PRAYE

R
Be reminded of the following
HOUSE

RULES:
Make sure that you have a stable internet
connection.

 Observe unnecessary distractions / noises.

 Be attentive in the entire session.

 Provide a pen and paper in jotting down

important notes.

 Just send in your messages in group chat if

you have comments and questions.
 Republic of the Philippines
Department of Education
Region III-Central Luzon
Schools Division Office of Bulacan

PULONG BUHANGIN NATIONAL HIGH SCHOOL

Km. 38 Pulong Buhangin, Santa Maria, Bulacan

ENTREPRENEURSHIP
QUARTER 2 - WEEK 8

Identify a Profit or Loss for a Business and

Generate an Overall Report
A. Content Standards:
The learner demonstrates understanding of
concepts, underlying principles, and processes of
starting and operating a simple business.

B. Performance Standards:
The learner independently or with his/her
classmates starts and operates a business
according to the business plan and presents a
terminal report of its operation.
C. MELCs:
Identify where there is a profit or loss for a
business;
Generate an overall report on the activity
D. Specific Objectives:
1. Define income statement and balance
sheet
2. Identify where there is a profit or loss
for a business
3. Generate an overall report on the
activity

II. CONTENT
Starting and Operating a Simple
Business
Lesson 2: Identify where there is a profit or loss
for
III. PROCEDURES:
A. Preliminary Activities
1. Pretest
DIRECTIONS: Choose the letter that you think
is the best answer to each of the following
questions. Write the letter of your choice on
your answer sheet.
1. It is a structured financial statement that presents
the income, expenses, and net income or net loss
realized during a certain period.
a. Income Statement c. Liquidity
b. Balance Sheet d. Solvency
2. It is a structured financial statement that
presents the financial position of the business
at
a given date.
a. Income Statement c. Liquidity
b. Balance Sheet d. Solvency
3. It refers to the ability of the business to pay
long-term obligations while maintaining
stability.
a. Income Statement c. Liquidity
b. Balance Sheet d. Solvency
4. It refers to the ability of the business to
currently pay maturing obligations from the
date of the balance sheet.
5. It refers to the properties owned or
controlled
by the business.
a. liabilities c. equity
b. assets d. expenses
6. It refers to the financial obligations of the
business as the date indicated in the balance
sheet.
a. liabilities c. equity
b. assets d. expenses
7. It represents the residual interest of the
owner
or owners on the properties of the business.
8. It contains information on the name of the
business and the date.
a. heading c. current assets
b. body d. non-current
9. It is composed of the revenue, expenses
assets
and the net income or net loss of the
business during a given period.
a. heading c. current assets
b. body d. non-current
assets
10. It includes those assets of the business
that are consumed realized or utilized
within one year.
a. heading c. current assets
 2. Reviewing Previous Lesson
- What is bookkeeping?
- What are the duties and
responsibilities
of a bookkeeper?

B. Presenting the New Lesson

Welcome to Entrepreneurship class! This
course is designed to familiarize the
students with the basic definition of
income
statement and balance sheet. To identify
1.ACTIVITY:
Motivation
Collect responses.
What comes into your mind when you
hear the word profit and net loss?

________________ _______________
________________ _______________
________________ _______________
________________ _______________
________________ _______________
3. ABSTRACTION (Discussion of the Topic)
Profitability has always been the main goal of
any business. To identify the profit or loss of a
business, they must record every detail of all
business transactions and translate it into a
financial report. The profit and loss report are a
financial statement that summarizes the total
income and total expenses of a business in a
specific period. It is also known as the income
statement or the statement of operations.
The goal of income statement is to measure the
profits by deducting the expenses from the
revenue/income to provide an overview of the
financial health of the business.
 Income Statement also called Profit and
Loss Statement is a structured financial
statement that presents the income, expenses
and net income or net loss realized during a
certain period.

Parts of Income Statement

a.) Heading
- contains information on the name of the
business, name of the statement and the
date.
b.) Body
- composed of the revenue, expenses and
the
 Major Section of Income
Statement
1. Income or revenue section –
all income received and realized
within the accounting period
2. Expenses –
all expenses incurred during the
accounting period
3. Net Income or Net loss –
outcome of the business operation
Sample Income Statement for a Service
Business
Basic Equation for Profit and Loss

Net Loss/Net Income = Revenue –

Expenses

The major headings of the income

statement are explained below:

• Net Sales/Revenue
- are the sales generated by the major
activities of the business
- usually, the sale of products or services
or both less any sales discounts and sales
• Direct cost - Cost of goods sold (for
merchandising business)/Cost of service
(for service business) - the major expense
in companies which represents the cost of
what the customer paid for.

• Gross margin or gross profit – This is the

net sales less cost of goods sold or cost of
service which represents the amount we
charge customers above what we paid for the
items. This is also referred to as a company’s
markup.

