FUNDAMENTALS OF ACCOUNTANCY,

BUSINESS, AND MANAGEMENT 2

SH-AC2
Macaulay Quarter 1 & 2 Accountancy, Business and Management (ABM) 1
This subject focused on how to prepare the financial statements of service & merchandising businesses. It will also deal
with how to analyze and interpret the financial statements with the use of horizontal, vertical, and ratio analyses, that are
crucial in the critical decision-making among the users of financial information.

Moreover, it will introduce how to prepare some bank-related forms and documents, including bank transactions and a simple bank
reconciliation statement. Lastly, it will focus on the discussion and computations of income and business taxations, and preparation
of BIR related forms.

FABM2 Modules 1 and 2 are your instructional guides and learning materials for FABM2 class. These will guide you about our
subject description, goals, tasks, and pointing system.

These will clearly show you the DepEd SHS Curriculum-aligned Standards, Competencies, and Objectives (SCO's) that you have to
attain and demonstrate per Quarter. But to help you in carrying out the SCO's, both modules contain a series of Tasks with
additional References.

Module 1 will guide you throughout Quarter 1 about the preparation, analysis, and interpretation of Financial Statements. While on Quarter 2,
Module 2 will help you in studying the basics of Banking, which are the Bank accounts, transactions, documents, and reconciliation statements;
it will guide you as well on the basics of Income and Business Taxations.

With the FABM2 Modules we especially made for YOU, we hope you can discover, process, understand, and apply a lot of FABM2 lessons in
real life. With these modules, we hope you can develop and enhance your analytical, problem-solving, and basic accounting skills that you can
use in your future endeavors. Enjoy and use them well !!!

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 MODULE 1
Financial Statements Preparation, Analysis &
Interpretation

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 Statement of Financial Posi
(SFP)
This lesson will focus on the elements, format and preparation of
Statement of Financial Position (SFP)

Content Standards:
The learners demonstrate an understanding of account titles under the assets, liabilities, and capital accounts of the Statement of Financial
Position, namely, cash, receivables, inventories, prepaid expenses, property, plant and equipment, payables, accrued expenses, unearned
income, long-term liabilities and capital that will equip him/her in the preparation of the SFP using the report form and account form.

Performance Standards
The learners are able to solve exercises and problems that require preparation of an SFP for a single proprietorship with proper classification
of accounts as current and noncurrent using the report form and the account form.

Most Essential Learning Competencies

1. Identify the elements of the SFP and describe each of them
2. Prepare an SFP using the report form and the account form with proper classification of items as current and noncurrent

Learning Objectives
1. Prepare a Statement of Financial Position using the account form and report form
2. Solve accurately the problems involving Statement of Financial Position

Topics
1. Introduction to Statement of Financial Position
2. Elements of Statement of Financial Position
3. Formats of Statement of Financial Position

Rubrics

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 To assess your Task answers, we will use this rubric:
Indicator Points
The student/s gave complete answers/solutions. All of the answers/solutions are correct. 10
The student/s gave complete answers/solutions. Almost all of the answers/solutions are correct. 8
The student/s gave complete answers/solutions. Some of the answers/solutions are correct. 6
The student/s gave incomplete answers/solutions. Few of the answers/solutions are correct. 4
The student/s gave incomplete answers/solutions. None of the answers/solutions are correct. 2

To assess your Task performance or output, we will use this rubric:

Indicator Points
The performance/product shows outstanding quality, organization, clarity, accuracy, and creativity. 10
The performance/product shows superior quality, organization, clarity, accuracy, and creativity. 8
The performance/product shows high quality, organization, clarity, accuracy, and creativity. 6
The performance/product shows good quality, organization, clarity, accuracy, and creativity. 4
The performance/product shows low quality, organization, clarity, accuracy, and creativity. 2

Other Instructions
• To validate your answers on Pre-test and Post-test, visit Appendix “A”. You are not required to submit your Pre-test and Post-test
answers.
• Assessments/Tasks from Phase 2 to 4 are all formative assessments.
• You are required to submit your outputs/answers from Phase 2 to 4 and Summative test answers on or before
_______________________.
• In submitting your Task outputs and Summative Test answers, you can choose between these two options:
o Option 1 (Offline submission): Your representative (parent/guardian/adult caregiver) may submit in person your answers/outputs.
You may also send your outputs/answers thru courier. Address the mail to BED Business Office.
o Option 2 (Online submission): Upload the soft copy of your output/answers in Classroom under the course FABM2: Fundamentals
of Accountancy, Business, and Management 2.
• Upon checking of your output/answers, you will receive a notification via SMS and GMail containing the following:
o validation of your answers
o evaluation for your Task outputs/performances

Phase 1 (Pre-test)
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This short test will assess your prior knowledge about the Statement of Financial Position.
Direction: Please encircle the letter of the best answer for each item. HPS=10 Points.

