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CHAPTER V

FINANCIAL STUDY
MAJOR ASSUMPTIONS
1. Service Revenue increases due to the additional locker purchased per year
subsequent to the first year of operation.
2. Service price of Php 55 per week is constant within the 5 years of operation.
3. It is also assumed that all the units each year will be occupied due to the demand
which is greater than the service that will be supplied within 5 years (please see
the demand-supply analysis).
4. Rent Expense will increased by Php 700 per month due to the additional locker
purchased per year. It is assumed that Php 3,500.00 of Rent Expense will be
incurred per month for the space occupied by the lockers for the first year of
operation. Php 3,500.00 divided by the number lockers that occupy the space
which is 5. The result would be Php 700.00 is expensed related to rental per
space occupied by a locker. Therefore, if one additional locker is purchased, it is
assumed that rental expense will increase by Php 700.00 per month.
5. Repair and maintenance will be experienced once a year. Php 2,500.00 is
estimated to be incurred for the whole year.
6. Supplies will be consumed throughout the whole year of operation. Therefore, no
Supplies are reported in the balance sheet rather it is already expensed upon
acquisition.
7. Advertising Expense that is going to be incurred is Php 1,500.00 per semester.
8. Utilities expense is fixed throughout the covered years of projection. It is paid as
it becomes due.
9. Acquired Noncurrent Assets are depreciated using straight line method with the
following useful life:
o Lockers 5 years with 10% of cost is considered as salvage value
o Drawer Safe 1 year with no salvage value.
o Padlocks 2 years with no salvage value.
o Monoblock 1 year with no salvage value.
10. Acquired noncurrent assets at the end of their useful lives will be disposed
through donation.
11. All partners will contribute Php 20,000 each as their initial investment.
12. No additional contribution from partners is invested throughout the five-year
projection.
13. Rental of space was negotiated for 10 years at a monthly rental of Php 7,500.00.
Php 3,500.00 for the space occupied by the lockers while Php 2,500.00 is
allocated for the office space. Contract is renewable.
14. No employees are hired. The partners will personally operate the business
through dedication of enough time to manage and operate as well as investing to
the said venture.
15. Business operation will start from 7:00am up to 6:00pm from Monday to Saturday
starting on the first day of the first semester S.Y. 2015-2016.
16. Sharing of profit or loss is divided equally.
17. Withdrawal of P1,500.00 at the first year of operation can be made by each
partner and increased of P150.00 in withdrawal is allowed in subsequent years.
18. 3% percentage tax based on gross receipts is paid within 25 days after the end
of each taxable quarter. This is included in the renewal of business permit and
license expense.
19. Estimated organizational cost is shown below:
SEC's Registration Charges and Fees for Partnership:
Name verification fee


40.00
Articles of Partnership-filing fee (1/5 of 1% of the partnership's
capital but not less than 1,000)


1,000.00
Legal research fee (1% of the filing fee but not less than 10)


10.00



Certificate of Business Registration


Brgy. Clearance


500.00
Notarize the business permit application form at the notary


50.00
Business Permit:


Mayor's permit


2,500.00
Business plate


150.00
Sign board


260.00
Special books of account


400.00
Certificate of registration and TIN at BIR


115.00
Registration fee as BMBE


1,000.00
Print receipts and invoices (estimated)


200.00
Total Organizational Cost

6,225.00

20. Renewal of Business permit is computed as follows:
Renewal of Business Permit and License:


Brgy. Clearance


500.00

Mayor's permit


2,500.00

Business plate


150.00

Sign board


260.00

Total Cost


3,410.00

21. SureLock is exempt from paying 30% annual income tax because it will be
registered as Barangay Microbusiness Enterprise (BMBE) in the Philippines.
(See Apendix B for more information about BMBE).
22. Renewal of application as BMBE shall be made every two years. Php 1,000.00 is
the estimated renewal cost.







