FABM 2 NOTES

Financial Statement- use for communicating

- Product of accounting process

Statement of Financial Position -balance sheet

-permanent account

-shows the condition of the company

Statement of Comprehensive Income- nominal account

-result of its operation

Permanent Account -accounts are permanent in a sense that their balances remain intact from one
accounting period to another

-the accounts are retained permanently in the SFP until their balances become zero.

Proper order:

SFP SCF
SCI SC in Eq.
Year-end balance Cash
Net income
of equity accounts

Classification of SFP:

>> Current

>>Non-current

Current Assets:

1. Cash
2. Accounts Receivable
3. Inventory – in a manufacturing company, raw materials are the inventory
Consignment -not an inventory of a company
-Earning income from rent or commission (company)

4. Supplies – not an inventory

-once supplies were used, it considered as supplies expense

5. Prepaid Expense -advance payment

A/R Notes Payable

Have collectible
No formality amounts Promissory notes or
contract
Non-current Assets:

1. PPE (Property, Plants and Equipment)

2. Intangible Assets – patent, brand name, and trademark

Contra-Assets:

1. Allowance for Doubtful Accounts / Bad Debts

2. Accumulated Depreciation

Current Liabilities:

1. Accounts Payable -notes payable

2. Accrued expense – payment after you expense (e.g. utilities expense)

Meaning:
Credit Term:
2/10 -if you pay within 10 days, 2% discount
2/10, n/30
n/30- if you pay for 30 days, no discount

3. Unearned Income – once you receive the cash, consider it as revenue.

Non-current Liabilities:

1. Loans Payable
2. Mortgage Payable
3. Long-term liabilities

Owner’s Equity

1. Owner’s Investment
2. Net Income
3. Owner’s drawing