• Operating expenses - other expenses

incurred in the normal business functions of a
• Selling expenses - are expenses a company
incurs in selling and marketing efforts.
Examples: salaries and commissions of
salespersons, advertising, utilities on a sales
building, and sales supplies used.
• Administrative expenses - are expensing a
company incurs in the overall management of a
business. Examples: administrative salaries,
rent or depreciation, (if owned) and utilities on
an administrative building, insurance expense,
administrative supplies.
• Net Income/Net Loss - is the net income or

net loss result after deducting all expenses to

 Preparation of Profit and Loss
Report for a simple business

Step 1: Write the Heading (refer to

the sample income statement)

Name of the business: Modern Laundry Center

Name of the statement: Income Statement or
Profit and Loss Statement
Date of the Report: For the period
ended__________

Step 2: Compute for all

• Selling expenses - are expenses a company
incurs in selling and marketing efforts.
Examples: salaries and commissions of
salespersons, advertising, utilities on a sales
building, and sales supplies used.
• Administrative expenses - are expensing a
company incurs in the overall management of a
business. Examples: administrative salaries,
rent or depreciation, (if owned) and utilities on
an administrative building, insurance expense,
administrative supplies.
• Net Income/Net Loss - is the net income or

net loss result after deducting all expenses to

 Step 3: Compute for direct cost - cost of goods
sold for merchandising business or all cost of service for
service business.
To compute for the cost of goods sold:
Add (+) beginning inventory and all purchases
Deduct (-) ending inventory
Equals (=) Cost of goods sold

Step 4: Compute for Gross profit by subtracting

direct cost to revenues/sales.

Step 5: To compute for the Net income/Net

loss, List down all other operating expense and
deduct/subtract to the Gross profit.
If you get a POSITIVE number, it is a PROFIT
otherwise it is a LOSS if the result is NEGATIVE.
 Generate an Overall Report
on the Activity
Here are a few things to do if you are
asked to review an income statement and
you are not sure where and how to start:

1. Check all the numbers and

computations.
Errors occur even in printed, published
statements; If you find an error, you
might also uncover something that
changes the results completely.
2. Find the bottom line (the
result).
It is good to see a positive number in the result.
That means the company has earned more than it
spent during this period. This means it can pay its
employees, keep the lights on, and not be forced to
borrow money.
But if the result is negative or enclosed in
parentheses, then expenses exceeded revenue. Find
out why to make plans.
A net loss occasionally does not necessarily means
disaster. Sometimes new firms have a lot of start-up
costs and do not expect to turn a profit in the first
year or three. If net losses become a trend, or if the
company does not have enough cash to fund its
3. Look at the sources of income.
Do they make sense for the business? For example, if
you are in the cotton candy business, then sales income
from the county fair sounds right. But if one income line
is “gifts from friends” that is probably not sustainable.
What about next year when those friends do not come
through again?

4. Look at the expense

categories.
For most businesses, you will see salaries and wages,
insurance, rent, supplies, interest, are the amounts
logical? Is anything missing that you would expect to
see? For example, if the business has a hundred
employees and you do not see rent, or mortgage
5. Now look at the amounts: What are
the biggest expenses?
If this is a service business, expect to see a large
number for salaries. If it’s a manufacturing
business, materials and supplies may logically be
a significant total. On the other hand, what if you
know the company has only three employees but
the salary line is extremely high? Is someone
being overpaid? Are there more people working
there than you realized? Or what if the president
told you the company has been profitable for
years, but you see high interest expense? Find
out why the company is borrowing money, and
from whom, and whether they are paying a
 6. Compare year-over-year numbers.
Usually, the income statement has separate column showing
the figures for the prior year. Question any significant changes
you see like, why is sales income 50 percent lower this year
than last? Or why the expenses soar 20% high versus last
year?

7. Think about logical relationships between

numbers.
Most companies these days have employee benefits with
significant cost (like health insurance, retirement plan
contributions,) If the salary line increased but the benefits
number went up by only 10 percent, that should strike you as
odd. Is there some reason the new employees do not qualify
for benefits? Did the company drop one of its benefit plans?

All these questions may have perfectly reasonable answers but

looking through them will help you understand what’s going on
 BALANCE SHEET
- also known as statement of financial position
- It is a structured financial statement that
presents the financial position of the business at
a given date.
Liquidity
- refers to the ability of the business to currently
pay maturing obligations from the date of the
balance sheet.
Solvency
- refers to the ability of the business to pay long-
term obligations while maintaining stability.
Major Section of the Balance
Sheet
1. Asset section
2. Liability section
3. Owner’s equity section

1. Asset
- refers to the properties owned or
controlled
by the business.
a. Current assets
- include those assets of the business that are
consumed realized or utilized within one year.
 b. Non-current assets
- Include assets whose usefulness and benefits
extend
usually beyond one year.
Ex. Land, building, machinery. Equipment,
furniture and fixtures

