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1. CORPORATE INFORMATION
PRISTINE FABRIC TECH LAUNDRY SHOP CORP was incorporated in the Philippines on
May 31, 2013 with SEC reg. No. 201309538 with Bureau of Internal Revenue on March
08, 2012, under certificate of registration OCN # 4RC0000726852 with TIN No. 008-
535-581-000.
The Company owns, maintains and manages the operation of PRISTINE FABRIC TECH
LAUNDRY SHOP CORP who is engaged in the operation of a laundry shop business.
The registered office address and place of business of the Company is JP Rizal St.,
Poblacion, Pulilan, Bulacan.
2.2 Going-Concern
Management shall evaluate whether relevant conditions and events, considered in the
aggregate, indicate that it is probable that an entity will be unable to meet its obligations
as they become due within one year after the date that the financial statements are
issued. The evaluation initially shall not take into consideration the potential mitigating
effect of management’s plans that have not been fully implemented as of the date that
the financial statements are issued (for example, plans to raise capital, borrow money,
restructure debt, or dispose of an asset that have been approved but that have not been
fully implemented as of the date that the financial statements are issued).
When evaluating an entity’s ability to meet its obligations, management shall consider
quantitative and qualitative information about the following conditions and events,
among other relevant conditions and events known and reasonably knowable at the date
that the financial statements are issued:
The entity’s current financial condition, including its liquidity sources at the date that
the financial statements are issued (for example, available liquid funds and available
access to credit)
The entity’s conditional and unconditional obligations due or anticipated within one
year after the date that the financial statements are issued (regardless of whether those
obligations are recognized in the entity’s financial statements)
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The funds necessary to maintain the entity’s operations considering its current financial
condition, obligations, and other expected cash flows within one year after the date that
the financial statements are issued
The other conditions and events, when considered in conjunction with (a), (b), and (c)
above that may adversely affect the entity’s ability to meet its obligations within one
year after the date that the financial statements are issued.
New amendments to standards are effective for annual periods beginning after January
1, 2018 and have not been applied in preparing these financial statements. None of these
is expected to have a significant effect on the financial statements of the Company, which
becomes mandatory for the Company’s 2018 financial statements and could change the
classification and measurement of assets. The Company does not plan to adopt these
standards early and the extent of the impact has not yet been determined.
The following amendments that have been published and issued by the International
Accounting Standards Board (IASB) FRSC which will become effective for accounting
periods beginning on or after January 1, 2018 are not adopted early by the Company:
Section 1, Small and Medium-sized Entities – The amendment clarify that the types of
entities listed are not automatically publicly accountable and addition of clarifying
guidance on the use of the standard for SMEs in the parent’s separate financial
statements.
Section 10, Accounting Policies, Estimates and Errors – The amendment refers the initial
application of a policy to revalue assets in accordance with Section 17 Property, Plant
and Equipment is a change in accounting policy to be dealt with as a revaluation in
accordance with Section 17. Consequently a change from the cost model to the
revaluation model for a class property, plant and equipment shall be accounted for
prospectively.
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Section 11, Basic Financial Instruments – The amendment refers to the addition of an
undue cost or effort exemption from the measurement of investments in equity
instruments at fair value. Further clarifications made on the following: (a) the
interaction of the scope of Section 11 with other sections of the standards for SMEs (b)
the application of the criteria for basic financial instruments to simple loan
arrangements (c) when an arrangement would constitute a financing transaction, and
(d) the guidance on fair value measurement in Section 11 of when the best evidence of
fair value may be a price in a binding sale agreement.
Section 20, Leases - Modification to include leases with an interest rate variation
clause that is linked to market interest rates and the clarification that only some
outsourcing arrangements, telecommunication contracts that provide rights to capacity
and take-or-pay contracts are, in substance, leases.
Section 22, Liabilities and Equity – The amendments clarify guidance on classifying
financial instruments as equity or a liability. Exemption from the initial requirements for
equity instruments issued as part of a business combination, including business
combinations of entities or business under common control, and exemption
requirements for distributions of non-cash assets ultimately controlled by the same
parties before and after the distribution. IFRIC 19 interpretation to provide guidance on
debt for equity swaps when the financial liability is negotiated and the debtor
extinguishes the liability by issuing equity instruments. Further clarify that income tax
relating to distribution to holders of equity instruments and to transaction costs of an
equity transaction should be accounted for. Modification to require that the liability
component of a compound financial instrument is accounted for in the same way as a
similar standalone financial liability. Addition of an undue cost or effort exemption from
the requirement to measure the liability to pay a non-cash distribution at the fair value
of the non-cash assets to be distributed and clarifying guidance on accounting for the
settlement of the dividend payable.
