OVERVIEW

OF THE
BUSINESS

1|Page

Profile of the Business

Name of the Business: E.A Reyes Poultry & Agricultural Supply

Owner: Elisa Abarientos Reyes

Business Address: Poblacion, Libmanan, Camarines Sur
Form of the Organization: Sole Proprietorship
Nature of the Business: Poultry Feeds Store (Merchandising)
DTI Number: 03969569
BIR Tin Number: 942-174-099

Historical Background
E.A Reyes Poultry & Agricultural Supply was established in
2006. The business has been operating for more than 10 years.
The business is a family business owned by the Reyes family. It
was the very first business the Reyes family has engaged into.
As

beginner

business

have

in

the

been

business,

the

rocky

road.

first
E.A

few

years

Reyes

of

the

Poultry

&

Agricultural struggled to find customers and even suppliers. The

business strategy used by the Reyes family in order to gain
customers

was

they

have

lower

prices

compared

to

their

competitors. Through the years, they gained the trust of their

customers and some even became regular customers. In 2010, E.A
Reyes Poultry & Agricultural Supply have opened another business
with the same nature in Tinanquihan, Libamanan, Camarines Sur.
2|Page

Existing Organizational Chart

Manager
Mike Reyes

Store Personnel

Store Personnel

Store Personnel

Vincent Abarientos

Michael Castor

Jerwin bermundo

3|Page

Existing Job Description

Manager
Controls the over-all affairs of the business
Monitors the work done by the employees and supervises the
production of the business
Authorizes the hiring and firing of employees
Determines the payroll of the employees
Deals with the customers
Deposits the money to the bank
Issues checks to the suppliers
Store Personnel
Displays the goods in the store every morning and keeps it
at the end of the day
Assists the customers in identifying the products they wish
to buy
Deliver the goods to the customers
Packs the items purchased by the customers

4|Page

PROPOSED ORGANIZATIONAL CHART

Manager

Assistant
Manager

Cashier

Bookkeeper

Store
Personnel

5|Page

Proposed Job Description

GENERAL OPERATION OF THE BUSINESS
MANAGER

The manager is the one in charge for the over-all

activities of the business. He is given the task to
monitor the daily activities of the business and
take

corrective

action

if

it

is

needed.

He

supervises the work done by employees.

He shall onitor the daily activities of the business

and take the corrective action when needed.

He supervises the work done by employees

HIRING OF THE EMPLOYEES

Collects resume from the applicant and verify the

profile.

If

the

applicant

is

qualified

for

the

said

position, the manager shall conduct an interview

with the applicant.

Once the applicant passed the interview, the

manager turnover the hired employee to the
assistant manager

ASSISTANT MANAGER
TRAINING OF STORE PERSONNEL

After

the

manager

hires

the

employee,

the

assistant manager will orient him about the job

6|Page

description and the rules and regulations of the

entity.

The assistant manager will give him a list of

duties

and

responsibilities

that

he

has

to

him

list

of

perform every day.

The

assistant

manager

will

give

product and prices that the hired employee needs

to be familiar with.

Since the employee was just hired, the assistant

manager shall guide the hired employee to locate
every product displayed in the store.

He

oversees

the

work

done

by

lower

level

employees such as cashier and store personnel.

STORE PERSONNEL

The

front

liner

of

the

business,

the

one

who

primarily interacts with walk-in customers.

He is responsible of displaying the goods every

morning and keeping it at the end of the day.

They are also the persons in charged with the

maintenance
cleanliness

of

the

and

business

situs

orderliness

of

in

term

of

inventory

displayed.

7|Page

CASHIER

Shall maintain change fund amounting 2,000.

May be liable for the discrepancy of the OR and

the actual cash on hand after an operating day

Keeps the collection box safe

CASH RECEIPTS TRANSACTION

Cash Sales
CASHIER

The customer will approach the cashier.

The cashier will ask the customer what items he will

buy and after knowing such, he will ask the store
personnel to prepare the desired items.

The

cashier

together

with

the

customer

will

then

double check the items prepared by the store personnel

for the confirmation of the consistency with what the
customer want to buy.

After that the cashier will receive the payment from

the

customer.

He

will

then

issue

two

copies

of

Official Receipts; the first copy is to be given to

the customer and the other copy would be kept by him
temporarily for the day for the preparation of the
Daily Cash Collection Report.

After

that,

he

will

hand

over

the

items

to

the

customer in cases when the items are of small amount,

but in cases when the items involve sacks of feeds,
the cashier will ask the store personnel to hand over
the item to the customer or load such to the vehicle
of the customer if there is.

8|Page

STORE PERSONNEL

The store personnel will check the availability of the

inventory

If the item is not available, he will inform the

cashier

and

the

assistant

manager

about

the

prepare

the

shortage.

If

it

is

available,

then

he

will

items as the cashier told him.

Once the inventory is prepared he will hand it over to

the cashier.

The store personnel as directed by the cashier will

hand over the inventory to the customer in cases when
the item involves sacks of feeds or fertilizers.

Sales on Account

In cases when regular customers have Purchase Order

with them.

MANAGER

The manager will check whether he had a prior

negotiation

with

forwarded

to

indicated

there

customer

him,

and

whether

regarding

the

check

the

it

consistent

is

PO

information
with

their agreement or not.

If

there

were

inconsistencies

with

the

agreement, he will personally talk to the

customer

to

verify

and

correct

the

agreement. After fixing any inconsistencies,

ask the customer to prepare another PO. He
will also ask the cashier to prepare another
SO

containing

the

right

information

after

receiving the revised PO of the customer.

9|Page

If it is already consistent with the prior

agreement,

the

Manager

will

sign

it

and

forward the approved SO and received PO to

the cashier.
CASHIER

The customer will give the PO to the cashier.

After receiving such, the cashier will fill out a

Sales Order with the same info with the PO.

The cashier will then forward the PO and SO to

the Manager.

