STATEMENT OF

FINANCIAL POSITION
Learner's Module in Fundamentals of
Accountancy, Business and Management
Quarter 1 ● Module 1

FRANCES ANNE C. BERAQUIT

Developer

Department of Education • Cordillera Administrative Region

Name: __________________________Grade/Section:_____________
Teacher: ________________________ Score:____________________
 Republic of the Philippines
DEPARTMENT OF EDUCATION
Cordillera Administrative Region
SCHOOLS DIVISION OF BAGUIO CITY
Military Cut-off, Baguio City

Published by
DepEd Schools Division of Baguio City
Curriculum Implementation Division

COPYRIGHT NOTICE
2020

Section 9 of Presidential Decree No. 49 provides:

“No copyright shall subsist in any work of the Government of the Philippines.
However, prior approval of the government agency of office wherein the work is
created shall be necessary for exploitation of such work for profit.”

This material has been developed for the implementation of K-12 Curriculum
through the DepEd Schools Division of Baguio City – Curriculum Implementation
Division (CID). It can be reproduced for educational purposes and the source must be
acknowledged. Derivatives of the work including creating an edited version, an
enhancement or a supplementary work are permitted provided all original work is
acknowledged and the copyright is attributed. No work may be derived from this
material for commercial purposes and profit.

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 PREFACE

This module is a project of the DepEd Schools Division of Baguio City through
the Curriculum Implementation Division (CID) which is in response to the
implementation of the K to 12 Curriculum.

This Learning Material is a property of the Department of Education, Schools

Division of Baguio City. It aims to improve students’ academic performance specifically
in Entrepreneurship.

Date of Development : August 2020

Resource Location : DepEd Schools Division of Baguio City
Learning Area : Accountancy, Business and Management
Grade Level : 12
Learning Resource Type : Module
Language : English
Quarter/Week : Q1/W1
Learning Competency/Code : Identify the elements of the SFP and describe each
of them (ABM_FABM12-Ia-b-1); Prepare an SFP
using the report form and account form with proper
classification of items as current and noncurrent
(ABM_FABM12-Ia-b-4).

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 ACKNOWLEDGEMENT

As the author of this learning module, I would like to express my sincerest

gratitude to those who meaningfully contributed in the development of this material.
To our School Principal, Mr. Edward C. Vicente, thank you for the moral support you
gave me in crafting this learning module. To our Assistant School Principal, Ms. Pia P.
Duligas, thank you for the guidance and technical assistance. To my mentor, Mr.
Norbert C. Lartec, thank you for the motivation and imparting your proficiency towards
the development of this module. Lastly, my humblest gratitude to DepEd Division of
Baguio for the given opportunity to develop a module for Filipino learners.

Development Team
Frances Anne C. Beraquit Author
Jerielle Acop Illustrator

School Learning Resources Management Committee

Edward C. Vicente School Principal
Pia P. Duligas Assistant School Principal
Genevieve C. Tudlong School LR Coordinator
Aurea D. Daweng Master Specialist

Quality Assurance Team

Francisco Copsiyan EPS – Mathematics
Leticia Hidalgo PSDS – West Baguio and Baguio Central

Learning Resource Management Section Staff

Loida C. Mangangey EPS – LRMDS
Victor A. Fernandez Education Program Specialist II - LRMDS
Christopher David G. Oliva Project Development Officer II – LRMDS
Priscilla A. Dis-iw Librarian II
Lily B. Mabalot Librarian I

CONSULTANTS

JULIET C. SANNAD, EdD

Chief Education Supervisor – CID

SORAYA T. FACULO, PhD

Asst. Schools DivisionSuperintendent

MARIE CAROLYN B. VERANO, CESO V

Schools Division Superintendent

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 TABLE OF CONTENTS

COPYRIGHT NOTICE ................................................................................................ii

PREFACE .................................................................................................................. iii
ACKNOWLEDGEMENT .............................................................................................iv
TABLE OF CONTENTS ............................................................................................. v
What I Need To Know ................................................................................................ 1
What I Know ............................................................................................................... 3
What’s In .................................................................................................................... 5
What’s New ................................................................................................................ 6
What’s In It ................................................................................................................. 7
What’s More ............................................................................................................. 10
Activity 1: Yay or Nay?....................................................................................... 10
Activity 2: Where am I? ...................................................................................... 10
Activity 3: What is my total cost? ....................................................................... 11
Activity 4: Let’s Compute! .................................................................................. 16
What I have Learned ................................................................................................ 17
Activity: Complete Me! ....................................................................................... 17
What I Can Do .......................................................................................................... 17
Activity: Comprehensive Problem ...................................................................... 17
Assessment.............................................................................................................. 18
Additional Activity ..................................................................................................... 20
KEY ANSWERS ....................................................................................................... 21
REFERENCES ......................................................................................................... 23

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 What I Need To Know

The primary objective of Fundamentals of Accountancy, Business and

Management subjects is to help understand the conceptual frameworks and apply
these concepts in various business transactions. This module will help you recognize
the different account titles under assets, liabilities and equity which is needed in the
preparation of the financial statement to be tackled.

After taking this module, you shall be able to:

1) identify the different accounting elements of the Statement of Financial
Position;
2) categorize the accounting items according to its classification;
3) solve different problems on computing the accounting items under each
accounting element; and
4) prepare the Statement of Financial Position in proper accounting format.

Below is an outline of the different parts of your learning module. The

descriptions will guide you on what to expect on each part of the module.

