AFAR FORMULAS
HOBA
COMPUTATION FOR COGS, ENDING INVENTORY, ALLOWANCE, COGAS
SFHO
Outside Purchase
COGAS
End. Inventory
SHFO
Outside Purchase
COGS
COST OF SFHO:
If based on Cost: Cost =
RETAIL
P xx
xx
P xx
COST
Net of Markup
Just copy amount
P xx
( xx )
( xx )
P xx
Net of Markup
Just copy amount
P xx
Allowance
Retail - Cost
n/a
P xx
n/a
Retail - Cost
P xx.
SFHO @retailed amount
1+ mark −up rate
If Based on Sales: Cost = SFHO - (SFHO x Markup Rate)
NET INCOME
Home Office
Sales
P xx
COGS
( xx )
Gross Profit
P xx
OpEx
( xx )
Net Income
P xx

Branch
Sales
COGS
Gross Profit
P xx
OpEx
Unrecorded Expenses
Net Income
P xx
Realized portion of Allowance
True Income
P xx
( xx )
( xx )
( xx )
xx
P xx
It is the NET INCOME that is reflected in the FS of the brand and HO, and not the true income.
COST OF SALES OF HOME OFFICE
Beginning Inventory
Purchases
Less: Shipment to Branch
Ending Inventory
COGS
P xx
xx
( xx )
( xx )
P xx
LONG-TERM CONSTRUCTION CONTRACT
GENERAL FORMULA:
Contract Price
Less: TEC
Cumulative Cost Incurred to Date
Est. Cost to Complete
TEC
Est. Gross Profit/(Loss)
Multiply by: % of Completion
Gross Profit/(loss) to Date
Less: PY Gross P/L to Date
Realized Gross P/L for the Year
% of COMPLETION
P xx
P xx
xx
P xx
ZERO PROFIT
P xx
P xx
xx
P xx
xx
P xx
x%
P xx
xx
P xx
xx
P xx/(xx)
P(xx)
xx
P xx
COMPUTATION OF % OF COMPLETION:
% of Completion =
Cost AT completion” = TEC
CumulativeCost Inccured
TEC
Alternative Formula: % of Completion =
applies only if there’s NO LOSS
Construction∈Progress
Contract Price
OTHER FORMULAS:
Contract Price
Multiply by: % of Completion
REVENUE TO DATE
Less: Cost incurred to Date
Gross Profit/(Loss) to Date
Revenue to Date (Current Year) P xx
Revenue to Date (Prior Year)
Revenue for the year
Construction cost of Sales (Squeezed)
Gross Profit/(Loss) for the Year
P xx
x%
P xx
( xx )
P xx
( xx )
P xx
( xx )
P xx
CONSTRUCTION IN PROGRESS
CONSTRUCTION IN PROGRESS
Cost incurred to date
P xx
Gross Profit for the year
xx
P xx
CIP, Balance
P xx
CIP > Progress Billing = ASSET
CIP < Progress Billing = LIABILITY
“Est.
Loss for the Year
FRANCHISE
REVENUE RECOGNITION
Revenue
STAND ALONE PRICE
Trade-Name
Franchise Stall
Deliveries
Others…
P xx
xx
xx
xx
P xx
FRACTION * INITIAL F.FEE
xx/xx
xx/xx
xx/xx
xx/xx
P xxx
COLLECTION IS REASONABLY ASSURED
Down Payment
P xx
PV of the Balance
Less: Direct Cost
Gross Profit
CFF
Interest Income
xx
Indirect Cost
Net Income

=
ALLOCATION
P xx
xx
xx
xx
*
xx/xx
Finished
xx/xx
xx/xx
Used portion
=
P xx
xx
xx
xx
P xx
xx
( xx )
P xx
xx
( xx )
P xx
If the down payment is REFUNDABLE, recognized total Initial Franchise Fee (IFF) as
unearned revenue.
COLLECTION IS NOT REASONABLE ASSURED
Down Payment
P xx
Collection (at PV)
Total Collection
Multiply by: Gross Profit Ratio x%
REALIZED GROSS PROFIT
CFF
Interest Income
xx
Indirect Cost
NET INCOME
Gross
xx
P xx
P xx
xx
( xx )
P xx
Profit
Ratio
=
Down payment + PV of tℎe Balance − Direct Cost
Down Payment + PV of tℎe Balance
REVENUE FROM FRANCHISE FEE = IFF + CFF
NO SUBSTANTIAL PERFORMANCE
CFF
Interest Income
Indirect Cost
NET INCOME
xx
P xx
( xx )
P xx
CONSIGNMENT
Net Sales
Cost of Sales
Gross Profit
OpEx
Commission Expense
Freight-out
Bad debt Expense
Samples Consumed
NET INCOME
Cash/Collection from credit sales
Less: Payment made by consignee in behalf of the consignor
Sales Commission
NET REMITTANCE
Cost of Consigned goods * (units sold/total units)
Freight In * (units sold/total units)
Cartage Cost * (units sold/total units)
COST OF SALES
PART OF COST OF SALES
1.
Freight from consignor to Consignee
2.
Cartage cost
PART OF EXPENSE
1.
Commission of Consignee
2.
Freight from Consignee to third person
3.
Freight from Consignee to consignor
P xx
( xx )
P xx
( xx )
( xx )
( xx )
( xx )
( xx )
P xx
( xx )
P xx
( xx )
P xx
P xx
xx
xx
P xx
GOVERNMENT ACCOUNTING
JOURNAL ENTRIES:
1.
Receipts of the Notice of Cash Collection (NCA) from Department of Budget and
Management (DBM).
Cash-MDS, Regular
P xx
Subsidy Income National Government
P xx
2.
Reversion of UNUTILIZED NCA
Subsidy Income National Government
Cash-MDS, Regular
3.
To record acquisition of equipment acquired on account
Equipment
P xx
Accounts Payable
P xx
To record payment of Accounts Payable
Accounts Payable
Due to BIR
Cash-MDS, Regular
P xx
xx
4.
P xx
P xx
5.
To record the remittance of the tax withheld
Due to BIR
P xx
Cash-Tax Remittance Advice
6.
Establishment of Petty Cash Fund
Petty Cash Fund
Cash-MDS, Regular
P xx
7.
Replenishment of Petty Cash Fund
Various Expenses
Cash-MDS, Regular
P xx
8.
To record unused Petty Cash Fund
Cash-Collecting Office
Petty Cash Fund
P xx
9.
To record liabilities to officers and employees
Salaries & wages, Regular
P xx
PERA
xx
Due to BIR
Due to GSIS
Due to Pag-ibig
P xx
P xx
P xx
P xx
P xx
xx
xx
P xx
Due to Philhealth
Due to Officers & Employees
10.
11.
To record Cash Advance for the payroll
Advances for Payroll
Cash-MDS, Regular
To record the liquidation of the payroll
Due to Officers & Employees
Advances for Payroll
xx
xx
P xx
P xx
P xx
P xx
12.
To record remittances of GSIS, Pag-ibig, and Philhealth
Due to GSIS
P xx
Due to Pag-ibig xx
Due to Philhealth
xx
Cash-MDS, Regular
P xx
13.
To record cash advance
Advances to Officers & Employees
Cash-MDS, Regular
P xx
P xx
14.
To record liquidation of cash advance
Expense
P xx
Advances to Officers & Employees
P xx
15.
To record the refund of the unused cash advance
Cash-collecting Officer
P xx
Advances to officers & Employees
P xx
16.
To record the receipt of notes receivable
Notes Receivable
Revenue
P xx
17.
18.
19.
20.
Receipt of payment from notes receivable
Cash-collecting Officer
Notes Receivable
Interest Income
P xx
P xx
P xx
xx
To record the net income of the agency
Sales Revenue P xx
Other Income
xx
Revenue & Expense Summary
P xx
Revenue & Expense Summary P xx
Acc. Surplus / (Deficit)
P xx
To record loan payable
Cash in Bank - Local/Foreign Currency
P xx
Loan Payable - Local/Foreign Currency
To record the loss from Loan payable under foreign currency
Loss on Foreign Currency
P xx
P xx
Loan payable - Foreign Currency
21.
To record the gain from loan payable under foreign currency
Loan payable - Foreign Currency
P xx
Gain on Foreign Exchange
P xx
22.
Settlement of Loan Payable
Loan Payable - Foreign/Local Currency
Cash in bank - Foreign/Local Currency
P xx
P xx
P xx
ADDITIONAL INFORMATION

The receipt of allotment from the DBM shall be recorded in Registry of Allotments,
Obligations and Disbursements.

To record the incurrence of the obligation it shall be posted in the Obligation Request
Status (ORS), RAOD Capital Outlay

Government Accounting Manual (GAM) took effect on January 1, 2016

Government Accounting encompasses the process of analyzing, recording, classifying,
summarizing and communicating all transactions involving the receipt and disposition of
government funds and property, and interpreting the results thereof.

