: Chart of Account (Majorem Lending Investor)

CHART OF ACCOUNTS

MAJOREM LENDING INVESTOR, INC.

Unit 3-C, Fuentes Building, Angono, Rizal

PRO-FORMA BALANCE SHEET:

MAJOREM LENDING INVESTOR, INC.

BALANCE SHEET

___________________

ASSETS

Current Assets

Cash

Loan Receivables

Real Estate

Prepaid Expenses

Non-Current Assets

Property and Equipment

Less:  Accumulated Depreciation

TOTAL ASSETS:

LIABILITIES

Accrued Expenses

Accrued Interest Payable

Loans  Payable

SHAREHOLDERS' EQUITY

Authorized Capital Stock

Subscribed Capital Stock

Less: Subscription Receivable

Paid-up Capital

Retained Earnings, Beginning Balance

Add: Net Income during the period

TOTAL LIABILITIES & SHAREHOLDERS' EQUITY

PRO-FORMA INCOME STATEMENT

MAJOREM LENDING INVESTOR,INC.

STATEMENT OF INCOME

FOR ______ MONTHS ENDED ______________

Interest Income

Other Income

LESS:  Interest Expenses

GROSS INCOME

LESS:  OPERATING EXPENSES

Salaries and Wages

Employees' Benefits

Incentives & Bonuses

Taxes and Licenses

Litigation Expenses

Rent Expenses

Light, Water, and Power

Telephone/Internet

Insurance Expenses

Representation

Office Supplies

Printing Expenses

Postage and Stamps

Travel Expenses

Transportation

Oil and Gasoline

Repairs and Maintenance

Doubtful Accounts Expense

Depreciation Expenses

Miscellaneous Expenses

TOTAL OPERATING EXPENSES

NET INCOME BEFORE TAX LESS: INCOME TAX NET INCOME AFTER TAX:

PRO-FORMA STATEMENT OF CASH FLOW

MAJOREM LENDING INVESTOR, INC.

STATEMENT OF CASH FLOW

FOR _____ MONTHS ENDED _________________

Beginning Balance, January 1, 2013

CASH FLOW FROM OPERATIONS

Cash Inflow:

CAPF Collection

PC Collection

IF Collection

Loan Collections

Funds Total Inflow

OUTFLOW:

Marketing Expenses

Operating Expenses:

Salaries & Wages

Incentives & Bonuses

Employee Benefits

Mortality/Casualty Expenses

Travelling Expenses

Representation Expenses

Office Supplies Expenses

Postage & Stamps

Funds Total Outflow

NET CASH FLOW FROM OPERATION

CASH FLOW FROM INVESTMENTS

Cash Inflow:

Income from Bank Deposits

Interest Income

Total Inflow from Investments

Cash Outflow:

Capital Expenditures

Building Improvements

Investment

Sinking Funds

Total Outflow from Investments

NET CASH FLOW FROM INVESTMENTS

CASH FLOW FROM BORROWING ACTIVITIES

Inflow

Additional Capital

Discounting of Installment Contracts Receivables (ICR)

Private Placements

Loans - in-house

Total Inflow from Borrowing

Outflow

Remittance of Discounting

Accrued Expenses

Remittance on Arrears

Payment of Loans

Total Outflow from Borrowing

NET CASH FLOW FROM BORROWING:

ENDING BALANCE: PRO-FORMA PNL MAJOREM LENDING INVESTOR, INC. Revenue       Income from Loan       Interest Income for Deposits                      Total  Less: Operating Expense Salaries & Wages Rent Interest Expense Utility                  Total Expense         Gross Expense       Add:  other Income Penalties Less : Penalties ENDING BALANCE:

INTEREST INCOME – Earnings derived from lending activities such as charging interest rates against principal amount borrowed by borrowers.

INTEREST EXPENSES – The cost incurred by the company for borrowed funds. It is the amount that a lender charges to the borrower for the use of the lender's money.

