Senior High School
QUARTER 1 – MODULE 1
Statement of Financial Position (SFP)
Department of Education ● Republic of the Philippines
Fundamentals of Accountancy, Business and Management 2 - Senior High
School
Alternative Delivery Mode
First Edition, 2020
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ii
Introductory Message
Dear Teachers and Learners! The writer welcomes you all to this module for the
subject Fundamentals of Accountancy, Business and Management 2 in the ABM Strand of
Senior High School. The discussion focussed on the preparation of financial statements and
its analyses to determine the profitability, liquidity and solvency of the business.
As your partner in learning, I hope that you will not miss out every detail that the
writer would like you to learn in this material. Do enjoy as there are challenging and
interesting activities inside this learning modules. Congratulations in advance for this will
make you the master of your own learning.
Ops! you wait for a while, for an easy use of this material take note of some few
reminders
1. Take your time to read every detail that this module contains.
2. This material contains Module 1 and Module 2 and each of which is provided
with activities/tests that will surely lead you to learn.
3. Here are the Icons used as your guide in every part of the lesson.
Icons of this Module
What I Need to
Know
What I know
This part contains learning objectives
that are set for you to learn as you go
along the module.
This is an assessment as to your level
of knowledge to the subject matter at
hand, meant specifically to gauge prior
related knowledge.
This part connects previous lesson with
that of the current one.
What’s In
What’s New
This is an introduction of the new lesson
through various activities before it will
be presented to you
What is It
This is a discussion of the activities as a
way to deepen your discovery and
understanding of the concept.
What’s More
What I Have
Learned
What I can do
iii
This is a follow-up activity that is
intended for you to practice further in
order to master the competencies.
This activity is designed to process
what you have learned from the lesson
This is a task that is designed to
showcase your skills and knowledge
gained, and applied into real-life
concerns and situations.
4. Please do follow the directions given per activity so your experience to the use
of this material will be meaningful and fruitful.
5. Answer all the tests in this material.
6. As a courtesy to the future users, PLEASE DO NOT WRITE ANYTHING ON
ANY PART OF THIS MODULE. Write your answer/s on a separate sheet of
paper, notebook, workbook or whichever is specified by your facilitator
Special Reminders for you learners;
1. Answer every activity intelligently and diligently.
2. Write your answer as directed by your facilitator.
3. Feel free to approach or communicate your teacher/facilitator whenever you
need help.
4. Don’t forget to put a smiley face if you finish the activity within the allotted
time.
iv
Table of Contents
Page
What This Module is About…………………………………………………..
1
Icons of this Module…………………………………………………………..
2
MODULE 1
Statement of Financial position…………………...
5
Introduction to Statement of
Financial Position ………………………………..
5
Activity 1.1.1 Prepare a Personal SFP……………………………..
7
Lesson 1.1 Nature of Statement of Financial Position………
7
Lesson 1.2 Elements of Statement of Financial Position
And Steps in the Preparation……………………..
9
Activity
1.1.2
1.1.3
1.1.4
1.1.5
11
12
13
14
LESSON 1
Classify Me……………………………………………
Fill Me Now……………………………………………
Can You Solve the Problem ………………………..
Choosing the Right One…………………………….
v
Module 1
Fundamentals of Accountancy, Business and
Management 2
What I Need To Know
Beloved Learner,
Hello! I hope that you are okay. This module will guide you as you keep on
asking many things on how financial statements are prepared and presented? How
is net income measured? How are equity transactions presented? How are assets
and liabilities classified? How are cash flows presented? How are financial ratios
utilized?
These are the enduring questions meant to be addressed by this self-learning
module. This module is a response to the need for fresh and innovative instructional
materials needed for the “New Normal” way of teaching for the Accountancy,
Business and Management Track of Senior High School.
This module deals with the preparation and analysis of financial statements of
a service business and merchandising business using horizontal and vertical
analyses and financial ratios. Knowledge and skills in the analysis of financial
statements will aid the future entrepreneurs in making sound economic decisions.
