12

Entrepreneurship
Quarter 2 – Module 6
4 M’s of Production and
Business Model
This instructional material was collaboratively developed and reviewed by educators
from public and private schools, colleges, and universities. We encourage teachers and other
education stake holders to email there feedback, comments, and recommendations to the
Department of Education at action @deped.gov.ph
We value your feedback and recommendations.

Department of Education ● Republic of the Philippines

What I Need to Know

In developing a business plan we also have to consider the importance of the 4M’s of
operations in all business opportunities. Because it helps you to identify the problems of the
business in the future and in actual situation especially in the production process and marketing.

In application of your 4M’s of production, it is best to consider the customer’s point of view
in terms of their influences as to why they will buy a particular product, does your product aim to
answer each consumer’s wants or needs and meet up with their expectations over the product,
and how do suppliers, value chain and supply chain affects the business and production.

This module will guide you to demonstrate understanding of the 4M’s of operations and for
you to be able to:
• Describe the 4M’s (Manpower, Method, Machine, Materials) of operations in
relation to the business opportunity;
• Develop a product description;
• Create a prototype of the product;
• Test the product prototype;

What I Know

Before we start with this module, answer the following questions below.

Directions: Write True if the statement is correct, otherwise write False if the
statement is incorrect on the space provided below.
______1. Output represents the final products from the production process and distributed to the
customers.
______2. The 4M’s in the production operation are the materials, manpower, machine and money.
______3. Manpower in production operation refers to the workers involved in the production of
goods.
______4. Product description is the marketing copy that explains what a product is and it’s
benefits.
______5. Prototype is a replica of a product.
______6. Product to produce is one of the factors to be considered in the production method.
______7. Educational qualifications and experience is one of the criteria in considering
manpower.
______8. Skills and expertise is not important in considering manpower.
______9. Benefits are the reasons why customers will decide to buy the products.
______10. Machine refers to the manufacturing equipment.
______11. Supplier is an entity that supplies goods and services to another organization.
______12. Supply chain is a system of organizations, people, activities, data and properties
involved in moving a product or service from supplier to customer.
______13. Business model describes the rationale of how an organization makes, transports,
and captures value in economic, social, cultural or other contexts.
______14. In selecting the type of equipment to purchase, the entrepreneur may consider cost
and capacity of the equipment.
______15. Value chain is the process or activities by which a company adds cost to an article,
that includes production, promotion, and providing of after-sales service.

Lesson 4 M’s of Operations in Relation to the

1 Business Opportunity and
Developing Business Model

What’s In

In your previous lesson, you learned about the 7P’s of Marketing Mix; Product, Place, Price,
Promotion, People, Packaging and Positioning in relation to business opportunity, wherein
marketing is about creating and accumulating customers. Marketing plans are intended to capture
a market portion and to setback competitors.
Brand name was also introduced, where it is a name, symbol, or other feature that
distinguishes a seller’s goods or services in the marketplace. Your brand is one of the greatest
assets because your brand is your customers’ over-all experience of your business.
Experts believed that a good brand can result in better loyalty for its customers, a better
corporate image and a more relevant identity.
ACER 2
 What’s New

GUESS THE PICTURE

Direction: Given with the following pictures, fill in the following blanks
below to form a meaningful word. Two (2) points for each correct word.

M __ __ P __ W __ R M __ __ H __ N __ S

M __ T __ __ I __ __ S M __ __ H __ __ S

What is It

The most serious issues in the whole production system are the inputs and the
transformation process. Their quality determines the quality of the output.
The factors involved in the input and the production process are usually referred to as the Four
M’s of production, namely Manpower, Method, Machine, and Materials.

Four M’s

• Manpower
• Method OUTPUT
• Machine
• Materials

ACER 3
Manpower
- Talks about human labor force involved in the manufacture of products.
- It is measured as the most serious and main factor of production. The entrepreneur must
determine, attain and match the most competent and skilled employees with the jobs at the
most appropriate time period.
- Educational qualifications and experience, status of employment, numbers of workers
required, skills and expertise required for the job are some of the manpower criteria that
must be highly considered by the entrepreneur. Material
- Talks about raw materials necessary in the production of a product. Materials mainly form
part of the finished product. Just in case the resources are below standard, the finished
product will be of unsatisfactory as well.
- The entrepreneur may consider cost, quality, availability, credibility of suppliers and waste
that the raw material may produce. Machine
- Discusses about manufacturing equipment used in the production of goods or delivery of
services.

- In the process of selecting the type of equipment to purchase, the entrepreneur may
consider types of products to be produced, production system to be adopted, cost of the
equipment, capacity of the equipment, availability of spare parts in the local market,
efficiency of the equipment and the skills required in running the equipment. Method
- Production method discusses the process or way of transforming raw materials to finished
products. The resources undergoes some stages before it is finalized and becomes set for
delivery to the target buyers.
- The selection of the method of production is dependent on product to produce, mode of
production, manufacturing equipment to use and required skills to do the work.

Product Description
- Is the promotion that explains what a product is and why it’s worth buying? The purpose of
a product description is to provide customers with details around the features and benefits
of the product so they’re obliged to buy.
- Know who your target market is, focus on the product benefits, tell the full story, use natural
language and tone, use power words that sell, and use good images. These are guidelines
for you to have a good product description; since some customers are very particular with
it since they consider the welfare of their family, if it is safe to use.

Prototyping
A duplication of a product as it will be produced, which may contain such details as color, graphics,
packaging and directions. One of the important early steps in the inventing process is making a
prototype. Benefits are the reasons why customers will decide to buy the products such as
affordability, efficiency or ease of use. The features of the product or service merely provide a
descriptive fact about the product or service.
It is better to test your product prototype to meet customers’ needs and expectations; and for your
product to be known and saleable. Pretesting of the product or service is similar to a sample of
the product or service given to the consumer free of cost in order that he/she may try the product
before committing to a purchase.

Supplier
An entity that offers goods and services to another business. This entity is among of supply
chain of a business, which may offer the main part of the value contained within its products.

ACER 4
Certain suppliers may even involve in drop shipping, where they ship goods directly to the
customers of the buyer.
Suppliers are your business partners, without them your business will not live. You need
them as much as you need your customers to be satisfied. But as an entrepreneur you have to
choose a potential supplier that has loyalty and value your partnership; a supplier that would lead
you to the fulfillment of your business objectives, mission and vision.
Value chain is a method or activities by which a company adds value to an item, with
production, marketing, and the provision of after-sales service. The main goal and benefit of a
value chain, and therefore value chain analysis, is to make or support a competitive benefit.
A supply chain is a structure of organizations, people, activities, data, and resources
involved in moving a product or service from supplier to customer.
The main objective of supply chain management includes management of a varied range
of components and procedures, for instance, storing of raw materials, handling the inventory,
warehousing, and movement of finished product from the point of processing to the point of
consumption.

Business model describes the reasons of how an organization creates, delivers, and captures
value in economic, social, cultural or other contexts. The development of business model
construction and variation is also called business model innovation and forms a part of business
plan.

It is a company's plan for how it will make revenues and make a profit. It describes what
products or services the business plans to manufacture and market, and how it plans to do so, as
well as what expenses it will incur.

There are important phases in developing your business model, namely; Identifying the specific
audience; establishing business process; recording a business resources; developing strong value
proposition; determining key business partners; and creating a demand for today’s generation
strategy and be open for innovations.

After developing a business model, we will proceed in developing a business plan. To be

able to successfully complete this module, you need to prepare a business plan and operate your
plan and finally keep records of your business transactions.

Business plan is an important tool for you to have an idea about the future of your business.
Your business plan will be your guide in the moment you will be implementing and operating your
business proposal.

ACER 5
 You can also make use of the business plan in securing investment capital from financial
institutions or lenders. It can also be used to influence people to work for your enterprise, to secure
credit from suppliers, and to fascinate potential customers.
Read the stories of Jessie, Mercy and Monna below to fully understand the importance of
having a business plan:

“Jessie is the eldest of five children of Mr. & Mrs. Natividad. The family is having difficulty
to support for their everyday needs. Because of this, Jessie tried to enter selling banana cue and
with his dream to make his business grow, he put up many stalls in the community without
considering the advises of his friends to make a business plan before implementing his decision.
After a few months his stalls shutdown.”

“Mercy is the youngest in the family. She found out that she loves to cut hair and apply make up
to her friends. Until such time that her friends introduced her to their friends too for haircut and
make up when there are occasions. Few months after, Mercy was told by her friends to put up a
beauty parlor in their place. So she asks her mother who is also a businesswoman to teach her
how to make a business plan and eventually ended with a successful business.”

“Monna is a diligent student. Because of her knowledge gained from school about business
plan she was able to enhance her skills in business and finally found herself into his laundry shop
business.”

Each scenario taught us that business is not just about how much income or profit you can
get but it’s about the life of your business. And in having a business, you also have to consider
technological forces, Social forces, Political forces, Cultural forces, Economic forces and Legal
forces.

The following are the components found in a Business Plan.

• Introduction- this part discusses what is the business plan all about.
• Executive Summary- is part of the business plan which is the first to be presented but the
last to be made.
• Management Section- shows how you will manage your business and the people you need
to help you in your operations.
• Marketing Section- shows the design of your product/service; pricing, where you will sell
and how you will introduce your product/service to your market.
• Financial Section- shows the money needed for the business, how much you will take in
and how much you will pay out.
• Production Section- shows the area, equipment and materials needed for the business.
• Competitive Analysis- is the strategy where you identify major competitors and research
their products, sales and marketing strategies.
• Market- The persons who will buy the product or services
• Organizational chart- is the diagram showing graphically the relation of one official to
another, or others of a company.

What’s More

General Directions: Answer the following questions based on your learnings about
4M’s of production and Value Chain or Supply Chain. Write your answer on the space provided.
Five (5) points in each correct answer for Problem No.1 and 2 points for each correct answer in
Problem No.2.

ACER 6
Problem No. 1. “In your home, when you want to eat egg sandwich before going to school, your
mother would surely prepare it for you. Your egg sandwich would not be produced without a
process.”

1. Who would be your manpower? _______________________________

2. What would be your materials? ________________________________
3. What machines or tools would you use? _________________________
4. What methods are needed to produce the egg sandwich? (Cooking procedures- enumerate
them). ______________________________________________

Problem No. 2: With the pictures shown below, identify each picture whether it is Value
Chain or Supply Chain.

1. _____________

2. _______________

3. _______________

What I Have Learned

Complete the statements below and write your answers on the space provided.

1. _____________ talks about human labor force involved in the manufacture of products. It
is measured as the most serious and main factor of production.
2. _____________ is about raw materials necessary in the production of a product.
3. _____________ discusses the process or way of transforming raw materials to finished
products.
4. The purpose of a _____________________ is to provide customers with details around
the features and benefits of the product so they’re obliged to buy.

ACER 7
 5. A duplication of a product as it will be produced, which may contain such details as color,
graphics, packaging and directions. One of the necessary early steps in the inventing
method is creating a _______________.
6. ____________ are your business partners, without them your business will not live.
7. ______________________ describes the reasons of how an organization creates,
delivers, and captures value in economic, social, cultural or other contexts.
8. ____________________ is an important tool for you to have an idea about the future of
your business.
9. ____________________ is part of the business plan which is the first to be presented but
the last to be made.
10. ____________________ shows the design of your product/service; pricing, where you will
sell and how you will introduce your product/service to your market.

What I can Do
Direction: Answer the following questions base on the picture shown below.
Write your answers on the space provided. Two (2) points in each correct
answer.

1. Are you familiar with the picture above? Give one example of a food business establishment that
you think is famous among teenagers today.
______________________________________________________________
_____________________________________________________________.
2. What do you think is the reason why this particular food business establishment becomes famous
amongst teens nowadays?
______________________________________________________________
_____________________________________________________________.
3. Do you know some other ways to enjoy their product other than coming in personally into their
store and buying their product for yourself?
______________________________________________________________
_____________________________________________________________.
4. Do you think such strategies are effective to make the business more productive? Why or why
not?
______________________________________________________________
____________________________________________________________

Assessment

Direction: Encircle the letter of your choice.

ACER 8
 1. Which of the following refers to the human workforce involved in the manufacture of
products?
A. Materials B. Method C. Machine D. Manpower
2. The 4M’s of production are as follows except ONE.
A. Management B. Manpower C. Method D. Machine
3. Which of the following refers to the marketing copy that explains what a product is and
why it is worth purchasing?
A. Prototype C. Business Model
B. Product description D. Suppliers
4. It represents the final products from the production process and distributed to the
customers.
A. Input B. Supplies C. Output D. Materials
5. It is a replica of a product.
A. Prototype C. Business Model
B. Product description D. Suppliers
6. Which of the following refers to the system of organizations, people, activities, information,
and resources involved in moving a product or service from supplier to customer?
A. Supply chain B. Value chain C. Business model D. Prototype
7. Which of the following is the process or activities by which a company adds value to an
article, including production, marketing, and the provision of aftersales service?
A. Supply chain B. Value chain C. Business model D. Prototype
8. It describes the rationale of how an organization creates, delivers, and captures value in
economic, social, cultural or other contexts.
A. Prototype C. Business Model
B. Product description D. Suppliers

9. It is an entity that supplies goods and services to another organization.

A. Prototype B. Product description C. Business model D. Suppliers
10. Which of the following refers to the manufacturing equipment used in the production of
goods or delivery of services?
A. Machine B. Manpower C. Method D. Materials
11. It refers to the process or technique of converting raw materials to finished products.
A. Machine B. Manpower C. Method D. Materials
12. It simply refers to the raw materials needed in the production of a product.
A. Machine B. Manpower C. Method D. Materials
13. Statement I- Skills and expertise is not important in considering manpower. Statement II-
Benefits are the reasons why customers will decide to buy the products.
A. Only Statement I is true. C. Both Statements are true.
B. Only Statement II is true. D. Both Statements are false.
14. Statement I- Educational qualifications and experience is one of the criteria in
considering manpower.
Statement II- Product to produce is one of the factors to be considered in
method or production method.
A. Only Statement I is true. C. Both Statements are true.
B. Only Statement II is true. D. Both Statements are false.
15. Statement I- In selecting the type of equipment to purchase, the entrepreneur
may consider cost and capacity of the equipment.
Statement II- The purpose of a product description is to supply customers
through details around the features and benefits of the product.
A. Only Statement I is true. C. Both Statements are true.
B. Only Statement II is true. D. Both Statements are false.

ACER 9
 Additional Activities

Business Plan Making

Below is a template for business plan. You need to fill this out using the business you want
to pursue.

This section will show how you will manage your business and the people you
need to help you in your operations
a. Manager: ______________________________
MANAGEMENT
SECTION
b. Workers: ______________________________

This section shows the design of your product/service; pricing, where you will
sell and how you will introduce your product/service to your market.

a. Product Description: _______________________________________

MARKETING b. Price: ______________________________________
SECTION
c. Selling location: ____________________________

d. Promotional Activity: _________________________

This section shows the money needed for the business, how much you will
take in and how much you will pay out

a. Capital Amount: __________________________

FINANCE
SECTION b. Expected Daily Sales: _______________________
c. Expected Daily Expenses: _______________

d. Income per Day: _____________________

This section shows the area, equipment and materials needs for the business.

a. Draw a lay out of your production area:

PRODUCTION
SECTION b. Enumerate the equipment needed:

c. Enumerate the materials needed:

RUBRIC FOR BUSINESS PLAN MAKING

ACER 10
 The content was well thought ,guide questions were thoroughly
Content 15
answered
Organization The paper was wellwritten with ideas easily conveyed to readers. 10

Development Points are thoroughly developed 5

TOTAL 30

Quarter 2 – Module 7
Forecasting Revenues
And Costs
What I Need to Know

Now that you have identified what business to undertake and are
familiar with the tools and materials needed in the operation of your business,
let us apply what you have learned in the previous module by forecasting the
revenues and costs incurred in your business. You might probably be wondering how profits
are computed. This module will help guide you realize the revenues and profits of your chosen
business.
Revenue is a result when sales exceed the cost to produce goods or render the
services. Cost on the other hand simply refers to the amount of money used to produce or
manufacture goods/merchandise as well as costs incured in selling the goods/merchandise.
How much revenues and costs incurred in the operation of the business? How are these
projected? And how are these used to compute profit/loss of the business shall be learned in
this module.
This module is divided into two lessons:
Lesson 1 – Forecasting the revenues of the business
Lesson 2 – Forecasting the costs to be incurred
To be able to successfully complete this module, previous knowledge in multiplying
numbers will best help.
Why forecast? We often watch news as Kuya Kim reports the direction of the typhoon
in the next 2 days, what Kuya Kim is doing is giving us information taken by satellites and
gives us the direction of the typhoon. In weather forecasting, the reporter is giving us advance
information that could help us prepare and be ready for upcoming typhoon. This way, risks
such as accidents, devastation of properties and loss of life may be prevented.
ACER 11
 Forecasting is a tool used in planning that aims to support management or a business
owner in its desire to adjust and cope up with uncertainties of the future. Forecasting depend
on data from the past and present and make meaningful estimates on revenues and costs.
Forecasting revenues and costs is the same as weather forecasting, though forecasting
revenues and costs is in the context of business. Entrepreneurs use forecasting techniques to
determine events that might affect the operation of the business such as sales expectations,
costs incurred in the business as well as the profit that the business is earning. Making
informed estimates reduces risks that might be experienced by the entrepreneur in the future.
In this module, you will be making informed estimates about revenues and calculated
estimates involving costs incurred by the business. Factors affecting forecasting will be
discussed to better help you in making projections.
After carefully studying the contents of this module, you should be able to:
• Identify essential factors in forecasting revenues and costs;
• Calculate mark-up and selling price of a product or merchandise;
• Compute projected revenues;
• Compute projected costs.
• Create a table showing projected revenue and costs.

