II. CORPORATE LIQUIDATION Three (3) years to liquidate
The extinguishment of juridical personality happens in dissolution
VALUATION: 1. Asset – Fair Value 2. Liabilities – Maturity Value (Principal + Interest)
CLASSIFICATION (Statement of Affairs): 1. ASSETS
Assets Pledge with Fully Secured Creditors
Assets Pledge with Partially Secured Creditors
Free Assets assets that are not originally pledge to any liabilities
2. LIABILITIES
Fully Secured Liabilities
Partially Secured Liabilities
Unsecured Liabilities with Priority * Salaries * Taxes * Administrative Expense (Liquidation Expense) * Customer Deposit
Unsecured Liabilities without Priority (no collateral)
Percentage of Recovery (POR) =
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 4 CPA Review School of the Philippines – Batch 82
3. OWNER’S EQUITY DEFICIENCY / CAPITAL
Capital
NET FREE ASSETS (NFA)
TOTAL UNSECURED CREDITORS WITHOUT PRIORITY (TULi-w/o)
1. Excess of APTFSL ₱xx 1. Excess of PSL ₱xx over PSL xx ₱xx over APTPSL xx ₱xx
2. Free Asset xx 2. UL w/o Priority xx TFA xx TULi w/o ₱xx
3. Loss UL with Priority xx Net Free Asset ₱xx
ESTIMATED DEFICIENCY (ED):
ED = TULi – NFA or ED = TULi w/o × (1 – POR)
ED: A = L + C
SHE beginning ₱xx Estimated net loss (xx) Accrued interest (xx) Liquidation expense (xx) EED ₱ xx +/−
*NOTE: Statement of Realization no cash
STATEMENT OF REALIZATION AND LIQUIDATION
1. Assets to be realized (ATBR)
Noncash Assets, beginning
2. Assets acquired (AA) / ↑ on Asset
Interest Receivable
Accounts Receivable
7. Liabilities liquidated (LL)
8. Liabilities not liquidated (LNL)
Ending balance of the liabilities
9. Supplementary charges / Expenses
Cost of Sales
Accrued Expenses
11. NET INCOME / GAIN
3. Assets realized (AR)
PPE – net proceeds
Receivables – collection
Inventory – cost of sales
4. Assets not realized (ANR)
Noncash Asset, ending
5. Liabilities to be liquidated (LTBL)
6. Liabilities assumed (LA) / ↑ in Liabilities
Accrued Expenses
Accounts Payable
10. Supplementary credits / Revenue
Sales
Accrued Interest Income
12. NET LOSS / LOSS
A
Cash, end
ANR
= L
LNL
+ C
SHE, end
SHE, beginning ₱xx Net (loss) / Profit xx Estate Equity ₱xx
III. INSTALLMENT SALES
TYPES OF SALES
1. REGULAR SALES
Cash Sales
Credit Sales
Use the accrual method
2. INSTALLMENT SALES
Cost Recovery
Gross Profit Realization
Installment Method
*all are prescribed by the standard
GP from Sale of Repossessed Merchandise* ₱xx GP on Regular Sales (Regular Sales – Cost of Regular Sales) xx RGP on Installment Sales: 2017 2017
2015 DGP to RGP xx 2017 2016 2016 (Collection × GPR) xx 2017 (Collection × GPR) xx
Total RGP ₱xx Less: Expenses (Loss on Repossession and
Loss/Expense from write-off) (xx) NET INCOME 2017 ₱xx
*Sales ₱ xx Less: Cost of Sales:
Fair Value of Repossessed Merchandise ₱xx Reconditioning Cost xx (xx)
GP from Sale of Repossessed Merchandise ₱ xx
Fair Value of Repossessed Merchandise ₱xx Reconditioning Cost xx Net Purchases xx Estimated Selling Price ₱xx (*If silent, after)
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 5 CPA Review School of the Philippines – Batch 82
Installment Sales ₱xx Cost of Sales (xx) Deferred Gross Profit ₱xx
Installment Accounts Receivable ₱xx Unsecured Cost xx Deferred Gross Profit ₱xx
EXAMPLE:
Fair Value of Repossessed Merchandise* ₱70 Less: Unrecovered Cost:
IAR/Repossessed Account (Receivable Defaulted/Unpaid Balance) ₱100
Less: Deferred Gross Profit (20) (80) LOSS (UC > FV of Repossessed Merchandise) ₱(10)
ENTRIES:
1. Reposs. Mdse. – FV ₱70 DGP 20 Loss 10
IAR ₱100 2. Expenses ₱80
DGP (20%) 20 IAR ₱200
write-off
3. Cash ₱___ IAR ₱___
4. DGP ₱___
RGP ₱___
*Gain/Loss P/L **DGP Contra receivable account
(20%) IAR 2016
Beginning ₱100 Collection ₱50 RA 30 WO 5
End ₱ 15
DGP 2016
RGP ₱10 DGP on RA 6 DGP on WO 1
Beginning ₱20
End ₱ 3
IAR 2017
AIS ₱___ Collection ₱___ RA ___ WO ___
End ₱___
DGP 2017
RGP ₱__ DGP on RA __ DGP on WO __
Beginning ₱__
End ₱ _
Beginning Inventory ₱xx Net Purchases xx Freight-in xx Repossessed Merchandise xx Reconditioning Cost xx TGAS ₱xx Ending Inventory (New + Unsold RM + RC) xx Cost of Sales (Regular/Installment/Repossessed Merchandise) ₱xx
TRADE-IN & SALE OF REPOSSESSED MERCHANDISE:
Down payment – Cash Down payment – FV of Trade-in Collection, net of interest Collection Multiply: Gross Profit Ratio Realized Gross Profit Gross Profit from Sale of Repossessed Merchandise Total Realized Gross Profit Loss (FV of Reposs. Mdse. – Unrecovered Cost) NET INCOME
₱xx xx xx ₱xx xx ₱xx xx ₱xx (xx) ₱xx
TRADE-IN:
Installment Sales ₱xx Fair Value of Trade-in xx Trade-in Allowance (xx) Adjusted Installment Sales ₱xx Cost of Sales (xx) GROSS PROFIT ₱xx
Adjusted Installment Sales ₱xx Down payment – Cash (xx) Fair Value of Trade-in (xx) CV of Receivable ₱xx
Installment Sales ₱xx Trade-in Allowance (xx) Collectibles ₱xx
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 6 CPA Review School of the Philippines – Batch 82
IV. LONG TERM CONSTRUCTION CONTRACTS (IAS 11)
1. PERCENTAGE OF COMPLETION METHOD - outcome can be estimated reliably - if the problem is silent
1.1. INPUT MEASURE (Cost to Cost) Cost Incurred To Date ÷ Total Cost 1.2. OUTPUT MEASURE
Total Units Prod. ÷ Total Units Expected Prod.
