ACCOUNTING 2

STATEMENT OF
FINANCIAL POSITION

SHS-ACCTG 2 | Ms. Maine Fulgar

Objectives:
Identify the elements of the SFP and describe each of
item
Classify the elements of the SFP into current and non-
current items
Prepare the SFP for Sole Proprietorship
Prepare an SFP using the report form and the account
form with proper classification of items as current
and non-current.

SHS-ACCTG 2 | Ms. Maine Fulgar

FINANCIAL
STATEMENT

SHS-ACCTG 2 | Ms. Maine Fulgar

 A structured representations of the
financial position and financial
FINANCIAL performance of the entity. The
STATEMENT objective of financial statements is to
provide information about the financial
position, financial performance, and
cash flows of an entity that is useful to a
wide range of users in making proper
economic decisions.
SHS-ACCTG 2 | Ms. Maine Fulgar
 FINANCIAL STATEMENT
Financial Statement also show the results of the management
stewardship of the resources entrusted to it. To meet this objective,
financial statements provide information about an entity’s;

1. Assets
2. Liabilities
3. Equity
4. Income and Expenses, including gains and losses.
5. Contributions by and Contributions to Owners in
their capacity as owners.
6. Cash Flow

SHS-ACCTG 2 | Ms. Maine Fulgar

 Also known as the balance sheet.
This statement includes the
STATEMENT amounts of the company’s total
OF FINANCIAL assets, liabilities, and owner’s
equity which in totality provides
POSITION the condition of the company on a
specific date.

SHS-ACCTG 2 | Ms. Maine Fulgar

 Review of Balance Sheet Elements

Assets resources owned by an entity. as a result of past

events and from which future economic benefits are
expected to flow to the entity

Liabilities is a present obligation of the entity arising from past

events, the settlement of which is expected to result
in an outflow from the entity of resources embodying
economic benefits

Equity is the residual interest in the assets of the entity after

deducting all its liabilities.
SHS-ACCTG 2 | Ms. Maine Fulgar
The Accounting Equation

Liabilities
ASSETS
Owner's
Equity

SHS-ACCTG 2 | Ms. Maine Fulgar

The Accounting Equation
CURRENT
LIABILITIES
NONCURRENT
CURRENT
LIABILITIES
ASSETS
NONCURRENT
ASSETS
EQUITY

SHS-ACCTG 2 | Ms. Maine Fulgar

The SFP also shows us the very basic formula in
accounting:

Assets = Liabilities + Equity

or
ALE
Thus, assets should always equal to the sum of
liabilities and capital. SFP is called Balance Sheet as it
shows sheet where two sides are always equal or
balance.
SHS-ACCTG 2 | Ms. Maine Fulgar
 Elements of the Statement of Financial Position
CURRENT ASSETS
It expects to realize the asset, or intend to sell or consume it, in its normal operating
cycle.
It holds the asset primarily for the purpose of trading.
It expects to realize asset within the twelve months after the reporting period;
The Asset is cash or cash equivalent , unless the asset is restricted from being
exchanged or used to settle a liability for at least 12 months after the reporting period.

1. Cash and Cash Equivalents

2. Accounts Receivable
3. Inventories
4. Prepaid Expenses
5. Marketable Equity Securities
6. Office and Store Supplies SHS-ACCTG 2 | Ms. Maine Fulgar
 Elements of the Statement of Financial Position
NONCURRENT ASSETS

Assets that cannot be realized(collected, sold, used up) one year after
year- end date.

1. Property, Plant and Equipment

2. Machinery
3. Land Improvements
4. Intangible Assets

SHS-ACCTG 2 | Ms. Maine Fulgar

 Elements of the Statement of Financial Position
CURRENT LIABILITIES
·It expects to settle the liability in its normal operating cycle
·It holds the liability primarily for the purpose of trading
·The liability is due to be settled within 12 months after the reporting period;
·It does not have an unconditional right to defer settlement of the liability for at
least 12months after the reporting period.