What I Know
Before starting with this module, let us see what you already know about forecasting
revenues and costs. Answer the questions below.
Encircle the letter that bests correspond to your answer.
1. Refers to the amount added to the cost of a product to determine the selling price –
a. Revenue b. Cost c. Mark Up d. Mark Down
2. Aling Marta sells bibingka in her neighbourhood, every day she can sell 45 pieces
of bibingka at 20 pesos each. How much is her daily revenue?
a. 900.00 b. 450.00 c. 800.00 d. 1000.00
3. It is a planning tool that helps entrepreneur copes up with uncertainties in the future
operation of the business.
a. Revenue b. Selling c. Benchmarking d. Forecasting
4. The selling price of an item or merchandise is computed by adding cost per unit and
__________?
a. Revenue b. Mark Up c. Discount d. Number of Items
5. Mang Berting is a fruit vendor selling at the local public market. He gets his mangoes
from a supplier at 25 pesos per kilo and sells it at 45 per kilo to his customers. How
much mark-up was Mang Berting adding to his selling price?
a. 25.00 b. 30.00 c. 15.00 d. 20.00
6. Aling Elvie sells t-shirt at 175.00 pesos each. If each t-shirt costs 135.00 pesos,
How much is the mark-up?
a. 30.00 b. 45.00 c. 40.00 d. 50.00
7. It is the result when sales exceed the cost to produce goods or render services -
a. Forecasting b. Selling c. Revenue d. Benchmarking
8. It is a tool that allows managers to make educated estimates on revenue and costs
of the business in order to cope up with uncertainties of the future –
a. Estimating b. Guessing c. Forecasting d. Benchmarking
9. Refers to goods and merchandise at the beginning of operation of business or
accounting period.
a. Merchandise Inventory, end c. Expenses
b. Merchandise Inventory, beginning d. Freight-in
ACER 12
 10. Mang Lito sold 5 pairs of slippers. Suppose Mang Lito purchased the 5 pairs of
slippers at P 30.00 each and pays P120.00 freight. Calculate how much is the cost
of goods sold?
a. 220.00 b. 420.00 c. 270.00 d. 200.00
11. Refers to amount paid to transport goods or merchandise purchased from the
supplier to the buyer.
a. Merchandise Inventory, end c. Expenses
b. Merchandise Inventory, beginning d. Freight-in
12. Costs incurred through payment of utilities such as electricity and water -
a. Revenue c. Mark-up
b. Operating expenses d. Free
13. Merchandise or goods purchased are referred to as –
a. Purchases c. Costs
b. Operating Expenses d. Loss
14. It is the result when cost to produce goods or render services is greater than the
sales –
a. Selling b. Revenue c. Benchmarking d. Loss
15. Jean purchased 5 baskets for P 30.00 each. According to her calculation, P 10.00
shall be added to the cost as mark-up. How much is the selling price of each basket?
a. 35.00 b. 40.00 c. 50.00 d. 60.00

How was the pre-test? If your answers are all correct, well very good! This only
shows that you already know about the topic. Please continue to study to know more about
the topic.
If your score is low, this means that this module is for you. Studying this module will
help you understand the concept of forecasting and how this lesson applies to your daily life.
Continue studying this module to know the answers to all the questions and a lot more things
to learn.
You may now start learning!

Lesson Forecasting the Revenues of the

1 Business
What’s In

You have learned in the previous lesson the 4Ms of operations, you
now have the idea on what product/s to manufacture and sell. Now, you also have
a business model. One of the most challenging parts in developing a business plan
is the financial plan. This part allows the entrepreneur to make decisions based on
financial assumptions without even having started the business. Therefore, these financial
projections should be given the most attention by the entrepreneur.
Let us now examine how the sale of products generates revenues. In this lesson, we
will identify the mark-up and selling price of the product. We will also project the revenues that
the business will make from the sale of products

What’s New

Have you tried estimating the time that it takes you to travel from
home to school? Try to fill in the necessary information in the table below. Write

ACER 13
your estimate in Estimated Time column, after arriving to school fill in the Actual Time in the
blank provided.
Estimated Time Actual Time
1. ____________ __________
2. ____________ __________
3. ____________ __________

How close were your estimates compared to the actual time? Did your estimate fell
short compared to the actual time? What do you think were the factors that might have
contributed in getting you early to school? List the reasons in the blank.
___________________________________________________________________
___________________________________________________________________
__________________________________________________________________

On the other hand, does your actual time exceed your estimates? What do you think
were the factors that might have contributed in arriving later than your estimated time? List the
reasons in the blank.
___________________________________________________________________
___________________________________________________________________
__________________________________________________________________

What is It
Making informed estimates requires careful considerations on several
factors that might affect the outcome of your travel such as, distance from home
to school, the means of transportation you will be taking, the number of
passengers and etc. Traveling from home to school on regular basis had helped
you arrive with an estimate that was very close to the actual time of arrival.
Considering these factors are essential in making informed estimates by the
entrepreneur. Since the business he/she is venturing hasn’t started yet, it is important that
these factors affecting forecasting will be determined to better help him/her in making the best
decisions for the business.
The entrepreneur after realizing the potential for profit of his/her business concept,
the next step is to estimate how much the revenue is on daily, monthly and annual basis.
Before going to forecasting and projecting the revenues of the business, let us determine first
what revenue is.
Revenue is a result when sales exceed the cost to produce goods or render the
services. Revenue is recognized when earned, whether paid in cash or charged to the account
of the customer. Other terms related to revenue includes Sales and Service Income. Sales is
used especially when the nature of business is merchandising or retail, while Service Income
is used to record revenues earned by rendering services.
You have just learned about what revenue is. This time, let us study the various
factors to consider in forecasting revenues.
The entrepreneur would want his/her forecasting for his/her small business as
credible and as accurate as possible to avoid complications in the future. In estimating
potential revenue for the business, factors such as external and internal factors that can affect
the business must be considered. These factors should serve as basis in forecasting revenues
of the business. These factors are:
1. The economic condition of the country. When the economy grows, its growth is
experienced by the consumers. Consumers are more likely to buy products and
services. The entrepreneur must be able to identify the overall health of the

ACER 14
 economy in order to make informed estimates. A healthy economy makes good
business.
2. The competing businesses or competitors. Observe how your competitors are doing
business. Since you share the same market with them, information about the
number of products sold daily or the number of items they are carrying will give you
idea as to how much your competitors are selling. This will give you a benchmark
on how much products you need to stock your business in order to cope up with the
customer demand. This will also give you a better estimate as to how much market
share is available for you to exploit.
3. Changes happening in the community. Changes’ happening in the environment
such as customer demographic, lifestyle and buying behaviour gives the
entrepreneur a better perspective about the market. The entrepreneur should
always be keen in adapting to these changes in order to sustain the business. For
example, teens usually follow popular celebrities especially in their fashion trend.
Being able to anticipate these changes allows the entrepreneur to maximize sales
potential.
4. The internal aspect of the business. Another factor that affects forecasting revenues
in the business itself. Plant capacity often plays a very important role in forecasting.
For example, a “Puto” maker can only make 250 pieces
of puto every day; therefore he/she can only sell as much as 250 pieces of puto
every day. The number of products manufactured and made depends on the
capacity of the plant, availability of raw materials and labour and also the number
of salespersons determines the amount of revenues earned by an entrepreneur.

Now that all factors affecting forecasting revenues are identified, you can now
calculate and project potential revenues of your chosen business. The table below shows an
example of revenues forecasted in a Ready to Wear Online Selling Business.
Example: Ms. Fashion Nista recently opened her dream business and
named Fit Mo’to Ready to Wear Online Selling Business, an online selling business which
specializes in ready to wear clothes for teens and young adults. Based on her initial interview
among several online selling businesses, the average number of tshirts sold every day is 10
and the average pair of fashion jeans sold every day is 6.
From the information gathered, Ms. Nista projected the revenue of her it Fit Mo’to Ready to
Wear Online Selling Business.
She gets her supplies at a local RTW dealer in the city. The cost per piece of t-shirt
is 90 pesos, while a pair of fashion jeans costs 230 pesos per piece. She then adds a 50
percent mark up to every piece of RTW sold.
Mark up refers to the amount added to the cost to come up with the selling
price. The formula for getting the mark up price is as follows:

Mark Up Price = ( Cost x desired mark up percentage)

Mark Up for T-shirt = ( 90.00 x .50)
Mark Up for T-shirt = 45.00

In calculating for the selling price, the formula is as follows:

Selling Price = Cost + Mark Up
Selling Price = 90.00 + 45.00
Selling Price for T-shirt = 135.00

ACER 15
 Table 1 shows the projected daily revenue of Ms. Nista’s online selling business.
Computations regarding the projected revenue is presented in letters in upper case A, B, C,
D, and E.

Table 1
Projected Daily Revenue
Fit Mo'to Ready to Wear Online Selling Business
Type of Cost per Mark-up Selling Projected Projected
RTW's Unit 50% Price Volume Revenue
(A) (B) (C) (D) (E)
Average
No. of (Daily)
Items Sold
(Daily)
(A) (B)= (A x .50) (C)= (A+B) (D) (E) =(C x D)
T-Shirts 90.00 45.00 135.00 10 1,350.00
Jeans 230.00 115.00 345.00 6 2,070.00
Total 320.00 160.00 480.00 16 3,420.00

Table 2 shows the projected monthly and yearly revenue of Ms. Nista’s online selling
business. Computations about the monthly revenue is calculated by multipying daily revenues
by 30 days ( 1 month).
Example, in table 1 the daily revenue is 3,420.00. To get the monthly projected
revenue it is multiplied by 30 days. Therefore,
Projected Monthly Revenue = Projected daily revenue x 30 days
Projected Monthly Revenue = 3,420.00 x 30
Projected Monthly Revenue = 102,600.00
On the other hand, the projected yearly revenue is computed by multiplying the
monthly revenue by 12 months. The calculation for projected yearly revenue is as follows.
Projected Yearly Revenue = Projected daily revenue x 365 days
Projected Yearly Revenue = 3,420.00 x 365
Projected Yearly Revenue = 1,248,300.00

Table 2
Projected Monthly and Yearly Revenue
Fit Mo'to Ready to Wear Online Selling Business
Type of Selling Projected Projected Projected Projected
RTW's Price Volume Revenue Volume Revenue
Average Average No.
No. of Items of Items Sold
(Monthly) (Yearly)
Sold (Yearly)
(Monthly)
(C)= (A+B) F= (D x 30 G= (C x F) H= (D x 365 I= (C x H)
days) days)
T-Shirts 135.00 300 40,500.00 3,650 492,750.00
Jeans 345.00 180 62,100.00 2,190 755,550.00
Total 480.00 480 102,600.00 5,840 1,248,300.00

Table 3 shows the projected monthly revenues covering one year of operation. The
table shows an average increase of revenue every month by 5 percent except June, July to
ACER 16
October and December. While the month of June has twice the increase from previous month,
10 percent. Let us consider that months covering July to October are considered to be Off-
Peak months, therefore sales from July to October are expected to decrease. It is assumed
that there is no increase in revenue from July to August while from August to October the
decrease in revenues is 5 percent from previous month. Since revenues from sales of RTW’s
are considered to be seasonal, it assumed that there is 10 percent increase in revenue from
November to December.
Computation for assumed increase of revenue on specific months is as follows:
Projected Monthly Revenue (Increase) = Revenue (January) x 5 % increase
Projected Monthly Revenue (Increase) = 102,600.00 x .05 Projected Monthly
Revenue (Increase) = 5,130.00

Projected Revenue for February = Revenue (January) + Amount of increase

Projected Revenue for February = 102,600.00 + 5,130.00
Projected Revenue for February = 107,730.00

On the other hand, decrease in revenue is computed as follows:

Projected Monthly Revenue (Decrease) = Revenue (August) x 5 % increase
Projected Monthly Revenue (Increase) = 144,041.14 x .05 Projected Monthly
Revenue (Increase) = 7,202.06

Projected Revenue for September = Revenue (August) - Amount of decrease

Projected Revenue for September = 144,041.14 – 7,202.06 Projected
Revenue for September = 136,839.08
Table 3
Projected Monthly Revenue
Fit Mo'to Ready to Wear Online Selling Business
Month January February March April May June
Revenue 102,600.00 107,730.00 113,116.50 118,772.33 124,710.94 137,182.04

Month July August September October November December

Revenue 144,041.14 144,041.14 136,839.08 129,997.13 136,496.98 150,146.68

Important Assumptions:
February to May Increase of 5% from previous revenue
June Increase of 10% from previous revenue
July to August The same Revenue
September to October Loss 5% from previous revenue
November Increase 5% from previous revenue
December Increase 10% from previous revenue
The numbers in the last table are very attractive, having revenues that are increasing
in numbers is a good sign that a business is growing. However, an entrepreneur should not
be overwhelmed on these revenues as these are just gross revenue, this is not the final
amount of profit or income an entrepreneur will get at the end of every period. Take note that
the amount of net revenue is still subjected to the expenses incurred in the operation of
business.

ACER 17
 What’s More

After learning the calculations presented, you can now compute the projected
revenue by day, month and year based on your business concept.
Aling Minda is operating a buy and sell business, she sells broomsticks (walis
tingting) in her stall at a local market. She gets her broomsticks from a local supplier for 25
pesos each. She then adds 50 percent mark-up on each broomstick. Every day, aling Minda
can sell 30 broomsticks a day.
Use the template below and fill in the necessary figures based on the scenario.
Remember to use the factors to consider in projecting revenues and refer to tables 1, 2 and 3
as your guide.
Table 1
Projected Daily Revenue
Merchandise/ Cost per Mark-up Selling Projected Projected
Products Unit ____% Price Volume Revenue
(A) (B) (C) (D) (E)
Average No. of
Items (Daily)
Sold (Daily)
(A) (B)= (A x (C)= (A+B) (D) (E) =(C x D)
.50)

Total
Name of Business ___________________________

Use the calculations you have made in Table 1 to successfully complete the
information in Tables 2 and 3 and calculate the projected monthly and yearly revenue of
Aling Minda’s business.
Table 2
Projected Monthly and Yearly Revenue
Name of Business ___________________________
Merchandise/ Selling Projected Projecte d Projected Projected
Products Price Volume Revenue Volume Revenue
Average No. of Average No. of
Items Sold Items Sold
(Monthly) (Yearly)
(Monthly) (Yearly)
(C)= F= (D x 30 days) G= (C x F) H= (D x 365 days) I= (C x H)
(A+B)

Total

For Table 3, use the following assumed increases in sales every month. From January to
May, 5 percent increase from previous sales. For the month of June, 10 percent increase from
previous sales. For the months July to December, record the same sales every month.

ACER 18
 Table 3
Projected Monthly Revenue
Name of Business ___________________________
Month January February March April May June
Revenue

Month July August September October November December

Revenue

What I Have Learned

Entrepreneurs use ______________ techniques to determine events

that might affect the operation of the business. Factors such as __________ and _________
much be considered to avoid possible complications in the future. To forecast revenues, it is best
that the entrepreneur must be acquainted with the _________, and __________ to determine the
selling price of a product. This way, the selling price is then multiplied to the projected volume to
arrive with the ______________.
The entrepreneur should always present the assumptions to consider in projecting
revenues, may it be seasonality, economic slow down or changes in costumer preferences and
the like. This will help achieve the best educated estimate of your revenues

What I Can Do
It is understood that you now know how to calculate mark-up and selling
price of an item or merchandise. Let us try the following situation to see if you have
understood the concepts.
Kyle, a local entrepreneur is planning to sell 10 liter bottled water in his sari-
sari store. A local water purifying business in the city sells their 10 liter bottled water for 20 pesos
each. Kyle wants to add 25 per cent mark up from the original cost of 10 liter bottled water.
Calculate how much mark-up Kyle should add. Determine how much should be the selling price
for 10 liter bottled water.

Lesson 2 Forecasting the Costs to be Incurred

What’s In

You have learned in Lesson 1 that the revenue generated by selling RTW’s has
a corresponding amount of costs incurred. This cost was the amount of RTW before adding its
mark-up price. Each piece of t-shirt has a corresponding cost of 90.00 pesos, while each pair of
jeans has a corresponding cost of 230.00 pesos. These costs are incurred each time revenues
are generated. On the other hand, the business also incurs costs in its operation, these costs are
called Operating Expenses. Operating expenses such as payment on Internet connection,
Utilities expense (i.e.Electricity), Salaries and Wages and Miscellaneous are essential in the
operation of the business; this allows the business to continue operate in a given period of time.
Now that you have learned what cost is, let us identify the costs and
expenses incurred by the business in generating revenues.
ACER 19
 What’s New

Have you tried recording the amount of money you spend from your daily
allowance? You might be experiencing difficulties in making your allowance meet
your daily needs as student. Try to fill in the information below to come up with a breakdown of
your daily allowance.

Breakdown on Daily Allowance

Name: ______________________

Daily Allowance: Ᵽ __________

Less: Daily Expenses
Food Ᵽ_________
Fare _________
School Supplies _________
Recreation _________

Others _________ ___________

Total Ᵽ ___________

Were you able to get a positive total? You may have spent your daily allowance wisely and
saved some of your daily allowance. Did you spend all your allowance and ended up with a zero
total? You may have spent your allowance on expenses essential to your need as a student.
Considering your expenses as a student, a business also has expenses necessary for its
upkeep. It would be best for any business to arrive with a positive total; this would mean profit for
the business. Careful consideration and projection of these factors could mean success for the
business.