2. COST RECOVERY METHOD - outcome cannot be estimated reliably
CONTRACT RETENTION
receivables
does not the an income element
reduces collection PRO-FORMA ENTRY:
Cash ₱xx Contract Retention xx
Accounts Receivable ₱xx
UPON COMPLETION OF PROJECT: Cash ₱xx
Contract Retention ₱xx
MOBILIZATION FEE
no income element PRO-FORMA ENTRY:
Cash ₱xx Advances from Customers ₱xx
COMPUTATION OF COST INCURRRED TO DATE (CITD): (1.) Direct Materials ₱xx
+ (2.) Direct Labor xx + (3.) Overhead xx + (4.) Depreciation of Construction Equipment (*Idle = Expense) xx + (5.) Any reimbursable Cost xx + (6.) xx + (7.) Borrowing Cost (Qualifying Asset) xx
*Specific = IE – II; **General = (AI × C) × CR + (8.) Unused Supplies / Materials without Alternative Use xx + (9.) Incidental Income from Sale excess over Scrap Materials xx
COST INCURRED TO DATE ₱xx
COMPUTATION OF ADJUSTED PRICE BILLING (APB):
Contract Price ₱xx + EC (↑ in certain cost) xx − DC (↓ in certain cost) xx − Penalty Clause (due to late turnover) xx + IP (due to early turnover) xx +/− Modification / Change Order / Variation xx
ADJUSTED PRICE BILLING (CP = APB) ₱xx
CITD + PTD-LTD
CIP − APB (Due to)/Due from ↓ ↓ Liability Asset
YEAR 1 ₱xx xx ₱xx xx ₱xx
YEAR 2 ₱xx xx ₱xx xx ₱xx
YEAR 3 ₱xx xx ₱xx xx ₱xx
= 0 → CIP @ the end of the year of contract.
CONSTRUCTION IN PROGRESS:
(1) If Profit: Contract Price × Percentage of Completion = CIP (2) If Loss: [(CP × POC) – LTD × (1 − POC)] = CIP (3) [(TC × POC) – LTD] = CIP
ENTRIES:
1.) Construction in Progress Various Accounts
₱xx ₱xx
2.) Accounts Receivable Progress Billings
₱xx ₱xx
3.) Cash Accounts Receivable
₱xx ₱xx
4.) COC Construction in Progress
Construction Revenue
₱xx xx
₱xx
5.) Accounts Receivable Progress Billings
₱xx ₱xx
6.) Progress Billings Construction in Progress
₱xx ₱xx
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 7 CPA Review School of the Philippines – Batch 82
COMPUTATION OF ADJUSTED CONTRACT PRICE:
Contract Price ₱xx Variable Price xx Bonus xx Adjusted Contract Price ₱xx
COMPUTATION OF CIP:
Cost Incurred to Date ₱xx Realized Gross Profit – to date xx Construction in Progress ₱xx
COMPUTATION OF REALIZED GROSS PROFIT – CURRENT YEAR:
Contract Price CITD (Prior Year + Current Year) Estimated Costs Total Costs Total Estimated Gross Profit Multiply: Percentage of Completion Total Realized Gross Profit – To Date Realized Gross Profit – Prior Year (+/−) Realized Gross Profit – Current Year
1ST YEAR ₱xx ₱xx xx (₱xx) ₱xx % ₱xx xx ₱xx
2ND YEAR ₱xx ₱xx xx (₱xx) ₱xx % ₱xx xx ₱xx
LAST YEAR ₱xx ₱xx xx
(₱xx) ₱xx % ₱xx xx ₱xx
COMPUTATION OF CIP, net of PB (ZPM/CRM):
Cost Incurred To Date Total Estimated Gross Profit Multiply: Percentage of Completion Total Realized Gross Profit – To Date Progress Billings (PY + CY) Construction in Progress, net of PB
₱xx X
-_ ₱-0- ₱xx (xx) ₱+/−
₱xx (₱xx) 100% (₱xx) ₱xx (xx) ₱+/−
₱xx (₱xx) 100% (₱xx) ₱xx
(xx) ₱-0-
RECOGNITION OF REVENUE
over time at a point in time
COMPUTATION OF DUE FROM / (DUE TO) CUSTOMER – Y2:
Year 1 Billings Year 2 Billings Mobilization Fee Year 1 Collection [(Y1B × customer payment % of amount billed) ×
(100% - Retention Fee %)] Year 2 Collection [(Y2B × customer payment % of amount billed) ×
(100% - Retention Fee %)] Due from / (Due to) Customers – Y2
₱xx xx
(xx)
(xx)
(xx) ₱xx
V. IAS 18 – REVENUE
CRITERIA TO RECOGNIZE REVENUE:
1. Receivables (*silent) - reasonably assured
2. Cash as Down Payment (*silent)
- nonrefundable 3. Franchise Revenue
- substantial performance
NOTE:
These conditions shall meet to recognize revenue.
