Lesson 1

Statement of
Financial Position
(SFP)
 Objective

At the end of the lesson, the learner should be able to:

1. Identify the elements of the SFP and describe each of

them;
2. Prepare an SFP using the report form with proper
classification of items as current and non- current
 Essential Questions

• What elements are included in the Statement of Financial

Position(SFP)?

• What is the heading for SFP?

• What is the left side and the right side of an account?

 Warm Up!

As a prerequisite to FABM2 is FABM1. You must recall

through your stock knowledge the Elements of Financial
Statements. The basic purpose of accounting is to
provide information that is useful for making economic
decision Accounting information is most commonly
communicated to users of accounting information
through the financial statements.
 Warm Up!

Instruction: Fill in the blank with the correct answer (Find the
answers in the box.)
Income Journal
Accounting Equation Expenses (COGS)
Assets Liabilities
Posting Ledger
Posting to ledger Stakeholders

_________ 1. The book of original entry.

_________ 2. Assets are equal to liabilities and owner’s equity.

_________ 3. Users of accounting information is mostly communicated

__________4. Are what the company owns.

__________5. Are what the company owed.

 Warm Up!

_________ 6. Inflows of cash because of services rendered.

_________ 7. Assets from cash spent because of sales of goods.

_________ 8. The second accounting cycle.

_________ 9. Is called the book of the final entry.

________ 10.is the next cycle after journalizing.

 Warm Up!

•The book of original entry.

👉 Journal – this is where transactions are first recorded chronologically—also known as the book of original entry Assets
are equal to liabilities and owner’s equity.
👉 Accounting Equation – Assets = Liabilities + Owner’s Equity Users of accounting information is mostly
communicated
👉 Stakeholders – such as investors, creditors, management, and regulators (decision-makers rely on this info).
•Are what the company owns.
👉 Assets.
•Are what the company owed.
👉 Liabilities.
•Inflows of cash because of services rendered.
👉 Income.
•Assets from cash spent because of sales of goods.
👉 Expenses (or Cost of Goods Sold if referring to direct costs).
•The second accounting cycle.
👉 Posting – moving entries from the journal to the general ledger Is called the book of the final entry.
👉 Ledger – the principal book to which journal entries are posted; also called the book of final entry Is the next cycle
after journalizing.
👉 Posting to the Ledger (transferring journal entries into ledger accounts)
 Learn about It!

The , Statement of Financial Position also called

Balance Sheet, is a financial statement that reports the
assets, liabilities, and equity of a company on a given
date. In other words, it lists the resources, obligations,
and ownership details of a company on a specific day.
You can think of this like a snapshot of what the company
looked like at a certain time in history. Reports the
permanent accounts as of the end of an accounting
period.
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The elements of the

financial positions
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The elements of the financial positions

1.Assets(A)
-are resources you control that have resulted from
past events and can provide you with the future
economic benefits.
- are what the business owns.
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The elements of the financial positions

2. Liabilities (L)
-are your present obligations that have resulted from
past events and can require you give up resources
when settling them.
- are what the business owes or claims against
assets.
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The elements of the financial positions

3. Owner's Equity or Equity (OE)

-means assets minus liabilities. Other terms for
equity are capital, net assets, and net worth
-is what the business is worth.
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The Statement of Financial Position or Balance Sheet

contains the following:
A. Heading
1. Name of the Business
2. Title of Report
3. Date of the Report (specific date)
B. The Asset Section
C. The Liability Section
D. The Owner's Equity Section
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Classification of Balance Sheet Accounts

The Statement of Financial Position or Balance Sheet

shall be identified and distinguished from other
statements.
The entity shall present current and noncurrent assets
and current and noncurrent liabilities, as separate
classifications on the face of the balance sheet.
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Current Assets
- are those assets that are expected to be used (sold or
consumed) within 12 months.

Current assets include (according to the IFRS):

• Current inventories
• Trade and other current receivables
• Current tax assets
• Current biological assets
• Other current financial assets
• Other current non-financial assets
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Cash and cash equivalents non-cash assets pledged as collateral for which
transferee has right by contract or custom to sell or repledge collateral.

An asset shall be classified as current when it satisfies any of the following

criteria:
• it expects to realise the asset, or intends to sell or consume it, in its normal operating
cycle;
• it holds the asset primarily for the purpose of trading;
• it expects to realise the asset within twelve months after the reporting period; or
• the asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted
from being exchanged or used to settle a liability for at least 12 months after the
reporting period.

All other assets shall be classified as non-current assets.

