Recognition of Income and Expenses for Sales Of Holy Gardens Plots

This office discussed with the Accounting Staff (AP, AR, Treasury and Majorem Acctg.Loans the Chart of  Accounts and Significant accounting policies and Chart of Accounts. They are not aware of this

They are walking in the dark.They need light

Objectives:

1. To determine the eligibility of SBU to be granted additional benefits like the health card.;they must be profitable for the last 6 months to qualify;

2.  To make the accounting staff  be expert on the system and structure of accounting at Holy Gardens before attempting changes.;

3.  To move the accounting staff to be more efficient:   stricter on the expenses, and stingy on the discount,  ME, and collection fee

4.  To be aware of other opportunities for earning like service

Reality:

1.  We do not know the latest financial  statements from the chief accountant

2.  We received  the Jan Feb P N L which showed the SBUs making large sums of money and thus must be verified

Explanations

Some important concepts to be understood

1.  Sale -

    Cost

    GP

     Businesses must increase sales always:   Sales can be increased by:

            1.   Increasing the channels

            2.   Price increase

            3.   Increase awareness

            4.  Increase the number of uses (or frequency, as with Starbucks, to 

                 increase number of occasions to drink coffee)

            5.  Increase the value of the product

     Decrease the cost:

           1.  Improve quality

           2.  Remove waste (MUDA)

           3.  Reduce labor cost

           4.   Reduce COGS

           5.   Outsource

   Increasing the GP is incresing value added,   increases value creation

2.   Setting up a real estate company:

      1  Cash/Cash in bank                xxxx

                Stockholders equity              xxxx

      2.   Purchase of land               xxxx

                Cash/Loans                         xxxx

      3.   Set up inventory

               Development cost          xxx

                    Unexpended development cost       xxxxx

              Thus let us say we buy land at  P350.00/ sm   x   50,000 =

                    P16,500,000

              Computing for development cost let us say P1,000/sm =  P50,000,000

              Total inventory / salable area =     CGS

              Saleable area =    50,000 x 65% =   32,500

             Total inventory   =   P50,000,000  +  16,500,000 =  66,500,000/32,500

             CGS =  P2,078/sm   

                        Lawn   x 2.5    =       P5,195

                        SSN   x  10.00 sm = 20,078

                        GE     x  30 =           62,340

    4.  Determine the GP  rate  vs SP

             Thus:

                  TLP                                         100%

                Less PC               17%

\

                        Insurance       4%

                       Collection fee  5%

                       Total             26%

             Net sales                                      74%

                 Less VAT   12%  -  8.88%

                         ME    20%    14.8

                         Total              23.68              

                         Amount subject for JV       50.32

                        Say  TLP  =   36,000 x  50.32%

                                                             P18,000

                       Say   50% - 50% sharing     9,000

                                     Less CGS            5,195

                                     RGP/DGP            3,805

                        Thus our RGP per installment rate =  3,805/36,000 = 10.56%

     5.  Computing for RGP for installment  sales

          MA of P600.00 x 10.56      =    P63.36

        However, actually, our CGS is P3,500 /sm or P8,350

       or    DGP   of only   P9,000 - 8,350   =  P650 only !!!

             GP rate =    650,00 /36,000  = 1.8% only

       RGP for installment sales (60 months to pay  

             P600 x 1.8%   =    ONLY P10.80!!!!

       Thus:  (CONCLUSION)

      1.  The PNL so submitted could be over stated

      2.   We have to be more efficient

      3. The special plots sale is not sustainable, and does not make money

      4.  We make money on:

           1. Regular plots

           2.  20% dp, only 3 years to pay with interest

           3. Services like PIS and PMS where there is no huge CGS

        Please print and discuss with the Chief Accountant

        What is your take on this?                   

               

             

--

Jorge U. Saguinsin

To "be the best, do your best, expect the best" always

N.B.   The information contained herein are private and confidential in nature.  The sender does not assume any damage that may arise from improper use of the email contained. ;  especially if the information in this communication falls into the wrong hands causing damage and loss. to the company or any other parties.