IFRS 15 Contingent Franchise Fee = IAS 18 Continuing Franchise Fee
R C F
CASE 1
IFF = Revenue
CASE 2 x
IFF = Deferred Revenue
CASE 3 x
Cash ₱xx NR xx Discount ₱xx Franchise Revenue xx Deferred Revenue xx
EXCEPTION TO THE RULE: Down payment still considered as revenue if the DP is nonrefundable and
DP represents fair measure of services already rendered.
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 8 CPA Review School of the Philippines – Batch 82
CASE 1
R – Interest Bearing (Accrual Method) C F
Revenue (IFF)
Cost of Sales (Direct Cost for Initial Services)
Gross Profit
Continuing Franchise Fee (Sales × %)
Interest Income (Face Amount × Interest Rate × ?/12)
Expense (IC for IS + IC for CS + DC for SC)
NET INCOME
₱xx
(xx)
₱xx
xx
xx
(xx)
₱xx
CASE 2
R x – Non-interest Bearing (Installment Method) C F
Down Payment – Cash
Collection during the period
Total Collection
Multiply: Gross Profit Ratio (GP ÷ Revenue) *REVENUE = IFF
Realized Gross Profit
Continuing Franchise Fee
Interest Income
Expenses
NET INCOME
₱xx
xx
₱xx
%
₱xx
xx
xx
(xx)
₱xx
CASE 3
R – Non-interest Bearing C F
Revenue (DP + PV)
Cost of Sales
Gross Profit
Continuing Franchise Fee
Interest Income (PV × IR × ?/12)
Expenses
NET INCOME
₱xx
(xx)
₱xx
xx
xx
(xx)
₱xx
CASE 4
R x – Non-interest Bearing C F
Down Payment
Collection, net of interest income
Total Collection
Multiply: Gross Profit Ratio (GP ÷ Revenue) *REVENUE = DP + PV
Realized Gross Profit
Continuing Franchise Fee
Interest Income (PV × IR × ?/12)
Expenses
NET INCOME
₱xx
xx
₱xx
%
₱xx
xx
xx
(xx)
₱xx
TOTAL REVENUE OF THE FRANCHISOR Down payment ₱xx Collection xx CFF xx Interest Income xx TR-F ₱xx
TOTAL REVENUE FROM F.F.
Down payment ₱xx Collection xx CFF xx TR from FF ₱xx
VI. HOME OFFICE AND BRANCH ACCOUNTING
BP − Cost = AFOBI Beginning Inventory:
Home Office* Outsider
Shipment, net* Purchases (NP) Freight in Total Goods Available for Sale Ending Inventory:
Home Office* Outsider
Cost of Goods Sold
₱xx xx
SFHO xx xx ₱xx
(xx) (xx) ₱xx
₱xx xx STB xx xx ₱xx
(xx) (xx) ₱xx
₱xx -
xx -
-_ ₱xx
(xx) (xx) ₱xx
(GPR-PY)
(GPR-CY)
RGP
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 9 CPA Review School of the Philippines – Batch 82
*NOTE:
Beginning Inventory – HO (a) In transit – prior year (b) Freight Charges
Ending Inventory – HO (a) In transit – current year (SFHO is < its true amount) (b) Freight Charges
EXAMPLE:
Freight Charges Home Office to Branch 1 ₱10 Branch 1 to Branch 2 5 Home Office to Branch 2 (4) (Excess Freight) Expenses ₱11
Net Income @ Billed Price Reported Net Income (Branch) Net Income @ Cost True Net Income (Home Office) COGS @ BP – COGS @ Cost + Net Income @ BP = Realized Gross Profit
Net Income reported by the branch Unrecorded expenses of branch:
Depreciation
Allocation of expense Net Income that should have reported Realized Gross Profit True Net Income
₱xx
(xx) (xx) ₱xx xx ₱xx
EXAMPLE ₱ 87
(5) (2) ₱ 80 20 ₱100
*ENTRIES
#11 #12
FREIGHT PREPAID
FREIGHT COLLECT
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 10 CPA Review School of the Philippines – Batch 82
BP (Reported) Cost (True/Correct) Sales Cost of Goods Sales Gross Profit Expenses Net Income
₱xx (xx) ₱xx (xx) ₱xx
₱xx (xx) ₱xx
(xx) ₱xx
AFOBI
RGP Beginning Shipment
End
HO 1. 100 – 80 = 20 2. 100 × 20% = 20 3. 100 × 25/125 = 20 4. 80 × 25% = 20
VII. BUSINESS COMBINATION (IFRS 3) & CONSOLIDATED
F.S. (IFRS 10)
BUSINESS COMBINATION is a transaction where the acquirer obtains control over the net assets of
the acquiree.
OWNERSHIP ACCOUNT TITLE METHOD 51% to 100% 20% to 50% 1% to 19%
Investment in Subsidiary Investment in Associate
FA @ FVPL/FVOCI
Cost / Equity / Fair Value Equity
Cost / FV
COST METHOD – CV P/L
Purchase Price ₱xx
Transaction Cost xx
Impairment Loss (xx)
CV of Investment ₱xx
Impairment Loss ₱(−)
Dividend Income +
P/L ₱xx
FAIR VALUE METHOD – CV P/L
Purchase Price ₱xx Unrealized Gain xx Unrealized Loss (xx) CV of Investment ₱xx
Unrealized Gain ₱ + Unrealized Loss (−) Dividend Income + Transaction Co (−) P/L ₱xx
EQUITY METHOD – CV P/L
Purchase Price ₱xx Transaction Cost xx Investment Income xx Dividend xx Impairment Loss (xx) CV of Investment ₱xx
Investment Income ₱ + Impairment Loss (−) P/L ₱xx
*NOTE: The fair value method is applicable only for trading securities.
