Senior High School
Department of Education
Republic of the Philippines
SCHOOL DIVISION OFFICE
LAS PIŇAS CITY
Fundamentals Of Accountancy,
Business And Management II
STATEMENT OF FINANCIAL POSITION
First Quarter – Module 1
Writer: Sandra H. Gali
FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
This is an 80-hour course offered in the ABM strand in the Senior High School. This course
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.
CONTENT
This is a self-instructional module for Senior High School (SHS) learners in the Department of
Education - Division of City Schools Las Pinas – Las Pinas National Senior High Schools, Main Campus
under the Alternative Delivery Mode or ADM. There are exercises to be accomplished in this
particular module which are expected to be submitted to the faculty or teacher during the face-toface encounter in field or in classroom sessions or other means of submission.
The exercises provided give emphasis in bridging the gap between theory and practice. SHS
learners are expected to analyze the concepts presented and apply these eventually in their work,
for those who are already have jobs. Before answering the exercises, the learners should have fully
understood the concepts presented. No one could stop the learners to read the modules as many
times as they desire.
Email:
sandra.gali@deped.gov.ph
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
HOW TO USE THIS MODULE
Before starting the module, I want you to set aside other tasks that will disturb you while
enjoying the lessons. Read the simple instructions below to successfully enjoy the objectives
of this kit. Have fun!
Follow carefully all the contents and instructions indicated in every page of this module.
Write on your notebook the concepts about the lessons. Writing enhances learning that is important
to develop and keep in mind.
Perform all the provided activities in the module. Let your facilitator/guardian assess your answers
using the answer key card. Analyze conceptually the posttest and apply what you have learned.
Enjoy studying! What is this module all about?
PARTS OF THE MODULE
Expectations
Pre-test
Looking Back to
your Lesson
Introduction
Brief Discussion
Activities
Remember
Check your
Understanding
Assessment
References
Answer keys
These are what you will be able to know after completing the lessons in the
module
This will measure your prior knowledge and the concepts to be mastered
throughout the lesson.
This section will measure what learning and skills did you understand from the
previous lesson.
This section will give you an overview of the lesson.
This section provides a brief discussion of the lesson. This aims to help you
discover and understand new concepts and skills.
This is a set of activities you will perform to process what you have learned from
the lesson
This section summarizes the concepts and applications of the lessons.
It will verify how you learned from the lesson.
This will measure how much you have learned from the entire module.
This is a list of all sources used in developing this module.
This contains answers to all activities in this module.
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
NAME: ___________________________________________
GRADE & SECTION __________________________
Score: ___________________
Teacher: ___________________
QUARTER 1 WEEK 1
CONTENT: STATEMENT OF FINANCIAL POSITION
The module is divided into three lessons, namely:
•
•
•
Lesson 1 – The Elements of Statement of Financial Position
Lesson 2 – Classification of the Elements of Statement of Financial Position
Lesson 3 – Preparation of Statement of Financial Position
This module will help you to
• identify the elements of the SFP and describe each of them; ABM_FABM12-Ia-b1
• prepare a SFP using the report form and the account form with proper classification of items as
current and noncurrent ABM_FABM12-Ia-b-4
Let us start your journey in learning more on Statement of Financial Position. I am sure
you are ready and excited to answer the Pretest. Smile and cheer up!
Directions: Read carefully and write the correct answer on the box. (letter only)
1. Which is an essential characteristic of an asset?
A. An asset is tangible
B. An asset is obtained at a cost
C. An asset provides future benefits
D. The claims to an asset’s benefits are legally enforceable
2. Which should NOT be considered as current assets?
A. Prepaid expenses
B. Trading securities
C. Building
D. Inventory
3. Which of the following is NOT a noncurrent asset?
A. Copyrights
B. Supplies
C. Equipment
D. Machineries
4. These are obligations of an entity arising from past events and basically, they are the debts of the
entity to external creditors.
A. assets
B. liabilities
C. equity
D. revenue
5. It represents the residual interest of the owners of the entity.
A. assets
B. liabilities
C. equity
D. revenue
6. Which of the following is NOT a current liability?
A. mortgage payable B. accounts payable
C. unearned revenue D. accrued expense
7. The following represents the accounting equation, EXCEPT:
A. Assets = Liabilities + Equity
C. Liabilities = Assets - Equity
B. Equity = Assets - Liabilities
D. Assets = Liabilities – Equity
8. When classifying assets as current and noncurrent ______________.
A. the amounts at which current assets are carried and reported must reflect realizable cash value.
B. prepayments for items such as insurance and rent are included in “other assets”.
C. current assets are determined by the seasonal nature of the business.
D. assets are classified as current if reasonably expected to be realized in cash or consumed during
the normal operating cycle.
9. The basis for classifying asset as current or noncurrent is the period of time normally require to
convert cash invested in _________________
A. inventory back into cash or 12 months, whichever is shorter.
B. receivables back into cash or 12 months whichever is longer.
C. property, plant and equipment back into cash or 12 months, whichever is longer
D. inventory back into cash or 12 months, whichever is longer.
10. Accrued revenue would normally appear in the statement of financial position under ____.
A. Noncurrent assets
C. Noncurrent liabilities
B. Current assets
D. Current liabilities
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
11. Prepaid expense would normally appear in the statement of financial position under ____.
A. Noncurrent assets
C. Noncurrent liabilities
B. Current assets
D. Current liabilities
12. Which of the following asset has no physical appearance?
A. cash
B. patent
C. building
D. inventory
13. Which of the following are collectibles evidenced by a promissory note?
A. Accounts receivable
C. Accounts payable
B. Notes receivable
D. Notes payable
14. The total asset of Blue Ribbon Company amounts to ₱2,500,000 and owner has 65% over it. How
much would be the total liability be presented in the statement of financial position?
A. ₱1,625,000
B. ₱1,500,000
C. ₱875,000
D. ₱500,000
15. The statement of financial position of Junior Car Wash Company shows the following information as
at June 30, 2022
Assets
Liabilities and Equity
Cash
70,000
Accounts Payable
170,000
Accounts Receivable
?
Notes Payable
?
Car
?
Junior, Capital
?
Equipment
?
Financial record shows that customers owed accounts of ₱40,000. Mr Junior signed a note payable to
the bank for ₱500,000 which he used to buy the car and equipment. The cost of equipment is ₱380,000.
Only half of the notes are outstanding. Complete the statement of financial position at the end of the
period.
