FABM 2 GENERAL INSTRUCTIONS

 Always THINK POSITIVE! - DO POSITIVE! - BE POSITIVE!

 BE PATIENT! – BELIEVE IN YOURSELF “You can do it.”
 “The only way to learn mathematics is to do
mathematics.” --- Paul Halmos

 Start and end the day with a prayer.

 Read every information in the module.
 Take down notes and copy some important information in the link/websites given here.
 If necessary, you may have a Math notebook for taking down notes and solving
activities, or it can be your scratch papers. Remember what Paul Halmos said.
 Go beyond the module given. Explore more.
 BE SYSTEMATIC. “There is no elevator to success. You have to take the stairs.---”
 Goodluck and God bless my dearest.

INSTRUCTIONS FOR ACTIVITY:

 Read and follow every instruction given.
 Answer sheets: any YELLOW paper
 Output: It must be handwritten (readable).
 Write your COMPLETE NAME (Last name, First name, Middle initial) and
SECTION on EVERY PAGE of your answer sheets.
 BOX your FINAL answer.
 Pointing System:
1-point for the final answer (handwritten)
2-points for the complete solution/computation/explanation (handwritten)
 For the computation,
If the answer is a fraction, write it in SIMPLIFIED form (lowest term).
If the answer is a decimal number, use two-decimal places or
four-decimal places.
 How and Where to Submit your Handwritten Output:
Submit your output personally in the faculty office.
FABM 2 LET US STUDY !

LECTURE: Balance Sheet

The Balance Sheet, also called as Statement of Financial Position, shows what the business is
worth in terms of the properties it owns (assets), the debts it owes (liabilities), and the investment of the owners
(proprietorship). This report informs internal and external users of the financial condition of the business at a
given date, usually at the end of the accounting period.

Users of financial statements analyze the balance sheet to evaluate an entity’s liquidity, its financial
flexibility, and its ability to generate profits, and its solvency.
 Liquidity refers to the availability of cash in the near future after taking account of the
financial commitments over this period.
 Financial flexibility is the ability to take effective actions to alter the amounts and timings of
cash flows so that it can respond to unexpected needs and opportunities.
 Solvency refers to the availability of cash over the longer term to meet financial commitments
as they fall due.

Forms of Balance Sheet

1. Report Format - simply lists the assets, followed by the liabilities then by the owner’s
equity in vertical sequence.
2. Account Format - lists the assets on the left and the liabilities and owner’s equity on the
right.

Their difference lies only in the manner of presentation.

Whichever form you choose to present your financial position, you will arrive at the same totals.

Classification
It is proper to present a classified balance sheet; that is, the assets and liabilities are separated
into various categories. Assets are sub-classified as current assets and non-current assets;
while liabilities as current liabilities and non-current liabilities.

To make accounting information useful to decision-makers, the items in the balance sheet may be
grouped and arranged in accordance with the following guidelines:
 Assets are classified and presented in decreasing order of liquidity. Cash is the most liquid.
Assets that are least likely to be converted to cash are listed last.
 Liabilities are generally classified and presented based on time of maturity
such that obligations which are currently due are listed first.

Note that although there is no prescribed format for the balance sheet, what is required is the current and
non-current distinction for assets and liabilities. Assets can be presented current then non-current, or vice versa.
Liabilities and equity can be presented current liabilities then non-current liabilities then equity, or vice versa

Teacher: Jeanalyn B. Brosa, LPT

Reference: Ong, Flocer L.. (2017). Fundamentals of Accountancy, Business, and Management 2 for SHS..Quezon City: C&E Publishing, Inc..
 LECTURE: Balance Sheet

Report Form of Balance Sheet

Teacher: Jeanalyn B. Brosa, LPT

Reference: Ong, Flocer L.. (2017). Fundamentals of Accountancy, Business, and Management 2 for SHS..Quezon City: C&E Publishing, Inc..
 LECTURE: Balance Sheet

Account Form of Balance Sheet

TYPICAL ACCOUNT TITLES USED

Assets
An entity shall classify an asset 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 asset primarily for the purpose of trading;
c. it expects to realize the asset within twelve months after the end of the
reporting period;
d. the asset is cash or a cash equivalent unless it is restricted from being
exchanged or used to settle a liability for at least twelve months after
the end of the reporting period.

An entity shall classify all other assets as non-current.

