Department of Education

SCHOOLS DIVISION OF CITY OF MEYCAUAYAN

Pag-asa St., Malhacan, City of Meycauayan, Bulacan

Senior High School

Activity Sheet 12
in
Fundamentals of
Accountancy, Business
and Management
Statement of Financial Position
ABM_FABM12Ia-b-1 & ABM_FABM12Ia-b-4
 STATEMENT OF FINANCIAL POSITION

LET US KNOW

From the book of Theory of Account 2015 editions, Valix defines financial statement
as the means by which the information accumulated and processed in financial accounting
is periodically communicated to the users. Financial statement is an important tool to
measure and report the company’s financial performance, its condition in the market, inflows
and outflow of cash and changes in equity, (Conrado Valix 2015). It is a product of financial
accounting process. A sound financial statement aid manager to make an objective and
relevant decision. These activity sheet aims to practice your skills in preparation of a
financial statement where you can evaluate entities liquidity, solvency and need of an
entity for additional financing. The Statement of Financial Position.

LET US REVIEW

Choose the correct letter of an answer. Write your answer on separate sheet of paper.

1. Which of the following is considered bookkeeping?

a. Analyzing
b. Reporting
c. Recording
d. Summarizing

2. Which of the following process best defines an accounting?

a. Measuring Economic Activity
b. Communicating results to interested parties
c. Preventing Fraud
d. Both a and b

3. To which area of accounting are generally accepted accounting principles primarily

relevant?
a. Managerial Accounting
b. Financial Accounting
c. Tax Accounting
d. Taxation

4. Which of the following is not one of three types of business activities?

a. Investing
b. Financing
c. Marketing
d. Operating

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 5. Which of the following is the best definition of accounting?
a. Accounting is a process of measuring and communicating financial information.
b. Accounting is a service activity that provide quantitative information primarily
financial in nature about economic entities that is intended to be useful in making
economic decision.
c. Accounting is a process of identifying, measuring business transactions that
is useful for overall business operation.
d. Accounting is an art of recording, classifying, and summarizing significant
business transactions used in business operation

LET US STUDY

Statement of Financial Position (Balance Sheet) is a formal statement showing the

three elements comprising financial position namely, Asset, Liabilities and Equity. It is
previously referred as Balance Sheet. Investors, creditors, and statement user refer to this
data to evaluate entities liquidity, solvency, and financial flexibility.

Solvency refers to the availability of cash over the longer term to meet financial commitments
as they fall due.

Financial flexibility is the ability to take effective actions to alter the amounts and timings
of cash flow so that it can respond to unexpected needs and opportunities.

Liquidity refers to the availability of cash in the near future after taking account of financial
commitments over this period .

Accounts found in the Statement of Financial Position are called permanent

account or real accounts. Real accounts are permanent an in nature and are not closed
at the end of the accounting period. They are forwarded to the next accounting period.
The date of this statement is always “as at” or “as of” the end of the period.

Preparation of Statement of Financial Position

In preparation of Statement of Financial Position, it is important to remember the

accounting equation.

ASSET = LIABILITIES +
OWNER’S EQUITY

Statement of Financial Position has two major parts – its heading and body.

Heading displays:

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  The legal name of the business enterprise as it is registered with securities and
exchange commission, the Department of Trade and Industry, or other government
agencies. Being a separate entity.
 The title of Financial Statement , Statement of Financial Position.
 The particular date as of when the financial condition of the business is being
reported which is usually as of the end of the month.

Body displays :

 Asset is an economic resources owned by reporting entity.

 Liabilities is an economic obligation of the enterprise.
 Equity is the residual claim of the owners over assets of business enterprises.

Classification of Asset,Liabilities and Owners Equity

Table 1 : Classification of Statement of Financial Position Elements.

