Senior High School

Fundamentals of
Accountancy and
Business and
Management 2
Quarter 1. Week 1

Statement of Financial Position (SFP)

 I What I need to know?
The 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.

The learners should be able to:

1. identify the elements of the SFP and describe each of them
2. Prepare on SFP using the report form and the account form with proper
classification of items as current and noncurrent.

I What is new?
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 communicated to users of accounting information
through the financial statements.
TASK 1. Directions: Fill in the blank with the correct answer. Choose from the
given words below. (Critical Thinking, Communication and Collaboration)
_________ 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.
_________ 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

Ledger Journal Assets Expenses

Accounting Equation Posting to Ledger

Financial Statement Liabilities Income

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 D What I know?
Pre-Test: True or False
Directions: Write True if the statement is correct and False if the statement is
incorrect (Collaboration)
__________1. The left side of the account is Debit
__________2. The permanent accounts are the nominal account.
__________3. The right side of the account is credit.
__________4. The elements of the statement of financial position are Assets and
expenses.
__________5. Current Assets are easily convertible into cash within the
normal operating cycle of the business
___________6. The elements of Statement of financial position are Assets,
Liabilities and Owner’s Equity account.
___________7. Kinds of Assets are Current Assets and Non-Current Assets
___________8. Kinds of Liabilities are Current Liabilities and Non-Current
Liabilities
___________9. Under owner’s Equity Account includes Capital, Owner’s
withdrawal, Revenue and Expenses.
__________10. Account form and Report form are the two kinds of forms of the
Statement of Financial Position
__________11. Cash, Accounts Receivables and Merchandize Inventory are examples
of Current Assets.
__________12. The Fixed Assets are those assets that could last more than five
years.
___________13. Liability is an expression to indicate a debt or an amount of money
owed by the business to the creditor.
___________14. Accounts payable is an example of Current Assets.
___________15. Land, Equipment, Furniture and Fixtures are also termed as Fixed

D What is in?
Assets.

Task 2: My Personal Statement of Financial Position

Directions: In a piece of paper, write down the following:
A. amount of your current savings and the things that you owned,
(clothes, bags, shoes, gadgets, etc). Get the total amount.

B. amount of the things that you owed to your friends, family members
or parents (tuition, allowance, etc). Get the total amount.
C. Deduct the amount you owe from the amount you own

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 A. Things that I owned. B. Things that I owed
a. _____________________ _____________________
b._____________________ _____________________
c. _____________________ _____________________
d._____________________ _____________________
e. _____________________ _____________________
f. _____________________ _____________________
g._____________________ _____________________

Totals:

Questions:
1. Which has the greater amount, things you own or things you owe?
__________________________________________________________________
2. Do you think you managed your finances well? Why?
__________________________________________________________________
3. What can you say about your financial situation right now?
___________________________________________________________________

D What is it?
Financial statements are structured representation of an entity’s
financial position which is balance sheet and results of its operations which
is the statement of performance. Financial statements are product of the
accounting process.

The elements of the financial positions are as follows:

1. Assets are resources you control that have resulted from past events and
can provide you with the future economic benefits
2. Liabilities are your present obligations that have resulted from past
events and can require you give up resources when settling them.
3. Equity means assets minus liabilities. Other terms for equity are capital,
net assets, and net worth.
The above elements are termed Permanent Accounts because their
life or usefulness continues throughout the life of the company. These are in
contrast with temporary accounts which are found in the Statement of
Comprehensive Income (SCI). Temporary accounts unlike permanent
accounts will have zero balances at the end of the accounting period
STATEMENT OF FINANCIAL POSITION – Also known as the balance
sheet. This statement includes the amounts of the company’s total assets,
liabilities, and owner’s equity which in totality provides the condition of the

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company on a specific date. (Haddock, Price, & Farina, 2012)

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
a. 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.
b. 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.

Two ways to present SFP

Report Form – A form of the SFP that shows asset accounts first and then
liabilities and owner’s equity accounts after. (Haddock, Price, &
Farina, 2012) This form is usually the needed format submitted to the
government, financial institutions and other private agencies.
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 credit balances of an account. (Haddock, Price, & Farina, 2012)
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

Penson Trading Enterprise

Statement of Financial Position
As of December 31, 2019

Account Form
__________________________________________________________________________________

Penson Trading Enterprise

Statement of Financial Position
As of December 31, 2019

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 Report Form

Elements of the Statement of Financial Position

Heading- Heading should include the following:

i. Name of the Company

ii. Name of the Statement

iii. Date of preparation (emphasis on the wording – “as of”)

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.

Current Assets are arranged based on which asset can be realized first
(liquidity). Current assets and current liabilities are also called short
term assets and shot term liabilities.

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 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.

Noncurrent assets and noncurrent liabilities are also called long term
assets and long-term liabilities.

