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Financial Statements Based On Philippine Accounting Standards

Financial statements include the statement of financial position, statement of comprehensive income, statement of changes in equity, and cash flow statement. These statements are prepared based on Philippine Accounting Standards and show key financial information such as assets, liabilities, equity, revenues and expenses. The statement of financial position provides a snapshot of the company's financial condition at a point in time, while the statement of comprehensive income shows profitability over a period of time.

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Dashiell Robert Parr
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178 views3 pages

Financial Statements Based On Philippine Accounting Standards

Financial statements include the statement of financial position, statement of comprehensive income, statement of changes in equity, and cash flow statement. These statements are prepared based on Philippine Accounting Standards and show key financial information such as assets, liabilities, equity, revenues and expenses. The statement of financial position provides a snapshot of the company's financial condition at a point in time, while the statement of comprehensive income shows profitability over a period of time.

Uploaded by

Dashiell Robert Parr
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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FINANCIAL STATEMENTS BASED ON PHILIPPINE ACCOUNTING STANDARDS

Financial statements are the formal reports prepared by accountants. These statements show
the financial effects of transactions and other events that are grouped into broad classes
according to their economic characteristics. These broad classes are called elements of
financial statements.
Based on the Philippine Accounting Standard (PAS) No. 1, the basic financial statements are
the following:
1. Statement of Financial Position (SFP) also known as the balance sheet shows the
financial condition of the business entity at any given time.
This financial statement conveys information about the business entity’s liquidity,
solvency, stability, capital structure, and financial flexibility.
The accounting elements of the financial position are Assets, Liabilities, and Equity.
2. Statement of Comprehensive Income is also known as the Income Statement. This
accounting report shows the operating performance of the business entity for a given
period.
This financial statement provides information about the business entity’s profitability. The
accounting elements of performance are Revenues and Expenses.
3. Statement of Changes in Equity shows the movements in the various elements of the
owner’s equity or capital for a certain period.
The following are the basic components of this statement:
a. Owner’s investment to the business;
b. Profit or loss for the period;
c. Owner’s personal withdrawals; and
d. Prior period adjusments.

4. Cash Flow Statement. This financial report explains the changes of cash and cash
equivalents during an accounting period.
The components of a cash flow statement are classified into the following activities:
a. Operating – the inflows and outflows of cash from the normal operating activities of
the business.
b. Investing - the inflows and outflows of cash from the sale or purchase of assets other
than inventory.
c. Financing - the inflows and outflows of cash from the owners and creditors of the
enterprise.

5. Notes to the Financial Statements.


The parenthetical disclosures and notes to the financial statement are considered part of
the basic financial statements to achieve proper understanding of the financial reports.
Elements of Financial Statements
The elements directly used to the measurement of financial position are the following:
1. Assets. These are resources owned or controlled by an entity resulting from past events
and from them, future economic benefits are expected to flow to the entity.
2. Liabilities. These are existing obligations of the entity arising from past events; their
settlements are expected to result in an outflow of assets from the entity.
3. Equity. The residual interest in the assets of an entity after deducting all its liabilities.
The elements that are used to measure operating performance consist of the following:
4. Revenues. These are increases in assets or decreases in liabilities arising from business
operation during an accounting period that result to increase owner’s equity. These
increases in assets are not contributions of owner’s or creditors.
5. Expenses. These are decreases in assets or increases in liabilities arising from business
operation during an accounting period that result to the decrease in owner’s equity. These
decreases in assets are not withdrawals of owners or payment of existing liabilities.

The Asset Accounts


Assets are resources or things of value owned by an enterprise. Some of them have physical
form but others have no physical form. For as long as future economic benefits are expected
from them to flow to the entity and if they are controlled by the entity, they are assets.
Generally, they are recorded in the books of accounts with a normal debit balance. The asset
accounts are classified into current and non-current assets.
Current Assets. An asset should be classified as a current asset when any of the following
criteria are met:
1. It is cash or cash equivalent which is not restricted for current use.
2. It is expected to be realized, or is held for sale or consumption in the normal course of the
enterprises’ operating cycle.
3. It is held primarily for trading purposes or for the short-term, and it is expected to be
realized within twelve months of the SFP date.
Noncurrent Assets. These are assets that do not meet the criteria of a current asset.

The Liability Accounts


Liabilities are present obligations to pay cash or cash equivalent by an entity. In other words,
they represent claims against the assets of the business. Liability accounts have a normal credit
balance.
Current liability is one that meets the following criteria:
1. It is expected to be settled in the normal course of the enterprise’s operating cycle.
2. It is due to be settled within twelve months of the SFP date.
Noncurrent Liability is one that does not meet the criteria of a current liability.

The Owner’s Equity Account


Owner’s equity is the residual amount after deducting liabilities from assets. It comprises the
capital contribution and withdrawals by the owner. It is increased by capital contribution of the
owner and net income of the business, and decreased by the owner’s withdrawal and net losses
of the business.
Owner’s equity is described as owner’s capital (sole proprietorship), partners’ capital
(partnership) and shareholders’ equity (corporation). These accounts have normal credit
balance.

The Revenue Accounts


Revenue represents the earnings of the business from sales of goods or service rendered.
Revenue accounts have a normal credit balance.

The Expense Accounts


Expenses are costs incurred in conducting the business activities. Expense accounts have
normal debit balances. Some common expense accounts are as follows:

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