Chapter 2

The Statement
of financial
position &
Assets
Lecture 1

Make today matter

Outcomes for this session

• Apply the duality concept;

• Explain the purpose of the statement of financial position;
• Identify the elements of the statement of financial position
with reference to the Conceptual Framework;
• Analyse transactions according to the Accounting
Equation.
 Financial position as reflected in the Statement of
p.23
financial position

Snapshot of the value of the

entity as at a specific point in
time.
 Duality concept
p.23

Framework for the accountability of funds

Employment of funds = Generated funds

Basic Accounting Equation

Assets = Equity + Liabilities

Debit Credit Debit Credit

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Elements included in the Statement of financial position
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p.24 to go here – 30pt Open Sans Bold

Assets Equity Liabilities

In the Conceptual Framework for Financial Reporting (March 2018) you will find:
• Definition and
• Recognition
requirements for these items.

Chapter 2 – Financial position as reflected in the statement of Financial position

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Assets
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DEFINITION
Present economic resource (right) Non-current assets
Controlled by the entity owned by the entity 3

Resulting from a past event

steps

RECOGNITION
Current assets
Relevance equipment

Faithful representation record it at its value

neutral, unbaised, complete, free of error

Chapter 2 – Financial position as reflected in the statement of Financial position

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Statement of financial position as at ………………
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ASSETS XXX XXX

Non-current assets

Current assets
assets = equity and liabilities
positive bank balance

EQUITY AND LIABILITIES XXX XXX

Equity

Non-current liabilities

Current liabilities
negative bank balance

Chapter 2 – Financial position as reflected in the statement of Financial position

Let’s get to work………………
Example 2.1

p.25
Example 2.1
Example 2.1
Example 2.1
Exercise 2.1

p.26

assets debited=incrrease;
 Exercise 2.1

bank=credit; assets=debited
Exercise 2.1
Exercise 2.1
 Example 2.2

• Read the information carefully. Is this a valid transaction?

1

• Identify the accounts that are affected (At least 2)

2 • Ask questions like: What did we buy? How did we pay? Have we paid at all?

• Assign the element to each account

3

• Insert the signs for debit and credit sides

4

• Evaluate the effect on the element (Did it increase or decrease the element?)
5

• Complete the T-accounts and make sure you have applied the duality concept
6
 Example 2.2

p.29

A = E+L

BR VEHICLES

CR BANK
 Duality concept

Basic Accounting Equation

Assets = Equity + Liabilities

Debit Credit Debit Credit

 Basic Accounting Equation

Assets = Equity + Liabilities

Debit Credit Debit Credit

General ledger accounts (aka T-accounts)

Account name

Debit Credit
Example 2.2
Exercise 2.2
Exercise 2.2
 What next?

HOMEWORK

• Do Question 2.3 in the Question Book.

Chapter 2 – Lecture 1