Assets
Cash
Accounts Receivable
Car
Equipment
Total Assets
₱
₱
Liabilities and Equity
70,000 Accounts Payable
₱ 170,000
Notes Payable
Junior, Capital
Total Liabilities and Equity
₱
Great! You finished answering the questions. You may request your facilitator to check your work.
Congratulations and keep on learning!
Lesson
The Elements of Statement of Financial Position
1
Competency code:
ABM_FABM12-Ia-b1
MELC: Identify the elements of the Statement of Financial Position and describe each of them.
Objectives: At the end of this lesson, the learners will be able to……
1. Identify the elements of Statement of Financial Position;
2. Describe each account of asset, liability and equity;
3. Solve problems related to the computation of assets, liabilities and equity.
LOOKING BACK TO YOUR LESSON:
Direction: Write the letter A, L or E on the given box before the word, if the written word is
an Asset, Liability or Equity respectively.
Inventory
Accounts payable
Capital
Cash
Accrued expense
Trading securities
Equipment
Retained earnings
Long term debt
Accrued Revenue
Accounts receivable
Prepaid expense
Drawing
Common stock
Building
Notes payable
Supplies
Rent deposit
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
ACTIVITY: Identify the account that is most likely to represent the following picture and describe briefly.
_______________
_______________
_______________
_______________
________
_______________
_______________
_______________
_______________
________
_______________
_______________
_______________
_______________
________
_______________
_______________
_______________
_______________
________
_______________
_______________
_______________
_______________
________
_______________
_______________
_______________
_______________
________
INTRODUCTION:
Financial Statements –
• are the means by which the information accumulated and processed in financial accounting is periodically
communicated to users.
• are the end product or main output of the financial accounting process.
• Objectives: to provide information about the financial position, financial performance and cash flows of an
entity that is useful to a wide range of users in making economic decisions.
Components of Financial Statements:
1. Statement of Financial Position
2. Income Statement
3. Statement of Comprehensive Income
4. Statement of Changes in Equity
5. Statement of Cash Flow
6. Notes to Financial Statement
DISCUSSION:
STATEMENT OF FINANCIAL POSITION
• A financial statement that reveals the financial position of a company comprising assets, liabilities and
equity as at a particular date.
• Purpose: The users analyze this statement to evaluate such factors as liquidity (ability to pay short-term
obligations), solvency (ability to meet long-term obligations and manage operations into the foreseeable
future) and the need of the entity for additional financing.
• The US GAAP uses the terminology Balance Sheet, while the International Financial Reporting Standard
(IFRS) uses the term Statement of Financial Position.
Elements of Statement of Financial Position:
1. Assets
2. Liabilities
3. Equity
Assets – resources of the company.
Characteristics of assets:
1. Resources controlled by the entity.
2. Result of past transaction/event.
3. Future economic benefits are expected to flow to the entity.
4. The cost can be measured reliably.
Assets can be
a. Tangible – with physical appearance
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
b. Intangible - without physical appearance
Example of assets:
Cash – refers to money readily available to be used in the company’s operation. It includes cash in bank, cash
on hand (bills, coins, and bank checks received from customers) kept in the premises of the company. A
check is a bank document used by the issuer to instruct the bank to pay the assigned payee from funds in
the issuer’s bank account. A check is classified as cash if the date of the check is on or before the
statement of financial position date. Classification of cash fund depends on purpose:
• Unrestricted cash – readily available for use – cash.
• Restricted cash:
➢ Funds set aside for current purposes – cash. Examples: petty cash fund, payroll fund, travel fund,
interest fund, dividend fund, and tax fund.
➢ Funds set aside for non-current purposes – long-term investment. Examples: sinking fund,
preference share redemption fund, contingent fund, insurance fund, and fund for acquisition or
construction of PPE.
Valuation of cash: at face value; foreign currency is measured at the current exchange rate.
Cash equivalents – technically are not cash because it is not readily available for use. These are short-term
investments that are highly liquid and easily convertible into cash with a maturity period of 90 days or less
from the date of purchase. Example: Treasury bills (short-term government securities with a fixed interest
rate and maturity date), commercial paper (short-term debt securities issued by corporations to raise
funds), or bank certificates of deposit (time deposits with a fixed interest date and maturity date).
Valuation: initially at cost, subsequently at fair value (the amount that will be received upon maturity).
To illustrate:
Pida Convenience Store is managed and owned by Natalis Pida. Determine the amount of cash
balance as of December 31, 2022, on the following information:
• He kept some cash in the store as change fund (panukli). The cash count revealed 6 pieces of
100 peso bills, 7 pieces of 50 peso bills, 10 pieces of 20 peso bills, 5 pieces of 20 peso coins, 10
pieces of 10 peso coins, 20 pieces of 5 peso coins, 20 pieces of 1 peso coin and 50 pieces of 25
centavo coins.
• There are four checks payments from customers in the drawer composed of the following:
1. ₱20,640 dated December 29, 2022
2. ₱15,120 dated January 15, 2023
3. ₱7,500 dated November 30, 2022
4. ₱11,550 dated January 5, 2023
• The company maintained four bank accounts with the following balances:
1. BDO savings account balance as shown in passbook as of December 31, 2022, ₱26,770.50
2. Union bank checking account, overdrawn by ₱15,500.
3. Metrobank time deposit ₱100,000 due February 15, 2023. The deposit was made February
15, 2022.
4. Citibank checking account balance as shown in the bank statement as of December 31,
2022, ₱25,000. (assume that there are no debit/credit memos, no outstanding checks and
other fees unrecorded)
• The company invested in debt security on November 15, 2022, amounting to ₱50,000 which
matures on February 14, 2023.
SOLUTION:
Check dated Jan. 15, 2023
15,120
Cash on hand (bills and coins):
Check dated Jan 2, 2023
11,550
₱100 x 6
600.00
Classify
as
Accts
receivable
26,670
₱50 x 7
350.00
₱20 x 10
200.00
Time deposit of ₱100,000 is classified as
₱20 x 5
100.00
Short-term investment because the date
₱10 x 10
100.00
of purchase is more than 90 days
₱5 x 20
100.00
maturity.
₱1 x 20
20.00
₱0.25 x 50
12.50
Total bills and coins
1,482.50
Total of these are considered as cash on
Dated checks:
hand.