COVERAGE OF GAM
1.
Basic accounting policies and principles in accordance with the Philippine
Public Sector Accounting Standards (PPSAS) adopted through COA
Resolution No. 2014-003
2.
Revised Chart of Accounts (RCA) prescribed under COA Circular No. 2013002
3.
The accounting procedures, books, registries, records, forms, reports, and
financial statements and illustrative accounting entries.

Government Budget is the financial plan of the government for a given period, usually for a
fiscal year, which shows what resources are, and how they will be generated and used over the
fiscal period.

Responsibility Accounting provides access to cost and revenue information under the
supervision of a manager having a direct responsibility for its performance. It is also a system
that measures the plans and actions of each responsibility center

OBJECTIVE OF RESPONSIBILITY ACCOUNTING
1.
Ensure that all costs and revenues are properly charged/credited to the correct
responsibility center so that deviations from the budget can be readily attributed to
managers accountable thereof.
2.
Provide a basis for making decisions for future operations
3.
Facilitate review activities, monitoring the performance of each responsibility center
and evaluation of the effectiveness of agency’s operations.

Services of the Government Agency shall be recognized as revenue when:
a.
The services are rendered
b.
If not practicable, when fees are collected upon issuance of the respective permits,
certificates of registration plates, stickers, clearance, certification franchises, and
licenses

Statement of Financial Position, Statement of Comparison of Budget & Actual Amounts, and
Statement of cash flows are included in the complete set of General Purpose FS.

Regular Agency Fund, Foreign Assisted Project Fund, and Trust receipts are different fund
cluster.
BUSINESS COMBINATION - STOCK ACQUISITION
STEP ACQUISITION

If the FV of the previously acquired shares (without controlling interest) is not given at the
time there’s new acquisition that makes it to have controlling interest, use this formula:
FV
of
Previously
=
Value of of Newly Acquired Sℎares +Control Premium
% of tℎe newly acquired sℎares
x % of Previously Acquired Shares
Acquired Shares
FULL GOODWILL METHOD IS USE

Always compare the FV of the NCI to the proportionate share of the NCI.

If Proportionate share is greater than the FV, then use the proportionate share of NCI.
FV
OF
NCI
Consideration − Inclusive Control Premium
% of Controlling Interest
NCI
Total Assets (Not including unidentifiable assets)
Less: Total Liabilities
FAIR VALUE OF NET ASSETS
Less: Overvaluation of Assets
Add: Undervaluation of Assets
ADJUSTED FVNA
Multiply by: % of NCI
Proportionate Share of NCI
FVNA
Less: Consideration
% controlling Interest
% of NCI
BARGAIN/(GOODWILL)


P xx
( xx )
P xx
( xx )
xx
P xx
x%
P xx
P xx
( xx )
( xx )
P xx
For the consolidated TOTAL ASSETS; Parent - BOOK VALUE ; SUBSIDIARY - FV
Don’t include unidentifiable intangible assets of SUBSIDIARY
=
x
% of
CONSOLIDATION SUBSEQUENT TO THE DATE OF
ACQUISITION
CONSOLIDATED NET INCOME
Net Income of Parent
Net Income of Subsidiary
Amortization of Excess
Impairment Loss
Intercompany Dividend
Gain on Acquisition
σ
σ
σ
Consideration
FVNA
GOODWILL
PARENT -CI
P xx
xx
xx/(xx)
( xx )
( xx )
xx
P xx
SUBSIDIARY - NCI
P xx
xx/(xx)
( xx )
P xx
Amortization of Excess - this shall be allocated properly to years when it will be
realize. The amortization of excess is computed according to its effect to the
EXPENSES.
a)
If OVERVALUATION of Expenses - ADD Back to Income
b)
If UNDERVALUATION of Expenses - DEDUCTED from Income
Impairment Loss
a)
FULL GOODWILL - if the result is GOODWILL, this shall be subject for
impairment loss. The amount of impairment loss shall be divided to both
parent & the subsidiary according to goodwill allocated to each.
b)
PARTIAL GOODWIL - if the result is GOODWILL, this shall be subject for
impairment loss and ONLY the parent shall bear the loss.
Distribution shall be base on the Goodwill Allocated for CI and NCI
Intercompany Dividend
Intercompany Dividend = Dividend declared by Subsidiary x % of CI
This amount shall be DEDUCTED from the income of PARENT only
CI
P xx
xx
P xx
NCI
P xx
xx
P xx
NON-CONTROLLING INTEREST
NCI - Beginning
NCI - NI
Dividend Declared by Subsidiary (%of NCI)
NCI, Ending
Total
P xx
xx
P xx
P xx
xx
( xx )
P xx
WORKING PAPERS ON THE DATE OF ACQUISITION
1.
2.
3.
4.
Adjustment to SUBSIDIARY Assets (Assume there is Overvaluation in assets of the subsidiary
and there is goodwill in its assets)
Investment in Subsidiary (Controlling Interest %)
P xx
Non-Controlling Interest
xx
Over-valuated Assets
P xx
Goodwill
xx
Adjustment to Subsidiary's EQUITY
Share Capital
P xx
Share Premium
xx
Retained Earnings
xx
Investment in Subsidiary (Controlling Interest)
P xx
Non-Controlling Interest
xx
Adjustment to GOODWILL computed
Goodwill
P xx
Investment in Subsidiary (Controlling Interest)
P xx
Non-Controlling Interest
xx
GAIN ON ACQUISITION
Investment in Subsidiary
P xx
Gain on Acquisition
P xx
CONSOLIDATED RETAINED EARNINGS
Consolidated R/E, Beginning
CI - Net Income of Parent
Dividend Declared by Parent
CONSOLIDATED R/E, Ending
CONSOLIDATED SHE
Share Capital - Parent
Share Premium - Parent
Consolidated R/E
NCI, Ending (SHE of subsidiary in CONSO FS)
CONSOLIDATED SHE
P xx
xx
( xx )
xx
P xx
P xx
xx
xx
P xx
SALE OF FIX ASSET (UPSTREAM & DOWNSTREAM)
CONSOLIDATED DEPRECIATION EXPENSE
Depreciation Expense - Parent
Depreciation Expense - Subsidiary
Amortized portion of Under/(Over) Valued FA
Amortized portion of (URP)/URL of FA
CONSOLIDATED DEPRECIATION EXPENSE
UNREALIZED PROFIT/(LOSS) =
Unrealized Portion
REALIZED PROFIT/(LOSS) =
Portion
P xx
xx
xx/(xx)
(xx)/xx
P xx
Gross Profit
Estimated Useful Life
Gross Profit
Estimated Useful Life
CONSOLIDATED NET INCOME
Net Income - Parent
Net Income - Subsidiary
Realized URP/(URL) from PY - if Down
Realized URP/(URL) from PY - if UpS
(URP)/URL - if DownS
(URP)/URL - if UpS
Amortization Excess
Intercompany Dividends
Gain on Acquisition
PARENT - CI
P xx
xx
xx/(xx)
xx/(xx)
(xx)/xx
(xx)/xx
xx/(xx)
(xx)
xx
P xx
CONSOLIDATED FIXED ASSETS
Fixed Assets - Parent
Fixed Assets - Subsidiary
(Over)/Under Valuation of FA
Amortized portion of Over/(Under) valued FA
URP/(URL) on sale of FA
(RP)/RL on sale of FA
CONSOLIDATED FIXED ASSETS