ICON LABEL DESCRIPTION

What I need This states the learning objectives that you need to achieve
to know as you study this module.
This is to check what you already know about the lesson on
What I
this module. If you answered all the questions here
know
correctly, then you may skip studying this module.
This connects the current lesson with a topic or concept
What’s In
necessary to your understanding.

What’s New This introduces the lesson to be tackled through an activity.

This contains a brief discussion of the learning module

What’s In it
lesson. Think of it as the lecture section of the lesson.

What’s These are activities to check your understanding and to

More apply what you have learned from the lesson.

What I have This generalizes the essential ideas tackled from this
Learned module.

What I Can
This is a real life application of what you have learned.
Do

Post- This is an evaluation of what you have learned from this

Assessment learning material.

Additional This is an activity that will strengthen and fortify your

Activity knowledge about the lesson.

1
General Guidelines:
1. Please use a 10-column worksheet in answering all the activities included in
this module. Write your name (LN, FN, MI) and section at the upper left portion
of your worksheet.
2. Avoid erasures to make your work more presentable.
3. Refer to the table below for your guide in answering this module:

Activity Week/Day
What I Know W1/Day 1
What’s New W1/Day 1
What’s More
Activity 1 W1/Day 1
Activity 2 W1/Day 2
Activity 3 W1/Day 2
Activity 4 W1/Day 3
What I Have Learned W1/Day 3
What I Can Do W1/Day 4
Additional Activity W1/Day 4

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 What I Know

Instruction: Choose the letter of your answer which you think best fits to the question.
(One point each)

1. What is considered the language of every business?

A. Accounting C. Financial statements
B. Business transactions D. Numbers
2. Who is known as the inventor of the bookkeeping system?
A. Amatino Manucci C. Luca Pacioli
B. Andrea Barbarigo D. All of the above
3. What is the basic accounting equation?
A. Assets – Revenues = Net worth
B. Assets = Liabilities + Equity
C. Expenses = Capital – Drawings
D. Net Income = Revenues – Expenses
4. What entry manifests the double-entry bookkeeping system and has a debit,
credit, and an explanation?
A. Journal entry C. Memorandum Entry
B. Ledger entry D. Subsidiary ledger entry
5. What month is the end of accounting cycle in a fiscal year?
A. January
B. February
C. December
D. Depends on the month when the business began
6. What accounting book is known as the “book of final entry”?
A. Financial Statements C. Ledgers
B. Journals D. Special Journals
7. What is considered the financial diary of a business?
A. Financial Statements C. Ledgers
B. Journals D. Special Journals
8. What is the revenue account used in a merchandising business?
A. Income C. Sales
B. Professional Fees D. Service revenue
9. What account refers to services which has been rendered but payment is not
yet received?
A. Accrued expenses C. Prepaid expenses
B. Accrued revenue D. Unearned revenue
10. What account is considered as a short-term investment normally held for
trading?
A. Cash C. Marketable security
B. Inventory D. Bonds payable

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 11. What accounting element is referred as claims of external parties from existing
obligations?
A. Asset C. Expense
B. Equity D. Liability
12. What financial statement is considered as the “snapshot” of the company’s
financial condition and position at a point in time?
A. Statement of Cash Flows
B. Statement of Changes in Owner’s Equity
C. Statement of Comprehensive Income
D. Statement of Financial Position
13. What financial statement needs to be prepared first before other financial
statements?
A. Notes to Financial Statements
B. Statement of Cash Flows
C. Statement of Changes in Owner’s Equity
D. Statement of Comprehensive Income
E. Statement of Financial Position
14. Which of the following accounting item is NOT included in the Statement of
Comprehensive Income?
A. Interest income C. Unearned revenue
B. Interest expense D. Expired insurance
15. Which of the following accounting principles states that revenues must be
recognized when services have been rendered or goods have been sold,
regardless of when the payment was received?
A. Accrual basis assumption
B. Going concern assumption
C. Matching principle
D. Revenue recognition principle

Now, how many of the questions did you get correctly? If you got:

1 point to 5 points I encourage you to take this module.

6 points to 9 points You need to practice more!
10 points to 14 points You’re almost there!
Job well done! You may skip this module. However, I
15 points still encourage you to take this module to have a better
understanding on Accounting.

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 What’s In

Accounting is the language of every business. It is used by businesses to convey a

“special” message to various people which may be directly or indirectly involved in the
business. The “special” message takes the form of financial information essential to
understand the financial conditions of the business. And to successfully deliver this message,
accounting is used as a tool for users to better communicate it to different users of the
information. It is also a systematic process which starts with identifying business transactions
which are economic in nature, followed by the recording, classifying and posting of these
events, and summarizing it to the different financial reports to be used to communicate to
various parties interested in the business.

Remember that the accounting process could further be elaborated as a cycle. The
accounting cycle is a ten (10)-step procedure which includes the following steps:
1) Identification and analysis of financial transactions
2) Recording of transactions in the journal
3) Posting of the journal entries in the ledger
4) Preparing the unadjusted trial balance
5) Journalizing adjusting entries
6) Preparing the worksheet (including adjusted trial balance, balance sheet and
income statement)
7) Preparing the financial statements
8) Closing of entries
9) Preparing post-closing trial balance
10) Reversing of entries

FINANCIAL STATEMENTS

What will be discussed in your first quarter are financial statements. Financial
statements are formal reports prepared by accountants to show the financial effects of
transactions in the business. The financial statements prepared should be formatted in
accordance to the Conceptual Framework for Financial Reporting. The Philippine
Accounting Standards (PAS) No. 1 enumerates the basic financial statements: (a)
Statement of Financial Position; (b) Statement of Comprehensive Income; (c) Statement
of Changes in Owner’s Equity; (d) Statement of Cash Flows; and (e) Notes to Financial
Statements. To deepen your understanding about these financial statements, these are to be
discussed through the first quarter.