Basically, the module has five lessons:
Lesson 1: Statement of Financial Position (SFP)
Lesson 2: Statement of Comprehensive Income (SCI)
Lesson 3: Statement of Changes in Equity (SCE)
Lesson 4: Cash Flow Statement (CFS)
Lesson 5: Analysis and Interpretation of Financial Statements
Hence, at the end of this module, you are expected to:
1. Identify the elements of the SFP and describe each of them (ABM_FABM12Ia-b1);
2. Classify the elements of the SFP into current and noncurrent items
(ABM_FABM12-Ia-b-2);
3. Prepare the SFP of a single proprietorship (ABM_FABM12-Ia-b-3);
4. Prepare an SFP using the report form and the account form with proper
classification of items as current and noncurrent (ABM_FABM12-Ia-b-4);
5. Identify the elements of the SCI and describe each of these items for a
service business and a merchandising business (ABM_FABM12-Ic-d-5);
1
6. Prepare an SCI for a service business using the single-step approach
(ABM_FABM12-Ic-d-6);
7. Prepare an SCI for a merchandising business using the multistep approach
(ABM_FABM12-Ic-d-7);
8. Discuss the different forms of business organization (ABM_FABM12-Ie-8);
9. Prepare an SCE for a single proprietorship (ABM_FABM12-Ie-9);
10. Discuss the components and structures of a CFS (ABM_FABM12-If-10);
11. Prepare a CFS (ABM_FABM12-If-11);
12. Define the measurement level namely, liquidity, solvency, stability, and
profitability (ABM_FABM12-Ig-h12);
13. Perform vertical and horizontal analyses of financial statements of a single
proprietorship (ABM_FABM12-Ig-h13)
14. Compute and interpret financial ratios such as current ratio, working capital,
gross profit ratio, net profit ratio, receivable turnover, inventory turnover, debt-toequity ratio, and the like (ABM_FABM12-Ig-h14)
Icons of this Module
What I Need to
Know
This part contains learning objectives that are
set for you to learn as you go along the
module.
What I know
This is an assessment as to your level of
knowledge to the subject matter at hand,
meant specifically to gauge prior related
knowledge
What’s In
This part connects previous lesson with that of
the current one.
What’s New
An introduction of the new lesson through
various activities, before it will be presented to
you
What is It
These are discussions of the activities as a way
to deepen your discovery and understanding
of the concept.
What’s More
These are follow-up activities that are
intended for you to practice further in order to
master the competencies.
2
What I Have
Learned
What I can do
Activities designed to process what you have
learned from the lesson
These are tasks that are designed to showcase
your skills and knowledge gained, and applied
into real-life concerns and situations.
What I Know
Directions. Read and analyze each item carefully. Write the letter that corresponds the best
answer on your answer sheet. 1 point each.
1. A statement of financial position can be best described as a:
A. Listing of money received and paid during the past year
B. Summary of what happened last year
C. Summary of all assets, expenses, liabilities, and revenues
D. Summary of the position of an organization
2. An asset is an
A. Expense that will recur in more than one year
B. Obligation to transfer benefits as a result of past transactions
C. Interest of the owner in the business
D. Any financial resources that is used by the business in its operation
3. The Statement of Financial Position equation is:
A. A – C = L
B. L + C = A
C. A – L = C
D. all of the choices
4. XYZ Company have non-current assets of P 60,000, current assets of P 70,000,
current liabilities of P 40,000, and a long-term loan of P 50,000; as such the
owner’s equity will be:
A. P 40,000
C. P 60,000
B. P 50,000
D. P 70,000
5. What is a financial statement that shows the financial position of an enterprise at a
particular point in time?