Section 27, Impairment of Assets – The amendments clarify that section 27 does not
apply to assets arising from construction contracts.
Section 28, Employee Benefits – The clarification of the application of the accounting
requirements to other long-term employee benefits and removal of the requirements to
disclose the accounting policy for termination benefits.
Section 29, Income Tax – Alignment of the main principles of Section 29 with IAS 12
Income Taxes for the recognition and measurement of deferred income tax, but modified
to be consistent with the other requirements in the IFRS for SMEs. Addition of an undue
cost or effort exemption to the requirement to offset income tax assets and liabilities.
Section 33, Related Party Disclosures - Alignment of the definition of ‘related party’
with IAS 24 Related Party Disclosures, including incorporation of the amendment to the
definition in IAS 24 from Annual Improvements to IFRSs 2010–2012 Cycle, issued in
December 2013, which include a management entity providing key management
personnel services in the definition of a related party.
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3. Summary of Significant Accounting Policy
Financial Instruments
Subsequent measurement
At financial statement date, the company measures its financial instruments as follow;
Debt instruments are measured at amortized costs using effective interest method.
Rental deposit, bank loan, and advances from stockholders accounts are included in this
category.
Short-term debt instruments are measured at undiscounted amount. Cash and cash
equivalent, trade and other receivable, and trade and other payable account are included
in this category.
Investments in non-convertible and non-put table shares that are publicly traded are
measured at fair value with changes in fair value recognized in profit or loss.
Investments in non-convertible and non-put table shares that are not publicly traded
are measured at cost less accumulated impairment.
Derecognition
Financial asset: The Company derecognizes a financial asset when the contractual right
to the cash flow from financial assets has expired or when the Company has transferred
to another party substantially all of the risks and rewards of ownership of the financial
asset.
For certain categories of financial assets such trade and other receivable, assets that are
assessed not to be impaired individually are, in addition, assessed for impairment on a
collective basis. Objective evidence of impairment for a portfolio of receivables could
include the company’s pas experience of collecting payments, an increase in number of
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delayed payments in the portfolio past the average credit period as well as observable
changes in economic conditions that correlate with default on receivables.
Cash
Cash includes cash on hand cash in bank that are unrestricted and available for current
operations. This is stated in the statement of financial position at face amount. Cash
dominated in foreign currency is translated in peso using the closing rate as of the
financial statement date
Inventories
Inventories are valued at the lower of cost and estimated selling price less costs to
complete and sell. Cost of inventories includes all costs of purchase and other costs
incurred in bringing the inventories to their present location and condition. The costs of
purchase of inventories comprise the purchase price, and other costs directly
attributable to the acquisition of inventories.
Periodic system is the accounting used for the company’s inventories. The cost of
inventories is determined using the First-In-First-Out (FIFO) method.
Items of property and equipment are initially measured at cost. Such cost includes
purchase price and all incidental costs necessary to bring the asset to its usable
condition. Subsequently to initial recognition, items of property and equipment are
measured in the financial position at cost less accumulated depreciation and any
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accumulated impairment losses. Depreciation, which is computed on a straight-line
basis, is recognized so as to allocate the cost of assets less their residual values over their
estimated useful lives.
When assets are sold, retired or otherwise, disposed of, their cost and related
accumulated depreciation and amortization and impairment losses, if any, are removed
from the accounts and any resulting gain or loss is reflected in profit or loss for the
period.
and subsequently measured at cost less any accumulated depreciation and any
accumulated impairment losses.
The initial cost of property and equipment comprises of its purchase price and any costs
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.
A part of some items of property and equipment may require replacement at regular
interval. The entity decides not to add to the carrying amount of an item of property and
equipment the cost of replacing part of such an item when that cost is incurred if the
replacement part is expected not to provide incremental future benefits to the entity.
Refundable deposits
Refundable deposits represent security and utility deposit related in the lease contracts
that are initially measured at cost. Any incremental on the said deposits as stated per
renewal of contract are taken and reflected in the account.
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Due from related parties pertain to advances to stockholders and associates as
authorized and approved by the board of directors during special meeting. Due from
related parties is measured initially at transaction cost and subsequently measured at
the undiscounted amount of cash or other considerations expected to be received.