2. Liability
- refers to the financial obligations of the business
as
the date indicated in the balance sheet.
a. Current liability
- Includes financial obligations of the business that
are payable or will mature within one year.
 b. Non-current liability
- refers to financial obligation of the

business whose maturity period is

beyond one year.
Ex. Mortgage payable and long-
term
bank loan payable

3. Owner’s Equity
- represents the residual interest of the
Sample Balance Sheet
C. Independent Activities
(Formative)
• Matching
ACTIVITY A.Type:
(Written Work / Task):
Directions: Match Column A with Column B.
Write only the letter on the answer sheet
provided for you.
Column A Column B
1. Part of income a. Accounts receivables
statement
2. current assets b. Accounts payable
3. non-current assets c. Heading
4. current liability d. Mortgage payable
5. non-current liability e. Building
ACTIVITY B: (Written Work / Task)
True or False
Directions: Write TRUE if the statement is true
otherwise write FALSE.
Write your answer on your answer
sheet.
1. Balance sheet shows the financial position of the
business for a given period.
2. The ability of the business to pay all its obligation is
called solvency.
3. Income statement is composed of assets, liability, and
equity.
4. Non-current liability is referring to financial obligation
of the business whose maturity period is beyond one
year.
5. Heading is composed of the revenue, expenses and
ACTIVITY C: (Performance Task)
Identify if a Profit or Loss
Directions: Suppose you are starting a simple
business and have the following business
transactions for the year 2020:
Jan. 2 - Purchase merchandise worth Php 25,000
Jan. 5 - Sold merchandise for Php10,800, cost of
goods sold Php 8,000
Jan. 10 - Purchase merchandise worth Php 20,000
Jan. 11 - Sold merchandise for Php 8,100, cost of
goods sold Php 6,000
Jan. 15 - Paid salary to employee Php 3,000
Jan. 16 - Sold merchandise for Php 10,800, cost of
goods sold Php 8,000
Jan. 20 – Sold Merchandise worth Php 6,170, cost of
goods sold Php 5,000
Jan. 28 - Paid utility expense of Php 1,000
Jan. 30 – Paid rental expense of Php 2,000
Jan. 31 - Paid salary to employee amounting to Php
3,000
Jan. 31 - Merchandise ending inventory Php 18,000

Prepare the Profit and Loss Statement for the month

ended of January 2020. Write in a separate answer
sheet. For the heading, use/make your own business
name, then compute for the Profit and Loss
Statement. Determine if a profit or a loss.
ACTIVITY D: (Performance Task)
Analyze and interpret the result
Directions: Based on the result of your income
statement in activity C, analyze and interpret the
result by giving simple recommendations.
Write your answer in a separate answer sheet.

1. How can you improve sales?

2. How can you improve the gross profit?
3. How can you improve the net income?
4. What will be the effect of the income
statement to the balance sheet?
IV. REFLECTION
VI. ASSESSMENT
Posttest
Multiple Choice
Directions: Choose the letter that you
think is the best answer to each of the
following questions. Write the letter of
your choice on your answer sheet.
1. It represents the residual interest of
the owner or owners on the
properties
of the business.
a. liabilities c. equity
2. It contains information on the name of the
business and the date.
a. heading c. current assets
b. body d. non-current assets
3. It is composed of the revenue, expenses
and the net income or net loss of the
business during a given period.
a. heading c. current assets
b. body d. non-current assets
4. It includes those assets of the business that
are consumed realized or utilized within one
year.
a. heading c. current assets
b. body d. non-current assets
5. It is a structured financial statement that
presents the income, expenses, and net
income
or net loss realized during a certain period.
a. Income Statement c. Liquidity
b. Balance Sheet d. Solvency
6. It is a structured financial statement that
presents the financial position of the
business at a given date.
a. Income Statement c. Liquidity
b. Balance Sheet d. Solvency
7. It refers to the ability of the business to pay
long-term obligations while maintaining
stability.
a. Income Statement c. Liquidity
8. It refers to the ability of the business to
currently pay maturing obligations from the
date of the balance sheet.
a. Income Statement c. Liquidity
b. Balance Sheet d. Solvency
9. It refers to the properties owned or
controlled
by the business.
a. liabilities c. equity
b. assets d. expenses
10. It refers to the financial obligations of the
business as the date indicated in the
balance sheet.
a. liabilities c. equity
Enrichment Activities
Interview a family, relative or a friend who have a
business and ask them how do they know if there
was a profit or loss in their business? Do they
prepare a simple profit and loss report and how do
they manage the result of operation? Take note of
the learnings.

References:
Aduana, N. L. (2016). Entrepreneurship in Philippine
Setting for Senior High School pp. 201-208
https://www.freshbooks.com/hub/reports/profit-and-loss-report
https://articles.bplans.com/how-to-read-an-income-statement/
 Thank you!
GOD bless you all and stay safe.