Owner’s Equity- Includes Capital, Net Assets, and Net Worth.

E What is more?
Task 3. Current or Non-Current
Direction: A. Identify whether the following account title is current asset or
non-current asset.
________1. Accounts Receivable
________2. Cash
________3. Land
________4. Furnitures and Fixtures
________5. Inventories

B. Identify whether the following account title is current liability or non-

current liability.
________1. Mortgage Payable
________2. Accounts Payable
________3. Notes Payable
________4. Loans Payable
________5. Accrued Expenses

Task 4. ELEMENTS OF SFP

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Directions: Identify and label the elements of Statement of Financial

1
.

Position.

E What I can do? do?

Task 5 Let’s Practice

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Directions: Compute for the needed information. Remember to use the
Accounting Equation: Assets = Liabilities + Owner’s Equity.
(attach your solution and computation)

_______________1. E-Learning Tutorial 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. Thank You Online Shopee total liabilities amounted Php 10,000.
Total equity had an ending balance of Php 20,000. How much is
total asset?
_______________3. Five Aces Marketing Company 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. Salamuch Shopee Accounts Receivable amounted to Php
500,000. Prepaid Expense and Unearned Income totaled Php
30,000 and Php10,000 respectively. Cash balance amounted to
Php 100,000 while Accounts Payable and Inventory totaled to
Php 20,000 and Php 10,000respectively. How much is the
company’s current assets? Current liabilities?_
______________5. Bangtan Entertainment Liabilities and Equity amounted to Php
285,000. Total noncurrent assets ended at Php 85,000. Cash
totaled Php50,000. Inventory amounted to Php100,000.
Assuming the company had no other assets, how much is
Accounts Receivable?

E What else I can do?

Task 7: Think about this!

Directions: Read and analyze each situation. Answer the questions that
follows.

1. Gina neglected to make a Financial Report. She thought that her

company is doing well because of the increasing assets that she has
acquired in account. As a result, her liabilities increased also. What
will be its effect on her Equity? Is it healthy for the company to have
this kind of activity? Why?

2. Small businesses like sari-sari stores do not invest in non-current

assets. They seldom account their assets and liabilities. Their main
priority is to pay their liabilities with their current asset (Cash). What
do you think will be the impact of not accounting their assets and
liabilities to the stability of their business?

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 Task 8. Try this!

Directions: Prepare a Statement of Financial Position using the following

accounts (one in report form and one in account form):

Cash – 10,000

Loans Payable – 87,500

Accounts Receivable – 7,600

Supplies – 2,300

Equipment – 17,000

Owner’s equity – 40,000

Accounts Payable – 22,400

Building – 113,000

A What I have learned?

Task 9. Fill me in
Directions: Fill-in the blanks with appropriate words that you have learned.
_______________________________is one of the Financial reports
submitted by the company to the users of information such as banks and
other financial institutions. They are called ____________________because of
their existence is continuous and the balance is forwarded to the next
accounting period. The elements of financial position are _________,
_________ and ______________ account. The kinds of Assets are ___________
and ______________ while the kinds of liabilities are Current
and Long-Term Liabilities. Under ____________ assets are cash, receivables,
Inventories and prepaid expenses. _____________ assets include Land,
Building Equipment and furniture and their accumulated depreciation.
While for Current Liabilities includes Accounts Payables and Notes Payable
and for the Long-Term Liabilities are _____________,____________.
and________________.

A What I can achieve?

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Directions: Write True if the statement is correct and False if the statement is
incorrect (Collaboration)
__________1. The left side of the account is Debit
__________2. The permanent accounts are the nominal account.
__________3. The right side of the account is credit.
__________4. The elements of the statement of financial position are Assets and
expenses.
__________5. Current Assets are easily convertible into cash within the
normal operating cycle of the business
___________6. The elements of Statement of financial position are Assets,
Liabilities and Owner’s Equity account.
___________7. Kinds of Assets are Current Assets and Non-Current Assets
___________8. Kinds of Liabilities are Current Liabilities and Non-Current
Liabilities
___________9. Under owner’s Equity Account includes Capital, Owner’s
withdrawal, Revenue and Expenses.
__________10. Account form and Report form are the two kinds of forms of the
Statement of Financial Position
__________11. Cash, Accounts Receivables and Merchandize Inventory are examples
of Current Assets.
__________12. The Fixed Assets are those assets that could last more than five
years.
___________13. Liability is an expression to indicate a debt or an amount of money
owed by the business to the creditor.
___________14. Accounts payable is an example of Current Assets.
___________15. Land, Equipment, Furniture and Fixtures are also termed as Fixed
Assets.

REFLECTION:

I have learned that

___________________________________________________________________________
___________________________________________________________________________
Based on what I learned, I intend to
___________________________________________________________________________
___________________________________________________________________________
What I value most with this lesson is that
___________________________________________________________________________
___________________________________________________________________________

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