₱20,640 + ₱7,500
28,140.00
Cash in bank:
Bank overdraft = 15,500 classified as
₱26,770.50 + ₱25,000
51,770.50
current liability.
Cash equivalent (debt security)
50,000.00
Cash and cash equivalent
131,393.00
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
Bank overdraft – when the cash in bank account has a credit balance, this results from issuance of checks in
excess of deposits. This is classified as current liability and should not be offset against other bank
accounts with debit balances unless the company is maintaining more than one account in one bank.
To illustrate:
Pida Convenience Store maintained five bank accounts with their corresponding balances as of December
31 as follows:
1. BDO Saving account, Las Pinas branch, balance as shown in passbook, ₱23,150.
2. BDO Checking account, Las Pinas branch, overdrawn by ₱2,650.
3. Metrobank one-year time deposit, Bacoor branch, due on Feb 15, 2023, ₱100,000.
4. Citibank Checking account, Paranaque branch, bank statement balance, ₱55,000
5. Union bank Current account, Las Pinas branch, overdrawn by ₱5,650.
How much will be reported as Cash in bank as of December 31, 2022, assuming there are no debit/credit
memos?
Note:
SOLUTION:
• Metrobank time deposit
BDO saving account
23,150
₱100,000 is classified as shortBDO checking account -overdraft (same branch)
(2,650)
term investment.
Citibank checking account
55,000
• Union bank overdraft ₱5,650 is
Total Cash in bank
75,500
classified as a current liability.
Short-Term Investments – these are temporary investment that includes bonds, promissory notes, certificate
of deposit, and stocks of other corporation that matures in less than one year but more than 90 days.
Valuation: initially at cost (purchase price plus any transaction cost); subsequently at fair value. Fair value
is the observable current market price.
Receivables – pertain to the company’s right to collect or right to claim payment.
• Accounts receivable - collectible from customers evidenced by sales invoices or charge invoices. A
credit sales agreement gives rise to accounts receivable. It normally comes with a term such as n/30;
2/15, n/45.
• Notes receivable – a loan granted to debtor evidenced by promissory notes. A promissory note is a
legal document that says the borrower promises to pay on scheduled payment dates a specified sum
called principal and interest and stated interest rate.
• Interest receivable –when interest is collectible on promissory notes received from clients and
customers.
• Loan receivables – collectible from loans to customers.
• Rent receivable – rent already earned but not yet collected from the tenant.
• Dividend receivable – dividend collectible by a shareholder from a corporation.
• Advances to employees – these are loans provided by employers to their employees.
• Advances to suppliers – these are prepayments to suppliers for the goods or services that will be
received in the future. Can be presented as a separate line item under current asset or be listed as
prepaid expense account.
• Allowance for doubtful accounts – the estimated uncollectible amount of accounts receivable. (contra
accounts receivable account).
Valuation of receivables: initially at fair value plus transaction costs that are directly attributable to
the acquisition. Fair value is the transaction price or the value of the consideration given.
Subsequently, receivables are measured at amortized cost or the net realizable value.
To illustrate:
Pida Convenience Store has the following transaction for the month of December 2022:
• Dec 1 Sold to Customer A assorted merchandise with a list price of ₱25,000, 5% trade discount.
Terms n/15.
• Dec 5 Sold to Customer B, ₱15,000, terms 1/10, n/20.
• Dec 7 Rented a portion of the store to Jolly FC to display its products. The rent for the month of Dec
is ₱2,500. No payment is made until Jan. 7, 2023.
• Dec 10 sold to Customer C, ₱35,000, terms 2/15, 1/30, n/45.
• Dec 15 Customer B paid.
Note: Customer A’s failure to pay his account on time results in 1% of credit sales uncollectibility.
Determine the amount of receivables to be reported in the statement of financial position at the end of
December, 2022.
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
SOLUTION:
Customer A (25,000 x 0.95)
Customer C
Total Accounts receivable
Less: Allowance for bad debts (23,750 x 0.01)
AR, Net realizable value 12/31/2022
Rent receivable
Total Receivables, net
23,750.00
35,000.00
58,750.00
(237.50)
58,512.50
2,500.00
61,012.50
Merchandise Inventories – refers to the cost of unsold merchandise that the company purchased for the
purpose of reselling to its customers in the normal course of business. The sold merchandise is called cost
of sale or cost of goods sold.
• In a manufacturing company, inventories are composed of:
a. Raw materials – natural materials used in the first stage of production.
b. Work-in process – raw materials that were turned into partially finished products ready for the
next production process.
c. Finished goods – these are end-of-the-line products that are ready for shipment or sale.
• In a consignment arrangement, the owner places his goods “on consignment” in the premises of the
store owner. The store is not obligated to purchase the goods. The owner may withdraw his unsold
goods from the store at any time. Goods on consignment (unsold) are to be accounted for in the
owner’s statement of financial position. Proceed from the sold goods are to be remitted by the store
to the owner. The store’s income from this transaction maybe in the form of commission or rent from
the space used to display the goods.
o Consignee – the company or person to whom the goods are sent/delivered.
o Consignor – the company or person that ships/delivered the goods.
To illustrate:
Pida Convenience Store made a physical count of the merchandise inside its store on December 31,
2022. The result of the count is given below.
Item
Unit cost
Selling price per unit SOLUTION
(A)
(B)
(A X B)
1 cartoon of candies with 24 packs
₱20/pack
₱36/pack
480
1 sack of rice (50kgs)
₱32/kg
₱45/kg
1,600
10 packs of detergent (500gms each) ₱92/pack
₱126/pack
920
10 bars of chocolate
₱65/bar
₱85/bar
0
15 notebooks
₱15/notebook ₱20/notebook
210
2 boxes of sardines with 48 cans/box ₱16/can
₱22/can
1,536
12 sachets of 3-in-1 coffee
₱4.50/sachet
₱7.50/sachet
54
24 pineapple juice in can
₱32/can
₱45/can
768
Merchandise inventories 12/31/22
₱5,568
Additional information:
a. The chocolate bars were on consignment from Tobi Bars.
b. One of the notebooks is used for listings of customers’ credit.
What is the amount of merchandise inventory to be reported in the statement of financial position at
year-end?
Note:
• The chocolate bars under consignment are excluded from the inventory of Pida Convenience
Store. It is accounted for as inventory of Tobi Bars.
• Only 14 notebooks are accounted as inventory, the other one is accounted as supplies
expense.
