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R"SA: The Review School of Accountancy

V. NOTES TO FINANCIAL STATEMENTS
ORDER OF PRESENTING THE NOTES
A. Statement of compliance with PFRS'
B. Summary of significant accounting polti-res irne used'
C. Supporting informaiiol-r or- corrrp,utation for itefits presented in the financial statements'
D. Other disclosures, such as contingent ii,lb.irties, unrecognized contractual commitments and nonfinancial

no other ccn.rprehenst,'. 1come items, it ma\/ present *,tat-ement of

lncome a-nd'Bealle{
- If an entity has
during the period arise from profit or loss,
EarytinqE (slRE). providecl further, th.ri :he ctnly change to equity
palntent of aUiAends, correctic'n of prir'' ceriod errors and changes^li li!t?^"j;^^i-^A for
r^, sMEs'
cMEc
"i,{r"riili' niiiig' or Losses rrcn' tnvestment at t'air value are not recognized
CJiit

2. CORRECTION OF ERRORS
- where the requirement is the EEEECI-qF- ERBaBS TO-NE-TI'NqQME:
1, Consider all current Period Errors-iiiunter salancingt or Non-counter balancingxx)
2. Consider all lmmedlAlCfrc-r Year Ccunter Balancing Errors
3. Ignore all Prior Years' Non-counter b'alancing errors
x The effect of a CoUNTERBALANCING ERRoR to net income of the year of incurrence and the year
NET II\COME OF THE
9!FsEquqllr IEAB
INDIRECT

DIRECT

-- year of incurrence and the

The effect of a NoN-coUNTERBALANCTNG ERRoR in net income of the
year following the
y'ear rollorrlnq year
Lrre y_edr of
ur rrrL_9lr:lrL::_"y'l-Yi
inc-tilre1cs --, ,;: ;.^;;;.;;;;
thgl-L-q---, '-l ... o-;ili;;Mtr r1c rm--
ise
f-:Nai
ai iNcbuior -;;-----T | -f,frurr
iNCbMaOFTUt INcoME oF
iTlfif-COf,aE OFTH-E-
rHE I
, yEAg_ol_l,N!_qRRENCE_|-s!-BSEQ-UE-NIJE4&*-
YEAR oF INCURRENCE -l-suaSrauEllJE48 I

-_ cou n re r Ba ta n cr n q rro r na Li AB
Ef -__i-_------plltr9J_-'-
Lrry_ _]
--l:-- - -
l
E i r
--- -__ --lIq!BEld---L--- ---ll9-LFlEgf.._----]
EARNINGS. END (AFIER CLO-SING ENfSI-ES)-I
pF ERRORS TO RETATNED
g...e.EFFECT
*'-^1 ***ol
-',rn.r._-.na is
.- iodsrOei all Current Period Errors (CB or NCB)
2. lgnore all Prior Year Counter Balancing Errors
prior years'net income)
3. Consider all prior years'Non-counterbllancing Errors (as they affected the
- y,,here the requirement is the EFFECT-oF ERRORS.TO WORKTNG-CAIITAL ICURREYISSE:IS ":CURRENTLI.AB-)
period only.
and current liab. as of the end of the current
1. Consider all errors affecting current assets
2. The error in the current asset is DiRECTLY related to the WC (overstated current asset means
overstated WC, and vice versa)
3. The error in the current liability is INVERSELY related to the WC (overstated current liability means
understated WC, and vice versa)

3. CASH/ACCRUAL ANq STNGLE ENTRY

FoT CASH-ACCRUAt,PROELEMS TCIAtcd tO SALES ANd PURCHASE-S;

Accounts Receivable/ Advances from Advances to Accounts Payable/

Notes Receiva ble-Trade Notes Payable-Trade
--- -1qpp,Le-rs,----*
Bes. Bal (AR/NR) XXX XXX Beg. Bal. (Advanc.) Beg, Bal (Advanc,) XXX XXX Bes. Bal (AP/NP)
Sales on Account XX XX Collections Payments xx XX Purchase on Acc.
(Accrual ba3is) (Cash basis) (Cash basis) (Accrual basis)
Recoveries ofxx XX Sales discounts Purchase discounts XX
prev. write offs XX XX Sales returnsx Purchase returns* XX
Xx Sales allowances Purchase allowance XX
.El{-lellaBtNc XX
"-dxx Write offs
in x ErL!1tJAryl
*excluding refunded sales return tc custamers
**included in the analysis only if cc'llections from suppliers
included the said recoverY

@LEM.S rglated to item -oF'I_llcoME and EXPENSES (e.g. rental incorne and expense-
roya I ty i n come--ar.d--sxBe!-cc-an d--o!h er srmt-ior]-Lcnrs)
Accrued inco nearned rncome .,.*. ifit (pret:.t*- xXl xX-Beg bal (Acc, ;Exp)
-'*-- -

Beg bal. (Acc Inc.) XX I XX Beg bal. (Unear, Inc.) Beg

--=-_ry9perd-E-x-eol-{$eru5d*-E-rP.9rle
Recog. Income I Cottection of cash Payment of cash I Recogn. of ExP.
Accrual basis) XL]-Xx--"--LQeptt-bgSj-9,) --- - =lgsplr baFjg}- xx I xx (AsqudLas-is).
ir '1-.r., -tr;;h"r -/4". tr"^)
(ncc'l-xpj-,
qld
End --'. (Acc
bal. Inc.) XX I xX lttg]lel-ture,.r.jlsf
\.._:-_-_
-..- bsL{As-c-l!sJ- End bal - -jLro-b-q!,ercpJ* -XX.l -XX-Elq!e! -
Note: if the prabtem inadtes n€reie a'i Aec/eaii iine'ietated-ba'lan ce sheef accounts, rnstead ?f.lh",bu!!^l:\9,:nlcl
ending balances, simply place in the beginning balance if it is net (lecrease (since this indicates that the beginntng
ts

higheT than ending balaice) or pla<:e in the enclintT batance if it is net increase (since this indicates that ending balance is
higher than the beginning balance).