FUNDAMENTALS IN

ACCOUNTANCY AND
BUSINESS MANAGEMENT
II
SPECIALIZED SUBJECT:
(GRADE 12 First Semester)

MODULE 1
Statement of Financial Position: Its Elements Form
and Form
 STATEMENT OF FINANCIAL POSITION

Financial Statements are structured representation of an entity’s financial

position which is balance sheet and results of its operations which is the
statements of performance. Financial statements are product of accounting
process.

Elements of Financial Positions:

1. Assets are resources you control that have resulted from past events and can provide
you with the future economic benefits.

2 Kinds of Assets
a. Current Assets – cash, receivables, inventories, marketable securities and
prepaid expenses
b. Non-Current Assets – land, building equipment and furniture and their
accumulated depreciation.

Other Assets term:

1. Accrued Income – also known as outstanding income. It is the income which

has been earned during a particular accounting period. However, the related
funds have not been received until the end of that accounting period.

2. Prepaid Expenses – is money received by an individual or company for a service

or product that has yet to be provided or delivered.

2. Liabilities are your present obligations that have resulted from past events and can
require you give up resources when settling them.

2 Kinds of Assets
a. Current Liabilities – accounts payables
b. Long-term Liabilities - note payables

Other assets term:

1. Accrued Expense – refers to an expense that is recognized on the books before

it has been paid: the expense is recorded in the accounting period in which it is
incurred.
2. Unearned Revenue – are those expenses which are paid in advance for a
benefit yet to be received

3. Owner’s Equity means assets minus liabilities. Other terms for equity are capital, net
assets, and net worth.

The elements are termed Permanent Accounts because their life or usefulness
continues throughout the life of the company.
Recall that the accounting equation is as follows:

ASSETS = LIABILITIES + EQUITY

1. The assets of Rianne Company total ₱200,000 while its liabilities only amount to
₱100,000. What is the total equity of Rianne Company?

Given: Assets - ₱200,000.00

Liabilities - ₱100,000.00
Let x be the total equity of Rianne Company

Solution:
ASSETS = LIABILITIES + EQUITY
₱200,000.00 =₱100,000.00 + x
₱100,000.00 = x

Conclusion:
Therefore, Rianne Company’s total equity is ₱100,000.00

2. A hotel company has owner’s equity ₱5,000,000.00 and liabilities of ₱2,560,000.00.

How much is the company’s total assets?

Given: Let x be the total assets of hotel company

Owner’s Equity - ₱5,000,000.0
Liabilities - ₱2,560,000.00

Solution:
ASSETS = LIABILITIES + EQUITY
x = ₱2,560,000.00 + ₱5,000,000.0
x = ₱7,560,000.0
Conclusion:
Therefore, the total asset of hotel company is ₱7,560,000.0.

2 Forms of Statement of Financial Position

1. Report Form- assets, liabilities and owner’s equity accounts are in one direction. This
is usually the format that will be submitted to the government and private sectors.
2. Account Form- all assets are found on the left side of the account and the liabilities
and owner’s equity account are found on the right side.

Steps in preparing a simple Statement of Financial Position (SFP):

1. You should start with a heading. The heading includes the name of the business or
entity (ex. Cool Guitars, Inc.), name of the financial statement (ex. Balance Sheet) and
the reporting date/period (ex. As of December 31, 2013). We use ‘as of’ in SFP because
the amounts (in Philippine Peso) of the items are cumulative from the start of the
operations of the business up to the accounting date.

2. Assets are presented first. (Classified into current and non-current)

3. Next is to present the Liabilities. (Classified into current and non-current)

4. Equity/ Owner’s Equity is then added after the liabilities to complete the accounting
equation (Assets = Liabilities + Equity)

Example:

Prepare a State of Financial Position using the following accounts (supposed the
date/period is Sept. 5, 2020 and El Bernardos) :

Step Cash – 5,000 Accounts Payable – 22,400 1:

Loans Payable – 77,500 Building – 113,000
Accounts Receivable – 2,600 Equipment – 17,000
Supplies – 2, 300 Owner’s Equity – 40, 000
Heading
El Bernardo
Statement of Financial Position
As of September 5, 2020

Step 2: Classify assets into current and non-current assets

CURRENT ASSETS NON-CURRENT ASSETS

Cash – 5,000 Building – 113,000
Accounts Receivable – 2,600 Equipment – 17,000
Supplies – 2, 300

Step 3: Classify liabilities into current and non-current

CURRENT LIABILITY NON-CURRENT LIABILITY

Accounts Payable – 22, 000 Loans Payable – 77, 000

Step 4: Equity/Owner’s equity is then added after the liabilities

CURRENT LIABILITY NON-CURRENT LIABILITY

Accounts Payable – 22, 000 Loans Payable – 77, 000
OWNER’S EQUITY
40,000

Then: (Account Form)