A. Balance Sheet
C. Income Statement
B. Cash Flow Statement
D. Statement of Changes in Equity
3
6. A Statement of Financial Position
A. Shows the changes of the owners interest
B. Reports the assets and claims of an enterprise at a specified moment in time
C. Presents revenue and expenses of an enterprise
D. Reports the inflow and outflow of cash in an enterprise
7. Which of the following transactions would increase cash as well as non-current
liabilities?
A. Long-term bank loan
B. Purchasing equipment on credit
C. Payment to suppliers
D. Payment from customers
8. Which of the following accounts is a current asset?
A. Bond Payable
B. Property, Plant and Equipment
C. Notes payables
D. Accounts receivables
9. Which of the following accounts is a non-current asset?
A. Accounts Payable
B. Capital
C. Cash
D. Trademarks
10. Which of the following accounts is a current liability?
A. Trade receivables
B. Retained Earnings
C. Trade Payables
D. Machineries
4
lesso
n
1
STATEMENT OF FINANCIAL POSITION
(SFP)
What’s In
Accounting can be defined as the “process of identifying, recording, and
communicating economic information about an organization or another entity, in
order to permit informed judgments by users of the information.” (Meyer 2009)
Based on the definition, accounting consists of inputs, several processes, and
an output. The inputs needed by an accountant are the economic transactions
entered into by the business, evidenced by supporting documents. These include
capital contribution by owners, rendering of services to customers, and payment of
expenses to suppliers.
The end product or output of accounting is useful financial information. This
useful financial information is the “story” that accounting tells to the interested users.
Useful financial information helps the owners to answer the question. “Should I
invest more cash in the business?” Creditors are also guided by this information in
answering the question. “Should we lend more money to the business?”
These transactions will undergo the process of identification, measurement,
and recording. The end product or output of accounting is useful financial
information. Identification answers “what transactions/accounts are concerned?”
Measurement, on the other hand, answers the question “how much money is
involved?” Recording then captures the transaction in the business book of
accounts.
Financial information is contained and communicated through the financial
statements. Financial statements are like chapters of a novel, telling different stories
of an interrelated subject. Specifically, financial statements are organized depictions
of the events that happened in a business. A complete set of financial statements
are composed of the following
1. Statement of Financial Position or Balance Sheet
2. Statement of Comprehensive Income or Income Statement
3. Statement of Changes in Equity
4. Statement of Cash Flow
5
What’s New
To achieve the objectives of this module, you must remember to do the
following:
 Read the lessons carefully.
 Follow all directions and given instructions.
 Answer all given tests and activities.
 Learn to familiarize the following terms:
TERM
DEFINITION
Statement of Financial Position
Also known as the Balance Sheet. This statement
includes the amounts of the company’s total
assets, liabilities, and owner’s equity which in
totality provides the condition of the company on a
specific date. (Haddock, Price, & Farina, 2012)
Permanent Accounts
As the name suggests, these accounts are
permanent in a sense that their balances remain
intact from one accounting period to another.
(Haddock, Price, & Farina, 2012) Examples of
permanent account include Cash, Accounts
Receivable, Accounts Payable, Loans Payable
and Capital among others. Basically, assets,
liabilities and equity accounts are permanent
accounts. They are called permanent accounts
because the accounts are retained permanently in
the SFP until their balances become zero. This is
in contrast with temporary accounts which are
found in the Statement of Comprehensive Income
(SCI). Temporary accounts unlike permanent
accounts will have zero balances at the end of the
accounting period.
Contra-Assets
Contra assets are those accounts that are
presented under the assets portion of the SFP but
are reductions to the company’s assets. These
include Allowance for Doubtful Accounts and
Accumulated Depreciation. Allowance for Doubtful
Accounts is a contra asset to Accounts
Receivable. This represents the estimated amount
that the company may not be able to collect from
delinquent customers. Accumulated Depreciation
is a contra asset to the company’s Property, Plant
and Equipment. This account represents the total
amount of depreciation booked against the fixed
assets of the company.