Appendix B:
How to Register as a Barangay Micro Business Enterprise (BMBE) in the Philippines?
Apr 24, 2013 by Victorino Abrugar at Business, Small Business
A micro business or enterprise is defined as any business activity or enterprise engaged in
industry, agribusiness and or services, whether single proprietorship, cooperative, partnership or
corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which
the particular business entitys office, plant and equipment are situated, must have value of not more
than 3 million Pesos (Sec. 3. of R.A. 9501 otherwise known as the Magna Carta for Micro, Small and
Medium Enterprises (MSMEs).
If your business or activity falls under the micro enterprise category, you might also be eligible
to be registered as a BMBE (Barangay Micro Business Enterprise) which may avail of the following
incentives provided by the government through R.A. 9178, otherwise known as the Barangay Micro
Business Enterprises Act of 2002:
1. Income tax exemption from income arising from the operations of the enterprise
2. Exemption from the coverage of the Minimum Wage Law (BMBE employees will still
receive the same social security and health care benefits as other employees)
3. Priority to a special credit window set up specifically for the financing requirements of
BMBEs
4. Technology transfer, production and management training, and marketing assistance
programs for BMBE beneficiaries.
Sounds interesting, especially the income tax exemption? Lets continue


The BMBEs Act of 2002
The government, in its objective to strengthen Barangay Micro Business Enterprises in the
country and provide more jobs, livelihood and a better quality of life for Filipinos, has enacted Republic
Act 9178, otherwise known as the Barangay Micro Business Enterprises Act of 2002.
R.A. 9178 is An Act to Promote the Establishment of Barangay Micro Business Enterprises (BMBEs),
Providing Incentives and Benefits therefore, and for Other Purposes
The BMBEs Act of 2002 encourages the formation and growth of barangay micro business
enterprises by granting them incentives and other benefits. The Act was signed into law by President
Gloria Macapagal-Arroyo on November 13, 2002.
What is BMBE and who are eligible to register as BMBEs?
A BMBE is defined as any business enterprise engaged in production, processing, or
manufacturing of products, including agro-processing, as well as trading and services, with total assets
of not more than P3 million. These assets include those arising from loans but not the land on which
the plant and equipment are located. However, services rendered by any one, who is duly licensed by
the government after having passed a government licensure examination, in connection with the
exercise of ones profession (e.g., Accountant, Lawyer, Doctor, Architects, Civil Engineers, etc.) shall
not be included.
Is the government discouraging the professionals to start a micro business and want them to
just get a job as an employee instead? Im just asking. I think professionals also need aid from the
government when it comes to entrepreneurship especially that they have the skills, knowledge, and
potential to succeed in business. Besides, professionals, having incurred a lot of money to review and
pass the licensure exams, may not have any money left to start an enterprise. So why exclude them?
Anyway, the DOF Department Order No. 17-04 also provides that, an enterprise can only
qualify for registration if it is not a branch, subsidiary, division or office of a large scale enterprise and its
policies and business modus operandi are not determined by a large scale enterprise or by persons
who are not owners or employees of the enterprise (i.e., franchises). So if you are a franchisee, you
are not eligible to register as a BMBE.
In other words, a business or activity may be eligible to register as BMBE if they meet the
following criteria:
1. The business enterprise is engaged in production, processing, or manufacturing of
products, including agro-processing, as well as trading and services.
2. The business enterprise has total assets of P3 million or less including those arising from
loans but excluding the land on which the plant and equipment are located.
3. The business enterprise or service provider, in connection with his or her exercise of
profession, is not a professional who is duly licensed by the government after having passed a
government licensure examination (e.g. accountant, lawyer, doctor, etc.).
4. The business enterprise is not a branch, subsidiary, division or office of a large scale
enterprise or it is not a franchisee.
How to register as a Barangay Micro Business Enterprise (BMBE)?
The registration of BMBE in the Philippines is processed and done in the Office of the
Treasurer of the city or municipality where the business is located. Thus you may want to visit your City
or Municipality office to inquire more about this.
The requirements for BMBE registration are different for those micro business enterprises with
assets of P300,000 and less and those with assets of P300,001 to P3,000,000, in which the former
have fewer requirements to be submitted than the latter.
Basic requirements for new applicants and for BMBEs applying for renewal of registration:
a. Duly filled out application form (BMBE Form 01) in triplicate, signed by the owner or manager of the
entity applying for registration (you may download BMBE Form 01 here which I got from
Paranaque.gov.ph website).
b. Three passport size ID pictures
Additional requirements for new applicants:
A. For those with assets worth three hundred thousand pesos (P300,000) and less
1. Registration as a business entity or enterprise from the appropriate government agency (e.g.,
Securities and Exchange Commission (SEC) registration in the case of corporation, partnership or
association; Cooperative Development Authority (CDA) registration in the case of cooperative;
Department of Trade and Industry (DTI) business name registration in the case of sole proprietorship)
2. Mayors Permit or City/ Municipal Business Permit
B. For those with assets worth more than three hundred thousand pesos (P300, 000) up to three
million pesos (P3,000,000.00)
1. Registration as a business entity as explained above in item A.1
2. Taxpayer Identification Number (TIN)
3. Certificate of Registration from the Bureau of Internal Revenue (BIR)
4. Mayors Permit or City/Municipal Business Permit
5. Sworn affidavit executed by the sole proprietor or the President of the enterprise, as the case may
be, that the enterprise is barangay-based and micro-business in nature and scope
6. Sworn Statement of Assets and Liabilities supported by pertinent documents
7. Pictures of the place of business and its assets, other than cash, receivables and intangibles
8. Copy of Loan Contract/s, if any, and duly-notarized Certification of Amortization Payments on the
Loan
9. Income Tax Return (ITR).
Additional requirements for the renewal of BMBE registration:
C. For those with assets worth three hundred thousand pesos (P300,000) and less
1. Documents previously listed in item A.1 for new applicants with assets worth three hundred
thousand pesos and less
2. Annual Information Return (for the year immediately preceding the renewal of registration) duly filed
with the BIR, together with its attachments
D. For those with assets worth more than three hundred thousand pesos (P300,000) up to three
million pesos (P3,000,000.00)
1. Documents previously mentioned in item B.1-8
2. Annual Information Return (for the year immediately preceding the renewal of registration) duly filed
with the BIR, together with its attachments.