1. What are the elements of the accounting equation?

a. Asset, Capital, and Liability
b. Asset, Drawing, and Liability
c. Asset, Equity, and Liability
d. Asset, Expense, and Liability
2. It is the measure of the ability of an individual or company to meet their short-term financial obligations.
a. Efficiency
b. Leverage
c. Liquidity
d. Profitability
3. Goodwill, brand recognition and intellectual property, such as patents, trademarks, and copyrights, are all _________________.
a. Accrued assets
b. Current assets
c. Operating assets
d. Tangible assets
4. Which of the following is not a contra-asset account?
a. Accumulated depletion
b. Accumulated depreciation
c. Allowance for obsolete inventories
d. Allowance for returned goods
5. The _________________ form of SFP lists assets on one side and liabilities and owners' equity on the other side.
a. Account
b. Multi-step
c. Report
d. Single-step
6. These are general ledger accounts that are not closed at the end of each accounting year.
a. Current accounts
b. Doubtful accounts
c. Nominal accounts
d. Real accounts
7. Which of the following is not an example of Permanent Account?
a. Cash
b. Inventory
c. Payable
d. Sales

8. This statement includes the amounts of the company’s total assets, liabilities, and owner’s equity.
a. Statement of Cash Flow
b. Statement of Changes in Equity
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 c. Statement of Financial Position
d. Statement of Profit or Loss
9. Which of the following assets can’t be realized one year after year-end date?
a. Accounts Receivable
b. Copyright
c. Merchandise Inventory
d. Prepaid Expense
10. A form of the SFP that shows asset accounts first and then liabilities and owner’s equity accounts after.
a. Account
b. Multi-step
c. Report
d. Single-step

Phase 2 (Priming)
This part will introduce the elements, formats and samples of SFP.

TASK 1
a. Get 1 whole pad paper
b. Write your current savings and everything that you own (clothes, pen, pencil, etc.)
c. Write the amount that you owe to your friends, family members, parents (tuition)
d. Deduct the amount you owe from the amount you own
e. From the task, answer the following:
• How will you associate the amount you owned with assets and the amount you owed with liabilities with the net amount as equity?
• What are the differences between assets and liabilities?
• Can you say that having more assets means that a business is earning? Explain your answer.

Now, let’s proceed to the INTRODUCTION TO STATEMENT OF FINANCIAL POSITION

 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. They are called
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

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 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.
 Sample SFP:
LEARNING IS FUN COMPANY
STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 2016

Assets
Current Assets
Cash Php 100,000.00
Accounts Receivable Php 500,000.00

Less: Allowance for Doubtful Accounts (50,000.00) 450,000

Accrued Income 300,000
The use of “as
Inventory 200,00 of” in SFP
Prepaid Expenses 50,000 Heading
signifies that the
Total Current Assets Php 1,100,000.00 amounts in the
Noncurrent Assets SFP are
permanent,
Long Term Investments Php 1,250,000.00
meaning, the
Intangible Assets 500,000.00 amounts are
Property, Plant and Equipment cumulative from
the beginning of
Cost Php 1,000,000.00
the life of the
company
Less: Accumulated Depreciation (300,000.00) 700,000.00
Total Noncurrent Assets Php 1,450,000.00
Total Assets Php 3,550,000.00

Liabilities and Owner’s Equity

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 Current Liabilities

Accounts Payable Current assets

.
Php 250,000.00
and current
Accrued Expenses 100,000.00 liabilities are
also called short
Unearned Income 80,000.00 term assets and
short term
Notes Payable 150,000.00 liabilities. On the
other hand,
Total Current Liabilities 1,500,000.00 noncurrent
assets and
580,000.00 noncurrent
liabilities are
Noncurrent Liabilities
also called long
term assets and
Mortgage Payable Php 500,000.00
long term
Loans Payable 1,000,000.00 Current assets
show the
Total Noncurrent Liabilities . Php 1,500,000.00 company’s
ability to sustain
Total Liabilities Php 3,080,000.00
its current
Owner’s Equity . 470,000.00 operations while
noncurrent
Total Liabilities and Owner’s Equity .
Php 3,550,000.00 assets show the
company’s
ability to sustain
WHAT ARE THE ELEMENTS OF STATEMENT OF FINANCIAL POSITION? long-term
operations.