6
Activity 1.1.1 Prepare a Personal SFP:
A. Get a piece of paper.
B. Write your current savings and everything that you own (clothes,
money, gadgets, jewelry etc.)
C. Write the amount that you owe to your friends, family members,
parents (tuition)
D. Deduct the amount you owe from the amount you own
E. Associate amounts owned with assets and amount owed with
liabilities with the net amount as equity.
Processing Questions:
1. How much is your equity?
2. Do you have greater assets than your liabilities? Or vice versa?
3. There might be some cases your computation is zero or even
negative. This means that your liabilities to your friends, relatives
and/or parents are higher than your assets.
4. In business, having more assets does not mean that the business is
earning but usually companies have assets that are bigger than
their liabilities.
5. Reflect on the importance of having a personal statement of
financial position.
What Is It
Lesson 1.1 Nature of Statement of Financial Position
One can compare a Statement of Financial Position to a static picture or portrait.
This statement literally presents a company’s “position” when it comes to the
resources it owns (assets), obligations claimed against it (liabilities), and the owner’s
residual interest (equity). There are three major elements of the Statement of
Financial Position: (1) assets, (2) liabilities (3) owner’s equity. Always remember that
the total amount of assets is equivalent to the total amount of liabilities and owner’s
equity combined. (Accounting Equation)
There are two forms of Statement of Financial Position namely;
1. Report Form – A form of the SFP that shows asset accounts first and then
liabilities and owner’s equity accounts after. (Haddock, Price, & Farina, 2012)
2. Account Form – A form of the SFP that shows assets on the left side and
liabilities and owner’s equity on the right side just like the debit and credit
balances of an account. (Haddock, Price, & Farina, 2012)
7
Sample Statement of Financial Position
ABM COMPANY
Heading
Statement of Financial Position
As of December 31, 2020
ASSETS
Current Assets
Cash and Cash Equivalents
Accounts Receivables
Less: Allowance for Bad Debts
P 1,119,250.00
240,000.00
20,000.00
220,000.00
Notes Receivables
22,000.00
Inventories
Current
Assets
220,000.00
Total Current Assets
P 1,581,250.00
Noncurrent Assets
Property, Plant and Equipment
P
Long-term Investment
407,000.00
1,100,000.00
Intangible Assets
198,000.00
Total Noncurrent Assets
Noncurrent
Assets
1,705,000.00
TOTAL ASSETS
P 3,286,250.00
============
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable
P
220,000.00
Accrued Expenses
55,000.00
Unearned Income
99,000.00
Notes Payable
Current
Liabilities
110,000.00
Total Current Liabilities
P 484,000.00
Noncurrent Liabilities
Mortgage Payable
P 395,000.00
Loans Payable
100,000.00
Total Noncurrent Liabilities
P
495,00.00
TOTAL LIABILITIES
P 979,000.00
Noncurrent
Liabilities
OWNER’S EQUITY
Owner’s, Capital
P 2,307,250.00
TOTAL LIABILITIES & OWNER’S EQUITY
P 3,286,250.00
=============
Fig. 1.1 Sample of Statement of Financial Position in Report Form
8
Owner’s
Equity
Lesson 1.2. Elements of Statement of Financial Position and Steps in
Preparation
Note: The repot form of Statement of Financial Position is used in this discussion.
Refer to the sample given in Figure 1.1
1. Prepare the Statement Heading
The statement heading includes the name of the company, name of the
statement, and the date covered. The date of the statement of financial
position is “as at” or “as of” the end of the period (e.g. As of December 31,
2020). The use of “as of” in the SFP means that the amounts are cumulative
from the beginning of the life of the company since these amounts are
permanent.
2. Prepare the Asset Section
Assets are categorized as current or non-current. Current assets and noncurrent assets are arranged by liquidity. Liquidity, for this purpose, means the
ease of converting such assets into cash.
Current Assets – Assets that can be realized (collected, sold, used up) one
year after year-end date. Examples include Cash, Accounts Receivable,
Merchandise Inventory, Prepaid Expense, etc.
