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AFAR FORMULAS
HOBA
COMPUTATION FOR COGS, ENDING INVENTORY, ALLOWANCE, COGAS
RETAIL COST Allowance SFHO P xx Net of Markup Retail - Cost Outside Purchase xx Just copy amount n/a COGAS P xx P xx P xx End. Inventory SHFO ( xx ) Net of Markup Retail - Cost Outside Purchase ( xx ) Just copy amount n/a COGS P xx P xx P xx.
COST OF SFHO:
If based on Cost : Cost =^ SFHO^ @retailed^ amount
1 + mark −up rate
If Based on Sales: Cost = SFHO - (SFHO x Markup Rate)
NET INCOME
Home Office Branch Sales P xx Sales P xx COGS ( xx ) COGS ( xx ) Gross Profit P xx Gross Profit P xx OpEx ( xx ) OpEx ( xx ) Net Income P xx Unrecorded Expenses ( xx ) Net Income P xx Realized portion of Allowance xx True Income 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 P xx Purchases xx Less: Shipment to Branch ( xx ) Ending Inventory ( xx ) COGS P xx
LONG-TERM CONSTRUCTION CONTRACT
GENERAL FORMULA:
% of COMPLETION ZERO PROFIT Contract Price P xx P xx Less: TEC Cumulative Cost Incurred to Date P xx P xx Est. Cost to Complete xx xx TEC P xx xx P xx xx Est. Gross Profit/(Loss) P xx P xx/(xx) Multiply by: % of Completion x% Gross Profit/(loss) to Date P xx P(xx) Less: PY Gross P/L to Date xx xx Realized Gross P/L for the Year P xx P xx COMPUTATION OF % OF COMPLETION: % of Completion =
CumulativeCost Inccured
TEC
“Est. Cost AT completion” = TEC Alternative Formula: % of Completion =
Construction ∈ Progress
Contract Price
applies only if there’s NO LOSS OTHER FORMULAS: Contract Price P xx Multiply by: % of Completion x% REVENUE TO DATE P xx Less: Cost incurred to Date ( xx ) Gross Profit/(Loss) to Date P xx Revenue to Date (Current Year) P xx Revenue to Date (Prior Year) ( xx ) Revenue for the year P xx Construction cost of Sales (Squeezed) ( xx ) Gross Profit/(Loss) for the Year P xx CONSTRUCTION IN PROGRESS CONSTRUCTION IN PROGRESS Cost incurred to date P xx Gross Profit for the year xx (^) P xx Loss for the Year CIP, Balance P xx CIP > Progress Billing = ASSET CIP < Progress Billing = LIABILITY
NO SUBSTANTIAL PERFORMANCE
CFF P xx Interest Income xx Indirect Cost ( xx ) NET INCOME P xx CONSIGNMENT Net Sales P xx Cost of Sales ( xx ) Gross Profit P xx OpEx ( xx ) Commission Expense ( xx ) Freight-out ( xx ) Bad debt Expense ( xx ) Samples Consumed ( xx ) NET INCOME P xx Cash/Collection from credit sales P xx Less: Payment made by consignee in behalf of the consignor ( xx ) Sales Commission ( xx ) NET REMITTANCE P xx Cost of Consigned goods * (units sold/total units) P xx Freight In * (units sold/total units) xx Cartage Cost * (units sold/total units) xx COST OF SALES P xx PART OF COST OF SALES
- Freight from consignor to Consignee
- Cartage cost PART OF EXPENSE
- Commission of Consignee
- Freight from Consignee to third person
- Freight from Consignee to consignor
GOVERNMENT ACCOUNTING JOURNAL ENTRIES:
- 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
- Reversion of UNUTILIZED NCA Subsidy Income National Government P xx Cash-MDS, Regular P xx
- To record acquisition of equipment acquired on account Equipment P xx Accounts Payable P xx
- To record payment of Accounts Payable Accounts Payable P xx Due to BIR P xx Cash-MDS, Regular xx
- To record the remittance of the tax withheld Due to BIR P xx Cash-Tax Remittance Advice P xx
- Establishment of Petty Cash Fund Petty Cash Fund P xx Cash-MDS, Regular P xx
- Replenishment of Petty Cash Fund Various Expenses P xx Cash-MDS, Regular P xx
- To record unused Petty Cash Fund Cash-Collecting Office P xx Petty Cash Fund P xx
- To record liabilities to officers and employees Salaries & wages, Regular P xx PERA xx Due to BIR P xx Due to GSIS xx Due to Pag-ibig xx
Loan payable - Foreign Currency P xx
- To record the gain from loan payable under foreign currency Loan payable - Foreign Currency P xx Gain on Foreign Exchange P xx
- Settlement of Loan Payable Loan Payable - Foreign/Local Currency P xx Cash in bank - Foreign/Local Currency 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
- Basic accounting policies and principles in accordance with the Philippine Public Sector Accounting Standards (PPSAS) adopted through COA Resolution No. 2014-
- Revised Chart of Accounts (RCA) prescribed under COA Circular No. 2013- 002
- 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
- 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.