In case when there was inconsistency with

the

agreement

customer,

and

customer,

the

made

by

another

the

PO

cashier

was

will

manager

and

sent

the

then

by

prepared

another SO upon receiving the revised PO of

the customer and forward such to the manager
for confirmation.
The

cashier

will

receive

the

Approved

SO

and

Received PO by the Manager.

He

will

then

ask

the

store

personnel

to

prepare the items indicated in the approved

SO.
The cashier and the customer will double check the
prepared inventory.
The

cashier

will

prepare

two

copies

of

Sales

Invoice; the first copy is to be given to the

customer and the other copy to the bookkeeper.
After

that

personnel

to

the

cashier

load

the

will
items

ask
to

the
the

store
vehicle

prepared by the customer.

10 | P a g e

STORE PERSONNEL

The store personnel will prepare the inventory as

the cashier said. After preparing the inventory,
he will inform the cashier and ask the customer
to double check the items prepared

The store personnel will load the items to the

vehicle prepared or brought by the customer.

In cases when a non-regular customer doesnt have PO

MANAGER

The Manager will receive an SO from the cashier.

He will personally talk to the customer, assess

its

capability

of

paying,

get

the

personal

information, and make an agreement with regard to

the

sale,

such

as

the

term

for

payment

and

whether a discount will be granted or not.

If

the

manager,

based

on

his

conversation with the customer, thinks

that the customer may not be able to
pay, he will decline to sign the SO.

If the manager thinks that the customer

can pay then he will approve the SO and
forward the Approved SO to the cashier.

CASHIER

The customer will approach the cashier.

The cashier will have the interaction with the

customer,

know

what

the

customer

will

buy

and

fill out a Sales Order form.

He will forward the SO to the Manager for

approval.
11 | P a g e

The cashier will receive the Approved SO, he will

then ask the Store Personnel to prepare the items
indicated in SO.

The Cashier with the customer will double check

the quantity and quality of the items prepared by
the store personnel.

The cashier will then issue two copies

of Sales Invoice; the first copy to the
customer

and

the

other

one

will

be

ask

the

forwarded to the bookkeeper.

After

such

the

cashier

will

Store Personnel to hand over the items

to the customer or load the items in
the vehicle prepared or brought by the
customer if there is.
STORE PERSONNEL

The

store

personnel

will

prepare

the

items

indicated in the SO and notify the cashier when

done.
In cases when there is partial payment or prepayment.
CASHIER

The cashier will issue an SI where the partial

payment is indicated.

When the sale on Account is to be collected

CASHIER

In case when the customer still have the Sales Invoice

with them.

The customer will present the SI together

with the payment to the cashier.
12 | P a g e

The

cashier

will

receive

the

Payment

together with the SI from the customer.

The cashier will go to the bookkeeper and

ask for the copy of the SI that the entity
have

regarding

the

sale

made

with

the

specific customer.

The cashier upon verifying the specific sale

on account to be paid will issue stamp the
SI as Paid; the copy of Sales Invoice owned
by

the

entity

should

also

be

stamped

as

paid.

The

copy

of

SI

by

the

entity

will

be

temporarily kept by the cashier for the day

for

the

preparation

of

the

Daily

Cash

Collection Report.

In case when the customer lost the Sales Invoice.

The cashier will then ask for the name

of the customer and the date when he
had the sale which is to be settled.

The

cashier

will

then

goes

to

the

bookkeeper and look for the copy of the

entity of the Sales Invoice.

Once

it

is

found,

the

cashier

will

check whether there are prior payments

or none, and know what the amount is
due.

Ask

for

the

confirmation

from

the

customer about the Sales Invoice that

the cashier has found.
13 | P a g e

Upon confirmation, he will receive the

payment and stamp the SI as paid: the
Sales Invoice later will be forwarded
to the bookkeeper.

BOOKKEEPER

The bookkeeper will look for the SI and hand

it over to the cashier.

CASHIER AND MANAGER

At the end of the day, the cashier and the manager will
conduct a cash count to check the consistency of the total
cash

on

hand

net

of

change

fund

with

the

Daily

Cash

Collection Report.

If after the cash count it already tallied,

then the manager will sign the DCCR.

The

cash

will

be

given

to

the

Manager.

The DCCR together with the ORs and

SI

will

be

forwarded

to

the

bookkeeper.

If after the cash count the cash did not

tally

with

the

DCCR,

they

will

conduct

recount and reassessment of ORs.

The DCCR with the ORs and SI will

be forwarded by the cashier to the
Bookkeeper.

If after the recount it still did

not

tally,

number

of

they

will

inventories

check

the

that

were

sold based on the inventory report

of

the

Assistant

Manager

and

14 | P a g e

assess the total amount of prices

of the inventories that were taken
out from the stock for that day.

They will assess whether the total

amount of that prices will match
the collection and if yes then the
Manager

will

ask

the

cashier

to

correct the discrepancy in DCCR.

If

after

that

it

still

did

not

tally:
o And the cash is greater
than the total in DCCR;
it

will

be

considered

miscellaneous income.
o And

the

cash

is

lower

than the amount in DCCR;

it

will

to

the

be

deduction

salary

of

the

after

the

cashier.
MANAGER

If

it

already

tallied

recount, the manager will sign the

DCCR.

The manager will receive the cash.

BOOKKEEPER
o The

bookkeeper

customer,

will

Approved

receive

SO,

SI,

the
OR,

Received
and

DCCR

PO
from

from
the

cashier.

15 | P a g e

The SI will be posted in the Sales Journal

and

afterwards

to

the

Accounts

Receivable

Subsidiary Ledger.

The ORs will be posted in the Cash Receipts

Journal and in cases where the OR is with
reference to an Invoice, he will make the
necessary

posting

in

the

AR

Subsidiary

Ledger.

At

the

end

of

certain

period,

the

aggregate of amounts in the ARSL, SJ, and

CRJ

will

be

posted

which

will

be

Trial

Balance

used

to

the

general

in

the

preparation

affecting

the

Cash,

ledger
of

Account

Receivable and Sales Accounts.

