STATEMENT OF FINANCIAL POSITION – Also known as the balance sheet.

This statement
includes the amounts of the company’s total assets, liabilities, and owner’s equity which in totality
provides the condition of the company on a specific date

PERMANENT ACCOUNTS – As the name suggests, these accounts are permanent in a sense that their
balances remain intact from one accounting period to another.

Examples of permanent account include Cash, Accounts Receivable, Accounts Payable, Loans
Payable and Capital among others. Basically, assets, liabilities and equity accounts are permanent
accounts. They are called permanent accounts because the accounts are retained permanently in the SFP
until their balances become zero.

CONTRA ASSETS – Contra assets are those accounts that are presented under the assets portion of the
SFP but are reductions to the company’s assets. These include Allowance for Doubtful Accounts and
Accumulated Depreciation. Allowance for Doubtful Accounts is a contra asset to Accounts Receivable.
This represents the estimated amount that the company may not be able to collect from delinquent
customers. Accumulated Depreciation is a contra asset to the company’s Property, Plant and Equipment.
This account represents the total amount of depreciation booked against the fixed assets of the company.

Report Form – A form of the SFP that shows asset accounts first and then liabilities and owner’s equity
accounts after. The balance sheet shown earlier is in report form.

Account Form – A form of the SFP that shows assets on the left side and liabilities and owner’s equity
on the right side just like the debit and credit balances of an account.
a. Emphasize that the two are only formats and will yield the same amount of total assets,
liabilities and equity
b. Emphasize that assets should always be equal to liabilities and equity

a. Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wording – “as of”)
Current Assets – Assets that can be realized (collected, sold, used up) one year after year-end-date.
Examples include Cash, Accounts Receivable, Merchandise Inventory, Prepaid Expense, etc.

Current Liabilities – Liabilities that fall due (paid, recognized as revenue) within one year after year-
end-date. Examples include Notes Payable, Accounts Payable, Accrued Expenses (example: Utilities
Payable), Unearned Income, etc.

Current Assets are arranged based on which asset can be realized first (liquidity). Current assets and
current liabilities are also called short term assets and shot term liabilities.

Noncurrent Assets – Assets that cannot be realized (collected, sold, used up) one year after year-end-
date. Examples include Property, Plant and Equipment (equipment, furniture, building, land),
Long Term investments, Intangible Assets etc.

Noncurrent Liabilities – Liabilities that do not fall due (paid, recognized as revenue) within one year
after year-end-date. Examples include Loans Payable, Mortgage Payable, etc.

Noncurrent assets and noncurrent liabilities are also called long term assets and long term liabilities.