STATEMENT OF FINANCIAL POSITION

Financial Statement

 Are a structured representation of the financial position and financial performance of an

entity. The objective of financial statements is to provide information about the financial
position, financial performance and cash flows of an entity that is useful to a wide range of
users in making economic decisions.
 Also shows the results of the management’s stewardship of the resources entrusted to it.
To meet this objective, financial statements provide information about an entity’s:
a. Assets
b. Liabilities
c. Equity
d. Income and expenses, including gains and losses
e. Contributions by and distribution to owners in their capacity as owners
f. Cash flows
 This information, along with other information in the notes, assist users of financial
statements in predicting the entity’s future cash flows and, in particular, their timing and
certainty.
 Also called as Notes and Disclosure or the Notes to Financial Statements wherein all
information are seen such as company information, applied accounting standards,
computation of cash, contents of liabilities, etc.
 A complete set of financial statements comprises:
a. A statement of financial position as at the end of the period
b. As statement of comprehensive income for the period
c. A statement of changes in equity for the period
d. A statement of cash flows for the period
e. Notes, comprising a summary of significant accounting policies and other
explanatory information
f. A statement of financial position as the beginning of the earliest comparative
period when an entity applies an accounting policy retrospectively or makes
retrospective restatement of items in its financial statements, or when it
reclassifies items in its financial statements

Review of balance sheet elements

Assets An asset is a resource controlled by the entity as a result of past events and
from which future economic benefits are expected to flow to the entity
Liabilities A liability is a present obligation of the entity arising from past events, the
settlement of which is expected to result in an outflow from the entity of
resources embodying economic benefits
Equity Equity is the residual interest in the assets of the entity after deducting al its
liabilities
The Balance Sheet and Accounting Equation

Current
Current Liabilities
Liabilities
Assets
Noncurrent
Assets Liabilities

Noncurrent
Capital Assets
Capital

Figure 1. Balance Sheet Figure 2. Statement of Financial Position

Assets

An entity shall classify an asset as current when…

 It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle
 It holds the asset primarily for the purpose of trading
 It expects to realize the asset within twelve months after reporting period
 The asset it cash or cash equivalents unless the asset is restricted from being exchanged or
used to settle a liability for at least 12 months after the reporting period
 Examples: Cash, Accounts Receivables, Inventory, Prepaid Expenses, Marketable Equity
Securities, Office and Store Supplies

All other assets (that are not current) shall be classifies as noncurrent assets…

 Examples: Land, Land Improvements, Building, Equipment, Machineries, Intangible Assets,

Investment Property, Investment in Equity Securities, Investment in an Associate

Liabilities

An entity shall classify a liability as current when…

 It expects to settle the liability in its normal operating cycle

 It holds the liability primarily for the purpose of trading
 The liability is due to be settles within twelve months after the reporting period
 It does not have an unconditional right to defer settlement of the liability for at least 12
months after the reporting period
 Examples: Trade Accounts Payable, Short-term Notes Payable, Salaries Payable, Rent
Payable, Utilities Payable, Current Income Tax Payable

All other liabilities (that are not current) shall be classified as noncurrent liabilities…

 Example: Bonds Payable, Long-term Notes Payable