CASH DISBURSEMENTS TRANSACTION
Purchasing Inventory
MANAGER

The

manager

will

receive

the

PRF

prepared

by

the

Assistant Manager.

He will then check the inventory available in the

stock room and assess if there is really a need
to purchase.

If

after

the

assessment

of

inventory

it

turned out that there is no need to purchase

then he will not approve the PRF

If after the assessment it turned out that

there is really a need to purchase, then the
manager will sign the PRF

16 | P a g e

The manager upon approving the PRF will canvass

prices of the items indicated in the PRF from
different suppliers.

He will select one supplier and have an agreement

with

it.

Purchase

He

will

Orders

prepare
in

the

line

three

with

copies

what

was

of
the

agreement made with the supplier, and send the

first copy of PO to the supplier. The second copy
will be given to the Assistant Manager which will
be the basis in receiving the Inventory purchased

He will send the PO to the supplier hand in hand

The

manager

will

receive

the

Receiving

Report

from the Assistant manager together with the SI.

The manager will then check whether the actual
count of inventory received indicated in the RR
is the same as what was placed in the stock room.

When

the

debt

for

the

purchase

is

due,

the

Manager will ask the assistant manager to prepare

the CDV based on the related SI to the certain
purchase.

ASSISTANT MANAGER

The Assistant manager is conducting Inventory count

every Saturday and records each inventory coming in
and out of the inventories.

If after assessment of inventory he noticed that

the inventory is only at 30% of their regular
number of order, then He will prepare a Purchase
Requisition

Form

indicating

the

items

he

have

indicated that reached 30%, and the quantity of

each item to purchase.
17 | P a g e

He will then forward the PRF to the Manager.

The assistant having the copy of PO will be the one to

receive the inventory.
When the inventory arrives he shall count each
item and prepare an inventory report. After the
preparation of the inventory report, he will send
it to the manager for checking together with the
SI given by the supplier upon delivery.
The inventories received by the assistant manager
will be kept in the stock room through the help
of the store personnel.
The Assistant Manager will then prepared the CDV and
forward such to the Manager for approval.
The Manager will receive the CDV from the Assistant
Manager and will check if the amount indicated there
in corresponds to the amount in the SI.
The Manager will approve the CDV and issue a check
for the payment which he himself will hand over to
the supplier together with the SI. The SI should be
stamped by the supplier as paid.
The approved CDV, and stamped as Paid SI will then
be forwarded to the bookkeeper for proper recording.
BOKKEEPER

The bookkeeper will receive the A-PO, Checked RR, ACDV, stamped SI from the Manager; he will then record
the SI in the Purchase Journal and afterward to the
Accounts

payable

Subsidiary

Ledger,

then

the

adjustment to the balance for debt evidenced by the

stamped SI as paid.

18 | P a g e

 GENERAL DISBURSEMENT
MANAGER
The

Manager

Assistant

will

receive

Manager

the

together

CDV

with

prepared
the

by

related

the
bill

thereof for approval

The Manager should check whether the CDV is matched
with the bills.
If not, he will not sign it and ask the assistant
manager to prepare another CDV
If yes, he will approve the CDV and issue a check
with the corresponding amount indicated in the CDV.
He will forward the Approved CDV and the check to
the Assistant Manager.
ASSISTANT MANAGER

The Assistant Manager will receive the bills from the

vendors or creditors.

He will prepare the CDV with reference to the bills

received which he will forward to the Manager for
approval.

The Assistant Manager will receive the A-CDV and the

Check.

He will send the check to the creditor or vendor.

He shall ask for an OR as a proof that the payment

was really made.

After

such,

he

will

send

the

A-CDV,

bills,

and

related OR to the bookkeeper for recording.

19 | P a g e

BOOKKEEPER

The

bookkeeper

will

receive

the

A-CDV,

bills

and

related OR from the Assistant Manager.

He

will

record

the

bill

first

on

the

general

journal, the A-CDV and OR to the Cash Disbursements

journal.
PETTY CASH FUND
ESTABLISHMENT OF PETTY CASH FUND
MANAGER

The Manager should command for the establishment of

the Petty Cash Fund amounting to 1,500 and set the
cashier as the Petty Cash Custodian.

He will ask the cashier to prepare a CDV indicating

there the establishment of fund with the amount of
1,500.

The manager will receive the prepared CDV from the

cashier and he shall approve it.

After the approval of CDV, he will issue a check

with the corresponding amount indicated in the CDV
and forward it to the cashier for withdrawal.

CASHIER

The cashier will prepare the CDV as directed by the

Manager amounting to 1,500 for the establishment of
the fund.

He will forward the CDV to the manager for Approval.

The cashier will receive the A-CDV and the check.

He will encash the check and put such in the petty

cash box ready for petty cash disbursements.

20 | P a g e

 PETTY CASH DISBURSEMENT PROCESS

MANAGER

The manager will receive the PCRF from the requestor,

then he will decide whether to approve it or not.

If

not,

he

will

inform

the

requestor

about

the

unapproved PCRF.

If yes, then he would sign it and forward such to

the requestor.

CASHIER

The cashier will issue PCRF to the requestor.

The cashier will receive the A-PCRF.

He will then issue a PCV and upon giving the cash

indicated

in

the

A-PCRF

he

should

ask

for

the

signature of the requestor to the Petty Cash Fund

Received form.

The cashier will receive the PCV with the attached OR

and Si from the requestor.

He will then record such in the Petty Cash Register.

REQUESTOR

The requestor will ask for the Petty Cash Requisition

Form from the cashier.

He

will

purchased

fill

it

out

immediately

indicating
and

the

forward

items
such

to

be

to

the

PCRF

and

Manager for approval.

The

requestor

will

receive

the

approved

forward such to the cashier to get the amount.

The

requestor

will

receive

the

PRV

and

the

cash

indicated in the A-PCRF and sign in the PCFRF.