TYPES OF BUSINESS COMBINATION
1. ASSET ACQUISITION (100% Ownership) 1.1. Statutory Merger A + B = A/B 1.2. Statutory Consolidation A + B = C
2. STOCK ACQUISITION A + B = AB (Parent – Subsidiary)
2.1. Fully Owned 2.2. Partially Owned
ACCOUNTING METHOD IFRS 3 – Acquisition Method (*OLDPurchase Method)
Disclose the following:
1) Determine the acquirer 2) Determine the acquisition date
The acquisition date is the measurement date, and you have within 1 year from the balance sheet date to adjust the fair value of those assets and liabilities
The net assets of the subsidiary can be adjusted within 1 year from the acquisition date
3) Recognize and measure identifiable assets, identifiable liabilities, and non-controlling interest (*The pre-existing goodwill of subsidiary is ignored.)
4) Measure and recognize goodwill or gain
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 11 CPA Review School of the Philippines – Batch 82
FORMULAS
*
× PHI% = ₱xx
EXAMPLE:
Purchase Price ₱1000 NA@BV (SHE) (700) Excess ₱ 300 OVA (50) UVA (100) Goodwill ₱ 250
NA@BV – 12/31 ₱xx Net Income (xx) Dividend xx NA@BV – BC ₱xx
Purchase Price ₱1000 NA@FV (squeezed) (750) Goodwill ₱ 250
NA@BV – BC ₱700 UVA 100 OVA (50) NA@FV ₱750
ACQUISITION RELATED COST
1. Direct Cost expense 2. Indirect Cost expense 3. Cost to Issue or Register (CTIR) Based on priority: 3.1. Share Premium from
issuance; 3.2. Share Premium from
original issuance; 3.3. Debit to Stock Issuance
Cost
CTIR Keywords: SEC Stock Share Documentary Stamp Tax
EXAMPLE: Share Premium from issuance ₱ 50 Share Premium from original issuance 30 CTIR 100
ENTRY:
Share Premium ₱50 Share Premium 30 SIC 20
Cash/Payable ₱100
PRESENTATION OF NCI
1. FV of NCI / Full Goodwill
If the fair value is unknown compute the implied fair value FORMULA:
2. Proportionate Share / Relevant Share / Interest in the Net Asset of Subsidiary (INAS)
FORMULA: FV of Net Assets × NCI% = INAS
CONTROL PREMIUM (CP) 1. It must be included in the purchase price 2. Excluded in computing NCI 3. It affects goodwill or gain
CONTINGENT CONSIDERATION PAYABLE (CCP) 1. If the information existed already as of the acquisition date, any adjustment to fair value would affect the goodwill or gain. 2. If the information is related to target profit or target market price, any adjustment goes to P/L and it does not affect the goodwill or gain. NOTE: Adjustment to goodwill should be applied retrospectively.
*SME − Direct Cost is capitalized / capitalizable − NCI is measured using proportionate − Goodwill goes to parent − Goodwill is subject to amortization (10 years)
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 12 CPA Review School of the Philippines – Batch 82
EXAMPLE:
Case 1
(100%) (80%) (20%) TOTAL Purchase Price NCI Fair Value of Subsidiary Net Assets @ FV Goodwill
₱1700000 (1000000) ₱ 700000
₱1300000 (800000) ₱ 500000
₱ 400000 FV (200000) ₱ 200000
Impairment Loss ₱50000 ₱35714 (5/7) ₱14286 (2/7)
*If the problem is silent, use the FV. The FV of NCI should not lower of INAS.
FV ₱400000
vs.
INAS
Case 2 [CP = ₱300000]
(100%) (80%) (20%) TOTAL Purchase Price NCI Fair Value of Subsidiary Net Assets @ FV Goodwill
₱1550000 (1000000) ₱ 550000
₱1300000 (800000) ₱ 500000
₱ 250000 (200000) ₱ 50000
₱200000
vs.
Case 3
(100%) (80%) (20%) TOTAL Purchase Price NCI Fair Value of Subsidiary Net Assets @ FV Goodwill
₱1250000 (1000000) ₱ 250000
₱1000000 (800000) ₱ 200000
₱ 250000 (200000) ₱ 50000
₱200000 vs.
Case 4 [CP of ₱300000 is included]
(100%) (80%) (20%) TOTAL Purchase Price NCI Fair Value of Subsidiary Net Assets @ FV Goodwill
₱1200000 (1000000) ₱ 200000
₱1000000 (800000) ₱ 200000
₱ 200000 (200000) ₱ -0-
₱200000
vs.
