FUNDAMENTALS
of Accounting,
Business &
Management 2
STATEMENT
OF
FINANCIAL
POSITION
At the end of the lesson, you should be able to :
1. Review balance sheet elements
–Juan dela Cruz opened his pet shop business called Petness First
2. Differentiate Current Petshop. HeAssets
opened a bankfrom Non-Current
account for his business and
deposited PHP500,000. The business earned PHP50,000 but he
Assets had doubts with the recorded expense of PHP60,000. He is not
sure if he should include the following items as expenses:
3. Differentiate Current Liabilities from
bank account for his business and deposited PHP500,000. The business earned PHP50,000 but he had doubts with the recorded exp
Non-Current Liabilities
4. Prepare Statement of Financial Position using
Report Form and Account Form
5. Solve accounting problems relative to
SFP/Balance Sheet
–Financial Statements are a
structured representation of
the financial position and
financial performance of the
entity. The objective of
FINANCIAL financial statements is to
STATEMENTS 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.
FINANCIAL STATEMENTS
Financial Statements also show the result of the
management’s stewardship of the resource
entrusted to it. To meet this objective, financial
statements provide information about the
entity’s
• Assets
• Liabilities
• Equity
• Income & Expense including gains and losses
• Contributions by the distributions to owners in their
capacity as owners, and
• Cash Flows
FINANCIAL STATEMENTS
This information, along with other
information in the notes, assists users of
financial statements in predicting the
entity’s future cash flows and in particular,
their timing and certainty.
FINANCIAL STATEMENTS
A complete set of financial statements
compromises:
a. A statement of financial position as at the end of the
period
b. A statement of comprehensive income for the period
c. A statement of changes in equity for the period
d. A statement of cash flows for the period
e. Notes, comprising a summary of significant accounting
policies and other explanatory information and
f. A statement of financial position as at the beginning of
the earliest comparative period when an entity applies
an accounting policy retrospectively or makes a
REVIEW OF BALANCE SHEET ELEMENTS
An asset is a resource controlled by the
ASSET entity as a result of past events from
which future economic benefits are
expected to flow to the entity
A liability is a present obligation of the
entity arising from past events, the
LIABILITIES
settlement of which is expected to
result in an outflow from the entity of
resources embodying economic
Equity is
benefits the residual interest in the
EQUITY
assets of the entity after deducting all
BALANCE SHEET and ACCOUNTING EQUATION
LIABILITIE
S
ASSET = +
CAPITAL
BALANCE SHEET and ACCOUNTING EQUATION
CURRENT CURRENT LIABILITIES
ASSETS
= NON CURRENT
LIABILITIES
NON-CURRENT +
ASSETS CAPITAL
An entity shall classify an asset as current when:
It expects to realize 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 realize the asset within twelve
months after the reporting period or
The asset is cash or a cash equivalent
unless the asset is restricted from being
exchanged or used to settle a liability for at
An entity shall classify an asset as current when:
Example of Current assets:
Cash Prepaid Office &
Expenses Store
Supplies
Account
Receivable Marketable
Equity
Securities
Inventories
NON CURRENT ASSETS
All other assets (that are not current) shall
be classified as Non Current Assets
Land Intangible
Investment in
Assets
equity
Building Land securities
Improvements
Equipme Investment in
nt Investment an associate
Machinerie Property
s
An entity shall classify a liability as current when:
It expects to settle the liability in its
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
consider settlement of the liability for at
least months after the reporting period.
CURRENT LIABILITIES
Example of Current LIABILITIES:
Trade accounts Rent payable
payable
Utilities payable
Short term
payable
Current income
Salaries payable tax payable
NON CURRENT LIABILITY
All other liabilities (that are not current)
shall be classified as Non Current Liabilities
Long term
Bonds payable
notes payable
KNOWLEDGE CHECK:
Determine if the following are CA, Non CA,
CL , Non CL
Property, Plant & Equipment Trade accounts
payable
Salaries & wages Investment property
payable
Bonds payable Office & Store Supplies
Cash & cash Marketable equity
equivalents securities
ACCOUNT FORM OF BS
REPORT
FORM
OF
BALANC
E SHEET
Accruals and other current
liabilities 125,890
Bonds payable 5,000,000
Using the following Cash and cash equivalents 2,500,000
information, Current income tax payable 589,660
prepare a properly Intangible assets, net 2,654,700
Investment in associate 1,890,600
classified Investment in equity securities 3,650,400
Statement of Investment property 1,968,740
Financial Position Long-term notes payable 2,000,000
Merchandise inventory 2,789,000
for Graduation Office and store supplies 400,000
Company as at Other noncurrent assets 600,000
December 31, 20X1 Other noncurrent liabilities 750,000
Owner's Equity 18,211,250
under: Prepayments and other current
a.Report form assets 385,000
Property, plant, and equipment,
b.Account form net 9,856,250
Short-term notes payable 320,000
Accruals and other current liabilities 125,890 Current Liability
Bonds payable 5,000,000 Non Current Liability
Cash and cash equivalents 2,500,000 Current Assets
Current income tax payable 589,660 Current Liability
Intangible assets, net 2,654,700 Non current Assets
Investment in associate 1,890,600 Non current Assets