ASSETS CLASSIFICATION
Current Asset is an asset expected to be realized within, or it is intended for sale or
consumption within the entities normal operating cycle or one year whichever is longer
related to receivables.inventories and prepaid expenses.
Non-Current Asset is a long lived assets or long term assets,includes tangible and
intangible assets of a long term.
Presented in the Statement of Financial Position in the order of liquidity or nearness
to cash.
LIABILITIES CLASSIFICATION
Current Liabilities are obligation that are expected to to be settled within entity’s
normal operating cycle or is due to be settled within twelve months after the balance
sheet date which ever is longer and finally, the entity does not have an unconditional
right to defer the settlement of the liabilities for atleast twelve months after the balance
sheet date.
Non-Current Liabilities all liabilities that will mature beyond one year from the
Statement of Financial Position date.
Presented in the Statement of Financial Position in the order of maturity or
narrness to date of payment.
OWNER’S EQUITY
Residual interest of owner in the assets of the entity sometimes called capital or
simply equity.
Equity = Asset - Liabilities

Notes to Financial Statement is prepared as reference to the details of the total

amount reported to the Statement of Financial Position. It is a narrative description or
disaggregation of items presented in the financial statements and information about items
that do not qualify for recognition. Notes also contain information that does not fit into the
body of the statements in order to enhance the understandability of statements (Conrado
Valix 2015).

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 Statement of Financial Position Presentation- Service Entity

Mahangin Vulcanizing
Statement of Financial Position
December 31,2019

ASSETS
Current Assets
Cash ₱100,000.00
Accounts Receivable 15,000.00
Supplies 25,000.00
Total Current Assets ₱140,000.00

Non Current Assets

Office & Furniture ₱25,000.00
Office Equipment 15,000.00
Total Non Current Assets ₱40,000.00

Total Assets ₱180,000.00

LIABILITIES AND OWNERS EQUITY

Current Liabilities
Accounts Payable ₱10,000.00
Salaries Payable 15,000.00
Utilities payable 5,000.00
Total Current Assets ₱30,000.00

Non- Current Liabilities

Mortgage Payable ₱ 50,000.00

Owners Equity
Mahangin, Capital ₱100,000.00

Total Liabilities and Owner's Equity ₱180,000.00

Figure 1. Service Entity Statement of Financial Position

Double Lines are ruled across the total assets to show that there are no more to be followed.
Normal Operating Cycle of an entity is the time the acquisition of inventories processing
and their realization in cash or cash equivalent . When the entity’s normal operating cycle is
not clearly identifiable ,its duration is assumed to be twelve months. (Palma 2014)

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 Statement of Financial Position Presentation – Merchandising Entity

Honey Bunch Trading

Statement of Financial Position
December 31, 2019

ASSET
Current Asset
Cash and Cash Equivalent s (Note 1) ₱1,119,250.00
Note Receivables 22,000.00
Accounts Receivables 220,000.00
Inventories (Notes 2) 220,000.00
Total Current Assets ₱1,581,250.00

Non-Current Assets
Property Plant and Equipment ( Note 3) 407,000.00
Investment Property 1,100,000.00
Intangible Assets (Note 4) 198,000.00
Total Non-Current Assets ₱1,705,000.00
Total Assets ₱3,286,250.00
LIABILITIES & OWNERS' EQUITY
Current Liabilities
Accounts Payable ₱220,000.00
Notes Payable 110,000.00
Current portion portion of long-term debt (Note 5) 55,000.00
Income Tax Payable 99,000.00
Interest Payable 11,000.00
Total Current Liabilities ₱495,000.00

Non Current Liabilities

Long Term Debt (Note 5 ) ₱495,000.00

Owner's Equity
Honey Cervantes Capital 2,296,250.00
Total Liabilities and Owners's Equity ₱3,286,250.00

Figure 2. Merchandising Going Concern Statement of Financial Position

Table 2 .Notes to Financial Statement Presentation

Note 1: Composition of Cash and Cash Note 2: Composition of

Equivalent Inventories
Cash in BPI ₱880,000 Raw Materials ₱66,000
Cash in BDO ₱220,000
Petty Cash Fund ₱5,500 Work in ₱44,000
Progress
Change Cash Fund ₱2,750
Finished ₱110,000
Cash Equivalents ₱11,000
Goods
Total Cash and Cash
Equivalents ₱1,119,250 Total
Inventories ₱220,000

