Chapter 13

Statement of Affair shows the insolvency of the company and the status of the
creditor with respect to the insolvency assets. It is a statement of position from a
quitting concern point of view.
Assignee or trustee is the one responsible for to debtors property on behalf of the
creditors of the bankrupt company. His job is to convert assets into cash and make
appropriate distribution.
The presentation of the Statement of Affairs differs on the presentation statement
from the classification and presentation of assets in the balance sheet. Assets
classification are related to the liability on the opposite side of the statement.
1. Assets pledged with full secured creditors
Meaning it is the assets allocated to pay the full claims of the creditor.
The claims can be return at exact amount or more than the claims.
2. Assets pledge with partially secured creditors
Partial of the asset is secured to the creditors. The claims will be given
lower than it.
3. Free assets
These are assets not allocated to secured creditors. These are assets
free to be given to the remaining creditors.
The classification of liabilities is in lined with the assets presentation and
classification.
1. Liabilities with priorities
These are creditors classified by law to be paid first before the others.
2. Fully secured creditors
These are creditors which the company already allocate the assets to
its claims. It may be more than or equal.
3. Partially secured creditors
These are creditors which the company allocated its certain assets but
expected to have lesser than its claims.
4. Unsecured Creditors
These are creditors which the company have not allocated its asset to
them. They are expected to receive lesser than their claims or nothing
at all.
5. Owners equity
These are balances summarizing the interests of the owners in the
business and are reported under the heading Owners Equity or
Stockholders Equity.
 Chapter 14
Foreign Currency Transactions - these are transaction incurred in exchange of
foreign denomination or currency. For example: Your company is in the Philippines
there is a foreign company based in USA ordered a machine from your company for
$100,000. This transaction is treated as foreign transaction which is needed to be
translated into your functional currency or Philippine peso.

Foreign Operation These are companies w/ a branch or subsidiaries base in other

countries. For example: Your company again is based in the Philippines but you have
a subsidiary in other countries. Your subsidiaries have the freedom to present their
financial statement on the currency they are using or the functional currency of the
state therein. But in presenting the consolidated financial statement it is required
that the parent will translate its subsidiary on its parent functional currency.

Functional Currency it is the money or the currency by which the company

generates and expend. For example: your company is in the Philippines and you use
Philippine peso to expend (buy, pay etc) and it is the monetary unit that you receive
when you generate income.

Presentation Currency PAS 21 required parents company to present their

consolidated financial statement into its functional currency but subsidiaries base
on other country have the freedom to present their financial statement on the
functional currency of the country therein it is called presentation currency.

Spot Rate this is the rate on the day that you want to translate your transaction or
it is the exchange rate on a specific date.

Closing rate is the rate in the end of your accounting period. For example calendar
year users have their closing rate at December 31.

Derivative - Its value is determined by fluctuations in the underlying asset.

The purpose of obtaining derivatives is either to speculate (incur risk) or to
hedge (avoid or manage risk).

Risk is the possibility of loss in the investment or transaction you will

undergo.

Financial Statement it is the risk of a possible future change in one or more

of a specified interest rate.
 Chapter 15
Franchise it is the right transfer to customer to use your trademark, operation,
name and product for their business. It can be classified into two parts one is
government and another one is individual entity. For government it is the privilege
to use public property owned by the government to be use by individuals. For
example is toll gates. For individual entity some sample of it is 7-11 and mcdo etc.

Franchise Fees - Franchise fees may cover the supply of initial and subsequent
services, equipment and other intangible assets.

Cost of Franchise - Direct(incremental) costs relating to franchise sales for which

revenue has not been recognized ordinarily shall be deferred until the related
revenue is recognized. Indirect costs of a regular and recurring nature that are
incurred irrespective of the level of sales. Cost yet to be incurred shall be accrued
and charged against income no later than the period in which the related revenues
is recognized.