Teacher: Jeanalyn B. Brosa, LPT

Reference: Ong, Flocer L.. (2017). Fundamentals of Accountancy, Business, and Management 2 for SHS..Quezon City: C&E Publishing, Inc..
 LECTURE: Balance Sheet

Current Assets

Any medium of exchange that a bank will accept for deposit at face value.
Cash
It includes coins, currency, checks, money orders, bank deposits, and drafts.
Short-term, highly liquid investments that are readily convertible to known amounts
Cash Equivalents
of cash and which are subject to an insignificant risk of changes in value.
A written pledge that the customer will pay the business a fixed amount of money on
Notes Receivable
a certain date.
Claims against customers arising from sale of services or goods on credit. It offers less
Accounts Receivable
security than a promissory note
Assets which are (a) held for sale in the ordinary course of business;
(b) in the process of production for such sale; or
Inventories
(c) in the form of materials or supplies to be consumed in the production process
or in the rendering of services.
Expenses paid for by the business in advance. It is an asset because the business
avoids having to pay cash in the future for a specific expense. These include insurance
Prepaid Expenses
and rent. The prepaid items represent future economic benefits – assets – until the
time these start to contribute to the earning process; these, then, become expenses.

Non-Current Assets

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 and which
Property, Plant, and
are expected to be used during more than one period. Included are such items as
Equipment
land, building, machinery and equipment, furniture and fixtures, motor vehicles and
equipment.

A contra asset account that contains the sum of the periodic depreciation charges.
Accumulated
The balance in this account is deducted from the cost of the related asset –
Depreciation
equipment or buildings – to obtain book value.

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
Intangible Assets purposes.
These include goodwill, patents, copyrights, licenses, franchises, trademarks, brand
names, secret processes, subscription lists, and noncompetition agreements

Teacher: Jeanalyn B. Brosa, LPT

Reference: Ong, Flocer L.. (2017). Fundamentals of Accountancy, Business, and Management 2 for SHS..Quezon City: C&E Publishing, Inc..
 LECTURE: Balance Sheet

Liabilities

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 months after the end of 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 end of the reporting period.

An entity shall classify all other liabilities as non-current.

Current Liabilities

Represents the reverse relationship of the accounts receivable. By accepting

Accounts Payable
the goods or services, the buyer agrees to pay for them in the near future.
Like a note receivable but in reverse sense. In the case of a note payable, the
business entity is the maker of the note; that is, the business entity is the
Notes Payable
party who promises to pay the other party a specified amount of money on a
specified future date
Amounts owed to others for unpaid expenses. This account includes salaries
Accrued Liabilities
payable, utilities payable, interest payable and taxes payable
When the business entity receives payment before providing its customers
with goods or services, the amounts received are recorded in the unearned
Unearned Revenues
revenue account (liability method). When the goods or services are provided
to the customer, the unearned revenue is reduced and income is recognized.
These are portions of mortgage notes, bonds and other long-term
Current Portion of Long-Term
indebtedness which are to be paid within one year from the balance sheet
Debt
date

Non-Current Liabilities

Long-term debt of the business entity for which the business entity has
pledged certain assets as security to the creditor. In the event that the debt
Mortgage Payable
payments are not made, the creditor can foreclose or cause the mortgaged
asset to be sold to enable the entity to settle the claim.
Business organizations often obtain substantial sums of money from lenders
to finance the acquisition of equipment and other needed assets. They
Bonds Payable obtain these funds by issuing bonds. The bond is a contract between the
issuer and the lender specifying the terms of repayment and the interest to
be charged

Teacher: Jeanalyn B. Brosa, LPT

Reference: Ong, Flocer L.. (2017). Fundamentals of Accountancy, Business, and Management 2 for SHS..Quezon City: C&E Publishing, Inc..
 LECTURE: Balance Sheet

Owner’s Equity

Used to record the original and additional investments of the owner of the
business entity. It is increased by the amount of profit earned during the year or
Capital is decreased by a loss. Cash or other assets that the owner may withdraw from
the business ultimately reduce it. This account title bears the name of the
owner.
When the owner of a business entity withdraws cash or other assets, such are
Withdrawals recorded in the drawing or withdrawal account rather than directly reducing the
owner’s equity account
It is a temporary account used at the end of the accounting period to close
Income Summary income and expenses. This account shows the profit or loss for the period
before closing to the capital account

Teacher: Jeanalyn B. Brosa, LPT

Reference: Ong, Flocer L.. (2017). Fundamentals of Accountancy, Business, and Management 2 for SHS..Quezon City: C&E Publishing, Inc..
 LECTURE: Balance Sheet

Teacher: Jeanalyn B. Brosa, LPT

Reference: Ong, Flocer L.. (2017). Fundamentals of Accountancy, Business, and Management 2 for SHS..Quezon City: C&E Publishing, Inc..