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MODULE 5
ASPECTS
OPERATIONAL
Chapter 5 of the Text–Accounting
Pages 155 - 205
Prof. Néstor Oscar Paz Díaz

Operational aspects
➢Accounting records
[Link] Book – Journaling
2. General Ledger - Majorization

➢Trial Balance
➢Worksheet with adjustments
[Link]
Depreciation
[Link] expenses
[Link] for errors or omissions
[Link] accounts

Prof. Néstor Oscar Paz Díaz 2

Operational aspects
➢FinancialStatements
[Link] de Resultados
2. Balance Sheet
3. Shareholders' Equity and Earnings Statements
Retained
4. Statement of Cash Flows
5. Notes to the Financial Statements

➢ Closure Records
➢ Trial balance or post-closing check
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Illustration 5.4

MONAGRE CORP, S.A.

Worksheet
Period from January to December 2018
Trial Balance Adjustments Adjusted Balance Income Statement Balance Sheet
ACCOUNT
Debit Credit Debit Credit Débito Crédito Debit Credit Débito Crédito
1000.00 Oscar Bank 9,580.00 9,580.00 9,580.00
1120.00 Accounts Receivable 9,950.00 1,200.00 8,750.00 8,750.00
1201.00 Merchandise inventory 10,000.00 (1) 83,625.00(2) 68,125.00 25,500.00 25,500.00
1202.00 Inventory of supplies 3,150.00 (3) 1,135.00 2,015.00 2,015.00
1301.00 Prepaid insurance 9,000.00 (4) 6,000.00 3,000.00 3,000.00
1302.00 Prepaid municipal taxes 12,000.00 (5) 9,000.00 3,000.00 3,000.00
1402.00 Rolling equipment 14,000.00 14,000.00 15,000.00
1403.00 Office Equipment 15,000.00 15,000.00 8,700.00
1404.00 Office Furniture 8,700.00 8,700.00 14,000.00
2101.00 Accounts Payable 15,947.00(7) 1,200.00 14,747.00 14,747.00
2102.00 Taxes payable 2,500.00 2,500.00 2,500.00
2108.00 National Treasure ITBMS 2,965.00 2,965.00 2,965.00
2120.00 Employer-employee contribution payable 890.00 890.00 890.00
2301.00 Loans Payable 25,000.00 25,000.00 25,000.00
3000.00 Capital in shares 20,000.00 20,000.00 20,000.00
4001.00 Taxable sales 7% 133,982.45 133,982.45 133,982.45
5001.00 Taxable purchases 7% 83,625.00 (1) 83,625.00
7101.00 Salarios 12,500.00 12,500.00 12,500.00
7101.01 Thirteenth month 1,667.00 1,667.00 1,667.00
7103.00 Social contributions 2,160.45 2,160.45 2,160.45
7110.00 Repairs 2,550.00 2,550.00 2,550.00
7114.00 Office supplies 1,567.00 1,567.00 1,567.00
7117.01 Electricity 1,984.00 1,984.00 1,984.00
7117.02 Phone 1,076.00 1,076.00 1,076.00
7119.00 Cleaning supplies 275.00 275.00 275.00
7152.00 Gasoline and lubricants 2,500.00 2,500.00 2,500.00
201,284.45 201,284.45
5050.00 Cost of sales (2) 68,125.00 68,125.00 68,125.00
7141.00 Prepaid insurance (5) 6,000.00 6,000.00 6,000.00
7136.00 Municipal taxes (4) 9,000.00 9,000.00 9,000.00
7143.00 Supplies (3) 1,135.00 1,135.00 1,135.00
7142.00 Provision for uncollectible accounts (7) 875.00 875.00 875.00
1199.99 Reserve for uncollectible accounts (7) 875.00 875.00 875.00
7120.00 Depreciation Expense (5) 5,812.08 5,812.08 5,812.08
1590.02 Accumulated Depreciation Rolling Stock (5) 2,333.33 2,333.33 2,333.33
1590.03 Accumulated Depreciation Office Equipment (5) 2,500.00 2,500.00 2,500.00
1590.04 Accumulated depreciation Office furniture (5) 978.75 978.75 978.75
175,772.08 175,772.08 206,771.53 206,771.53 117,226.53 133,982.45 89,545.00 72,789.08
Profit before income tax 16,755.92
2102.00 Less Profit Tax 25% 4,188.98 4,188.98
Net utility 12,566.94 12,566.94
133,982.45 133,982.45 89,545.00 89,545.00

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Financial Statements
Accounting reports that are prepared periodically (monthly,
quarterly, semiannually or annually) according to the company's requirements, for
which are announced:

1. The economic situation - Balance Sheet

2. The results - Income Statements
3. Cash flows - Statement of Cash Flows
4. Changes in equity - Statement of Shareholders' Equity
Retained Earnings
5. Notes to the Financial Statements.