- Provide a basis for making decisions for future operations
- 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 =
Valueof of Newly Acquired S ℎares + Control Premium
% of t ℎe newly acquired s ℎares
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
x % of NCI Total Assets (Not including unidentifiable assets) P xx Less: Total Liabilities ( xx ) FAIR VALUE OF NET ASSETS P xx Less: Overvaluation of Assets ( xx ) Add: Undervaluation of Assets xx ADJUSTED FVNA P xx Multiply by: % of NCI x% Proportionate Share of NCI P xx FVNA P xx Less: Consideration % controlling Interest ( xx ) % of NCI ( xx ) BARGAIN/(GOODWILL) P xx For the consolidated TOTAL ASSETS; Parent - BOOK VALUE ; SUBSIDIARY - FV Don’t include unidentifiable intangible assets of SUBSIDIARY
WORKING PAPERS ON THE DATE OF ACQUISITION
- 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 P xx CI - Net Income of Parent xx Dividend Declared by Parent ( xx ) CONSOLIDATED R/E, Ending P xx CONSOLIDATED SHE Share Capital - Parent P xx Share Premium - Parent xx Consolidated R/E xx NCI, Ending (SHE of subsidiary in CONSO FS) xx CONSOLIDATED SHE P xx
SALE OF FIX ASSET (UPSTREAM & DOWNSTREAM)
CONSOLIDATED DEPRECIATION EXPENSE
Depreciation Expense - Parent P xx Depreciation Expense - Subsidiary xx Amortized portion of Under/(Over) Valued FA xx/(xx) Amortized portion of (URP)/URL of FA (xx)/xx CONSOLIDATED DEPRECIATION EXPENSE P xx UNREALIZED PROFIT/(LOSS ) =
Gross Profit
Estimated Useful Life
x % of Unrealized Portion REALIZED PROFIT/(LOSS) =
Gross Profit
Estimated Useful Life
x % of Realized Portion CONSOLIDATED NET INCOME PARENT - CI SUBSIDIARY - NCI Net Income - Parent P xx Net Income - Subsidiary xx P xx Realized URP/(URL) from PY - if Down xx/(xx) Realized URP/(URL) from PY - if UpS xx/(xx) xx/(xx) (URP)/URL - if DownS (xx)/xx (URP)/URL - if UpS (xx)/xx (xx)/xx Amortization Excess xx/(xx) xx/(xx) Intercompany Dividends (xx) Gain on Acquisition xx P xx P xx CONSOLIDATED FIXED ASSETS Fixed Assets - Parent P xx Fixed Assets - Subsidiary xx (Over)/Under Valuation of FA (xx)/xx Amortized portion of Over/(Under) valued FA xx/(xx) URP/(URL) on sale of FA xx/(xx) (RP)/RL on sale of FA (xx)/xx CONSOLIDATED FIXED ASSETS P xx If the fixed asset is a LAND, no amortization needed, recognized the whole amount.
ENTRY UPON SALE:
PARENT/SUBSIDIARY: Accounts Receivable P xx Sales P xx PARENT/SUBSIDIARY: Merchandise Inventory P xx Accounts Payable P xx WORKING PAPER ENTRIES:
- 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 P xx Retained Earnings 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 P xx FV of the Assets of ACQUIREE xx Cash Consideration Paid ( xx ) Acquisition Related Cost Paid ( xx ) Goodwill from Acquisition ( xx ) TOTAL ASSETS OF THE MERGED CORPORATION 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 P xx Acquisition Related Expense ( xx ) Gain from Acquisition xx Excess of Share Issue Cost from Share Issuance ( xx ) TOTAL RETAINED EARNINGS OF THE MERGED CORPORATION P xx
CORPORATE LIQUIDATION
FREE ASSETS UNSECURED PORTION OF LIABILITIES LIABILITIES ALREADY SECURED CASH Receivable (assuming pledged to FSL) Inventory (assuming pledged to PSL) Unsecured Liabilities w/o Priority P xx If there’s excess (FV of ASSETS - FSL) Leave it blank if NO excess P xx xx P xx P xx FREE ASSETS Less: Unsecured Liabilities w/ Priority Liquidating Exp. Salaries Payable Taxes P xx ( xx ) ( xx ) ( xx ) NET FREE ASSETS; Unsecured Liabilities P xx P xx
% OF RECOVERY =^ Free^ Assets
Unsecured Liabilitier
Free Assets P xx Less: Unsecured Liabilities with Priority ( xx ) Net Free Assets P xx Less: Total unsecured Liabilities without Priority ( xx ) Estimated Deficiency P 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 OF REALIZATION AND LIQUIDATION 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
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 LIQUIDATED Liabilities paid during the given period LIABILITIES NOT LIQUIDATED Liabilities not paid at the end of the period Liability to be Liquidated + Increase in Liability - Liabilities Liquidated = Liabilities not liquidated
LIABILITIES TO BE LIQUIDATED
Book value of the recorded liabilities to be paid in the given period INCREASE IN LIABILITIES Unrecorded Liabilities Liabilities Assumed Example: Accrued Interest Payable SUPPLEMENTARY DEBITS/CHARGES Expenses and Losses
SUPPLEMENTARY CREDITS
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
TAC = NP contribution / New Partner % Old Partner New Capital Balance = (Capital of OP –/+ Share in Difference between TCC & TAC) x (100% - NP%) Agreed Capital of New Partner = TAC x New Partner % Share of OP from Bonus = (CC of NP – AC of NP) x OP% 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 REVALUATION is assumed The amount paid by the new partner is the amount to be credited to his account TCC ≠ TAC TCC TAC A P xx P xx B xx xx C xx P xx ≠ P xx 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 TAC A P xx P xx B xx xx C xx xx P xx = P xx Agreed Capital of New Partner = TAC x New Partner % Capital Balance of Old Partners = Capital - % transferred to NP
whichever of the two produces Goodwill
GOODWILL METHOD
Compute for the Agreed Capital that will result to Goodwill TAC = investment of NP / NP% ; or TAC = Capital of OP / (100% - NP%) 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 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 P xx (Loan to)/Loan From – Applicable only to retiring partner (xx)/xx Gain/(loss) in the revaluation of asset xx/(xx) Net Income/(Loss) share in Partnership operation xx/(xx) Payment made to retiring partner (xx) CREDIT BALANCE 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 % TAC = NP investment / NP%
