Fundamentals of
Accountancy,
Business, and
Management 2
Module 1
Mr. John Michael
D. Caparas
SUBJECT TEACHER
2 OPERATION ON FUNCTIONS • NU BALIWAG
STATEMENT OF
FINANCIAL POSITION
1
(SFP)
WHAT WILL YOU LEARN?
Focus Questions:
This module has been designed to help you:
What are the Financial Statements?
How are these statements relevant to
Identify, describe and classify the elements of
my strand? a Financial Statement;
What are the significance of these
financial statements to you as future Prepare the Financial Statement of a Single
CPA/Business Owners and Managers?
Proprietorship; and
Discuss the different forms of business
CONTENT STANDARD
The learner demonstrates an organization.
understanding o account titles under the
assets, liabilities, and capital accounts
of the Statement of Financial Position,
namely, cash, receivables, inventories,
prepaid expenses, property, plant and
equipment, payables, accrued
WHAT MATERIALS DO YOU
expenses, unearned income, long-term
liabilities and capital that will equip NEED?
WHAT MATERIALS DO YOU
him / her in
the preparation of the SFP using the NEED?
report form and account form FABM 2 Module No. 1
PERFORMANCE STANDARD Laptop, phone, tablet
The learner shall be able to solve
exercises and problems that require Google Meet
preparation of an SFP for a single
proprietorship with proper classification
of accounts as current and noncurrent
using the report form and the account
form
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TABLE OF CONTENTS
4 Starting Point
Statement of Financial
5 Position
SFP Types of Accounts
6
7 Elements of the
Statement of Financial
Position
11 Elements of the Statement
of Financial Position
Presentation of
11 Statement of Financial
Position
13 Illustration of SFP
15 Evaluation/ Assessment
16 References
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Before you start, try answering the following
questions.
Classify the following accounts whether they are
What I know? asset, liability or equity accounts. Check the
appropriate box. Write your answers on a separate sheet
Account Asset Liabilities Owner’s
Equity
1. Income Tax Payable √
2. Trade Accounts Receivable
3. Trademark
4. Bonds Payable
5. J. Bustos, Capital
6. Inventories
7. Property, Plant and Equipment
8. Mortgage Payable
9. Salaries Payable
[Link] Shares
Identify, describe and classify the Elements of the SFP
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Before going further into this module, please recall all the accounting
elements or accounting terms that you have encountered in your study of
Accounting 1 as it will serve as a gauge on how well you know the
accounting elements especially the ones found in the Statement of Financial
Position or the Balance Sheet.
Can you still recall the following terms?
• Accounting Equation
• Assets
• Liabilities
• Equity
• Single/Sole Proprietorship Business
Can you identify the normal balances of assets, liabilities and equity? What
about the different financial statements then you had prepared as we went
through the accounting cycle? This lesson will deal on the elements and
the classification of the elements in the Statement of Financial Position
(SFP).
Financial Position is ….
The Statement of Financial Position is also known as the balance
sheet. It includes the amounts of the company’s total assets, liabilities and
owner’s equity which in totality provides the condition of the company on a
specific date. (Haddock, Price, Farina 2012)
The Statement of Financial Position usually consist of the following types of
accounts: a. Permanent Accounts b. Temporary Accounts c. Contra-assets
Accounts
SFP Types of Accounts
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ELEMENTS OF THE STATEMENT OF FINANCIAL POSITION
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ELEMENTS OF THE STATEMENT OF FINANCIAL POSITION
CLASSIFICATION OF ASSETS:
A. CURRENT ASSETS
Current assets are assets that are expected to be converted to cash, sold or
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5. Inventories
There are three items that are considered as parts of inventories:
a. Finished goods are the goods for sale in the normal course of the business.
b. Work in progress or goods in process includes goods in the process of
production.
c. Raw materials includes materials and supplies to be consumed in the
production process.