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Financial Statements
The relevance of the Financial Statements is the use they are given in the
most cases to make decisions or to inform to:

a. Investors and/or owners of the shares

b. Bank and Commercial Creditors
[Link] and regulatory entities
[Link]
Employees or collaborators
General public.

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Financial Statements
The responsibility of preparing the Financial Statements lies with the
company management is responsible for reporting on the
content of the same, as well as notes and/or information
complementary financial that clarifies or explains comprehensively the
management of the period to be reported, which will contribute to:

Carry out your planning

2. Make just-in-time decisions

3. Control the responsibilities

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Financial Statements
The objectives of the Financial Statements are to provide information.
useful for decision-making about the:
a. Economic situation of the company
b. Performance or result of the company
c. Changes in the financial position and cash flow statement
of the company.
The financial statements must be prepared on the
base of the accrual accounting system.

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State financial what

identify the result of the
operations through the
accounts nominal o
State of temporal: income, costs
Results (if it is a commercial company or
industrial y expenses, whose
the objective is to determine the
utility or loss of a
entity
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MONAGRE CORP, S.A.

STATEMENT OF INCOME
Period from January 1 to December 31, 2018
(in balboas)

INGRESOS Note
Ventas netas 133,982
Less Cost of Goods Sold
Initial inventory 10,000
More: Net purchases 83,625
Cost of goods available for sale 93,625
Less: Final inventory 25,500
Cost of sales 68,125
Profit margin on sales 65,857
Less Expenses
Employee benefits 14,167
Depreciation 6 5,812
Provision for uncollectible accounts 3 875
Other expenses (Annex 1) 28,247
Total expenses 49,102
Profit before tax 16,756
Income tax 25% 4,189
Net utility 12,567

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MONAGRE CORP, S.A.

Annex 1 Other Expenses
Period from January 1 to December 31, 2018
(in balboas)

Note
1 Social contributions 2,160
2 Repairs 2,550
3 Electricity 1,984
4 Phone 1,076
5 Office Supplies 1,567
6 Gasoline and lubricants 2,500
7 Insurances 6,000
8 Taxes 9,000
9 Supplies 1,135
10 Cleaning Supplies 275
11 Total of other expenses 28,247

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Statement of Financial Position - IAS 1

Financial statement that allows understanding the economic situation of

a natural or legal entity; whose objective is to express in terms
monetary:
1. Resources or assets - Assets
2. Obligations or debts - Liabilities
3. The investment of the owners, shareholders, or partners - Equity,
what the investment or contribution includes and the accumulated result of the
operations
A=P+C

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MONAGRE CORP, S.A.

BALANCE SHEET
December 31, 2018
(in balboas)

ACTIVE Note
Current Asset
Cash 9,580
Accounts receivable, net 3 7,875
Inventory of goods 4 27,515
Prepaid expenses 5 6,000
Total Current Assets 50,970
Non-Current Asset
Report Type or Properties, plant and equipment, net 6 31,888

Vertical Total Non-Current Assets 31,888

TOTAL ACTIVO 82,858
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable 7 25,291
Current loan payable 8 6,250
Total current liabilities 31,541
Non-current liabilities
Long-term loan payable 8 18,750
Total pasivo 50,291
Shareholders' Equity
Capital in shares 9 20,000
Retained earnings 12,567
Total assets 32,567
TOTAL LIABILITIES AND EQUITY 82,858
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MONAGRE CORP, S.A.

BALANCE SHEET
December 31, 2018
(in balboas)

Active Note Liabilities and Equity Note

Current Asset Current liabilities
Cash 9,580 Accounts payable 7 25,291
Accounts receivable, net 3 7,875 Current loan payable 8 6,250
Inventory of merchandise 4 27,515
Tipo Cuenta Prepaid expenses 5 6,000 Total current liabilities 31,541

Total current assets 50,970 Non-current liabilities

Long-term loans payable 8 18,750
Non-current Asset Total liability 50,291
Property, Plant, and Equipment, net 6 31,888 Shareholder Equity
Capital in shares 9 20,000
Retained earnings 12,567
Total non-current assets 31,888 Total assets 32,567
Total Assets 82,858 Total liabilities and equity 82,858

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Statement of Equity of the

Shareholders and Retained Earnings
Financial statement that identifies changes in capital
accountable
➢For increases or decreases in investments in the
shares, participation quotas and/or contributions of the
owners or investors of the companies;
➢Or, due to the increase or decrease in profits
retained or accumulated losses, as well as the
dividend payments

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MONAGRE CORP, S.A.

