Lesson 1

Statement of
Financial Position
(SFP)
 
Objective

At the end of the lesson, the learner should be able to:

1. Identify the elements of the SFP and describe each of

them;
2. Prepare an SFP using the report form with proper
classification of items as current and non- current
Essential Questions

 What elements are included in the Statement of Financial

Position(SFP)?

 What is the heading for SFP?

 What is the left side and the right side of an account?

Warm Up!

As a prerequisite to FABM2 is FABM1. You must recall

through your stock knowledge the Elements of Financial
Statements. The basic purpose of accounting is to
provide information that is useful for making economic
decision Accounting information is most commonly
communicated to users of accounting information
through the financial statements.
Warm Up!

Instruction: Fill in the blank with the correct answer (Find the
answers in the box.)

_________ 1. The book of original entry.

_________ 2. Assets are equal to liabilities and owner’s equity.

_________ 3. Users of accounting information is mostly communicated

__________4. Are what the company owns.

__________5. Are what the company owed.

Warm Up!

_________ 6. Inflows of cash because of services rendered.

_________ 7. Assets from cash spent because of sales of goods.

_________ 8. The second accounting cycle.

_________ 9. Is called the book of the final entry.

________ 10.is the next cycle after journalizing.

 
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The , Statement of Financial Position also called

Balance Sheet, is a financial statement that reports the
assets, liabilities, and equity of a company on a given
date. In other words, it lists the resources, obligations,
and ownership details of a company on a specific day.
You can think of this like a snapshot of what the company
looked like at a certain time in history. Reports the
permanent accounts as of the end of an accounting
period.
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The elements of the

financial positions
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The elements of the financial positions

1.Assets(A)
-are resources you control that have resulted from
past events and can provide you with the future
economic benefits.
- are what the business owns.
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The elements of the financial positions

2. Liabilities (L)
-are your present obligations that have resulted from
past events and can require you give up resources
when settling them.
- are what the business owes or claims against
assets.
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The elements of the financial positions

3. Owner's Equity or Equity (OE)

-means assets minus liabilities. Other terms for
equity are capital, net assets, and net worth
-is what the business is worth.
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The Statement of Financial Position or Balance Sheet

contains the following:
A. Heading
1. Name of the Business
2. Title of Report
3. Date of the Report (specific date)
B. The Asset Section
C. The Liability Section
D. The Owner's Equity Section
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Classification of Balance Sheet Accounts

The Statement of Financial Position or Balance Sheet

shall be identified and distinguished from other
statements.
The entity shall present current and noncurrent assets
and current and noncurrent liabilities, as separate
classifications on the face of the balance sheet.
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Current Assets
- are those assets that are expected to be used (sold or
consumed) within 12 months.

Current assets include (according to the IFRS):

• Current inventories
• Trade and other current receivables
• Current tax assets
• Current biological assets
• Other current financial assets
• Other current non-financial assets
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Cash and cash equivalents non-cash assets pledged as collateral for which
transferee has right by contract or custom to sell or repledge collateral.

An asset shall be classified as current when it satisfies any of the following

criteria:
• it expects to realise the asset, or intends to sell or consume it, in its normal operating
cycle;
• it holds the asset primarily for the purpose of trading;
• it expects to realise the asset within twelve months after the reporting period; or
• the asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted
from being exchanged or used to settle a liability for at least 12 months after the
reporting period.

All other assets shall be classified as non-current assets.

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Current Liabilities
- are financial obligations of a business entity that are due and
payable within a year. A liability occurs when a company has
undergone a transaction that has generated an expectation for a
future outflow of cash or other economic resources.
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Examples of Current Liabilities

The following are common examples of current liabilities:

•Accounts payable or trade payables

•Notes payable that will be due within one year
•The principal portion of a long-term loan that must be paid within one
year
•Wages payable
•Income taxes payable
•Interest payable
•Other accrued expenses payable
•Deferred revenues and customer deposits
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-a liability shall be classified as current when it satisfies any of the

following criteria:
• 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 twelve months after the
reporting period; or
• it does not have an unconditional right to defer settlement of
the liability for at least twelve months after the reporting
period.
If none of the above criteria is met, a liability is classified as non-
current.
 
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Direction. Identify all the Assets, Liabilities and

Owner’s Equity of your family. You can ask your
family members to help you identify the
elements of the financial position.
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Direction. Identify all the Assets, Liabilities and Owner’s Equity of your family. You can ask your
family members to help you identify the elements of the financial position.

EXAMPLE:.
In the example, the assets
amount to $60,000, but the value
of the assets the owner can lay
claim to is only $40,000. This is
because there are liabilities
(debts) of $20,000, so $20,000
of the assets will be needed at
some point to pay off these
debts.
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Statement of Financial Position

There are two forms of statement of financial position, the report
form and account form.
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Report form presents all the accounts vertically. Although both balance sheet formats are
acceptable, the report form is much more popular.
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Account format presents the asset accounts on the left side and the liabilities and equity accounts on
the right.
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Post-Closing Trial Balance

In an on-going business,
• The accounting period starts with the carry forward balances of the real
accounts or the balance sheet accounts.
• The nominal accounts or income statement accounts start with zero balances.
Within the accounting period, transactions and events are recorded.
• An adjusted trial balance is prepared from the general ledgers at the end of the
accounting period. This is called post-closing trial balance.
• To demonstrate this, the following is the post- closing Trial Balance of Paul’s
Guitar Shop, Inc. as of December 31, 2015. Note that the accounts and
amounts in the post- closing trial balance are the same as those in the
statement of financial position.
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Post-Closing Trial Balance
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Requirement 1
Write the accounting equation from the post- closing trial balance of Leyes
Service Grafix
Assets = Liabilities + Owner’s Equity

Requirement 2
From the post- closing trial balance of Leyes Service Grafix as of December 31,
2021, prepare Statement of Finacial Position

A. Report Form
B. Account Form
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Post-Closing Trial Balance
December 31, 2021
Dr. Cr.
Cash in Bank P 100,000
Account Receivable 480,000
Allowance for Bad Debts P 5,000
Prepaid Rent 10,000
Office Equipment 660,000
Accumulated Depreciation
Office Equipment 60,000
Salaries Payable 30,000
Accounts Payable 240,000
Fred Leyes, Capital 915,000

Total P 1,250,000 P 1,250,000

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SOLVING ACCOUNTING EQUATION

Instruction: Solve for the accounting equation.
Remember the Accounting Equation?
Assets is equals to Liability and Owner’s Equity Account
1.Angels Tutorial Center has an asset amounting to P 200,000, Liability is P 75,000. How much
is the owner’s equity account?

2. Assets of TMAM is P15,000 and Total Equity is P10,000, how much is total Liabilities?

3.Assets is equal to P350,000, Owner’s equity is 250,000, How much is Equity?

4.Sure Fresh Company’s total liabilities amounted P30,000. Total equity had an ending balance
of P50,000. How much is total assets?

5.Current Assets is P50,000, Non- Current Assets is P150,000.00, Current Liabilities is P10,000
and Non- Current Liabilities is P40,000, How much is the Equity of the company?
Key Points

Function
1 It is a special kind of relation in which no two distinct ordered pairs have the same
first element.

Independent and Dependent Variables

2 The value that a function takes in is called the input or the independent variable
while the corresponding value that it produces is the output or the dependent
variable.