Noncurrent Assets – Assets that cannot be realized (collected, sold, used up)
one year after yearend date. Examples include Property, Plant and Equipment
(equipment, furniture, building, land), long term investments, Intangible Assets
etc.
3. Prepare the Liabilities Section
Liabilities are categorized as current or non-current. Finally, current and noncurrent liabilities are arranged by liquidity. Liquidity, for this purpose, means
the ease of converting such liabilities into cash.
Current Liabilities – Liabilities that fall due (paid, recognized as revenue)
within one year after yearend date. Examples include Notes Payable,
Accounts Payable, Accrued Expenses (example: Utilities Payable), Unearned
Income, etc.
Noncurrent Liabilities – Liabilities that do not fall due (paid, recognized as
revenue) within one year after year-end date. Examples include Loans
Payable, Mortgage Payable, etc.
Note: Noncurrent assets and noncurrent liabilities are also called long term
assets and long term liabilities respectively.
4. Prepare the Owner’s Equity Section
This section is basically lifted from the ending balances of accounts in the
statement of changes in equity.
5. Ensure that the Accounting Equation is Balanced
Total assets will have to equate to total liabilities and equities. Furthermore,
the statement is footed and tested for mathematical accuracy.
9
Sample Statement of Financial Position in Account Form
ASSETS
Current Assets:
Cash and Cash Equivalents
Accounts Receivables
Less: Allowance for Bad
Debts
Notes Receivables
Inventories
Total Current Assets
Noncurrent Assets:
Property, Plant & Equipment
Long-term Investment
Intangible Assets
Total Noncurrent Assets
TOTAL ASSETS
ABM COMPANY
Statement of Financial Position
As of December 31, 2020
LIABILITIES & EQUITY
Current Liabilities:
1,119,250.00
Accounts Payable
240,000.00
Accrued Expenses
20,000.00
220,000.00
Unearned Income
22,000.00
220,000.00
1,581,250.00
407,000.00
1,100,000.00
198,000.00
1,705,000.00
3,286,250.00
==========
Notes Payable
Total Current Liabilities
Noncurrent Liabilities:
Mortgage Payable
Loans payable
Total Noncurrent Liabilities
220,000.00
55,000.00
99,000.00
110,000.00
484,000.00
395,000.00
100,000.00
495,000.00
979,000.00
TOTAL LIABILITIES
OWNER’S EQUITY
Owner’s, Capital
2,307,250.00
TOTAL LIABILITIES &
EQUITY
3,286,250.00
==========
Figure 1.2 Sample of Statement of Financial Position in Account Form
Remember that the two are only formats and will yield the same amount of
total assets, liabilities and equity. The assets should always be equal to liabilities
and equity.
“There are many ways to skin a cat”. This is an expression that means there
are different ways of doing the same thing. And that also applies with the Statement
of Financial Position because there are different ways or forms to do it but still it’s the
same thing – the same content but different presentation or arrangement.
Total assets are double ruled and total liabilities and equity is double ruled
because they represent the end of a part of the financial statement.
10
What’s More
Activity 1.1.2. Classify Me
.For you to advance your learning and understanding of the Statement of Financial
Position, you have to gradually learn each of its elements and components. Classify
the following accounts whether they are assets, liability, or equity accounts. For
asset and liability accounts, classify whether they are current or non-current.
ACCOUNTS
Ex. Accounts Payable
Accounts Receivable
Cash
Interest Payable
Acain, Capital
Notes Payable
Notes Receivable
Prepaid Rent
Property and Equipment
Raw Materials
Salaries Payable
Supplies
Utilities Payable
Cash in Bank
Finished Goods
Accrued Interest
Bonds Payable
Prepaid Insurance
Unearned Income
Land
Goods in Process
Acain, Personal
Furniture and Fixtures
Accrued Salaries
Income Tax Payable
Intangible Assets
Delivery Truck
Interest Receivable
ELEMENT
Liability
11
CLASSIFICATION
Current
What Have I Learned
When the company has a lot of assets (example: cash, accounts receivable,
prepaid expenses), owners may sometimes think that the company is doing well.