x % of Realized
SUBSIDIARY - NCI
P xx
xx/(xx)
(xx)/xx
xx/(xx)
P xx
xx/(xx)
x % of
P xx
xx
(xx)/xx
xx/(xx)
(xx)/xx
P xx
If the fixed asset is a LAND, no amortization needed, recognized the whole amount.
SALE OF MERCHANDISE (UPSTREAM & DOWNSTREAM)
CONSOLIDATED SALES REVENUE
Sales Revenue - Parent
Sales Revenue - Subsidiary
Less: Intercompany Sales
CONSOLIDATED SALES REVENUE
P xx
xx
( xx )
P xx
CONSOLIDATED COST OF GOODS SOLD
COGS - Parent
COGS - Subsidiary
Less: Intercompany Sales
Realized (Profit)/Loss from PY
Unrealized Profit/(Loss)
CONSOLIDATED COGS
P xx
xx
( xx )
(xx)/xx
xx/(xx)
P xx
CONSOLIDATED NET INCOME
Net Income - Parent
Net Income - Subsidiary
Realized URP/(URL) from PY - if Down
Realized URP/(URL) from PY - if UpS
(URP)/URL - if DownS
(URP)/URL - if UpS
Amortization Excess
Intercompany Dividends
Gain on Acquisition
PARENT - CI
P xx
xx
xx/(xx)
xx/(xx)
(xx)/xx
(xx)/xx
xx/(xx)
(xx)
xx
P xx
SUBSIDIARY - NCI
P xx
xx/(xx)
(xx)/xx
xx/(xx)
P xx
CONSOLIDATED GROSS PROFIT
Gross Profit - Parent
Gross Profit - Subsidiary
Realized URP/(URL) from PY
(URP)/URL
CONSOLIDATED GROSS PROFIT
CONSOLIDATED ENDING INVENTORIES
Ending Inventory - Parent
Ending Inventory - Subsidiary
(URP)/URL
CONSOLIDATED ENDING INVENTORY
P xx
xx
xx/(xx)
(xx)/xx
P xx
xx
P xx
(xx)/xx
P xx
ENTRY UPON SALE:
PARENT/SUBSIDIARY:
PARENT/SUBSIDIARY:
Accounts Receivable
Sales
P xx
Merchandise Inventory
P xx
Accounts Payable
WORKING PAPER ENTRIES:
1.
2.
3.
4.
P xx
To eliminate INTERCOMPANY SALES
Sales
P xx
Cost of Goods Sold
P xx
To eliminated RECEIVABLE and PAYABLE
Accounts Payable
P xx
Accounts Receivable
P xx
To eliminate REALIZED UNREALIZED PROFIT/(LOSS) of ENDING INVENTORY from
PY
URP: Cost of Goods Sold
P xx
Merchandise Inventory
P xx
URL: Merchandise Inventory
P xx
Cost of Goods Sold
P xx
To eliminated REALIZED URP/URL from RETAINED EARNINGS from PY
Realized URP: Retained Earnings
P xx
Cost of Goods Sold
P xx
Realized URL: Cost of Goods Sold
Retained Earnings

P xx
P xx
P xx
Both the REALIZED and UNREALIZED PROFIT/(LOSS) were already included in the
reported net income of each party. That’s why, only the UNREALIZED PROFIT/(LOSS)is
DEDUCTED/ADDED from the net income because it should not yet form part of the net
income of the entity.
BUSINESS COMBINATION - MERGER
TOTAL ASSETS OF MERGED CORPORATION
Book Value of the Assets of ACQUIRER
FV of the Assets of ACQUIREE
xx
Cash Consideration Paid
Acquisition Related Cost Paid
( xx )
Goodwill from Acquisition
TOTAL ASSETS OF THE MERGED CORPORATION
P xx
( xx )
( xx )
P xx
TOTAL LIABILITIES OF MERGED CORPORATION
BV of the Liabilities of ACQUIRER
P xx
FV of the Liabilities of ACQUIREE
xx
Bonds issued by the ACQUIRER
xx
Premium/(Discount) of Bonds Issued
xx/(xx)
Bond Issue Cost
( xx )
Contingent Liability (at FV)
xx
TOTAL LIABILITIES OF THE MERGED CORPORATION
P xx
SHARE PREMIUM OF MERGED CORPORATION
Share Premium - ACQUIRER
P xx
Share Premium - Contingent Consideration
xx
Share Premium from the issuance (consideration)
xx
Share Issuance Cost
( xx )
TOTAL SHARE PREMIUM OF THE MERGED CORPORATION
P xx
SHARE CAPITAL OF MERGED CORPORATION
Share Capital - ACQUIRER
P xx
Share Capital from Issuance (consideration)
xx
Share Capital -Contingent Consideration
xx
TOTAL SHARE CAPITAL OF THE MERGED CORPORATION
P xx
RETAINED EARNINGS OF THE MERGED CORPORATION
Retained Earnings - ACQUIRER
Acquisition Related Expense
Gain from Acquisition
Excess of Share Issue Cost from Share Issuance
( xx )
TOTAL RETAINED EARNINGS OF THE MERGED CORPORATION
P xx
( xx )
xx
P xx
FOREIGN TRANSACTIONS
INITIAL MEASUREMENT:

Initially it is measured at SPOT RATE at transaction date.

Transaction date will defer depending on the FOB terms use by the transaction. If no
FOB term is provided, transaction date shall be the INVOICE date.
-
If you are a BUYER of goods, the spot rate @ transaction date that you should consider
must be the SELLING RATE.
If you are a SELLER of goods, the spot rate @ transaction date that you should consider
must be the BUYING RATE.
If the problem gives you a BUYING or SELLING RATE as ratio : P1:$0.0250, just
divide the P1 by $0.0250 which is equal to P40.00
INTEREST INCOME = (Face Amount in dollar x Nominal Rate x Period) * Spot Rate
Interest Receivable
P xx
Interest Income
P xx

Remeasure interest income subsequently at FS date and Settlement date

Any INCREASE/(DECREASE) will be recognized as GAIN/(LOSS)
Monetary value should be measured subsequently at FS date and Settlement date.

Any foreign gain/(loss) shall be recognized in the income statement.

If in the FS date or Settlement Date, the selling rate increases, a LOSS shall be
recognized. This is because as the selling rate increases so as the accounts payable.
Foreign Exchange Loss
P xx
Accounts Payable
P xx

If in the FS date or settlement date, the selling rate decreases, a GAIN shall be
recognized. This is because as the selling rate deceases so as the account payable.
Accounts Payable
P xx
Foreign Exchange Gain
P xx

If in the FS date or Settlement Date, the buying rate increases, a GAIN shall be
recognized. This is because as the selling rate increases so as the accounts receivable.
Accounts Receivable
P xx
Foreign Exchange Gain
P xx

If in the FS date or settlement date, the buying rate decreases, a LOSS shall be
recognized. This is because as the selling rate deceases so as the account receivable.
Foreign Exchange Loss
P xx
Accounts Receivable
P xx
CORPORATE LIQUIDATION
FREE ASSETS
CASH
Receivable (assuming
pledged to FSL)
P xx
If there’s excess (FV of
ASSETS - FSL)
Leave it blank if NO excess
Inventory
(assuming
pledged to PSL)
Unsecured
Liabilities
w/o Priority
LIABILITIES
ALREADY
SECURED
P xx
P xx
P xx
FREE ASSETS
Less:
Unsecured
Liabilities w/ Priority
Liquidating Exp.
Salaries Payable
Taxes
xx
P xx
( xx )
( xx )
( xx )
P xx
NET FREE ASSETS;
Unsecured Liabilities
% OF RECOVERY
UNSECURED
PORTION OF
LIABILITIES
P xx
=
Free Assets
Unsecured Liabilitier
Free Assets
Less: Unsecured Liabilities with Priority
Net Free Assets
Less: Total unsecured Liabilities without Priority
Estimated Deficiency
P xx
P xx
( xx )
P xx
( xx )
ESTIMATED PAYMENT TO PARTIALLY SECURED CREDITOR = Amount Secured +
(Unsecured Portion * % of Recovery)
ESTIMATED PAYMENT TO UNSECURED CREDITORS w/O PRIORITY = Total Unsecured
Liabilities w/o Priority * % of Recovery

In COMPUTATING THE ESTIMATED LOSS ON ASSET REALIZATION, ADD all the lost
and NEVER deduct the realized gain against the realized loss.
STATEMENT
LIQUIDATION

OF
REALIZATION
AND
It shows how the receiver or trustee managed the assets of the debtor corporation on
behalf of the creditors.
ASSETS TO BE REALIZED

Non-cash assets to be collected or sold
for the given period.

BV of all recorded non-cash assets
INCREASE IN ASSETS

Unrecorded non-cash assets

Example: Accrued Interest Receivable
LIABILITIES LIQUIDATED

Liabilities paid during the given period
ASSETS REALIZED

Non-cash assets collected or sold for the
given period
ASSETS NOT REALIZED

Non-cash assets not collected or sold for
the given period
LIABILITIES TO BE LIQUIDATED

Book value of the recorded liabilities to
be paid in the given period
INCREASE IN LIABILITIES
LIABILITIES NOT LIQUIDATED

Unrecorded Liabilities

Liabilities not paid at the end of the

Liabilities Assumed
period

Example: Accrued Interest Payable

Liability to be Liquidated + Increase in

Liability - Liabilities Liquidated =
Liabilities not liquidated
SUPPLEMENTARY DEBITS/CHARGES
SUPPLEMENTARY CREDITS

Expenses and Losses

Income, profits, sales and gains

If the DEBIT side is GREATER than credit side, there’s a LOSS.

Under perpetual Inventory system, any inventory sold is DEBITED to the GOGS
(Dr. COGS; Cr. INVENTORIES)

Realized asset are recorded at Realizable amount

Asset to be realized does NOT include cash. So any cash earned and paid is NOT
recorded in the above table.

