GRADE

12
Fundamentals of Accountancy,
Business and Management 2
Quarter I (Week 1)
Module 1: Statement of Financial
Position

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Introduction

Good day! Grade 12 ABM students, welcome to the world of Accounting! This time I would like
to introduce to you the continuation of Fundamentals of Accountancy, Business and
Management 1.
Fundamentals of Accountancy, Business and Management 2 deals with the preparation of
financial statements of a service and merchandising business and analysis of financial ratios.
In these modules, you are about to learn how to prepare financial statements which serves as
the output of the financial accounting process. One of the components of the Financial
Statements is the Statement of Financial Position or also known as Balance Sheet.
So, let’s begin because you will surely meet a lot of learning experiences that will make you
appreciate accounting subject. Enjoy and have fun!

Diagnostic Pre-Test

Classify the following accounts as to Assets (A), Liabilities (L), Capital (C), Revenue (R ) and
Expenses (Ex).

__________1. Equipment _________11. Accrued expense

__________2. Accounts payable
__________3. Office Equipment
__________4. Cash
__________5. Careon, Capital
__________6. Salary Expense
__________7. Supplies Expense
__________8. Service income
__________9. Careon, Withdrawal
_________10. Rent Expense
_________12. Depreciation
_________13. Unearned Commission
_________14. Furniture and Fixtures
_________15. Concession income
_________16. Bad debts
_________17. Sales
_________18. Careon, Drawing
_________19. Prepaid rent
_________20. Mortgage payable

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 THE MODULAR PROGRAMS
LEARNING EPISODE 1
THE STATEMENT OF FINANCIAL POSITION
The statement of financial position shows what the business is worth in terms of the properties
it owns (i.e., the assets), the debt it owes (i.e., the liabilities), and the investment of its owner/s
(i.e., the capital/equity). This report informs the internal and external users of the financial
condition of the business at a given date, usually at the end of an accounting period.
TWO FORMS OF THE STATEMENT OF FINANCIAL POSITION
The Statement of Financial Position can be prepared in two forms, namely the account form and
report form as shown in illustration 1.

FORMS OF STATEMENT OF FINANCIAL POSITION

Account Report

Charlotte’s Designer and Tailoring Shop Charlotte’s Designer and Tailoring Shop
Statement of Financial Position Statement of Financial Position
December 31, 2015 December 31, 2015

Assets Liabilities Assets

Current Assets Current Liabilities Current Assets
Cash ₱168,500 Account payable ₱20,000 Cash ₱168,500
Accounts receivable 23, 000 Non-current Liabilities Accounts receivable 23,000
Sewing supplies 21, 250 Notes payable Sewing Supplies 21,250
(due in 2017) 80,000 Total current assets ₱212,750
________ Total Liabilities ₱100,000 Non-current assets
Non-current Assets ₱212,750 Owner’s Equity Property, Plant and Equipment 249,500
Property, Plant and Charlotte, Capital 362,250 Total Assets ₱462,250
Equipment 249,500 Total liabilities and
Total Assets ₱462,250 Owner’s Equity ₱462,250 Liabilities and Owner’s Equity

Current Liabilities
Accounts payable ₱ 20,000
Non-current Liabilities
Notes payable (due in2017) 80,000
Total Liabilities ₱100,000
Owner’s Equity
Charlotte, Capital 362,250
Total Liabilities and Capital ₱462,250

Figure 1 Forms of Statement of Financial Position

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 PARTS OF THE STATEMENT OF FINANCIAL POSITION

Statement Heading This includes the name of the business, what

kind of statement it is, and gives the date for
which the report is prepared.
Asset, Liability, and Owner’s equity Items are grouped and each group of items is
identified by special captions.
Account titles Individual account titles in each classification
are indented
Current Assets The individual current assets are usually listed
in order of their liquidity, with the most liquid
asset, cash appearing first.
Non-current assets The non-current assets are often listed in
order of their expected useful life with the
assets with the longest expected useful life,
land appearing first.
Current Liabilities The current liabilities are in theory listed in
order of due date, with the debt with the
earliest due date appearing first.
Non-current Liabilities Debts or obligations that will become due and
payable after one year from statement of
financial position date.
Caption Classification of each group of items appear
against the left margin of the statement.
Single rule line The last figure group of items is underlined.
Final total The two final totals appear as the last line in
their respective sections are underlined twice
(double ruled) to indicate final total.
Peso sign Peso signs are used (a) to the left of the final
amount of a group of amounts being
combined (b) to the left of each final total.