The illustration on the next page shows the relationship of the four major financial
statements. Among the financial statements, the income statement is prepared first to
generate the report regarding the net income. The net income from the SCI will be used in
the Statement of Changes in Owner’s Equity to come up with the total capital ending balance.
The total capital ending balance should then be reflected in the Statement of Financial Position
at the end of the accounting period.

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 (https://www.slideshare.net/missdollar_caem/01-presentation-939350)

On the other hand, the beginning cash balance needed for the Statement of Cash
Flows must come from the ending cash balance found in the SFP of the previous period. After
computing the ending cash balance, it should now be reflected in the SFP of the current period.
Likewise, the beginning capital balance needed for SCE should come from the ending capital
balance found in the SFP of the previous period.

What’s New

Activity: Jumble Time

Instruction: The following jumbled words are related to the topic. Your task is to unjumble the
words.

JUMBLED WORDS ANSWER

ALBAENC EHESET
NECIMO NATEMTSAE
ESRWNO YUTQEI
SCAH SLOWF
AECNLVREE
SNSEILMET
HUAILFFT TANPERETNRISON
AIBITYLIL
ASHC
ACPILAT

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 What’s In It

STATEMENT OF FINANCIAL POSITION

To recall, Philippine Accounting Standards (PAS) No. 1 enumerated five financial

statements namely Statement of Financial Position (SFP), Statement of Comprehensive
Income (SCI), Statement of Cash Flows (SCF), Statement of Changes in Owner’s Equity
(SoCE) and the Notes to Financial Statetements.

The Statement of Financial Position (SFP) is a financial statement which shows the
current position or standing of the business at a given time – therefore the “As of” in the
heading of this financial statement. Some also calls this financial statement as “snapshot”
because it merely captures the financial condition of the business entity at a point in time. SFP
also presents information regarding the business’ liquidity, solvency, stability, efficiency,
flexibility and capital structure (Valencia & Roxas, 2015).

This financial statement reports on the accounting equation, assets equal liabilities
plus equity, thus the other term balance sheet. This statement must show that the sum of
assets is equal to the combined amount of liabilities and equity. With this, we can conclude
that SFP contains three major accounting elements: the assets, liabilities, and equity. The
accounts found in the SFP are known as real or permanent accounts which are continuous
in nature – the balances of these accounts could be forwarded to the succeeding year.

Asset refers to “any current economic resource controlled by the entity as a result of
past events which has the potential to produce economic benefits” (IASB 2018). There are
two classifications of assets: current and noncurrent assets. Examples of accounting items
which are categorized to current and noncurrent assets are shown in the table below:

CURRENT ASSETS NONCURRENT ASSETS

1) Cash and cash equivalents (to be 1) Property, Plant and Equipment
further discussed in “What is My
Total Cost” activity)
2) Receivables 2) Long-term Investments
3) Marketable Securities 3) Intangible Assets
4) Supplies (Unused) 4) Biological Assets
5) Inventories
6) Prepayments

Liabilities refer to “any present obligation, duty or responsibility of the entity to transfer
an economic resource as a result of past events and the entity has no practical ability to avoid
it”. (IASB, 2018) In other words, liabilities are the claims of creditors from the assets of the
business and the latter has the obligation to give or pay so in due time. Like assets, liabilities
could also be categorized into current and noncurrent liabilities. Accounting items under each
category are shown in the table:

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 CURRENT LIABILITIES NONCURRENT LIABILITIES
1) Accounts Payable 1) Bonds Payable
2) Notes Payable (if the maturity date 2) Long-term Debts
falls within 12 months upon
issuance)
3) Accrued Expenses
4) Unearned Revenues

Last of the three major accounting elements found in the SFP is the equity. Equity
refers to the net assets or claims of the owner. If we put the equation, equity is simply the
leftover of assets after deducting the liabilities. This means that in the event of filing for
bankruptcy, the creditors must be paid first before claiming the assets left. In-depth discussion

COMPONENTS AND FORMAT OF THE STATEMENT OF FINANCIAL POSITION

The illustration is a sample of a Statement of Financial Position in proper format.

The illustration above is an example of an SFP report form. Now, this part of the
discussion will focus on the key components of the SFP and how to properly prepare it. For
each section, refer to its corresponding number as given in the sample illustration.
1. Financial Statement Heading – the first three (3) lines of must contain the name of
the business, financial statement prepared, and the period of preparation. Remember
that SFP uses “As of” because it focuses on the position of business at a point in time.

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 2. Asset Section – this section must be divided into current and noncurrent assets. The
accounting items under each category must be arranged according to its liquidity. Next,
the total amount for each category must be placed in the next column for emphasis.
After which, the total of all assets must be written in the last row of this section. Never
forget to double-rule your final answer.
3. Liabilities Section – similar to the asset section, this section is divided into two (2):
current and noncurrent liabilities. In the case of the example given, there were no
noncurrent liabilities. This means that the total current liabilities is equal to the total
liabilities.
4. Equity Section – this section presents the total capital of the owner. The ending capital
balance is actually reported in the Statement of Changes in Owner’s Equity and
reflected in SFP.
5. Total Balances – remember that another purpose of the SFP is to show that the
accounting equation is balanced. The total assets must always be equal to the total
liabilities and equity.

