HUMAN ESSENCE BEAUTY PARLOR (Jennie F.

Espiritu)
Financial Statements 2018

STATEMENTS OF FINANCIAL POSITION

As of December 31, 2018 and 2017
(In Philippine Peso)
2018 2017

ASSETS

CURRENT ASSETS
Cash and Cash Equivalents 4 504,558 451,311
Accounts Receivable - -
Other Current Assets 5 35,511 33,279
Total Current Assets 540,069 484,590

NON-CURRENT ASSETS
Property, Plant and Equipment, net 137,778 -
Office Equipment, net 19,707 40,492
Leasehold Improvements, net 84,953 104,334
Total Non-Current Assets 242,438 144,826

TOTAL ASSETS 782,507 629,417

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Withholding Taxes Payable 6 400 375
SSS/Pag-ibig/PhilHealth Payable 6 11,629 9,651
Percentage Tax Payable 6 13,883 5,015
Income Tax Payable 6 - -
Total Current Liabilities 25,912 15,041

NON-CURRENT LIABILITIES
Accounts Payable and accrued expenses 93,333 30,000
Total Current Liabilities 93,333 30,000

EQUITY
J. Espiritu, Capital 10 663,262 584,376
Total Equity 663,262 584,376

TOTAL LIABILITIES & EQUITY 782,507 629,417

See accompanying Notes to Financial Statements
 HUMAN ESSENCE BEAUTY PARLOR (Jennie F. Espiritu)
Financial Statements 2018

STATEMENTS OF COMPREHENSIVE INCOME

As of December 31, 2018 and 2017
(In Philippine Peso)
2018 2017

Revenue from Sale of Services 1,637,915 1,766,860

Cost of Sales 6 217,194 221,170

GROSS INCOME (LOSS) 1,420,721 1,545,690

Operating Expenses 7 1,341,836 1,339,530

INCOME/(LOSS) BEFORE INCOME TAX 78,886 206,161

Provision for Income Tax 9 - -

NET INCOME/(LOSS) AFTER TAX 78,886 206,161

See accompanying Notes to Financial Statements
 HUMAN ESSENCE BEAUTY PARLOR (Jennie F. Espiritu)
Financial Statements 2018

STATEMENTS OF CASH FLOWS

As of December 31, 2018 and 2017
(In Philippine Peso)
2018 2017
CASH FLOW FROM OPERATING ACTIVITIES
Net Income/(Loss) 78,886 195,429
Operating Income before changes in capital 78,886 195,429
Increase / (Decrease):
Other Assets – CWT (2,232) (1,344)
Office Equipment (78,806) 20,785
Accounts Payable 96,667 (55,000)
Other Liabilities 10,010 (6,167)
Net Cash (Used) in Operations 25,639 (41,726)
NET CASH PROVIDE/(USED) IN OPERATING
ACTIVITIES 53,247 237,155

Cash at beginning of the year 451,311 214,157

CASH AT END OF YEAR 504,558 451,311

 HUMAN ESSENCE BEAUTY PARLOR (Jennie F. Espiritu)
Financial Statements 2018

NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2018 and 2017

1. CORPORATE INFORMATION

HUMAN ESSENCE BEAUTY PARLOR was registered with the Bureau of Internal Revenue on
August 23, 2003 under registration number 1RC0000240183 as a single proprietorship. The address of its
registered office and principal place of business is at 2700 Juan Luna Street, Gagalangin, Tondo, Manila.

The primary purpose of the business is to render aesthetic services.

The company operates within the Philippines and employed about six employees as of December 31,
2018.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the preparation of these financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Statement of Compliance with PFRS for SMEs

The financial statements of the Company have been prepared in accordance with PFRS for SMEs. The
financial statements have been prepared using the measurement bases specified by PFRS for SMEs for
each type of assets, liabilities, income and expense. The measurement bases are more fully described in
the accounting policies below.