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3. Investment Properties
Investment Properties are long-lived assets not used in production, intended
to be leased out or for long-term asset appreciation. An example is a piece of
land with a building intended to be leased out to renters and will generate
rental income for the entity.
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4. Biological Assets
Living plants or animals held by the business for resale or breeding
Examples are sheep, trees in plantation, dairy cattle, pigs, bushes, figs and
fruit trees.
CLASSIFICATION OF LIABILITIES:
A. CURRENT LIABILITIES
Current liabilities are debts that are due to be paid within one year or
within the entity’s operating cycle if the cycle is longer than a year.
Examples of Current Liabilities
1. Trade Accounts Payable
A trade accounts payable is an unwritten promise to pay a
supplier for an asset purchased or for a service rendered.
2. Notes Payable
A notes payable is a formal written promise to pay a supplier or lender
a specific sum of money at a definite future time.
3. Interest Payable
An interest payable is related to a note payable since it is
considered as cost for borrowing money. Interest are computed as
principal amount multiplied by time factor and interest rate.
4. Other accrued expenses
An accrued expense is an expense that has been incurred but not yet
paid in cash. The most common examples of accrued expenses are
salaries, rent and utilities.
5. Income Tax Payable
Income Tax Payable is composed of taxes due to the government
within one year. The calculation of income tax payable is according
to the prevailing tax law in the Philippines.
B. NON-CURRENT LIABILITIES
Non-current liabilities, also known as long-term liabilities are debts or
financial obligations that are expected to be paid after a year.
Examples of Non-Current Liabilities
1. Long-term Debts
Long-term debts represent bank loans as a source of financing for the entity.
They can be in a span of five years to twenty-five years.
2. Bonds Payable
Bonds payable are a form of long-term debt usually issued by
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ILLUSTRATION: STATEMENT OF FINANCIAL POSITION
ABC Co. post-closing trial balance on December 31, 2018 shows the
following account balances:
ACCOUNTS DR CR
Cash 20,000
Accounts Receivable 122,000
Allowance for bad debts 30,000
Notes Receivable (trade) 8,000
Inventory 200,000
Prepaid supplies 15,000
Prepaid rent 25,000
Prepaid insurance 10,000
Land 1,000,000
Building 2,000,000
Accumulated Depreciation-Bldg 1,600,000
Equipment 800,000
Accumulated Depreciation-Equipment 250,000
Accounts Payable 100,000
Note Payable-short term loan 200,000
Note Payable-long term loan 1,450,000
(50,000 due within 1 yr.)
Interest Payable 65,000
Salaries Payable 105,000
Utilities Payable 8,000
Unearned Income 35,000
Owner’s Capital 357,000
Totals 4,200,000 4,200,000
REQUIREMENT: Prepare the statement of financial position (Report Form)
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SOLUTION:
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ABM Co.
Statement of Financial Position
As of December 31, 2018
Note
ASSETS s
Cash and cash equivalents 1
Trade and other receivables 2
Inventory
Prepaid Assets 3
Total Current Assets
Property, Plant and Equipment 4
Total Non-current Assets
TOTAL ASSETS
LIABILITIES
Trade and other payables 5
Short term borrowings
Current portion of long term borrowings 6
Total Current Liabilities
Long term borrowings 6
Total Non-current Liabilities
EQUITY
Owner’s Equity
TOTAL LIABILITIES AND EQUITY
REFERENCES
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Teaching Guide for Senior High School – Accountancy, Business
and Management 2
Fundamentals of Accountancy, Business and Management
Volume 1By: Ma. Elenita Balatbat Cabrera MBA MBA CPA CMA
Fundamentals of Accountancy, Business and Management: A
Textbook in Basic Accounting 2
By: Solita A. Frias Erlinda C. Pefianco, Ed. D (Project Director)
Fundamentals of Accountancy, Business and Management
Volume 2
By: Josefina L. Beticon James Cristopher D. Domingo
Fermin Antonio D. Yabut – Authors Ma. Gina T. Manaligod