3. The account balances of Convergence, Inc.

as of 31 December 2019 are given in a

column that follows. Prepare the SFP for the entity in both report form and account form.

The SFP of Convergence, Inc, in illustration 1 follows the account form. The account form
follows the style of the accounting equation (i.e., assets are on the left side of the SFP while
liabilities and owner’s equity are on the right side). However, another form called the report form
is also used. In this form, the accounts are presented in one straight column- assets first,
followed by liabilities, and finally, the owner’s equity. According to the Philippine Accounting
Standards (PAS), there is no prescribed form for financial reporting, but the form should be
appropriate to the nature of business and transactions of the entity.

In illustration 2, you will find the SFP of Convergence, Inc presented in report form.

Accounts Debit (₱) Credit (₱)

Notes Payable, due after 10 477 850.00

years

Prepaid Rent 90
900.00

Chen, Capital 960 250.00

Cash 27 700.00

Allowance for Doubtful 5 800.00

Accounts

Property and Equipment 1 230 000.00

Chen, Drawing 30 000.00

Accounts Receivable 95 300.00

Accounts Payable 30 000.00

Total 1 473 900.00 1 473 900.00

REPORT FORM

Convergence, Inc
Statement of Financial Statement
31 December 2019
Assets

Current Assets
Cash ₱ 27,700.00
Accounts Receivable ₱ 93,300.00
Prepaid Rent ₱ 90,900.00

Total Current Assets: ₱ 213,900.00

Property and Equipment ₱ 1,230,000.00

Chen, Drawings ₱ 30,000.00

Total Assets: ₱ 1,473,900.00

Liabilities and Owner’s Equity

Current Liabilities:
Accounts Payable ₱ 30,000.00

Total Current Liabilities: ₱ 30,000.00

Non-current Liabilities:
Notes Payable, Due After 10 years ₱ 477,850.00
Allowance for Doubtful Accounts ₱ 5,800.00

Total Non-current Liabilities: ₱ 483,650.00

Owner’s Equity
Chen, Capital ₱ 960,250.00
 Total liabilities and Owner’s Equity: ₱ 1,473,900.00

ACCOUNT FORM:

Convergence, Inc
Statement of Financial Position
31 December 2019
Assets Liabilities and Owner’s Equity
Current Assets: Current Liabilities:

   Cash                           ₱27,000.00     Accounts Payable    

   Accounts Receivable  ₱ 95,300.00 ₱30,000.00
Prepaid Rent ₱ 90,900.00      ₱30,000.00
Total Current Liabilities:

₱213,900.00
Noncurrent Liabilities:
Total Current Assets
     Notes Payable, due after 10 ₱477,850.00
years
Allowance for doubtful accounts ₱5,800.00
Total Liabilities:
₱483,650.00

Owner’s Equity:
Property and Equipment ₱ 1,230,000.00 Chen, Capital ₱960,250.00
Chen, Drawings ₱ 30,000.00

Total Assets: ₱ 1,473,900.00 Total Liabilities and Owner’s ₱1,473,900.00

Equity:

The account format presents the asset accounts on the left side and the liabilities and equity accounts
on the right. The report format presents all the accounts vertically. Although both balance sheet formats
are acceptable, the report form is much more popular.The Total of Debit and Credit is equal(Balance).