What is It
You have just learned about what cost is. This time let us identify costs and expenses
incurred by the business.
Cost of Goods Sold / Cost of Sales refer to the amount of merchandise or goods
sold by the business for a given period of time. This is computed by adding the beginning
inventory to the Net Amount of Purchases to arrive with Cost of goods available for sale from
which the Merchandise Inventory end is subtracted.
Merchandise Inventory, beginning refers to goods and merchandise at the
beginning of operation of business or accounting period.
Purchases refer to the merchandise or goods purchased. Example: Cost to
buy each pair of Jeans or t-shirt from a supplier.
Merchandise Inventory, end refers to goods and merchandise left at the end of
operation or accounting period.

ACER 20
 Freight-in refers to amount paid to transport goods or merchandise purchased from
the supplier to the buyer. In this case, it is the buyer who shoulders this costs.
In a merchandising business such as Fit Mo’to Ready to Wear Online Selling
Business, the formula to compute for costs of goods sold is as follows:

Merchandise Inventory, beginning P XX.XX

Add: Net Cost of Purchases XX.XX
Freight-in XX.XX
Cost of Goods Available for Sale P XX.XX
Less: Merchandise Inventory, end XX.XX
Cost of Goods Sold P XX.XX

Let us calculate the cost of goods sold of Ms. Fashion Nista’s online selling business
for the month of January.
Table 4 shows the costs incurred during the first month of operation of Fit
Mo’to Ready to Wear Online Selling Business. Since Ms. Nista get her stocks from an online
supplier, there is no need to order ahead and stock more items. Therefore, there is no
Merchandise Inventory, beginning as well as Merchandise Inventory, end. Ready to wear
items purchased online from the supplier are then sold as soon as they arrived.
Cost of goods is calculated by simply multiplying the number of items sold every month
(300 t-shirts and 180 pairs of jeans) to its corresponding cost per unit (90.00 pesos for every
t-shirt and 230.00 pesos for every pair of jeans). A cost in transporting the goods from the
supplier to the seller (Ms. Nista) or Freight-in is then added to Net Cost of Purchases.

Table 4
Projected Cost of Goods Sold (Monthly)
Fit Mo'to Ready to Wear Online Selling Business
Type of Cost per Unit Projected Volume
RTW's
Average No. of
Items Sold Projected Costs of Purchases
(Monthly) (Monthly)
(A) F = (D x 30 days) J = (A x F)
T-Shirts 90.00 300 27,000.00
Jeans 230.00 180 41,400.00
Total 320.00 480 68,400.00

Table 5 shows how freight-in is calculated.

It is assumed that at an average, Ms. Nista pays at least 250.00 pesos for every 12 items
delivered successfully by her supplier through a courier service.
Since her average order is 480 pieces every month, she pays:
480 pcs. / 12 pcs. = 40
40 x 250.00 = 10,000.00

Table 5
Freight-in paid by Ms. Nista every month
ACER 21
 Type of No. of Items Projected Volume Freight In (January
RTW's Sold (Daily) Average No. of Items Only)
Purchased (Monthly)
(A) F = (D x 30 days) K = (F/12) x 250
T-Shirts 10 300 6,250.00
Jeans 6 180 3,750.00
Total 16 480 10,000.00

Let us now substitute the values from table 4 and table 5. Since there is no
Merchandise Inventory, beginning and end, let us add Cost of Purchases and Freight-in to get
the Cost of Goods Sold.
Merchandise Inventory, beginning P 00.00
Add: Net Cost of Purchases 68,400.00
Freight-in 10,000.00
Cost of Goods Available for Sale P 78,400.00
Less: Merchandise Inventory, end 00.00
Cost of Goods Sold P 78,400.00

Now that the cost of goods sold is now calculated, let us now identify expenses that
the business incurs in its operation. Operating expenses such as Internet connection, Utilities
like electricity and miscellaneous expense are important to keep the business running. These
expenses are part of the total costs incurred by the business in its day-to-day operation and
are paid every end of the month. The operating expenses and assumed amount are presented
below:
Operating Expenses
Add: Internet Connection P 1,299.00
Utilities (Electricity) 800.00
Miscellaneous expense P 300.00
Total Operating Expense P 2,399.00

To calculate the total costs incurred by the business, cost of goods sold and total
operating expenses are then added. The calculation for the costs incurred for the month of
January is presented below:

Cost of Goods Sold P 78,400.00

Total Operating Expense P 2,399.00
Cost P 80,799.00

The projected monthly costs covering the first of operation of Ms. Nista’s
Fit Mo’to RTW Online Selling Business is presented in Table 6.

ACER 22
 Table 6
Projected Monthly Costs (Year 1)
Fit Mo'to Ready to Wear Online Selling Business
Month January February March April May June

Cost of
Goods Sold 78,400.00 82,320.00 86,436.00 90,757.80 95,295.69 104,825.26

2,399.00 2,446.98 2,495.92 2,545.84 2,596.75 2,648.69

Expenses
Total Cost &
Expenses 80,799.00 84,766.98 88,931.92 93,303.64 97,892.44 107,473.95

Month July August September October November December

Cost of Goods
Sold 110,066.52 110,066.52 104,563.20 99,335.04 104,301.79 114,731.97

Expenses 2,701.66 2,755.70 2,810.81 2,867.03 2,924.37 2,982.85

Total Cost &
Expenses 112,768.19 112,822.22 107,374.01 102,202.06 107,226.16 117,714.82

What’s More
After learning the calculations presented, you can now compute the
projected costs by month on your business concept. Use the template below and
fill in the necessary figures based on the scenario.

Mang Eduard operates a buy and sell business. He sells umbrellas in his
shop near the city mall. He gets his umbrellas from a local dealer. Each umbrella costs 90.00
pesos each. Expecting rainy season to come, Mang Eduard purchased 4 dozens of umbrellas
every week. The supplier then charges 200.00 pesos per dozen for freight. Mang Eduard can sell
12 umbrellas every day.
Remember to use the factors to consider in projecting revenues and refer to tables 4, 5
and 6 as your guide. Suppose Mang Eduard purchases and sales is the same every month, fill in
the necessary information in table 6.

Table 4
Projected Cost of Goods Sold (Monthly)

Merchandise/ Cost per Unit Projected Volume

Products
Average No. of Items Projected Costs of
Sold (Monthly) Purchases (Monthly)
(A) F = (D x 30 days) J = (A x F)
90

ACER 23
 Total

Table 5
Freight-in paid
Merchandise/ No. of Items Projected Volume Freight In (1 Month
Products Sold (Daily) Average No. of Only
Items Purchased
(Monthly)
(A) F = (D x 30 days) J = (F/12) x *Ᵽ200.00

Total

Table 6
Projected Monthly Costs (Year 1)

Month January February March April May June

Cost of Goods
Sold

Expenses

Total Cost &

Expenses

Month July August September October November December

Cost of Goods
Sold
Expenses
Total Cost &
Expenses

What I Have Learned

The entrepreneur should always present the assumptions to

consider in projecting costs, may it be cost of goods sold or operating
expenses. This will help achieve the best educated estimates of your costs. The entreprenuer
must clearly identify costs incurred in the business operation. ________________ is the
amount of goods or merchandise sold during a period of time incurs a large portion of the total

ACER 24
cost of a _________________ business. The cost of goods sold can be calculated by simply
multiplying _____________________ to its corresponding ________________. A cost in
transporting the goods from the supplier to the seller or __________________ is then added
to Net Cost of Purchases.

What I Can Do
Now that you know how to calculate the projected costs of a business,
look around and interview any business existing in your community such as sari-
sari stores or buy and sell business. Using the table for Projected Costs of
Goods Sold (Daily) below. Fill in the necessary figures from the business you
have selected.

Projected Cost of Goods Sold (Daily)

Business Name: ______________________
Goods/ Cost per Unit Projected Volume
Merchandise
Average No. of Items Projected Costs of
Sold (Daily) Purchases (Daily)

Total

Assessment

Now, that you have finished the module, let us check what you have learned.
Answer the questions given below by encircling the letter of the correct answer.

1. Profit or Loss in computed by subtracting cost / expenses from –

a. Income/Revenue c. Sales
b. Sales Discount d. Operating expenses
2. Sales is an account title used to describe goods or merchandise sold by a business. What
nature of business uses Sales?
a. Servicing c. Merchandising
b. Barber Shop d. Both Servicing and Merchandising
3. Irene sells fashion bags online. She gets each bag for P 150.00 from a local supplier. She
then adds P 100.00 as mark-up for each bag. How much is the selling price of each bag?
a. P 200.00 b. P 250.00 c. P 300.00 d. P 350.00
4. A merchandising business earns through –
a. Rendering services c. Donating products
b. Lending money d. Buys and sells goods
5. It is a tool that allows managers to make educated estimates on revenue and costs of the
business in order to cope up with uncertainties of the future –
a. Estimating b. Guessing c. Forecasting d. Benchmarking
6. Which of the following businesses use Service Income in recording revenues?
a. Beauty Salon b. Sari-sari store c. Movie House d. Hardware

ACER 25
 7. Refers to the amount of merchandise or goods sold by the business for a given period of
time –
a. Operating Expense c. Deductions
b. Cost of Goods Sold d. Sales
8. Aling Coring sold 5 pieces of rugs. She bought the rugs for 20 pesos and sold it for 35
pesos. How much is the total cost of goods sold?
a. P 80.00 b. P 90.00 c. P 100.00 d. P 110.00
9. Freight-in refers to the amount paid to transfer goods or merchandise purchased from the
_________.
a. Buyer to the supplier c. Buyer to buyer
b. Supplier to the buyer d. Supplier to supplier
10. The costs incurred through payment of utilities such as water, electricity, internet
connection is considered as –
a. Costs c. Operating expenses
b. Purchases d. Personal Expense of the owner
11. Nathaniel sells bottled water in a nearby city bus terminal. Every day he can sell 30 pieces
of bottled water at 20 pesos each. How much is Nathaniel’ daily sales?
a. P 900.00 b. P 800.00 c. P 700.00 d. P 600.00
12. The amount added to the cost of a product to determine the selling price is called –
a. Mark-up b. Discount c. Mark-down d. Sale

13. Lina sold all ten t-shirts for 1,500.00 pesos. Suppose she added 50.00 pesos as mark-up
price for every t-shirt. How much was the cost for every t-shirt sold?
a. P 80.00 b. P 90.00 c. P 100.00 d. P 110.00
14. Refers to goods and merchandise left at the end of operation or accounting period.
a. Merchandise inventory, beginning c. Freight-in
b. Merchandise inventory, end d. Freight-out

15. The Total Cost and Expenses is calculated by –

a. Adding cost and expenses c. Adding revenue and expense
b. Subtracting expenses from costs d. Subtracting expense from revenue

Additional Activities

Now that you have learned how to forecast revenues and cost of the business,
investigate how these concepts are being applied by existing businesses in your
community. Using the table below, fill in the necessary information based on your
investigation.

Daily Revenue and Cost

Name of Business: ______________________
Merchandise/ Cost Mark-up Selling Projected Projected
Products per Unit ____% Price Volume Revenue
(A) (B) (C) (D) (E)
Projected
Average (Daily) Costs of
No. of Purchases
Items Sold (Daily)
(Daily)

ACER 26
 A (B)= (A x C=A+ D E=CxD K = (A x D)
.50) B

Ex. Bag 150.00 75.00 225.00 10 2250 1500

Entrepreneurship
Quarter 2 – Module 8
Computation of Gross
Profit
What I Need to Know
As we all know that profit is a financial gain from a transaction or from a period of investment
or business activity, usually calculated as income in excess of costs or as the final value of an
asset in excess of its initial value.

It is a total revenue minus total expenses, profit is the amount of money a business
"makes" during a given accounting period. The more profit you make, the better, as profit can be
re-invested into the business or retained by the business owners. Being able to accurately
ACER 27
determine your business's profit is an essential part of being able to judge its financial health. It
can also help you decide how to price your goods and services, how to pay your employees, and
more.

To make your business gain more profit, begin by adding up all of the money your
business has made in a set period of time (either, quarterly, yearly, monthly, etc. Other sources,
like products sold, services rendered, membership payments, or, in the case of government
agencies, taxes, fees, the sales of resource rights, and so on.

Note that you will need to subtract any amount of cash refunded to customers for returns
or disputes in order to find an accurate figure for your total income.

It's easier to understand the process of calculating a business's profit by following along
with an example.

Let's say that we own a small publishing business. In the last month, we sold P20,000
worth of books to retailers in the area. However, we also sold the rights to one of our intellectual
properties for P7,000 and received P3,000 from book retailers for official promotional materials. If
these represent all of our revenue sources, we can say that our total income is P20,000 + P7,000
+ P3,000 = P30,000.

This module is divided into two lessons:

Lesson 1 – Compute for profits CS_EP11/12ENTREP-0h-j-16

Create the company’s five (5) year projected financial statements -
CS_EP11/12ENTREP-0h-j-17

To be able to successfully complete this module, previous knowledge in adding &

multiplying numbers will best help.
After carefully studying the contents of this module, you should be able to:
• compute for profits
• define profitability, liquidity & solvency
• identify commonly used profitability ratios.

What I Know
Let us see what you already know about forecasting revenues and costs.
Answer the questions below.

Write True if the statement is correct & write False if you think the answer is not correct.
_________1. The gross profit rate of the entrepreneurial venture is computed by dividing
the cost of goods sold by net sales.
_________ 2. The gross profit rate provides information on the cost ratio of the
business.
_________3. In evaluating the profitability of the entrepreneurial venture the
evaluation must focus on the information reflected on the face of the balance
sheet.

ACER 28
_________4. The operating profit margin rate indicates information on the percentage of
operating expenses on the net sales.
_________5. Mr. Q is a practicing Doctor of Medicine. During the month of March
2019 he received Professional Fees amounting to P 1,000,000 and total
expenses of P250,000. The net income of Mr. Q is P 750,000. __________6. Profit is the
money received from customer in exchange of products given to customer.
_________ 7. The gross profit rate of the entrepreneurial venture is computed by
dividing the cost of goods sold by net sales.
_________ 8. The gross profit rate provides information on the cost ratio of business.
_________ 9. One of the objectives in evaluating the gross profit rate of the business is to
determine whether the amount of the gross profit is sufficient to cover the
operating expenses.
__________10. The operating profit margin rate indicates information on the
percentage of operating expenses to net sales.
__________11 The government is not interested in financial statements since it is not
a party to any of the transactions of the business.
__________12. The net profit margin rate presents the general perspective of the
operating performance of the business.
__________13. The amount of income per peso investment can be determined by
computing the net profit margin rate.
__________14.In normal situation, it is favorable for the business to have high
inventory
__________15. Preparation & presentation of the financial statements of the entity is
the primary responsibility of an accountant.

Lesson Computation of Gross Profit

1

What’s In
Let’s review of what is revenue of the business. This is an important tool and materials
needed in the operation of the business. It is said that revenue is the result when sales exceed
the cost to produce or manufacture goods/merchandise as well as costs incurred in selling.

Forecast is advance information that could help us prepare and ready for any incoming
event. Forecasting is the tool used in planning that aims to support management or a business
owner in its desire to adjust and cope up with uncertainties of the future. If anyone of us can
predict that we can be rich so it means all of us will be rich. This fantasy is played out every day
in boardrooms across the globe with the practice of business forecasting.

ACER 29
 It is important to have a good organization in the business to easily grow and expand in the
future.

What’s New
Activity 1
Read and understand the given problem.

Rodrigo is engaged in a buy-and sell business of perfumes. He bought 10 boxes of

perfumes. Each box costs 12,000.00 and contains a dozen of perfume bottles. He is planning to
sell one perfume bottle at P1,500. What is his expected profit on the 10 boxes of perfumes?
The ultimate goal of any business whether a retail or wholesale is to earn a profit. Getting
the difference between the amount of money earned from the selling 10 boxes containing a dozen
of perfume bottles and the cost of those 10 boxes gives the profit.

In the example that I gave, answer the following questions:

1. How much does Rodrigo earned profit?
2. Is it good to engage in a business? Yes or No?
3. What do you think of Rodrigo’s business? Is it good for a beginner?

What Is It Compute the Gross Profit

The profitability ratios are a group of financial statement that primarily determine the
profitability of the business operation.
The gross profit rate on a product is computed as:
Net Sales xxxxxxx
Less: Cost of sales xxxxxxx
Gross profit xxxxxxx

By using the formula , the gross of XYZ Trading in the year 2017
Net Sales P 734, 000.00
Less: Cost of Sales 577, 000.00
Gross Profit 157, 000.00

Profit is the gross income. The amount of gross profit provides information to the
entrepreneur about revenue earned from sales.

The term cost refers to the purchase price of the product including of the product including
the total outlay required in producing it.
The gross profit margin is computed as follows:

The gross profit rate measures the percentage of gross profit to sales, indicating the profit
that the business realizes from the sale of the product.

ACER 30
The gross profit rate of XYZ Trading for the year computed as follows:

The gross profit rate may signal to the entrepreneur that the amount of margin on sales is
21.39%. This rate will be used to determine whether the amount of gross profit can cover the
operating of the business. Since the gross profit rate of XYZ Trading is 21.39%, the cost ratio to
sales will be 78.61%. This information will help the entrepreneur in assessing whether the cost is
too high or too low. Any product with a very high cost will not become competitive in the market.

The gross profit rate will also help the entrepreneur set the selling price.