There are instances that owners forget that they might also have a lot of liabilities
which may result to their equities having a very small balance. With the preparation
of the SFP, the owner can easily see the assets, liabilities and equity balances of
his/her company which will show exactly the financial position of the company as of a
given point in time. Without the SFP, the company cannot know if it truly owns
anything because in case of bankruptcy, liabilities are paid first. - Small businesses
don’t usually account for their assets and liabilities as long as the owners see that
cash is coming in. They sometimes forget that when liabilities become due, if they
don’t have enough current assets to be able to pay those liabilities, then they can get
in trouble with their debts.
Activity 1.1.3. Fill Me Now
Instruction: Fill in the blanks the correct answer to the question.
1. Learning is Fun Company had current assets amounting to Php 100,000.
Noncurrent assets for the year totaled Php 76,000. How much is the
company’s total assets? Answer: _______________
2. Happy Selling Company’s total liabilities amounted Php 10,000. Total equity
had an ending balance of Php 20,000. How much is total assets?
Answer: _______________
3. Happy Selling’s had the following accounts at year end: Cash-250,000,
Accounts Payable-70,000, and Prepaid Expense-15,000. Compute for the
company’s current assets. Answer: ______________
4. Happy Selling’s Accounts Receivable amounted to Php 500,000. Prepaid
Expense and Unearned Income totaled Php 30,000 and Php 10,000
respectively. Cash balance amounted to Php 100,000 while Accounts Payable
and Inventory totaled to Php 20,000 and Php 10,000 respectively. How much
is the company’s current assets? Current liabilities? Answer: ___________
and ________________
5. Company’s Total Liabilities and Equity amounted to Php 285,000. Total
noncurrent assets ended at Php 85,000. Cash totalled Php50,000. Inventory
amounted to Php100,000. Assuming the company had no other assets, how
much is Accounts Receivable? Answer: _______________
6. Total assets amounted to Php575,000. Total equity amounted to Php
250,000. Accounts Payable amounted to Php 50,000 while Unearned Income
totalled Php 85,000. Assuming there are no other current liabilities, compute
for the company’s noncurrent liabilities. Answer: ______________
12
What I Can Do
Report form vs Account form – these are just formats. Usually depends on the
reader for preference. Report form is the normal format for those not familiar with
accounting. Account form easily shows that the SFP is balanced and separates
assets from liabilities and equities. Separation of the current and noncurrent –
current liabilities are upcoming liabilities and the company should be prepared to pay
them. Companies should prepare as early as today for payment of noncurrent
liabilities as these usually have large balances. Current assets shows the company’s
ability to sustain its current operations while noncurrent assets shows the company’s
ability to sustain long-term operations.
Activity 1.1.4. Can You Solve the Problem?
Construct the Report Form and Account Form of the Statement of Financial Position
using the Post-Closing Trial Balance of Dela Cruz Law Office.
DELA CRUZ LAW OFFICE
POST-CLOSING TRIAL BALANCE
JANUARY 1, 2020
ACCOUNTS
DEBIT
Cash
588,500.00
Accounts Receivable
75,000.00
Office Supplies
2,000.00
Prepaid Rent
110,000.00
Office Furniture
36,000.00
Accumulated Depreciation-Office Furniture
Accounts Payable
Notes Payable
Unearned Revenue
Accrued Interest
Mortgage Payable-Long Term
Juan Dela Cruz, Capital
811,500.00
13
CREDIT
1,000.00
25,000.00
50,000.00
35,000.00
500.00
50,000.00
650,000.00
811,500.00
Activity 1.1.5. Choosing the Right One
Read and carefully examine the statements and choose the best answer.