Statement of Shareholders' Equity and Retained Earnings
December 31, 2018
(in balboas)
Note
Capital in shares as of January 1, 2018 5,000
More:
Issuance of new shares 15,000
Share capital as of December 31, 2018 20,000

More:
Utilities of the period 2018 16,756
Income tax (25%) (4,189)
Retained earnings 12,567
Total of equity and retained earnings 32,567

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Estado de Flujos de Efectivo

Based on International Accounting Standard No. 7 (IAS-7), this report
provides information on historical changes in cash y sus
equivalents of an entity.

The concepts that apply to this financial statement are the following:

➢ Cash: Composed of cash on hand and demand deposits (Bank)

➢ Cash equivalents: Short-term investments with high liquidity, which are
easily convertible into determined amounts of cash and that are
subjected to a non-significant risk of changes in its value
➢ Cash flows: Inflows and outflows of cash and cash equivalents

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Statement of Cash Flows

The statement of cash flows is intended to enable investors,
financiers, creditors, and usurers in general to evaluate the following:

Changes in net assets

b. The financial structure of the entity
c. The entity's ability to generate cash flows and the timing of when it
generate
The way in which the funds are used and the timing of that use
It improves the comparison with the present value of future cash flows of
different companies
f. Improve the comparison of operational performance
[Link] the accuracy of past events related to cash flows
futures

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Statement of Cash Flows

It is composed of three (3) types of cash flows:

1. Cash flows from operating activities

a. Direct method
b. Indirect method
2. Cash flows from investing activities

3. Cash flows from financing activities

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Statement of Cash Flows

The statement of cash flows is composed of three (3) types of activities:

1. Cash flows from operating activities. It includes the results of the operations of
the entity (Net Income or Loss) and to reconcile that result, those charges or are added
expenses that are not part of cash outlays, such as: reserves and/or depreciations.
In addition, changes related to increases and decreases in operations are included.
currents of assets and liabilities. The models for presenting cash flows by
Operating activities are Direct and Indirect.

a. Direct: The significant classes of gross cash inflows and outflows, or cash equivalents, are revealed;
the information about the significant classes of gross cash inflows and gross cash outflows may
obtained from:
➢ The accounting records of the company, o
➢ Adjusting sales, cost of sales, and other items in the income statement for:
✓ Changes during the period in inventories and accounts receivable and payable operations,
✓ Other non-monetary items, and

✓ Periods for which cash effects are related to investing or financing cash flows

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Statement of Cash Flows

[Link]: The net profit or loss is adjusted with:

➢ The effects of transactions that do not represent flows of

cash
➢ Any deferrals or accumulated entries or cash payments
related to the operations, and
➢ Income and expense items related to cash flows
of investments or financing

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2. Cash flows from investment activities.

These investments are considered as: Inflows or
cash outflows equivalent to collections or payments
anticipated y loans a third parties, sale o
acquisition of durable assets (land,
buildings, equipment, machinery, etc.), sale o
acquisition of equity instruments o
debts of other companies e interests in
State of joint venture companies.
Flows of
Cash 3. Cash flows from activities of
financing. Cash received is considered.
y / o paid for by loans a short term
negotiable documents, bonds, mortgages,
collection or payment of fixed-term deposits with
financial entities (Banks).

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MONAGRE CORP, S.A.

