12

Fundamentals of Accounting, Business

and Management 2
Quarter 1-Module 1:
Statement of Financial Position (SFP)

s
 Fundamentals of Accounting, Business and Management 2-Grade 12
Quarter 1-Module 1: Statement of Financial Position

I. Introduction

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Whether you are an accountant, investor, business owner, having some basic
knowledge of accounting statements is necessary. Accounting is the language of
business. Even if you are not a CPA, understanding accounting is helpful as it enables
you to understand the numbers behind business and evaluate the financial health of
companies.
(Source: https://tfageeks.com/dev/introduction-to-financial-statements/_)

II. Objective
s At the end of this modules you are expected to:
• Identify the elements of the SFP and describe each of these items for a
single/sole proprietorship business. (ABM_FABM12-Ia-b-1)
• Prepare an SFP for a single/sole proprietorship business using the report and
account forms. (ABM_FABM12-Ia-b-4)

• Appreciate the importance of SFP using report form and account form
III. Vocabulary List

For better understanding of this module, read and understand the meaning of the
following words and key terms:

➢ STATEMENT OF FINANCIAL POSITION - It is also known as the balance

sheet. This statement includes the amount of the company’s total assets,
liabilities, and owner’s equity which in totality provides the condition of the
company on a specific date.
➢ ASSETS - These are economic resources owned by the business expected for
future gain. They are property and rights of value owned by the business.
 ➢ LIABILITIES - These include debts, obligations to pay, and claims of the
creditors on the assets of the business.
➢ OWNER’S EQUITY OR CAPITAL- This includes the interest of the owners
on the business; claims of the owners on the assets of the business; and the
investment of the owner plus or minus the results of operations. Owner’s
equity or capital comes from two main sources— investment of owners and
earnings of the business.
➢ 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.
➢ 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.
➢ 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 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.
➢ 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.
➢ Report Form – A form of SFP that shows asset accounts first and then
liabilities and owner’s equity accounts after.
➢ 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
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.
The report format presents all the accounts vertically. Although both balance
sheet formats are acceptable, the report form is much more popular. As the name
implies, the report format looks more like a traditional report and is used more often in
the general-purpose financial statements. Here is an example of a report form balance
sheet.
NAME OF COMPANY
 STATEMENT OF FINANCIAL POSITION
HEADING

Assets
Current Assets CURRENT
Cash P _________________ ASSETS
Accounts _________________
Receivable
LESS:
Allowance for _________________
Doubtful Account
Accrued Income _________________
Inventory _________________
Prepaid Expense _________________
Prepaid Rent _________________
Total Current ( a) P _____________
Assets

Noncurrent Assets
Long Term P _________________
Investment
Intangible Assets _________________
Property, Plant and _________________
Equipment
Less: Accumulated _________________
Depreciation
Total Noncurrent P _________
Assets
NON- CURRENT
ASSETS
Total Assets (a+b) P ____________

Liabilities
Current Liabilities
Accounts Payable P _________________
Accrued Expense _________________
Unearned Income _________________
Notes Payable _________________
Total Current P __________
Liabilities
CURRENT
LIABILITIES
Noncurrent
 Liability NON CURRENT
Mortgage Payable P _________________ LIABILITIES
Loans Payable _________________
Total Noncurrent P __________
Liabilities
Total Liabilities (a+b) P ________

Owner’s Equity
Owner’s capital (c)________________ OWNER’S
_
EQUITY
Total Liabilities and (a+b Total+c)P _____
Owner’s Equity

Learning Activity 2. Let’s Analyze and Identify

This time, your task is to analyze the different elements and identify the
different account title used in the transaction. Prepare a Statement of Financial Position
for the company using Report form for the year ended December 31, 2016.

Problem: At the end of the first month of operations for Juana’s Delivery
Service, the business had the following accounts: Accounts Receivable, Php1,200;
Prepaid Insurance, Php500; Equipment, Php36,200 and Cash, Php40,650. On the same
date, Juana owed the following creditors: Nena’s Supply Company, Php12,000 (due in 6
months); Maria’s Equipment, Php9,500 (due after 2 years). Place your answer using the
given format above and use long size bond paper to answer the given problem.

The account form balance sheet is a financial statement format where the assets
are reported on the left side and the liabilities and equity are reported on the right side.
The liabilities and owner's equity are added together and listed on the right.

NAME OF COMPANY STATEMENT OF FINANCIAL POSITION AS OF (YEAR-

END)

Assets Liabilities and Owner’s Equity

Current Assets Current
 Liability
Cash P Accounts P
____________ Payable _________
Accounts Noncurrent
Receivable Liability
Total Current P Loans Payable
Assets ____________
Noncurrent Total P
Assets Liabilities _________
Building Owner’s
Equity
Total Total
Noncurrent Liabilities and P
Assets Owner’s _________
Equity

Total Assets P
____________

DID YOU KNOW

Financial statements are the means by which companies communicate their story.
Together these statements represent the profitability and financial strength of a
company. The financial statement that reflects a company’s profitability is the income
statement. The statement of owner’s equity—also called the statement of retained
earnings—shows the change in retained earnings between the beginning and end of a
period (e.g., a month or a year). The balance sheet reflects a company’s solvency and
financial position. The statement of cash flows shows the cash inflows and outflows for a
company during a period of time.