.1. A statement of financial position can be best described as a:
A. Listing of money received and paid during the past year
B. Summary of what happened last year
C. Summary of all assets, expenses, liabilities, and revenues
D. Summary of the position of an organization
2. An asset is an
A. Expense that will recur in more than one year
B. Obligation to transfer benefits as a result of past transactions
C. Interest of the owner in the business
D. Any financial resources that is used by the business in its operation
3. The Statement of Financial Position equation is:
A. A – C = L
B. L + C = A
C. A – L = C
D. all of the choices
4. XYZ Company have non-current assets of P 60,000, current assets of P 70,000,
current liabilities of P 40,000, and a long-term loan of P 50,000; as such the
owner’s equity will be:
A. P 40,000
C. P 60,000
B. P 50,000
D. P 70,000
5. What is a financial statement that shows the financial position of an enterprise at a
particular point in time?
A. Balance Sheet
C. Income Statement
B. Cash Flow Statement
D. Statement of Changes in Equity
6. A Statement of Financial Position
A. Shows the changes of the owners interest
B. Reports the assets and claims of an enterprise at a specified moment in time
C. Presents revenue and expenses of an enterprise
D. Reports the inflow and outflow of cash in an enterprise
7. Which of the following transactions would increase cash as well as non-current
liabilities?
A. Long-term bank loan
B. Purchasing equipment on credit
C. Payment to suppliers
D. Payment from customers
8. Which of the following accounts is a current asset?
A. Bond Payable
B. Property, Plant and Equipment
C. Notes payables
D. Accounts receivables
14
9. Which of the following accounts is a non-current asset?
A. Accounts Payable
B. Capital
C. Cash
D. Trademarks
10. Which of the following accounts is a current liability?
A. Trade receivables
B. Retained Earnings
C. Trade Payables
D. Machineries
Congratulations! You have just finished Lesson 1 of this module. Let’s recap!
The Statement of Financial Position (SFP) lists the business’s assets,
liabilities, and equity. It reflects the financial standing of a business in a given period.
An asset is defined as a resource controlled by the enterprise as a result of
past events and from which future economic benefits are expected to flow to the
enterprise. Simply, assets are possessions of a business that will bring business
benefits in the future. It adds value to your business!
Assets are classified as current and non-current assets. For an asset to be
classified as current it needs to meet some of the following criteria: 1. expected to be
realized, sold, or consumed in the entity’s normal operating cycle; 2. Held primarily
for trading; 3. Expected to be realized 12 months after the reporting period; and 4. an
asset is a cash or cash equivalent unless restricted for at least 12 months after the
reporting period.
Liability is officially defined as a present obligation arising from past events;
the settlement of which is expected to result in an outflow from the entity of
resources embodying economic benefits. Liabilities can be also classified as current
and non-current liabilities. Liabilities are classified as current if the entity has no
unconditional right to defer settlement for at least 12 months, otherwise it is noncurrent.
The last element of the Statement of Financial Position is the owner’s equity.
Owner’s equity is the residual interest of the owner in the business.
Keep in mind that the total amount of the assets must equate to the total
amount of the liabilities and owner’s equity combined. To wit: Asset = Liabilities +
Owner’s Equity.
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Answer Key
What I Know / Pre-test & Post Test
1.
2.
3.
4.
5.
