HOLY SPIRIT ACADEMY OF LAOAG

FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 2

HOMEWORK #1

DIRECTIONS:

1. READ AND STUDY THE MODULE.

2. DO THE TASK GIVEN.
3. MAKE SURE THAT YOU DO YOUR WORK AT HOME. USE YOUR AVAILABLE
RESOURCES AT HOME.

TOPIC: FINANCIAL STATEMENT ANALYSIS (PART 1)

 FINANCIAL STATEMENT ANALYSIS
- It is the process of evaluating risks, performance, financial health, and future prospects
of a business using computational and analytical techniques with the objective of making
economic decisions.
TWO TYPES OF FINANCIAL STATEMENT ANALYSIS:
1. HORIZONTAL ANALYSIS/TREND ANALYSIS
- It is a technique that involves the comparison of a line item (account) over a
number of periods
- It is the comparison of the same type of financial statement for two or more
periods.
- The objective of this type of analysis is to answer the following questions:
 What is the behavior of the account over time? Is it increasing,
decreasing, or not moving?
 What is the relative or the percentage change in the balances of the
account over time?
- Changes can be expressed in monetary value (peso) or percentages computed
by using the following formulas:
 Peso change= Balance of Current Year – Balance of Prior Year
 Percentage change = (Peso change ÷ Balance of Prior Year) x 100%

Example:

KEEP CALM COMPANY

STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31
2018 2019 Increase (Decrease)
ASSETS ₱ Change % Change

CURRENT ASSETS
Cash and Cash Equivalents ₱ 500,000.00 ₱ 600,000.00 ₱ 100,000.00 20%
Accounts Receivable 250,000.00 300,000.00 50,000.00 20%
Inventory 150,000.00 180,000.00 30,000.00 20%
Prepaid Expenses 80,000.00 120,000.00 40,000.00 50%
Total Current Assets 980,000.00 1,200,000.00 220,000.00 22.45%
NONCURRENT ASSETS
Property, Plant and Equipment 1,000,000.00 1,250,000.00 250,000.00 25%
Intangible Assets 350,000.00 400,000.00 50,000.00 14.29%
Total Noncurrent Assets 1,350,000.00 1,650,000.00 300,000.00 22.22%
TOTAL ASSETS ₱2,330,000.00 ₱2,850,000.00 ₱520,000.00 22.32%

LIABILITIES AND OWNER’S EQUITY

Current Liabilities 300,000.00 320,000.00 20,000.00 6.67%
Long-term Liabilities 1,500,000.00 1,750,000.00 250,000.00 16.67%
Total Liabilities 1,800,000.00 2,070,000.00 270,000.00 15%
JC, Capital 530,000.00 780,000.00 250,000.00 47.17%
TOTAL LIABILITIES AND OWNER’S ₱2,330,000.00 ₱2,850,000.00 ₱520,000.00 22.32%
EQUITY

NOTES:
 2019- Current Year
 2018- Prior Year
 ₱ Change = Balance of Current Year – Balance of Prior Year
 o i.e. Cash and Cash Equivalent:
₱ Change = Balance of Current Year – Balance of Prior Year
= ₱ 600,000.00 - ₱ 500,000.00
= ₱ 100,000.00
 % Change = (Peso change ÷ Balance of Prior Year) x 100%
o i.e. Cash and Cash Equivalent:
% Change = (Peso change ÷ Balance of Prior Year) x 100%
= (₱ 100,000.00 ÷ ₱ 500,000.00) x 100%
= 20%
(Kindly study the example in pages 96-97 of your book- JC TRADING COMPANY)

2. VERTICAL ANALYSIS
- It is the preparation of common-size financial statements
- It is a technique that expresses each financial statement line item as a
percentage of a base amount.
 For SFP- base amount used is the TOTAL ASSETS
 FOR SCI- base amount used is the SALES

EXAMPLE:

KEEP CALM COMPANY

STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31
2018 % 2019 %
ASSETS

CURRENT ASSETS
Cash and Cash Equivalents ₱ 500,000.00 21.46% ₱ 600,000.00
Accounts Receivable 250,000.00 10.73% 300,000.00
Inventory 150,000.00 6.44% 180,000.00
Prepaid Expenses 80,000.00 3.43% 120,000.00
Total Current Assets 980,000.00 42.06% 1,200,000.00
NONCURRENT ASSETS
Property, Plant and Equipment 1,000,000.00 42.92% 1,250,000.00
Intangible Assets 350,000.00 15.02% 400,000.00
Total Noncurrent Assets 1,350,000.00 57.94% 1,650,000.00
TOTAL ASSETS ₱2,330,000.00 100.00% ₱2,850,000.00

LIABILITIES AND OWNER’S EQUITY

Current Liabilities 300,000.00 12.87% 320,000.00
Long-term Liabilities 1,500,000.00 64.38% 1,750,000.00
Total Liabilities 1,800,000.00 77.25% 2,070,000.00
JC, Capital 530,000.00 22.75% 780,000.00
TOTAL LIABILITIES AND OWNER’S EQUITY ₱2,330,000.00 100.00% ₱2,850,000.00

NOTE:
 % = (ACCOUNT BALANCE ÷ TOTAL ASSETS*) x 100%
o i.e. Cash and Cash Equivalent
% = (ACCOUNT BALANCE ÷ TOTAL ASSETS*) x 100%
= (₱ 500,000.00 ÷ ₱2,330,000.00) x 100%
= 21.46%
(Kindly study the example in pages 98-100 of your book- JC TRADING COMPANY)
YOUR TASK:
ANSWER PROBLEMS 1, 2, AND 3 IN PAGES 102-103 OF YOUR BOOK