Operating Profit Margin Rate

The operating the profit margin is the excess of gross profit from operating expenses.
Gross profit xxxxx
Less: Operating Expenses xxxxx
Operating profit margin xxxxx

The operating profit margin is the second level of revenue in the income statement. At this
stage, not only the cost of buying or making the product that has been deducted is included but
also the operating expenses. These are expenses incurred during a particular period only, and
are not expected to provide benefits to any future period. The operating expenses are also period
costs.

In case there are no financing charges like interest, expenses, and income tax, the amount
of the operating profit margin is equal to the net income .
Gross profit P 157,000.00
Less: Operating expenses 90,000.00
Operating profit margin P 67,000.00

This information that the business realized an income of P 67,000.00 during the year after
deducting the cost and operating expenses from the sales made.

By applying

The operating profit margin of the business measures the percentage of profit available
after deducting the cost of sales & operating expenses of the business. A higher operating profit
margin is favorable to the business.

Net Profit Margin Rate

Operating profit margin xxxxxxx

Add: Interest Income xxxxxxx Total
ACER 31
 Less: Interest Expense xxxxxx
Income Tax xxxxxx xxxxxx
Net Profit margin xxxxxx

The Income statement.is the net profit margin & the third level in the revenue.
The business is only given consideration like interest expense and income tax.
Operating profit margin P67,000.00
Less: Income tax 20,000.00
Net profit margin P46,900.00 The
income statement of XYZ Trading does not reflect any data on interest
expense. Only income tax has been deducted from the operating profit
margin.

By applying the formula the profit margin of XYZ

XYZ Trading appears to have earned 6.39% of its total sales of P734,000 during the year.
This profits rate must be compared with those of other similar businesses within the industry.

Analyse the Liquidity Status of the Business

Liquidity Ratios

Current ratio = Current assets / Current liabilities

Quick ratio =(Current assets – Inventories) / Current liabilities
= (Cash and equivalents + Marketable securities + Accounts receivable) / Current
liabilities

The quick ratio measures its short-term obligations with its most liquid assets and
therefore excludes inventories from its current assets.

. Financial statements are important in a company management as a means of

communicating past successes as well as future expectations. The financial statement records all
the operating results such as sales, expenses and profits or losses.

Return of Investment (ROI)

The Return of investment (ROI) measures the amount of net income per peso invested to the
business.

The formula to compute ROI is as follows

ACER 32
 The average total assets are by dividing the sum of the total assets at the beginning and
end of the period.

Table 1
Projected Five Year Balance Sheet
Fit Mo'to Ready to Wear Online Selling Business
Year 1 Year 2 Year 3 Year 4 Year 5

ASSET

Cash
337,398.56 686,417.05 1,052,886.47 1,437,679.36 1,841,711.89

Total Assets
337,398.56 686,417.05 1,052,886.47 1,437,679.36 1,841,711.89

Liability - - - - -

Owners’
equity 337,398.56 686,417.05 1,052,886.47 1,437,679.36 1,841,711.89

Total
Liabilities
and Owner's
Equity
337,398.56 686,417.05 1,052,886.47 1,437,679.36 1,841,711.89

Table 1
Projected Five Year Income Statement
Fit Mo'to Ready to Wear Online Selling Business
Year 1 Year 2 Year 3 Year 4 Year 5

Revenue 1,545,673.95 1,622,957.64 1,704,105.53 1,789,310.80 1,878,776.34

Cost 1,213,275.38 1,273,939.15 1,337,636.11 1,404,517.91 1,474,743.81

Gross Profit
Before tax 332,398.56 349,018.49 366,469.42 384,792.89 404,032.53

Yearly increase in revenue is assumed at 5%

Yearly increase in cost is assumed at 5%

As a future entreprenuer, one should always remember that nothing is permanent in the
field of entreprenuership. What is applicable to one entreprenuer may not be applicable to another.
Certain things may happen to one entrepreneur but may not happen to another.

ACER 33
 Entreprenuership should be practiced not as a science but as an art. Creativity should
always be applied to entrepreneur by regularly evaluating the market and the environment and
responding to the changes in them.

The owner of an ordinary small business has the freedom to manage and operate. Ideally
he/she prefers business activities which are done easily. However, the entrepreneur has to
perform the entrepreneurial activities correctly regardless of whether they are undertaken easily
or not. The important in entrepreneurship is that the business activities are performed correctly.

What’s More
Compute the Gross Profit

Answer the given problem.

1. Annie bought one dozen smartphones for P200,000.00 with a discount of 5%. She sold half
dozen at a price of P18,000.00 per unit. However, a new model of smartphone became
available in the market, so she sold the remaining half dozen @ P12,000.00 each unit.
What was her profit or loss?

Compute the following requirements:

a. Gross profit rate
b. Operating profit margin rate
c. Net profit margin rate
d. Return on Investment
Now ask yourself the following questions:
1. Is creativity present in the operation of ordinary small businesses along the streets
and highways and in your neighborhood? Why do you say so?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
2. Will you consider the daily business practices of the small owner within the concept
of entrepprenuership? Why?
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________

What I Have Learned

ACER 34
 The profitability and ratios are a group financial statement ratios that primarily determine
the profitabilty of the business operation. They provide information on the efficiency of resource
utilization.

The gross profit represents the difference between net sales and cost of sales of the
entrepreneurial venture during a given period. It is computed as follows:

Net Sales xxxxxx

Less: Cost of Sales xxxxxx
Gross Profit xxxxxx

By using the formula, the gross profit of XYZ Co., in the year 2017 is computed as
follows :
Net Sales P734,000.00
Less: Cost of Sales 577,000.00
Gross profit P 157,000.00
Profit is determined by:
• the money you get from sales
• the cost of stock – if you're selling a product
• all the expenses you incurred
Income earned by the business are sales & gross profit. Commissions, discounts , fixed
expense are business expenses.

How to Increase your Sales

 Improve profit by looking at the money you earn from sales, and increase:
o The number of customers o The volume of goods or services existing
customers to buy o The sales price

What I Can Do

Conduct an interview of at least three (3) successful business people in your

locality, use the following questions as your guidelines:
1. What made him motivate to start a business?
_______________________________________________________
_______________________________________________________
_______________________________________________________
2. What is the nature of his business?
_______________________________________________________
_______________________________________________________
_______________________________________________________
3. How much capital involved?
_______________________________________________________
_______________________________________________________
_______________________________________________________
4. How many years of existence?
_______________________________________________________
_______________________________________________________
_______________________________________________________
5. Did you consider the population of the community?
________________________________________________________
_______________________________________________________
ACER 35
 _______________________________________________________

6. How much gross profit did you earn for the first year of operation?
________________________________________________________
_______________________________________________________
_______________________________________________________

Assessment
How did you understand the lessons that you have studied in this module?
Answer the following questions.

Write True if the statement is correct & write False if you think the answer is not correct.
_________1. The gross profit rate of the entrepreneurial venture is computed by dividing the cost
of goods sold by net sales.
_________ 2. The gross profit rate provides information on the cost ratio of the
business.
_________3. In evaluating the profitability of the entrepreneurial venture the
evaluation must focus on the information reflected on the face of the balance sheet.
_________4. The operating profit margin rate indicates information on the percentage of operating
expenses on the net sales.
_________5. Mr. Q is a practicing Doctor of Medicine. During the month of March 2019 he
received Professional Fees amounting to P 1,000,000 and total expenses of P250,000. The
net income of Mr. Q is P 750,000.
_________6. Profit is the money received from customer in exchange of products given to
customer.
_________7. The gross profit rate of the entrepreneurial venture is computed by dividing the cost
of goods sold by net sales.
_________8. The gross profit rate provides information on the cost ratio of business.
_________ 9. One of the objectives in evaluating the gross profit rate of the business is to
determine whether the amount of the gross profit is sufficient to cover the operating
expenses.
_________10. The operating profit margin rate indicates information on the
percentage of operating expenses to net sales.
_________11. The government is not interested in financial statements since it is not a party to
any of the transactions of the business.
_________12. The net profit margin rate presents the general perspective of the
operating performance of the business.
_________13. The amount of income per peso investment can be determined by
computing the net profit margin rate.
_________14. In normal situation, it is favorable for the business to have high inventory
_________15. Preparation & presentation of the financial statements of the entity is the primary
responsibility of an accountant.

Additional Activities
After learning how to compute the gross profit at least you have
learned now how to do it by your own. Solve and compute the following:

ACER 36
 1. A watch store owner decided to offer 20% discount for a particular brand of watch that sells
at P35,000.00. By doing so, his average sales increased from 5 watches to 12 watches a
day. If he bought one watch at a price of P22,000.00 from the supplier, by how much was
his daily profit increased or decreased by offering such discount on the watch?

2. Michelle went to Baguio and bought 20 jars of strawberry jam for P3,500.00 with 1 5%
discount. When she got back to Manila, she sold 10 of the jars for a total of P1,800.00and
the rest as P185.00 each. How much profit did Michelle again?

Quarter 2 – Module 9
Business Implementation

What I Need to know

In this module, you will be able to practically implement your newly

developed Business Plan. In which case, will help your target business most likely
to succeed. Because this is where you will actually operate the business. Thus, selling your
product/service to the potential customers.
You are expected to operate your own business and keep your business records to
monitor the progress of your business operation.

This module covers learning competencies:

• Implementing the business plan
• Operating the business
• Selling the product
• Identifying reasons for keeping business records

What I Know

Before starting with this module, let us see what you already know about
implementing a business plan. Answer the questions below.

Instruction: Read the statements carefully then Write True if the statement is
correct & write False if you think the answer is not correct.
ACER 37
 1.
You go to the office of the Department of Industry (DTI) if you will register you
corporation business.
The office to visit when registering your solely owned business is Securities and
2.
Exchange Commission (SEC)
You go to the Bureau of Internal Revenue when you get Tax Identification Number
3.
(TIN)
Employers are the only one to pay contribution at the Social Security
4.
System(SSS)
5. You cannot start your business without a consultant.
6. Record keeping is not necessary in business operation
7. Record keeping is beneficial to the owner
8. The objective of the businessman should be clear
9. Tasks before starting the business should have a time allotment
10. Records are sources of documents
11. Professional advices is necessary before starting the business
12. Professional advice is not needed during the business operation
13. Bookkeeping is only important to the accountant
14. Record keeping can measure the profit and performance of the enterprise
15. Recordkeeping can be both physical and electronics

What’s In
Before you proceed, let us first recall our previous lesson.
Profit is the amount you gain after selling your product. In computing your
profit, you just simply follow this formula:
Sales - Cost of Goods Sold = Gross Profit
The gross profit represents the difference between net sales and cost of sales. Variable costs
are those things that change based on the amount of product being made and are incurred
as a direct result of producing the product.

Variable costs include:

1. Materials used 6. Utilities for a plant or a
2. Direct labor warehouse
3. Packaging 7. Depreciation expense on
4. Freight production equipment
5. Plant supervisor salaries 8. Machinery

Fixed costs generally are more static in nature. They include:

1. Office expenses such as supplies, utilities, a telephone for the office, etc.
2. Salaries and wages of office staff, salespeople, officers and owners
3. Payroll taxes and employee benefits
4. Advertising, promotional and other sales expenses
5. Insurance
6. Auto expenses for salespeople
7. Professional fees
8. Rent

ACER 38
 W hat’s New
Identify the services offered by the following offices to you as an entrepreneur.
1. Department of Trade and Industry (DTI)_____________________
2. Securities and Exchange Commission (SEC)_________________
3. Bureau of Internal Revenue (BIR)__________________________
4. Mayor’s Office_________________________________________
5. Social Security System (SSS)____________________________
6. Philhealth____________________________________________
7. Pag-ibig Fund_________________________________________

What is it?
Answer the following questions:
1. As an entrepreneur, is it important to know the services offered by the offices mentioned
above?
2. If your answer is YES, in what way that their services becomes important to you?
3. If your answer is NO, what makes their services unnecessary to you?
4. Do you think a business can last without availing the services of the said offices? Why? Or
why not?
RUBRIC FOR ESSAY
The content was wellthought , guide
Content questions were thoroughly answered 4
The paper was wellwritten with ideas easily
Organization 3
conveyed to readers.
Development Points are thoroughly developed 3
TOTAL 10

Guidelines for successful business plan implementation:

1. Objectives- the entrepreneur should have a clear idea on what is his purpose of
putting up his enterprise.
2. Tasks- this means that the entrepreneur must know what the tasks are he has to
perform in order that his objectives will be realized.
3. Time allocation- This means that the entrepreneur should have a timetable or a
schedule to follow every task, so that it will be accomplish on time and realize his objective.
4. Progress- This means that the entrepreneur should monitor the development of
the tasks and the accomplishment of the objective.

In Operating a business, the entrepreneur should first consult professional for advices, like
accountants or consultants from small enterprises. In your case, you can consult your teacher in
entrepreneurship or anyone you think that could help you.
The following are the basic requirements to start a business in the Philippines:
• Securities and Exchange Commission (SEC) Registration-for partnership or
Corporation
• Department of Trade and Industry (DTI) Registration- for your business tradename
• Mayor’s Business Permit- for getting the license to operate in the city or municipality
and payment of your local business taxes.
ACER 39
 • Bureau of Internal Revenue (BIR) Registration - for getting TIN, official receipts and
invoices, registering your books of accounts and paying your national Internal revenue
taxes
• SSS, PhilHealth, and Pag-Ibig Fund registration- for registering yourself or company
as an employer and for remitting your employees’ contribution together with your
employer’s share

Other steps to follow before operating a Business are as follows :

1. Set up an accounting system or hire an accountant. Knowing how the business is doing
financially is important for planning and survival.
2. Advertise the business. No one will buy the products or services if customers do not know
that the company exists. You can make use of the social media.
3. Secure insurance for the business. Liability insurance protects the business in the event
of litigation. Consider life and disability insurance, health insurance and fire insurance when
you are leasing an office or storefront.

Keeping Business Records

Good record keeping can help protect the business, measure the performance and maximize
profit.
Records are the source documents, both physical and electronic, that specify transaction dates
and amounts, legal agreements and private customer and business details.
Developing system to log, store and dispose of records can benefit the business. A systematic
recording allows you to;

A. Plan and work more efficiently D. Protect your rights, and

B. Meet legal and tax requirements E. Manage potential risks
C. Measure profit and performance

What’s More

Try to look around in your community and identify the three (3) oldest
existing businesses and find time to ask the owner on how did they started their business and
sustain it until today.

What I Have Learned

Implementing the Business Plan is not that easy. It needs to be registered to make
it legal and record keeping gives a lot of benefits to the enterprise.

What I Can Do

You are going to implement your business for one and a half month. Following the Business
plan you have presented.
RUBRICS FOR THE BUSINESS PLAN IMPLEMENTATION
Feasibility The business is operated according to the plan. 50
Bookkeeping The records are properly kept and accounted for 40
Profitability The business is gaining as to its projected financial plan 10

ACER 40
 TOTAL 100

Assessment
Now that you are finished accomplishing the module, let us check what you have learned.
Answer the questions given below by encircling the letter of the correct answer.
1. Which office will you go to register your single owned business?
A. SEC C. BIR
B. DTI D. Mayor’s Office
2. Which office do you visit to register partnership or corporation business?
A. SEC C. BIR
B. DTI D. Mayor’s Office
3. To secure Tax Identification Number (TIN) , which office will you go?
A. SEC C. BIR
B. DTI D. Mayor’s Office
4. SSS, Philhealth and Pag-ibig fund contributions is made by ___
A. Employees only C. Both Employees and Employers
B. Employers only D. None of the choices
5. Which of the following is not a step to follow before operating a business
A. Register your business C. Advertise the business using Facebook
B. Set up accounting system D. Selling the product
6. Which of the following is true?
A. Good record keeping is not important to the business owner
B. Good record keeping is important only to the accountant
C. Good record keeping gives benefits to the enterprise
D. Good record keeping gives no importance at all.
7. Which of the following is NOT a benefit to the enterprise?
A. Plan and work more efficiently
B. Meet legal and tax requirements
C. Can check if the business is doing good.
D. It cannot protect the rights of the owner
8. The objectives of the entrepreneur should be
A. Specific and clear C. Short and blurred
B. Specific and long term D. Long and not specific

9. The tasks before operating the business must be ____ A. Specified to be accomplished
by the owner alone
B. In detail so that the owner will know what to do
C. Kept by the owner for future reference
D. None of the choices
10. The tasks to be accomplished before operating the business should have:
A. Design C. Time allotment
B. Decoration D. Measurement
11. Which of the statements is true?
A. Before starting a business the entrepreneur may not consult a professional for advice
B. Before starting a business the entrepreneur should consult a professional for advice
C. Before starting a business the entrepreneur must start selling when there are available
buyers
D. None of the choices
ACER 41
12. To register your Business Trade name is done in the office of?
A. SEC C. Mayor’s Office
B. B. DTI D. Philhealth Office
13. The sources of documents are called?
A. Income statement C. Record
B. Balance sheet D. Record Keeping
14. Which of the following is not a benefit of record keeping
A. It will not help in managing potential risks
B. It will measure profit and performance
C. It will protect the rights of the owner
D. It will not let you know how much you are earning
15. Which of the following statements is true?
A. Professional advice is only needed before starting the business
B. Professional advice is needed all throughout the life of the business
C. Professional advice is made only by consultants
D. Professional advice is only a waste of money

Additional Activities

Prepare a journal entry of all your business transactions. Give the benefits
you get from keeping all your records.

Quarter 2 – Module 10
Bookkeeping

What I Need to Know

Welcome to this module. In this module you will learn how to record
business transactions, generate financial information and communicate them to different
users. This is your tool to keep track of the operations of your business, know how much
should you collect, determine your capability to meet the currently maturing obligations,
know the levels of your profitability, cash position, and communicate them to management
and other interested parties such as the Bureau of Internal Revenue and Local
Government Unit for tax and regulation purposes.