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 Note 3. Composition of PPE
Building &
Land Plant Fixtures Total
Cost ₱110,000 ₱220,000 ₱110,000 ₱440,000
Accumulated -
Depreciation (22,000) (11,000) (33,000)
Carrying Value ₱110,000 ₱198,000 ₱99,000 ₱407,000

Note 4 Intangible Assets

Patents Trademarks Total
Cost ₱110,000 ₱110,000 ₱220,000
Accumulated Depreciation (11,000) (11,000) (22,000)
Carrying Value ₱99,000 ₱99,000 ₱198,000
Note 5. Long Term Debt Schedule
Long Term Debt
Non-Current Portion ₱550,000
Current Portion (55,000)
Total Long-term Debt ₱495,000

LET US PRACTICE

I. Classify whether the account element given is assets,liability or owners equity

account.For asset and liability account categorize whether they are current or non current
.Write your answer on a separate sheet of paper.

Account Element Classification

Accounts Payable
Accounts Receivable
Bond Payable
Cash
Cash in Bank
Cash on Hand
Inventories
Interest Payable
Tumangan’s Capital
Income tax payable
Accrued Expense
Prepaid Expense
Unearned Revenue
Notes payable

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 Loan Payable current
portion
Loan Payable not yet
payable
Supplies
Prepaid Insurance
Property,Plant and
Equipment

II. Determining Balance in T-account .Copy and write your answer on separate sheet of paper.

Problem 1. The T- account below is for the account Prepaid Expense.

Prepaid Expenses
March 1, 2019 ₱ 150,600 July 31,2019 ₱ 45,760
August 15,2019 ₱ 95,450 December 31,2019 ₱ 90,000

Balance

The balance of Prepaid Expenses on January 2019,is ₱245,675.What is the balance of

Prepaid expenses as of December 31,2019?

Problem 2. The T-account below is for the account Accrued Expenses.

Accrued Expenses
March 1, 2019 ₱ 150,630 July 31,2019 ₱54,760
August 15,2019 ₱95,170 December 31,2019 ₱ 60,000

Balance

The balance of Accrued Expenses on January 2019,is ₱245,675.What is the balance of

Accrued expenses as of December 31,2019?

LET US REMEMBER

In presentation of Statement of Financial Position. Let us remember the following key

points,

 Statement of Financial Position (Balance Sheet) is a formal statement showing the

three elements comprising financial position namely Asset, Liabilities and Equity. It
is previously referred as Balance Sheet. Investors, creditors, and statement user refer
to this data to evaluate entities liquidity, solvency, and financial flexibility.

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  Asset is presented in the Statement of Financial Position in the order of Liquidity
or nearness to cash.
 Liabilities is presented in the Statement of Financial Position in the order of
Maturity or nearnessto the date of payment.
 Owner’s Equity is a residual interest of owner in the assets of the entity. sometimes
called capital or simply equity. Equity = Asset – Liabilities.
 Notes to Financial Statement is prepared as reference to the details of the total
amount reported to the Statement of Financial Position.
 In preparation of Statement of Financial Position, it is important to remember the
accounting equation. Asset = Liabilities + Owner’s Equity.
 Double rule the final computed amount.

LET US APPRECIATE

The objective of an audited financial statements is to enable the auditor to express

an opinion whether the financial statements are prepared, in all material respects in
accordance with the financial reporting framework or acceptable financial reporting
standards. Looking at the Statement of Financial Position of E&E Trading as of December
31,2019.Identify the errors committed by the clients in preparing the Statement of Financial
position.Prepare your audit findings and suggest correction to ensure that the submitted
report is in accordance with Generally Accepted Accounting Principle (GAAP) or Philippine
Financial Reporting Standards (PFRS). Write your answer on separate sheet of paper.