NOTE: The above illustration is applicable if the unit cost of each inventory is properly monitored and
accounted. There are three methods of costing inventory: FIFO, LIFO, and Weighted Average as already
discussed in Accounting 1. To calculate ending inventories, the following formula is followed:
Beginning inventory
xx
Add: Net purchases
xx
Goods available for sale
xx
Less: Cost of goods sold
xx
Ending inventory
xx
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
To illustrate a manufacturing industry’s inventory:
Fluppyburgs Company is producing a very delicious burger using Japanese cake freshly baked every day and a
sumptuous patty using the right ground beef with a good balance of fat. During the month, the company
bought ingredients amounting to ₱45,000. 90% of the ingredients were mixed to produce burgers. The cost of
labor is ₱7,000 and the indirect materials used to complete the production is ₱5,000. At the end of the month,
burgers that are still in process equivalent to ₱1,100. The total number of burgers made is 3,425 pieces of
which 3,365 pieces were sold. What is the ending inventory to be reported in the statement of financial
position at the end of the month?
SOLUTION:
Direct Raw materials used (0.90 x 45,000)
40,500
Raw material unused (0.10 x 45,000)
4,500
Direct labor cost
7,000
Work in process
1,100
Factory overhead (indirect materials)
5,000
Unsold finished goods (60 x 15)
900
Total manufacturing cost
52,500
Total ending inventory
₱6,500
Less: Work-in process, end
1,100
Finished goods
51,400
Unsold finished goods = 3,425 – 3,365
Divide by No. of burgers made
3,425
Cost per burger
15.00
Note: all ending inventories will become the beginning inventories to the next accounting cycle.
Prepaid expenses – future expenses that the company had paid for in advance.
• Supplies – these are items bought for office use such as pens, papers, inks, and the like.
• Prepaid rent – rental fee paid in advance for future rent consumption.
• Prepaid insurance – insurance premium paid to cover future uncertainties.
NOTE: all prepaid expenses are transferred to an expense account when the expenses are already
consummated.
To illustrate:
Pida Convenience Store paid premium of ₱3,600 on October 1, 2022, to cover the fire insurance of the
store for one year. As of December 31, 2022, how much is to be reported as Prepaid Insurance in the
statement of financial position?
Solution:
Prepaid Insurance = 9/12 x 3,600 = ₱2,700 (9 months unconsummated as of Dec. 31, 2022)
Insurance expense = 3/12 x 3,600 = ₱900 (3 months consumed are to be transferred to an expense
account)
Property, plant, and equipment (PPE) – these are long-term assets that are used in the operations of the
business. Capitalization is the process of recognizing the asset while depreciation refers to transferring the
cost of asset to an expense. Depreciation is the method to allocate the cost of a tangible asset over its
useful life. Depreciation is linked to usage, gradual wear and tear, or obsolescence.
• Land – owned for business purposes (not for sale). This is the only PPE that is not subject for
depreciation.
• Equipment – these are tangible assets that are used in a business’s operation and are expected to
have a useful life of more than one accounting period. These are mechanical tools for using
production or making or repairing any big machine. Examples: Computers, printers, delivery trucks,
tools used by craftsmen, kitchen equipment, microscopes, x-ray, and the like.
• Machineries – powered by mechanical, chemical, thermal, or electrical means, and are often
motorized. Used for production and manufacturing purposes. Machine has its own system to do any
work. Examples: Packaging machines (for filling, sealing, and labeling food products), food processing
machinery (slicer, dicers, grinders), turbines (converts various forms of energy into mechanical energy
for electricity generation), looms (used to weave threads into fabric), and the like.
• Building – a structure with a roof and walls intended for store, office, warehouse, or factory use.
• Furniture & fixtures – items or movable equipment that are used to furnish an office. Example: office
table, chair, shelves or cabinets.
• Tools – items used by the company to operate in the day-to-day business. Example: mechanical tools,
or cooking tools.
• Accumulated depreciation - represents the decrease in value of a fixed asset due to continued use,
wear & tear, passage of time, and obsolescence. (contra property, plant, and equipment asset)
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
Valuation: Initially at cost; subsequently at book value or carrying value. (cost minus accumulated
depreciation)
To illustrate:
Pida bought a cash register machine at a cost of ₱25,000 on March 1, 2022 with a salvage value of
₱1,000 after five years. In addition, on August 1, 2022, Pida purchased an office table and chair at a
cost of ₱15,000 with a salvage value of ₱500 after seven years. What amount of property, plant, and
equipment is to be reported at the end of December 2022? The company is using a straight-line
method of depreciation.
SOLUTION:
Office equipment
25,000
Less: Accumulated depreciation (25,000-1,000)/5 x 10/12
(4,000)
21,000
Table and Chair
Less: Accumulated depreciation (15,000-500)/7 x 5/12
Total Property, plant, and equipment, net, 12/31/22
15,000
(863)
14,137
35,137
Long-term investments – these include real estate, money restricted for a building project, bonds, preferred
stocks, or common stocks where the holding period last for more than 12 months.
Purpose of investments:
a. For accretion of wealth, through interest, dividends, royalties and rentals.
b. For capital appreciation as in the case of investment in land, real estate, gold, diamond, and other
precious commodities.
c. For ownership control as in the case of investment in subsidiaries and associates
d. For meeting business requirements as in the case of sinking fund, preference share redemption fund,
or plant expansion fund.
e. For protection as in the case of interest in life insurance contract in the form of cash surrender value.
Valuation: initially at cost (purchase price plus any directly attributable transaction cost such as
brokerage fee); subsequently at fair value (current market value)
To illustrate:
Pida Convenience Store purchased equity securities on June 1, 2022, from the following corporation with
the following market value on December 31, 2022:
Cost
Market value
Gain/(Loss)
ABC preference share
20,000
15,000
(5,000)
DEF ordinary share
80,000
95,000
15,000
XYZ ordinary share
100,000
110,000
10,000
TOTAL
200,000
220,000
20,000
The amount of Investment in securities, 12/31/22
₱220,000
Note: Initially, the investment in securities is ₱200,000. The ₱20,000 difference is to be reported as
Unrealized Gain under the Other Comprehensive Income (OCI) or under Profit/Loss depending on the
nature of the investment. This topic will be discussed in higher accounting.
Biological assets – living plants and animals (agricultural activity manage by an entity)
• Consumable – those that are to be harvested as agricultural produce or sold as biological assets.