GROSS INCOME – is the total amount of revenue that is earned by the company on its business activities during a certain accounting period.

TOTAL LOANS – Borrowed money that is usually repaid with interest.

1.      RETAIL LOAN – A loan that is availed by individuals particularly the lot owners of the Holy Gardens.  The amounts loaned through retail lending are usually smaller than those amounts loaned businesses.  The loan amount must be equivalent of market value of the owned lot.  The primary targets of these loans are lot owners of the Holy Gardens whose memorial lots are not yet used.  Retail loans may take the form of installment loans which must be paid off thru monthly amortizations.

2.     CORPORATE LOAN – A loan that is granted to Single Business Unit (SBU) of the Holy Gardens Memorial Park to finance the development costs of memorial parks to make suitable for selling.

3.     COMMERCIAL LOANS – To provide loan facilities for non-holy gardens lot owners, living in Binangonan, Angono, and Taytay, area (BAT). The new product will enhance MLII Lending activities, an additional source of income for MLII.

PRINCIPAL AMOUNT – The total amount borrowed or owed separate from interest.

PROCESSING FEE – The amount that is charged to the borrowers for documentation, appraisals, employment and credit history of borrower.  Processing fee is deducted from the principal amount of the loan.

DOCUMENTARY STAMP TAX – Documentary Stamp Tax is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto. Tax Form is BIR Form 2000 (Documentary Stamp Tax Declaration Return).

OPERATING EXPENSES – Necessary expenditures to be incurred in normal business operations such as salaries and wages, employees' benefits, incentives, bonuses, taxes and licenses, rent, utilities, insurance, representation, office supplies and stationeries, computer consumables, postages and stamps, marketing, advertising, promotion, travelling, gasoline, transportation, doubtful accounts, depreciation, and miscellaneous expenses.

SALARIES AND WAGES – Remunerations and compensations for rendition of services by employees

EMPLOYEES' BENEFITS – These represent both the employer and employee contribution to Social Security System, Home Development Mutual Fund (where applicable), and Philhealth which are lodged in this account immediately on payroll date when said contributions are deducted from the employees' compensation.  These are paid or remitted to SSS, HDMF, and Philhealth on or before 10^th day of the month with accomplished M1-1 for HDMF, SBR for SSS, and reconciliation form for Philhealth.

INCENTIVES & BONUSES – These are rewards for efficient and excellent performance by deserving employees or staff when accomplishments will exceed a target goal. These are gifts to employees or staff granted and released by the company as a result of profitable business operations.

TAXES AND LICENSES – Taxes are compulsory contributions to national government or local government units (LGUs) as levied by the government on business profits, or added to the cost of some goods, services, and transactions.  Licenses are permission granted by a competent authority to exercise a certain privilege that, without such authorization, would constitute an illegal act. The certificate or the document itself that confers permission to engage in otherwise prescribed conduct.

LITIGATION EXPENSES – Costs incurred for contesting a legal action or claim in courts.

RENT – Expenses incurred for a building, space, and equipment used by the company in its business.

LIGHT, WATER, AND ELECTRICITY – Expenses incurred for the use of electricity and water in business operations.

TELEPHONE/INTERNET – Expenses incurred for the use of telecommunication, either land phone or mobile phone and internet provided by Internet Service Provider (ISP).  It is common that internet is bundled with telephone services.

INSURANCE – Premiums for a contract whereby for a specified consideration, one party undertakes to compensate the other for a loss relating to a particular subject as a result of the occurrence of designated hazards.  The term insurance describes any measure taken for protection against risks.

REPRESENTATION EXPENSES – Include expenses for public relations activities which are directly related to the promotion of business development and enhancement of the prestige and reputation of the company. These expenses must be reasonable, not contrary to laws, morals, and public policy or public order. The expenses must be substantiated with sufficient evidences such as official receipts or adequate records.