Now, to deepen more your understanding and knowledge on the preparation of an

SFP, let’s take a look at this example:

Let’s assume that you are the accountant of Bernie Enterprises. The owner wants you
to prepare the business’ SFP and then he showed to you the following accounts as of
December 31, 2019:
Accounts Payable Php 100,000
Bernie, Capital 1,840,000
Prepaid Rent 100,000
Cash and Cash equivalents 1,000,000
Inventories 450,000
Notes Payable (due in 18 months) 400,000
Notes Receivable 140,000
Machineries 550,000
Unused Supplies 100,000

The Statement of Financial Position to be prepared would like the table below. This is
an SFP presented in an account form. It looks like a T-account – all assets on the right side,
while liabilities and equity are on the left side.
BERNIE ENTERPRISES
Statement of Financial Position
As of December 31, 2019

Current Assets Current Liabilities

Cash and Cash equivalents Php 1,000,000 Accounts Payable Php 100,000
Notes Receivable 140,000 Noncurrent Liabilities
Inventories 450,000 Notes Payable 400,000
Unused Supplies 100,000 Total Liabilities Php 500,000
Prepaid Rent 100,000
Total Current Assets Php 1,790,000 Equity
Noncurrent Assets Bernie, Capital Php 1,840,000
Machineries Php 550,000
TOTAL LIABILTIES &
TOTAL ASSETS Php 2,340,000 Php 2,340,000
EQUITY

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 What’s More

Activity 1: Yay or Nay?

Instruction: Write YAY if the idea of the statement is correct, and NAY if the idea is incorrect.
(One point each)
1. Business transactions must be relevant and faithfully represented in any instance.
2. Balance sheet is the other term for Statement of Comprehensive Income.
3. Of all the financial statements, the Statement of Cash Flows must be prepared first to
reflect it on the Statement of Financial Position.
4. The preparation of financial statements should only be done on a monthly basis.
5. The enhancing qualitative characteristics of a financial information are verifiability,
understandability, timeliness, and comparability.
6. Statement of Cash Flows presents all cash transactions which occur from the
commencement of the business up to the date of preparation.
7. The format of financial statements is in accordance with the Philippine Accounting
Standards (PAS) No. 1.
8. The International Financial Reporting Standards is the regulating board of the
conceptual framework of financial statements.
9. Accounting involves the identification and analysis of financial transactions.
10. One accounting cycle could only be completed in one calendar or fiscal year.

Activity 2: Where am I?

Instruction: Below are pool of accounting items. Classify these items according to their
accounting element. Write your answers inside the column of the corresponding accounting
element. The first ones are given as examples. (One point each)

Three-month treasury bill Notes Receivable Utilities Payable

Amortization Owner’s Capital Furniture and Fixtures
25-year loan from the bank Vehicles Supplies
Unearned Revenue Cash in Metrobank Accrued Rent
Income Tax Payable Accumulated Depreciation Patents
Owner’s Withdrawals Bonds Payable Marketable Securities
ASSETS LIABILITIES EQUITY
Noncurrent Current Noncurrent
Current Asset
Asset Liability Liability
Inventory Biological Accounts Long-term
Assets Payable debts

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Activity 3: What is my total cost?

Instruction: Read the notes given then answer the questions that follow by showing your
complete solution in proper format and final answers should be double ruled. Refer to the
rubric below for the assigned points:

CRITERIA ASSIGNED POINTS

Complete solution in proper format 3 points
Final answer with double rule 2 points
TOTAL SCORE 5 POINTS

1) Cash is simply money. Cash could be bills or coins owned by the business which could
be readily used in different transactions of the company. In a broader sense, cash
refers to any acceptable item by bank or other financial institutions for deposit at face
value. (Valix & Valix, 2011)

The “cash items” may be categorized into three (3): Cash on Hand, Cash in
Bank, and Cash Funds. Cash on Hand refer to undeposited collections such as bills
and coins, customer’s check, manager or cashier’s check, bank drafts and money
orders. Cash in Bank includes money in the demand deposit which are unrestricted
as to withdrawal. Lastly, Cash Funds are those money which are segregated for
current purposes such as petty cash fund, change fund, payroll fund, tax fund, interest
fund, etc. These “cash items” to be reported in the current asset section must be
unrestricted and readily available for payment. If, in case, the cash item is restricted,
it must be reported under the noncurrent financial asset section. (Valix & Valix, 2011)

Other than the cash items, cash equivalents are also reported under the current
section. Cash equivalents, according to PAS No. 7 paragraph 6, are those short term
and highly liquid investments that are readily convertible into cash and so near their
maturity that they present insignificant risk of changes in value because of changes in
interest rate. In addition to this, only those highly liquid investments which are acquired
three months before maturity can be qualified as cash equivalents. The cash
equivalents may include three-month BSP treasury bills, three-month time deposits,
three-month money market instrument or commercial papers, and three-year BSP
treasury bill acquired three (3) months before date of maturity. Always remember
that cash is valued at its face value. Also take note that foreign currencies can be
included in the cash and cash equivalents balance if it is unrestricted. Thus, it must be
converted in the Philippine currency using the exchange rate at the end of the current
accounting period. If it is restricted, then it must be reported under noncurrent asset.
Aside from this, cash in closed banks or banks facing bankruptcy must be
reclassified under accounts receivable and must be written down to its estimated
realizable value if the recoverable amount is lower than the face value. To understand
the composition of the cash and cash equivalent, let’s have this as an example:

Dandelion Company had the following account balances on December 31, 2019:
Cash in bank – current account Php 5,000,000
Cash in bank – payroll account 1,500,000
Cash on hand 500,000

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 Cash in bank – restricted account for plant
expansion 3,500,000
Time deposit – purchased in November 10, 2019
and due on February 10, 2020 890,000

The cash on hand includes a Php150,000 check payable to Dandelion dated January
3, 2020. How much should be reported as “cash and cash equivalents” on December
31, 2019?

Solution and Answer:

Cash in bank – current account Php 5,000,000
Cash in bank – payroll account 1,500,000
Cash on hand (500,000-150,000) 350,000
Time deposit 890,000
CASH AND CASH EQUIVALENTS Php 7,740,000

Explanation: The cash in bank for payroll account is considered as cash fund since it
is a payment for current liability. The cash in bank, which is restricted for plant
expansion purposes must not be included in cash and cash equivalents but will be
included under noncurrent assets. The check in the amount of Php150,000 must not
be included under current asset because it is a postdated check.

 Now, it’s your time to answer the question below:

On December 31, 2019, you gathered the following information from the records of
Genny Company:

Cash in BDO – demand deposit Php 1,500,000

Cash in Metrobank – payroll fund 2,000,000
Petty cash fund 11,500
Manager’s check 56,000
NSF check from a customer 300,000
Cash in foreign bank (50% restricted) 610,000
Additional information:
a) A check of Php100,000 in payment of accounts payable was dated and recorded
on December 15, 2019 but was mailed to creditors on January 10, 2020.
b) Genny Company agreed to maintain a cash balance of Php100,000 at BDO to
ensure fund sufficiency.

How much should be the reported as cash and cash equivalents in the Statement
of Financial Position on December 31, 2019? (5 points)

2) Receivable is a general term that refers to the company’s right to collect or claim
payment. The right to collect comes from unpaid sales or lending activities. (Salazar,
2017) Accounts Receivable refers to the amount owed by a customer to a company

12
while Notes Receivable are the receivables which are evidenced by a promissory
note. Some authors may also suggest using the terms trade receivables and nontrade
receivables. Trade receivables refers to any receivable expected to be received by
the company for selling goods and providing services. On the other hand, nontrade
receivables would the amount owed to the company not related to selling goods or
providing services.

Moreover, an allowance for doubtful accounts is a contra-asset that should

also be considered. From your previous subject in Accounting, you have known that
companies usually provide an allowance for doubtful accounts for receivables which
are long overdue and could possibly be uncollectible. The established allowance for
doubtful accounts must be deducted from the original amount of accounts receivable
to get its net realizable value. To better understand this, let’s have an example:

Banana Enterprises had the following information for 2018 relating to its accounts
receivable:

Accounts receivable, beginning Php 800,000

Credit Sales 1,200,000
Estimated uncollectible as of December 31 150,000

On December 31, 2018, how much should be reported amount of accounts receivable?
Solution and Answer:
Accounts receivable, beginning Php 800,000
Add: Credit Sales 1,200,000
Total accounts receivable, ending Php 2,000,000
Less: Estimated uncollectible as of December 31 150,000
Net Realizable Value – A/R Php 1,850,000

Explanation: The amount of credit sales is added to the beginning balance of accounts
receivable because basically the company had its sales on account. To get the net
realizable value, the estimated uncollectible must be deducted from the total amount
of accounts receivable for the period. The NRV of the accounts receivable must be
reflected on the SFP and the composition of this must be reported in the Notes to
Financial Statements.

Now, what if, on the same period, there were accounts written-off in the amount of
Php200,000 and a recovered amount of Php10,000 which has been paid?

Solution and Answer:

Accounts receivable, beginning Php 800,000
Add: Credit Sales 1,200,000
Total Php 2,000,000
Less: Accounts written-off 200,000
Accounts receivable, ending Php 1,800,000
Less: Estimated uncollectible as of December 31 150,000
Net Realizable Value – A/R Php 1,650,000

Explanation: The recovered amount from previously written-off accounts does not
affect the balance of the accounts receivable because the effect is offsetting.

13
  Now, it’s your time to answer the question below:

The trial balance of Aye-na Store shows the following information for the current period:

Accounts Receivable, beginning Php 800,000

Allowance for Doubtful Accounts 20,000
Credit Sales Php 1,500,000
Sales Returns 280,000
Sales Discount 40,000

Aye-na Store estimates that 5% of the net sales are uncollectible. How much is the
net realizable value of Accounts Receivable at the end of the period? (5 points)

3) Prepayments or Prepaid Expenses are future expenses that the company had paid
for in advance. Examples of these prepaid expenses are prepaid loads for your sim
cards, insurance expenses which were paid in advance before consumed, prepaid
rent, prepaid utilities (like in BENECO), and so on. As discussed in your previous
subject, the prepayments come about because of the accrual basis assumption which
states that expenses must be recognized regardless of when paid. Refer to the
example given:

Friendly Store paid insurance premiums in advance in the amount of Php12,000 good
for six (6) months from September 30, 2019 to March 31, 2020. How much should be
the remaining prepaid insurance on December 31, 2019?