Agricultural produce are those that are in their natural state and are not yet processed. These are
classified as current assets, normally inventories.
• Bearer – held to bear produce
o Bearer plants – are living plants that are expected to bear agricultural produce for more than one
period. These are presented in the same way as property, plant, and equipment.
o Bearer animals – are animals that are used for breeding to generate economic benefits over
multiple periods. These are presented as biological assets. Animals related to recreational
activities are accounted for as property, plant, and equipment.
Valuation: initially at fair value less cost of disposal; subsequently at fair value less cost of disposal. Any
subsequent changes in the fair value shall be included in the profit/loss.
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
To illustrate:
At the beginning of the year, a company purchased 100 cows that are 3 years old for ₱35,000 each for the
purpose of producing milk for the local community. On July 1, the cows gave birth to 30 calves.
The active market provided the fair value less cost of disposal of the biological assets as follows:
Newborn calf on July 1
5,000
Newborn calf on December 31
5,500
½-year-old calf on December 31
9,500
3 years old cow on December 31
37,000
4 years old cow on December 31
48,000
Milk harvested during the year
120,000
What is the amount of biological assets to be reported on December 31?
SOLUTION:
4 years old cow (100 x 48,000)
4,800,000
½-year-old calves (30 x 9,500)
285,000
Total Biological assets 12/31
5,085,000
Note: the change in fair value of the biological assets is to be reported as ‘Gain from change in fair value’
in the Statement of Comprehensive Income and computed as follows:
Change in fair value of 100 cows: (48,000 – 35,000) x 100
1,300,000
Change in the fair value of 30 calves: (9,500 – 5,000) x 30
135,000
Fair value of 30 newborn calves: 5,000 x 30
150,000
Milk produce
120,000
Gain from change in fair value
1,705,000
The milk harvested is accounted for as Milk Inventory ₱120,000 under current asset.
Intangible assets – these are identifiable non-monetary assets without physical substance. Identifiable means
distinguish it clearly from the entity or from other rights and obligations. They represent valuable rights,
privilege or intellectual property that a business or individual owns.
• Copyright – is an exclusive right given to authors, composers, or creators of certain categories of work
such as literary, dramatic, musical, sound recordings, films.
• Patent – is an exclusive right granted to an inventor to prevent others from making, using, selling, or
importing the patented invention without permission. It is an intellectual property protection that
allows inventor to control their invention. The cost of licensing and other related legal fees in securing
the patent rights are capitalized. The research and development costs are expensed.
• Franchise – an exclusive right granted by a franchisor to a franchisee to operate a business using the
franchisor’s established brand, business model, and support system.
• Tradename – is the official name under which product or service is marketed.
• Trademark – is an exclusive right to use a word, phrase, slogan, symbol, logos, or design that
identifies or distinguishes goods or services in the marketplace.
• Goodwill – is unidentifiable intangible asset that arises when one company purchases another for a
premium value. The value of company’s brand name, solid customer base, good customer relations,
etc represents goodwill.
Valuation: depends on the type of intangible asset. Initially, at cost (licensing fee plus other legal fees
paid); subsequently, subject to amortization or impairment test. This topic will be discussed further in
higher accounting.
To illustrate:
The entity developed a patent at a cost of ₱150,000 and spent ₱200,000 for the licensing of the patent
including legal fees and the cost of models and drawings that accompany the registration on January 1,
2021. The patent will be useful for the entire life of 20 years. What is the amount of patent that would
be reported in the statement of financial position at the end of 2021?
SOLUTION:
Cost of license
200,000
Amortization expense (200,000/20)
(10,000)
Amortized cost
190,000
Note: the ₱150,000 is to be recorded and reported as Research and Development Expense in the
statement of comprehensive income.
The valuation of other intangible assets differs from each other. This lesson will be discussed further in
higher accounting.
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
Liabilities - obligations that the company is required to pay.
Characteristics of liabilities:
1. They are current obligations that obligate an entity.
2. The liability arises from a past event.
3. Settlement of an obligation will result in transferring of assets or providing service in the future.
Example of liabilities:
Payables –obligations to make payment to creditors.
• Accounts payable - obligation to suppliers of goods/services received.
• Notes payable - obligation to pay documented in a promissory note.
• Loans payable - obligation to pay based on the earlier receipt of a sum of cash from a lender.
Accrued Expenses – expenses incurred but not yet paid. (Ex. Salaries, utilities, rent, interest)
• Salaries payable - the amounts owed to employees for wages earned but not yet paid.
• Utilities payable -the amounts owed to the utility companies for electricity, gas, water, and phone as
of the date of the balance sheet.
• Interest payable – the amount of interest incurred on borrowed funds but not yet paid to the
creditors or lenders as of the date of the balance sheet.
• Rent payable -the amount of rent that the tenant owes to the lessor for the use of the leased
property but not yet paid as of the date of the balance sheet.
Unearned income – these are payments received in advance for goods or services to be delivered in the
future.
To illustrate:
Pida Convenience Store incurred the following transactions during the year 2022:
Oct 5 - purchased merchandise from Yale Industries with a list price of ₱28,000, 5%/2%. The term is 2/15,
n/60.
Oct 15 - loaned from BDO, ₱100,000, and issued a 120-day promissory note at 12% per annum. Assume
360-days in a year.
Oct 18 - purchased merchandise from Kobe Merchandising Co., ₱85,000, terms 1/45, n/90.
Oct 20 - paid half of the accounts to Yale Industries.
Nov 1 - borrowed money from a friend, ₱50,000, with 5% interest for 3 months due on February 1, 2023.
Nov 15 – purchased merchandise from ABC Co., ₱33,000. Terms n/45.
Dec 5 – paid the full amount to Yale Industries.
Dec 15 – paid 80% of the accounts to Kobe Merchandising.
Dec 20 – received advance payment from customer for goods to be delivered next month, ₱120,000.
Dec 30 – the company was not able to pay its rent for three months until January 5 of the following year.
Monthly rental, ₱10,000.
What is the amount of liability to be reported at the end of December 2022?
SOLUTION:
Accounts payable:
Kobe Merchandising (85,000 x 0.20)
17,000.00
ABC Co.