Assets to be Realized and Liabilities to be Liquidates serve as BEGINNING
balances; whereas Asset not Realized and Liabilities not liquidated serve as
ENDING balances.
Liabilities to be Liquidated
P xx
Add: Increase in Liabilities
Less: Liabilities Liquidated
Liabilities not Liquidated
xx
( xx )
P xx
OTHER WAY TO COMPUTE FOR THE PROFIT/(LOSS) OF THE TRUSTEE
Cash
P xx
Add: Assets Not Realized
xx
Total Assets
P xx
Total Assets
Less: Liabilities not Liquidated
( xx )
Less: NCA Not Liquidates
SHE
( xx )
CASH
Deficit ( xx )
Profit/(Loss)
P xx
Asset to be Realized
Increase in Asset
Less: Asset Not Realized
Book Value of the Asset Sold
Less: Asset Realized
Loss on Realized Asset
Add: Total Supplementary Charges
Less: Total Supplementary Credit
(Gain)/Loss on Realization & Liquidation
P xx
( xx )
xx
( xx )
P xx
P xx
xx
( xx )
P xx
P xx
( xx )
P xx
PARTNERSHIP DISSOLUTION
ADMISSION
PURCHASE OF INTEREST
If the problem is SILENT

There’s only a simple transfer of capital

Thus, TCC = TAC
TCC
TAC
A
P xx
P xx
B
xx
xx
C
xx
P xx
=
P xx
Agreed Capital of New Partner
= TAC x New Partner %
Capital Balance of Old Partners
= Capital - % transferred to NP
REVALUATION is assumed

The amount paid by the new partner is the amount to be credited to his account

TCC ≠ TAC
A
B
C
TCC
P xx
xx
P xx
≠
TAC
P xx
xx
xx
P xx
TAC = NP contribution / New Partner %
Old Partner New Capital Balance
= (Capital of OP –/+ Share in Difference between TCC & TAC) x (100% - NP%)
WAYS TO COMPUTE FOR NEW PROFIT and LOSS RATIO
OP new Capital Ratio = % of OP x (100% - New Partner %)
INVESTMENT
The problem is SILENT

The amount invested by the new partner in added to TCC

Thus, TCC = TAC

From TAC compute the equivalent capital of the new partner
BONUS METHOD
TCC
A
P xx
B
xx
C
xx
P xx
=
TAC
P xx
xx
xx
P xx
Agreed Capital of New Partner
= TAC x New Partner %
Share of OP from Bonus
= (CC of NP – AC of NP) x OP%
GOODWILL METHOD
Compute for the Agreed Capital that will result to Goodwill

TAC = investment of NP / NP% ; or
whichever of the two produces

TAC = Capital of OP / (100% - NP%)
Goodwill

Negative Goodwill is NOT applicable
REVALUATION is assumed

The amount invested by the NP is the amount to be credited in his capital

The amount invested is also added to the TCC

TCC ≠ TAC

Difference between TCC and TAC is then distributed to OP
TCC
TAC
A
P xx
P xx
TAC = NP investment / NP%
B
xx
xx
C
xx
xx
P xx ≠
P xx
RETIREMENT
-
Interest paid to retiring partner
If problem is SILENT, use Bonus Method
Note: Any LOAN balances is only applied to retiring partners
Unadjusted Capital Balances of Partners
(Loan to)/Loan From – Applicable only to retiring partner
Gain/(loss) in the revaluation of asset
Net Income/(Loss) share in Partnership operation
Payment made to retiring partner
CREDIT BALANCE
P xx
(xx)/xx
xx/(xx)
xx/(xx)
(xx)
P xx
If there is difference between the RETIRING partner capital balance and
the amount paid to him, it shall be distributed to REMAINING partners
proportionately.
ASSET REVALUATION is assumed

The difference between the RETIRING partner capital balance and the
amount paid to him is divided by its % and distributed proportionately to
ALL partners.
Capital of Retiring Partner - Payment to Retiring Partner
Retiring Partner %
PARTNERSHIP LIQUIDATION
COMPUTATION FOR TOTAL CASH PAID TO PARTNERS
Total adjusted Capital Balances of Partner
Share in Gain/(Loss) on Realization of NCA
Share in Liquidating Expenses
( xx )
Share in Maximum Possible Loss (MPL)
Share on Gain on Condoned Liability
TOTAL CASH PAID TO PARTNERS
Book Value of the Unrealized NCA
Cash Withheld for Future Liquidating Expenses
MAXIMUM POSSIBLE LOSS (MPL)
xx
P xx
xx/(xx)
( xx )
xx
P xx
P xx
P xx
Compute for the Total Cash Paid to ALL partners to determine if there is
deficiency.
IF THERE’S DEFICIENCY

Partner/s legally SOLVENT - deficient partner will continue additional cash to the
partnership to fix the deficiency

Partner/s legally INSOLVENT - deficiency of the deficient partner shall be absorb
by remaining partners with NO deficiency.
COMPUTATION OF INTEREST FOR NEXT INSTALLMENT

Applies to installment ONLY

Assume first installment was made
Total Adjusted Capital Balances of Partner/s
Gain/(Loss) on Realization of NCA
Liquidating Expenses
Gain on Condoned Liability
Cash Paid to the Partner/s
INTEREST FOR NEXT INSTALLMENT
COMPUTATION FOR TOTAL CASH WITHHELD
Future Liquidating Expenses
Unpaid Liabilities to third persons
TOTAL CASH WITHHELD
( xx )
P xx
xx/(xx)
xx
( xx )
P xx
P xx
xx
P xx
BY-PRODUCT: AT THE POINT OF SALE

NO joint cost is allocated to the by-product
JOINT
COST
PER
Total Joint Cost
¿ pf Main Products Produced
UNIT
=
Price of BY-PRODUCT
should be net of disposal
cost, or at Net realizable
Value
BY-PRODUCT IS TREATED AS ADDITIONAL SALES REVENUE
COGS = Joint cost per unit * # of Main Product Sold
Sales - Main Product
Sales - By-product
TOTAL SALES
COGS
GROSS INCOME
OpEx
NET INCOME
P xx
xx
P xx
( xx )
P xx
( xx )
P xx
BY-PRODUCT IS TREATED AS OTHER INCOME
COGS = Joint cost per unit * # of Main Product Sold
Sales - Main Product
COGS
GROSS INCOME
Sales-By-product
OpEx
NET INCOME
P xx
( xx )
P xx
xx
( xx )
P xx
BY-PRODUCT IS TREATED AS DEDUCTION FROM COGS
COGS = (Joint cost per unit * # of Main Product Sold) - Sales of By-product
Sales - Main Product
COGS
GROSS INCOME
OpEx
NET INCOME
P xx
( xx )
P xx
( xx )
P xx
BY-PRODUCT IS TREATED AS DEDUCTION OF TOTAL MANUFACTURING COST
JOINT
COST
PER
UNIT
Total Joint Cost − Sales of By − product
¿ pf Main Products Produced
COGS = Joint cost per unit * # of Main Product Sold
Sales - Main Product
P xx
=
COGS
GROSS INCOME
OpEx
NET INCOME
( xx )
P xx
( xx )
P xx
BY-PRODUCT AT TIME OF PRODUCTION

IGNORE sales of By-product
NRV METHOD
Joint Cost
# of By-product produced * SP at NRV
ADJUSTED JOINT COST
COGS/unit =
P xx
( xx )
P xx
Adjusted Joint Cost
¿ pf Units Produced
Sales - Main Product
COGS
GROSS INCOME
OpEx
NET INCOME
P xx
( xx )
P xx
( xx )
P xx
REVERSAL COST METHOD
Selling Price of By-Product
Less: Disposal Cost
Normal Profit (given %)
Additional Cost/unit
JOINT COST/UNIT of By-Product
.
Additional Cost/Unit =
P xx
( xx )
( xx )
( xx )
P xx
Total Additional Cost
¿ of By − product Produced
Joint Cost
Joint Cost/unit of By-product * By-product Produced
ADJUSTED JOINT COST
COGS/unit =
Sales - Main Product
COGS
P xx
( xx )
P xx
Adjusted Joint Cost
¿ pf Units Produced
P xx
( xx )
GROSS INCOME
OpEx
NET INCOME
P xx
( xx )
P xx
PROCESS COSTING - FIFO METHOD
MATERIAL PLACEMENT:
a)
If place at the START/Beginning: 100% Complete
b)
If place at the END
: 0% Complete
WIP, Beginning xx units
Started
xx
Total
xx units
Completed
WIP, Ending
Total