1. Trade Account Payable

2. Accrued Expenses (Utilities &
Salaries)
3. Unearned Income
4. Current Income Tax Payable
SHS-ACCTG 2 | Ms. Maine Fulgar
 Elements of the Statement of Financial Position
NONCURRENT LIABILITIES

Liabilities that do not fall due (paid, recognized as revenue) within

one year after the year-end date.

1. Loans Payable
2. Mortgage Payable

SHS-ACCTG 2 | Ms. Maine Fulgar

 Elements of the Statement of Financial Position

Equity

Equity is the excess of assets over liabilities. Hence, equity is the

net assets of the business. This represents capital contributed by
the owners.It will increase due to accumulated income and
additional investments; It will decrease because of accumulated
loss and owner’s withdrawals.

SHS-ACCTG 2 | Ms. Maine Fulgar

 KNOWLEDGE CHECK
Determine if the following are Current Assets, Current
Liabilities, Noncurrent assets, or Noncurrent Liabilities:

1. Salaries and wages payable

SHS-ACCTG 2 | Ms. Maine Fulgar

 KNOWLEDGE CHECK
Determine if the following are Current Assets, Current
Liabilities, Noncurrent assets, or Noncurrent Liabilities:

1. Salaries and wages payable

2. Property, Plant and Equipment

SHS-ACCTG 2 | Ms. Maine Fulgar

 KNOWLEDGE CHECK
Determine if the following are Current Assets, Current
Liabilities, Noncurrent assets, or Noncurrent Liabilities:

1. Salaries and wages payable

2. Property, Plant and Equipment
3. Cash and Cash Equivalent

SHS-ACCTG 2 | Ms. Maine Fulgar

 KNOWLEDGE CHECK
Determine if the following are Current Assets, Current
Liabilities, Noncurrent assets, or Noncurrent Liabilities:

1. Salaries and wages payable

2. Property, Plant and Equipment
3. Cash and Cash Equivalent
4. Loans Payable

SHS-ACCTG 2 | Ms. Maine Fulgar

 KNOWLEDGE CHECK
Determine if the following are Current Assets, Current
Liabilities, Noncurrent assets, or Noncurrent Liabilities:

1. Salaries and wages payable

2. Property, Plant and Equipment
3. Cash and Cash Equivalent
4. Loans Payable
5. Trade Accounts Payable

SHS-ACCTG 2 | Ms. Maine Fulgar

 Debit Side Credit Side
Assets Liabilities
Current Assets Current Liabilities
Accounts Receivable Accounts Payable
Accrued Income Accrued Expenses
Inventory Unearned Income
Prepaid Expenses Notes Payable

Noncurrent Assets Noncurrent Liabilities

Long Term Investments Mortgage Payable
Intangible Assets Loans Payable
Property, Plant and Equipment
Owner’s Equity
SHS-ACCTG 2 | Ms. Maine Fulgar
How to create
Statement of Financial Position
(SFP)?

A. Heading
Name of the Company
Name of the Statement
Date of preparation (emphasis on the wording – “as of”)

SHS-ACCTG 2 | Ms. Maine Fulgar

 Account Form Format
Growth in Demand
Re
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Fo
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Fo
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at
 Preparation of Statement of Financial Position
SFP is prepared from the Trial balance.
In the Trial balance, Assets are usually at the top, followed by Liabilities, Equity,
Revenue and Expenses. Take note that balance sheet consists of Assets, Liabilities
and Equity only.
The easiest way to prepare a balance sheet is to identify the account if it an asset,
liability or equity. Before you prepare the Balance Sheet.

Assets
Debit Credit
(Dr) (Cr)

SHS-ACCTG 2 | Ms. Maine Fulgar

Sample questions:

Learning is Fun Company generated revenues amounting to

Php 100,000. Expenses for the year totaled Php 76,000. How
much is the company’s net income for the year?

SHS-ACCTG 2 | Ms. Maine Fulgar

Sample questions:

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.

SHS-ACCTG 2 | Ms. Maine Fulgar

Using the following information, prepare a properly classified Statement of Financial Position for
Graduation Company as at December 31, 20X1 under:
a. Report form
b. Account form
SHS-ACCTG 2 | Ms. Maine Fulgar