Statement of Financial Position

(SFP)
Elements: Current and Non-current
Learning Competencies
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)
Your Personal SFP
 Get ¼ piece of paper
 Write your current savings and everything you
own (clothes, pen, pencil, etc.)
 Write the amount that you owe your friends,
family members, parents
 Deduct the amount you owe from the amount
you own
Recall your FABM 1

AMOUNT
ASSETS
YOU OWN

AMOUNT
LIABILITIES
YOU OWE

NET
EQUITY
AMOUNT
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)
Statement of Financial Position
 It is a clear representation of the Accounting
Equation:
Permanent Accounts and Contra
Asset Accounts
Permanent Accounts
 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:
ACCOUNTS ACCOUNTS
CASH
RECEIVEABLE PAYABLE

LOANS
PAYABLE CAPITAL
Permanent Accounts
 Basically, assets, liabilities and equity
accounts are permanent accounts because
the accounts are retained permanently in the
SFP until their balances become zero.
 This is in contrast with temporary accounts
which are found in the Statement of
Comprehensive Income (SCI). Temporary
accounts unlike permanent accounts will have
zero balances at the end of the accounting
period.
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.
Contra Assets
 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.
Contra Assets
 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.
Questions???

15
Two Forms of Statement of
Financial Position
Report Form vs. Account Form
Report Form vs. Account Form of SFP
 Report Form – A form of the SFP that shows
asset accounts first and then liabilities and
owner’s equity accounts after.(Haddock, Price,
& Farina, 2012).
** The balance sheet shown earlier is in report
form.
Report Form vs. Account Form of SFP
Report Form vs. Account Form of SFP
 Account Form – A form of the SFP that shows
assets on the left side and liabilities and
owner’s equity on the right side just like the
debit and credit balances of an account.
(Haddock, Price, & Farina, 2012).
Report Form vs. Account Form of SFP
Account Form
The Importance of the Format
 Report form vs. Account form – these
are just formats. Usually depends on the
reader for preference.
 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.
Questions???

22
Current and Noncurrent Accounts
and the Owner’s Equity
Current Accounts
 Current Assets – Assets that can be realized
(collected, sold, used up) one year after year-
end date.
Current Accounts
 Current Liabilities – Liabilities that fall due
(paid, recognized as revenue) within one year
after yearend date.
Current Accounts
Current Assets are arranged
based on which asset can be
realized first (liquidity).
Current assets and current
liabilities are also called
short term assets and
short term liabilities.
Noncurrent Accounts
 Noncurrent Assets – Assets that cannot be
realized (collected, sold, used up) one year
after yearend date.
Noncurrent Accounts
 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.
Noncurrent Accounts

Noncurrent assets and

noncurrent liabilities
are also called long
term assets and long
term liabilities.
How can a company 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.
How can a company have a lot of assets but
still have very low equity?
 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.
The Statement of Owner’s Equity
 The Statement of Owner’s Equity - shows
the changes in the Capital or Owner’s Equity
as a result of additional investment or
withdrawals by the owner, plus or minus the
net income or net loss.
 Difference between the SFP of a Service
Company and of a Merchandising Company
SFP: Service vs. Merchandising
 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.
Questions???

35
Parts of a Statement of Financial
Position
Parts of a SFP
A. Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wording –
“as of”)
B. Sample of a Report Form SFP
C. Sample of an Account Form SFP
Parts of a SFP: Report Form
Parts of a SFP: Report Form
Parts of a SFP: Account Form
Parts of a SFP: Account Form
Questions???

42
 Eureka!

Let’s check your understanding of the lesson…

Easy Question #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?
 Answer: P176,000.
Easy Question #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?
 Answer: P30,000.
Medium Question#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.
 Answer: P265,000.
Medium Question#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?
 Answer: P640,000 and P30,000
Difficult Question #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?
 Answer: P50,000.
Difficult Question #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.
 Answer: P190,000
Questions???

50