UNIT COST
xx units
xx
xx
WIP, Beg. (Record the INCOMPLETE %)
Started & Completed (record 100%)
WIP, End (Record the COMPLETE %)
EQUIVALENT UNITS OF PRODUCTION
DM
xx
xx
xx
xx
CC
xx
xx
xx
xx
Allocate the “COMPLETED” to “WIP, Beginning”, first, then the remaining balance
to the “Started and Completed”.
“Started & Completed” is always recorded at 100% to both DM and CC
UNIT
COST
OF
DM
UNIT
Current Cost ∨Cost Incurred duringTOTAL
Production
COST
EUP of DM
UNIT
COST
OF
DM
Current Cost ∨Cost Incurred during Production
EUP of CC
Cost of Beginning WIP (DM + CC)
Cost to Complete (WIP, Beg, the INCOMPLETE %)
DM: Incomplete Portion * DM unit cost
P xx
xx
=
=
CC: Incomplete Portion * CC unit cost
Started & Completed: 100% units * Total unit cost
COST OF INVENTORY TRANSFERRED OUT
Cost of WIP, Ending
DM: Complete Portion * DM unit cost
CC: Complete Portion * CC unit cost
COST ACCOUNTED FOR


xx
xx
P xx
xx
xx
P xx
Cost of Inventory Transferred Out is considered as Transferred-IN in next
department.
Cost of Ending WIP is considered as “remaining cost of WIP”
PROCESS
METHOD
COSTING
-
WEIGHTED
AVERAGE
MATERIAL PLACEMENT:
c)
If place at the START/Beginning: 100% Complete
d)
If place at the END
: 0% Complete
WIP, Beginning xx units
Started
xx
Total
xx units
Completed
WIP, Ending
Total Units
UNIT COST
xx units
xx
xx units
DM
xx
xx
xx
CC
xx
xx
xx
UNIT
100% Complete
Record the COMPLETE %
Equivalent Units of Production (EUP)
COST
OF
DM
TOTAL UNIT
Beginning Cost of DM +Current Cost
of DM
COST
EUP of DM
=
UNIT
COST
OF
DM
Beginning Cost of CC +Current Cost of CC
EUP of CC
Completed: 100% Units * Total Unit Cost
Cost of WIP, Ending
DM: Complete Portion * DM unit Cost
CC: Complete Portion * CC unit Cost
COST ACCOUNTED FOR

=
P xx
xx
xx
P xx
In the LAST department, the cost of COMPLETED units is considered as “ cost of
goods manufacture.”
PROCESS
COSTING - IN CASE THERE
DEPARTMENT
(WEIGHTED AVERAGE to FIFO METHOD)
ARE
2
ASSUME DEPARTMENT 1 USES WEIGHTED AVE., THEN DEPARTMENT 2 USES FIFO
METHOD
DEPARTMENT 1: WEIGHTED AVERAGE
WIP, Beginning xx units
Started
xx
Total
xx units
DM CC
Completed
xx units
xx
xx
100% Complete
WIP, Ending
xx
xx
xx
Record the COMPLETE %
Total Units
xx units
xx
xx
Equivalent Units of Production (EUP)
UNIT COST
UNIT
COST
OF
DM
TOTAL UNIT
Beginning Cost of DM +Current Cost
of DM
COST
EUP of DM
UNIT
COST
OF
DM
Beginning Cost of CC +Current Cost of CC
EUP of CC
Completed: 100% Units * Total Unit Cost
Cost of WIP, Ending
DM: Complete Portion * DM unit Cost
CC: Complete Portion * CC unit Cost
COST ACCOUNTED FOR


=
P xx
xx
xx
P xx
Cost of “COMPLETED” units is considered as the AMOUNT TRANSFERRED-IN
in Department 2.
“Cost of WIP, Ending” is considered the Remaining cost of WIP in Department 1
DEPARTMENT 2: FIFO
WIP, Beginning xx units
Started
xx
(Completed units in Department 1)
Total
xx units
Transferred-In
WIP, Beg. (INCOMPLETE %)
Completed
xx units Started & Completed (100%)
xx
WIP, Ending
xx
WIP, End (COMPLETE %)
xx
Total
xx
EUP
xx
UNIT COST
=
UNIT
COST
OF
DM
xx
xx
xx
xx
CC
xx
xx
xx
xx
DM
Current Cost ∨Cost Incurred during Production
EUP of DM
UNIT
COST
OF
=
TOTAL UNIT
DM
=
COST
Current Cost ∨Cost Incurred during Production
EUP of CC
UNIT
COST
OF
TRANSFERRED-IN
=
Amount Transferred −∈¿ Department 1
EUP of Transferred∈¿ ¿
Cost of Beginning WIP (DM + CC)
Cost to Complete (WIP, Beg, the INCOMPLETE %)
DM: Incomplete Portion * DM unit cost
CC: Incomplete Portion * CC unit cost
Started & Completed: 100% units * Total unit cost
COST OF INVENTORY TRANSFERRED OUT
Cost of WIP, Ending
TI: Complete Portion * TI unit cost
DM: Complete Portion * DM unit cost
CC: Complete Portion * CC unit cost
COST ACCOUNTED FOR
P xx
xx
xx
xx
P xx
xx
xx
xx
P xx
PROCESS
COSTING
DEPARTMENT
-
IN
CASE
THERE
ARE
2
(FIFO to WEIGHTED AVERAGE)
ASSUME DEPARTMENT 1 USES FIFO METHOD., THEN DEPARTMENT 2 USES WEIGHTED
AVE.
DEPARTMENT 1
WIP, Beginning xx units
Started
xx
Total
xx units
DM
CC
WIP, Beg. (Record the INCOMPLETE %)
xx
xx
Completed
xx units Started & Completed (record 100%)
xx
xx
WIP, Ending
xx
WIP, End (Record the COMPLETE %)
xx
xx
Total
xx
EQUIVALENT UNITS OF PRODUCTION xx
xx

UNIT COST
The “COMPLETED” units are the one transferred-out to the next department and
became the “STARTED” units of the next department.
UNIT
COST
OF
DM
UNIT
Current Cost ∨Cost Incurred duringTOTAL
Production
COST
EUP of DM
UNIT
COST
OF
DM
Current Cost ∨Cost Incurred during Production
EUP of CC
Cost of Beginning WIP (DM + CC)
Cost to Complete (WIP, Beg, the INCOMPLETE %)
DM: Incomplete Portion * DM unit cost
CC: Incomplete Portion * CC unit cost
Started & Completed: 100% units * Total unit cost
COST OF INVENTORY TRANSFERRED OUT
Cost of WIP, Ending
DM: Complete Portion * DM unit cost
CC: Complete Portion * CC unit cost
P xx
xx
xx
xx
P xx
xx
xx
=
=
COST ACCOUNTED FOR

P xx
Cost of Inventory Transferred Out is considered as Transferred-IN in next
department.
Cost of Ending WIP is considered as “remaining cost of WIP”

DEPARTMENT 2
WIP, Beginning xx units
Started
xx
Total
xx units
Completed
WIP, Ending
Total Units
xx units
xx
xx units
UNIT COST
Transferred-In DM
xx
xx
xx
xx
xx
xx
UNIT
CC
xx
xx
xx
100% Complete
Record the COMPLETE %
(EUP)
COST
OF
DM
Beginning Cost of DM +Current Cost of DM
EUP of DM
UNIT
COST
OF
=
TOTAL UNIT
DM COST =
Beginning Cost of CC +Current Cost of CC
EUP of CC
UNIT
COST
OF
TRANSFERRED-IN
BeginningTI + Amountof TI ¿ Departmetn 1
Completed: 100% Units * Total Unit Cost
Cost of WIP, Ending
TI: Complete Portion * TI unit cost
DM: Complete Portion * DM unit Cost
CC: Complete Portion * CC unit Cost
COST ACCOUNTED FOR
P xx
xx
xx
xx
P xx
=
¿
EUP of Trans
PROCESS COSTING - IF THERE IS LOST UNITS
DISCRETE NORMAL or ABNORMAL
There is an INSPECTION point

Inspection Point is in terms of CONVERSION Process

No computation to get this (this is given in the problem)
DIRECT MATERIAL
a)
If PLACEMENT FIRST - include only in the EUP schedule the portion place before
the inspection point.

Example: A quarter of the total materials are added at the start of the process,
while the remaining 3 quarters are added at the end. Goods are inspected at
the halfway mark of the process.
b)
If INSPECTION FIRST before placement - don’t account any normal or abnormal
lost units in the EUP schedule.
CONVERSION COST

Lost Units

x
% of Inspection Point
If LOST UNITS are within tolerable range, then NO need to recognize lost units.
COMPUTATION OF LOST UNITS
WIP, Beginning
Started
WIP, Ending
Correct Balance of Completed Units
xx units
xx
(xx)
xx
Recorded Completed Units
LOST UNITS
a)
b)
The “LOST UNITS” are allocated to
NORMAL LOST = Started Units x
% of Normal Lost
ABNORMAL lost = Remaining balance of “started units”
FIFO METHOD
WIP, Beginning
Started
These are
NOT
Balance
due to
lost units
Completed
WIP, Ending
Completed xx
WIP, Ending
xx units
xx
Xx
xx
xx
Xx
WEIGHTED AVERAGE
WIP, Beginning
Started
These are
NOT
Balance
due to lost
units
(xx)
xx units
DM
WIP, Beg.
Xx
S&C
xx
WIP, End
xx
Normal Lost
xx
Abnormal Lost xx
EUP
xx
xx units
xx
Xx
Completed
xx
Xx
DM
xx
xx
WIP, End
xx
Normal Lost
xx
Abnormal Lost
xx
EUP
xx
CC
xx
xx
xx
xx
xx
xx
CC
xx
xx
xx
xx
NORMAL LOST is allocated always to “Started and Completed”, and either between WIP, Beginning or
WIP, Ending, or both.