ACCOUNTS

 ASSETS

 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.
 PAS 1, paragraph 54 provides that as a minimum, the line items under current assets are:
 Cash and cash equivalents
 Financial assets at fair value such as trading securities and other investments in quoted equity instruments
 Trade and other receivables
 Inventories and Prepaid assets
 Noncurrent Assets – Assets that cannot be realized (collected, sold, used up) one year after year- end date. Examples include
Property, Plant and Equipment (equipment, furniture, building, land), Long Term investments, Intangible Assets etc.

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  PAS 1, paragraph 66, simply states that an entity shall classify all other assets not classified as current as noncurrent.
 Property, plant and equipment
 Long-term investments
 Intangible assets
 Other noncurrent asset

 Contra-Valuation Accounts – normal credit balance

 Allowance for impairment loss – refers to an amount estimated uncollectible on receivable in compliance with conservatism.
 Accumulated depreciation – the aggregate periodic costs of using a depreciable plant asset.

 LIABILITIES

 Current Liabilities – Liabilities that fall due (paid, recognized as revenue) within one year after year- end date. Examples include
Notes Payable, Accounts Payable, Accrued Expenses (example: Utilities Payable), Unearned Income, etc.

 PAS 1 Presentation of Financial Statements provides that an entity shall classify a liability as current when:
 Settlement is within the normal operating cycle
 It holds the liability primarily for the purpose of trading
 It is due to be settled within twelve months after the reporting period; or
 The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the
reporting period

An entity shall classify all other liabilities as noncurrent.

Current liabilities
are upcoming
 Noncurrent Liabilities – Liabilities that do not fall due (paid, recognized as revenue) within one year after year-end liabilities and the
date. Examples include Loans Payable, Mortgage Payable, etc. company should
be prepared to
pay them.
 CAPITAL (OWNER’S EQUITY)
Companies
BASIC PARTS
should prepare
as early as
 HEADING today for
payment of
 Name of the Company
noncurrent
 Name of the Statement liabilities as
 Date of preparation these usually
have large
 LINE ITEMS – caption used to describe a group of accounts with similar nature.

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 Assets

 Cash

Cash (on hand and in banks) xxx

Cash equivalents xxx
Cash and cash equivalents xxx

 Trade and Other Receivables

Accounts receivable xxx

Allowance for impairment loss (xxx)
Notes receivable xxx How Do We
Advances to suppliers xxx Present the
Trade and other receivables xxx Accounts in
Statement of
Financial
Position?
 Prepaid Assets 1. Classified –
current/non-
Prepaid supplies xxx current
Prepaid rent xxx distinction
Prepaid insurance xxx 2. Unclassified
Prepaid assets xxx – based on
liquidity.
Liquidity

 Plant, Property and Equipment

Land xxx
Building xxx
Accumulated depreciation – Bldg. (xxx)
Equipment xxx
Accumulated depreciation – Bldg. (xxx)
Property, plant and equipment xxx

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  Liabilities

Accounts payable xxx

Notes payable xxx
Interest payable xxx
Salaries payable xxx
Utilities payable xxx
Unearned income xxx
Trade and other payables xxx

WHAT ARE THE FORMATS OF STATEMENT OF FINANCIAL POSITION?

 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.

 ACCOUNT FORM – A form of the SFP that shows assets on the left side and liabilities and owner’s equity on the right side The two are only

just like the debit and credit balances of an account. (Haddock, Price, & Farina, 2012) formats and will yield
the same amount of
total assets, liabilities
and equity. The assets
should always be equal
to liabilities and equity.

Report Form SFP

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 Only assets and
liabilities are classified
as current and
noncurrent. There is no
Report
such form is the for
classification
normal format for those
equity.
not familiar with
accounting. Account
form easily shows that
the SFP is balanced and
separates assets from
liabilities and equities

Account Form SFP

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 Phase 3 (Processing)
This part will help you to familiarize more yourself on the computations involving the elements of Statement of Financial Position.

TASK 2

From what you read, answer the following questions on 1 yelllow pad. Justify each answer.

a. 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?
b. 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?
c. 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.
d. 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?
e. 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?

Phase 4 (Understanding/Applying)
This part will help you to apply in real-life your knowledge and skills about Statement of Financial Position.

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DID YOU KNOW A COMPANY CAN HAVE A LOT OF ASSETS BUT STILL HAVE VERY LOW EQUITY? HOW COME?