The preparation of financial statements in conformity with the PFRS for SMEs requires the use of certain
critical accounting estimates. It also requires management to exercise its judgment in the process of
applying the Company’s accounting policies. Areas involving a higher degree of judgment or complexity,
or areas where assumptions and estimations are significant to the financial statements are disclosed in
Note 3.

Functional and Presentation Currency

These financial statements are presented in Philippine pesos, the Company’s functional and presentation
currency, and all values represent absolute amounts except otherwise indicated. Items included in the
financial statements of the Company are measured using its functional currency. Functional currency is
the currency of the primary economic environment in which the Company operates.

Cash

Cash include cash on hand and in bank that are subject to an insignificant risk of changes in value.

Trade and Other Receivables

Trade receivables are recognized initially at the transaction price. They are subsequently measured at
amortized cost using the effective interest method, less impairment losses. An allowance for impairment
 HUMAN ESSENCE BEAUTY PARLOR (Jennie F. Espiritu)
Financial Statements 2018

of trade receivables is established when there is objective evidence that the Company will not be able to
collect all amounts due according to the original terms of the receivables. The related impairment loss is
recognized immediately in profit or loss.

The Company has no Trade and Other Receivables as of December 31, 2018.

Inventories

Inventories are stated at lower of cost and selling price less costs to complete and sell. Costs of
inventories include all cost of purchase, cost of conversion and other costs incurred in bringing the
inventories to their present location. It is calculated using the first-in, first-out method.

The Company has no Inventories as of December 31, 2018.

Property and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and any accumulated
impairment losses. Historical cost includes the purchase price and other expenditure that is directly
attributable to bringing the asset to the location and condition necessary for it to be capable of operating
in the manner intended by management.

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted
prospectively if appropriate, if there is an indication of a significant change since the last reporting date.
The carrying amount of an item of property and equipment shall be derecognized on disposal or when no
future economic benefits are expected from its use or disposal. When assets are derecognized, their cost,
accumulated depreciation and amortization and accumulated impairment losses are eliminated from the
accounts. Gains and losses on disposals are determined by comparing the proceeds with the carrying
amount and are recognized as part of the Other Income in the statement of comprehensive income.

Impairment of Assets

At each reporting date, trade and other receivables, prepayments and property and equipment are
reviewed to determine whether there is any indication that these assets have suffered an impairment loss.
If there is an indication of possible impairment, the recoverable amount of any affected asset is estimated
and compared with its carrying amount. If the estimated recoverable amount is lower, the carrying
amount is reduced to its estimated recoverable amount, and an impairment loss is recognized immediately
in profit and loss.

Trade Payables and Other Payables

Trade and other payables are recognized initially at the transaction price and subsequently measured at
amortized cost using the effective interest method.

Provisions and Contingencies

Provisions are recognized when the Company has a present legal or constructive obligation as a result of
past events; it is probable that a transfer of economic benefits will be required to settle the obligation and
 HUMAN ESSENCE BEAUTY PARLOR (Jennie F. Espiritu)
Financial Statements 2018

the amount can be reliably estimated. Provisions are measured at the present value of the amount
expected to be required to settle the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the obligation. The increase in
the provision due to passage of time is recognized as interest expense.

In those cases, where the possible outflow of economic resource as a result of present obligations
is considered improbable or remote, or the amount to be provided for cannot be measured
reliably, no liability is recognized in the financial statements. Similarly, possible inflows of
economic benefits to the Company that do not yet meet the recognition criteria of an asset are
considered contingent assets, hence, are not recognized in the financial statements. On the other
hand, any reimbursement that the Company can be virtually certain to collect from a third party
with respect to the obligation is recognized as a separate asset not exceeding the amount of the
related provision.