33,000.00
Total Accounts payable
50,000.00
Notes payable
100,000.00
Loans payable
50,000.00
Interest payable
Notes (100,000 x 0.12 x 75/360) = 2,500.00
Loans (50,000 x .05 x 2/3)
= 1,666.67
4,166.67
Rent payable (10,000 x 3 months)
30,000.00
Unearned revenue
120,000.00
Total Liabilities 12/31/22
354,166.67
Note: all the liabilities listed above are classified as current liabilities.
Long-term Debt– these are obligations or debts to be settled at some specific date that is more than one year
away from the date of the balance sheet. The maturity period is longer than one year.
• Notes payable -these are loans with a written promise to repay a specific amount at a future date
longer than one year.
• Mortgage payable – these are debts used to purchase or finance real estate properties wherein the
property itself often serves as collateral.
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
Bond payable – these are borrowed funds from investors supported by bond certificates with a
promise to make periodic interest payments and repay the principal amount at a specified maturity
date.
Valuation of liabilities: initially at present value; subsequently at amortized cost.
•
To illustrate:
Pida Convenience Store is expanding its business by constructing a branch at Bacoor, Cavite. To fund the
expansion, Pida made the following transactions for the year 2022:
Aug 1 borrowed ₱300,000 from Metrobank and issued a promissory note payable on August 1, 2026.
Terms of the loan: Principal amount is to be paid on due date. The interest rate is at 6% per annum
payable every 6 months starting January 31, 2023.
Sept 1 borrowed ₱500,000 from Unionbank payable in 5 equal annual payments starting August 31, 2023
plus interest on the unpaid balance. The interest rate is 10% per annum.
Oct 1 to fund the operation of the new branch, Pida issued bonds with a face amount of ₱500,000 at 97.
The bonds mature in 5 years and pay 12% interest semiannually on April 1 and Oct 1.
How would you account the above transactions as of December 31, 2022?
SOLUTION:
Notes payable (Metrobank)
300,000
Long-term debt (Unionbank)
400,000
Bonds payable
Face amount
500,000
Less: Bond discount
(500,000 x .03) – ((500,000x.03)/5 x 3/12)
(14,250)
485,750
Total Long-term Debt
1,185,750
Bond discount: 500,000 x .03
Amortization of bond discount: 15,000/5 yrs x 3/12
Ending balance Bond discount
Current portion of long-term debt (Unionbank) 500,000/5
Interest payable:
Metrobank (300,000 x 0.06 x 5/12)
7,500.00
Unionbank (500,000 x 0.10 x 4/12)
16,666.67
Bonds (500,000 x 0.12 x 3/12)
15,000.00
Total current liabilities
Interest expense:
Metrobank (300,000 x 0.06 x 5/12)
Unionbank (500,000 x 0.10 x 4/12)
Bonds (500,000 x 0.12 x 3/12)
Amort of bond discount (15,000 – 14,250)
Total interest expense reported to income statement
15,000
750
14,250
100,000.00
39,166.67
139,166.67
7,500.00
16,666.67
15,000.00
750.00
39,916.67
Note1: if bonds are issued at a price less than the face amount, bonds are sold at a discount. Bond
discounts are deductible from the face of bonds. Bond discounts are to be amortized over the life
of the bond and charged to interest expense.
Note 2: if bonds are issued at a price higher than the face amount, bonds are sold at a premium. Bond
premiums are added to the face of the bonds. Bond premiums are to be amortized over the life of
the bond and credited to interest expense.
Equity - is the net asset of the business. It reflects the portion of the assets that belong to the owners of the
business.
Components of Equity
For Sole proprietorship/Partnership:
• Owner’s capital – any cash/property invested by the owner in the business.
• Owner’s drawing –personal withdrawals made by the owner.
• Net income/loss – the result of revenue minus expense.
For Corporation:
• Share Capital - corporation's equity that has been obtained by the issue of shares in the corporation to a
shareholder. It represents a piece of ownership in a corporation. Shares are measured at par value
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
o Common share – with voting rights; variable dividends that are declared by the board of directors and
never guaranteed; value of shares is regulated by demand and supply of the market participants
o Preferred share – no voting rights; investors are usually guaranteed a fixed dividend in perpetuity; have
a par value which is affected by interest rates (When interest rates rise, the value of the preferred stock
declines, and vice versa)
• Share premium - the excess amount paid by an investor over and above the par value price of a stock.
• Retained Earnings - the accumulated net income of the corporation that is retained by the corporation at
a particular point of time.
• Treasury shares - stocks which is bought back by the issuing company, reducing the amount of
outstanding stock on the open market.
The Statement of Financial Position is formatted in the same way as the basic accounting equation:
ASSETS = LIABILITIES + EQUITY
REMEMBER:
Statement of Financial Position is a financial report that shows the financial health of the company in terms
of its:
• Assets are resources that are within the control of the company and have future economic benefits.
• Liabilities are obligations that the company is required to pay.
• Equity is the amount that belongs to the owner after deducting all the liabilities of the company. It
the net asset of the business.
Importance of Statement of Financial Position:
• Helps determine the company’s liquidity, solvency, and the need of the entity
Lesson
2
Classification of The Elements of
Statement of Financial Position
Competency code:
ABM_FABM12-Ia-b2
MELC: Classify the elements of the SFP into current and noncurrent items
Objectives: At the end of this lesson, the learners will be able to…
1. Classify assets and liabilities as to current and non-current;
2. Solve problem that requires classification of current and non-current assets and liabilities; and
3. Differentiate current from non-current items.
LOOKING BACK TO YOUR LESSON:
Direction: Match the accounts on the table with the appropriate elements of the
Statement of Financial Position. Write on their respective column.
Mortgage payable
Accounts payable
Cash and cash equivalent
Owner’s Capital
Unearned income
Assets
TABLE OF ACCOUNTS
Inventory
Notes receivable
Office Equipment
Accrued rent expense
Owner’s Drawing
Liabilities
Prepaid rent expense
Interest payable
Copyright
Building
Accumulated depreciation
Equity
INTRODUCTION:
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
What is actually the origin of Balance Sheet?
LIABILITIES
The balance sheet is divided into two parts: assets on the
(claims of creditors)
other side and claims on the other side. Claims of creditors
ASSETS
EQUITY
are called liabilities while claims of owners are called equity.
(claims of owners)
The total assets should equal the total of the claims. Hence,
the statement was referred to as Balance Sheet because it is a statement where the two parts must balance.
A balance sheet is also called a ‘statement of financial position’ because it provides a snapshot of your assets
and liabilities — and therefore net worth — at a single point in time.