Case 5
(100%) (80%) (20%) TOTAL Purchase Price NCI Fair Value of Subsidiary Net Assets @ FV Goodwill
₱ 900000 (1000000) ₱(100000)
₱ 700000 (800000) ₱ (100000)
₱ 250000 (200000) ₱ -0-
NOTE: Gain is never allocated. It goes to Parent. 01/01/17 12/31/17 Purchase Price Net Assets @ Fair Value Goodwill
₱1000000 (700000) ₱ 300000
₱1000000 (800000) ₱ 200000
Goodwill on December 31, 2017 = ₱200000 Goodwill on January 1, 2017 = ₱200000
CONSOLIDATED FINANCIAL STATEMENT (*At the date of business combination) TOTAL ASSETS:
*If, paid
Total Assets of Parent @ BV Total Assets of Subsidiary @ FV Goodwill Purchase Price (Cash/NCA) Direct Cost Indirect Cost CTIR Total Assets
₱xx xx xx
(xx) (xx) (xx) (xx) ₱xx
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 13 CPA Review School of the Philippines – Batch 82
TOTAL LIABILITIES:
*If, unpaid
Total Liabilities of Parent @ BV Total Liabilities of Subsidiary @ FV CPP Purchase Price (Liabilities) Direct Cost Indirect Cost CTIR Total Liabilities
₱xx xx xx xx xx xx xx ₱xx
TOTAL SHAREHOLDER’S EQUITY:
*Paid/
Unpaid
SHE of Parent @ BV NCI
on BPO ₱xx Gain on PHI xx
on CCP xx Purchase Price (Stocks @FV) Direct Cost Indirect Cost CTIR Total Assets
₱xx xx
xx xx
(xx) (xx) (xx) ₱xx
CONTROL PREMIUM
Additional investment
Part of purchase price
Affects goodwill/(gain)
Ignored in computing NCI PURCHASE PRICE
Cash
Noncash
Liability
Stock
WORKING PAPER ELIMINATING ENTRIES
1. DIVIDEND RECEIVED
Dividend Income ₱xx
NCI (partially) xx
Dividend Declare – Subsidiary ₱xx
2. SUBSIDIARY – SHE Ordinary Share – Subsidiary ₱xx Share Premium – Subsidiary xx Retained Earnings – Subsidiary xx
Investment in Subsidiary ₱xx NCI xx
3. OVA, UVA, & GOODWILL Equipment ₱xx Inventory xx Goodwill xx
Investment in Subsidiary ₱xx NCI xx
4. AMORTIZATION OF IMPAIRMENT LOSS Operating Expense ₱xx
PPE, net ₱xx
Impairment Loss ₱xx Goodwill ₱xx
Cost of Sales ₱xx Inventory ₱xx
5. INTERCOMPANY SALES & PURCHASES
Sales ₱xx Cost of Sales ₱xx
6. UPEI Cost of Sales ₱xx
Inventory ₱xx
7. RPBI Retained Earnings – Parent ₱xx NCI (up) xx
Cost of Sales ₱xx
*Ending Inventory ₱xx Multiply: GPR of Seller % UPEI – 20x6 ₱xx RPBI – 20x7 ₱xx
NOTE: CONSO COS NI INVENTORY UPEI + − −
RPBI − + Ignored
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 14 CPA Review School of the Philippines – Batch 82
EXAMPLE: Intercompany Sale of Inventory
Sales ₱1000 Cost of Sales (700) Gross Profit ₱300 Ending Inventory % × 50% UPEI ₱150
Ending Inventory (1000×50%) ₱500 GPR × 30% UPEI (12/31/16) ₱150 RPBI (01/01/17) ₱150
Working Paper Eliminating Entries
DOWN UP UPEI: COS ₱xx
Inventory ₱xx COS ₱xx
Inventory ₱xx
RPBI: RE, beg. ₱xx COS ₱xx
RE, beg. ₱xx NCI xx
COS ₱xx
EXAMPLE: Intercompany Sale of Equipment
Sales ₱ 70 CV [₱90-(₱90/10) ×3)] (63) Gain ₱ 7
SELLER BUYER W.P.E.E.
Cash ₱70 Acc. Dep. 27
Equipment ₱90 Gain 7
Equipment ₱70 Cash ₱70
Gain ₱ 7 Equipment 20
Acc. Dep. ₱27
Dep. Exp. ₱ 9 Acc. Dep. ₱ 9
Dep. Exp. ₱10 Acc. Dep. ₱10
*(₱70/7=₱10)
Acc. Dep. ₱ 1 Dep. Exp. ₱ 1
*(RG thru amortization: ₱7/7=₱1)
UNREALIZED GAIN
Gain ₱ 7 Equipment ₱ 7
*(it depends upon the Selling Price)
YEAR 2 YEAR 3 Unrealized Gain
RE ₱7 Equipment ₱7
NO ENTRY
Realized Gain
Acc. Dep. ₱2 Dep. Exp. ₱1 RE 1
RE ₱5 Dep. Exp. ₱1 Gain 4
EXAMPLE: Intercompany Sale of Land
Land (selling price) - ₱100 CL - 80 Sale to third party - 150
YEAR 1 YEAR 2 YEAR 3 Recorded – Subsidiary ₱50
UG ₱(20) -0- -0- Not yet recorded 20 RG -0- -0- ₱20 ₱70
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 15 CPA Review School of the Philippines – Batch 82
FORMULAS: Non-controlling Interest, beginning Non-controlling Interest – Net Income Dividend Share Non-controlling Interest, end
₱xx xx
(xx) ₱xx
Retained Earnings – Parent Consolidated Net Income – Parent Dividend – Parent Consolidated Retained Earnings
₱xx xx
(xx) ₱xx
Ordinary Share – Parent Share Premium – Parent Consolidated Retained Earnings Non-controlling Interest Consolidated Shareholder’s Equity
₱xx xx xx xx ₱xx
Shareholder’s Equity, end Net Income of Subsidiary Dividend of Subsidiary Shareholder’s Equity at book value Overvalued Assets (OVA) Undervalued Assets (UVA) Net Assets at fair value
₱xx (xx) xx ₱xx
(xx) xx ₱xx
Sales – Parent Sales – Subsidiary Intercompany Sales & Purchases at Selling Price Consolidated Sales
₱xx xx
(xx) ₱xx
Cost of Sales – Parent Cost of Sales – Subsidiary Intercompany Sales & Purchases at Selling Price Unrealized Profit in Ending Inventory (UPEI) Realized Profit in Beginning Inventory (RPBI) Amortization of Undervalued Assets Amortization of Overvalued Assets Consolidated Cost of Sales
₱xx xx
(xx) xx
(xx) xx
(xx) ₱xx