Borrowings
Interest-bearing loans are raised for support of funding the construction of the building
improvements. These are recognized at proceeds received, net of direct issue cost and
subsequently stated in the statement of financial position at amortized cost.
Borrowings are classified as current liability unless the Company has an unconditional
right to defer settlement of the liability for at least 12 months after the reporting date.
The loans beyond 12 months are classified as non-current liability.
The amortized cost of the obligations under finance lease at each reporting date is the
net of the following amounts: (a) the amount at which the loans payable is measured at
initial recognition, (b) minus any repayments of the principal, and (c) plus or minus the
cumulative amortization using the effective interest method of any difference between
the amount at initial recognition and the maturity amount,
Obligations under finance lease be classified as current liability unless the Company has
an unconditional right to defer settlement of the liability for at least 12 months after the
reporting date. The obligations under finance lease beyond 12 months be classified as
non-current liability
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Retirement Payable
Retirement payable pertains to minimum benefits liability provided under RA No. 7461.
Retirement payable is initially measured at transaction cost and subsequently measured
at undiscounted amount of cash or other considerations expected to be paid.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred
tax assets are recognized for all deductible temporary differences and carry forward
benefits of unused tax credits from excess of minimum corporate income tax (MCIT)
over the regular corporate income tax and unused net operating loss carryover (NOLCO),
to the extent that it is probable that taxable income will be available against which the
deductible temporary differences and carry forward benefits of unused MCIT and
NOLCO can be utilized.
The carrying amount of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable income will be
available to allow all or part of the deferred tax asset to be utilized. Unrecognized
deferred tax assets are reassessed at each reporting date and are recognized to the
extent that it has become probable that future taxable income will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply to the period when the asset is realized or the liability is settled, based on tax rates
and tax laws that have been enacted or substantively enacted as of reporting date.
Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set
off current tax assets against current tax liabilities and the deferred taxes relate to the
same taxable entity and the same taxation authority.
Deferred tax liabilities are recognized for all temporary differences that are expected to
increase taxable profit in the future. Deferred tax assets are recognized for temporary
differences that are expected to reduce taxable profit in the future, and any net operating
loss carry over (NOLCO) or excess of minimum corporate income tax (MCIT) over the
regular corporate income tax (RCIT). The net carrying amount of deferred tax asset is
reviewed at each reporting date and any adjustments are recognized in profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit
on the basis of tax rates that have been enacted or substantively enacted by the end of
the reporting period.
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(BIR); SSS premium payable for Social Security System (SSS) and HDMF loan payable,
HDMF premium payable for Home Development Mutual fund (HDMF). This is
recognized initially at the transaction price and is subsequently stated in the statement
of financial position at transaction price less payments. These are measured at their
nominal values.
Value-Added Tax
Revenues, expenses and assets are measured net of the amount of value-added tax
except:
The net amount of value-added tax recoverable from, or payable to, the taxation
authority is included as part of other current assets or payables in the balance sheets.
Share capital
Share capital represents the total par value of the ordinary shares issued.
Equity instruments are measured at the fair value of the cash or other consideration
received or receivable, net of the direct costs or issuing the equity instruments. The
difference between consideration received and the par value of the shares issued is
credited to share premium.
Cumulative Earnings
Cumulative earnings include all current and prior period results as disclosed in the
statement of income.
Cumulative earnings (deficit) include all current and prior period results as disclosed in
the statement of comprehensive income or loss. The key change in this account is the
addition of the profit or loss for the current period. The main other movements shall be
the dividend payment and distribution, transfers to and from reserves, and changes in
accounting policy and errors, if any.
In order to limit or restrict the payment of dividends, if applicable, the Company may
transfer a portion of the retained earnings to retained earnings appropriated accounts.
The appropriation may be described as legal, contractual or voluntary appropriation.
Legal appropriation arises from the fact that the legal capital cannot be returned to the
shareholders until the Company is dissolved and liquidated. Contractual appropriation
arises from the fact that the terms of the bond issue and preferred share issue may
impose restriction on the payment of dividends. This is to ensure the eventual payment
of the bonds and redemption of the preferred share, if there are any. The voluntary
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appropriation is a matter if discretion on the part of the management. It may arise from
the fact that management wishes to preserve the funds for expansion purpose or for
covering possible losses or contingencies.
Trading
Revenue recognition
Revenue is recognized when it is probable that the economic benefits associated with
the transaction will flow to the Company and the amount of the revenue can be
measured reliably.