Allocation shall be based in their EUP schedule (DM EUP and CC EUP)

Allocation of NORMAL LOST depends on the % completed & the inspection point.
a)
If the % completed reach the % of inspection point, then such WIP will be
included in the allocation.

Take note that for “WIP, Beginning”, the % completed is where the BWIP
started in such department. Thus, the completed portion of BWIP has been
already performed in the previous department. So if the inspection point is
50% & BWIP is 80% completed, BWIP shall NOT be included in the
allocation.
ABNORMAL LOST is treated as PERIOD COST
FIFO
Cost of Beginning WIP (DM + CC)
P xx
Cost to Complete (Beg. WIP, the INCOMPLETE %)
DM: Incomplete Portion x DM unit Cost
CC: Incomplete Portion x CC unit Cost
Started & Completed: 100% units x Total Unit Cost
Normal Lost Allocation
COST OF INVENTORY TRANSFERRED OUT
Cost of Ending, WIP
Normal Loss Allocation, if there’s any
DM: Complete Portion x DM unit cost
CC: Complete Portion x CC unit cost
Abnormal Lost
COST ACCOUNTED FOR
xx
xx
xx
xx
xx
WEIGHTED AVERAGE
Completed: 100% units x Total Unit Cost
Normal Lost Allocation
Cost of Inventory Transferred-out
Cost of WIP, Ending
Normal Lost Allocation, if there’s any
DM: Complete Portion x DM unit cost
CC: Complete Portion x CC uni cost
Abnormal Lost
Cost Accounted For
xx
xx
xx
P xx
P xx
xx
P xx
xx
xx
xx
xx
P xx
P xx
SALE or RETURN
A seller entity sends goods to a customer and gives them the option to either:
a)
Approve and Retain the goods; or
b)
Return then within an agreed period
ON THE DAY OF SALE, the seller recognized the payment of the seller.
JOURNAL ENTRIES:
1. For items SOLD:
Cash or Accounts Receivable
Sales
P xx
COGS
P xx
2. Items for POSSIBLE RETURN:
3. Date of DELIVERY:
Inventory
P xx
P xx
Cash or Accounts Receivable
P xx
Liability for Possible Return
P xx
Asset for Possible Return
Inventory
P xx
P xx
Cash or Accounts Receivable P xx
Liability for Possible Return
Sales
COGS
Asset for Possible Return
Inventory
P xx
xx
4. Date or RETURN, BEFORE expiration date: Liability for Possible Return
Cash or Accounts Receivable
Inventory
P xx
P xx
xx
P xx
P xx
P xx
Asset for Possible Return P xx
5. Date of Return, AFTER expiration Date: Liability for Possible Return
Sales
COGS
Asset for Possible Return
P xx
P xx
NOTE:
Revenue is RECOGNIZED when either
1. There is historical evidence or data present: Reliable Estimate
2. The customer acknowledged or accepted the item
3. The period of return lapsed, therefore deemed sold.

P xx
P xx
If non of the above information was given in the problem, therefore the seller will NOT
recognize any revenue for that year.
INSTALLMENT SALES
GPR =
Total Installment Sale− Cost
Total Installment Sale
DEFERRED GROSS
PROFIT = Installment Receivable * GPR
INSTALLMENT SALE =
Cost of Installment Sales
Cost Ratio
REALIZED GROSS PROFIT = Collection (excluding interest) * GPR
Installment Receivable, Beginning
P xx
P xx
Default portion of repurchase item
Xx Collection from repurchase items
Xx Collections
P xx Installment Receivable, Ending
REPOSSESED MERCHANDISE
FMV of the Repossessed Merchandise
Less: URC (Defaulted Amount * Cost Ratio)
Gain/(Loss) from Repossessed Merchandise
FMV OF THE REPOSSESSED MERCHANDISE
Estimated Selling Price
Less: Reconditioning Cost
( xx )
P xx
P xx
P xx
( xx )
Normal Profit (% based on the estimated SP)
Cost to Sell
FMV of the Repossessed Merchandise
( xx )
( xx )
P xx
Once the Repossessed Merchandise is SOLD:
GPR =
Reconditioning Cost
Selling Price −Cost
Selling Price
Realized Gross Profit
Interest Income
Gain/(Loss) on Repossessed Item
NET INCOME
TRADE-IN TRANSACTIONS
FMV Trade-In
Allowance for Trade-In
Under/(Over) Allowance
COST = FMV +
xx
P xx
( xx )
P xx
If UNDER-Allowance - ADDBACK to Installment Sales
If OVER-Allowance - DEDUCT from the Installment Sales
Installment Sales
Under/(Over) Allowance
Adjusted Installment Sales
COLLECTION
P xx
xx
P xx --> New basis in computing the GPR
Down Payment
FV of the Trade-in Item
Collection, net of Interest
TOTAL COLLECTION
Original Installment Sale
P xx
xx
xx
P xx.
Installment Sales Receivable
P xx
P xx Down Payment
Xx Trade-in Allowance
Xx Collections
P xx
xx/(xx)
P xx
JOB ORDER COSTING
OVERHEAD COSTS
Overhead is applied to jobs using a PREDETERMINED RATE.
Predetermine Rate =
Total Budgeted Overℎead
Allocation Base
Allocation based can be DLHrs., DL Cost, or MHrs.
APPLIED OVERHEAD = Actual Allocation Base x Predetermined Rate
MANUFACTURING OVERHEAD CONTROL ACCOUNT

A temporary controlled account

Actual Overhead Costs are recorded on the DEBIT side of the Manufacturing OH
control account.

Applied Overhead Costs are recorded on the CREDIT side of the Manufacturing OH
control account.
MANUFACTURING OH ACCOUNT
End
Actual OH incurred
Applied OH
End


If the ending balance is a DEBIT balance, it is UNDERAPPLIED

ADDBACK to COGS
If the ending balance is a CREDIT balance, it is OVERAPPLIED

DEDUCT from COGS
Direct Materials Used
Direct Labor
Applied Overhead
Total Manufacturing Cost
WIP, Beginning
Total Goods Placed in Process
WIP, Ending
Total Goods Manufactured
Finished Goods, Beginning
Total Goods Available for Sale
Finished Goods, Ending
Normal COGS
Under/(Over) applied OH
Actual COGS
Actual Costing:
Total Net Sales
Less: Actual COGS
Gross Profit
Less: OpEx
Net Income
Normal Costing:
Total Net Sales
Less: Normal COGS
Gross Profit
Less: OpEx
Net Income
P xx
P xx
xx
P xx
P xx
( xx )
( xx )
P xx
P xx
( xx )
( xx )
P xx
P xx
xx
xx
P xx
( xx )
P xx
xx
P xx
( xx )
P xx
xx/(xx)
P xx
SPOILED GOODS
SPOILED GOODS CHARGED TO SPECIFIC JOB

Spoilage due to customer

Allowance for spoilage is NOT added to COGS

Spoilage is charged to customer thus increasing the cost/unit of good units.
PREDETERMINED
RATE
Overℎead Cost , exclusive of allowance
Allocation Base
Total Units Manufactured
Less: Spoiled Units
Good Units
Total Units Manufactured
Multiply by: Cost per Unit
Total Cost of Goods
NRV of Spoiled Goods
Cost Transferred to Finished Goods
Divide by: Good Units
xxx units
(xx)
xx units
xxx units
Px
P xx
( xx )
P xx
xx units
=
New Cost per unit
P x/unit
SPOILED GOODS CHARGED TO COMPLETE / ALL JOBS

Spoilage due to internal failure

Allowance for spoilage is ADDED to COGS

Allowance for spoilage is charged to Overhead as an additional cost
PREDETERMINED
RATE
=
Overℎead Cost , INCLUSIVE of allowance
Allocation Base
Total Units Manufactured
Less: Spoiled Units
Goods Units
Multiply by: Cost per unit
Costs Transferred to Finished Goods
Divide by: Good units
New Cost per unit
xxx units
( xx )
xx units
P xx
P xxx
xx units
P xx/unit
Cost of Spoiled Goods is DEDUCTED from WIP Account
Spoiled Goods at NRV
Manufacturing OH (squeezed)
xx
WIP Account
P xx
P xx
REWORK
REWORK and SPOILAGE CHARGED TO SPECIFIC JOB