This module is divided into four lessons:

ACER 42
 Lesson 1 – Perform bookkeeping tasks
Lesson 2 – Prepare an income statement and a balance sheet,
Lesson 3 – Identify where there is a profit or loss for a business,
Lesson 4 – Interpret financial statements (balance sheet, income statement),
cash flow projections, and summary of sales and cash receipts

To be able to completely learn this module, you need to know and understand the
basic concepts of bookkeeping and apply the same by performing bookkeeping tasks,
prepare income statement and balance sheet, interpret financial statements, identify
whether the business is profitable or not and most importantly, you will be able to generate
overall report on the company’s financial status.

What I Know

Before starting with this module, let us evaluate what you already know about
bookkeeping by answering the pre-assessment questions below.

TEST I – Multiple Choice: Identify the correct answer among the given choices. In your
answer sheet, write the letter only.

1. A source document evidencing that orders have been placed by the customer waiting
to be served by the supplier-
A. Purchase request B. Purchase order
C. Purchase invoice D. Purchase check
2. The source document evidencing that goods have been delivered by the supplier to
the customer-
A.Supplier’s sales invoice C. Customer’s sales invoice
B.Vale slip D. Customer’s delivery receipt
3. A source document issued by the supplier acknowledging that full payment has been
received from the customer-
A.Official receipt C. Delivery receipt
B.Purchase receipt D. Receiving report
4. Is a statement of the financial position of a business which states the assets, liabilities,
and owners' equity at a particular point in time.
A.Balance Sheet B. Income Statement C. Owner’s Equity D. Assets
5. A source document which accompanies a check when payment is made-
A.Check voucher C. Cash voucher
B.Purchase voucher D. All of the above
6. All of the following are examples of source documents, except-
A.Check B. Invoices C. Contract D. Journal

7. A source document which shows that the customer has already made partial payment
to the supplier through issuance of-
A.Check B. Voucher C. Official receipt D. Sales invoice
8. Are things or properties that the business owns, example includes cash, account
receivable and prepaid expenses.
A.Assets B. Liabilities C. Owner’s Equity D. Revenue
ACER 43
 9. It is the obligations of the company, payable in money, goods or services.
A.Assets B. Liabilities C. Owner’s Equity D. Revenue
10. It is the claim of the owner of the business also known as the capital.
A.Assets B. Liabilities C. Owner’s Equity D. Revenue
11. Is a record comprising the sales and other income recieved by the business.
A.Assets B. Liabilities C. Owner’s Equity D. Revenue 12. The most liquid
form of asset that can be used anytime to purchase another assets or pay
liabilities.
A. Inventories B. Receivables C. Payable D. Cash
13. An example of asset that can be used in the business for a long period of time.
Usually more than a year.
A. Inventories B. Computer C. Receivables D. Cash
14. A type of business that is purely engage in providing all types of service activities
such as medical or legal services.
A. Service Business C. Manufacturing business
B. Merchandising business D. Trading Business
15. A type of business that is engage in buying and selling of food products such as
Grocery/convenient stores.
A. Service Business C. Manufacturing business
B. Merchandising business D. Forex Trading Business

Lesson Perform Bookkeeping Tasks

1

What’s In

In the previous lesson, you learned how to make and prepare a business plan, operate the
business, know how to sell the product, and the significance for keeping business records.

A business plan is an effective tool in making your dream business come true. It reiterates
different plans or strategies in Operation and Administration, Marketing, Production and Logistics,
Finance, etc.

The operational plan put into details on what business model you are going to employ and
how are you going to start the business. Among others, its also reiterated the layers pf
management, type of skills and employee attitude your business need and the steps on how to
get the government license.

ACER 44
 The marketing plan contains valuable strategies as to what product your are going to produce
or sell, what industry you want to enter, group of target customers, or your target market and the
business model or strategies you are going to employ.

The production plan revealed the production processes and the quality control system of the
goods produced for sale. While the logistics provides a channel of distribution of the goods from
production lines down to the wholesellers/retailers or directly to consumers.

The financial plan talks about monetary requirements before you open the business. While
financial forcast informs the business owners of the expected outcome of the business in monetary
terms.

What’s New

What is Bookkeeping?

Bookkeeping is the process of recording business transactions in a systematic and

chronological manner.

It is systematic because it follows procedures and principles. On the otherhand, it is

chronological because the transactions are recorded in order of the date of occurrence.

Bookkeeping is the starting point of the accounting process. A sound bookkeeping system is
the foundation for gathering the information necessary to answer questions related to profitability,
solvency and liquidity of the business.

What is a Bookkeeper?

Each business has a bookkeeper who is incharge to record, maintain and update business
records from all sorts of financial transactions using account title that can be found in the charts of
accounts already set up by the Accountant.

The bookkeeping function dictates the bookkeeper to keep track of all financial transactions of
the business. Only transactions that has monetary value will be recorded.

The bookkeeper uses the Book of Accounts to record the business transactions which is to
be consolidated later to help construct financial statement such as the Trial Balance, Income
Statement and Balance Sheet.

What is a Book of Account?

The book of accounts are composed of the Journal and Ledger. It depends on the type of
business, some businesses used special journals when they are engaged merchandising type of
business to records business transactions. This module will cover and provide example for service
oriented business. Thus, only journal and ledger will be used in the succeeding examples.

There are two types of books used in recording business transactions. They are called
journals and ledgers.

ACER 45
 Journal refers to the book of original entry while the Ledger refers to the book of final
entry.

What is a General Journal?

The general journal is the most basic journal which provides columns for date, account titles
and explanations, folio or references and a separate column for debit and credit entries. Depicted
in figure 1 below is a sample format of a general journal:

Figure 1 – General Journal

What is a General Ledger?

The general ledger is a grouping of all accounts directly traceable to chart of accounts. These
accounts will be reflected in the financial statements as a summary of all financial activities that
have taken place as recorded in the general journal and subsidiary ledgers. Depicted in figure 2
below is a sample format of a general ledger:

Figure 2 – General Ledger

What is a Subsidiary Ledger?

The subsidiary ledger is a group of accounts directly associated from the general ledger. This
record is created to maintain individual accounts for customers and vendors whose cash is not
being used as a medium of exchange when purchasing or selling merchandise. Depicted in figure
3 and 4 below is a sample format of a subsidiary ledgers Accounts Receivable and Accounts
Payable respectively:

ACER 46
 Accounts Receivable

Buyer/Customer: Veggies Trading 11

Figure 3 – Accounts Receivable Ledger

Figure 4 – Accounts Payable Ledger

The Rules of Debit and Credit

In the process of journalization, following the rules of Debit and Credit are essential
part to ensure accurate recording and sound decision making. Debit is abbreviated as DR
while CR for Credit.

It is a requirement that the bookkeeper is able to master the normal balance of each
account title before performing the tasks of bookkeeper.

When to Debit?

When cash or non-cash items are received, the said cash or non-cash items must be
recorded in the debit column. This means that the debit balance increased. It is called
Value Received.

When to Credit?

When cash or non-cash items are given, the said cash or non-cash items must be
recorded in the credit column. This means that the credit balance is increased. It is called
Value Parted With.

The following steps will be undertaken in determining account balances for every
account title such as cash, account receivable, etc.:

1. Add all the debit side to generate total debit 2. Add

all the credit side to generate total credit.
3. Subtract total debit to the total credit.
4. Determine the balance of each account.

Depicted in figure 5 below is a matrix of normal debit and credit balances of Five
Major Accounts:

ACER 47
 Account Type Debit Credit

Assets

Liabilities

Owner’s Equity

Revenue

Expenses

Figure 5 - matrix of normal debit and credit balances of

Five Major Accounts

In order to fully understand the concept of debit and credit balances, depicted in
figure 6 below is a matrix of normal debit and credit balances under each of the five major
accounts:

Account Type Debit Credit

Assets
Cash on Hand
Cash in Bank
Accounts Receivable
Allowance for Doubtful
Accounts

Notes Receivable
Prepayments
Inventories
Land
Building
Equipment
Accumulated
Depreciations

Other Assets
Liabilities
Accounts Payable
Notes Payable
Salaries Payable
Mortgage Payable
Unearned Fees

ACER 48
 Owner’s Equity
Capital
Drawing
Revenue
Service Income
Other Income
Expenses
Rent Expense
Utilities Expense
Depreciation Expense
Salaries and Wages
Expense

Other Expenses

Figure 6 - Matrix of normal debit and credit balances of sub-accounts

TRIAL BALANCE

Trial balance is a list of all ledger accounts with closed or final balances on a certain period
arranged according to the rules of debit and credit. The debit and credit columns must be
equal in total amount. This is the first report prior to financial statement preparation.
Depicted in figure 7 below is a sample format of a trial balance report with peso amount.

Figure 7 – Sample format of a Trial Balance

ACER 49
 As you can observed, the accounts reflected in figure 7 above are arranged
according to the proper placement of the five major accounts. The Assets, Liabilities,
Owner’s Equity, Revenue and Expense accounts. You may refer to figure 6.

On the otherhand, the trial balance report has two phases. The first phase “Unadjusted
trial balance” is a report of all balances after the posting of the general ledger accounts.
The general ledger account balances are extracted to construct the unadjusted trial
balance. Meanwhile, the second phase is the “Adjusted trial balance”. This phase is a final
report of trial balance after all necessary adjustments in journal entries are posted in the
general ledger.

What is an Adjusting Entry?

Making an adjusting entry helps the bookkeeper capture all financial events
happened over a period of time within the accounting cycle. It is essential in keeping the
financial record updated. The bookkeeper is going to look or examine accounts that needs
to be updated. Outlined below are the five basic sources of adjusting entries:
1. Depreciation expense
2. Deferred expenses of prepaid expenses
3. Deferred income of unearned income
4. Accrued expenses of accrued liabilities
5. Accrued income or accrued assets

1. Depreciation.

This is a method of allocating the cost of an asset to an expense over the accounting
periods that make up the asset’s useful life. Examples of assets subject to depreciation
are: Store, Office, Building, and Transportation equipment. These types of assets lose their
ability to provide useful service as time passes. Depreciation can also be referred to as the
decrease in the usefulness of these types of assets. Take note that Land is not subject to
depreciation because the value of land mostly increases as time passes.

There are several methods or formulas to compute the amount of depreciation.

The simplest is the straight line method.

The formula:
(Acquisition Cost – Salvage or Residual Value)
Annual Depreciation =
Where: Useful Life
• Acquisition cost – the actual cost of the asset acquired.
• Salvage value – the selling price of the asset upon reaching the useful life.
• Useful life – is the economic or productive life of the asset.

Illustrative problem:

The cost of the equipment is PHP25,000. It was estimated to have a useful life of
five years. It is estimated that after five years, the office equipment can be sold at a scrap
value of PHP1,000. To compute for the monthly depreciation, just divide the annual
depreciation by 12. One year is composed of 12 months.

ACER 50
 (P 25,000 – P 1,000)
P 400 =
60 months

- (5 yrs x 12 mos. = 60 months) Adjusting

entry:
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
1 June 30 Depreciation expense 400.00
Accumulated depreciation – (equipment
2 name) 400.00
To record the allocation of
3 depreciation expense

The depreciation expense is an allocated for all sixed assets except land. Example
are building, equipment and or machineries that the business is using to generate income.
It shall be reported as an expense account in the income statement directly attributable in
the said fixed assets. While the accumulated depreciation is a balance sheet account but
treated as a contra-account to the concerned fixed asset.
Refer to the illustration below:

Balance Sheet

As of ____________

Equipment (at cost) P 25,000

Less: Accumulated Depreciation-Equipment 400

Net Book value of Equipment P 24,600

2. Deferred expenses or prepaid expenses.

These are items that have been initially recorded as assets but are expected to
become expenses over time or through the operations of the business.

In order to recognize the correct amount of expenses, prepayments shall be

amortized weekly, semi-monthly or monthly, depending on its nature and purpose.

Illustrative problem:

Purchased P5,000 worth of office supplies on account. By the end of the month,
PHP2,000 worth of these supplies are still unused.

Adjusting entry:

ACER 51
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
1 June 30 Supplies expense 3,000
2 Supplies 3,000
3 To set up the value of used supplies.

The supplies expense is an income statement account, while the supplies which is
now credited is an asset account. All asset has a normal debit balance. Considering that
the supplies in this record is credited, This will be deducted to the supplies account in the
balance sheet to generate the remaining balance in supplies.

3. Deferred income of unearned income

These are items that have been initially recorded as liabilities but are expected to
become income over time or through the operations of the business.

Illustrative problem:

On February 15, 2016 Matapang entered into a contract with Makisig to maintain
the computers of Makisig for two months starting on February 15, 2016 up to April 15,
2016. On the same date, Makisig paid the total contract amount of PHP40,000 in full. The
entries to record and adjust the books are: In the February 29, 2016 entry above, as of end
of February 2016, Matapang has already earned the service revenue for the first 15 days,
thus an adjusting entry is recorded.

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
Journal entry:
1 Feb 15 Cash 40,000
2 Unearned service revenue 40,000
To record receipt of full payment for
the two-month service contract with
3 Makisig
Adjusting entry:
4 Feb 29 Unearned Service Revenue 10,000
5 Service Revenue 10,000
To record service income earned
from Feb 15-29, 2016; P40,000 x (1/2
6 month /2 months)

ACER 52
 4. Accrued expenses of accrued liabilities

These are items of expenses that have been incurred but have not been recorded
and paid.

Illustrative problem:

On February 29, 2016, Matapang received the electric bill for the month of February
amounting to PHP3,800. Matapang will pay this bill on March 2016. The electric bill
represents the cost of electricity used (or incurred) for February. Although the said bill is
still unpaid and thus was not recorded, the matching principle and accrual basis of
accounting dictates that the same should be recorded in February. Otherwise, your
expense will be understated and thus the company will be reporting an overstated income
(or an erroneous income). Needless to say, erroneous information may lead to wrong
decisions. The entry to record the accrual of this expense is:

Adjusting entry:
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
1 Feb 29 Utilities Expense 3,800
2 Utilities Payable 3,800
To accrue the cost of electricity
3 incurred for the month of February.

5. Accrued expenses of accrued liabilities

These are income items that have been earned but have not been recorded and
paid by the customer. In short, these are receivables of the business.

Illustrative problem:

On February 28, 2016, Matapang repaired the computer of Pedro for PHP15,000.
Pedro was on an out-of-town trip so he could not pay Matapang. He told Matapang that he
will pay for their services on March 1, 2016. Matapang has already earned the PHP15,000
but was not paid as of the end of February 2016. Therefore, an income should be properly
recognized in February 2016 for this transaction. The entry to record this is:

Adjusting entry:
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
1 Feb 29 Accounts Receivable 15,000
2 Service Income 15,000
ACER 53
 To record accrued income for the
services already rendered during
the
3 month of February.

Lesson Prepare an Income Statement and

2 a Balance Sheet

INCOME STATEMENT

This statement is one of the major financial report. Also known as profit and loss statement or
statement of comprehensive income. This statement summarizes the results of company’s
operations for a specific period of time. If the result of operation is positive, then the business
earns net income otherwise, net loss.

Ledger accounts that can be found in the income statement are called Temporary accounts of
Nominal accounts. They are called such because at the end of the accounting period, balances
under these accounts are transferred to the capital account, thus having only temporary amounts
and resulting to zero beginning balances at the beginning of the following year.(Haddock, Price,
& Farina, 2012) Examples of temporary accounts include revenues, sales, utilities expense,
supplies expense, salaries expense, depreciation expense, interest expense among others.
Depicted in figure 8 below is sample format of an income statement.

The different parts of income statement are:

• The heading or title of report
• Name of the company
• Date or period covered Major parts are:
• Income or revenues - consist of all income received within the period upon provision of services
for service-concern business and sales for merchandising
• Expenses – money spent during the conduct of business operations
• Net income / net loss – the outcome of business operations.

ACER 54
 Figure 8 – Income statement of a Service type Business

BALANCE SHEET

Also known as the statement of financial position. This statement summarizes the total balances
of assets, liabilities and owner’s equity. In general, it provides the financial condition of the
business on a specific date.

The balance sheet is composed of Permanent accounts. Permanent in nature because their
balances remain intact and will be forwarded from one period to another.

Contra asset are those asset account presented under the asset portion of the balance sheet
such as Allowance for Bad debts and Accumulated depreciation. Depicted in figure 9 below is
sample format of a balance sheet of a service type business presented in as an account format
with contra asset account.

The different parts of balance sheet are:

• The heading or title of report
• Name of the company
• Date or period covered

Major parts are:

• Assets (Current and Non-current)

Current Assets – Assets that can be realized (collected, sold, used up) one year after year-
end date. Examples include Cash, Accounts Receivable, Merchandise Inventory, Prepaid
Expense, etc.
Current Assets are arranged based on which asset can be realized first (liquidity). Current
assets and current liabilities are also called short term assets and shot term liabilities.

Noncurrent Assets – Assets that cannot be realized (collected, sold, used up) one year after
yearend date. Examples include Property, Plant and Equipment (equipment, furniture,
building, land), Long Term investments, Intangible Assets etc.

• Liabilities (Current and Non-current)

ACER 55
Current Liabilities – Liabilities that fall due (paid, recognized as revenue) within one year
after year end date. Examples include Notes Payable, Accounts Payable, Accrued Expenses
(example: Utilities Payable), Unearned Income, etc.

