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Fundamentals of Accountancy, Business and Management 2: Statement of Financial Position (Balance Sheet)

The document defines a statement of financial position or balance sheet as a report that includes a company's total assets, liabilities, and owner's equity at a specific date. It identifies the key elements as assets (what is owned), liabilities (what is owed), and equity (what is owned minus what is owed). Assets and liabilities are further classified as current if realized within one year, and non-current if realized after one year. The document provides an example balance sheet prepared in both report and account form to illustrate the proper presentation and classification of items.

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Annalyn Dacutanan
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53 views21 pages

Fundamentals of Accountancy, Business and Management 2: Statement of Financial Position (Balance Sheet)

The document defines a statement of financial position or balance sheet as a report that includes a company's total assets, liabilities, and owner's equity at a specific date. It identifies the key elements as assets (what is owned), liabilities (what is owed), and equity (what is owned minus what is owed). Assets and liabilities are further classified as current if realized within one year, and non-current if realized after one year. The document provides an example balance sheet prepared in both report and account form to illustrate the proper presentation and classification of items.

Uploaded by

Annalyn Dacutanan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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FUNDAMENTALS OF

ACCOUNTANCY, BUSINESS AND


MANAGEMENT 2

STATEMENT OF FINANCIAL
POSITION (BALANCE SHEET)
Define Define Statement of Financial Position (SFP).

Identify Identify the elements of SFP and describe each of them.

LEARNING
OBJECTIVES
Classify Classify the elements of the SFP into current and noncurrent
items.

Prepare Prepare an SFP using the report form and the account form
with proper classification of items as current and noncurrent.
WHAT IS A STATEMENT OF
FINANCIAL POSITION?
It is also known as the balance sheet, which
includes the amounts of the company’s total
assets, liabilities, and owner’s equity which
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.
ELEMENTS OF STATEMENT OF
FINANCIAL POSITION
ACCOUNTING EQUATION

ASSETS = LIABILITIES + EQUITY


WHAT YOU “OWN” WHAT YOU “OWE” WHAT YOU “OWN” - WHAT YOU “OWE”

CONTROL NO CONTROL
RESIDUAL INTEREST
INFLOWS OUTFLOWS
REALIZED = COLLECTED/USED

SETTLED = PAID/EARNED
Assets that can be realized within
CURRENT the normal operating course of
ASSETS business or one year from the
reporting date whichever is longer.
CASH

EXAMPLES ACCOUNTS RECEIVABLE


OF
CURRENT MERCHANDISE INVENTORY
ASSETS
PREPAID EXPENSE
NON-
Assets that cannot be realized one
CURRENT year from the reporting date.
ASSETS
Property, Plant and
Equipment

EXAMPLE
S OF NON- Long-term Investments
CURRENT
ASSETS

Intangible Assets
Liabilities that fall due within the
CURRENT normal operating course of
LIABILITIES business or one year from the
reporting date whichever is longer.
Accounts Payable

Accrued Expenses
EXAMPLES
OF CURRENT
LIABILITIES
Unearned Income

Notes Payable
NON- Liabilities that do not fall due
CURRENT within one year from the reporting
LIABILITIES date.
Loans Payable
EXAMPLES
OF NON-
CURRENT
LIABILITIES
Mortgage Payable
REPORT FORM
This type of statement list the three different sections (Assets, Liabilities and
Equity) one on top of the other.

ASSETS

LIABILITIES

EQUITY
ACCOUNT FORM
Refers to two-column presentation of the SFP. In this format, assets are
listed in the first column, while liabilities and equity accounts are listed in
the second column.

LIABILITIES
ASSETS
EQUITY
ILLUSTRATIVE PROBLEM
Prepare the Statement of Financial Position of ADG Company using the following
accounts as of September 30, 2020. (in Report and Account Form)
Cash – 50,000
Property, Plant and Equipment – 120,000
Accounts Payable – 10,000
Merchandise Inventory – 60,000
Accounts Receivable – 15,000
Owner’s Equity – 155,000
Intangible Assets – 20,000
Loans Payable – 100,000
ADG Company
Statement of Financial Position
As of September 30, 2020
ASSETS
Cash 50,000
Merchandise Inventory 60,000
Accounts Receivable 15,000
Current Assets 125,000
Property, Plant and Equipment 120,000
Intangible Assets 20,000
Non-current Assets 140,000

TOTAL ASSETS 265,000

LIABILITIES
Accounts Payable 10,000
Current Liabilities 10,000
Loans Payable 100,000
Non-current Liabilities 100,000

TOTAL LIABILITIES 110,000

EQUITY
Owner’s Equity 155,000

TOTAL LIABILITIES AND OWNER’S EQUITY 265,000


ADG Company
Statement of Financial Position
As of September 30, 2020
ASSETS LIABILITIES
Cash 50,000 Accounts Payable 10,000
Merchandise Inventory 60,000 Current Liabilities 10,000
Accounts Receivable 15,000 Loans Payable 100,000
Current Assets 125,000 Non-current Liabilities 100,000
Property, Plant and Equipment 120,000
Intangible Assets 20,000 TOTAL LIABILITIES 110,000
Non-current Assets 140,000
EQUITY
TOTAL ASSETS 265,000 Owner’s Equity 155,000

TOTAL LIABILITIES AND EQUITY 265,000


THANK YOU!!!

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