Statement of Financial

Position (SFP)
FABM 2
 Learning Objectives:
The learners should be able to:
1. identify the elements of the SFP and describe each of them (ABM_FABM12-
Ia-b-1)
2. classify the elements of the SFP into current and noncurrent items
(ABM_FABM12-Ia-b-2)
3. prepare the SFP of a single/sole proprietorship (ABM_FABM12-Ia-b-3)
4. prepare an SFP using the report form and the account form with proper
classification of items as current and noncurrent (ABM_FABM12-Ia-b-4)
 Review

Give specific account titles for each of the terms

a. Accounting Equation
b. Assets
c. Liabilities
d. Equity
 Review

1. What are the normal balance of asset

(debit), liabilities (credit) and equity (credit).
2. How these accounts are
increased/decreased.
 Prepare a Personal SFP
a. Get a ¼ piece of paper (any paper will do if you don’t have a ¼ sheet)
b. Write your current savings and everything that you own (clothes, pen,
pencil, etc.)
c. Write the amount that you owe from your friends, family members, parents
(tuition)
d. Deduct the amount that you owe from the amount that you own
e. Associate amounts owned with assets and amount owed with liabilities with
the net amount as equity
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 are permanent
accounts.
 CONTRA ASSETS
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.
 Classification between Current and Noncurrent
Grouped into 4 groups.
Each group will start with 100 points.
1st group will be the current assets.
2nd group will be the noncurrent assets.
3rd group will be the current liabilities.
4th group will be the noncurrent liabilities.
Teacher will enumerate accounts
For each account, the group where the account should be classified into should stand while the
other groups should stay seated. For every member who was not able to stand when the group is
required to or for every member who stood when the group is not required to, a point will be
deducted from the group.
 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.
 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.
 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, Ending
Parts of the Statement of Financial Position
Parts of the Statement of Financial Position
Parts of the Statement of Financial Position
Parts of the Statement of Financial Position
Parts of the Statement of Financial Position
Parts of the Statement of Financial Position
 PRACTICE (Easy Questions)

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?
 PRACTICE (Easy Questions)

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?
 PRACTICE (Average Questions)
1. 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.
 PRACTICE (Average Questions)
2. 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?
 PRACTICE (Difficult Questions)

1. Company’s Total Liabilities and Equity amounted to

Php 285,000. Total noncurrent assets ended at Php
85,000. Cash totaled Php50,000. Inventory amounted
to Php100,000.
Assuming the company had no other assets, how much is
Accounts Receivable?
 PRACTICE (Difficult Questions)

2. Total assets amounted to Php575,000. Total equity

amounted to Php 250,000. Accounts Payable amounted
to Php 50,000 while Unearned Income totaled
Php 85,000.
Assuming there are no other current liabilities, compute
for the company’s noncurrent liabilities.
 How a company can have a lot of assets but
still have very low equity.
When the company has a lot of assets (example: cash, accounts receivable,
prepaid expenses), owners may sometimes think that the company is
doing well.
There are instances that owners forget that they might also have a lot of
liabilities which may result to their equities having a very small balance.
With the preparation of the SFP, the owner can easily see the assets,
liabilities and equity balances of his/her company which will show exactly
the financial position of the company as of a given point in time.
 Importance of SFP

Without the SFP, the company cannot know if it truly owns

anything because in case of bankruptcy, liabilities are paid first.
- 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.
 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.
 Evaluation

1. If assets are Php17,000 and owner's

equity is Php10,000, liabilities are
___________________.
 Evaluation
2. At the end of the first month of operations for Juana’s
Delivery Service, the business had the following accounts:
Accounts Receivable, Php1,200; Prepaid Insurance, Php500;
Equipment, Php36,200 and Cash, Php40,650. On the same date,
Juana owed the following creditors: Nena’s Supply Company,
Php12,000; Maria’s Equipment, Php9,500.The current assets for
the Juana’s Delivery Service are _________.
 Evaluation

3. At the end of the first month of operations for Juana’s

Delivery Service, the business had the following accounts:
Accounts Receivable, Php1,200; Prepaid Insurance, Php500;
Equipment, Php36,200 and Cash, Php40,650. On the same
date, Juana owed the following creditors: Nena’s Supply
Company, Php12,000 (due in 6 months); Maria’s Equipment,
Php9,500 (due after 2 years).Current liabilities are _________.
 Evaluation

4. If during the year total assets increase

by Php75,000 and total liabilities decrease
by Php16,000, by how much did owner's
equity increase/decrease?
 Evaluation

5. Prepare a Statement of Financial Position using

the following accounts (one in report form and one
in account form): Cash – 5,000 Loans Payable –
77,500 Accounts Receivable – 2,600 Supplies – 2,300
Equipment – 17,000 Owner’s equity – 40,000
Accounts Payable – 22,400 Building – 113,000
 Group Activity: Prepare a Statement of Financial Position for the
company (one in report form and one in account form)

You were hired by Mr. Juan Dela Cruz to prepare his sari-sari store’s Statement of Financial Position. In order to prepare the statement, you
identified the following assets and liabilities of Mr. Dela Cruz:
a. His sari-sari store has cash deposited in a bank account amounting to P50,000
b. His sari-sari store had a lot of collectibles from sales from customers amounting to P75,000
c. The total amount of merchandise left inside the store is P30,000
d. He already paid one year’s rent in advance amounting to P12,000
e. The value of all the company’s furniture amounted to P100,000
f. He bought merchandise from his supplier amounting to P25,000 and the supplier agreed that payment can be made 2 months after
year-end
g. SSS, Philhealth and Pag-ibig Payables for his one employee totaled P5,000
h. The sari-sari store had outstanding liabilities to utility companies amounting to P3,000
i. He had a loan from the bank amounting to P50,000 to be paid in 3 years