Investment in equity securities 3,650,400 Non Current Assets
Investment property 1,968,740 Non Current Assets
Long-term notes payable 2,000,000 Non Current Liability
Merchandise inventory 2,789,000 Current Assets
Office and store supplies 400,000 Current Assets
Other noncurrent assets 600,000 Non Current Assets
Other noncurrent liabilities 750,000 Non Current Liabilities
Owner's Equity 18,211,250 Equity
Prepayments and other current assets 385,000 Current Assets
Property, plant, and equipment, net 9,856,250 Non Current Assets
Short-term notes payable 320,000 Current Liability
Trade and other payables 1,562,890 Current Liability
Trade and other receivables 1,865,000 Current assets
Current Assets ASSETS
Cash and cash Current Assets
equivalents 2,500,000 Cash and cash equivalents 2,500,000
Merchandise inventory 2,789,000 Merchandise inventory 2,789,000
Office and store supplies 400,000 Office and store supplies 400,000
Prepayments and other Prepayments and other
current assets 385,000 current assets 385,000
Trade and other Trade and other receivables 1,865,000
receivables 1,865,000 Total Current Assets 7,939,000
+
Total Current Assets 7,939,000 Non Current Assets
Intangible assets, net 2,654,700
Non Current Assets Investment in equity
Intangible assets, net 2,654,700 securities 3,650,400
Investment in equity Investment property 1,968,740
securities 3,650,400 Other noncurrent assets 600,000
Investment property 1,968,740 Property, plant, and
equipment, net 9,856,250
Other noncurrent assets 600,000
18,730,09
Property, plant, and Total Non Current Assets 0
equipment, net 9,856,250 TOTAL CURRENT & NON 26,669,09
CURRENT ASSETS 0
Current Liabilities
LIABILITIES & EQUITY
Trade and other payables 1,562,890 Current Liabilities
Short-term notes payable 320,000 Trade and other payables 1,562,890
Current income tax Short-term notes payable 320,000
payable 589,660 Current income tax payable 589,660
Accruals and other Accruals and other current
current liabilities 125,890 liabilities 125,890
Total Current Liabilities 2,598,440 Total Current Liabilities 2,598,440
+ Non Current Liabilities
Bonds payable 5,000,000
Non Current Liabilities Long-term notes payable 2,000,000
Other noncurrent liabilities 750,000
Bonds payable 5,000,000
Total Non Curent Liabilities 7,750,000
Long-term notes 10,348,44
payable 2,000,000 TOTAL LIABILITIES 0
Other noncurrent
liabilities 750,000 Equity
Total Non Curent
Equity
Liabilities
+ 7,750,000 Owner's equity
18,211,25
0
Owner's equity 18,211,250 TOTAL LIABILITIES & 28,559,69
GRADUATION COMPANY
Account form STATEMENT OF FINANCIAL POSITION
AS AT DECEMBER 31, 20XX
ASSETS LIABILITIES & EQUITY
Current Assets Current Liabilities
Cash and cash equivalents 2,500,000 Trade and other payables 1,562,890
Merchandise inventory 2,789,000 Short-term notes payable 320,000
Office and store supplies 400,000 Current income tax payable 589,660
Prepayments and other current Accruals and other current
assets 385,000 liabilities 125,890
Trade and other receivables 1,865,000 Total Current Liabilities 2,598,440
Total Current Assets 7,939,000 Non Current Liabilities
Non Current Assets Bonds payable 5,000,000
Intangible assets, net 2,654,700 Long-term notes payable 2,000,000
Investment in equity securities 3,650,400 Other noncurrent liabilities 750,000
Investment property 1,968,740 Total Non Curent Liabilities 7,750,000
Investment in associates 1,890,600 10,348,44
Other noncurrent assets 600,000 TOTAL LIABILITIES 0
Property, plant, and equipment,
net 9,856,250 Equity
20,620,69 18,211,25
Trade and other payables 1,562,890
Short-term notes payable 320,000
Current income tax payable 589,660
Report form Accruals and other current liabilities 125,890
Total Current Liabilities 2,598,440
Non Current Liabilities
Bonds payable 5,000,000
Long-term notes payable 2,000,000
Other noncurrent liabilities 750,000
Total Non Curent Liabilities 7,750,000
TOTAL LIABILITIES 10,348,440
Equity
Owner's equity 18,211,250
GRADUATION COMPANY TOTAL LIABILITIES & EQUITY 28,559,690
ASSETS
STATEMENT OF FINANCIAL
Current Assets
POSITION Cash and cash equivalents 2,500,000
AS AT DECEMBER 31, 20XX Merchandise inventory 2,789,000
Office and store supplies 400,000
Prepayments and other current assets 385,000
Trade and other receivables 1,865,000
Total Current Assets 7,939,000
Non Current Assets
Intangible assets, net 2,654,700
Investment in equity securities 3,650,400
Investment property 1,968,740
Investment in associates 1,890,600
Other noncurrent assets 600,000
Property, plant, and equipment, net 9,856,250
Total Non Current Assets 20,620,690
TOTAL CURRENT & NON CURRENT ASSETS 28,559,690
Problem No. 1
Gissele Co. has current assets of P 4350,000
and total liabilities of 2,890,000. If capital is
8,000,000, how much is the entity’s non current
assets?
a. 6,540,000
b. 9,430.000
c. 10, 890,000
d. Insufficient information
Current assets 4,350,000
NonCurrent Assets
Total Liabiloities 2,890,000
Solution/ Equity 8,000,000
Discussio
n: Total Liabilities &
Equity 10,890,000
Total Assets 10,890,000
Total Assets 10,890,000
Less: Current Assets 4,350,000
Noncurrent Assets 6,540,000
Problem No. 2.
An entity has the following account balances at
December 31: Cash, 890,000, trade receivables,
450,000, trade payuables, 300,000, Land
improvements, 700,000, Short term notes payable
100,000, investment in associate, 1,250,000, bonds
payable, 6,000,000. If the entity maintains 400,00
worth of inventories at the end of the year, how
much is the entity’s current assets?
a.1,340,000
b.1,740,000
c.2,440,000
Cash 890,000
Solution: Trade
450,000
Receivables
Inventories 400,000
Total 1,740,000
End