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 Statement heading

Peso sign

Caption

Single rule
line
Caption
cv
Final Total

Caption

Single rule
line
Caption

Final Total

Illustration 1.2 Parts of the Statement of Financial Position

One important feature of Statement of Financial Position relates to a very simple fact that any
business must show total assets exactly equal in amount to the sum of the liabilities and capital.
Assets= Liabilities + Capital

This relationship exists regardless of the size of the enterprise or the variety of its assets,
liabilities, and ownership interest. This identity is called the basic accounting equation.

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THE ELEMENTS OF THE STATEMENT OF FINANCIAL POSITION

Assets
This includes anything owned or possessed by the business which is capable of being expressed
in terms of money or possessing monetary value, and which, is available for the payment of the
debt of the business. In short, assets represent the resources of the business.

Liabilities
Economic obligations (i.e., debts) payable to an individual or an organization outside the
business

Owner’s Equity
This represents the claim of an owner of a business over the assets of the business after the
claims of the creditors have been satisfied.
Beginning Capital +/- Net income or net loss + Additional Investment – Withdrawals = Ending
Capital

Task

I. For each of the following independent cases, fill in the blank with the appropriate peso amount.

Assets= Liabilities+ Owner’s Equity

Case A ₱725,000 ₱135,000 ?
Case B ₱2,825,000 ? ₱1,950,000
Case C ? ₱5,320,000 ₱3,725,000
Case D ₱10,525,000 ₱6,001,000 ?
Case E ₱4,525,000 ? ₱2,150,000

II. Accounting Equation

Michelle Enterprise began the year with total Assets of ₱8,500,000 and total liabilities of
₱3,250,000. Using this information and the accounting equation, answer the following
independent questions.

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1. What was the amount of Michelle’s owner’s equity at the beginning of the year?

2. If Michelle’s total assets increased by ₱1,572,500 and its total liabilities increased by ₱977,000
during the year, what was the amount of Michelle’s owner’s equity at the end of the year?

3. If Michelle’s total liabilities increased by ₱353,000 and its owner’s equity decreased by
₱288,000 during the year, what was the total amount of its total assets at the end of the year?

LEARNING EPISODE 2

Current Assets
This includes cash and any other assets that are reasonably expected to be converted in to cash
or consumed during one year or one operating cycle, i.e., whichever is longer.

Non- current Assets (Plant , Property, and Equipment)

Assets are classified as plant, property, and equipment if they meet the following criteria:
1. they must have physical existence;
2. they must be more or less permanent in nature;
3. they must not be for sale;
4. they must be used in business operations; and
5. they must undergo depreciation, except land.

If assets can be sub-classified into current and non-current assets, liabilities are also
classified in the same manner. The following section discusses the different types of debts that
are classified as current and non- current liabilities.

Current Liabilities
Current liabilities are debts or obligations of a business that are expected to be liquidated by
the use of assets classified as current or by the creation of another current liability.
Non- current Liabilities or Long- term Liabilities
Long-term liabilities are debts or obligations that will become due and payable after one year
from Statement of Financial Position date.

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 EVALUATIVE POSTTEST
A. Direction: Using the accounting equation, answer each of the following independent
questions. Write your answer on the space after each question.
1. Argem Company starts the year with ₱1,000,000 in assets and ₱650,000 in liabilities. Net
income for the year is ₱250,000, and no withdrawal was made by the owner. How much is the
owner’s equity at the end of the year?

2. Miracle Company doubles the amount of its assets from beginning of the year. Liabilities at
the end of the year amount to ₱240,000 and owner’s equity is ₱520,000. What is the amount
of Miracle Company’s assets at the beginning of the year?

3. During the year, the liabilities of Serendipity Enterprises triple in amount. Assets at the
beginning of the year amount to ₱300,000 and owner’s equity is ₱100,000. What is the amount
of liabilities at the end of the year?

B. Directions: The following accounts came from the ledger of Green Company as of
December 31, 2019, end of the annual accounting period. Prepare the Statement of Financial
Position of Green Company. Present your answer in Account format and Report format.

Accounts receivable ₱ 55,000

Accrued consultancy expense ₱ 8,000
Accrued taxes and licenses 8,400
Accrued utilities 3,250
Accumulated depreciation-
Equipment 24,150
Accumulated depreciation- Furniture 22,150
Allowance for bad debts 1,200
Cash 95,722
Equipment 90,500
Furniture 110,750
G. Berde, Capital 341,327
G. Berde, Drawing 80,000
Loans payable (18 months) 33,660

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Miscellaneous expense payable 2,185
Prepaid interest 850
Prepaid taxes and licenses 2,750
Supplies on hand 28,750
Unearned professional fees 20,000
Total ₱ 464,322 ₱ 464,322

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 REFERENCES
A. Books:

D.S. Pasion-CPA, Ped.D..1981. Bookkeeping simplified. Magistrado Enterprises

Dr. Marivic Valenzuela- Manalo. 2016. Learning to Succeed in Business with Accounting. The
Phoenix Publishing House Inc. 927 Quezon Ave., Quezon City: Phoenix Publishing House

Acop, Barry, Cataneda, Cope, Dacayo, Dagdag, Dizon, Dupo, Idio, Marquez, Ocampo,
Ramos, Santos, Silva. 2006, Fundamentals of Accounting 1.