 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.
 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.

TASK 3

Prepare a Statement of Financial Position using the following the account form. Write your SFP on Yelllow pad or Short Bond Paper.

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

Note: You can use any business name and the end of the current year for the heading.

TASK 4

Now, prepare a Statement of Financial Position using the report form. Write your SFP on Yelllow pad or Short Bond Paper.

Cash – 5,000
Loans Payable – 77,500
Accounts Receivable – 2,600

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 Supplies – 2,300
Equipment – 17,000
Owner’s equity – 40,000
Accounts Payable – 22,400
Building – 113,000

Note: You can use any business name and the end of the current year for the heading.

TASK 5

Prepare a Statement of Financial Position for the company below using report form with the use of spreadsheet program.

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 uncollected 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

Phase 5 (Post-test)
This short test will assess your knowledge about the Statement of Financial Position.
Direction: Please encircle the letter of the best answer for each item. HPS=10 Points.

1. What are the key elements of the Statement of Financial Position?

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 a. Asset, Capital, and Liability
b. Asset, Drawing, and Liability
c. Asset, Equity, and Liability
d. Asset, Expense, and Liability

2. Which of the following is not a contra-asset account?

a. Accumulated depletion
b. Accumulated depreciation
c. Allowance for obsolete inventories
d. Allowance for returned goods

3. What form of SFP lists all assets in vertical form and emphasizes the working capital position of the company?
a. Account form
b. Financial position form
c. Report form
d. Multi-step form

4. In making SFP, the reporting sequence is usually in order by ________________.

a. Efficiency
b. Leverage
c. Liquidity
d. Profitability

5. PAS 1, paragraph 54 provides that as a minimum, the line items under current assets are the following, except ________________.
a. Cash and cash equivalents
b. Plant, property and equipment
c. Prepaid assets
d. Trade and other receivables

6. If the amount of current and non-current liabilities in an SFP are Php 120,000 and 160,000, respectively, what should be the amount of Equity in SFP given
that the computed Total Assets is Php 450,000.00?
a. Php 170,000.00
b. Php 280,000.00
c. Php 290,000.00
d. Php 330,000.00

7. This statement includes the amounts of the company’s total assets, liabilities, and owner’s equity.
a. Statement of Cash Flow
b. Statement of Changes in Equity
c. Statement of Financial Position
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 d. Statement of Profit or Loss

8. Which of the following assets can’t be realized one year after year-end date?
a. Accounts Receivable
b. Merchandise Inventory
c. Patent
d. Prepaid Expense

9. Goodwill, brand recognition and intellectual property, such as patents, trademarks, and copyrights, are all _________________.
a. Accrued assets
b. Current assets
c. Operating assets
d. Tangible assets

10. Which of the following is not an example of Permanent Account?

a. Cash
b. Payable
c. Receivable
d. Sales

Reference

Acierto, M., & Abarquez, B. (2018). Fundamentals of Accountancy, Business, and Management 2. Manila, Philippines: Unlimited Books Library
Services & Publishing, Inc.

Commission on Higher Education (2016). Teaching Guide for Senior High School: Fundamentals of accountancy, business, and management 1,
specialized subject, academic – ABM. Quezon City: Author.

De Guzman, A. (2018). Fundamentals of Accountancy, Business & Management 2. Quezon City, Philippines: Lorimar Publishing, Inc.

Ferrer, R., & Millan, Z. (2019). Fundamentals of Accountancy, Business and Management Part 2 (3rd ed). Bulacan, Philippines: AKI Book Store.

Haddock, M., Price, J., & Farina, M. (2012). College Accounting: A Contemporary Approach (2nd ed). New York: McGraw-Hill/Irwin.

Palencia, F., Cabuñag, C., & Cabuñag, H. (2017). Fundamentals of Accountancy, Business, and Management 2. Manila, Philippines: Fastbooks
Educational Supply, Inc.

Santos, J. (2018). Statement of Financial Position [PowerPoint slides]. Lecture conducted from Manuel S. Enverga University, Lucena, Philippines.
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Timbang, F. (2018). Fundamentals of Accountancy, Business, and Management Part 2 TRAIN Law Updated. Manila, Philippines: Unlimited Books
Library Services & Publishing, Inc.

Valencia, E. G., & Roxas, G. F. (2010). Basic Accounting (3rd ed.). Mandaluyong City, Philippines: Valencia Educational Supply.

https://www.youtube.com/watch?v=_HK5gpg39pY

https://www.youtube.com/watch?v=r_t3zjRx4cU

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