Then,

he

will

proceed

to

purchasing

the

item

indicated in the PCRF.

21 | P a g e

He must ask for OR or SI in every purchase.

After the purchase. He must liquidate his expenses

through indicating all expenses made in the PCV and
attach

to

that

the

related

OR

and

SI

from

the

purchase which he will forward to the cashier.

REPLENISHMENT OF PETTY CASH FUND
MANAGER

The

Manager

will

receive

the

CDV

prepared

by

the

cashier together with the Petty Cash Register.

He should check whether the amount indicated in the

CDV matches the total amount of expenditures in the
Petty Cash Register.
If it did not match, he will disapprove the CDV
and inform the cashier that it did not match.
Then ask the cashier to prepare another CDV.
The

previous

CDV

in

this

cse

should

be

cancelled by the manager.

If it matched, the manager will sign it as a
sign

of

approval

and

issue

check

to

be

forwarded to the cashier.

CASHIER

When the cashier noticed that the aggregate of petty

cash disbursements reached 60% of the petty cash fund,
meaning

900

was

disbursed,

he

should

ask

for

its

to

the

replenishment.

He

will

prepare

CDV

and

forward

such

Manager evidenced with the Petty Cash Register for

approval.

The

cashier

will

receive

the

Approved

CDV

and

the

check from the manager.

22 | P a g e

He will then encash the check and put the cash in

the petty cash box for safekeeping ready for petty
cash disbursements.

The PCV, A-CDV and PCR should be forwarded by him to

the bookkeeper for recording.

BOOKKEEPER

The bookkeeper will receive the PCV, A-CDV and PCR

from the cashier.

He will then record the replenishment of fund in

the Cash Disbursement Journal.

The entire source documents after his recording

should be kept by him intact in a cabinet.

PAYROLL
MANAGER

The

Manager

is

in-charged

with

the

DTR

of

the

employees.

The DTR is in his table for him to be able to

check

whether

the

employees

are

faithfully

recording their logging in and out in it.

Every

15

Assistant

days

he

Manager

will
for

forward

the

such

to

the

preparation

of

the

by

the

Payroll register.

The

Manager

will

receive

the

prepared

PR

Assistant Manager.

He will check whether the computation made by the

Assistant Manager was right.
If it there are any error, he should ask the
assistant

manager

to

do

the

necessary

adjustments
23 | P a g e

 If it was right, then he would approve it

and ask the Assistant Manager to prepare the
CDV for the payroll.

The

manager

will

receive

the

CDV

prepared

by

the

Assistant Manager.

He will check whether it is consistent with the

Approved PR.
If not, he will ask for the preparation of
another

CDV

which

matches

the

amount

indicated in the PR.

If yes, he will sign the CDV and issue a
check

to

be

forwarded

to

the

Assistant

Manager for withdrawal.

The manager will receive the cash withdrawn by the

assistant manager.

He

will

then

distribute

the

cash

to

the

employees, equivalent with the computations made

in the PR.

He must ask for the signature of the employees

upon

distribution

of

salary

in

forward

all

the

Payroll

Distribution form.

After

such,

documents

he

such

will
as

PR,

A-CDV,

the
and

source
Payroll

Distribution Form to the cashier for recording

purposes.

24 | P a g e

ASSISTANT MANAGER

Every 15 days the Assistant manager will receive the

DTR of the employees from the Manager.

Using such, he will compute for the salaries of the

employees and prepare the Payroll Register out of
it.

After the preparation of the PR, he will forward

such to the Manager for checking together with the
DTR.

The assistant manager will receive the approved PR and

shall

prepare

the

related

CDV

for

the

request

of

check. The CDV will be forwarded to the manager for

approval.

The assistant manager will receive the approved CDV

and the check from the manager.

He

will

encash

it

and

forwards

the

cash

to

the

manager thereafter.
BOOKKEEPER

The bookkeeper will receive the PR, A-CDV, and Payroll

Distribution Form from the manager.

The PR will be recorded in the general journal

The

A-CDV

and

PDF

will

be

recorded

in

the

Cash

Disbursement Voucher.
CHECKING OF RECORDINGS MADE BY THE BOOKKEEPER

Every 15 days, the Manager should check the consistency

of recordings made by the cashier.

Using all the source documents that he has compiled,

he will conduct tracing of recordings made within 15
days in each of the Accounting forms.

25 | P a g e

ACCOUNTING
SYSTEM OVERVIEW

26 | P a g e

A. Accounting System
Accounting System is a set of orderly procedures that is
being used by the business entity for effective assessment
of the business operations. It shows the proper guidelines
and

procedures

operations

of

of

recording

the

business.

transactions
It

is

in

composed

the
of

daily

General

Policies, Organizational Structures, Chart of Accounts and

Flow Chart of the Business.

OBJECTIVES:
a. To provide an effective policy for smooth flow of the
operations in the business.
b. To

help

the

business

maximize

its

profit

by

properly

recording Revenues and Expenses.

c. To

orient

the

management

and

its

users

of

proper

treatment of different transactions.

d. To help management in planning and decision making.

B. ESSENTIAL COMPONENTS OF AN ACCOUNTING SYSTEM

Organizational Chart
Organizational

Chart

is

visual

representation

of

formal lines of authority within the organization. It

shows the flow of duties and responsibilities of each
employee in the daily business operations.
27 | P a g e

 Chart of Accounts
Chart of Accounts is the list of all the accounts that
is being use by the entity to record daily transactions.
The Chart of Accounts comprises of balance sheet accounts
(Assets,

Liabilities

and

Equity),

Income

Statement

Accounts (Revenues and Expenses). Each account has an

individual name and individual account number.
Financial Statements
It is considered the end product of the accounting
work. It shows the performance of the business and the
Income generated by the business. It shows the Balance
Sheet, Income Statement, and Changes in Equity. These
help the management in planning and decision making.
Business Forms and Papers
These are written documents used in the business that
serves as evidence of daily transactions that occurred in
the

business.