Noncurrent Liabilities – Liabilities that do not fall due (paid, recognized as revenue) within
one year after year-end date. Examples include Loans Payable, Mortgage Payable, etc.
Noncurrent assets and noncurrent liabilities are also called long term assets and long term
liabilities.

• Owner’s Equity or Capital

Capital is an item of balance sheet wherein the capital or interest of the owner of the business
is listed. Initial withdrawal of capital will be recorded in a drawing account of the owner and
will be reflected as a deduction to the capital balance.

Figure 9 – Balance Sheet of a Service type Business

(Account Form)

Lesson Identify where there is a Profit or

3 Loss for a Business

Profitability has always been the overall goal of the business. It is of great
achievement in a successful implementation of strategic, operating and other plans.

In identifying the profit or loss of a business, the business will record every detail of
all business transactions and translate it into financial report. An income statement is a
financial report that reveals the total revenue or income, total expenses incurred during the
conduct of the business and, most of all the net profit or net loss as a result of business
operations over a specified period of time.

Below is the basic equation of income statement of a service-concern business:

ACER 56
Net Income/Loss = Service Income - Total Expenses

Interpret Financial Statements (Balance Sheet, Income

Lesson Statement, Cash Flow Projections and Summary of
4 Sales and Cash Receipts)

Accounts Formula Interpretation

Profitability Measure the ability of the company to generate income from the use of its assets and
ratios invested capital as well as control its cost
Operating It measures the percentage of profit earned from each
income
Operating Income peso of (Horngren et.al. 2013).
ratio Net Sales
Return on asset Measures the peso value of income generated by
(ROA)
Net Income employing the company’s assets.
Ave. Assets
Return on equity Measures the return (net income) generated by the
(ROE)
Net Income owner’s capital invested in the business
Ave. Equity
Financial Health Refers to the company’s capacity to pay their short and long term obligations as they
Ratios become due.

Debt ratio Total Debt Indicates the percentage of the company’s assets that are
Total Assets financed by debt. A high debt to asset ratio implies a high
level of debt.

Equity ratio Indicates the percentage of the company’s assets that are
Total Equity financed by capital. A high equity to asset ratio implies a
Total Assets high level of capital.

Indicates the company’s reliance to debt or liability as a

Debt to equity source of financing relative to equity. A high ratio
suggests a high level of debt that may result in high
ratio Total Debt interest expense.
Equity

Liquidity Measure the company’s ability to pay debts that are coming due (short term debt).

Solvency Refers to the company’s capacity to pay their long term liabilities.
Current ratio It seeks to measure whether there are sufficient current
Current Assets assets to pay for current liabilities. Creditors normally
Current Liabilities prefer a current ratio of 2.

Quick ratio It does not consider all the current assets, only those that
Quick Assets are easier to liquidate such as cash and accounts
Current Liabilities receivable that are referred to as quick assets.

ACER 57
 INTERPRETATION OF FINANCIAL STATEMENTS

Financial statements will reveal the outcome of the business operations. A financial analyst is
like a medical doctor who will conduct diagnosis by reading the financial report and render
interpretations on it which will be used as the basis of a sound economic decision making.

As previously defined, balance sheet reflects the financial position and condition of the
business. The financial position refers to the assets of the business which will be financed by the
liability and owner’s equity. On the other hand, financial condition refers to the situation wherein
assets, liability and owner’s equity are used to maximize income. Also, assets, liability and owner’s
equity may encounter growth or decline in value.

There are many available financing tools to be used in analysing and interpreting financial
statements. It depends on the purpose. Most of these tools are able to evaluate and interpret asset
growth of the business, profitability, liquidity and solvency. In general, it will provide a bird’s eye
view of the overall health of the business.

Depicted in figure 14 below is a matrix of financial interpretation with formula and explanation.

Figure 14 - Matrix of financial interpretation with formula and explanation.

ACTIVITY TIME: Now, let us complete the accounting cycle by recording financial
transactions and applying the concept of bookkeeping which will generate financial
statements. Upon completing this activity you will be able to know the financial
position, profitability and the condition of the business thru financial statement
analysis and interpretation.

Activity 1 : Identifying and recording a business transaction using the

General Journal

Below is an example of business transactions of a service type business. You are task to
record the said transactions in the general journal by means of journal entry applying the rules
of debit and credit.

Depicted in figure 11 is the standard chart of accounts of Alpha Laundry System.

Figure 11– Chart ofAccounts

ACER 58
 Let us begin!

Mr. Denver Ambrose is a retired public school teacher. He started his laundry business
in June 2018. He used all of his savings to start a “coin-operated laundry” business. He named
it Alpha Laundry Systems (ALS). The following are business transactions for the month of June
2018, the first month of business operation:

1. June 1, 2018 - Mr. A invested P 200,000 cash in his newly opened Alpha
Laundry System business.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
1 June 1
2
3 To record the initial Capital investment of Mr. A.

2. June 2, 2018 - Mr. A hired his former classmate Doree Dy to be the laundry
operator of ALS for a fixed monthly salary of P10,000. The operator will be
paid every quencina.

3. On June 5, 2018 – Alpha Laundry Systems purchased laundry equipment for

cash, P150,000.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
4 June 5
5
6 To record the acquisition of Laundry equipment

4. On June 6, 2018 – Alpha Laundry Systems paid cash in advance for the 1 year insurance
coverage of laundry equipment for the whole year amounting to P6,000.
Monthly insurance expense will be recognized for each month end report.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
7 June 6
8
To record the prepaid Insurance for the Laundry equipment
9
ACER 59
 5. On June 7, 2018 – Alpha Laundry Systems bought supplies for laundry amounting to
P10,000. The supplies bought are laundry consumables such detergent powder, soap
bar and fabric softener. Monthly inventory will be conducted to determine unused
supplies and will be recognized for each month end report.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
10 June 7
11
12 To record the acquisition of laundry consumables

6. On June 15, 2018 – Alpha Laundry Systems paid P4,750 cash for salary of laundry
operator.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
13 June 15
14
15 To record the payment of Laundry operator’s salary

7. On June 16, 2018 – Alpha Laundry Systems received P25,000 cash for laundry
services rendered to MZ. Hotel.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
16 June 16
17
18 To record the payment received from MZ Hotel.

8. On June 17, 2018 – Alpha Laundry Systems rendered service to Argon Hotel amounting
to P45,000. Argon promised to pay on June 20 of the same year.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

ACER 60
 POST.
DATE PARTICULARS REF. DEBIT CREDIT
19 June 17
20
21 To record the service rendered to Argon Hotel

9. On June 18, 2018, Alpha Laundry Systems purchase office supplies from Ku
Enterprises amounting to P2,000 on account. ALS will pay it on June 25 of the same
year.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
22 June 18
23
To record the acquisition of Office
24 Supplies on account from Ku Enterprises

10. On June 20, 2018, Alpha Laundry Systems collected payment of Argon Hotel.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
25 June 20
26
To record the full payment from Argon
27 Hotel

11. On June 25, 2018, Alpha Laundry Systems paid in full the amount owed to Ku
Enterprises.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
28 June 25
29

ACER 61
 To record the full payment of account to
30 Ku Enterprises

12. On June 27, 2018, Alpha Laundry Systems paid electric bill for the month amounting
to P1,000 in cash. The payment is charged to Utility expense account.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
31 June 27
32
To record the payment Electricity for the
33 month

13. On June 30, 2018, Alpha Laundry Systems paid a month’s transportation expense
amounting to P 1,300.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
34 June 30
35
To record the payment of transportation
36 for the month.

14. On June 30, 2018, Alpha Laundry Systems paid P5,000 cash for salary of laundry
operator.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
37 June 30
38

ACER 62
 To record the payment Laundry
39 operator’s salary.

15. On June 30, 2018, Alpha Laundry Systems paid P7,500 cash for the month’s rent of
laundry space.

Your Journal Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
40 June 30
41
42 To record the payment of rent for Laundry space.

Completing the monthly General Journal record will give the owner of the business a
financial record of all business transactions that transpired during the month. It will reflect the
inflows and outflows of cash, provisions of services which generate income.

The debit and credit columns should always be equal. Otherwise, the record will affect
overall accuracy of the entire financial record. The error should be properly corrected before the
next step in the recording process takes place.

Activity 2 : Posting journal entries to the General Ledger using T - accounts.

In this activity, you are task to post journal entries in the general ledger. The most
convenient and fastest way of posting journal entries to the ledger is by way of using “T” Account.
A T- Account is divided into two sides. The left- hand side is called the debit side and the right-
hand side which is the credit side. The left -hand or debit side shows the value received while
the right-hand side shows the value parted with.
This is called T account because it resemble capital letter “T.” an account title is written
above the T- account.

After performing the T-accounts, balances for each account under Assets, Liabilities,
Capital, Revenue/Income and Expenses, can now be determined.

Depicted in figure 12 below is a T-account and its description:

ACCOUNT TITLE
Left-HandSide Rigt-HandSide
or Debit Side or Credit Side
is for is for
VALUE VALUE
RECEIVED PARTED WITH

Figure12 : T - account

ACER 63
 To strengthen your focus on the posting of journal entries to the general ledger, it is
suggested to create T – account and label them with account title and group them
according to Assets, Liabilities, Owner’s Equity, Revenue and Expense. Given below are
T – accounts for all ledger accounts group according to the five major accounts.

ASSETS LIABILITIES

OWNER’S EQUITY

REVENUE EXPENSES

Activity 3 : Transferring T - account balances to prepare Trial Balance (un adjusted TB).

In this activity, you are task to create/prepare a trial balance for ALS. The period covered
is June 2018.
You are going to pick up ledger account balances starting from cash, accounts receivable
up to the last account in expense. Then, plot them in the trial balance report (un-
ACER 64
adjusted trial balance). Compute for the total debit and credit balances. The debit amount
should be equal to the credit.

Activity 4 : Record adjusting journal entries in the General Journal.

In this activity, you are task to identify accounts that needs to be adjusted.

1. Depreciation of Equipment. The laundry equipment, which was purchased by ALS on

June 5, 2018 at P150,000 has an estimated useful life of 5 years with a salvage value
of P10,000. Compute for the monthly depreciation to be charge as depreciation
expense and will be deducted against the cost to get the net book value of the laundry
equipment.
a. Compute for the monthly depreciation using straight line method.

Your Adjusting Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
43 June 30
44
To recognize the depreciation expense
45 for the month of June.

2. Prepayments. The insurance paid for Laundry equipment is P6,000. An expired portion
of the insurance in the amount of P 500 is determined by dividing the prepayments over
12 months (P6,000 / 12 months). The expired portion will be charged to expense. This
will reduce the value of prepaid insurance balance.
a. Compute for the expired portion of the insurance.

To compute for the expired portion of the insurance:

Formula: Insurance Cost

Term of coverage = Expired insurance per month
(No. of Months)

Prepaid insurance P 6,000

Less: Expired portion (June) 500
Un-expired portion P 5,500

Note: The expired portion is charge to expense (insurance expense). The unexpired
portion will be reported as the new prepaid insurance account balance for the next
month.

Your Adjusting Entry:

ACER 65
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
46 June 30
47
To recognize the expired portion of the
48 prepaid insurance.

3. Deferred expenses for supplies inventory. At the end of the month, unused supplies
were recorded to be P3,000.

Note: The used supplies is charge to expense (supplies expense). The unused portion
will be reported as the new supplies inventory balance for the next month.

Your Adjusting Entry:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
49 June 30
50
To recognize the used portion of the
51 Laundry supplies consumables

Formula to compute for the used supplies:

Supplies at cost P 10,000
Less: Unused supplies 3,000 Used supplies P 7,000

Activity 5 : Post adjusting journal entries in the General Ledger.

In this activity, you are task to post the adjusting entries written in the general journal
to the general ledger and update the debit, credit and outstanding balances.
After doing so, you may proceed to the next activity.

Activity 6 : Prepare Adjusted Trial Balance.

In this activity, you are task to update the balance of all ledger accounts and transfer
the balance to form a new adjusted trial balance. Still, the total debit and credit balances
must be equal, if not you need to go back and review all entries and their corresponding
amount to avoid errors and accuracy issues.

ACER 66
 Activity 7 : Prepare Income Statement.

In this activity, you are task to segregate nominal accounts from permanent
accounts. Only nominal accounts will be reflected in the income statement. Determine the
debit and credit balances and deduct all expenses from revenue accounts in order to arrive
at net income/loss.

How much is net income or loss of Alpha Laundry System?

The net income or loss can be determine upon finalization of income statements.
Net income indicates that the business is profitable.

Activity 8 : Prepare Balance Sheet.

In this activity, you are task to segregate permanent accounts from nominal
accounts. Only permanent accounts will be reflected in the balance sheet. Determine the
debit and credit balances and compute for the total assets, total liabilities and total owner’s
equity. The net income generated from the income statement must be added to the capital
to generate total owner’s equity. If the business incur net loss, it will be deducted.

How much is the assets of the business? The assets of the business can be
computed by adding up all assets accounts and deduct contra asset account. assets are
used to generate income for the business.

As prescribed in the accouting equation, total assets must be equal to total liabilities
and owner’s equity. Depicted in figure 13 below is the basic accounting equation.

Figure 13 - Basic Accounting Equation

What is cash receipt?

Cash Receipts include all of a firm’s inflows of cash in a given financial period. The
most common components of cash receipts are cash sales, collections of accounts
receivable, and other cash receipts.

What is a sales report?

A sales report is a record of all sales transactions. There are two type of sales transactions.
A cash sales and a credit sales.

The amount received in cash sales transactions will be recorded in the cash receipt record
book bearing the account cash. This will increase cash inflow. While the credit sales
transactions cannot be recorded in the cash receipt record book because there were no
inflows of cash. Instead, it will be recorded in the account receivable account. This
means, that the business has a collectible account from a customer who bough the
merchandise on his/her account.
ACER 67
What Is Cash Flow Projection?

A cash flow report records all cash inflow or out flow of the business.

Normally, it will report three business activities, namely, the operating, investing and
financing activities.

The operating activities involves the main operations of the business which the buying
supplies (cash outflow) and selling (cash inflow) of its products.

The investing activities involves the acquisition of long term or fixed assets of the business
(cash outflow) and selling the old one’s cash inflow).

The financing activities involves the acquisition of capital of the business thru borrowings
or investors (cash inflow) and payments of investors and creditors (cash outflow).

The cash flow projection is an important task of an accountant to determine the cash
requirement for the next period of business operations. The business will be guided as to
how much cash should be needed in order to pay operating expenses and how much cash
should the business spend for fixed assets in order to increase sales, cash collection or a
market share.

Activity 9 : Interpret financial statements (balance sheet, income statement, cash

flow projection and summary of sales and cash receipts.

Accounts Formula Answer

Profitability ratios Measure the ability of the company to generate income from the use of its assets
and invested capital as well as control its cost

Operating income Operating Income Net 40,616.67 P70,000 58%

ratio Sales
Return on asset Net Income Ave. 16.63%
(ROA) Assets
Return on equity Net Income Ave. 20.31%
(ROE) Equity
Financial Refers to the company’s capacity to pay their short and long term obligations as
Health Ratios they become due.

Debt ratio Total Debt Total ___0___ 242,950 0.%

Assets
Equity ratio Total Equity Total 200,000 82.32%
Assets 242,950
0.%
Debt to equity
ratio ___0___ 200,000
Total Debt Equity

ACER 68
 Liquidity Measure the company’s ability to pay debts that are coming due (short term debt).

Current ratio Current Assets Current

Liabilities
Quick ratio Quick Assets 82,450
Current Liabilities

What Is It

Discussion of activities:

Activity 1

In this activity, the bookkeeper was tasked to journalize all business transactions such as
the buying and servicing or selling activities of the business. Transactions such as hiring
new employees, signing contracts, surveying for new potential markets and making
canvass for a merchandise to be purchased do not form part of the journalizing process.
In making journal entries, i.e, using account title the bookkeeper should use the standard
chart of issued by the company.
The bookkeeper will then compute for the total debit and credit column balances. The total
general journal balance representing the debit and credit columns must be equal. Please
refer to the General Journal.

Activity 2

In this activity, the bookkeeper was tasked to post journal entries in the general ledger. It
is suggested that the posting process be done using T-account for faster and convenient
way. Running balances of its account must be computed. The running balance must be
placed according to the account’s normal balance following the rules of debit and credit.
The T-accounts of the activity was already available. The bookkeeper will only fill in the T-
account of the specific account. Please refer to the T-account with running balances.

Activity 3

In this activity, the bookkeeper was tasked to transfer balances of each account in the T-
account. The bookkeeper will then compute for the total debit and credit column balances.
The bookkeeper must see to it that the debit and credit columns must be equal.
The un-adjusted trial balance can now be reported as partial financial report for the
period prior to any end of month adjustments. Please refer to the Worksheet.

Activity 4

ACER 69
In this activity, the bookkeeper was tasked to identify accounts that needs to be adjusted.
The bookkeeper will also use account titles available in the chart of accounts.
The adjustments are journalized in general journal on a separate page.

Activity 5

In this activity, the bookkeeper was tasked to post all adjustments in the general
ledger or thru the use of T-account. such adjustments and will be reflected in the
adjustment columns in the worksheet. The bookkeeper will then compute for the total debit
and credit column balances. Please refer to the Worksheet.

Activity 6

In this activity, the bookkeeper was tasked to prepare Adjusted trial balance by
updating all account balances horizontally, adding or subtracting accounts affected by the
adjustments made.
The bookkeeper will then compute for the total debit and credit column balances.
The bookkeeper must see to it that the debit and credit columns must be equal.

Activity 7

In this activity, the bookkeeper was tasked to prepare an Income Statement.