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Current Liabilities
- are financial obligations of a business entity that are due and
payable within a year. A liability occurs when a company has
undergone a transaction that has generated an expectation for a
future outflow of cash or other economic resources.
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Examples of Current Liabilities

The following are common examples of current liabilities:

• Accounts payable or trade payables

• Notes payable that will be due within one year
• The principal portion of a long-term loan that must be paid within one
year
• Wages payable
• Income taxes payable
• Interest payable
• Other accrued expenses payable
• Deferred revenues and customer deposits
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-a liability shall be classified as current when it satisfies any of the

following criteria:
• it expects to settle the liability in its normal operating cycle;
• it holds the liability primarily for the purpose of trading;
• the liability is due to be settled within twelve months after the
reporting period; or
• it does not have an unconditional right to defer settlement of
the liability for at least twelve months after the reporting
period.
If none of the above criteria is met, a liability is classified as non-
current.
Learn about It!
.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.
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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: ______________
 Try It!

Direction. Identify all the Assets, Liabilities and

Owner’s Equity of your family. You can ask your
family members to help you identify the
elements of the financial position.
 Try It!
Direction. Identify all the Assets, Liabilities and Owner’s Equity of your family. You can ask your
family members to help you identify the elements of the financial position.

EXAMPLE:. Example: Family Financial Snapshot

Assets
₱800,000 – Family house
₱15,000 – Laptop
₱25,000 – Cash in bank + wallet
Total Assets = ₱840,000

Liabilities (Debts)
₱200,000 – Outstanding housing loan (e.g., from
Pag-IBIG or bank)
Total Liabilities = ₱200,000

Owner’s Equity (Family Net Worth)

₱640,000 = ₱840,000 – ₱200,000
 Try It!

✅ How You Can Do This with Your Family

1.Ask your family to list all assets: property, vehicles,
electronics, cash, savings, investments.
2.Record their estimated current values in PHP.
3.Sum them up → Total Assets.
4.List all debts: loans, unpaid bills, credit card balances →
sum → Total Liabilities.
5.Subtract liabilities from assets → Owner’s Equity / Net
Worth
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Statement of Financial Position

There are two forms of statement of financial position, the report
form and account form.
The different parts of the Statement of Financial Position are as follows:

1. Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation – we use “as of” before the date of preparation because the amounts
in the SFP are permanent - the amounts are cumulative from the beginning of the life of the company.

2. Total Assets = Current Assets + Non-current Assets

3. Total Liabilities = Current Liabilities + Non-current Liabilities

4. Owner’s Equity

5. Total liabilities + Owner’s Equity

ALWAYS REMEMBER THAT THE BALANCE SHEET REFLECTS THE ACCOUNTING EQUATION:

TOTAL ASSETS = TOTAL LIABILITIES + OWNER’S EQUITY

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Report form presents all the accounts vertically. Although both balance sheet formats are
acceptable, the report form is much more popular.
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Account format presents the asset accounts on the left side and the liabilities and equity accounts on
the right.
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Post-Closing Trial Balance

In an on-going business,
• The accounting period starts with the carry forward balances of the real
accounts or the balance sheet accounts.
• The nominal accounts or income statement accounts start with zero balances.
Within the accounting period, transactions and events are recorded.
• An adjusted trial balance is prepared from the general ledgers at the end of the
accounting period. This is called post-closing trial balance.
• To demonstrate this, the following is the post- closing Trial Balance of Paul’s
Guitar Shop, Inc. as of December 31, 2015. Note that the accounts and
amounts in the post- closing trial balance are the same as those in the
statement of financial position.
Learn about It!
Post-Closing Trial Balance
 Try It!

Requirement 1
Write the accounting equation from the post- closing trial balance of Leyes
Service Grafix
Assets = Liabilities + Owner’s Equity

Requirement 2
From the post- closing trial balance of Leyes Service Grafix as of December 31,
2021, prepare Statement of Finacial Position

A. Report Form
B. Account Form
Try It!
Post-Closing Trial Balance
December 31, 2021
Dr. Cr.
Cash in Bank P 100,000
Account Receivable 480,000
Allowance for Bad Debts P 5,000
Prepaid Rent 10,000
Office Equipment 660,000
Accumulated Depreciation
Office Equipment 60,000
Salaries Payable 30,000
Accounts Payable 240,000
Fred Leyes, Capital 915,000

Total P 1,250,000 P 1,250,000

 Try It!

SOLVING ACCOUNTING EQUATION

Instruction: Solve for the accounting equation.
Remember the Accounting Equation?
Assets is equals to Liability and Owner’s Equity Account
1.Angels Tutorial Center has an asset amounting to P 200,000, Liability is P 75,000. How much
is the owner’s equity account?

2. Assets of TMAM is P15,000 and Total Equity is P10,000, how much is total Liabilities?

3.Assets is equal to P350,000, Owner’s equity is 250,000, How much is Equity?

4.Sure Fresh Company’s total liabilities amounted P30,000. Total equity had an ending balance
of P50,000. How much is total assets?

5.Current Assets is P50,000, Non- Current Assets is P150,000.00, Current Liabilities is P10,000
and Non- Current Liabilities is P40,000, How much is the Equity of the company?
Learn about It!