E&E

ASSETS
Current Assets
Inve ntorie s (Note s 2) ₱450,000.00
Note s Re ce ivable s 45,000.00
Cash and Cash Equivale nts (Note s 1) 2,000,000.00
Accounts Re ce ivable s 500,000.00
Total Current Assets ₱2,995,000.00

Non-Current Assets
Intangible Asse ts ( Note 4 ) ₱700,000.00
Prope rty,Plant&Equipme nt (Note 3) 487,000.00
Inve stme nt Prope rty 2,000,000.00
Total Non-Curre nt Asse ts ₱3,187,000.00

Total Assets ₱6,182,000.00

LIABILITIES & OW NERS EQUITY

Current Liabilities
Inte re st Payable ₱20,000.00
Curre nt Portion of long-te rm de bt (Note 5) 95,000.00
Accounts Payable 300,000.00
Note s Payable 110,000.00
Income Tax Payable 99,000.00
Total Current Liabilities ₱624,000.00

Owners Equity
Dominic , Capital ₱5,063,000.00

Non-Current Liabilities
Long-te rm De bt (Note 5) ₱ 495,000.00

Total Liabilities and Owners' Equity ₱6,182,000.00

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 LET US PRACTICE MORE

I. Develop a Statement of Financial Position.Below are the accounts of Ethan’s

Trading as of December 31,2019.Answer the following questions and prepare the correct
pro-forma for Statement of Financial Position of Ethan’s Trading .Write your answer on a 12-
column worksheet.

Accounts Payable ₱100,000.00

Accounts Receivable ₱140,000.00
Cash ₱1,000,000.00
Ethan's Capital ₱1,840,000.00
Inventories ₱450,000.00
Long-term Debt ₱300,000.00
Notes Payable ₱100,000.00
Notes Receivable ₱100,000.00
Property and Equipment ₱550,000.00
Supplies ₱100,000.00

a. How much is the total current asset of the entity?

b. How much is the total non-current asset of the entity?
c. How much is the total current liability of the entity?
d. How much is the total non -current liability of the entity?
e. How much is the total asset of the entity?

II. Develop a Statement of Financial Position.Below are the accounts of Elijah’s

Trading as of December 31,2019.Answer the following questions and prepare the correct
pro-forma for Statement of Financial Position of Elijah’s Trading.Write your answer on a 12-
column worksheet.

Accounts Payable ₱400,000.00

Acccounts Receivable ₱280,000.00
Cash ₱2,000,000.00
Elijah's Capital ₱2,480,000.00
Inventories ₱900,000.00
Notes Payable ₱1,400,000.00
Property and Equipment ₱1,100,000.00

a. How much is the total current asset of the entity?

b. How much is the total non-current asset of the entity?
c. How much is the total current liability of the entity?
d. How much is the total non-current liability of the entity?
e. How much is the total asset of the entity?

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 EVALUATION

Choose the correct letter of an answer. Write your answer on a 12-column worksheet.

1. Which of the following is not a component of financial statements?

a. Statement of financial position
b. Statement of changes in equity
c. Board of Directors Report
d. Notes to Financial Statement
2. Which of the following is included in a complete set of finnacial statements?
a. A statement by the board of directors of compliance with local legislation.
b. A statement of changes in equity.
c. A statement of financial position for the last 5 years.
d. Value added statement .
3. The major financial statements are _______________, except.
a. Statement of finnacial position
b. Statement of changes in finnacial position
c. Statement of comprehensive income
d. Statement of changes in equity
4. The statement of financial position is useful for analyzing company’s,except.
a. Liquidity
b. Solvency
c. Profitability
d. Financial Flexibility
5. The statement of financial position provides the following informations,except.
a. Computing rate of return
b. Evaluating Capita Structure
c. Determining increase in cash due to operation
d. Assessing liquidity and financial flexibility

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 All Rights Reserved
2020

ACKNOWLEDGEMENT

CAROLINA S. VIOLETA, EdD

Schools Division Superintendent

JERRY D. CRUZ, PhD, CESE

Asst. Schools Division Superintendent

DOMINADOR M. CABRERA, PhD

Chief, Curriculum Implementation Division

EDWARD C. JIMENEZ, PhD

Education Program Supervisor- LR Manager

JOCELYN A. MANALAYSAY, PhD

Education Program Supervisor- Mathematics

CHARMAINE S. TUMANGAN
Developer- Meycauayan National High School

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