OFFICE SUPPLIES – are all supplies regularly used in the office for business use.  These include small and expendable items such as ball pens, pencils, paper clips, staples and staplers, hole punchers, binders, laminators, copy or bond paper.  Stationeries are considered official forms used by the company in its business operations. Computer consumables such as ribbons, ink cartridges, toners, USB flash disks, and memory cards are included.

PRINTING EXPENSES – Costs of photocopying documents and printing of forms done by printing press or shop.

POSTAGES AND STAMPS – These are expenses incurred for correspondences and mailing of letters, cards, and statement of accounts to customers thru postal office.

TRAVEL EXPENSES – Expenses incurred by an employee in the performance of his field assignments authorized and appointed to work in a temporary workplace.

TRANSPORTATION – Expenses incurred by an employee such as fares on riding a bus, jeepney, MRT/LRT, boat, or airplane authorized by the management of the company to conduct official business such as accounting/audit works, field trips, ocular inspection or site visits or visit to government agencies and offices.

OIL & GASOLINE – Cost of fuel of company vehicles used for official trips and purposes.

REPAIRS AND MAINTENANCE – Costs of repairs of equipment, tools, and vehicles which are used for company business.

DOUBTFUL ACCOUNTS EXPENSE – The amount that should be written off considered as uncollectible.

DEPRECIATION EXPENSE – The portion of a tangible asset that is deemed to have been consumed or expired due to normal wear and tear, thus, it has become an expense.

MISCELLANEOUS EXPENSES – A general ledger account which cannot be itemized and the amounts are very small amounts.

TOTAL OPERATING EXPENSES –  The summary of all expenses necessary in the operations of the business within a certain period.

INCOME TAX – Income tax is a tax on a person's income, emoluments, profits arising from property, practice of profession, conduct of trade or business.

NET INCOME BEFORE INCOME TAX – This combines all corporate profits before payment of tax including operating, non-operating, continuing operations and non-continuing operations.  The amount is obtained after deducting the operating expenses from the gross income for a certain period of business operations.

NET INCOME AFTER INCOME TAX – This is the net amount of revenue for a certain period after deducting 32% corporate income tax.

OTHER INCOME – Earnings from activities other than normal business operations such as interest income from bank deposits and investments, foreign exchange gains, rent income, sale of acquired assets.

1.     Penalties – The amount charged to clients for violation of terms and conditions of agreement or delinquency in amortizations or payments.

2.     Interest Income from Banks – The amount earned for maintaining savings accounts with a bank through the course of business operations.

3.     Interest Income from Placements – The amount earned for private placements by individual investors. The company will put a mark-up interest over rate of return on investments placed by individual investors.

4.     Income from Sale of Acquired Assets – The amount realized for disposing acquired assets, usually collateral by borrowers.  When borrowers will pay to repay the retail loan, the company will take the collateral as settlement for the unpaid loan.

BALANCE SHEET

A.    CASH AND CASH EQUIVALENTS:

1.     CASH ON HAND – This includes undeposited cash collections and other cash items awaiting deposit such as customers' checks, cashier's or manager's checks, traveler's checks, bank drafts, and money orders.

2.     CASH IN BANK – This includes demand deposit or checking account and saving deposit which are unrestricted as to withdrawal.

a.     Savings Deposits – Accounts are typically considered readily available funds and account holders can make withdrawals without giving an advance notice.

b.     Time Deposits – These deposits are held for a fixed period of time evidenced by certificate of time deposit (CTD). Although funds can be withdrawn upon presentation of certificates, there are penalties for premature withdrawal. Some savings accounts have features of time deposits but 30-day notice before withdrawal of funds must be undertaken by the depositor.

B.    LOAN RECEIVABLES - A type of asset-financing arrange in which the company uses its receivables as collateral in a financing agreement. The company receives an amount that is usually lower than the value of pledged receivables.

1. Direct Loan

2. Financing of Receivable

C.    REPOA (Real Estate Possessed, Owned, and Acquired) – This account includes real and other properties acquired by the corporation judicially or extra-judicially in the settlement of loans or for other reasons. The properties acquired for any reasons shall be recorded at cost value whichever is applicable at the time of acquisitions.