Consolidated Sales Consolidated Cost of Sales Consolidated Gross Profit
₱xx (xx) ₱xx
Gross Profit – Parent Gross Profit – Subsidiary Unrealized Profit in Ending Inventory (UPEI) Realized Profit in Beginning Inventory (RPBI) Amortization of Undervalued Assets Amortization of Overvalued Assets Consolidated Gross Profit
₱xx xx
(xx) xx
(xx) xx ₱xx
Operating Expense – Parent Operating Expense – Subsidiary Realized Loss (thru depreciation/amortization) Realized Gain (thru depreciation/amortization) Impairment Loss Amortization of Undervalued Assets Amortization of Overvalued Assets Consolidated Operating Expense
₱xx xx xx
(xx) xx xx
(xx) ₱xx
Inventory – Parent @ BV Inventory – Subsidiary @ BV Undervalued Inventory Overvalued Inventory Amortization of Undervalued Assets – Inventory Amortization of Overvalued Assets – Inventory Unrealized Profit in Ending Inventory (UPEI) Consolidated Inventory
₱xx xx xx
(xx) (xx) xx
(xx) ₱xx
Consolidated Net Income attributable to Parent Non-controlling Interest in Net Income Consolidated Net Income
₱xx xx ₱xx
VIII. JOB ORDER COSTING Predetermine OH Rate = Based on BUDGETED
Spoilage vs. Defect no use can be reworked
*Charged to all
- add allowance (unit cost) *Charged to specific job
- deduct allowance
Loss – add – FOH control account
(actual)
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 16 CPA Review School of the Philippines – Batch 82
ALLOCATION OF COST
DIRECT METHOD
Service Provided by
Quality Control Maintenance
to Machining
262500 120000 382500
Assembly
87500 80000 167500
STEP-DOWN
*Benefit provided ranking table (Company Policy) *Based on the service department which has the highest cost
QC Maintenance
QC 350000
(350000) ___-___
-0-
Maintenance 200000 70000
(270000) -0-
Machining 400000 210000 162000 772000
Assembly 300000 70000 108000 478000
*Once the OH cost of the service department becomes exhausted, do not allocate other cost to the service department
RECIPROCAL METHOD
Quality Control Maintenance
QC -
25%
Maintenance 20%
-
Machining 60% 45%
Assembly 20% 30%
Quality Control = 350000 + 0.25M Maintenance = 200000 + 0.20QC QC = 350000 + 71053 = 421053 M = 200000 + 0.20(421053) = 284211
QC
350000 (421053)
71053 -0-
Maintenance 200000 84211
(284211) -0-
Machining 400000 252632 127894 780527
Assembly 300000 84211 85263 469474
IX. JUST IN TIME
TRIGGER POINTS: Purchase Production Completion Sale
GOALS: 1. Eliminating any production process that does not add value 2. JOURNAL ENTRIES:
Purchase
Raw and In Process ₱xx Accounts Payable ₱xx
Conversion Cost ₱xx Various Accounts ₱xx
Completion
Finished Goods ₱xx Raw and In Process ₱xx Conversion Cost xx
Sales
Cost of Sales ₱xx Finished Goods ₱xx
Cost of Sales ₱xx Raw and In Process ₱xx Conversion Cost xx
75% were sold
Cost of Sales ₱xx Finished Goods xx
Conversion Cost ₱xx Raw and In Process xx
Substitute
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 17 CPA Review School of the Philippines – Batch 82
X. JOINT COSTING
Joint Cost Less: NRV of By-product Remaining Joint Cost
₱xx (xx)
₱xx
if, inventoriable/
material TREATMENT OF BY-PRODUCT
1. Upon sale or realization - recorded as other income, if the by-product is immaterial.
2. Upon production or inventoriable - the NRV of by-product is deducted from the total joint cost
ALLOCATION OF REMAINING 1. PHYSICAL
1.1. Physical measure such as gallon/kilogram 1.2. Units produce 1.3. Weighted average units produce
2. MONETARY 2.1. Sales value at split-off also known as relative market value 2.2. Net realizable value at split-off 2.3. Hypothetical/approximated/estimated at split-off also known as
adjusted market value
TWO TYPES OF COST FOR THE JOINT PRODUCT 1. Joint Cost Share or Allocated Joint Cost 2. Traceable Cost or Additional Processing Cost
XI. STANDARD COSTING
Purchased Used
DM
AQAP
AQSP
AQSP
SQSP
DMPV
DMUV
Rate Efficiency
DL
AHAR
AHSR
AHSR
SHSR
DLRV
DLEV
XII. FOREIGN EXCHANGE (IAS)
1. Foreign Currency Transaction 2. Foreign Exchange Translation 3. Hedging of FOREX Risk
EXCHANGE RATE – This is the ratio of exchange between two currencies.
SPOT RATE – Rate for immediate delivery.
CLOSING RATE – This is the spot rate at Balance Sheet date.
FUNCTIONAL CURRENCY – Currency of primary economic environment in which the entity operates.
What is the primary driver of functional currency? – SALES
Assets & Liabilities Closing Rate Shareholder’s Equity Historical Rate Revenue & Expenses Average [Computation: (B+E)/2 ] Spot Rate (Theory)
FOREX TRANSACTION: Importation
(Hedge Item) BUYING OF INVENTORY
1. ER↑ = Forex Loss [100] 2. ER↓ = Forex Gain
(Hedging Instrument) BUYING OF F.C.
