1.

GENERAL INFORMATION

KLABN COMPANY., was incorporated and registered as a general partnership with the Securities and
Exchange Commission (SEC) on January 1, 2018 with SEC reg. no.J20001519. The Company is
primarily engaged in manufacturing of accessories.
The Company’s head office is located at Sunflower ST. Brgy. Graceville, San Jose Del Monte, Bulacan.
The financial statements of the corporation as at December 31, 2018 were approved and authorized and
issue by the Partners on April 1, 2018. The Board of Director is empowered to make revisions even after
the date of issue.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out
below. These policies have been consistently applied to all the years presented unless otherwise stated.

Basis of Preparation
The financial statements have been prepared using the historical cost basis and are presented in
Philippine peso. All amounts are rounded to the nearest peso, except as otherwise indicated.

Statement of Compliance
The financial statements of the company have been prepared in accordance with the Philippine Financial
Reporting Standards for Small and Medium-sized Entities (PFRS for SMEs).

Summary of significant accounting policies

Cash

Cash includes cash in banks and petty cash funds. Cash in banks are deposits held at call with banks.
The company reconciles the books and bank balances regularly as part of its cash monitoring and
internal control measures. Petty Cash Fund is used for small payments not covered by checks.

Trade Receivables

Trade receivables, which are based on normal credit terms and do not bear interest, are recognized and
carried at original invoice amounts. Where credit is extended beyond normal credit terms, receivables
are measured at amortized cost using the effective interest method. Ate the end of each reporting period,
the carrying amounts of trade receivables are reviewed to determine whether there is any objective
evidence that the amounts are not recoverable. If so, an impairment is recognize immediately in
profit/loss.

Materials and supplies

Material and Supplies are valued ate the lower of cost or net realizable value. The net realizable value of
Materials and Supplies is the estimated selling price in the ordinary course of business, less estimated
costs of completion and estimated costs necessary to make the sale. Cost is determined primarily on the
basis of first-in, first-out method.
The Company uses the following in costing in its Materials and Supplies:
Materials and Supplies – Purchase cost on first-in, first-out basis; The cost of materials include all cost
directly attributable to acquisition such as the purchase price, import duties if any, and other taxes that
are not subsequently recoverable from taxing authorities.

Property and Equipment

Property and equipment are measured initially at its cost. Property and equipment, after initial
recognition are stated at cost less any accumulated depreciation and any accumulated impairment losses.
The initial cost of property and equipment, comprises its purchase price and any cost directly
attributable to bringing the asset to the location and condition necessary for it to be capable of operation
in the manner intended by the management. These can include the costs of initial delivery and handling,
installation and assembly, and testing of functionality.

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 The following costs are not costs of any item of property and equipment, and the entity recognized them
as an expense when they are incurred: costs of opening new facility, costs of introducing a new product
or service (including costs of advertising and promotional activities), costs of conducting business in a
new location or with a new class of customer (including costs of staff training), administration and other
general overhead costs and borrowing costs.
For financial reporting purposes, duties and taxes related to the acquisition of property and equipment
are capitalized.
For income tax purposes, such duties and taxes are treated as deductible expenses in the year these
charges are incurred.
For financial reporting purposes, depreciation is computed using the straight-line method over the
estimated useful lives of the assets.
If there is an indication that there has been a significant change since the last annual reporting date in
the pattern by which an entity expects to consume an asset’s future economic benefits, the entity shall
review its present depreciation method and, if current expectations differ, change he depreciation
method to reflect the new pattern. The entity shall account for the change as a change in an accounting
estimate.
Factors such as a change in how an asset is used, significant unexpected wear and tear, technological
advancement and changes in market prices may indicate that the residual value or useful life of an asset
has changed since the most recent annual reporting date. If such indicators are present, an entity shall
review its previous estimates and, if current expectation differ, amend the residual value, depreciation
method or useful life. The entity shall account for the change in residual value, depreciation method or
useful life as a change in an accounting estimate.
An item of property and equipment is derecognized upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss on derecognition of an item of property and
equipment is recognized in profit or loss when the item is derecognized (unless Section 20 Leases
requires otherwise on a sale and leaseback) such gain is not recognized as revenue.
For income tax reporting purposes, depreciation is computed using the straight-line method.

Trade and Other Payables

Trade and other payables are initially recorded at transaction price and subsequently measured at their
amortized cost less settlement payments.

Revenue and cost recognition

Revenue is recognized to the extent that is probable that the economic benefits will flow to the Company and
the amount of revenue can be reliably measured. However, when an uncertainty arises about the
collectability of an amount already included in the revenue, the uncollectible amount, or the amount in
respect of which recovery has ceased to be probable, is recognized as an expense, rather than as an
adjustment of the amount of revenue originally recognized.
Revenue is measured ate the fair value of the consideration received or receivable and represents amounts
receivable for goods or services provided in the normal course of business.