These

can

also

serve

as

historical

document that can be used to trace certain transactions.

This

is

used

by

the

bookkeeper

to

prepare

financial

report.

28 | P a g e

General Accounting Policy

Definition:
This includes the accounting principles and methods that
are

currently

being

implemented

by

the

entity,

the

recommendations that the consultants have prepared in order for

the

entity

Principles,

to

comply

fairly

with

the

Generally

presenting

the

Accepted

result

of

Accounting

its

operation,

financial position and other financial statements.

1. E.A Reyes Poultry and Agricultural Supply will switch to
the Accrual basis over Cash Basis which the business is
currently using.
Accrual Basis results in a fairer presentation of the
financial position and the operating results. Transactions
are reported in the period when they occur even though no
cash is involved. Accrual Basis recognizes income when it
is

earned

transaction

and

expense

involve

proper

matching

Basis,

the

of

balance

cash

when

it

is

incurred,

or

not,

an

entry

income
sheet

and

expenses.

accounts

are

is
Under

more

may

the

made

for

Accrual

precise

and

accurate because Assets, Liabilities and the Owners Equity

of the business are properly recorded.

As compare to the Cash Basis, although it is much

simpler

than

the

Accrual

Basis,

the

effects

of

the

29 | P a g e

transactions

on

measured

the

in

financial
period

statements

when

cash

is

are

recognized

actually

and

received.

Income and expense is recognized and measured in the period

when cash is received or paid, irrespective of when it is
earned or incurred.

Illustrative Problem:
1. Original cash investment

is P200,000

2. Furniture and equipment bought for cash, P20,000

3. Furniture and equipment bought on account,P40,000
4. Partial payment to apply to account purchases of furniture
and equipment, P10,000
5. Cash Sale, P420,000
6. Sales on account, P240,000
7. Cash Purchases, P400,000
8. Purchases on Account, P200,000
9. Collections from trade customers, P210,000
10. Payment to trade creditors, P150,000
11. Payment of Operating expenses, P120,000
12. Depreciation of Furniture and equipment ,P6,000
13. Accrued operating expenses as of December 31, P8,000
14.Prepaid operating expenses as of December 31, P30,000
15.Doubtful accounts are P6,600
16.At

the

end

of

the

period,

Merchandise

inventory

as

of

December 31, P190,000

30 | P a g e

E.A Reyes Poultry and Agricultural Supply

Comparative Income Statement
For the year ended December 31, 2015
Cash Basis
ASSETS
Cash
Accounts receivable
Less: AFDA
Merchandise Inventory
Prepaid Op. Expenses
Furniture and Equipment
Less: Depreciation Expense
Total Assets
LIABILITIES
Accounts Payable (trade)
Accounts Payable (non-trade
Accrued Op. Expense
Total Liabilities
OWNERS EQUITY
Reyes,Capital
Net Income 2015
Total Liab & OE

P130,000
0
0
0
0
0
0
P130,000

Accrual Basis
P130,000
30,000
(6,600)
190,000
30,000
60,000
(6,000)
P427,400

0
0
0
0

50,000
30,000
8,000
88,000

200,000
(70,000)
P130,000

200,000
139,400
P427,400

E.A Reyes Poultry and Agricultural Supply

Comparative Income Statement
For the year ended December 31, 2015
Cash Basis
Sales
Less: Cost of Sales
Purchases
MI,end
Cost of sales
Gross Profit
Operating Expenses
Depreciation expense
Doubtful Accounts
Furniture & eqpt expense
Net Income

P630,000
P550,000
(
0 )
P550,000
P 80,000
(120,000)
(
0
)
(
0
)
( 30,000)
P(70,000)

Accrual Basis
P660,000
P600,000
(190,000)
P410,000
P250,000
(98,000)
( 6,000)
( 6,600)
(
0 )
P139,400
31 | P a g e

Why do we recommend Accrual Basis?

Accrual basis provides a better measure of the results of
transactions since Accrual method records transactions when
they occur and not as cash is received or paid.
Accrual

Method

presents

clearer

picture

of

what

is

actually happening in the business.

Accrual method also traces revenues and expenses as they

occurred. It shows more accurate record of the business

activities.

2. The calendar year should be maintained.

A calendar year is a period of 12 months beginning

on January to December 31.

A Fiscal Year is a period of 12 consecutive months

beginning on a date other than January 1 (eg: April
1 to March 31).

Why should the Calendar Year be maintained?

The calendar year is much simpler than the Fiscal
Year.
In using the calendar year, it would be easier for the
bookkeeper of the business to prepare for the filling
32 | P a g e

for income tax since there will be more than 3 months

to prepare for the filling after the actual accounting
period and not showing just a part of the accounting
cycle when it is shown in the fiscal year.

3. The straight-line method should be used in depreciating the

fixed asset.
Methods of Depreciation:
a) Straight line method
The cost of a fixed asset is reduced uniformly
over the useful life of the asset.
b) Sum-of-the-years-digit-method

Accelerated method for calculating an asset's

depreciation.

Based on the assumption that assets are generally

more productive when they are new and their
productivity decreases as they become old.
c) Double declining balance method
An accelerated depreciation method that counts
twice as much of the assets book value each year
as an expense compared to straight-line
depreciation.

33 | P a g e

Illustrative Problem:
E.A. Reyes Poultry and Agricultural Supply purchased a
vehicle costing P50,000. The company expects the vehicle to
be operational for 5 years at the end of which it can be
sold for P5,000.