Nominal accounts are extracted from the adjusted trial balance to form income statement.

Below is the income statement of Alpha Laundry Systems:

Activity 8

In this activity, the bookkeeper was tasked to prepare Balance Sheet. Permanent
accounts are extracted from the adjusted trial balance to form a balance sheet.

Below is the balance sheet of Alpha Laundry Systems:

ACER 70
 What’s More

Activity 9

In this activity, the bookkeeper will be tasked to interpret financial statements

(balance sheet, income statement, cash flow projection and summary of sales and cash
receipts.

Normally it is not part of a bookkeeper’s job to analyse and interpret financial

statement. It is the accountant’s job.

Below are some enrichments questions that need your computations and
interpretations of balance sheet and income statement accounts of Alpha Laundry System
for the month of June 2018.

1. Operating income ratio : Operating Income __________ = ____% Net

Sales
Interpretation:_______________________________________________.

2. Return on asset (ROA) : Net Income __________ = _______% Ave. Assets

Interpretation:_______________________________________________.

3. Return on equity (ROE) : Net Income __________ = _______% Ave. Equity

Interpretation:_______________________________________________

4. Equity ratio : Total Equity __________ = _______%

Total Assets
Interpretation:______________________________________________.
ACER 71
 What I Have Learned

Answer the following fill in blank questions:

1. ___________ is an employee of the company in charge to maintain bookkeeping
records of the business.
2. ___________ Is considered the book of original entry.
3. ___________ Is considered the book of final entry.
4. ____________ Is a financial statement that reports the financial position of the
business.
5. ____________ Is a financial statement that reports net income or net loss of the
business.
6. ____________ Is an entry necessary to update ledger accounts from unadjusted
trial balance to adjusted trial balance.
7. _____________ Is a report summarizing the ledger accounts with updated
balances in debit and credit columns.
8. _____________ Is a statement that reports the cash inflow and cash outflow of
the business.
9. _____________ Is a type of sales report that presents cash collection only.
10. _____________ Is a record that report cash inflow of the business.

What I Can Do

GIN Janitorial and General Services, Inc., a company engaged in providing janitorial
services to different business establishments in the city. The following financial data
reveals the income and expenses records during the last quarter of 2018:

Revenue / Service Income:

Service rendered – on account (Deluxe Hotel) P95,000
Service rendered – Cash (Maxandria Hotel) 45,000
Service rendered – on account (Pearlmont Inn) 25,000
Service rendered – Cash (Mallberry Suites) 105,000
Service rendered – Cash (VIP Hotel Inn) 65,000
Service rendered – on account (Sogo Hotel) 55,000
Service rendered – on account (Dynasty Court 75,000
Hotel)
Service rendered – on account (Grand City Hotel) 60,000
-------------------
TOTAL P525,000

ACER 72
 Salaries and Wages of employees:

Janitor’s Salary – Total P 155,000

Management staff salary-Total 45,000
General Manager’s salary – total 90,000
-------------------
TOTAL P 290,000

Operating and administrative expenses:

Utilities expenses P 15,000

Rent expense 15,000
Repairs and Maintenance 7,500
Transportation and communications 4,500
Depreciation expense 10,000
-------------------
TOTAL P 52,000

The owner of the business wants to know the operations of the business. You are
tasked to compute for the following:

1. How much is the total service income collected in cash

2. How much is the total service income still collectible
3. How much is the total expenses
4. How much is the net income of GIN Janitorial and General Services, Inc.,

Assessment

1. Measure the ability of the company to generate income from the use of its assets and
invested capital as well as control its cost.
a. Solvency ratio c. Profitability ratio
b. Liquidity ratio d. Acid-test ratio
2. The following are financial records of ABC C
• Revenues – 20,000
• Rent expense – 3,000
• Salaries expense – 4,000
• Utilities expense – 2,000
How much is the total expenses?

ACER 73
 a. P9,000 b. P10,000 c. P 18,000 d. P1,000

3. How much is the net income?

a. P9,000 b. P10,000 c. P 18,000 d. P1,000

4. All of the following is an income statement accounts, except.
a. Rent expense c. Accounts receivable
b. Service fees d. Insurance expense
5. All of the following is a balance sheet accounts, except.
a. Cash c. Depreciation expense
b. Equipment d. Accumulated depreciation
6. One of the accounts title below is used in making an adjusting entry.
a. Liability c. Asset
b. Prepayments d. Capital
7. A financial statement that reports the Asset, Liability and Owner’s equity of the
business.
a. Income statement c. General journal
b. Balance sheet d. General ledger

8. A financial statement that reports the Sales or Income received, Expenses and the
Net income of the business.
a. Income statement c. General journal
b. Balance sheet d. General ledger
9. Is a book used to record journal entries called the book of original entry.
a. Income statement c. General journal
b. Balance sheet d. General ledger
10. Is a book used to record account balances called the book of final entry.
a. Income statement c. General journal
b. Balance sheet d. General ledger

Mr. Izatsuki Hamida, the bookkeeper of Honda Massage and Spa Services reported
the following data for the month of January to March 2018:

Water expenses ---------------------- P 4,000

Soap expense ---------------------- 7,500
Massage oil expenses ---------------------- 15,000
Light & power expenses ---------------------- 12,000
Rent of the Massage parlor---------------------- 24,000
Salary of staff (4 massage worker)-------- 72,000
Income received from massage service-------- 120,000
Telephone expenses ------------------------ 7,500

How much is the net profit or net loss?

ACER 74
 Additional Activities

ACTIVITY 1
Generate an overall report of your business transactions.
1. Journal Entries
2. T- accounts
3. Trial Balance
4. Income Statement
5. Balance Sheet

ACER 75
ACTIVITY 2
PART I - Preparing personal income statement:
Things needed:
• Pen
• ¼ piece of paper (a note book sheet is ok)
• Calculator Instructions:
• Write your monthly allowance (computed by daily allowance x number of
days in a month). Compute the total.
• Write the amount you spend on food, transportation, phone load, etc.
(make it monthly to match their allowance). Compute the total.
• Deduct the total amount you spend from the total amount of your
allowance.
• Associate allowance with revenue and spending with expense with the
net amount as net income.

PART II - Preparing personal balance sheet:

Things needed:
• Pen
• ¼ piece of paper (a note book sheet is ok)
• Calculator
Instructions:
• Write your current savings and everything that they own (clothes, pen,
pencil, etc.) Compute the total.
• Write the amount that you owed from your friends, family members,
parents (tuition).
• Deduct the amount you owed from the amount they own.
• Associate the amounts owned with assets and amount owed with
liabilities with the net amount as equity.

ACTIVITY 3

GROUP ACTIVITY: Compute your personal income:

Materials needed:
1. Ballpen
2. Meta cards - 3 colors ( Green, Light Blue and Yellow) Or if not available, use
any color
3. Calculator (cell phone is ok)
4. ½ White cartolina
5. Glue or scotch tape

Directions:
1. List down your income in Green metacard and compute the total
2. List down your expenses in yellow metacard and compute the total
3. Subtract the total amount computed in green metacard against the total
amount computed in the yellow metacard.
4. Write the amount in the light metacard after the label “Net Profit” if the result of
subtraction is positive. If the result is negative write “Net Loss”
5. Present it to the teacher when your name is called.
Quarter Challenge 2

1. Which of the following is the process or activities by which a company adds value to an
article, including production, marketing, and the provision of after-sales service?
A. 4Ms of production C. Value Chain
B. Supply Chain D. Business Model
2. Benjie is engage in buying and selling shoes in his neighborhood. He gets his stocks
from a local shoes dealer. Suppose each pair costs 1, 200.00 and Benjie add 50%
mark-up. How much is the mark-up price?
A. 500.00 C. 700.00
B. 600.00 D. 800.00
3. Assuming no returns outwards or carriage inwards, the cost of goods sold will be equal
to:
A. Sales less gross profit
B. Opening stock plus purchases plus closing stock
C. Closing stock less purchases plus opening stock
D. Purchases plus closing stock less opening stock 4. Which
section of a business plan is generally first but written last?
A. Business description and vision
B. Appendices
C. Executive summary
D. Description of market
5. Is the process of evaluating risks, performance, financial health, and future prospects of
a business by subjecting financial statement data to computational and analytical
techniques with the objective of making economic decisionsHorizontal analysis.
A. Horizontal analysis C. Ratio analysis
B. Vertical analysis D. Financial statement
analysis
6. Statement I- Manpower in production operation refers to the workers involved in the
production of goods.
Statement II- Machine refers to the raw materials needed in the production of a
product.
A. Statement I is true. C. Both statements are true.
B. Statement II is true. D. Both statements are false
7. Costs incurred through payment of utilities such as electricity and water –
A. Revenue C. Free B. Mark-up
D. Operating Expenses
8. Gross profit less expenses is known as:
A. Total drawings C.Net turnover
B. Cost of goods sold D. Net profit
9. What is typical timeframe that a business plan addresses?
A. One year
B. the anticipated life of the business
C. At least three to five years
D. At least five years
10. Is a technique for evaluating a series of financial statement data over a period of time
with the purpose of determining the increase or decrease that has taken place. Also
called trend analysis.
A. Horizontal analysis C. Ratio analysis
B. Vertical analysis D. Financial statement
analysis
11. Which of the following is a replica of a product as it will be manufactured, which may
include such details as color, graphics, packaging and instructions?
A. Prototype C. Supplies
B. Materials D. Outputs
12. Which of the following is a system of organizations, people, activities, information, and
resources involved in moving a product or service from supplier to customer.
A. Business Model C. Supply chain
B. Suppliers D. Value Chain
13. The selling price of an item or merchandise is computed by adding cost per unit and
__________?
A. Revenue C. Discount
B. Mark Up D. Number of Items
14. It is a tool that allows managers to make educated estimates on revenue and costs of
the business in order to cope up with uncertainties of the future –
A. Estimating C. Forecasting B. Guessing
D. Benchmarking
15. Net turnover can be calculated as:
A. Sales plus returns inwards
B. Gross profit plus cost of goods sold
C. Sales less returns outwards
D. Purchases plus opening stock less returns outwards
16. Which of the following would not appear in the profit and loss account?
A. Drawings C. Cash expenses.
B. Carriage outwards. D. Rent received
17. What is the biggest mistake you can make when preparing a business plan?
A. Not telling a compelling story
B. Forgetting the executive summary
C. Failing to include at least one appendix
D. Misrepresenting facts
E. Failing to have a clear vision of the business
18. This section will discuss information about your business, your goals and the customers
you plan to serve.
A. Executive summary
B. Company description
C. Marketing plan
D. Financial projection
19. Is a technique that expresses each financial statement item as a percentage of a base
amount. Also called common-size analysis.
A. Horizontal analysis C. Ratio analysis
B. Vertical analysis D. Financial statement
analysis

20. Which of the following best describes recruitment?

A. tools to produce goods or to generate services
B. process by which a business seeks to hire the right person for a vacancy
C.marketing copy that explains what a product is and why it's worth
purchasing
 D.rationale of how an organization creates, delivers, and captures
value in economic, social, cultural or other contexts 21. Which of the following is a set of
procedures and instructions?
A. Value chain C. Manpower
B. Supply chain D. Methods
22. Claire is a fish vendor selling at the local public market. He gets his fish from a supplier
at 100.00 pesos per kilo and sells it at160.00 45 per kilo to his customers. How much
mark-up did Claire add to his selling price?
A. 40.00 C. 60.00
B. 50.00 D. 70.00
23. Refers to the amount added to the cost of a product to determine the selling price –
A. Revenue C. Mark Up
B. Cost D. Mark Down
24. The correct double-entry to transfer commission received for the year to the profit and
loss account is:
The correct double-entry to transfer commission received for the year to the
profit and loss account is:
Debit Credit
A Trading Commission received
B Commission received Profit and loss
C Profit and loss Commission received
D Commission received Trading

25. What is an entrepreneur?

A. Someone who invests time and money to start a business.
B. Someone who makes a lot of money.
C. Someone who takes a risk to make a profit.
D. Both A & C.
26. This section of your business plan will show that you know the ins and outs of the
industry and the specific market you are planning to enter.
A. Executive summary
B. Marketing plan
C. Competitive analysis
D. Market analysis
27. Your rival in the industry is called?
A. Competitor
B. Suppliers
C. Lending firms
D. Board of directors
28. Expresses the relationship among selected items of financial statement data. The
relationship is expressed in terms of a percentage, a rate, or a simple proportion.
A. Horizontal analysis C. Ratio analysis
B. Vertical analysis D. Financial statement
analysis
29. Statement I- A product description is the marketing copy that explains what a product is
and why it's worth purchasing.
Statement II- Educational qualifications and experience is one of the criteria in
considering manpower.
a. Statement I is false. C. Both statements are true.
 b. Statement II is false. D. Both statements are false.
30. Statement I- Value chain is the process or activities by which a company adds value to
an article, including production, marketing, and the provision of after-sales service.
Statement II- A supply chain is a system of organizations, people, activities, information,
and resources involved in moving a product or service from supplier to customer.
A. Both statements are true. C. Statement I is false.
B. Both statements are false. D. none of the above.
31. Merchandise or goods purchased are referred to as –
A. Costs C. Expenses
B. Purchases D. Loss
32. Refers to goods and merchandise at the end of operation of business or accounting
period.
A. Merchandise Inventory, end C. Expenses
B. Freight-in D. Merchandise Inventory, beg.
33. Gross profit is the
A. Amount of money you get for profit lab.
B. Amount of money collected from selling products C. Amount of
money your product costs to produce
D. Has nothing to do with money.
34. Net profit is the:
A. Amount of money you get for profit lab.
B. Amount of money collected from selling products.
C. Amount of money your product costs to produce.
D. Has nothing to do with money.
35. The diagram showing your workers in the organization with their job responsibilities is
called?
A. Organizational perspective
B. Organizational layout
C. Organizational chart
D. Organizational diagram
36. Promotional activity is found in which section of your business plan?
A. Management section
B. Financial section
C. Marketing section
D. Company description section
37. Measure the ability of the company to generate income from the use of its assets and
invested capital as well as control its cost.
A. Solvency ratio C. Profitability ratio
B. Liquidity ratio D. Acid-test ratio
38. Statement I- . Output represents the final products from the production process and
distributed to the customers.
Statement II- The 4Ms in the production operation are the materials, manpower,
machine and money.
A. Both statements are true. C. Statement I is false.
B. Both statements are false. D. Statement II is false.
39. Which of the following is the marketing copy that explains what a product is and why it's
worth purchasing?
A. Production method C. Business model
B. Product description D. Prototyping
40. Mang Antolin sells bottled water in nearby public bus terminal, every day he can sell 30
pieces of bottled water at 20 pesos each. How much is his daily revenue?
 A.900.00 C. 800.00
B. 700.00 D. 600.00
41. Measure the ability of the company to generate income from the use of its assets and
invested capital as well as control its cost.
c. Solvency ratio c. Profitability ratio
d. Liquidity ratio d. Acid-test ratio
42. The following are financial records of ABC C
• Revenues – 20,000
• Rent expense – 3,000
• Salaries expense – 4,000
• Utilities expense – 2,000 How much is the total expenses?
b. P9,000 b. P10,000 c. P 18,000 d. P1,000

43. How much is the net income?

b. P9,000 b. P10,000 c. P 18,000 d. P1,000
44. All of the following is an income statement accounts, except.
a. Rent expense c. Accounts receivable
b. Service fees d. Insurance expense
45. All of the following is an balance sheet accounts, except.
a. Cash c. Depreciation expense
b. Equipment d. Accumulated depreciation

46. One of the account title below is used in making an adjusting entry.
a. Liability c. Asset
b. Prepayments d. Capital
47. A financial statement that reports the Asset, Liability and Owner’s equity of the
business.
a. Income statement c. General journal
b. Balance sheet d. General ledger
48. A financial statement that reports the Sales or Income received, Expenses and the
Net income of the business.
a. Income statement c. General journal
b. Balance sheet d. General ledger
49. Is a book used to record journal entries called the book of original entry.
a. Income statement c. General journal
b. Balance sheet d. General ledger
50. Is a book used to record account balances called the book of final entry.
a. Income statement c. General journal
b. Balance sheet d. General ledger

Answer Key

MODULE 6
What I Know Assessment
1. True 11. True 1. D 11. C
2. False 12. True 2. A 12. D
3. True 13. True 3. B 13. B
4. True 14. True 4. C 14. C
5. True 15. True 5. A 15. C
6. True 6. A
7. True 7. B
8. False 8. C
9. True 9. D
10. True 10. A

MODULE 7
Lesson 1
What I Know
1. C 6. C 11. D
2. A 7. C 12. B
3. D 8. C 13. A
4. B 9. B 14. D
5. D 10. C 15. B
What’s More
Table 1
Merchandise: Broomstick
A. 25 B. 12.50 C. 37.50 D. 30 E. 1,125
Table 2
Merchandise: Broomstick
C. 37.50 F. 900 G. 33,750 H. 10,950 I. 410,625
Table 3
January: 33,750 Feb. 35,437.50 Mar. 37,209.38 Apr. 39,069.89
May 41,023.34 Jun. 45,125.67 Jul. 45,125.67 Aug. 45,125.67
Sep. 45,125.67 Oct. 45,125.67 Nov. 45,125.67 Dec. 45,125.67 What I
have Learned
1. Forecasting
2. External
3. Internal
4. Cost
5. Mark-up
6. Projected Revenue
Lesson 2
What’s More
Table 4
Merchandise: Umbrella
A. 90 F. 360 K. 32,400
Table 5
Merchandise: Umbrella
No. of Items Sold Daily = 12 F. 192 J. 3,200
Table 6
January: 35,600 Feb. 35,600 Mar. 35,600 Apr. 35,600
May 35,600 Jun. 35,600 Jul. 35,600 Aug. 35,600
Sep. 35,600 Oct. 35,600 Nov. 35,600 Nov. 35,600
What I have Learned
1. Cost of Goods Sold
2. Merchandising
3. Number of items sold every month
4. Cost per unit
5. Freight-in
Assessment
1. A 6. A 11. D
2. C 7. B 12. A
3. B 8. C 13. C
 4. D 9. B 14. B
5. C 10. C 15. A
MODULE 8
What I Know Assesment
1. F 1. F
2. T 2. T
3. F 3. F
4. F 4. F
5. T 5. T
6. F 6. F
7. F 7. F
8. T 8. T
9. F 9. F
10. F 10. F
11. F 11. F
12. T 12. T
13. F 13. F
14. T 14.T
15. F 15. F

What’s New
Activity 1
Solution:
Given of 10 boxes of perfumes contain a dozen of bottles
120 bottles bought by Rodrigo
Cost of each box = P12,000.00
Selling Price of each perfume =P1,500.00
To solve the problem, we compute first the cost of 10 X 12=120 bottles
Since each box costs P12,000.00 & Rodrigo bought 10 boxes, we get
Cost = P12,000.00(10)= P120,000.00
Rodrigo can expect that the net sales he will get upon selling 10
boxes consisting of 120 bottles
Net Sales = 1,500 (120) = P180, 000.00
Thus, has
Profit =Net Sales – Costs
=180,000.00-120,000.00
=P60,000.00

MODULE 9

Post Test Pre Test

1. B 1. FALSE
2. A 2. FALSE
3. C 3. TRUE
4. C 4. TRUE
5. D 5. FALSE
6. C 6. FALSE
7. D 7. TRUE
8. C 8. TRUE
9. B 9. TRUE
10. C 10. TRUE
11. B 11. TRUE
12. B 12. FALSE
13. C 13. FALSE
14. B 14. TRUE
15. B 15. TRUE

MODULE 10
ACTIVITY 1 - Journalizing Transaction 1:
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT

1 June 1 Cash 200,000

2 Mr. A Capital 200,000
3 To record the initial Capital investment of Mr. A.

Transaction 2:
Your Journal Entry:
- No entry will be made because this transaction does not involve monetary consideration.