C
D
D
A
A
6. B
7. A
8. D
9. D
10. C
Activity 1.1.1 – Prepare a Personal SFP
 Answers may vary
What’s More / Activity 1.1.2 – Classify Me
ACCOUNTS
Accounts Receivable
Cash
Interest Payable
Acain, Capital
Notes Payable
Notes Receivable
Prepaid Rent
Property and Equipment
Raw Materials
Salaries Payable
Supplies
Utilities Payable
Cash in Bank
Finished Goods
Accrued Interest
Bonds Payable
Prepaid Insurance
Unearned Income
Land
Goods in Process
Acain, Personal
Furniture and Fixtures
Accrued Salaries
Income Tax Payable
Intangible Assets
Delivery Truck
Interest Receivable
ELEMENT
Asset
Asset
Liability
Capital
Liability
Asset
Asset
Asset
Asset
Liability
Asset
Liability
Asset
Asset
Liability
Liability
Asset
Liability
Asset
Asset
Capital
Asset
Liability
Liability
Asset
Asset
Asset
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CLASSIFICATION
Current
Current
Current
Current
Current
Current
Noncurrent
Current
Current
Current
Current
Current
Current
Current
Noncurrent
Current
Current
Noncurrent
Current
Noncurrent
Current
Current
Noncurrent
Noncurrent
Current
What Have I Learned / Activity 1.1.3 – Fill Me Now
1. P 176,000.00
2. P 30,000.00
3. P 265,000.00
4. Current Assets=P 640,000.00; Current Liabilities= P 30,000.00
5. P 190,000.00
Activity 1.1.4. Can You Solve the Problem?
1. Report Form of Statement of Financial Position
DELA CRUZ LAW OFFICE
Statement of Financial Position
As of January 31, 2020
ASSETS
Current Assets:
Cash
588,500.00
Accounts Receivable
75,000.00
Office Supplies
2,000.00
Prepaid Rent
110,000.00
Total Current Assets
775,500.00
Noncurrent Assets:
Office Furniture
36,000.00
Less: Accumulated Depreciation-Furniture
( 1,000.00)
Total Noncurrent Assets
35,000.00
TOTAL ASSETS
810,500.00
========
LIABILITIES
Current Liabilities:
Accounts Payable
25,000.00
Notes Payable
50,000.00
Unearned Revenue
35,000.00
Accrued Interest
500.00
Total Current Liabilities
110,500.00
Noncurrent Liabilities:
Mortgage Payable- Long-term
50,000.00
Total Noncurrent Liabilities
50,000.00
Total Liabilities
160,500.00
OWNER’S EQUITY
Dela Cruz, Capital
650,000.00
Total Liabilities & Owner’s Equity
810,500.00
========
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2. Account Form of Statement of Financial Position
DELA CRUZ LAW OFFICE
Statement of Financial Position
As of January 31, 2020
ASSETS
LIABILITIES & EQUITY
Current Assets:
Current Liabilities:
Cash
588,500.00
Accounts Payable
Accounts Receivables
75,000.00
Notes Payable
Office Supplies
2,000.00
Unearned Revenue
Prepaid Rent
110,000.00
Accrued Interest
Total Current Assets
775,500.00
Total Current Liabilities
Noncurrent Assets:
Noncurrent Liabilities:
Office Furniture
36,000.00
Mortgage Payable
Total Noncurrent Liabilities
Accumulated Depreciation-Furniture
(1,000.00)
Total Noncurrent Assets
35,000.00
TOTAL LIABILITIES
TOTAL ASSETS
810,500.00
OWNER’S EQUITY
==========
Dela Cruz, Capital
Total Liabilities & Owner’s
Equity
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25,000.00
50,000.00
35,000.00
500.00
110,500.00
50,000.00
50,000.00
160,500.00
650,000.00
810,500.00
==========
References
Arganda, A. M. (2016). Fundamentals of Accounting Bookkeeping 1. Anvil
Publishing, Inc.
Josefina L. Beticon, J. C. (2017). Fundamentals of Accountancy, Business and
Management 2 - Teacher's Manual. Vibal Group. Inc.
Reyes, V. D. (2017). Fundamentals of Accountancy, Business and Management 2.
GIC Enterprises & Co., Inc.
Salazar, D. R. (2017). Fundamentals of Accountancy, Business and Management 2.
Rex Bookstore.
Additional References:
Teacher’s Guide in Fundamentals of Accountancy, Business and Management 2
https://edge.pse.com.ph/openDiscViewer.do?edge_no=5b3feb584ad68ec41db82e3
77ee70f3b)
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