Events after the Reporting Date

Post year-end that provide additional information on the Company’s financial position at the report date
(adjusting events), are reflected in the financial statements. Post year-end events that are not adjusting events
are disclosed in the notes to the financial statements when material.

3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of the Company’s financial statements in conformity with Financial Reporting Framework
(in reference to the Philippine Financial Reporting Standards) requires management to make estimates and
assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes.
The estimates and assumptions used in the Company’s financial statements are based upon management’s
evaluation of relevant facts and circumstances as of the date of the Company’s financial statements. Actual
results could differ from such estimates.

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Determining Functional Currency
Based in the economic substance of underlying circumstances relevant to the Company, the functional
currency has been determined to be the Philippine Peso, which is the currency of the primary economic
environment in which the Company operates and is the currency that mainly influences the prices of the
products and services and the cost of providing such products and services.

Judgments
The preparation of the Company’s financial statements in conformity with Financial Reporting Framework in
reference to the Philippine Financial Reporting Standards requires management to make estimates and
assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes.
The estimates and assumptions used in the Company’s financial statements are based upon management’s
evaluation of relevant facts and circumstances as of the date of the Company’s financial statements. Actual
results could differ from such estimates, judgments and estimates are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.

Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation and uncertainty at the reporting
date that may have a significant risk of causing material adjustments to the carrying amounts of assets and
liabilities within the next fiscal year are discussed below:

Impairment of Receivables
The Company reviews its receivables at each reporting date to assess whether an allowance for impairment
should be recognized in the profit and loss. In particular, judgment by management is required in the estimation
of the amount and timing of future cash flows when determining the level of allowance required. Such
estimates are based on assumptions about a number of factors and actual results may differ, resulting in future
changes to the allowance.

Estimated allowance for doubtful accounts

The Company maintains allowances for doubtful accounts, if any, at a level considered adequate to provide
for potential uncollectible receivables. The level of this allowance is evaluated by management on the basis of
factors that affect the collectability of the accounts. These factors include, but are not limited to, the length of
the Company’s relationship with the customer, the customer’s payment behavior and known market factors.
The Company reviews the age and status of receivables, and identifies accounts that are to be provided with
allowances on a continuous basis.

The amount and timing of recorded expenses for any period would differ if the Company made different
judgments or utilized different estimates. An increase in allowance for doubtful accounts would increase the
recorded operating expenses and decrease current assets.

Impairment of inventories
The Company recognizes impairment on inventories whenever the net realizable value of inventories become
lower than cost due to damage, physical deterioration, obsolescence, changes in price levels or other causes.
The impairment is reviewed on a monthly basis to reflect the accurate valuation in the financial records.
Estimating useful lives of property and equipment
If there is an indication that there has been a significant change since the last annual reporting date in the
pattern by which an entity expects to consume an asset’s future economic benefits, the entity shall review its
present depreciation method and, if current expectations differ, change the depreciation method to reflect the
new pattern. The entity shall account for the change as a change in an accounting estimate.

Factors such as a change in how an asset is used, significant unexpected wear and tear, technological
advancement, and changes in market prices may indicate that the residual value or useful life of an asset has
changed since the most recent annual reporting date. If such indicators are present, an entity shall review its
previous estimates and, if current expectations differ, amend the residual value, depreciation method or useful
life. The entity shall account for the change in residual value, depreciation method or useful life as a change
in an accounting estimate.

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Depreciation is computed on a straight-line method over the estimated useful lives of the assets as follows:

Office Equipment 25 years

Furniture and Fixtures 25 years

Impairment of Property and Equipment

The Company assesses the value of property and equipment which require the determination of future cash
flows expected to be generated from the continued use and ultimate disposition of such assets, and require the
Company to make estimates and assumptions that can materially affect the financial statements. Future events
could cause the Company to conclude that property and equipment and other long-lived assets are impaired.
Any resulting impairment loss could have a material adverse impact on the Company's financial condition and
results of operations.

The preparation of the estimated future cash flows involves significant judgment and estimations. While the
Company believes that its assumptions are appropriate and reasonable, significant changes in these
assumptions may materially affect the Company's assessment of recoverable values and may lead to future
additional impairment charges.

5. Cash

This account consists of:

2018
Cash in Bank 56,057
Petty Cash Fund 10,000
TOTAL CASH 66,057

Cash in bank represents savings/current account in a reputable local bank. Savings account deposits earn
interest at the respective bank deposit rates and current account deposits do not earn interest. The Company
reconciles the books and bank balances regularly as part of its cash monitoring and internal control measures.

A reasonable amount of Petty Cash Fund is maintained to cover small payments not covered by checks, such
as transportation, small amount of office supplies, and other payments as defined by management and not
exceeding P2,000 per single payment.