Dr. Maria Veronica Joy M. Binuya. 2016. Fundamentals of Accountancy, Business, and
Management (Book 2) . Unit 9005 Central Park Condominium 2 168 D. Jorge Street, Pasay
City, Philippines: JFS Publishing Service

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 ANSWER KEY
PRE- TEST
1. A 6. EX 11.L 16.EX
2. L 7. EX 12.EX 17. R
3.A 8.R 13.L 18.C
4.A 9.C 14. A 19.A
5.C 10. EX 15. R 20.L

TASK
I.
Case A ₱590,000
Case B ₱2,630,000
Case C ₱9,045,000
Case D ₱4,524,000
Case E ₱2,375,000

II.
1. 2.
Total assets ₱8,500,000 Total assets ₱10,072,500
Total liability (3,250,000) Total Liability (4,227,000)
Total Owner’s Equity ₱5,250,000 Total owner’s equity ₱ 5,845.500
3.
Total liability ₱3,603,000
Total owner’s equity 4,962,000
Total assets ₱8,565,000

POST TEST
A
1. Assets- Beg. ₱1,000,000 2. Liability- ending ₱240,000
Liabilities- Beg. 650,000 Owner’s equity- ending 520,000
Owner’s equity- Beg. ₱ 350,000 Assets- ending ₱760,000
Add: Net income 250,000 Divide by 2
Owner’s equity- Ending ₱ 600,000 Assets- beg ₱380,000

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3.
Assets- Beg. ₱300,000
Owner’s equity- Beg (100,000)
Liability- Beg ₱200,000
Multiply by 3
Liability- End ₱600,000

GREEN COMPANY
STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED DECEMBER 31, 2019

ASSETS LIABILITIES
CURRENT ASSETS CURRENT LIABILITIES
Cash 95,722.00 Unearned Professional fees 20,000.00
Accounts receivable 55,000.00 Miscellaneous expense payable -2,185.00
Allowance for bad debts -1,200.00 Accrued consultancy expense 8,000.00
Supplies on hand 28,750.00 Accrued taxes and licenses 8,400.00
Prepaid interest 850.00 Accrued Utilities 3,250.00
Taxes and Licenses 2,750.00 Total current assets 41,835.00
Total current assets 181,872.00
NON CURRENT LIABILITIES
NON CURRENT ASSETS Loan Payable 33,660.00
Equipment 90,500.00
Accumulated depreciation- Equipment -24,150.00 TOTAL LIABILITIES 75,495.00
Furniture 110,750.00
Accumulated depreciation- Furniture -22,150.00 OWNER'S EQUITY
Total non-current assets 154,950.00 G. Berde, Capital 341,327.00
G. Berde, Withdrawal -80,000.00
TOTAL ASSETS 336,822.00 TOTAL OWNER'S EQUITY 261,327.00

TOTAL LIABILITIES AND CAPITAL 336,822.00

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 GREEN COMPANY
STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED DECEMBER 31, 2019

ASSETS
CURRENT ASSETS
Cash 95,722.00
Accounts receivable 55,000.00
Allowance for bad debts -1,200.00
Supplies on hand 28,750.00
Prepaid interest 850.00
Taxes and Licenses 2,750.00
Total current assets 181,872.00

NON CURRENT ASSETS

Equipment 90,500.00
Accumulated depreciation- Equipment -24,150.00
Furniture 110,750.00
Accumulated depreciation- Furniture -22,150.00
Total non-current assets 154,950.00

TOTAL ASSETS 336,822.00

LIABILITIES
CURRENT LIABILITIES
Unearned Professional fees 20,000.00
Miscellaneous expense payable -2,185.00
Accrued consultancy expense 8,000.00
Accrued taxes and licenses 8,400.00
Accrued Utilities 3,250.00
Total current assets 41,835.00

NON CURRENT LIABILITIES

Loan Payable 33,660.00

TOTAL LIABILITIES 75,495.00

OWNER'S EQUITY
G. Berde, Capital 341,327.00
G. Berde, Withdrawal -80,000.00
TOTAL OWNER'S EQUITY 261,327.00

TOTAL LIABILITIES AND CAPITAL 336,822.00

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