Rework and Spoilage is due to customer

Rework Cost and Spoilage Allowance is NOT added to COGS
PREDETERMINED
RATE
Overℎead Cost , exclusive of allowance
Allocation Base
Total Goods Manufactured
Multiply by: Cost per unit
Total Cost of Goods
Less: NRV of Spoiled Goods
Add: Rework Cost
xx units
Px
P xx
( xx )
xx
=
Cost of Goods Transferred to Finished Goods P xx
Divide by: Good units
New Cost per unit
xx units
P xx
Total Rework Cost = Defective Units x Rework Cost per unit
REWORK and SPOILAGE CHARGED TO COMPLETE / ALL JOBS

Spoilage and Rework is due to internal failure

Allowance for spoilage is ADDED to COGS

The rework cost is IGNORED because it is already part of the manufacturing costs.
PREDETERMINED
RATE
Overℎead Cost , INCLUSIVE of allowance
Allocation Base
Total Units Manufactured
Less: Spoiled Units
Goods Units
Multiply by: Cost per unit
Costs Transferred to Finished Goods
Divide by: Good units
New Cost per unit
Direct Material
Direct Labor
OH, inclusive of allowance
Total Manufacturing Cost
Divide by: Total Goods manufactured
Cost per unit
=
xxx units
( xx )
xx units
P xx
P xxx
xx units
P xx/unit
P xx
xx
xx
P xx
xx units
P x/unit
JUST-IN-TIME MANUFACTURING SYSTEM




A production system
Each component in a production line is produce immediately as needed by the next step in the
production process.
Ideal Batch: ONE
No place for error
BENEFITS:
1.
2.
Lowering the cost in inventory
Enhance product quality and delivery time
3.
Accounting procedures are simplified through backflush costing
DISADVANTAGE: Less margin of errors in the production process
GENERALLY:
if SILENT, loss is normal, EXCEPT for JIT, it is considered abnormal
BACKFLUSH COSTING



A product costing system usually used for JUST-IN-TIME production system
It eliminates the detailed tracking of cost throughout the production system and only
prepares journal entries at the specified TRIGGER POINTS.
Standard Costing is the most appropriate costing method when using backflush
costing in a JIT inventory system.
TRIGGER POINTS
PURCHASE
3 TRIGGER POINTS
Materials-in-Process
Cash
P xx
P xx
2 TRIGER POINTS
(Purchase and Sales)
Materials-in-Process
P xx
Cash
P xx
CONVERSION COST
PRODUCTION
SALES
Conversion Cost
P xx
Payroll
P xx
Various Accounts
xx
Finished Goods
P xx
Materials-in-Process P xx
Conversion Cost
xx
COGS
P xx
Finished Goods
P xx
Accounts Receivable
Sales
P xx
P xx
Conversion Cost
P xx
Payroll
P xx
Various Accounts
xx
NO ENTRY
COGS
P xx
Materials-in-Process P xx
Conversion Cost
xx
Accounts Receivable
Sales
P xx
P xx
3 TRIGGER POINTS

Upon purchase of materials and incurring conversion cost, a materials-inprocess and conversion cost are recognized, respectively.

Once the goods are finished, both the materials-inprocess and conversion cost are credited.

The amount of finished goods is then closed to COGS.
2 TRIGGER POINTS (Purchase and Sales)

If the Trigger Points are PURCHASES and SALES

PRODUCTION is ignored.

The Materials-in-Process and Conversion cost are closed
to COGS.
PURCHASE
CONVERSION COST
PRODUCTION
SALES
2 TRIGGER POINTS
(Production and Sales
NO ENTRY
Conversion Cost
P xx
Payroll
P xx
Various Accounts
xx
Finished Goods
P xx
Accounts Payable
P xx
Conversion Cost
xx
COGS
P xx
Finished Goods
P xx
Accounts Receivable
P xx
21TRIGER POINT
(Sales)
NO ENTRY
Conversion Cost
P xx
Payroll
P xx
Various Accounts
xx
NO ENTRY
COGS
P xx
Accounts Payable
P xx
Conversion Cost
xx
Sales
P xx
2 TRIGGER POINTS (Production and Sales)

If the Trigger Points are Production and SALES

PURCHASE is ignored.

Once the goods are FINISHED, accounts payable is
recognized.
JOINT COST
Common manufacturing costs from the START of production up to the SPLIT-OFF point.
PHYSICAL METHOD
Based of units produced
Products
AA
BB
CC
DD
Units
xx
xxx
xxxx
xxxxx
xxxxxx
Ratio
X
xx/xxxxxx
xxx/xxxxxx
xxxx/xxxxxx
xxxxx/xxxxxx
WEIGHTED AVERAGE METHOD
Based on Production x Weight Factor
Joint Cost
P xxxx
=
Joint cost Allocation
P xx
xx
xx
xx
Products
AA
BB
CC
DD
Units x Weight = Weighted
Ratio
X Joint Cost = Joint Cost Allocation
Factor
Average______________________________________________
xx
x.x
xxx
xxx/xxxx
=
P xx
xx
x.x
xxx
xxx/xxxx
P XXXX
xx
xx
x.x
xxx
xxx/xxxx
xx
xx
x.x
xxx
xxx/xxxx
xx
Xxxx
SALES VALUE at SPLIT-OFF METHOD
Based on Production x SP per unit at split-off
Products
Units x Sales Price = Sales Value Ratio
unit
at
SO
SO_____________________________________Allocation
AA
xx
P x.x
P xx
Pxx/Pxxx
BB
xx
x.x
xx
xx/xxx
CC
xx
x.x
xx
xx/xxx
DD
xx
x.x
xX
xx/xxx
P xxx
X
Joint Cost =
=
P xx
P XXXX xx
Joint Cost
at
xx
xx
NRV at SPLIT-OFF METHOD
Based on (Production x SP per unit at SO) - Separate Cost at SO
Products Units x Sales Price - Separate = NRV
Allocation
AA
BB
Cc
DD
Unit at SO
xx
xx
xx
xx
P x.x
x.x
x.x
x.x
Cost at SO
P xx
xx
xx
xx
P xx
xx
xx
xx
P xxx
Ratio
X Joint Cost =
Joint Cost
at SO ___________________________________
Pxx/Pxxx
xx/xxx
xx/xxx
xx/xxx
P XXXX
=
P xx
xx
xx
xx
APPROXIMATE NRV

Based on (Production x Ultimate SP per unit) - Total Separate Cost after SO

Total separate cost after SO is just the sum of the separate costs at SO and separate
cost after SO.

More suitable for products that undergo further processing after the split-off point since it takes
into account the additional costs needed to further process and sell the joint products.
Products Units x Ultimate SP - Total Separate = Approximate Ratio X Joint Cost = Joint Cost
Per unit
Cost after SO
NRV _______________________________
Allocation
AA
BB
CC
DD
xx
xx
xx
xx
P x.x
x.x
x.x
x.x
P xx
xx
xx
xx
P xx
xx
xx
xx
P xxx
Pxx/Pxxx
xx/xxx
xx/xxx
xx/xxx
P XXXX
=
P xx
xx
xx
xx
SUPPORT ALLOCATION
PLEASE VIEW THE BIGGER NOTES
NON-PROFIT ORGANIZATION
STATEMENT OF FINANCIAL POSITION
ASSETS - LIABILITIES = NET ASSETS
NET ASSETS
Under SFAS 17
1.
Unrestricted Contribution
2.
Temporary Restricted Contribution
3.
Permanent Restricted Contribution
UNDE ASU - 2016 - 14

Unrestricted Contribution = Without Donor Restriction

Temporary & Permanent R. Con. = With Donor Restriction
UNRESTRICTED CONTRIBUTION
JOURNAL ENTRY: If cash is received:
Cash
P xx
Contribution Revenue
P xx
If NCA is received:
NCA
P xx
Contribution Revenue
P xx
Once NCA received is USED: NCA Expense
NCA
P xx
TEMPORARY RESTRICTED CONTRIBUTION
JOURNAL ENTRY: If cash is received: Cash
P xx
Contribution Revenue - Temporary
If the cash is to be used: Net Asset Released from Temp. Restriction
Cash
Then record it under the UNRESTRICTED as:
Cash
P xx
Net Asset Released from Temp. Restriction
P xx
Then record it under the UNRESTRICTED as:
Cash
P xx
Net Asset Released from Perm. Restriction
If NCA is received: NCA
P xx
Contribution Revenue - Permanent
P xx
P xx
P xx
If Equity Security is received and only the investment income can be used by NPO.
UNDER UNRESTRICTED:
Cash
P xx
Dividend Income
P xx
UNCONDITIONAL PLEDGE (PROMISE)
Upon Receipt of Promise: Pledge Receivable
Contribution Revenue
Cash
Pledge Receivable
P xx
P xx
P xx
P xx
P xx
PERMANENTLY RESTRICTED CONTRIBUTION
JOURNAL ENTRY: If cash is received: Cash
P xx
Contribution Revenue - Permanent
If the cash is to be used: Net Asset Released from Perm. Restriction
Cash
P xx
P xx
P xx
P xx
P xx
If there’s Doubtful Collection: Doubtful Account
P xx
Allowance for Doubtful Account
P xx
CONDITIONAL PLEDGE (PROMISE)

