Republic of the Philippines

Department of Education
Region III
School Division of Nueva Ecija
PANTABANGAN NATIONAL HIGH SCHOOL
SENIOR HIGH SCOOL DEPARTMENT
Villarica Pantabangan, Nueva Ecija

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. (Haddock, Price, & Farina, 2012)

PERMANENT ACCOUNTS – As the name suggests, these accounts are permanent in a sense that their balances

remain intact from one accounting period to another. (Haddock, Price, & Farina, 2012).

Examples of permanent account include Cash, Accounts Receivable, Accounts Payable, Loans Payable and Capital

among others. Basically, assets, liabilities and equity accounts . They are called permanent accounts because the

accounts are retained permanently in the SFP until their balances become zero. This is in contrast with TEMPORARY

ACCOUNTS which are found in the Statement of Comprehensive Income (SCI). Temporary accounts unlike

permanent accounts will have zero balances at the end of the accounting period.

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.

Differentiate the Report Form and Account Form

Report Form – A form of the SFP that shows asset accounts first and then liabilities and owner’s equity accounts

after. (Haddock, Price, & Farina, 2012).

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. (Haddock, Price, & Farina, 2012) a.

(NOTE: Emphasize that the two are only formats and will yield the same amount of total assets, liabilities and equity

Emphasize that assets should always be equal to liabilities and equity.)

 Republic of the Philippines
Department of Education
Region III
School Division of Nueva Ecija
PANTABANGAN NATIONAL HIGH SCHOOL
SENIOR HIGH SCOOL DEPARTMENT
Villarica Pantabangan, Nueva Ecija

Group accounts under Current Assets, Noncurrent Assets, Current Liabilities, Noncurrent Liabilities and Owner’s

Equity

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 yearend 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 yearend 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.

Difference of the Statement of Financial Position of a Service Company and of a Merchandising Company

The main difference of the Statements of the two types of business lies on the inventory account. A service company

has supplies inventory classified under the current assets of the company. While a merchandising company also has

supplies inventory classified under the current assets of the company, the business has another inventory account

under its current assets which is the Merchandise Inventory.

 Republic of the Philippines
Department of Education
Region III
School Division of Nueva Ecija
PANTABANGAN NATIONAL HIGH SCHOOL
SENIOR HIGH SCOOL DEPARTMENT
Villarica Pantabangan, Nueva Ecija

LET’S TRY (ANSWERS ONLY)

1. Learning is Fun Company had current assets amounting to Php 100,000. Noncurrent assets for the year

totaled Php 76,000. How much is the company’s total assets?

2. Happy Selling Company’s total liabilities amounted Php 10,000. Total equity had an ending balance of Php

20,000. How much is total assets?

3. Happy Selling’s had the following accounts at year end: Cash-250,000, Accounts Payable-70,000, Prepaid

Expense-15,000. Compute for the company’s current assets.

4. Happy Selling’s Accounts Receivable amounted to Php 500,000. Prepaid Expense and Unearned Income

totaled Php 30,000 and Php 10,000 respectively. Cash balance amounted to Php 100,000 while Accounts

Payable and Inventory totaled to Php 20,000 and Php 10,000 respectively. How much is the company’s

current assets? Current liabilities?

Other important matters:

a. Without the SFP, the company cannot know if it truly owns anything because in case of bankruptcy, liabilities are

paid first.
 Republic of the Philippines
Department of Education
Region III
School Division of Nueva Ecija
PANTABANGAN NATIONAL HIGH SCHOOL
SENIOR HIGH SCOOL DEPARTMENT
Villarica Pantabangan, Nueva Ecija

- Small businesses don’t usually account for their assets and liabilities as long as the owners see that cash is coming

in. They sometimes forget that when liabilities become due, if they don’t have enough current assets to be able to

pay those liabilities, then they can get in trouble with their debts.

b. Discuss the importance of the format:

i. Report form vs Account form – these are just formats. Usually depends on the reader for preference.

ii. Report form is the normal format for those not familiar with accounting. Account form easily shows that the SFP is

balanced and separates assets from liabilities and equities.

iii. Separation of the current and noncurrent – current liabilities are upcoming liabilities and the company should be

prepared to pay them. Companies should prepare as early as today for payment of noncurrent liabilities as these

usually have large balances. Current assets shows the company’s ability to sustain its current operations while

noncurrent assets shows the company’s ability to sustain long-term operations.