6. Trade and Other Receivables

This account consists of:

2018

Accounts receivable-trade 28,943

Allowance for doubtful accounts -
TOTAL TRADE AND OTHER RECEIVABLES 28,943

Trade receivables are non-interest bearing and generally on a 30-day term.

Allowance for doubtful accounts is computed for aged receivables over the estimated percentage of
uncollectibility of the accounts receivables as follows: neither past due nor impaired, 0%; 31-60 days,1%; 61-
90 days,2%; and more than 90 days,3%. Receivables in 2014 and 2013 are deemed collectibles.

No receivables have been pledged as a security for liabilities.

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8. Inventories

Inventories amounted to P 5,800 as at December 31, 2018. These inventories are the unsold goods. They are
valued at the lower of cost or net realizable value.

Impairment test conducted revealed that there are no impaired inventories, thus, no allowance for impairment
was provided.

No inventories have been pledged as a security for liabilities.

9. Property and Equipment

Property and equipment consist of the following:

Office Furniture &

Equipment Fixtures Total
Cost
At Jan1 12,500 7,500 20,000
Additions - - -
Disposal - - -
Total 12,500 7,500 20,000

Accumulated depreciation

At January 1 - - -
Depreciation 500 300 800
Disposals - - -
Impairment Loss - - -

Carrying Value 12,000 7,200 19,200

Property and equipment are carried at cost less accumulated depreciation, and amortization and any impairment in
value.

Depreciation is computed on a straight line method over the estimated useful life of the assets.

No assets were found impaired .in the year 2016 and 2015.

10. Trade and Other Payables

Trade and other payables consist of: 2015

Trade payables 53,943

53,943

Trade payables represent the unpaid portion of the company's purchases of goods from its suppliers. They do
not earn interest and expected to be settled within a short period of time.

Other Payables are also non-interest bearing and these are statutory obligations and is expected to be paid the
following month.

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11. Partnership Capital

The total balance of the partnership capital amounts to 66,057, profit sharing ratio is decided to be equally
divided among partners.

12. Related Party Disclosure

Parties are considered to be related if one party has the ability to control the other party or exercise significant
influence over the other party in making financial and operating decisions. This includes: (a) individuals
owning, directly or indirectly through one or more intermediaries, control or are controlled by, or under
common control with, the Company; (b) associates; and (c) individuals owning, directly or indirectly, an
interest in the voting power of the Company that gives them significant influence over the Company and close
members of the family of any such individual.

The Company’s related parties include the Company’s Key Management. The compensation of the key
management personnel of the Company pertains to the usual monthly salaries and government mandated
bonuses; there are no other special benefits paid to management personnel.

There were no other related party transactions in 2018.

13. Revenue

Revenue is derived from the sales of accessories. Total sales for 2018 amounted to P .

14. Cost of Sales consist of

2018
Inventory, beginning -
Purchases 27,300
Total available for sale 27,300
Direct Labor 3,100
Overhead 6,400
Work in Process, beginning (2,800)
Finished goods, end (3,000)
30,000

15. Operating Expenses

This consists of
2018
Salaries & other benefits 12,224
Rent 4,300
Communication, Light & Water 7,224
Depreciation expense 800
Supplies 676
Taxes & Licenses 3,224
Miscellaneous 2,448
30,896

16. Supplementary Information under Revenue Regulations No. 19-2011

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Revenue Regulations (RR) No. 19-2011 was issued to prescribe to new BIR Forms that will be used for income
tax filing covering and starting with calendar 2011, and to modify Revenue Memorandum Circular No. 57-
2011. The revenue regulation is effective for all taxpayers required to file their income tax returns under
section 51(A)(1) of the Tax code, and those not required to file under section 51(A)(2) but who nevertheless
opt to do so, covering and starting with December 21, 2011.
The following are the required schedules prescribed under existing revenue issuances applicable to the
Company as of December 31, 2018:

a. Sales/receipts/fees
For the year ended December 31, 2018, the Company’s sales amounted to P
b. Cost and expenses
For the year ended December 31, 2018, schedule of cost and expenses are as follows:

c. Itemized deductions:

d. Taxes and Licenses

For the year ended December 31, 2018, the Company paid the following taxes and licenses:

2018
Business permits 3,200
CTC 3,200
6,400

Supplementary Information Required by Bureau of Internal Revenue’s Revenue Regulations

(RR) No. 15-2010.

On November 25, 2010, the Bureau of Internal Revenue issued Revenue Regulations (RR) No. 15-
2010 to amend certain provisions of RR No. 21-002 prescribed the manner of compliance with any
documentary and/or procedural requirements in connection with the preparation and submission of
financial statements accompanying the tax return.
The Company reported and/or paid the following types of taxes for the year ended December 31,
2018.

The Company is currently not involved in any tax cases, preliminary investigations, litigation
and/or prosecution in courts outside of BIR.

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