Steps and procedures for registering as a BMBE
The following are the procedures for BMBE registration and getting the Certificate of Authority as a
BMBE:
a. Accomplish BMBE Form 01 in triplicate and submit to the Office of the Municipal or City Treasurer.
b. The Municipal or City Treasurer evaluates the application. The application shall be processed within
15 working days upon submission; otherwise, the BMBE shall be deemed registered.
c. A registered BMBE shall be issued a Certificate of Authority as proof of registration, effective for a
period of two years. The application is renewable every two years.

How much will it cost to register?
According to Section 4 of the Act, registration and issuance of the Certificate of Authority of the LGU is
free of charge and shall be done promptly. However, to cover the administrative costs of registering
and monitoring the BMBEs, the LGUs are allowed to charge a fee not exceeding P1,000.00.

How to avail for the Income Tax Exemption?
To avail with the income tax exemption, the BMBE must register with the BIR Revenue District Office
(RDO) where the principal office or place of business is located and submit the following documents:
a. Copy of the BMBEs Certificate of Authority
b. Sworn Statement of Assets of the BMBE and/or its affiliates, supported by pertinent documents
c. Certified list of branches, sales outlets, places of production, warehouses and storage facilities
d. Certified list of affiliates
e. Latest audited Financial Statement or Account Information Form or its equivalent
What document should be filed with BIR by an income tax exempt BMBE?
Instead of an income tax return, an income tax exempt BMBE is required to submit an Annual
Information Return. This is filed on or before the 15th day of the 4th month after the close of the taxable
year with an Account Information Form, which contains data from its financial statement and Sworn
Statement of Assets Owned and/or Used.
However, while a registered BMBE could be exempt from income tax, its Income Tax Exemption
privilege may be revoked for any of the following reasons:
1. Transfer of place of business
2. Value of its total assets exceeds P3M
3. Voluntary surrender of the Certificate of Authority
4. Death of the registered individual owner of the BMBE; violation or noncompliance with the
provisions of R.A. 9178
5. Merger or consolidation with an entity which is not eligible to be a BMBE
6. Sale or transfer of the BMBE, if it is a sole proprietorship without prejudice to the transferee applying
for registration
7. Submission of fake or falsified documents;
8. Retirement from business, or cessation/suspension of operations for one year; and
9. Making false or omitting required declarations or statements.
For more information, please read DTIs Handbook Guide to Republic Act (RA) 9178: BMBEs
Act of 2002 which also includes the full text of RA 9178 and its implementing rules and regulations
(IRR) including the supplementary guidelines or clarifications issued by concerned agencies.
For questions and discussions, we can discuss this topic in our online business forums.
Reference: RA 9178, R.A. 9501, DTI Department Administrative Order (DAO) No. 1, Series of 2003,
Department of Finance Department Order No. 17-04, Revenue Memorandum Circular No. 40-2004,
Revenue Memorandum Circular No. 52-2004