Related Party Transactions

Related party relationship exists when one party has the ability to control, directly or indirectly
through one or more intermediaries, the other party or exercise significant influence over the
other party in making financial and operating decisions. Such relationship also exists between
and/or among entities which are under common control with the reporting enterprise, or between
and/or among the reporting enterprises and their key management personnel, directors, or its
shareholders. In considering each possible related party relationship, attention is directed to the
substance of the relationship, and not merely the legal form.

Owner’s Capital

Owner’s Capital is recognized as net of all investment, profit (loss) and withdrawals made during
the year.

Revenue Recognition

Revenue is recognized to the extent the revenue can be reliably measured. It is probable that the
economic benefits associated with the transactions will flow to the Company and the cost
incurred or to be incurred can be measured reliably.

Cost and Expense Recognition

Cost of services are recognized in profit and loss upon utilization of the service or at the date
incurred. Expenses are recognized in the statement of income upon utilization of the service or at
the date they are incurred. The Company follows the accrual method of accounting for income
and expenses.
 HUMAN ESSENCE BEAUTY PARLOR (Jennie F. Espiritu)
Financial Statements 2018

Current and deferred income tax

Income Tax expense represents the sum of the tax currently payable and deferred tax. The tax
currently payable is based on taxable profit for the year and measured using the tax rates and
laws that have been enacted or substantively enacted at the reporting date.

Events after the End of the Reporting Period

Events after the end of the reporting period are those events, favorable and unfavorable, that occur
between the end of the reporting period and the date when the financial statements are authorized for
issue. There are two types of events:

(a) Those that provide evidence of conditions that existed at the end of the reporting period
(adjusting events after the end of the reporting period), and

(b) Those that indicate of conditions that arose after the end of the reporting period (non-adjusting
events after the end of the reporting period).

Events after the end of the reporting period include all events up to the date when the financial statements
are authorized for issue, even if those events occur after the public announcement of profit and loss of
other selected financial information.

Comparatives

When necessary, comparative figures have been adjusted to conform to the changes in the presentation of
the current year.

3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The Company’s presentation of its financial statements prepared in accordance with PFRS for SMEs
requires management to make judgments and estimates that effect amounts reported in the financial
statements and related notes. Judgments and estimates are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. Actual results may ultimately differ from these estimates.

Critical Management Judgments in Applying Accounting Policies

In the process of applying the Company’s accounting policies, management has made the following
judgments, apart from those involving estimation, which have the most significant effect on the amounts
recognized in the financial statements:

Operating and Finance Leases

Critical judgment was exercised by management to distinguish each lease agreement as either an
operating or finance lease by looking at the transfer or retention of significant risk and rewards of
ownership of the properties covered by the agreements. Failure to make the right judgment will result in
either overstatement or understatement of assets and liabilities.
 HUMAN ESSENCE BEAUTY PARLOR (Jennie F. Espiritu)
Financial Statements 2018

Provisions and Contingencies

Judgment is exercised by management to distinguish between provisions and contingencies. Policies on

recognition and disclosure of provision and contingencies are disclosed.

Key Sources of Estimation Uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year.

Allowance for Impairment of Receivables

Allowance is made for specific and group off accounts, where objective evidence of impairment exists.
The Company evaluates these accounts based on available facts and circumstances, including, but not
limited to, the length of the Company’s relationship with customers, known market forces, average age of
accounts, collection experience and historical loss experience.

Determining Net Realizable Value of Inventories

In determining the net realizable value of inventories, management takes into account the most reliable
evidence available at the times the estimates are made. The Company’s core business is continuously
subject to rapid technology changes which may cause inventory obsolescence. Moreover, future
realization of the carrying amounts of inventories is affected by changes in prices in the market. Both
aspects are considered key sources of estimate uncertainty and may cause significant adjustments to the
Company’s inventories within the next financial year.