D.    PREPAID EXPENSES – Expenses that are paid in advance within a 12-month period.

NON-CURRENT ASSETS – An entity shall classify all other assets not classified as current as noncurrent. All others are classified as noncurrent assets which include the following:

A.    PROPERTY, PLANT AND EQUIPMENT – These are tangible assets which are held by an entity for use in production or supply of goods and services, for rental to others, or for administrative purposes, and are expected to be used during more than one period.

B.    LONG-TERM INVESTMENTS – Assets held by an entity for the accretion of wealth through capital contribution, such as interest, royalties, dividends and rentals, for capital appreciation or for other benefits to the investing entity such as those obtained through trading relationships.

C.    INTANGIBLE ASSETS – An identifiable nonmonetary asset without physical substance. The common examples of identifiable intangible assets include patent, franchise, copyright, lease rights, trademark and computer software.  An example of an unidentifiable intangible asset is goodwill.

D.    OTHER NONCURRENT ASSETS – are those assets that do not fit into the definition of the previously mentioned noncurrent assets.  Examples include long-term advances to officers, directors, shareholders, and employees, or abandoned property and long-term refundable deposit.

LIABILITIES

Liabilities are defined as present obligations of an entity arising from past transactions or events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.

CURRENT LIABILITIES – The face of the statement of financial position includes the following line items for current liabilities.

a.     Trade and other payables – a line item for accounts payable, notes payable, accrued interest on note payable, dividends payable, and accrued expenses. No objection can be raised if the trade accounts and notes payable are separately presented.

b.     Current Provisions

c.     Short-term Borrowing

d.     Current Portion of Long-term Debt

e.     Current Tax Liability

NON-CURRENT LIABILITIES – is also a residual definition, provides that all liabilities not classified as current (within 12-month period) are classified as noncurrent.

Examples are:

a.     Noncurrent of long-term debt

b.     Finance lease liability

c.     Deferred tax liability

d.     Long-term obligations to company officers

e.     Long-term deferred revenue

SHAREHOLDERS' EQUITY

Shareholders' equity is the residual interest of owners in the net assets of a corporation measured by the excess of assets over liabilities. The elements constituting shareholders' equity are:

a.     Capital Stock – This is the capital contribution made by the shareholders to the corporation.  This is actually paid in cash.

b.     Subscribed Capital Stock – This account is credited upon subscriptions and debited when the par value thereof is fully paid and the corresponding certificate is issued to the stockholders.

c.     Additional Paid-in Capital – Refers to aggregate amount of capital contributed to a corporation by shareholders through purchase of stock. This account can refer to paid-in capital in excess of par value.

d.     Retained Earnings (Deficit) – This represents as the cumulative undistributed earnings of the company, net of provision for losses and provision for income tax.

e.     Treasury Stock – The Corporation's own stock, fully paid and issued to stockholders and then reacquired by the company not for cancellation.

STATEMENT OF CASH FLOWS

The statement of cash flows is a basic component of the financial statements which summarizes the operating, investing and financing activities of an entity.  In simple language, the statement of cash flows provides information about the cash receipts and cash payments of an entity during a period.

BEGINNING BALANCE – The beginning balance establishes cumulative beginning balances for each revenue and expense using the ending balance from the previous fiscal year as the beginning balance of the new fiscal year.

Customer's Amortization Protection Fund (CAPF) – Single Business Units (SBUs) are remitting the collections of CAPF to the company. This amount is charged to clients who are similar to redemption insurance.  In case the client would pass away with existing installment contract payables, CAPF would assume the remaining balance of the ICR.

Perpetual Care (PC) – The amount that is charged to clients for perpetual care of memorial lots is remitted to the company as a trust fund of the memorial park.

Interment Fund (IF) – The amount that is charged to clients for interment purposes.

Loan Collections – Amounts received from corporate and individual borrowers evidenced by promissory notes, deed of assignments, and other documents securing the note receivable.