Transaction 3:
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT

4 June 5 Laundry equipment 150,000

5 Cash 150,000
To record the acquisition of Laundry
6 equipment

Transaction 4:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
7 June 6 Prepaid Insurance 6,000
8 Cash 6,000
To record the prepayment of Insurance for
9
the Laundry equipment

Transaction 5:

PAGE 1
GENERAL JOURNAL

POST.
 DATE PARTICULARS REF. DEBIT CREDIT
10 June 7 Laundry supplies 10,000
11 Cash 10,000
To record the acquisition of laundry
12
consumables

Transaction 6:

GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT

13 June 15 Salaries and wages 4,750

14 Cash 4,750
To record the payment of Laundry operator’s
15 salary

Transaction 7:

GENERAL JOURNAL

POST.
DATE PARTICULARS REF. DEBIT CREDIT

16 June 16 Cash 25,000

17 Laundry Income 25,000
To record the payment received from MZ
18 Hotel.

Transaction 8: 1
GENERAL JOURNAL PAGE

POST.
DATE PARTICULARS REF. DEBIT CREDIT

19 June 17 Accounts Receivable 45,000

 20 Laundry Income 45,000
To record the service rendered to
21 Argon Hotel

1
Transaction 9:
GENERAL JOURNAL PAGE

POST.
DATE PARTICULARS REF. DEBIT CREDIT

22 June 18 Office supplies 2,000

23 Accounts payable 2,000
To record the acquisition of
Office Supplies on account
24 from Ku Enterprises

Transaction 10:
1
GENERAL JOURNAL PAGE

POST.
DATE PARTICULARS REF. DEBIT CREDIT

25 June 20 Cash 45,000

26 Accounts receivable 45,000
To record the full payment from Argon
27 Hotel

Transaction 11:
1
GENERAL JOURNAL PAGE

POST.
DATE PARTICULARS REF. DEBIT CREDIT

28 June 25 Accounts payable 2,000

29 Cash 2,000
To record the full payment of account to
30 Ku Enterprises

Transaction 12:
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT
 31 June 27 Utilities expense 1,000
32 Cash 1,000
To record the payment Electricity for the
33 month

Transaction 13:
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT

34 June 30 Transportation expense 1,300

35 Cash 1,300
To record the payment of transportation for
36 the month.

Transaction 14:
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT

37 June 30 Salaries and wages 5,000

38 Cash 5,000
To record the payment Laundry operator’s
39 salary.

Transaction 15:
GENERAL JOURNAL PAGE 1

POST.
DATE PARTICULARS REF. DEBIT CREDIT

40 June 30 Rent expense 7,500

41 Cash 7,500
To record the payment of rent for Laundry
42 space.

Activity 2 : Posting journal entries to the General Ledger using T - accounts.

ASSETS
 LIABILITIES

OWNER’S EQUITY

REVENUE
EXPENSE
ADJUSTING JOURNAL; ENTRIES:
 CHART OF ACCOUNTS

WORKSHEET

Laundry System
Income Statement
For the month of June 2018
 Laundry Income P 70,000.00
Less: Operating expenses:
Rent expense P 7,500.00
Depreciation expense 2,333.33
Insurance expense 500.00
Salaries and wages 9,750.00
Utilities expense 1,000.00
Transportation expense 1,300.00 29,383.33
Net Income P 40,616.67
==========

Alpha Laudry System

Balance Sheet
As of June 30 2018

ASSETS

Cash P 82,450.00
Accounts receivable 0.00
Prepaid insurance 5,500.00
Office supplies 2,000.00
Laundry supplies 3,000.00
Laundry equipment P150,000.00
Less: Accumulated Dep’n 2,333.33 147,666.67
Total Assets P 240,616.67
==========

LIABILITIES
Accounts payable P 0.00

OWNER’S EQUITY
Mr. A Capital P 200,000.00
Add: Net Income 40,616.67
Total Liabilities and Owner’s Equity P 240,616.67
==========

ANSWERS TO WHAT I HAVE LEARNED:

1. BOOKKEEPER
2. GENERAL JOURNAL
3. GENERAL JOURNAL
4. BALANCE SHEET.
5. INCOME STATEMENT.
6. ADJUSTING ENTRY.
7. TRIAL BALANCE.
8. CASH FLOW STATEMENT
9. CASH SALES
10. CASH RECEIPTS.

SOLUTION TO PROBLEM - GIN Janitorial and General Services, Inc.

1. Total service income collected in cash P 215,000

2. The total service income still collectible P310,000
3. The total expenses P342,000
4. The net profit of ABC Company. P183,000
SOLUTION TO PROBLEM - Honda Massage and Spa Services

Income received from massage service--- P 120,000

Water expenses ------------------- ( 4,000)
Soap expense ------------------- ( 7,500)
Massage oil expenses ------------------- ( 15,000)
Light & power expenses ------------------- ( 12,000)
Rent of the Massage parlor ------------------ ( 24,000)
Salary of staff (4 massage worker)-- (72,000)
Telephone expenses ------------------- ( 7,500)
----------------------
Net Loss (P 22,000)

=============

ASSEESSMENT

ITEM NUMBER ANSWER

1. C
2. A
3. D
4. C
5. C
6. B
7. B
8. A
9. C
10. D

Quarter Challenge 1
1. A
2. A Quarter Challenge 2
3. B
4. D 1.C 41. C
5. B 2. A 42. A
6. D 3. A 43. D
7. B 4. B 44. C
8. D 5. D 45. C
9. D 6. A 46. B
10. A 7. D 47. B
11. D 8. D 48. A
12. C 9. C 49. C
13. B 10. A 50. D
14. B 11. A
15. A 12. C
16. A 13. B
17. D 14. C
18. A 15. B
19. A 16. A
20. A 17. E
 21. C 18. B
22. B 19. B
23. C 20. B
24. C 21. D 25. C 22. C
26. D 23. C
27. B 24. B
28. A 25. D
29. D 26. D
30. B 27. A
31. C 28. C
32. A 29. C
33. B 30. A
34. D 31. B 35. B 32. A
36. A 33. A
37. C 34. B
38. B 35. C
39. D 36. C
40. A 37. C
41. C 38. D
42. B 39. B
43. A 40. D
44. D
45. B
46. D
47. A
48. A
49. C
50. A

Nick L. Aduana, Etrepreneurship in Philippine Setting for

References Senior High School, 2017, C&E publishing, Inc.p.46-51
BOOKS
Angeles A. De Guzman, Entrepreneurship for Senior High
School Applied Subject ABM Strand,Lorimar Publishing,p.25-
26
Ronaldo S. Batisan, DIWA Senior High School Series:
Entrepreneurship Module. Diwa Learning Systems Inc.
Raymund B. Habaradas and Tereso S. Tullao,Jr., Pathways to
Entrepreneurship,2016,Phoenics publishing
Angeles A. De Guzman. Entrepreneurship (For Senior High
house,p.17-28
School, Applied subject, ABM Strand. Lorimar Publishing, Inc
2018, 25 – 26.
Aduana, Nick L. "Chapter 5/Lesson 3 The Marketing Mix." In
Entrepreneurship In Philippine Setting For Senior High
Edralin, Divina M. Entrepreneurship. Quezon City: Vibal
School, 184-199. Quezon City, Philippines: C&E Publishing,
Group, Inc. 2016, 80 – 83.
2016.
Leedy, P. and Ormrod, J. Practical Research: Planning and
Aduana,N (2015). Financial statements; Preparation,
Design 7th Edition. (Merrill Prentice Hall and SAGE
presentation, analysis and interpretation, presentation.Quezon
Publications, 2001),
City, Philippines: C & E Publishing,Inc.
Nick L. Aduana, Entrepreneurship in Philippine Setting (for
Angeles A. De Guzman, Entrepreneurship for Senior High
Senior High School), 2017
School Applied Subject ABM Strand,Lorimar Publishing,p.25-
26
Dr. Eduardo A. Morato Jr., Entrepreneurship, 2016
Banastao,C.,& Frias, S.(2008) Entrepreneurship.Quezon City
Angeles A. De Guzman, Entrepreneurship for Senior High Philippines: C & E Publishing,Inc.
School Applied Subject ABM Strand,Lorimar Publishing,p.1-5

Ronaldo S. Batisan, Entrepreneurship: Diwa Senior High

School Series, Diwa Learning Systems Inc., p. 16-20

Eduardo A. Morato Jr., Entrepreneurship, 1st ed., Manila,

Philippines: REX Books Store,p.13
Nick L. Aduana, Etrepreneurship in Philippine https://www.google.com.ph/search?q=value+chai
Setting for Senior High School, 2017, C&E n&oq=value&aqs=chrome.1.69i57j69i
publishing, Inc.p.46-51 59j0l4.3827j0j9&sourceid=chrome&ie=UTF-8
Raymund B. Habaradas and Tereso S. Tullao,Jr.,
Pathways to https://www.google.com.ph/search?ei=IDdFXIaU
Entrepreneurship,2016,Phoenics publishing MtrrwQPKrrqgCA&q=supply+chain&o
house,p.17-28 q=supp&gs_l=psy-
ab.1.0.0i67l8j0l2.337222.338710..340558...1.0..0.
Aduana, Nick L. Entrepreneurship in the 512.1404.0j1j3j5-
Philippine Setting for Senior High School. Quezon 1......0....1..gws-wiz.......0i71j0i131.pwF4FAungm0
City.C & E Publishsing, Inc. 2016. https://www.google.com/search?sxsrf=ACYBGNS
4jjQJj3vRJDboe06xVydYg9Segg%3
Morato, Eduardo A. Entrepreneurship. Manila. A1580443120499&source=hp&ei=8KUzXqGRHN
Rex Bookstore, Inc. 2016. P7wAO29K2YDg&q=what+is+prototy
pe+product&oq=what+is+prototype&gs_l=psy-
Batisan, Ronaldo S. Entrepreneurship Module, ab.1.1.0i131j0l9.1525.6742..9589...2.0..0.146.201
Diwa Senior Highschool Series, Diwa Learning 2.1j16......0....1..gwswiz.....10..35i362i39j35i39j0i6
System Inc. Legaspi Village, Makati City 7j0i20i263.Eo6MP-6t984
Philippines, copyright 2016.
https://en.wikipedia.org/wiki/Business_model
Lopez, Rafael Jr. Basic Accounting for Non-
Accountants. 2015 https://www.google.com/search?sxsrf=ACYBGNS
PBhu3TIpORq6cUraQO0W4kVv9A%3A1580443
Lopez, Rafael Jr. Fundamentals of Accounting. 131001&ei=-
2016 qUzXo_kPJvZhwPSgpaYDw&q=business+plan&
oq=business&gs_l=psy-
Rabo, Tugas, and Salendrez, H.E. Fundamentals ab.1.1.0i131i273l2j0i67l2j0i131i67l2j0i67j0i131l2j
of Accountancy, Business and 0.45360.47333..48595...0.3..0.139.92
Management. Vibal Group Inc. 2016 0.1j7......0....1..gws-
wiz.......0i71j35i39j0i273j0i20i263.X5Tyn8npzGw
Lopez, Jr. Rafael M. Fundamentals of
Accounting, 2014-2015 Edition https://www.tutorialspoint.com/entrepreneurship_
development/entrepreneurship_devel
opment_process.htm
Morato, Eduard, Jr. A. Entreprenuership, Rex
Bookstore 2016
Santos, ELi. "Marketing Mix the 7 Ps of
Marketing." LinkedIn SlideShare. February 06,
Teaching Guide for Senior High School,
2012. Accessed January 04, 2019.
Fundamentals of Accountancy, Business, &
https://www.slideshare.net/elisantos11/marketing
Management 1, CHED in collaboration with PNU
mix-the-7-ps-of-marketing.
Teaching Guide for Senior High School,
Tracy, Brian. "The 7 Ps of Marketing." Entrepreneur.
Fundamentals of Accountancy, Business, &
May 17, 2004. Accessed January 04, 2019.
Management 2, CHED in collaboration with PNU
https://www.entrepreneur.com/article/70824.
Teaching Guide for Senior High School, Business
"Marketing Mix Definition - 4Ps & 7Ps of the
Finance, CHED in collaboration with PNU
Marketing Mix." The Marketing Mix. Accessed
January 04, 2019. https://marketingmix.co.uk/.

ELECTRONIC RESOURCES "Branding Explained." Luminosity Branding

Agency. Accessed January 04, 2019.
https://www.luminosity.com.au/what-we-
https://articles.bplans.com do/brand/branding-explained/.

https://smartasset.com "Marketing: Distribution Channels (GCSE) |

Tutor2u Business." Tutor2u. Accessed January
https://www.scirp.org/(S(351jmbntvnsjt1aadkposzj 04, 2019.
e))/reference/ReferencesPapers.asp https://www.tutor2u.net/business/reference/marke
x?ReferenceID=2026950 ting-distributionchannels.

https://www.google.com.ph/search?q=what+is+a+ "What Is a Price? - Definition of Price." Marketing-

supplier+in+business&oq=what+is+a +sup Insider. July 13, 2015. Accessed January 04,
plier&aqs=chrome.0.69i59j69i57j0l4.6134j0j7&so 2019. https://marketing-insider.eu/what-is-a-
urceid=chrome&ie=UTF-8 price/.

"5 Basic Functions of Packaging in Marketing a

Product." Your Article Library. January 03, 2014.
Accessed January 15, 2019. https://www.tutorialspoint.com/entrepreneurship_devel
http://www.yourarticlelibrary.com/marketing/5basi opment/entrepreneurship_devel opment
c-functions-of-packaging-in-marketing-a- Business Dictionary.
product/22204. http://www.businessdictionary.com/defination/market-
size.html
"Market Positioning - Creating an Effective
Positioning Strategy." Corporate Finance “Forecasting” Businessdictionary, Accessed December
Institute. Accessed January 15, 2019. 10, 2018,
https://corporatefinanceinstitute.com/resources/kn http://www.businessdictionary.com/definition/forecastin
owledge/strategy/marketpositioning/. g.html

Jwayne2013 Follow. "Branding Ppt." LinkedIn “How to Make Revenue Forecasts” Smarta, Accessed
SlideShare. January 16, 2013. Accessed January December 10, 2018,
18, 2019. http://www.smarta.com/advice/business-
https://www.slideshare.net/jwayne2013/branding- planning/business-plans/how-to-makerevenue-
ppt16015717. forecasts/

Stec, Carly. "Brand Strategy 101: 7 Essentials for Katie Jensen, “Factors Considered in Financial
Strong Company Branding." HubSpot Blog. Forecasting.” Chron. Hearst Newspapers. Acessed
Accessed January 21, 2019. December 10, 2018.
https://blog.hubspot.com/blog/tabid/6307/bid/317 https://smallbusiness.chron.com/factorsconsidered-
39/7-components-that-comprise- financial-forecasting-80716.html
acomprehensive-brand-strategy.aspx.
Amanda Jesnoewski, Four ways to identify more https://www.slcbookkeeping.com/blog/bid/207078/Book
business opportunities. November keeping-Tasks-for-Every-Partof-the-year
20, 2018 retrieve from:
https://www.smartcompanyng.com.au/ https://www.thebalancesmb.com/steps-to-increase-
startupsmart/advice/business-planning/four-ways-to- small-business-profits-1200720
identify-more-businessopportunities/
https://www.wikihow.com/Calculate-Profit