Useful Lives of Property and Equipment

The Company estimates the useful lives of property and equipment based on the period over which the
assets are expected to be available for use. The estimated useful lives of property and equipment are
reviewed periodically and are updated if expectations differ from previous estimates due to physical wear
and tear, technical or commercial obsolescence and legal or other limits on the use of the assets. Based on
management’s assessment as at end of year, there is no change in estimated useful lives of certain
property and equipment during the year.

Actual results, however, may vary due to changes in estimates brought about by changes in factors
mentioned above.

Realizable Amount of Deferred Tax Assets

The Company reviews its deferred assets at the end of each reporting period and reduces the carrying
amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow all
or part of the deferred tax asset to be realized.
 HUMAN ESSENCE BEAUTY PARLOR (Jennie F. Espiritu)
Financial Statements 2018

4. CASH AND CASH EQUIVALENTS

This account consists of:

2018 2017
Cash on Hand and in Bank 504,558 451,311
TOTAL 504,558 451,311

5. OTHER CURRENT ASSETS

This account consists of:

2018 2017
Prepaid CWT 9,511 7,279
Rental Deposit 26,000 26,000
TOTAL 35,511 33,279

6. OTHER CURRENT LIABILITIES

This account consists of:

2018 2017
Withholding Tax Payable 400 375
SSS/HDMF/Philhealth Payable 11,629 9,651
Percentage Tax Payable 13,883 5,015
TOTAL 25,912 15,041

7. DIRECT COSTS

This account consists of:

2018 2017
Cost of Sales 217,194 221,170
TOTAL 217,194 221,170

8. OPERATING EXPENSES

This account consists of:

2018 2017
Salaries & Employee Benefits 786,105 848,423
Taxes and Licenses 114,445 62,053
Professional Fees 4,000 4,000
Light and Water 179.621 138,763
Depreciation Expense 43,007 29,735
Amortization Expense 38,187 76,374
Postage and Communication Expense 25,128 16,855
 HUMAN ESSENCE BEAUTY PARLOR (Jennie F. Espiritu)
Financial Statements 2018

Insurance Expense 800 800

Office Supplies 9,311 19,338
Rent Expense 94,000 90,000
Repairs and Maintenance 5,298 23,776
Miscellaneous Expense 41,934 29,413
TOTAL 1,341,836 1,339,530

9. INCOME TAX

There is no income tax payable for the year 2018 and 2017 but the taxpayer have paid its previous
quarter/s income tax due amounting to 2,231.89 and 12,076.10 respectively.

10. EQUITY

This account consists of:

2018 2017
J. Espiritu, January 1 584,376 388,948
Add/(Deduct):
Net Income/(Loss) for the year 78,886 195,429
J. Espiritu, December 31 663,262 584,376

11. SUPPLEMENTARY TAX INFORMATION UNDER RR 15-2010

The Bureau of Internal Revenue (BIR) has issued Revenue Regulation No. 15-2010 on November 25,
2010, which amended certain provisions of RR No. 21-2002, implementing Section 6 (H) of the Tax
Code of 1997. The regulation prescribed the manner of compliance with the preparation and submission
of financial statements accompanying tax returns. Provisions for additional disclosure requirements in the
notes to financial statements, particularly on taxes, duties and licenses paid or accrued during the year
were made.

The following information on taxes, duties and licenses paid or accrued during the taxable year is
presented for the purpose of filing with the BIR and is not a required part of the basic financial
statements.

The company reported and/or paid the following types of taxes in 2018:

a. Percentage Tax

2018 2017
3% Percentage Tax 49,137 53,006
TOTAL 49,137 53,006
 HUMAN ESSENCE BEAUTY PARLOR (Jennie F. Espiritu)
Financial Statements 2018

b. Withholding Taxes

2018 2017
5% Withholding Tax 4,700 4,500
15% Withholding Tax 320 320
TOTAL 5,020 4,820

c. Other Taxes and Licenses

2018 2017
Business Taxes and Permits 67,737 61,552
Annual Registration Fee 500 500
TOTAL 68,237 62,052
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