Comparative Situation Balance
December 31
(in balboas)
Balances as of
CHANGES
December 31, 2018
January 1, 2018
ACTIVE
Bank 9,580.00 5,000.00 4,580.00
Accounts receivable (net of reserves for 7,875.00 - 7,875.00
bad accounts of B/.875.00 for 2018 -
Inventory of merchandise 27,515.00 10,000.00 17,515.00
Prepaid taxes 3,000.00 - 3,000.00
Prepaid insurance 3,000.00 - 3,000.00
Office equipment 15,000.00 - 15,000.00
Office furniture 8,700.00 - 8,700.00
Rolling stock 14,000.00 - 14,000.00
Accumulated depreciation (5,812.08) - (5,812.08)
Total assets 82,857.92 15,000.00 67,857.92

LIABILITIES AND EQUITY

Passive
Accounts Payable 14,747.00 10,000.00 4,747.00
Employer-employee contribution payable 890.00 - 890.00
Taxes to be paid 2,500.00 2,500.00
National Treasure ITBMS 2,965.00 - 2,965.00
Income tax payable 4,188.98 - 4,188.98
Loans payable 25,000.00 - 25,000.00
Total liabilities 50,290.98 10,000.00 40,290.98
Shareholder equity
Capital in shares 20,000.00 5,000.00 15,000.00
Retained earnings 12,566.94 - 12,566.94
Total assets Prof. Néstor Oscar32,566.94
Paz Díaz 5,000.00 27,566.94 23
Total liabilities and equity 82,857.92 15,000.00 67,857.92

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MONAGRE CORP, S.A.

Cash Flow Statement
For the period ended December 31, 2018
(in balboas)

Note
Cash flows from operating activities
Result before income tax 16,756
Adjust to reconcile net income to cash
Operation activities net provided for operational activities:

Indirect Method Depreciation 6 5,812

22,568
Changes in operating assets and liabilities:
Net accounts receivable 3 (7,875)
Inventory of merchandise 4 (17,515)
Prepaid insurance 5 (3,000)
Prepaid municipal taxes 5 3,000
Accounts payable 7 15,291
Cash generated from operating activities 6,469
Income tax (4,189)

Net cash flows from operating activities 2,280

Cash flows from investing activities:

Acquisition of furniture, machinery, and equipment 6 (37,700)

Net cash from investing activities (37,700)

Cash flows from financing activities:
Loans payable 8 25,000
Capital contribution 9 15,000

Net cash from financing activities 40,000

Net decrease in cash 4,580
Cash and cash equivalents at the beginning of the year 5,000
Cash and cash equivalents atProf. Néstor
the end Oscar
of the yearPaz Díaz 9,580 24

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MONAGRE CORP, S.A.

Notes to the Financial Statements
December 31, 2018

General Information

La empresa MONAGRE CORP, S.A., se constituyó el 1 January 2018

through public deed 20022 of the Notary of the Circuit of Panama, operates
in the Republic of Panama with the operating notice (Commercial License)
No. 054000 of 3 January 2018, which describes sales activity of
goods of those products that do not require special requirements.
2. Accounting Policies

The company's accounting policies are in accordance with a the rules

international financial reporting the practice y in general
developed within commercial activity which we present the most
important.

• Monetary Unit

The financial statements are expressed in Balboa (B/.) unit

currency of the Republic of Panama and which is on par with the Dollar of
United States (USD) is used and legal tender in the Republic of Panama.

• Business in Progress

The company has operated normally during the periods of 2018,

which has projected its activities for the future years, which confirms
and ensures its continuity in the market.

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• Income tax

In accordance with the current tax legislation in the Republic of Panama, corporations
they will cause the income tax on profits or gains based on article 699 of the Code
Prosecutor of the Republic of Panama.

The tax return of MONAGRE CORP, S.A., for the fiscal year ending December 31
2018 is subject to review by the National Administration of Public Revenue for the last three (3)
fiscal periods, according to the provisions of the Tax Code of the Republic of Panama.

3. Accounts receivable

In the accounts receivable balance as of December 31, 2018, it includes that of the customers, which
they represent the billing for unpaid credit income up to this date based on sales
assets with a recovery period of 30 to 45 days. A provision was established for the accounts
uncollectible based on Article 34 of Executive Decree 170 of 1993. The management of the company
It is considered that the book value of accounts receivable approximates fair value.

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4. Inventories

The inventory line records the value of the goods acquired for sale based on the
average method and the consumable supplies in the following period.

5. Prepaid expenses

They represent the balance of prepaid expenses that must be amortized in the following
periods.

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6. Net Equipment and Furniture

The asset recorded in Equipment and Furniture is above the historical value or cost; these are goods with
a duration of more than a year, its useful life is estimated according to the characteristics of each acquired good and
they are intended for the development of the company's operations. Depreciation is calculated on the
base of the straight or linear method.
As of December 31, 2018, the Equipment and Furniture are detailed below:

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7. Accounts Payable

The amount of accounts payable represents balances to local suppliers as of December 31, 2018.
for B/.25,291.