3. FR↑ = Forex Gain [80] = [20] 4. FR↓ = Forex Loss
FOREX TRANSACTION: Exportation
SELLER OF MERCHANDISE
5. ER↑ = Forex Gain 6. ER↓ = Forex Loss
SELLER OF F.C.
7. FR↑ = Forex Loss 8. FR↓ = Forex Gain
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 18 CPA Review School of the Philippines – Batch 82
ENTRIES:
BUYING OF INVENTORY
Purchases ₱xx Accounts Payable ₱xx
Forex Loss ₱xx
Accounts Payable ₱xx Accounts Payable ₱xx
Forex Gain ₱xx Accounts Payable ₱xx
Cash ₱xx
BUYING OF F.C.
FCR ₱xx FCP (fixed) ₱xx
FCR ₱xx
Forex Gain ₱xx Forex Loss ₱xx
FCR ₱xx FCP (fixed) ₱xx Cash xx
FCR ₱xx
SELLER OF MERCHANDISE
Accounts Receivable ₱xx Sales ₱xx
Accounts Receivable ₱xx
Forex Gain ₱xx Forex Loss ₱xx
Accounts Receivable ₱xx
SELLER OF F.C.
FCR (fixed) ₱xx FCR ₱xx
Forex Loss ₱xx
FCP ₱xx
FCP ₱xx Cash xx
FCR (fixed) ₱xx
FOREX TRANSLATION only reflected in consolidated FS an Other Comprehensive Income component OCI:
1. Forex Translation (IAS 21) 2. Effective Portion of Cash Flow Hedge (IFRS 7/9) 3. Revaluation Surplus (IAS 16) 4. Remeasurement G/L related to employee benefit (IAS 19R) 5. Estimated Unrealized G/L on FA at FVTOCI (IFRS 7/9) 6. Risk G/L on credit risk for financial liability designated to P/L
RECLASSIFIED TO P/L: 1. Forex Translation 2. Effective portion of Cash Flow Hedge
A $ 10M × ₱1 ₱ 10M
$ 10M × ₱1 ₱ 10M
=
=
=
L $ 8M × ₱1 ₱ 8M
$ 8M × ₱1 ₱ 8M
+
+
+
C $ 2M
× ₱0.5 ₱ 1M
$ 2M × ₱2 ₱ 4M
+
+
₱ 1M
₱ 2M
Translation Adjustment Credit
Translation Adjustment Debit
NA, ending @ CR > NA, ending @ RF = Translation Adjustment Credit NA, ending @ CR < NA, ending @ RF = Translation Adjustment Debit
NA, beg. OS × HR
RE, beg. Net Income @ Average Dividend @ SR NA, end @ RF
₱xx xx xx
(xx) ₱xx
(translated amount)
QUOTATION: 1. DIRECT – Foreign Currency to Philippine Peso 2. INDIRECT – Philippine Peso to Foreign Currency SPOT RATE: 1. BUYER – Selling Spot Rate / Offer Rate / Asking 2. SELLER – Buying Spot Rate / Bid Rate FIRM COMMITMENT (1) The hedge is perfect when the company acquired a forward contract for
the same amount of the same currency in which the firm commitment is (2) Under perfect hedging, the amount of forex gain from hedging instrument
is equal to firm commitment as liability (3) The amount of forex loss from hedging instrument is equal to firm
commitment as asset (4) TYPES OF FIRM COMMITMENT
4.1. Sales Commitment 4.2. Purchase Commitment
(5) The asset sold or purchased is recorded at the date of settlement based on the forward rate on the date of commitment
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 19 CPA Review School of the Philippines – Batch 82
THREE HEDGE RELATIONSHIP
(1) Fair Value Hedge - Hedges of exposure to the changes in value of a recognized asset/liability or unrecognized firm commitment - If the problem is silent, use the FVH
(2) Cash Flow Hedge - Hedges of probable forecasted transactions or the variability in the cash flow of a recognized asset or liability
(3) Net Investment Hedge - Hedges of the net investment in a foreign operation
OPTIONS Contracts that are right and not obligation to buy or sell commodities at a
certain price This is always favorable on the part of the holder If it is gain or in the money, exercise the option If it is out of the money, do not exercise the option Call option is on the part of the buyer Put option is on the part of the seller
CALL OPTION:
Market Price = Strike Price AT THE MONEY Market Price > Strike Price IN THE MONEY (UG) Market Price < Strike Price OUT OF THE MONEY
PUT OPTION:
Market Price = Strike Price AT THE MONEY Market Price > Strike Price IN THE MONEY Market Price < Strike Price OUT OF THE MONEY
CFH
FVH
CFH
FVH
SPLIT ACCOUNTING
Intrinsic Value – Unrealized Gain Time Value – Gain/Loss
Intrinsic Value – Unrealized Gain
Time Value – Gain/Loss
NON-SPLIT ACCOUNTING
Intrinsic Value – Unrealized Gain
Intrinsic Value – Unrealized Gain
OCI P/L
P/L P/L
OCI
P/L
XIII. ACCOUNTING OF NPO (AICPA)
COMPUTATION:
Gross Patient Service Revenue Charity Care Amount Charge / Billed to Customers Contractual Adjustment (PHILHEALTH, MEDICARE) Discount to Hospital Employees Net Patient Service Revenue
₱xx (xx) ₱xx (xx) (xx) ₱xx
STATEMENT OF ACTIVITIES
Shows contractual adjustment
This is collectible at third party payor (1) For Hospitals (contra-revenue account)
Contractual Adjustment ₱xx Accounts Receivable ₱xx
(2) For Schools (contra-revenue account)
Expenditure for student ₱xx Accounts Receivable ₱xx
CONTRIBUTED MATERIALS, SERVICES, & FACILITIES
− Unrestricted funds
(1) Inventory ₱xx Contribution Revenue ₱xx