Solution and Answer:

Prepaid Insurance for 6 months Php 12,000
Multiplied by: 3/6
Prepaid insurance – December 31, 2019 Php 6,000

Explanation: There are three (3) months from September 31, 2019 to December 31,
2019. This means that, if the company paid insurance premiums good for six (6)
months, the remaining months for the unused insurance is three (3) months.

 Now, it’s your time to answer the question below:

Below is the T-account of Prepaid Advertising of Madee Ngai Enterprises for the
current year:
Prepaid Advertising
Debit Credit
February 1, 2019 Php 15,000 May 1, 2019 Php 10,000
August 31, 2019 20,000 August 1, 2019 4,000
October 10, 2019 1,000 November 1, 2019 3,000

The beginning balance of prepaid advertising on January 1, 2019 is Php17,000. How

much is the balance of prepaid advertising to be reported in the Statement of
Financial Position? (5 points)

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4) Property, Plant and Equipment (PPE) are tangible assets, either be movable or
immovable properties, which are held by the company for its use in the normal
operations or production. These assets are also known as fixed assets which include
land, building, machineries, equipment, furniture and fixtures, vehicles, and even land
improvements.

Like the accounts receivable, a contra-asset associated with PPEs is called

Accumulated Depreciation. It is the aggregate periodic costs of using a depreciable
plant asset. The common method of computing accumulated depreciation is the
straight-line method. The accumulated depreciation should be deducted from the
acquisition cost of the PPE to get the amount to be reflected in the SFP. This amount
is known as the book value of PPE. Let’s have an example regarding this:

On January 1, 2019, Clark Shop acquired an equipment costing Php1,000,000 with a

10-year life and no residual value. What is the carrying amount of the equipment on
December 31, 2019?

Solution and Answer:

Cost of the equipment Php 1,000,000
Less: Accumulated Depreciation – equipment
(1,000,000/10 years) 100,000
Book value of equipment – December 31, 2019 Php 900,000

Explanation: The book value of the equipment to be reflected in the SFP is

Php900,000. The computation part could be reported in the Notes to Financial
Statements.

 Now, it’s your time to answer the question below:

Justin Trading purchased an office furniture on March 31, 2019. The cost of office
furniture amounted to Php250,000 with a market value of Php240,000. It is expected
to be used for five (5) years with Php10,000 salvage value. How much is the book
value of the office furniture on December 31, 2019? (5 points)

5) When the business collects payment from customers in advance of the services to be
rendered, it is called unearned revenue or deferred revenue. This type of revenue
account falls under liability because the company has still the obligation to render
services to its customers.

 Now, it’s your time to answer the question below:

On January 1, 2019, the beginning balance of unearned rent of Sycah Company

amounted to Php150,000. During the year, the company rendered rent services to
various tenants amounting to Php80,000. On December 31 of the same year, the
company collected Php50,000 rent in advance from various tenants. How much
should be the reported ending balance of unearned rent of Sycah Company on
December 31, 2019? (5 points)

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 6) Senyora, the owner of Slapsoil Co., started her business by depositing Php25,000 to
open a savings account. On June 30, 2019, Senyora deposited additional Php10,000
and Php12,000 because her business needed additional resources. For the whole
year, she withdrew Php9,000 for personal use. How much should be reported as
the ending capital balance of Senyora? (5 points)

Activity 4: Let’s Compute!

Instruction: Answer the following questions below by showing your complete solution in proper
format and final answers should be double ruled. Refer to the rubric below for the assigned
points:

CRITERIA ASSIGNED POINTS

Complete solution in proper format 3 points
Final answer with double rule 2 points
TOTAL SCORE 5 POINTS

Below are the accounts of Axel Goods as of December 31, 2019 and answer the questions
below:

Cash on hand Php 1,500,000

Cash in East west 2,400,000
Change fund 8,200
Time deposit (due on January 2, 2020) 123,400
Deposited NSF check from a customer 12,000
Notes Receivable 90,000
Land 485,000
Building 120,000
Accumulated Depreciation – building 70,000
Patent 10,000
Accounts Payable 1,220,000
Salaries Payable 107,500
Income Tax Payable 29,000
Unearned Sales 910,000
Long-term debt 1,800,000
Axel, Capital ?

Questions:
1. How much is the total current assets? (5 points)
2. How much is the total noncurrent assets? (5 points)
3. How much is the total current liabilities? (5 points)
4. How much is the total noncurrent liabilities? (5 points)
5. How much should the reported ending capital balance of Axel? (5 points)

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 What I have Learned

Activity: Complete Me!

Instruction: Complete the following statements by filling up the blanks in each statement. (One
point each)

1) Statement of Financial Position is also known as ___________________ because it

presents that the accounting elements must be balanced at all times.
2) _______________ is the basic accounting equation.
3) The normal balance of asset accounts is ______________.
4) The normal balance of owner’s capital is ______________.
5) Three (3) categories of cash items are _______________, _______________, and
___________________.
6) ______________________________ is the financial statement which must be
prepared first.
7) _____________________ are receivables evidenced by a promissory note.
8) Noncurrent liabilities are present obligations which must be settled __________ 12
months.
9) The aggregate cost of using a depreciable asset is known as _____________.
10) Statement of Financial Position uses “_________” in its heading because it focuses on
the position of the business at the given time.