STRAIGHT LINE METHOD

P50,000 P5,000
Depreciation Expense =

5 years

=
Year

1
2
3
4
5

Particular
Acquisition
Cost
Depn (1st
year)
Depn (2nd
year)
Depn (3rd
year)
Depn (4th
year)
Depn (5th
year)

P 9,000

Depreciation Accumulated
Carrying
Depreciation Amount
(a)
(b)
(c)
P 50,000
P9,000

P9,000

41,000

P9,000

18,000

32,000

P9,000

27,000

23,000

P9,000

36,000

14,000

P9,000

45,000

5,000

SUM-OF-THE-YEARS-DIGIT METHOD
Year

1
2

Particular
Acquisition
Cost
45,000 x
5/15 **
45,000 x
4/15

Depreciation Accumulated
Carrying
Depreciation Amount
(a)
(b)
(c)
P 50,000
P15,000

P15,000

35,000

12,000

27,000

23,000
34 | P a g e

45,000 x
9,000
3/15
4
45,000 x
6,000
2/15
5
45,000 x
3,000
1/15
** SYD = 5 [(5+1) 2] = 15

36,000

14,000

42,000

8,000

45,000

5,000

DOUBLE DECLINING BALANCE METHOD

Year

Particular

Depreciation Accumulated
Carrying
Depreciation Amount
(a)
(b)
(c)
P 50,000

Acquisition
Cost
1
50,000 x
P20,000
P20,000
40% **
2
30,000 x
12,000
32,000
40%
3
18,000 x
7,200
39,200
40%
4
10,000 x
4,320
43,520
40%
5
6,480-5000
1,480
45,000
** (100% 5years) = 20%; (20% x 2) = 40%

30,000
18,000
10,800
6,480
5,000

Table of Estimated Useful Life of an Asset:

ASSET
Tricycle
Weighing Scale
Motorcycle (with
sidecar)
Cabinets
Tables
Chairs
Delivery Cart

EUL
10 years
5 years
10 years
10
10
8
10

years
years
years
years

35 | P a g e

Why do we recommend Straight Line Depreciation Method?

AS shown in the first table of the Illustrative Problem,
the depreciation expense every year is fixed, which means
that the depreciation expense is spread out evenly
throughout the estimated useful life of the asset

It is the simplest and most commonly used depreciation

method and more convenient to use as compared to the other
depreciation methods.

4. The business should maintain a Change Fund.

A change fund is a cash fund set aside for a certain
purpose, which is in this case, is to provide change to
customers who were not able to give exact amount of cash
for their purchased goods.
The use of the change fund is strictly for cash change
among

the

registers,

it

is

not

to

be

used

for

reimbursement of any expense to employees, paying any

travel expenses, etc.
We recommend that the business should maintain an amount
of P2000.
The amount in the change fund remains constant at the end
of the day.

36 | P a g e

5. Imprest System of Cash Control should be observed by the

business. All cash receipts are deposited intact to a bank
and all cash disbursements are made by means of check.
Expenditures involving small amounts are made from Petty
cash fund.

What is a Petty Cash Fund?

Petty Cash fund is a small amount of cash that the business

keeps on hand to pay for small and miscellaneous expenses
instead of writing a check.
The Petty Cash Custodian shall maintain a petty cash fund
of P1500 for small and miscellaneous expenses such as
food, gasoline, supplies, etc.
The Petty Cash fund should be replenished when it equals
40% of the established fund or P600.
For each expense, a Petty Cash voucher is completed with
an attached proof of document (Receipt or other document)
and signature by the requestor is required to indicate
that cash has been received from the petty cash fund.

37 | P a g e

There are 2 methods of handling petty cash fund:

1. IMPREST FUND SYSTEM

The fund system that is usually followed in handling

cash transactions.

Petty Cash fund is always maintained at fixed amount.

The replenishment check is usually equal to the petty

cash disbursements.

At the end of the period, the cash spent is to be

reimbursed to restore the imprest petty cash fund
balance.

2. FLUCTUATING FUND SYSTEM

The disbursement from the PCF are immediately

recorded.

The replenishment check may or may not be the same as

the Petty Cash Disbursement.

The amount of the PCF does not remain constant.

ILLUSTRATION:

IMPREST FUND SYSTEM

FLUCTUATING FUND SYSTEM

1. E.A Reyes Poultry and Agricultural Supply establish a Petty

Cash Fund of
Petty Cash

P1500.

P1500

Cash in Bank

Petty Cash
P1500

P1500

Cash in Bank

P1500

2. Suppose E.A Reyes Poultry and Agricultural incurred the

following expenses:
38 | P a g e

Gasoline

P 500

Supplies

300

Food

100

Total

P 900

To request payment from the

Gasoline

petty cash fund, a petty cash

Supplies

voucher must be prepared. The

Food

PCV is signed by the requestor

P500
300
100
Petty Cash Fund

P900

and will be returned to the

petty cash custodian for
payment. Upon payment, the
payee signs the voucher and any
receipt or invoice supporting
the payment must be attached to
the signed voucher.
3.

The PCF needs to be replenished.

Gasoline

P500

Supplies

300

Food

100
Cash in Bank

Petty Cash Fund

Cash in Bank

P1000
P1000

P900

COMPUTATION OF PCF ENDING BALANCE

PCF balance, beginning

IMPREST

FLUCTUATING

P1,500

P1,500

Less: Disbursements
39 | P a g e

Gasoline

500

500

Supplies

300

300

Food

100

100

PCF balance, end

Add: Replenishment Check

600

900**

Total PCF on hand

600
1,000

P1,500

P1,600

** Under the Imprest Fund System, the replenishment check is

equal to the disbursements incurred.

Why not Fluctuating Fund System?

In this type of Fund System, the replenishment check do not

necessarily

equal

to

the

petty

cash

disbursement.

The

checks are simply drawn upon the request of the petty cash
custodian irrespective of the Petty Cash expense. In the
Fluctuating fund system, misappropriation of cash is always
possible and the possibility of theft is higher since the
amount of the replenishment check fluctuates. Some amount
of the replenishment check might be used for the personal
expenses of the petty cash custodian; hence it will be more
difficult to trace the outflow of the fund.

Why do we recommend to use Petty cash fund under Imprest fund

system?

By using the Imprest fund system, the management can track

all of the expenses form the Petty cash fund since it is

40 | P a g e

always

maintained

at

fixed

amount

as

compared

to

Fluctuating fund system.

