FABM 2 Module 3 SFP

Fundamentals of Accountancy, Business and
Governor Pack Road, Baguio City, Philippines 2600 Management 2

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 12- ABM
Email: email@uc-bcf.edu.ph; Website: www.uc-bcf.edu.ph
MODULE 3 – FABM 2 Subject Teacher: John Paul M. Lagao
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Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
STATEMENT OF FINANCIAL POSITION

Learning Objectives:
At the end of the modules, the student should be able to:
a) Identify the elements of the SFP;
b) Describe each of the elements of the SFP;
c) Prepare an SFP using the report form and the account form with proper classification of items as
current and noncurrent.
A. Statement of Financial Position (SFP)

-The new title of the balance sheet.
-A structured FS that shows the assets, liabilities, and equity of a business entity as of a given
date. The SFP has the information about the company’s liquidity, solvency, financial structure, and
capacity for adaptation. Liquidity is the availability of cash in the near future after taking to account
the commitments over the period. On the other hand, solvency is the availability of cash over the
longer term to meet the financial commitments as they fall due.
Elements of Statement of Financial Position:

1. Assets – are resources controlled by the entity as a result of past transaction or event and from
which future economic benefits are expected to flow to the entity.
Assets are classified into current assets and non-current assets. An entity shall classify assets as current
when:
a. it expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
b. it holds the assets primarily for the purpose of trading;
c. it expects to realize the asset within twelve months after the reporting period; or
d. the asset is cash or cash equivalent (as defined in IAS No. 7) unless the asset is restricted from being
exchanged or used to settle in a liability for at least twelve months after the reporting period.
Common Current Assets

o Cash- Any medium if exchange that a bank will accept for deposit at face value. It includes
coins, currency, unrestricted checks, money orders, bank deposits and drafts.
o Cash Equivalents- short-term, highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of change in value.
o Notes receivable- Written pledge that a customer will pay the business a fixed amount of
money on a certain date.
o Accounts Receivable- These are claims against customers arising from sales of services or
goods on credit. It offers less security than a promissory note.
o Inventories- assets that are held for sales in the ordinary course of business; in the production
for such sales; in the form of materials or supplies to be consumed in the production process or
in the rendering of services.
o Prepaid Expenses- These are expenses that are already paid but not yet consumed.
Assets are classified as non-current assets when the asset is to be realized for more than one
operating cycle. If an entity has an unclear operating cycle, it is assumed to be twelve months.
Common Non-current assets

o Property, Plant and Equipment (PPE)- tangible assets that are held by an enterprise for use in
the production or supply of goods or services, or for rental to others, or for administrative
purposes that are expected to be used for more than one accounting period. It includes
buildings, machineries, equipment, furniture and fixtures, and vehicles.
o Accumulated Depreciation- This is a contra-asset account containing the sum of all periodic
depreciation expenses. Accumulated Depreciation is placed under and deducted from the
amount of the PPE.
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o Intangible Assets- these are assets that are identifiable, nonmonetary assets without physical
substance held for use in the production or supply of goods or services, for rental to others or
for administrative purposes. It includes goodwill, patents, copyrights, licenses, franchises,
trademarks, brand names, secret processes, subscriptions lists and non-competition
agreements.
*When listing Current assets and Non-current Assets, present them in decreasing order of liquidity.
Thence, whichever is the most liquid asset should be written first followed by the next liquid asset.
Cash is the most liquid asset that is why all of the Balance Sheets presented to you have the assets
first written followed by the cash equivalents.
2. Liabilities – are present obligations of the entity arising from past transaction or events the
settlement of which is expected to result in an outflow from the entity of resources embodying
economic benefits.
Same with Assets, Liabilities is also classified as current liabilities and non-current liabilities.
Per revised International Accounting Standards (IAS) No. 1, an entity shall classify a liability as current
when:
a. it expects to settle the liability in its normal operating cycle;
b. it holds the liability primarily for the purpose of trading;
c. the liability is due to be settled within twelve month =s after the reporting period; or
d. the entity does not have an unconditional right to defer settlement of the liability for at least
twelve months after the reporting period.
Common current liabilities