What I Can Do

Activity: Comprehensive Problem

Instruction: Prepare a Statement of Financial Position using the proper format, either in report
form or account form. Refer to the rubric below for the assigned points:

CRITERIA ASSIGNED POINTS

Proper heading 3 points
Final answer with double rule 2 points
Each accounting item under proper classification 1 point

You are the bookkeeper of KathNiel Repairs & Maintenance. The owner, Kathy asked
you to prepare the Statement of Financial Position date December 31, 2019. KathNiel Repairs
& Maintenance had the following information:
1. On February 1, 2019, Kathy started the KathNiel Repairs & Maintenance. She opened
a checking account under the name of her business. The statement of account shows
that the balance as of December 31, 2019 amounted to Php450,000.

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 2. The business kept bills (23 pieces of Php1,000, 85 pieces of Php100, and 180 pieces
of Php50) and coins (10 pieces of Php10 and 117 pieces of Php1) for its change fund.
3. The cash on hand from services rendered of the business amounted Php68,000 as of
December 31, 2019.
4. KathNiel Repairs & Maintenance pays monthly rent of Php15,000. On February 1,
2019, the business paid Php180,000 for a year’s rent.
5. A sales invoice received dated December 1, 2019 from LizQuen Parts Shop amounted
to Php30,000 for repair machine acquired. The payment term is n/30. The repair
machine has an estimated useful life of 3 years.
6. The bill of internet in the amount of Php10,000 for the month of December was received
and remained unpaid on December 31, 2019.
7. The company paid Php16,000 for salaries of the two (2) employees on December 31,
2019.
8. Kathy withdrew funds from the business in the amount of Php24,000.
9. Joshnella, a VIP customer of KathNiel Repairs & Maintenance, paid cash advance of
Php780,000 for repair services on February 6, 2020.
10. KathNiel Repairs & Maintenance total credit sales amounted to Php619,000 on
December 31, 2019.

Assessment

Instruction: Choose the letter of your answer which you think best fits to the question. (One
point each)

1) What is considered the language of every business?

A. Accounting C. Financial Statements
B. Business transactions D. Numbers
2) What are formal reports prepared by accountants to show the financial effects of
transactions of the business?
A. Business transactions C. Financial Statements
B. Economic transactions D. Statement of Financial Position
3) What financial statement shows that the assets must be balanced with the sum of
liabilities and equity?
A. Statement of Cash Flows
B. Statement of Changes in Owner’s Equity
C. Statement of Comprehensive Income
D. Statement of Financial Position
4) What refers to any economic resource owned by an entity which could generate future
benefit to it?
A. Asset C. Liability
B. Expenses D. Revenue
5) The following are categories of “cash items”, EXCEPT:
A. Cash equivalents C. Cash in Bank
B. Cash funds D. Cash on Hand

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6) Which of the following refers to the amount owed by a customer to the company for
selling goods and/or providing services?
A. Accounts Receivable C. Notes Receivable
B. Nontrade Receivable D. Trade Receivables
7) Which of the following assets are purchased and held for trading, and expected to be
liquidated in less than a year?
A. Cash C. Marketable securities
B. Inventories D. Supplies
8) The following are included in the inventory account of a manufacturing business,
EXCEPT:
A. Finished goods C. Raw materials
B. Purchases D. Work-in-process goods
9) What assets lack physical substance and are realizable over long periods?
A. Biological Assets C. Intangible Assets
B. Fixed Assets D. Long-term Investments
10) What type expenses are already incurred but not yet paid?
A. Accrued expenses C. Prepaid expenses
B. Administrative expenses D. Selling expenses
11) What refers to the net assets or claims of the owner?
A. Capital C. Net Income
B. Equity D. Revenue

12) What type of form follows the T-account format?

A. Account form C. Report form
B. Classified form D. Normal form
13) Which of the following elements comes first in an account form SFP?
A. Asset C. Liability
B. Equity D. Revenue
14) The following are classified under noncurrent liability, EXCEPT:
A. Bonds Payable C. Long-term debts
B. Income tax payable D. Notes payable due in 15 months
15) The following assets have a debit normal balance, EXCEPT:
A. Accounts Receivable C. Property, Plant and Equipment
B. Amortization D. Supplies

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 Additional Activity

Activity: My Family’s Equation

Instruction: Interview your parents. Try to ask them some of the guide questions below and
you should be able to identify your family’s assets, liabilities, and equity. Let’s see if you can
determine your family’s net worth or equity.
Guide Questions
1) How much is the previous year’s family’s annual gross income? (Combine all the
earnings of the income-earners in the family)
2) How much is the previous year’s estimated family’s annual expenses? (List down all
the expenses with its corresponding amount)
3) How much is the family’s annual net income? (Deduct answer in question no. 2 from
answer in question no. 1)
4) How much is the previous year’s estimated total assets of the family for the year?
(List down the details with its corresponding amount)
5) Does the family have loans from the previous year? If yes, how much is the total
amount?
6) How much is the total equity of the family? (Deduct answer in question no. 5 from
answer in question no. 4)
7) How much of the equity is your family’s capital? (Deduct answer in question no. 3
from question no. 6)
8) What can you conclude about your family’s net worth?

Please encircle happy face 😊 if your answer to the question is yes.