Service Fee – An additional charge for a service which there is already a basic fee.

Penalties – are charges for a loss, forfeiture, or delinquency by non-fulfillment of some obligations by the clients.

Value-Added Tax (VAT) – The amount comprising 12% charged to client for purchasing the memorial lot. The VAT is remitted to the Bureau of Internal Revenue (BIR) by the company.

Marketing Expenses - These are all expenses actually paid and incurred in the sale of lots, goods or services and promotion of the product.

The company is using Direct Method in presenting cash flow statement.

Cash Inflows from Operating Activities are:

a.     Cash receipt from monthly collections, service fees, and penalties.

b.     All other cash receipt that do not stem from transactions defined as investing or financing activities.

Cash Outflows for Operating Activities are:

a.     Amount of loans granted and released to SBUs.

b.     Cash payments to other suppliers and employees for other goods and services

c.     Cash payments to government for taxes, duties, fines, and other fees or penalties

d.     Cash payment to lenders and other creditors for interest

All other cash payments that do not stem from transaction defined as investing and financing activities.

Cash Inflows from Investing Activities are:

a.     Receipt from collection of loans made by SBU and retail borrowers

b.     Receipt from sales of Property, Plant and Equipment and other productive assets

Cash Outflows from Investing Activities are:

a.     Disbursement of loans to SBU

b.     Disbursement of loans to retail borrowers

Cash Inflows from Financing Activities are:

a.     Proceeds from issuing notes and from other short or long-term borrowing.

Cash Outflows from Financing Activities are:

a.     Payment of interests

b.     Repayment of amounts borrowed

c.     Other principal payments to creditors who have extended long-term credit

ACCOUNTING POLICIES AND PRINCIPLES

1.     Imprest System of Accounting – The imprest system is a system of control of cash which requires that all cash receipts should be deposited intact and all cash disbursements should be made by means of check. The disbursements of company's expenses and settlement of obligations are operated by current bank accounts.  The transactions are traceable due to verifiability of documents and trails of financial transactions.

2.     Cash Method of Accounting – Revenue is recognized when received regardless of when earned.  All collections are treated as revenue.

3.     Straight Line Interest – Interest expenses are calculated based on principal and approved interest rate per annum. The interest amount is computed against the principal amount on yearly calculation. Accrual Interest of PN is based on principal (not in principal + Interest)

          __Amount * Interest per annum * Number of Years___

                                 Number of Amortization

4.     Provision for Probable Losses – Contingent loss is recognized as a provision if the loss is probable and the amount can be reliably measured.  Contingency for operational losses is estimated, as follows: (a) 25% for 3 months; (b) 50% for 6 months; and (c) 100% for 12 months.

5.     Interest for Loans in arrears is compounded – Amortizations which are not paid by clients are to be charged with penalties compounded monthly. Any condonation on penalties or consideration for re-computation of arrears and penalties must be approved by the management of the company.

4% MA computed / amortization per month.

6.     Penalties on Loans – Additional charges are imposed on clients who are accounts are allowed to be in arrears for 90 days. Accounts in arrears are to be collected.  Penalties are computed and charged on compounded monthly basis.

7.      Interest expenses are accrued in the time that rental based on approval Interest rate by the Board of Directors.

          Accrued interest payable 50% lower fixed term.

1. Comparison generated the funds barrowed,

Loan rates for all people and entities that have deposits can be use on a rate of 5% rate.

       8. AIP – Computed Quarterly lowest Monthly Balance (Separate ledger PN 

          Accounts)

      

       9. All PN and Funds are to be grouped such under one SL. With corresponding sub SL PER SBU.

          - SL {SBU

          - Funds {SBU open type

         

All funds are to be an open account and may be withdraw anytime without penalties.

AP is computed is in a lowest balance, quarterly basis base on a lowest balance

       10. Computing Funds

                    IR = 360 Days

                    PN= 365 Days