8. Loans Payable

It corresponds to a loan maturing in four (4) years with Oskar Bank, whose balance as of 31
December 2018 amounts to B/.25,000 with an annual interest rate of 7.5% plus FECI of 1%.

9. Capital in shares

The authorized share capital established in article three of the public deed No. 2973, dated 2 of
January 2018 consists of one hundred (100) common and registered shares with a nominal value of five hundred balboas.
(B/.500.00) each, as of December 31, 2018, two (2) share certificates had been issued.
that are described below for a total of 40 actions.

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Closing records

This process means that the

They are the records that allow transitory or temporary accounts
conclude with the complete cycle of (nominal) must remain with a
accounting, closing all the balance of zero, since its amount
nominal accounts (see has been transferred to the section
illustration 5.11) of the Blance heritage
Situation (see illustration 5.12)

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JOURNAL BOOK
Date Description Ref. Debit Credit
31-dic-2018 Ventas gravadas 7% 133,982.45
Utilidades retenidas 133,982.45
Record the closure of the income accounts
December 31, 2018 Retained Earnings 68,125.00
Cost of sales 68,125.00
Register closing of cost accounts
December 31, 2018 Retained Earnings 49,101.53
Salaries 12,500.00
Thirteenth month 1,667.00
Closing Records Social contributions 2,160.45
Repairs 2,550.00
Office supplies 1,567.00
Supplies 1,135.00
Electricity 1,984.00
Phone 1,076.00
Cleaning supplies 275.00
Depreciation 5,812.08
Taxes 9,000.00
Insurance 6,000.00
Bad debts 875.00
Gasoline and lubricants 2,500.00
Register the closure of the expense accounts
December 31, 2018 Retained Earnings 4,188.98
Income tax payable 4,188.98
Register the income tax for the year 2018
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MONAGRE CORP, S.A.

Post-Closing Trial Balance
Period from January to December 2018
(in balboas)

Major Account Balance Period Closure Record Balance

Code ACCOUNT
Debit Credit Debit Credit Debit Credit
1000.00 Oscar Bank 9,580.00 9,580.00
1120.00 Accounts Receivable 8,750.00 8,750.00
1199.99 Reserve for bad debt 875.00 - 875.00
1201.00 Inventory of merchandise 25,500.00 25,500.00
1202.00 Inventory of supplies 2,015.00 2,015.00
1301.00 Prepaid insurance 3,000.00 3,000.00
1302.00 Prepaid taxes 3,000.00 3,000.00
1402.00 Rolling equipment 14,000.00 14,000.00
1403.00 Office Equipment 15,000.00 15,000.00
1404.00 Office Furniture 8,700.00 8,700.00
1590.02 Accumulated depreciation Rolling stock 2,333.33 2,333.33
1590.03 Accumulated Depreciation Office Equipment 2,500.00 2,500.00
1590.04 Accumulated Depreciation Office Furniture 978.75 978.75
2101.00 Accounts Payable 14,747.00 14,747.00
2102.00 Taxes payable 2,500.00 2,500.00
2102.01 Income tax (profit) 4,188.98 4,188.98
2108.00 National Treasure ITBMS 2,965.00 2,965.00
2120.00 Worker-Employer Contribution Payable 890.00 890.00
2301.00 Loans Payable 25,000.00 25,000.00
3000.00 Capital in shares 20,000.00 20,000.00
3030.00 Retained earnings 12,566.94 12,566.94
4001.00 Ventas gravadas 7% 133,982.45 133,982.45
5050.00 Cost of sales 68,125.00 68,125.00
7101.00 Salaries 12,500.00 12,500.00
7101.01 Thirteenth month 1,667.00 1,667.00
7103.00 Social contributions 2,160.45 2,160.45
7110.00 Repairs 2,550.00 2,550.00
7114.00 Office supplies 1,567.00 1,567.00
7115.00 Supplies 1,135.00 1,135.00
7117.01 Electricity 1,984.00 1,984.00
7117.02 Phone 1,076.00 1,076.00
7119.00 Cleaning supplies 275.00 275.00
7120.00 Depreciation expense 5,812.08 5,812.08
7136.00 Taxes 9,000.00 9,000.00
7141.00 Prepaid insurances 6,000.00 6,000.00
7142.00 Provision for uncollectible accounts 875.00 875.00
7152.00 Gasoline and lubricants 2,500.00 2,500.00
Totals 206,771.53 206,771.53 133,982.45 133,982.45 89,545.00 89,545.00
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