Revenue is measured at the fair value of the consideration received or receivable and
represents amounts receivable for goods or services provided in the normal course of
business. The following specific recognition criteria must also be met before revenue is
recognized.
Sale of goods
The following specific criteria must be meet before revenue is measured;(a) when the
Company has transferred to the buyer the significant risks and rewards of ownership of
the goods; (b) the amount of revenue can be measured reliably; (c) it is probable that the
economic benefits associated with the transaction will flow to the Company and; (d) the
costs incurred or to be incurred in respect of the transaction can be measured reliably
Finance income
Finance income comprises interest income on bank deposits. Interest income is
recognized in profit or loss as it accrues, using the effective interest method.
Other income – are recognized when the right to received payment is established
Expense Recognition
Expenses
Expenses are decreases in economic benefits in the form of decreases in assets or
incurrence of liabilities that result in decreases in equity, other than those relating to
distributions to equity participants. Expenses are generally recognized when the
services are received or when the expenses are incurred.
Cost of services
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Cost of services is recognized in profit or loss in the period that the cost services are
provided. Cost of services include salaries, rent, depreciation utilities and other
expenses directly attributed to the services provided,
Operating Expenses
Operating expenses include general, administrative and distribution costs incurred by
the Company such as fuel freight out, other costs that cannot be associated directly to
the services rendered (goods sold).
Employee Benefits
Employee benefits represent: (a) short-term employee benefits, which are employee
benefits (other than termination benefits) that are wholly due within twelve months
after the end of the period in which the employees render the related service, and (b)
termination benefits, which are employee benefits payable as a result of either:) an
entity’s decision to terminate an employee’s employment before the normal retirement
date, or an employee’s decision to accept voluntary redundancy in exchange for those
benefits
Retirement benefits
The Company does not have a formal retirement benefit plan. However, the Company
provides retirement in compliance with RA 7641. No actuarial computation was
obtained during the year the amount of provision for retirement benefits will not
materially affect the fair presentation of the financial statements considering that there
are only few employees and the turnover of employees is high.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership of the leased asset to the lessee.
All other leases are classified as operating leases. Lease payments under operating
leases are recognized in profit or loss on a straight-line basis over the term of the
relevant lease.
The Company determines whether an arrangement is, or contains, a lease based on the
substance of the arrangement. It makes an assessment of whether the fulfillment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the assets.
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Provisions are recognized when present obligations will probably lead to an outflow of
economic resources and they can be estimated reliably even if the timing or amount of
the outflow may still be uncertain. A present obligation arises from the presence of a
legal or constructive commitment that has resulted from past events.
Provisions are measured at the estimated expenditure required to settle the present
obligation, based on the most reliable evidence available at the end of the reporting
period, including the risks and uncertainties associated with the present obligation.
Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole.
When time value of money is material, long-term provisions are discounted to their
present values using a pre-tax rate that reflects market assessments and the risks
specific to the obligation. Provisions are reviewed at the end of each reporting period
and adjusted to reflect the current best estimate.
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.
Initial recognition
The company recognized a provision when the company has an obligation at the
reporting date as a result of a past event and it is probable that the company will be
required to transfer economic benefits in settlement and lastly the amount of the
obligation can be estimated reliably.
The company measured provision at the best estimate of the amount required to settle
the obligation at the reporting date. The best estimate is the amount an entity would
rationally pay to settle the obligation at the end of the reporting period or to transfer it
to a third party at that time.
Subsequent measurement
The company shall charge against a provision only those expenditures for which the
provision was originally recognized and review provisions at each reporting date and
adjust them to reflect the current best estimate of the amount that would be required to
settle the obligation at that reporting date. Any adjustments to the amounts previously
recognized shall be recognized in profit or loss unless the provision was originally
recognized as part of the cost of an asset. When a provision is measured at the present
value of the amount expected to be required to settle the obligation, the unwinding of
the discount shall be recognized as finance cost in profit or loss in the period it arises.
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events that provide addition information about conditions existing after period end
(non-adjusting events) are disclosed in the notes to the financial statements.
A related party is a person or entity that is related to the entity that is preparing its
financial statements (the company)
(a) A person or a close member of that person’s family is related to a reporting entity if
that person:
1. is a member of the key management personnel of the reporting entity or of a parent of
the reporting entity
2. has control over the reporting entity; or
3. has joint control or significant influence over the reporting entity or has significant
voting power in it.
(b) An entity is related to a reporting entity if any of the following conditions applies:
1. the entity is controlled or jointly controlled by a person identify in (a).