o Accounts Payable- The opposite of Accounts Receivable. It is the agreement of the entity to
pay the supplier in the near future by accepting goods or services of the supplier.
o Notes Payable- The opposite of Notes Receivable. The business entity agrees, by drafting a
note, to pay the supplier in the near future.
o Accrued Liabilities- This includes expenses that are already incurred but not yet paid.
o Unearned revenue- The amount of payment received by the business entity but is not yet
delivered or performed.
o Current portion of long-term debt- These are portions of mortgage notes, bonds and other
long-term indebtedness which are due within an accounting period from the balance sheet
date.
All other liabilities should be classified as non-current liabilities.
Common Non-current liabilities

o Mortgage Payable- the debt of the entity that is secured by a certain asset to the creditor.
o Bonds payable- the contract between the issuer and the lender specifying the terms of
repayment and the interest to be charged. The contract is evidenced by a bond certificate.
*Liabilities are generally classified and presented based on time of maturity such that obligations
which are currently due are listed first.
3. Equity – the residual interest in the assets of the entity after deducting all of its liabilities.
- the amount for Equity to be used in Statement of Financial Position is the Capital, Ending
Balance amount from the Statement of Changes in Equity as discussed in module 2.
Format of Statement of Financial Position

The Statement of Financial Position (Balance Sheet) can be presented by either using Report format
or Account format. Report format is listing the Assets, followed by the liabilities and the owner’s equity
in a vertical manner. Account format is presented horizontally wherein Assets is placed on the left
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side. Then, the Liabilities is written on the right side. Below the Liabilities is the Equity. Either of the two
formats is acceptable and the final balances of each element should be same whichever format
used.
Bear in mind that SFP’s Header is composed of three lines
1st- Entity’s Name
2nd- Statement Title
3rd- Date for the accounting period
- For SFP, the template is: “As of ____________”. This phrase states that the amounts placed on
the statement are to be carried to the next accounting period.
Statement of Financial Position: Report Format (Sole Proprietorship)
Entity’s Name
Statement of Financial Position
As of December 31, 2019
ASSETS Notes
Current assets:
Cash and cash equivalents 1 ₱XX
Trade and other receivables 2 XX
Inventories XX
Prepaid insurance XX
Total current assets ₱XXX
Noncurrent assets:
Property, plant and equipment 3 ₱XX
Total noncurrent assets ₱XXX
TOTAL ASSETS ₱XXX
LIABILITIES AND EQUITY

Current liabilities:
Trade and other payables 4 ₱XXX
Current tax liability XX
Total current liabilities ₱XXX
Noncurrent liabilities:
Loans payable - net 5 ₱XX
Total noncurrent liabilities ₱XX
TOTAL LIABILTIES ₱XXX
Equity:
Owner's Capital ₱XX
TOTAL EQUITY ₱XXX
TOTAL LIABILITIES & EQUITY ₱XXX

Note: Numbers are needed in order to present the necessary computations made to obtain the
amounts placed in the SFP.
Statement of Financial Position: Account Format (Sole Proprietorship)

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Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
Entity’s Name
Statement of Financial Position
ASSETS Notes LIABILITIES AND EQUITY

Current assets: Current liabilities:
Cash and cash equivalents 1 ₱XX Trade and other payables 4 ₱XXX
Trade and other receivables 2 XX Current tax liability XX
Inventories XX Total current liabilities ₱XXX
Prepaid insurance XX
Total current assets ₱XXX Noncurrent liabilities:
Loans payable - net 5 ₱XX
Noncurrent assets: Total noncurrent liabilities ₱XX
Property, plant and equipment 3 ₱XX
Total noncurrent assets ₱XXX TOTAL LIABILTIES ₱XXX
Equity:
Owner's Capital ₱XX
TOTAL EQUITY ₱XXX
TOTAL ASSETS ₱XXX TOTAL LIABILITIES & EQUITY ₱XXX
Sample Problem:
The trial balance of Entity A on December 31, 2019 shows the following information:
Debits Credits
Cash on hand ₱60,000
Cash in bank 1,000,000
Accounts receivable 2,000,000
Allowance for doubtful accounts ₱300,000
Advances to employees 40,000
Advances to suppliers 30,000
Inventories 1,200,000
Prepaid insurance 800,000
Land 2,200,000
Building 3,400,000
Accumulated depreciation -
2,000,000
Bldg.
Accounts payable 720,000
Accrued liabilities 80,000
Income tax payable 500,000
Loans payable (due in 20x3) 3,000,000
Discount on loan payable 870,000
Interest payable (due in 20x2) 340,000
Owner's Capital 4,660,000
Totals ₱11,600,000 ₱11,600,000
Required Prepare the statement of financial position of Entity A as of December 31, 2019 by
completing all the required information in the pro-forma statement of financial position provided
below, including a proper heading for the statement.
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Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
Hint: “Discount on loans payable” is a contra-account to loans payable.