DISCUSSION:
A modification of this statement is called the classified Statement of Financial Position. This means that
assets and liabilities are classified as current or non-current.
When an entity supplies goods or services within a clearly identifiable operating cycle, the separate
classification of current and noncurrent assets is useful information by distinguishing between net assets that
are continuously circulating as working capital from the net assets used in long-term operations.
The operating cycle of an entity is the time between the acquisition of assets for
processing and their realization in cash or cash equivalent.
When the entity’s normal operating cycle is not clearly identifiable, the duration is
assumed to be twelve months.
Operating
cycle
An entity shall classify asset as current when:
1. The asset is cash or cash equivalent unless the asset is restricted to settle a
liability for more than twelve months after reporting period.
2. The entity holds the asset primarily for the purpose of trading.
3. The entity expects to realize the asset within twelve months after reporting period.
4. The entity expects to realize the asset or intends to sell or consume it within the entity’s normal operating
cycle.
Realization – converting the asset into cash or cash equivalent.
Noncurrent assets are assets that are not classified as current.
An entity shall classify liability as current when:
1. The entity expects to settle the liability within the entity’s normal operating cycle.
2. The entity holds the liability primarily for the purpose of trading.
3. The liability is due to be settled within twelve months after the reporting period.
4. The entity does not have an unconditional right to defer settlements of the liability for at least twelve
months after the reporting period.
Noncurrent liabilities are liabilities that are not classified as current.
❖
Statement of Financial Position or Balance Sheet reports the resources available for the
company to use, the obligations that the company is required to settle and the equity that belongs to
the owners of the company.
❖ Operating cycle is the average period of time required for a business to make an initial outlay of cash to
produce goods, sell the goods, and receive cash from customers in exchange for the goods.
❖ Current asset is any asset which can reasonably be expected to be sold, consumed, or exhausted through
the normal operations of a business within the current fiscal year or operating cycle.
❖ Noncurrent asset are those that are considered long-term, where their full value won't be recognized until
at least a year.
❖ Current liabilities are all liabilities of the business that are to be settled in cash within the fiscal year or the
operating cycle of a given firm, whichever period is longer.
❖ Noncurrent liabilities are those obligations not due for settlement within one year.
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
Lesson
3
Preparation of Statement of Financial Position
Competency codes:
ABM_FABM12-Ia-b3
ABM_FABM12-Ia-b4
Objectives: 1. calculate the amount of assets and liabilities as to current or non-current, and equity;
2. prepare a Statement of Financial Position of a single proprietorship; and
3. prepare a Statement of Financial Position using the report form and the account form with
proper classification of items as current and noncurrent.
LOOKING BACK TO YOUR LESSON:
Direction: Identify the following account if current asset, noncurrent asset, current liability or
noncurrent liability. write your answer on the blank before the number.
__________________1. Rent paid in advance.
__________________2. Cash restricted for plant expansion.
__________________3. Tax liability.
__________________4. Loan payable due in 5 years.
__________________5. Loan payable due in 5 yearly installments.
INTRODUCTION
The Statement of Financial Position is a report based on the accounting equation:
Assets = Liabilities + Owner’s Equity
The total sum of assets must equal the sum of liabilities and owner's equity. A modification of this statement
is called the classified statement of Financial Position. A classified Statement of Financial Position is helpful in
determining if the company has sufficient current assets to afford the payment of liabilities on their
scheduled dates.
•
•
•
A T-Account is a visual structure used in double-entry bookkeeping to keep debits and credits separate. It
is important to know the normal balances of each account. An account is increased by an entry on the
side of its normal balance. Similarly, it is decreased by an entry on the opposite side of its normal
balance.
Normal balance is the side where the balance of the account is normally found. Asset accounts normally
have debit balances, while liabilities and capital normally have credit balances.
The frequency of reporting statement of financial position shall be at least annually.
DISCUSSION
There are two acceptable formats for preparing Statement of Financial Position:
a. Report form – the accounts of assets, liabilities and equity are listed vertically.
X Company
STATEMENT OF FINANCIAL POSITION
As of December 31, 2022
ASSETS
Current Assets:
Cash & cash equivalent
Accounts receivable
₱xx
xx
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
Merchandise inventory
xx
Supplies
xx
Prepaid rent
xx
Total Current Assets
xx
Non-current Assets:
Property, Plant, and Equipment:
Equipment
₱xx
Less: Accumulated depreciation
xx
₱xx
Furniture
xx
Less: Accumulated depreciation
xx
xx
Total Property, Plant, and Equipment
xx
Long-term investment
xx
Intangible assets
xx
Total Non-current asset
xx
TOTAL ASSETS
₱xx
LIABILITIES AND EQUITY
LIABILITIES
Current Liabilities:
Accounts payable
Utilities payable
Salaries payable
SSS, PhilHealth, Pag-ibig payable
Tax withheld payable
Interest payable
TOTAL CURRENT LIABILITY
Non-current liability:
Notes payable
Bonds payable
TOTAL NON-CURRENT LIABILITY
TOTAL LIABILITIES
EQUITY
Mr. X., Capital
TOTAL LIABILITIES AND EQUITY
₱xx
xx
xx
xx
xx
xx
xx
₱xx
xx
xx
xx
xx
₱xx
b. Account form - it mimics the general ledger T-account format. The assets are listed on the left side and
the list of liabilities and equity is on the right side. The total assets and the total liabilities and equity
are shown side by side to highlight that both sides are equal.
X Company
STATEMENT OF FINANCIAL POSITION
As of December 31, 2022
ASSETS
LIABILITIES AND EQUITY
Current Assets:
LIABILITIES
Cash & cash equivalent
₱xx
Current Liabilities
Accounts receivable
xx
Accounts payable
Merchandise inventory
xx
Utilities payable
Supplies
xx
Salaries payable
Prepaid rent
xx
SSS, Phil., Pagibig payable
Total Current Assets
xx
Tax withheld payable
Non-current Assets:
Interest payable
Property, Plant and Equipment:
Total current liability
Equipment
₱xx
Non-current liability:
Less: Accum depreciation
xx ₱xx
Notes payable
Furniture
xx
Bonds payable
Less: Accum depreciation
xx
xx
Total non-current liability
Total Property, Plant, and Equipment
xx
TOTAL LIABILITIES
₱xx
xx
xx
xx
xx
xx
xx
₱xx
xx
xx
xx
17
Long-term investment
Intangible assets
Total Non-current asset
TOTAL ASSETS
FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
xx
EQUITY
xx
Bronze, Capital
xx
xx
TOTAL LIABILITIES AND EQUITY
₱xx
₱xx
How to prepare a Statement of Financial Position?