The condition must be fulfilled first
SERVICES

Measured at FV

It is considered as SERVICES if:
a.
It enhances or creates a non-financial asset
b.
Required specialized skills which would have been purchased
UNDER UNRESTRICTED:
Expense/Asset P xx
Contribution Revenue
NET INCREASE IN UNRESTRICTED ASSETS
Total Unrestricted Contribution
Other Income: Dividend Income (other)
xx
Less: Various Expense
Add: Net Assets Released from Restriction
NET INCREASE IN UNRESTRICTED ASSETS
P xx
P xx
( xx )
xx
P xx
FOREIGN EXCHANGE TRANSACTIONS and
DERIVATIVES
IF NO FORWARD CONTRACT IS ENTERED
1.
PURCHASE OF ITEMS
Foreign Exchange Gain/Loss
AT REPORTING DATE: Selling Rate at reporting Period
Selling Rate when ownership acquired
Difference
MULTIPLY BY: $ amount
Foreign exchange (Gain)/Loss
AT SETTLEMENT DATE: Selling Rate at Settlement Date
Selling Rate at reporting Period
Difference
MULTIPLY BY: $ amount
P xx
( xx )
P xx
$ xx
P xx
P xx
( xx )
P xx
$ xx
Foreign exchange (Gain)/Loss
P xx
JOURNAL ENTRY WHEN OWNERSHIP is acquired
Inventory
Accounts Payable ($ amount * Selling Spot Rate)
ᴥ
ᴥ
P xx
P xx
Any Gain/Loss from foreign exchange will only affect the
ACCOUNTS PAYABLE. Thus, AP will either, increase or
decrease depending on the changes in the Selling Rate.
Foreign Exchange LossP xx
Accounts Payable
P xx
Accounts Payable
P xx
Foreign Exchange Gain
P xx
INVENTORY value will remain the same when recognized when
ownership was acquired.
INTEREST EXPENSE = $ Amount x Interest Rate x Period x Selling Rate
SUBSEQUENT YEAR: TOTAL FOREIGN EXCHANGE GAIN/LOSS)
Selling Rate at Settlement Date
P xx
Selling Rate at reporting Period
( xx )
Difference
P xx
MULTIPLY BY: $ amount
$ xx
Foreign exchange (Gain)/Loss
P xx
Interest Expense at Settlement Date
Interest Expense at Reporting Date
Foreign Exchange (Gain) / Loss
2.
SELL OF ITEMS
Foreign Exchange Gain/Loss
AT REPORTING DATE: Buying Rate at reporting Period
Buying Rate when ownership acquired
Difference
MULTIPLY BY: $ amount
Foreign exchange Gain/(Loss)
P xx
( xx )
P xx
P xx
( xx )
P xx
$ xx
P xx
AT SETTLEMENT DATE: Buying Rate at Settlement Date
Buying Rate at reporting Period
Difference
MULTIPLY BY: $ amount
Foreign exchange Gain/(Loss)
INTEREST INCOME = $ Amount x Interest Rate x Period x Buying Rate
P xx
( xx )
P xx
$ xx
P xx
SUBSEQUENT YEAR: TOTAL FOREIGN EXCHANGE GAIN/LOSS)
Buying Rate at Settlement Date
P xx
Buying Rate at reporting Period
( xx )
Difference
P xx
MULTIPLY BY: $ amount
$ xx
Foreign exchange Gain/(Loss)
P xx
Interest Income at Settlement Date
Interest Income at Reporting Date
Foreign Exchange Gain / (Loss)
P xx
( xx )
P xx
FOREIGN EXCHANGE TRANSACTIONS and
DERIVATIVES
IF FORWARD CONTRACT IS ENTERED
FORWARD CONTRACT TO SELL


Same treatment with the foreign exchange transactions as if forward contract is NOT
entered.
We will only consider here, the effects in the FORWARD CONTRACT
WHEN CONTRACT IS ENTERED
Forward Contract Receivable
P xx
Forward Contract Payable ($ amount * Forward rate on the total days) P xx
ᴥ
Any foreign exchange gain/loss will only affect ACCOUNTS PAYABLE
FOREIGN EXCHANGE GAIN/(LOSS) from Forward Contract at reporting date
Forward Rate on the day nearest to settlement date
P xx
Forward Rate on the total days of the forward contract
( xx )
Difference
P xx
Multiply by: $ amount
$ xx
Foreign Exchange (Gain)/Loss in forward contract
P xx


If GAIN, forward contract ASSET
If LOSS, forward contract LIABILITY
FOREIGN EXCHANGE GAIN/(LOSS) from Forward Contract at settlement date
Spot Rate on the day of settlement
P xx
Forward Rate on the day nearest to settlement date
( xx )
Difference
P xx
Multiply by: $ amount
$ xx
Foreign Exchange (Gain)/Loss in forward contract
P xx


If GAIN, forward contract ASSET
If LOSS, forward contract LIABILITY
GAIN/LOSS FROM HEDGING ACTIVITY
Foreign Exchange Gain/Loss from Foreign Transaction
Foreign Exchange Gain/(Loss) from forward contract
GAIN/(LOSS) FROM HEDGING ACTIVITY
xx
P xx
P xx
FORWARD CONTRACT TO BUY


Same treatment with the foreign exchange transactions as if forward contract is NOT
entered.
We will only consider here, the effects in the FORWARD CONTRACT
WHEN CONTRACT IS ENTERED
Forward Contract Receivable ($ amount * Forward rate on day entered FC)
Forward Contract Payable
ᴥ
Any foreign exchange
RECEIVABLE
gain/loss
will
only
affect
FOREIGN EXCHANGE GAIN/(LOSS) from Forward Contract at reporting date
Forward Rate on reporting date
P xx
Forward Rate when forward contract was entered
( xx )
Difference
P xx
Multiply by: $ amount
$ xx
P xx
P xx
ACCOUNTS
Foreign Exchange Gain/(Loss) in forward contract



P xx
If GAIN, forward contract ASSET
If LOSS, forward contract LIABILITY
If the question ash for foreign gain/loss of HEDGE ITEM, refer to the foreign
exchange gain/(loss) in foreign exchange transactions and NOT on the hedge
instrument.
FOREIGN EXCHANGE GAIN/(LOSS) from Forward Contract at settlement date
Forward Rate on the day of settlement
P xx
Forward Rate on reporting date
( xx )
Difference
P xx
Multiply by: $ amount
$ xx
Foreign Exchange Gain/(Loss) in forward contract
P xx
NET CASH PAID/RECEIVED ON SETTLEMENT DATE
Cash Payment made in Foreign Exchange Transaction
Cash Received from Forward Contract
Cash Payment made in Forward Contract
NET CASH PAID/RECEIVED ON SETTLEMENT DATE
P( xx )
xx
( xx )
P xx
PURCHASE COMMITMENT



Upon order to purchase, there is still NO transaction, thus no entry.
The purchase is NON-CANCELLABLE and BINDING as to purchase price
FORWARD RATE is the only relevant rate
CASH PAYMENT = Spot Rate at Delivery & Payment Day * $ amount
Inventory
P xx
Cash
P xx
P xx
INITIAL MEASUREMENT OF INVENTORY
Inventory (Spot Rate at Delivery & Payment Day * $ amount)
± FX Gain/(Loss) in purchase commitment transaction
INITIAL MEASUREMENT OF
NET CASH PAID/RECEIVED ON SETTLEMENT DATE
Cash Payment made in Foreign Exchange Transaction
Cash Received from Forward Contract
Cash Payment made in Forward Contract
P xx
xx
P( xx )
xx
( xx )
NET CASH PAID/RECEIVED ON SETTLEMENT DATE

FORECASTED TRANSACTION and CALL OPTION




P xx
Same process of computation of foreign exchange gain or loss in foreign transactions
HIGHLY PROBABLE purchase transaction (CASH FLOW HEDGE)
by the time the company purchase the items, the entity will ONLY PAY the amount of
Call option purchased.
The option has INTRINSIC VALUE if it is highly probable that it will be exercise