El Bernardo
Statement of Financial Position
As of September 5, 2020

ASSETS LIABILITIES AND OWNER’S EQUITY

Current Assets Current Liability
Cash ₱5,000.00 Accounts Payable ₱22,000.00
Accounts Receivable ₱2,600.00
Supplies ₱2,300.00 Non-Current Liability
Total Current Assets ₱9,900.00 Loans Payable ₱77,000.00

Non-Current Assets Total Liabilities ₱99,000.00

Building ₱113,000.00
Equipment ₱17,000.00 OWNER’S EQUITY ₱40,000.00
Total Non-Current ₱130,000.00
Assets
Total Assets ₱139,900.00 Total Liabilities and Owner’s ₱139,900.00
Equity
(Report Form)
El Bernardo
Statement of Financial Position
As of September 5, 2020

ASSETS
Current Assets
Cash ₱5,000.00
Accounts Receivable ₱2,600.00
Supplies ₱2,300.00
Total Current Assets ₱9,900.00

Non-Current Assets
Building ₱113,000.00
Equipment ₱17,000.00
Total Non-Current Assets ₱130,000.00
Total Assets ₱139,900.00

--------------------------
-
LIABILITIES
Current Liability
Accounts Payable ₱22,000.00

Non-Current Liability
Loans Payable ₱77,000.00
Total Liabilities ₱99,000.00

OWNER’S EQUITY
Owner’s equity ₱40,000.00

Total Liabilities and ₱139,900.00

Owner’s Equity
 LET’S CHECK YOUR UNDERSTANDING!

Analyze the given situations, solve and give the appropriate answer using step by step
procedure (Given, Solution, Conclusion).

1. No Melt Ice Cream parlor has liabilities amounting to ₱395,000.00 and assets of
₱524,000.00. How much is the ice cream liabilities?

2. Read Me Book Shop has assets of ₱2,000,000.00 and owner’s equity of ₱600,000.00.
How much is the bookshop’s total liabilities?

3. Wash and Wear Laundry has current assets amounting to ₱300,000.00. Non-current
assets for the year totaled ₱89,000.00. How much is the laundry’s total assets?

4. Everyday Bake Shop has a total liability of ₱35,000.00. Total equity had an ending
balance of ₱42,000.00. How much is total assets?

5. Choose Me Boutique had the following accounts at year end: Cash- ₱250,000.00 ,
Accounts Payable- ₱70,000.00 , Prepaid Expense- ₱15,000.00. Compute for the
company’s current assets.

6. Happy Selling’s Account Receivable amounted to ₱50,000.00. Prepaid Expense and

Unearned Income totaled ₱30,000.00 and ₱10,000.00 respectively. Cash balance
amounted to ₱100,000.00 while Accounts Payable and Inventory totaled to ₱20,000.00
and ₱10,000.00 respectively. How much is the company’s current assets? Current
liabilities?

7. At the beginning of the year, the assets of David’s Services were ₱560,000.00 and its
Owner’s Equity was ₱250,000.00. During the year, assets were increased by
₱120,000.00 and liabilities increased by ₱20,000.00. What was the owner’s equity at the
end of the year?

8. The liabilities of Ryan Company total ₱200,000.00 while its equity only amounts to
half of its total assets. What is the total equity of Ryan Company?

9. The equity of Henry Company total is ₱200,000.00 while its equity only amounts to a
third of a half of its total assets. What is the total liability of Henry Company?

10. Total Assets amounted to ₱575,000.00. Total equity amounted to ₱250,000.00.

Accounts Payable amounted to ₱50,000.00 while Unearned Income totaled ₱85,000.00.
Assuming there are no other current liabilities, computed for the company’s noncurrent
liabilities.
Direction: From these randomly ordered accounts of Josh Trading prepare a properly
classified Balance Sheet (in report form). The balances shown are as of 12/31/2019.

General and Administrative Expense ₱200,000.00

Accumulated Depreciation ₱50,000.00
Net Income from Operation ₱200,000.00
Sales Returns and Allowances ₱11,000.00
Purchase Discounts ₱8,000.00
Merchandise Inventory, December 31,2019 ₱80,000.00
Josh Capital, January 1, 2019 ₱200,000.00
Sales ₱1,050,000.00
Merchandise Inventory, January 1, 2019 ₱100,000.00
Prepaid Rent ₱100,000.00
Purchases ₱400,000.00
Notes Payable ₱200,000.00
Selling Expenses ₱190,000.00
Accounts Receivable ₱220,000.00
Accounts Payable ₱100,000.00
Office Supplies ₱30,000.00
Purchase Returns and Allowances ₱2,000.00
Cash ₱50,000.00
Transportation-In ₱10,000.00
Office Equipment ₱220,000.00
Sales Discounts ₱29,000.00
Withdrawals ₱50,000.00