STATEMENT OF
FINANCIAL POSITION
also known as the balance
sheet. This statement
includes the amount of the
company’s total assets,
liabilities, and owner’s
equity which in totality
 provides the condition of the
company on a specific date.

PERMANENT ACCOUNTS
these accounts are permanent
in a sense that their balances
remain intact from one
accounting period to another.
(Haddock, Price, & Farina,
2012. Example of permanent
account include Cash,
Accounts Receivable,
Accounts Payable, Loans
Payable and
Capital among others.
Basically, assets, liabilities Source: https://images.app.goo.gl/vfnSt8d3MH9MmD2q9
and equity accounts are permanent accounts. They are called permanent
accounts because the
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

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

Report Form is a form

of the SFP that shows
asset accounts first
and then liabilities and
then liabilities and
owner’s equity
accounts after.

Account Form is a
form of the SFP that
shows on the left side
and liabilities and
owner’s equity on the
right side just like the
debit and credit
balances of an
account.

a. Emphasize that
the two are only
formats and will yield
the same amount of
total assets, liabilities
and equity
b. Emphasize that
assets should always
be equal to liabilities
and equity.
 There are two ways in preparing SFP such as (1) Account Form and (2) Report
Form. There are importance of using different
format such as:

a. Report form vs Account form – These are just formats and usually
depend on the reader for preference.
b. 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.
c. Separation of the current and noncurrent – current liabilities are
upcoming liabilities and the company should be prepared to pay them.

VI. Practice Tasks

Show that you have learned something by doing this activity.

Practice Task 1. Fill Me In

Instructions: Classify where the account belongs. Analyze the different transaction
using the SFP and compute the given problem. Using the formula: A=L+OE; Copy and
place your answer in your module book.

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?

2. Happy Selling Company’s total liabilities amounted Php 10,000. Total equity had an
ending balance of Php 20,000. How much is the total assets?

3. Happy Selling’s had the following accounts at year end: Cash-250,000, Accounts
Payable-70,000, Prepaid Expense-15,000. Compute for the company’s current assets.

4. If assets are Php56,000 and owner's equity is Php27,000, liabilities are

___________________.

5. At the end of the first month of operations for Cianar Service, the business had the
following accounts: Accounts Receivable, Php10,200; Prepaid Insurance, Php1,500;
Equipment, Php45,200 and Cash, Php80,900. On the same date, cianar owed the
following creditors: Tony’s Supply Company, Php43,500; Sara’s Equipment,
Php15,700. The current assets for the cianar’s Delivery Service are _________.
 Practice Task 2. “Think and Act”

Instruction: Prepare a Statement of Financial Position using the report form.

Analyze the different elements of the following account and Prepare a Statement of
Financial Position for the company using account form for the year ended December 31,
2016. Copy the given format above and write your answer on a long size bond paper.

Cash – 5,000
Loans Payable – 77,500
Accounts Receivable – 2,600
Supplies – 2,300
Equipm
ent –
17,000
Owner’
s equity
–
40,000
Accounts Payable – 22,400
Building – 113,000
Learners can use any business name and the end of the current year for the heading
CIANAR’S MERCHANDISE STATEMENT OF FINANCIAL POSITION
AS OF December 31, 2016

Assets
Current Assets

Total Current Assets

Total Noncurrent Assets

Total Assets
Liabilities
Current Liability

Noncurrent Liability
 Total Liabilities
Owner’s Equity

Total Liabilities and

Owner’s Equity

PPractice Task 2ractice Task 3. . Interpret me“Interpret Me”

Instructions. Prepare a Statement of Financial Position for the company (one in report
form and the other group in account form) – Teacher will create virtual grouping to
facilitate learning. The students can choose what appropriate online meeting modality
they can use for their brainstorming. Each group will select a leader, secretary and
reporter to present their output either powerpoint or spreadsheet presentation via online
meeting. Group 1 & 2 – Report form
Group 3 & 4 – Account Form

Problem: You were hired by Ms. Ode Na to prepare his atbp store’s Statement of
Financial Position. In order to prepare the statement, Analyze transaction and identified
the following assets and liabilities of Ms. Sen Sun Sue:
a. Her Atbp Store has cash deposited in a bank account amounting to P580,000.
b. Her Atbp Store had a lot of uncollected sales from customers amounting to
P150,000.
c. The total amount of Atbp Store left inside the store is P70,000.
d. She already paid six month rent in advance amounting to P15,000.
e. The value of all the company’s equipment amounted to P350,000.
f. She bought merchandise from his supplier amounting to P120,000 and the
supplier agreed that
payment can be made 3 months after year-end.
g. SSS, Philhealth and Pag-ibig Payables for her three employee totaled P8,000.
h. The Atbp Store had outstanding liabilities to staff companies amounting to
P10,000.
i. She had a loan from the bank amounting to P200,000 to be paid in 3 years.