2. a person identified in (a)(i) has significant voting power in the entity.
3. a person identified in (a)(ii) has significant influence over the entity or significant
voting power in it.
4. a person or a close member of that person’s family has both significant influence over
the entity or significant voting power in it and joint control over the reporting entity.
5. a member of the key management personnel of the entity or of a parent of the entity,
or a close member of that member’s family, has control or joint control over the
reporting entity or has significant voting power in it.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised if
the revision affects only that period or in the period of the revision and future periods if
the revision affects both current and future periods.
The Company’s financial statements prepared in accordance with PFRS for SMEs require
management to make judgments and estimates that affect 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.
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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:
The Company estimates the allowance for doubtful accounts related to the receivables
based on assessment of specific accounts where the Company has information that
certain customers are unable to meet their financial obligation. In these cases judgment
used was based in the best available facts and circumstances including, but not limited
to, the length of relationship with the customers and the customers’ current credit status
based on third party credit reports and known market factors, The company used
judgments to record specifics reserves for customers against amount due no reduce the
expected collectible amounts. These reserves are re-evaluated and adjusted as
additional information received impacts the amounts estimated.
The amount of timing of recorded expenses for any period would differ if different
judgments were made or different estimates were utilized. An increase in the allowance
for doubtful accounts would increase the recognized operating expenses and decrease
current assets.
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c) 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. Both aspects
are considered key sources of estimation uncertainty and may cause significant
adjustments to the Company’s inventories within the next financial year. . The carrying
amounts of property and equipment are analysed.
d) Revenue recognition
The Company’s revenue recognition policies require the use of estimates and
assumptions that may affect the reported amounts of revenues and receivables.
Differences between the amounts initially recognized and actual settlements are taken
up in the accounts upon reconciliation. However, there is no assurance that such use of
estimates may not result to material adjustments in future periods.
e) Asset Impairment
The Company assesses the value of property, plant and equipment which require the
determination of future cash flows expected to be generated from the continued use and
ultimate disposition of such assets, and require the Company to make estimates and
assumptions that can materially affect the financial statements. Future events could
cause the Company to conclude that property and equipment and other long-lived assets
are impaired. Any resulting impairment loss could have a material adverse impact on
the Company's financial condition and results of operations.
The preparation of the estimated future cash flows involves significant judgment and
estimations. While the Company believes that its assumptions are appropriate and
reasonable, significant changes in these assumptions may materially affect the
Company’s assessment of recoverable values and may lead to future additional
impairment charges.
5. Cash
This account consists of:
2017 2016
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1,043, 1,174
Cash in bank P 527 P ,547
1,043, 1,174
P 527 P ,547
6. Property Equipment
This account consists of :
9
Office Equipment P 76,337 P - 976,337
1,0 1,
P 19,668 P 019,668
Less: Accumulated Depreciation
1
Office Equipment 08,515 60,757 169,272
1
Total P 21,514 P 65,090 186,604
8 (
Carrying Value P 98,154 P 65,090) 833,064
Useful Life
Office Equipment 5 years
Furnitures & Fixtures 5 years
7. Accounts payables
This accounts consists of :
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2017 2016
318, 810
Accounts Payable 693 ,120
8. Revenue
This accounts consists of :
2017 2016
3,148, 2,248,
Sales from laundry services P 610 P 854
9. Cost of Services
This accounts consists of :
2017 2016
Direct cost, Materials, Supplies & Equipment
P 2,243,512 P 1,399,759
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Kind of Tax Amount
BIR 0605 500
2016 Business permit 19,028
Community Tax Certificate 2,253
29,472
Total
377,
VAT Output 833
176,
VAT Input 629
201,
VAT Payments P 204
VAT Input Summary: Materials, Supplies and 176,
Equipment P 629
B. Tax assessments
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The Company has not received any Final Assessment Notices from the
Bureau of Internal Revenue (BIR) as of December 31, 2017. Likewise, it has no
outstanding tax cases under preliminary investigation, litigation and/or
prosecution in courts or bodies outside the BIR as of the said date.
D. Taxable revenue
The Company’s taxable revenues for the year ended December 31, 2017
subject to regular tax rate regime is presented below:
Amount
3,148
Sales from laundry services P ,610
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Utilities P 165,820
Office Supplies 22,208
Transportation 108,000
Professional fee 3,000
Rental 49,440
Taxes and Licenses 21,781
Donation 15,000
Representation 15,543
Depreciation 65,090
Insurance -
Total P 465,882
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