(2) Salaries ₱xx
Contribution Revenue ₱xx
(3) Rent Expense ₱xx Contribution Revenue ₱xx
OTHER OPERATING REVENUE
− Unrestricted funds
Cash ₱xx Other Operating Revenue* ₱xx
*EXAMPLE OF OTHER OPERATING REVENUE Proceeds from cafeteria Proceeds from parking lots
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 20 CPA Review School of the Philippines – Batch 82
FINANCIAL STATEMENTS
(1) STATEMENT OF ACTIVITIES
Amount of changes in each of the three classes of net assets (a) Changes in Unrestricted Net Assets (b) Changes in Temporary Restricted Net Assets (c) Changes in Permanently Restricted Net Assets
(2) BALANCE SHEET
Assets, Liabilities, Net Assets
Three types of Net Assets: (a) Unrestricted Net Assets (b) Temporary Restricted Net Assets (c) Permanently Restricted Net Assets
The restricted cash and investment are prescribed separately
All securities are valued at fair value
(3) STATEMENT OF CASH FLOW
Restricted whether temporary/permanent (FINANCING)
Quasi-endowment unrestricted (OPERATING)
Receipts of donation to purchase PPE (Inflow: INVESTING)
Cash outflow to purchase PPE (FINANCING)
Term endowment Temporary (FINANCING)
Pure endowment Permanent (FINANCING)
(4) STATEMENT OF FUNCTIONAL EXPENDITURE Specifically for Voluntary Health and Welfare Organization (NGOs)
XIV. GOVERNMENT ACCOUNTING
PHASES OF BUDGETARY PROCEDURE
1. PREPARATION AND PRESENTATION − Submission of budget of the expenditure
2. BUDGET AUTHORIZATION − Enactment by the congress of the General Appropriation Act
3. BUDGET EXECUTION AND OPERATION − Release of revenue allotment
4. BUDGET ACCOUNTABILITY − Liquidation of expenditure and audit conducted by Commission on Audit
GOVERNMENT ACCOUNTING MANUAL (GAM)
Under GAM, entity shall not maintain regular agency book and national government book
GAM supersedes NGAS effective January 1, 2016 implemented in 2002
Commission on Audit has exclusive authority to define the scope of audit
COMPONENTS OF GENERAL PURPOSE FINANCIAL STATEMENTS
(1) Statement of Financial Position (2) Statement of Financial Performance (3) Statement of Changes in Net Assets / Equity (4) Statement of Cash Flow (5) Statement of Comparison of Budget and Actual Amounts (6) Notes to the financial statements, comprising a summary of significant
accounting policies and other explanatory notes
BOOKS OF ACCOUNTS & REGISTRIES
1. JOURNALS a. General Journal b. Cash Receipts Journal c. Cash Disbursement Journal d. Check Disbursement Journal
2. LEDGERS a. General Ledgers b. Subsidiary Ledgers
REGISTRIES
(1) RROR – Registries of Revenue and Other Receipts (2) RAPAL – Registry of Appropriation and Allotments (3) RAOD – Registries of Allotments, Obligation and Disbursements (4) RBUD – Registries of Budget, Utilization and Disbursements
CLASSIFICATION OF RAOD & RBUD
PS – Personnel Services MOE – Maintenance and Other Operating Expenses FE – Financial Expenses CO – Capital Outlay
(REVIEWER: Dr. Rodiel C. Ferrer, CPA, MBA, DBA, PhD CAR, CMA)
Page | 21 CPA Review School of the Philippines – Batch 82
NOTICE OF CASH ALLOCATION (NCA) Issued by Department of Budget and Management (DBM) to an agency
authorizing the latter to disburse by checks
(1) RECEIPT OF NCA
Cash – MDS, Regular ₱xx Subsidy from National Government ₱xx
*Net of 5% final VAT and 1% creditable income tax
(2) UNUSED NCA Subsidy from National Government ₱xx
Cash – MDS, Regular ₱xx
ACCOUNTING FOR DISBURSEMENTS
1. Net Payroll Advances to Disbursing Officer
Advances for Payroll ₱xx Cash – MDS, Regular ₱xx
2. Payable to Officers and Employees and to set up salary deductions
Salaries and Wages – Regular ₱xx PERA xx
Due to BIR ₱xx Due to GSIS xx Due to Pag-IBIG xx Due to PhilHealth xx Due to Officers and Employees xx
3. Remittance of Salary Deductions
Due to GSIS ₱xx Due to Pag-IBIG xx Due to PhilHealth xx
Cash – MDS, Regular ₱xx
4. Liquidation of Advances for Payroll
Due to Officer and Employees ₱xx Advances for Payroll ₱xx
MESSAGE TO THE READERS
Magandang buhay sa inyo mga ka-reviewee! Ang notes na ito ay hango sa mga itinuro ni Sir Ferrer (*one of my fave
reviewer). Kung sakaling may mapansin man kayo na kulang o mali ay kayo na lang ang magkusang magtama nito. Hindi naman perpekto ang pagkaka-type nito, tulad ko (*ansabe!?).
Nawa ay makatulong ito sa inyong pag-aaral. Fighting! Ipaglaban natin ang ating pangarap. May the odds be in our favor. God bless us all! ^_^ Sincerely, LFA
“For whatever is born of God overcomes the world. And this is the victory that has overcome the world – our FAITH.” 1 JOHN 5:4