1. Prepare the three headers:
• Name of the entity – identifies the reporting company
• Name of the report – identifies the financial statement
• Date at a point in time – tells that the balances reported are the net effect of all transactions related
to the specific account from the date of establishment of the company up to the date of the
statement of financial position. (“as of the year ended”)
2. Choose the format of presentation
• Account Form
• Report Form
3. Margin on the left side for the major classifications, such as current assets or noncurrent assets, current
liabilities or noncurrent liabilities, then list their respective accounts on the inner margin.
4. Money columns on the right side. The placement of amounts usually follows the margin on the left side.
The inner money column for the amounts of accounts is listed in the inner margin.
5. Include any intangible assets.
6. In the final money column, the peso sign is placed on the first and last amounts per accounting value; while
in the inner money column, the peso sign is placed on the first amount of every column of figures.
7. A single line or rule is placed under the last figure to be added or subtracted.
8. Add up the current and noncurrent assets totals and label this as “TOTAL ASSETS” then double rule the
amount.
9. List all current liabilities and noncurrent liabilities also known as Long-term Liabilities
10. Add up the current and noncurrent liabilities total and label this as “Total Liabilities”
11. Calculate the Owner’s equity. Or get the amount of owner’s equity from the statement of changes in
equity.
12. Add up the total liabilities and equity and label this as “TOTAL LIABILITIS AND EQUITY”, then double rule
the amount.
DOUBLE RULE is a double line drawn under an amount when the amounts above are totals and no other
entries will be made.
REMEMBER:
❖ Statement of Financial Position is a report based on the accounting equation: Assets = Liabilities + Equity
❖ In presenting SFP, the heading consists of three lines: name of the entity, title of the report, date.
❖ Classification of assets and liabilities into current and non-current help the users of financial information
to evaluate the position of the entity such as liquidity, solvency and the need for additional financing.
❖ Real Accounts – the accounts in SFP are permanent in the sense their balances remain intact from one
accounting period to another
Congratulations for a job well done!
ASSESSMENT:
Before we move on to the next journey, answer the following:
Part I – Multiple Choice
Part II – Problem solving
Part III – Case analysis
Part I: Read carefully and choose the correct answer on the given question and write the letter on the box.
1. Financial statements must be prepared at least ________________.
a. annually
b. quarterly
c. monthly
2. Which of the following is NOT an acceptable major asset classification?
a. Current assets
b. Deferred charges
c. Intangible assets
3. Which is NOT a current liability?
a. unearned revenue
c. Trade accounts payable
d. weekly
d. Fixed assets
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FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
b. Mortgage payable
d. Current portion of long-term debt
4. Accumulated depreciation should be reported as _____________________.
a. reduction of current asset
c. reduction of equity
b. reduction of current liability
d. reduction of property, plant and equipment
5. The company’s total assets are ₱325,000 and its equity is 40% of the total assets, current liability is twice as
long term debt, how much is the total liability?
a. ₱195,000
b. ₱130,000
c. ₱65,000
d. ₱260,000
6. What is written on the first line of the heading in preparing a statement of financial position?
a. title of the report
c. the amount of assets
b. name of the company
d. date
7. It is a piece of ownership in a corporation wherein investors are usually guaranteed a fixed dividend in
perpetuity.
a. treasury stock
b. common stock
c. preferred stock
d. bond
8. Which of the following has a normal debit balance?
a. accounts payable
b. accrued expenses
c. owner’s capital
d. accounts receivable
9. Which of the following has a normal credit balance?
a. cash
b. owner’s capital
c. prepaid expense
d. owner’s drawing
10. It is an account that reports the balances of bank savings and checking account as well as bills, coins and
check on hand.
a. cash
b. inventory
c. capital
d. accounts receivable
Part II: Problem solving
1. Maxi Mart has net assets of ₱223,000 after liabilities of ₱75,000 at the end of the year. What is Maxi’s
equity at year-end?
2. At the beginning of the year, Jolly Company’s assets were ₱280,000 and its equity was ₱150,000. During
the year, assets increased by ₱90,000 and liabilities increased by ₱50,000. What is the liability of Jolly
Company at the end of the year?
3. Fabunan’s Medical Clinic has assets equal to ₱5,850,000 and liabilities equal to ₱2,170,000. Before the year
ended cash was borrowed from the bank amounting to ₱500,000 half of which was used to buy
equipment and the other half to pay for the liabilities which were already past due. What is the total
equity of Fabunan at year-end?
Part III: Case Study
Cardo Dalisay, a policeman who became businessman, has the following personal properties: Cash ₱100,000;
Land ₱200,000; building ₱11,500,000 and car ₱500,000. Due to the suspension of their company brought by
non-compliance of the rule of franchising, Cardo invested half of his cash and the car in an eatery. The other
assets of the eatery were purchased and paid for using the cash invested and cash borrowed: furniture and
fixtures, ₱30,000; equipment, ₱60,000 and supplies, ₱15,000. Cardo needs ₱10,000 as reserve for emergency.
Required: Prepare a Statement of Financial Position using report form and account form.
References:
Florendo, Joselito, Fundamentals of Accountancy, Business and Management 1
Garcia, Vhinson, Intermediate Accounting 1, 2023 Edition
Haddock, M., Price, J., & Farina, M. (2012). College Accounting: A Contemporary Approach, Second Edition.
New York: McGraw-Hill/Irwin.
Salazar, Dani Rose, Fundamentals of Accountancy, Business and Management 2
Valix et al, Financial Accounting 2017 Edition volume 1
Valencia, E. G., & Roxas, G. F. (2010). Basic Accounting (3rd ed.). Mandaluyong City, Philippines: Valencia
Educational Supply
Vanderbeck, Edward & Mitchell, Maria. Principles of Cost Accounting, 17th Edition
Vera Cruz-Manuel, Zenaida, 21st Century Accounting Process, Basic Concepts and Procedures 2015 Edition
The Commission on Higher Education in collaboration with the Philippine Normal University
http://www.instopedia.com
https://www.wikihow.com/Make-a-Balance-Sheet-for-Accounting
https://www.educba.com/statement-of-financial-position/
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