Fundamentals of

Accountancy,
Business &
Management 2
 The learners shall be able to
1. identify the elements of the SFP and describe each of them.

2. classify the elements of the SFP into current and noncurrent

items.

3. prepare the SFP of a single proprietorship.

4. prepare an SFP using the report form and the account form
with proper classification of items as current and noncurrent.
 FINANCIAL STATEMENTS
1. Statement of Financial Position
2. Income Statement/Statement of Comprehensive
Income
3. Statement of Changes in Equity
4. Statement of Cash Flows
5. Notes, comprising a significant accounting policies
and other explanatory information
Responsibility for
financial statement
The management of
an entity has the
primary responsibility
for the preparation
and presentation of
financial statements.
 1.
Statement of
Financial
Position
Assets, Liabilities and Equity

1. What is Statement of Financial
Position?
2. How the other financial statements
are linked to the SFP?
 STATEMENT OF
FINANCIAL
POSITION
Is a formal statement showing the three
elements comprising the financial
position.
 Interrelationships among the
Financial Statements

The income statement and the statement of owners equity are interrelated.

Net income or net loss appears

on both statements.
 Interrelationships among the
Financial Statements

The owners capital at the end of

the period on the statement of
owners equity also appears on
the balance sheet as owners
capital.
 Interrelationships among the
Financial Statements

The balance sheet and the cash flow statement are interrelated.

The cash reported on the

balance sheet is also reported as
the end-of-period cash on the
cash flow statement.
SEQUENCE OF 1. Income statement
PREPARATION
2. Statement of owners equity
3. Statement of Financial Position
4. Statement of Cash Flow

1. What are the elements of SFP?
2. Differentiate each elements.
 ASSETS AS A BUILDING BLOCK
Assets are resources owned by a
business.
They are things of value used in
carrying out such activities as
production and exchange.
 LIABILITIES AS A BUILDING
BLOCK
Liabilities are claims against
assets.
They are existing debts and
obligations.
 EQUITY AS A BUILDING BLOCK
Owners Equity is equal to total assets minus total
liabilities.
Owners Equity represents the ownership claim on
total assets.
Subdivisions of Owners Equity:
1. Capital
2. Drawings
3. Revenues
4. Expenses
ELEMENTS Assets
OF
STATEMENT Liabilities
OF SFP Equity

What are the examples of Assets, Liabilities

and Equity?
 Prepaid Expense
Inventory
Receivables
Cash
Property,
IntangiblePlant & Equipment
assets

ASSETS
 Unearned
Accrued
PayablesExpense
Long-term Income
Liability

LIABILITY
 Expense
Revenue
Withdrawal
Capital

EQUITY

1. When is the presentation of assets,
liabilities with separate current & non-
current classification useful?
2. Why is it important to know the normal
balance of each account?
3. What are the two common formats of SFP?
 Accounting Equation: ???
ASSET
__________ LIABILITY
= _____________ EQUITY
+ __________
 BASIC
BASIC FORM OF ACCOUNT
In its simplest form, an account consists of
1. the title of the account,
2. a left or debit side, and
3. a right or credit side.
The alignment of these parts resembles the letter T,
and therefore the account form is called a T account.
Title of Account

Left or debit side Right or credit side

Debit balance Credit balance

 DEBITS
DEBITS AND
AND CREDITS
CREDITS
The terms debit and credit mean left and
right, respectively.

The act of entering an amount on the left

side of an account is called debiting the
account and making an entry on the right
side is crediting the account
DR CR
DEBIT &
CREDIT
NORMAL BALANCE OF AN ACCOUNT
 NORMAL
NORMAL BALANCES
BALANCES
ASSETS
ASSETS AND
AND LIABILITIES
LIABILITIES
Assets
Increase Decrease

Normal

Balance
Liabilities
Decrease Increase

Debit
Normal
Credit
NORMAL
NORMAL BALANCE
BALANCE
OWNERS
OWNERS DRAWINGS
DRAWINGS

Owners Drawings
Increase Decrease

Normal
Balance
Debit
Credit
NORMAL BALANCES REVENUES AND EXPENSES
Revenues
Decrease Increase

Normal

Expenses
Increase
Debit Decrease
Credit Balance

Normal
PRES
ENTA
TION
OF
STA
TEM
O EN
FIN F T
A
PO NCIA
SIT L
ION
 TWO
ACCEPTABLE
FORMATS
ACCOUNT FORM
REPORT FORM
Thanks!
Any questions?
You can find me at facebook RUBEN SOSING LEYBA
CONTACT NO. 09163131801
 1. The SFP provides readers with the
information as to the companys
financial position as of a specified
TRUE date.
OR 2. Assets=Liabilities + Owners Equity is
FALSE the governing equation of the SFP.

3. Asset is an element of the SFP that

has a normal balance of credit.

4. Debit means to increase an account

5. Credit means to decrease an account

ASSIGMNMENT
page 31
Problem 4
AMIHAN COMPANY-
Nos. 1-5
 Please prepare for
Summative Test
tomorrow.
THEORY & PROBLEM