SELF-
ASSESSMENT Encircle the sad face ☹ if your answer to the question is no and you
are highly encouraged to go over the module again.
Am I able to identify the different accounting elements of the SFP? 😊 ☹
Am I able to categorize the accounting items according to its classification? 😊 ☹
Can I solve different problems on computing the accounting items under each
😊 ☹
accounting element?
Can I prepare the SFP in proper accounting form? 😊 ☹

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 21
WHAT I KNOW Activity 3: What is my Total Cost?
1. A 9. B
2. A 10. C 1. Cash in BDO Php 1,400,000
3. B 11. D Cash in Metrobank 2,000,000
4. A 12. D Petty Cash Fund 11,500
5. D 13. D Manager’s Check 56,000
6. C 14. C Cash in foreign bank (50%) 305,000
7. B 15. D Check – Dec. 15 (100,000)
8. C Cash and cash
equivalents Php 3,672,500
WHAT’S NEW
1. Balance Sheet 2. Sales Php 1,500,000
2. Income Statement Sales returns (280,000)
3. Owner’s Equity Sales discount (40,000)
4. Cash Flows Net Sales Php 1,180,000
5. Relevance
6. Timeliness A/R, beginning Php 800,000
7. Faithful Representation Less: ADA
8. Liability (20,000+59,000) 79,000
9. Cash NRV of A/R Php 721,000
10. Capital
3. Prepaid Advertising Php 17,000
WHAT’S MORE Add: Total debit 36,000
Activity 1: Yay or Nay? Total Php 53,000
1. Nay 6. Nay Less: Total credit 17,000
2. Nay 7. Yay Prepaid Adv., end Php 36,000
3. Nay 8. Nay
4. Nay 9. Yay 4. Cost of furniture Php 250,000
5. Yay 10. Nay Less: A/D 36,000
BV of furniture Php 214,000
Activity 2: Where am I?
Current Assets Noncurrent Assets 5. Unearned revenue, beg Php 150,000
1. 3-month TB 1. Amortization Add: Collection 50,000
2. Notes Receivable 2. Vehicles Total Php 200,000
3. Cash in Metrobank 3. Accumulated Dep’n Less: Rendered service 80,000
4. Supplies 4. Furniture & Fixtures Unearned revenue, end Php 120,000
5. Marketable 5. Patents
Securities 6. Senyora, capital – beg --
Add: Initial Investment Php 25,000
Current Liabilities Noncurrent Liabilities Add’l Investment 22,000
1. Unearned Revenue 1. 25-year loan Total Php 47,000
2. Income tax 2. Bonds Payable Less: Withdrawals 9,000
Payable Senyora, capital – end Php 38,000
3. Utilities Payable
4. Accrued Rent
Equity
1. Owner’s Capital
2. Owner’s Withdrawals
KEY ANSWERS
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Activity 4: Let’s Compute! WHAT I CAN DO
1. Cash on hand Php1,500,000 KathNiel Repairs & Maintenance
Statement of Financial Position
Cash in Eastwest 2,400,000
As of December 31, 2019
Change fund 8,200
Time deposit 123,400 Current Assets
Deposited NSF check (12,000) Cash and Cash
Notes Receivable 90,000 equivalents (Note 1) Php 558,717
Total Current Assets Php4,109,600 Accounts Receivable 619,000
Prepaid rent 15,000 Php1,192,717
2. Land Php 485,000
Noncurrent Assets
BV of Building
Repair machine Php 30,000
(120,000-70,000) 50,000 Less: A/D 2,500 Php 27,500
Patent 10,000 TOTAL ASSETS Php1,220,217
Total Noncurrent Assets Php 545,000
Liabilities
3. Accounts Payable Php1,220,000 Accounts Payable Php 30,000
Salaries Payable 107,500 Utilities Payable 10,000
Income tax Payable 29,000 TOTAL LIABILITIES Php 40,000
Unearned Sales 910,000
Kathy, Capital Php 1,180,217
Total Current Liabilities Php2,266,500 TOTAL EQUITY Php 1,180,217
4. Long-term debt Php1,800,000 TOTAL LIABILITIES & EQUITY PHP 1,220,217
Total Noncurrent Liab. Php1,800,000
Note 1:
5. Total Assets Cash in Bank Php 450,000
(4,109,600+545,000) Php4,654,600 Change fund 40,717
Cash on Hand 68,000
Total Liabilities
Cash and Cash equivalents Php 558,717
(2,266,500+1,800,000) (4,066,500)
Axel, Capital Php 588,100 POST-ASSESSMENT
1. A
2. C
WHAT I HAVE LEARNED
3. D
1. Balance Sheet 4. A
2. Assets = Liabilities + Equity 5. A
3. Debit 6. D
4. Credit 7. C
5. Cash on Hand; Cash in Bank; Cash Funds 8. B
6. Statement of Comprehensive Income 9. C
7. Notes Receivable 10. A
8. After/For more than 11. B
9. Accumulated Depreciation 12. A
10. As of 13. A
14. B
15. B
 REFERENCES
IASB. 2018. Conceptual Framework for Financial Reporting. Cannon Street, United
Kingdom: IFRS Foundation.
Salazar, Dani Rose C. 2017. Fundamentals of Accountancy, Business and
Management 2. Manila, Philippines: Rex Book Store .
Valencia, Edwin G, and Gregorio F Roxas. 2015. Basic Accounting. Baguio City:
Valencia Educational Supply.
Valix, Conrado T, and Christian Aris M Valix. 2011. Financial Accounting 1. Recto,
Manila: GIC Enterprises & Co. Inc.
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