Scribd
Upload
30 views20 pages

Chapter 2 Current Assets and Non-Current Assets

FABM 2

Uploaded by

James Hiro Geraldino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
30 views20 pages

Chapter 2 Current Assets and Non-Current Assets

FABM 2

Uploaded by

James Hiro Geraldino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 20

CHAPTER 2

The Statement of Financial


Position and the Statement of
Owner’s Equity
ASSETS

Lesson Objectives
1. review the calssification of assets
2. know the accounts that comprise the
asset section of the statement of
financial position
3. prepare the asset section of the
statement of financial position including
the supporting notes
REVIEW OF CLASSIFICATION
OF ASSETS

01
Current
Assets

Non-current
02

Assets
CURRENT ASSETS
Current Assets are classified and
presented according to liquidity
with the most liquid followed by
those with lesser liquidity. Since
cash is the most liquid , it is always
listed first followed by other current
assets according to their proximity
to cash.
CURRENT ASSETS
Improvements to InternationalAccounting
Standards 1.66 Classify assets when it is
a. expected to be realized, or intends to sell
or consume it, in the entity’s normal operating
cycle;
b. held primarily for the purpose of trading;
c. expected to be realized within twelve months
after the reporting period; or
d. cash or cash equivalent (unless reatricted)
CLASSIFICATION OF
CURRENT ASSETS
Cash
includes coins, currencies,
checks, bank deposits, and
other cash items readily
available for use in the
operations of the business.
CLASSIFICATION OF
CURRENT ASSETS
Cash Equivalents
are short-term investments
that are readily convertible to
known amounts of cash, which
are subject to an insignificant
risk to changes in value (PAS 7
paragraph 6).
CLASSIFICATION OF
CURRENT ASSETS
Marketable Securities or
Investment in Trading Securities
are stocks and bonds purchased by
the enterprise and are to be held
for only a short span of time or
short duration. They are usually
purchased when a business has
excess cash.
CLASSIFICATION OF
CURRENT ASSETS
Trade and Other Receivables include the amounts collectible from any
of the following accounts:
Accounts Receivable - is the amount collectible from customers to
whom goods have been sold or to whom services have been
rendered on account or credit.
Notes Receivable - is a promissory note issued by clients or
customers as evidence of their obligation to pay for services or
goods received.
Interest Receivable - amount of interest collectible on promissory
notes received from customers and clients.
Advances to Employees - certain amount of money loaned to
employees payable in cash or through salary deductions.
Accrued Income - income already earned but not yet received.
CLASSIFICATION OF
CURRENT ASSETS

Merchandise Inventory
represent the unsold goods
at the end of the accounting
period. This is applicable to
merchandising and
manufacturing businesses.
CLASSIFICATION OF
CURRENT ASSETS
Prepaid Expenses
are expenses paid in advance,
including supplies bought for
use in the business or services
and benefits to be received by
the business in the future.
CLASSIFICATION OF
CURRENT ASSETS

Contra-Asset Accounts
are accounts deducted from
the related asset accounts. This
includes:
CLASSIFICATION OF
CURRENT ASSETS
Allowance for Bad Debts are estimated losses
due to uncollectible accounts. This is deducted
from the accounts receivable to get the net
realizable value. This is in line with the
financial statements' qualitative characteristic
of conservatism wherein no profits would be
anticipated but all probable or estimable
losses should be provided.
CLASSIFICATION OF
CURRENT ASSETS
Accumulated Depreciation represents
the expired cost of property, plant,
and equipment as a result of usage
and passage of time. This is deducted
from the cost of the related asset
account to get the carrying value or
book value of the asset.
NON-CURRENT ASSETS

These are assets which are not


expected to be converted to
cash, consumed or used up
within one year. They are also
called long-term assets because
they have a service potential for
more than one year.
CLASSIFICATION OF
NON-CURRENT ASSETS
Long-term Investments are
assets held by an enterprise with
expected returns such as those
obtained through trading
relationships which are intended
to be held for more than one
year.
CLASSIFICATION OF
CURRENT ASSETS
Property, Plant, and Equipment are tangible
assets that are held by an enterprise for use
in the production or supply of goods or
services, or for administrative purposes and
which are expected to be used for more than
one period (International Accounting
Standards No. 16). Examples of Property,
Plant, and Equipment are:
EXAMPLES OF PROPERTY,
PLANT AND EQUIPMENT

LAND BUILDING EQUIPMENT FURNITURE AND


Equipment includes FIXTURES
typewriter, air-
is a piece of lot or is an edifice or conditioner, calculator, Furniture and
Fixtures include
real estate owned structure used to filing cabinet,
computer, electric fan, tables, chairs,
by the enterprise accommodate trucks, and cars used carpets, curtains,
on which a the office, store, by the business in its lamp and lighting
building can be or factory of a office, store, or factory. fixtures, and wall
Specific account titles decors. Specific
constructed for business may be used such as account titles
business enterprise in the Office Equipment, maybe used such as
purposes. conduct of its Store Equipment, Office Furniture
Delivery Equipment, and Fixtures and
operations. Transportation Store Furniture and
Equipment, Machinery Fixtures.
and Equipment.
Presented below is the asset section of the
statement of financial position and the supporting
notes.

You might also like