Solution:
Entity A
Statement of financial Position
ASSETS Notes
Current assets:
Cash and cash equivalents 1 ₱ 1,060,000
Trade and other receivables 2 1,770,000
Inventories 1,200,000
Prepaid insurance 800,000
Total current assets ₱ 4,830,000
Noncurrent assets:
Property, plant and equipment 3 ₱3,600,000
Total noncurrent assets ₱3,600,000
TOTAL ASSETS ₱8,430,000
LIABILITIES AND EQUITY

Current liabilities:
Trade and other payables 4 ₱1,140,000
Current tax liability 500,000
Total current liabilities ₱1,640,000
Noncurrent liabilities:
Loans payable - net 5 ₱2,130,000
Total noncurrent liabilities ₱2,130,000
TOTAL LIABILTIES ₱3,770,000
Equity:
Owner's Capital ₱4,660,000
TOTAL EQUITY 4,660,000
TOTAL LIABILITIES & EQUITY ₱8,430,000
Note 1: Cash and cash

equivalents
This line item consists of the
following:
Cash on hand ₱60,000
Cash in bank 1,000,000
Cash and cash equivalents ₱1,060,000
Note 2: Trade and other

receivables
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following:
Accounts receivable ₱2,000,000
Allowance for doubtful accounts (300,000)
Advances to employees 40,000
Advances to suppliers 30,000
Trade and other receivables ₱1,770,000
Note 3: Property, plant and equipment

following:
Land ₱2,200,000
Building 3,400,000
Accumulated depreciation -
(2,000,000)
Bldg.
Property, plant and equipment ₱3,600,000
Note 4: Trade and other payables

following:
Accounts payable ₱720,000
Accrued liabilities 80,000
Interest payable 340,000
Trade and other payables ₱1,140,000
Note 5: Loans payable - net

following:
Loans payable ₱3,000,000
Discount on loan payable (870,000)
Loans payable - net ₱2,130,000
References:
Ferrer, R. & Millan Z. (2018). Fundamentals of Accountancy, Business, and Management 2. Baguio
City: Bandolin Enterprise
Ballada, W. (2019). Fundamentals of Accountancy, Business, and Management 2. Manila: DomDane

Publishers
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Fundamentals of Accountancy, Business and

Governor Pack Road, Baguio City, Philippines 2600 Management 2

MODULE 3 – FABM 2 Subject Teacher: John Paul M. Lagao

MODULE 3 – FABM 2 Subject Teacher: John Paul M. Lagao

STATEMENT OF FINANCIAL POSITION

A. Statement of Financial Position (SFP)

Elements of Statement of Financial Position:

Common Current Assets

Common Non-current assets

MODULE 3 – FABM 2 Subject Teacher: John Paul M. Lagao

Common current liabilities

All other liabilities should be classified as non-current liabilities.

Common Non-current liabilities

Format of Statement of Financial Position

MODULE 3 – FABM 2 Subject Teacher: John Paul M. Lagao

Statement of Financial Position: Report Format (Sole Proprietorship)

TOTAL ASSETS ₱XXX

LIABILITIES AND EQUITY

TOTAL LIABILTIES ₱XXX

TOTAL LIABILITIES & EQUITY ₱XXX

Statement of Financial Position: Account Format (Sole Proprietorship)

MODULE 3 – FABM 2 Subject Teacher: John Paul M. Lagao

ASSETS Notes LIABILITIES AND EQUITY

TOTAL ASSETS ₱XXX TOTAL LIABILITIES & EQUITY ₱XXX

MODULE 3 – FABM 2 Subject Teacher: John Paul M. Lagao

Hint: “Discount on loans payable” is a contra-account to loans payable.

TOTAL ASSETS ₱8,430,000

LIABILITIES AND EQUITY

TOTAL LIABILTIES ₱3,770,000

TOTAL LIABILITIES & EQUITY ₱8,430,000

Note 1: Cash and cash

Note 2: Trade and other

MODULE 3 – FABM 2 Subject Teacher: John Paul M. Lagao

This line item consists of the

Note 3: Property, plant and equipment

Note 4: Trade and other payables

Note 5: Loans payable - net

Ballada, W. (2019). Fundamentals of Accountancy, Business, and Management 2. Manila: DomDane

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