6. Cash

Collections

Supply

should

of

be

E.A

Reyes

deposited

to

Poultry
the

and

UCPB

Agricultural

Bank

the

next

following day. The reason for this is to minimize the risk

of theft since it is unsafe to keep a large amount cash
inside the house for a long period of time and also to
minimize the risk of unnecessary and excessive expenses on
the part of the management.

7. The payment of employees salaries is on 15th and 30th day of

the month. The basis of their salary in their payroll is
the Daily Time Record of each employee. The owner/manager
will distribute the employees salary every 15th and 30th day
of the month minus the appropriate contributions to SSS and
Philhealth and the cash advances made by the employee. The
Payroll

System

will

assist

the

management

in

properly

identifying the cash flow records of the employees salary.

8. The policy regarding the cash advances to the employees

shall be maintained and this will be treated as other
receivables. Cash Advances to Employees occurs when the
employee suddenly needed money for their personal needs.
41 | P a g e

9. The

FIRST-IN-FIRST-OUT

Valuation

should

be

(FIFO)

used.

FIFO

Method
method

for
assumes

Inventory
that

the

first unit to enter stock is the first one sold, which

means that the earliest costs assigned to the inventory are
the first ones to be charged to expense when the items are
sold.

Illustrative Problem:
The inventory records of E.A Reyes Poultry and Agricultural
Supply showed the following data:
July 1 Beginning Inventory
5 Purchase

20 units @ P120
78 units @ P120

11 Sale

68 units @ P150

15 Purchase

40 units @ P120

17 Purchase

35 units @ P110

22 Sale

35 units @ P140

28 Sale

30 units @ P150

Using the FIFO Periodic:

Units Available for Sale

173 units

Units Sold

133 units

Units in Ending Inventory

40 units

Cost of Ending Inventory:

Most recent cost (35 units @ P110)
Next most recent cost (5 units @ P120)
Total cost of ending inventory

P3850
600
P4450

42 | P a g e

Cost of Goods Sold:

Cost of goods available for sale
20 units @ P120

P2400

78 units @ P120

9360

40 units @ P120

4800

35 units @ P110

3850

P20410

Less: cost of ending inventory

4450

Cost of goods sold

P15960

Gross Profit
Sales

P19600

Less: cost of goods sold

15960

Gross Profit

P 3640

Why do we recommend FIFO method?

FIFO method gives the proper value of the ending inventory
on the balance sheet.
The products bought first should be sold first to minimize
spoilage.
It is essential for the business to sell the first batch of
deliveries to avoid piling up of goods in the warehouse.

10.

E.A Reyes Supply and Agricultural Supply will use the

Periodic Inventory System. In this inventory system, the

ending

inventory

balance

will

only

be

updated

when

periodic inventory count is made. Periodic Inventory System

does

not

maintain

continuous

record

of

the

physical

43 | P a g e

quantities of inventory on hand. This system does not track

inventory

on

daily

basis.

Generally

used

when

the

individual inventory items have small peso investment, such

as

groceries,

hardware

and

auto

parts.

It

Uses

an

occasional physical count to measure the level of inventory

and the cost of goods sold. All purchases made are recorded
in

purchases

account.

The

physical

inventory

count

is

inflow

or

conducted at the end of the accounting period.

Why not Perpetual Inventory System?

Perpetual

Inventory

system

records

the

outflow of the inventory every time the inventory is

being purchased or being sold, which makes it less
possible if this will be applied to E.A Reyes Supply
and Agricultural Supply since they are in a business
that offers their products in wholesale and in retail.
It will also be time-consuming if every time there is
a sale, the records would be adjusted since they have
lots of customers within the day.

44 | P a g e

45 | P a g e

ACCOUNTS DESCRIPTION
Account
No.
110

Cash on Hand

This account includes all coins and

currency that are readily available for
use and/or cash waiting to be deposited
in the bank.

120

Cash in Bank

130

Petty Cash
Fund

140

Accounts
Receivable
Store
Supplies

These are cash remittances deposited in

the bank under the clients name.
This is the amount of cash established
by the business and is kept on hand to
meet contingent and miscellaneous
expenditures.
The amount collectible from customers.

150

ASSET

160

Merchandise
Inventory

170

Land

180

Furniture and
Fixtures

185

Accumulated
DepreciationFurniture and
Fixtures

190

Equipment

195

Accumulated
DepreciationEquipment

DESCRIPTION

These are consumable items that were

purchased for the general purpose of
the business. (Calculators, Pens,
Plastic Bags, Cleaning Materials)
These are assets which are held for
sale in the ordinary course of business
particularly poultry feeds and
agricultural products.
Pertains to the land owned by the
owner.
This pertains to the cabinets, table
and chairs that the business used in
the daily operating business hours.
This serves as a contra asset account
that contains the sum of periodic
depreciation charges. The balance in
this account is deducted from the cost
of the Furniture and Fixtures to obtain
its book value or carrying amount.
These are tangible assets that are used
in the conduct of the business such as
weighing the goods (weighing scales and
carts)
This serves as a contra asset account
that contains the sum of periodic
depreciation charges. The balance in
this account is deducted from the cost
of the Equipment to obtain its book
value or carrying amount.
46 | P a g e

