Fundamentals of Accountancy

Business and Management 2

Lesson 1
Statement of Financial Position (SFP)
The Statement of Financial Position (SFP), which is also known as the Balance Sheet, shows the financial
position of a business entity at a given period or a specified date. Its purpose is to help the financial
statement users in the assessment of the financial health and soundness of a business entity in determining
its liquidity, financial, credit and business risks.

It has three (3) elements:

1. Assets (resources owned and controlled by the business);

2. Liabilities (obligations owed to someone by the business); and
3. Equity or Owner’s Equity (residual interest of the owners of the business or what was left of the assets
after paying the liabilities is the right of the owners).

The assets, aside from the capital investment of the owners, maybe financed from outside sources (like
loans from banks and other financial institutions or from other creditors). The total assets should always
be equal to the sum of the total liabilities and total equity. Thus, the Accounting Equation is stated as:
Assets = Liabilities + Equity.
Forms of Statement of Financial Position (SFP)
The Statement of Financial Position (SFP) has two forms Report form and the Account Form. The
format in the preparation of the SFP depends on the preference but most financial users prefer to use the
report form because it is easier to read especially when comparing multiple years SFP.
1. Report Form- it is a form of SFP wherein accounts are presented vertically, the Assets first,
followed by the Liabilities and then the Equity. The above presented Balance Sheet is an example
of a Report Form SFP.
2. Account Form- it is a form of SFP wherein accounts are presented horizontally, the Assets are
presented on the left side while the Liabilities and the Equity are on the right side of the Balance
Sheet. It will look like the debit and credit balances of an account.
SAMPLE FORMAT/TEMPLATE WITH AMOUNT of Statement of Financial Position
( REPORT FORM )
Dale’s Garden
Statement of Financial Position
As of December 31, 2020
(In Philippine Peso)

ASSETS
Current Assets
Cash PhP 250,000.00
Accounts Receivable 85,000.00
Garden Supplies and Materials 185,000.00
Prepaid Expenses 48,000.00
Total Current Assets Php 568,000.00
Non- Current Assets
Garden Tools and Equipment PhP 285,000.00
Accumulated Depreciation ( 95,000.00) PhP 190,000.00
Delivery Vehicle 500,000.00
Accumulated Depreciation ( 62,500.00) 437,500.00
Land 1,500,000.00
Building 550,000.00
Accumulated Depreciation ( 55,000.00) 495,000.00
Total Non- Current Assets PhP 2,622,500.00

TOTAL ASSETS PhP 3,190,500.00

================
LIABILITIES
Current Liabilities
Accounts Payable PhP 355,000.00
Notes Payable, 1 year 150,000.00
Salaries Payable 35,500.00
Total Current Liabilities PhP 540,500.00
Non-Current Liabilities
Notes Payable, 7 years 350,000.00
TOTAL LIABILITIES PhP 890,500.00

OWNER’S EQUITY
Owner’s Equity
D. Ramos, Capital PhP 2,300,000.00

TOTAL LIABILITIES AND OWNER’S EQUITY PhP 3,190,500.00

================
The illustration is an example of a simple statement of financial position of a single/ sole proprietorship.
Other forms of business organizations (partnership and corporation. The total assets must be always
equal to the total liabilities and owner’s equity. The total assets, as well as, the total liabilities and equity
are double ruled showing that it is the end part of a financial statement.

ASSETS

Current Assets

Cash PhP 250,000.00

Accounts Receivable 85,000.00
Garden Supplies and Materials 185,000.00
Prepaid Expenses 48,000.00

Total Current Assets Php 568,000.00

Non- Current Assets

Garden Tools and Equipment PhP 285,000.00

Accumulated Depreciation ( 95,000.00) PhP 190,000.00
Delivery Vehicle 500,000.00
Accumulated Depreciation ( 62,500.00) 437,500.00
Land 1,500,000.00
Building 550,000.00
Accumulated Depreciation ( 55,000.00) 495,000.00

Total Non- Current Assets PhP 2,622,500.00

LIABILITIES AND EQUITY
TOTAL ASSETS PhP 3,190,500.00
Current Liabilities
================
Accounts Payable PhP 355,000.00
Notes Payable, 1 year 150,000.00
Salaries Payable 35,500.00

Total Current Liabilities PhP 540,500.00

Non-Current Liabilities

Notes Payable, 7 years 350,000.00

TOTAL LIABILITIES PhP 890,500.00

OWNER’S EQUITY
Owner’s Equity
D. Ramos, Capital PhP 2,300,000.00

TOTAL LIABILITIES AND OWNER’S EQUITY PhP 3,190,500.00

================
The illustration is an example of a simple statement of financial position of a single/ sole proprietorship.
Other forms of business organizations (partnership and corporation. The total assets must be always
equal to the total liabilities and owner’s equity. The total assets, as well as, the total liabilities and equity
are double ruled showing that it is the end part of a financial statement.