200

Building

205

Accumulated
DepreciationBuilding

210

Vehicles

215

Accumulated
DepreciationVehicles

Account
No.
310

LIABILITIES
Accounts
Payable

320

Salaries
Payable

330

Utilities
Payable

340

Rent Payable

350

SSS
Contribution
Payable
Philhealth
Contribution
Payable
Income Tax
Payable

360
370

Account
No.
410

OWNERS
EQUITY
Reyes,
Capital

Refers to the physical structure where

the business is operating.
This serves as a contra asset account
that contains the sum of periodic
depreciation charges. The balance in
this account is deducted from the cost
of the Building to obtain its book
value or carrying amount.
This refers to the Vehicles used by the
entity such as motorcycle, tricycles.
This serves as a contra asset account
that contains the sum of periodic
depreciation charges. The balance in
this account is deducted from the cost
of the Vehicles to obtain its book
value or carrying amount.
DESCRIPTION
This used to record the clients
obligations to suppliers for purchasing
goods on credit.
This account is used to record the
accrued employees regular salaries but
have not yet been paid.
These are unpaid obligation that is not
yet paid by the owner/manager.
(Electricity Bills, Water Bills)
This account is used to record the
amount of rent that has not been paid.
Refers to the SSS contribution of the
employee that is not yet paid.
Refers to the Philhealth contribution
of the employee that is not yet paid.
Refers to the income tax obligation of
the business that is not yet paid by
the manager.
DESCRIPTION
This account is used to record the
original and additional investments of
47 | P a g e

420
430

Account
No.
510

Reyes,
Withdrawals
Income
Summary

INCOME
Sales

520

Sales Returns
and
Allowances

530

Sales
Discounts

540

Miscellaneous
Income

Account
No.
610

COSTS AND
EXPENSES
Purchases

620

Purchase
Discounts

630

Purchases
Returns and
Allowances
Salaries
Expense

640

the proprietor.
This is used for the withdrawals made
by the proprietor for personal use.
This is temporary account used at the
end of accounting period to close the
income and expenses.
DESCRIPTION
This account refers to the revenues
earned as a result of sale of goods.
Revenue or Income is the amount of
money the entity gets in exchange for
the goods of sold.
This serves as the contra account that
shows the goods returned by the
customers for defects or noncompliance with the customers order
specifications
This serves as the contra account that
shows the amount deducted from the
original price of the goods.
These are items that cannot be
appropriately classifies under any of
the foregoing income accounts. Example
of this is Cash Overage.

DESCRIPTION
These are direct costs attributable to
the production of the goods sold by a
business.
Costs assigned to units either
completed or still in the process of
being completed at the end of the
accounting period.
This account refers to the cost
incurred to purchase raw materials
which is rice.
This serves as a contra account that
shows the goods purchased that was
returned to the supplier due to the
defects or non-compliance with the
48 | P a g e

650
660
670
680
690

Store
Supplies
Expense
Utilities
Expense
Rent Expense
SSS
Contribution
Expense
Phil health
Contribution
Expense

700

Depreciation
ExpenseEquipment

710

Depreciation
ExpenseVehicles

720

Depreciation
ExpenseBuilding

730

Income Tax
Expense

orders specifications.
Transportation cost associated with the
delivery of goods to the customers.
Shows the expenses incurred related to
use of electricity and water.
Refers to the expenses incurred through
consumption of office supplies in the
conduct of daily business operations.
Shows the expenses incurred related to
use of electricity and water.
Refers to the expired portion of the
cost of Machines which is charged as
expense during the period. This is also
a reduction in the value of the
Machines.
Refers to the expired portion of the
cost of Equipment which is charged as
expense during the period. This is also
a reduction in the value of the
Equipment.
Refers to the expired portion of the
cost of Delivery Equipment (trucks)
which is charged as expense during the
period. This is also a reduction in the
value of the Delivery Vehicles
(motorcycle, tricycles).
Refers to the expired portion of the
cost of Building (trucks) which is
charged as expense during the period.
This is also a reduction in the value
of the Building.
Refers to the Income tax already paid.

49 | P a g e

Pro Forma of Financial Statements

E.A Reyes Poultry & Agricultural Supply

Statement of Comprehensive Income
For the month ended xxx
Net Sales
Gross Sales
Less: Sales returns and Allowances
Sales Discounts
Net Sales
Cost of Goods Sold
Merchandise Inventory, Beg.
Add: Purchases
Less: Purchases Returns and Allowances
Purchases Discounts
Net Purchases
Goods Available for Sale
Less: Merchandise Inventory, End
Gross Profit
Less: Operating Expenses
Salaries Expense
Store Supplies Expense
Utilities Expense
Rent Expense
SSS Contribution Expense
Phil health Contribution Expense
Depreciation Expense-Equipment
Depreciation Expense- Vehicles
Depreciation Expense- Building
Net Income

Pxxx
xxx
xxx
Pxxx
Pxxx
xxx
xxx
xxx
xxx
xxx
xxx
Pxxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx

xxx
Pxxx

50 | P a g e

E.A Reyes Poultry & Agricultural Supply

Statement of Changes in Equity
For the month ended xxx

Reyes, Owners equity, Beg.

Add: Additionan Investments by Reyes
Profit
Total
Less: Withdrawals
Reyes, Owners Equity, End.

Pxxx
Pxxx
xxx

xxx
Pxxx
xxx
Pxxx

51 | P a g e

E.A Reyes Poultry & Agricultural Supply

Statement of Financial Position

December 31, 20XX

Assets
Current Assets
Cash on Hand
Cash in Bank
Petty Cash Fund
Accounts Receivable
Store Supplies
Merchandise Inventory
Total Current Assets
Non- Current Assets
Land
Furniture and Fixtures
Less: Accumulated Depreciation-FF
Equipment
Less: Accumulated Depreciation- Equipment
Delivery Vehicles
Less: Accumulated Depreciation- Delivery Vehicles
Building
Less: Accumulated Depreciation- Building
Total Assets

Pxxx
xxx
xxx
xxx
xxx
xxx
Pxxx
xxx
Pxxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx

xxx
xxx
xxx
xxx

xxx
Pxxx

Liabilities
Current Liabilities
Accounts Payable
Salaries Payable
Utilities Payable
Rent Payable
SSS Contribution Payable
Philhealth contribution Payable
Income tax Payable
Total Current Liabilities

xxx
xxx
xxx
xxx
xxx
xxx
xxx

xxx
xxx

Owners Equity
Reyes, Capital 12/31/20XX
Total Liabilities and Owners Equity

xxx
Pxxx
52 | P a g e