FUNDAMENTALS OF

ACCOUNTANCY, BUSINESS AND

MANAGEMENT 2
(GRADE 12)

(GRADE 11)

LEARNER’S PACKET (MELC #1& 2)

WEEK 1
Prepared by:

Ma. Aurora C. Alonzo

Trece Martires City Senior High School

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 FABM 2 LEARNER’S PACKET 1

What I need to know?

QUARTER 1: MELC #1 and 2
Demonstrate an understanding of an understanding of account titles under the
assets, liabilities, and capital accounts of the Statement of Financial Position,
Content Standards 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 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 (MELC’S)
1. Identify the elements of the SFP and describe each of them. No. of Days Teaching
2.Prepare an SFP using the report form and the account form with proper Dates
classification of items as current and noncurrent. 4
WRITE ANSWERS ON AN A4 BOND PAPER.

D What is it?

Statement of Financial Position and its Accounting Elements

According to Weygant, J. et. al., Accounting is the process of identifying, recording and communicating
economic events of an organization to the interested users. From this definition states that the objective of accounting
is to communicate financial information to the users through financial reports.
One of the basic financial report is the Statement of Financial Position which is also referred to as Balance
Sheet. STATEMENT OF FINANCIAL POSITION (SFP) is a financial report that shows the financial condition of a business
through its assets, liabilities and equity for a specific period.
Accounting Elements of a Statement of Financial Position
I. ASSET – are things owned by the business. It is classified into;
a. CURRENT ASSETS are assets expected to be realized, or is intended for sale or consumption, within the entity’s
normal operating cycle. It is arranged based on which can be realized first (liquidity). It is also called SHORT TERM
ASSETS. Liquidity refers to the ability to be easily converted to cash.
b. NONCURRENT ASSETS are assets that cannot or will not be sold, collected or used up one year after year end
date. In short, these assets are expected to be used during course of operation and has the ability to sustain long-
term.. Also called LONG TERM ASSETS.
These are example of things owned by the business categorized as current and non-current.
Account Title Description Classification
Cash Most liquid among all assets Current Asset
Prepaid Expense Expense paid but not yet used Current Assets
Merchandise Inventory Items to be sold to customers Current Assets
Accounts Receivable Asset arising from credit sales Current Assets
Notes Receivable Receivables that are supported by a Current Asset/Noncurrent
Promissory Note Asset
Property, Plant and Equipment Equipment, Furniture, Building, Land Noncurrent Asset
Long Term Investment Investment in stocks and bonds Noncurrent Asset
Intangible Assets Asset with no physical substance but Noncurrent Asset
isvaluable like patent, goodwill.

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 C. CONTRA ASSETS are accounts presented under the asset portion of the SFP but are reductions to the company’s
asset. An example of this is Accumulated Depreciation which represents cost allocated to the life of a noncurrent
assets like Machinery and Equipment whose value changes overtime due to usage. Another example is Allowance for
Doubtful accounts or bad debts which represents part of receivable account that cannot be collected. In the SFP, these
are presented under the Asset portion but are deducted to its main account, Property and Equipment for Accumulated
Depreciation and Accounts Receivable for Allowance for Doubtful Accounts.
II. LIABILITY is owed by the business. It represents present obligation of an enterprise arising from past
events, which are to be settled in cash or other transfer of assets in the settlement in the future. In short,
these are claims(deductions) against the assets (A – L = C). Liabilities are classified into;
A. CURRENT LIABILITIES are liabilities expected to be paid or recognized as revenue in the entity’s normal
operating cycle or within one year after the year-end date. It is also referred to as SHORT TERM LIABILITIES.
Current liabilities are upcoming liabilities within 12 months.
B. NONCURRENT LIABILITIES are liabilities that do not fall due within one year after year-end date. This is also
called LONG TERM LIABILITIES. These are expected to be settled after one year of operation or more.
Examples:
Account Title Description Classification
Accounts Payable Obligation due to supplier, etc. Current Liabilities
usually these represents
merchandise, raw materials,
supplies, and other purchases
made on account.
Notes Payable Obligation supported by a Current Liabilities/Noncurrent
Promissory Note Liabilities
Accrued Expense Expenses incurred but not yet Current Liabilities
paid such as Utilities expense
Taxes Payable Taxes due for the period Current Liabilities
Loans Payable Bank loans Noncurrent Liabilities
Mortgage Payable Loans with a pledge (house, car, Noncurrent Liabilities
lot)

III. CAPITAL or (EQUITY) is the residual interest of the owner in the assets of an enterprise after deducting all
liabilities. It contains owner’s contribution and can be increased by the income from operation or
decreased by the owner’s withdrawal and losses.
Examples:
Account Title Description Classification
Owner’s Capital Contribution of owner Capital
Owner’s Drawings Personal withdrawal of owner Capital (deduction)

Accounts in the Statement of Financial Position are called PERMANENT ACCOUNTS (REAL ACCOUNTS)
because balances of these accounts are retained at the end of the accounting cycle until its balance become ZERO.
This indicates that at the end of the accounting cycle (one year) account balances under the permanent accounts will
be transferred to the next accounting cycle as beginning balances.

ACCOUNTING CYCLE is the time between the acquisition or realization of a business transaction into cash or
cash equivalents assumed to be twelve (12) months. Sometimes referred to as accounting period or time period.

Format used to prepare a Statement of Financial Position Report Form and Account Form

A STATEMENT OF FINANCIAL POSITION (SFP) or BALANCE SHEET shows the financial condition of an entity through
its Assets, Liabilities and Capital. It’s being described as a snapshot of an organization since by looking at the report
you’ll have a bird’s eye view of the company’s financial status.

I. Accounting Elements of a Statement of Financial Position

(Keyword: SFP =ALC)

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 IV. ASSET are things owned by the business. It is classified into Current and Noncurrent Assets. Contra Assets
are presented in the Asset portion of the SFP but is deducted to the company’s asset account.
V. LIABILITY are owed (obligations) by the business. It is classified into CURRENT LIABILITIES and
NONCURRENT LIABILITIES.
VI. CAPITAL or (EQUITY) contains owner’s contribution and can be increased by the income from operation
or decreased by the owner’s withdrawal and losses.

Accounts under the Statement of Financial Position are called PERMANENT ACCOUNTS (REAL ACCOUNTS)
meaning balances under these accounts remain at the end of the year and transferred to the next accounting
period as beginning balances.

II. Format of presenting the Statement of Financial Position

a. REPORT FORM – shows asset accounts first and then liabilities and capital after. This resembles the format of
a Chart of Accounts.

b. ACCOUNT FORM – format that shows assets on the left side and liabilities and owner’s equity on the right
side just like the debit and credit balances of an account in the accounting equation.

III. Parts of a Statement of Financial Position

a. Heading:
Name of Company
Statement of Financial Position
As of __________
Note: “As of” is used to indicate that the amounts in the SFP are permanent and are cumulative from the
beginning the company was organized.
b. Assets:
Current Assets
Noncurrent Assets
Total Assets
c. Liabilities and Owner’s Equity
Liabilities
Current Liabilities
Noncurrent Liabilities
Total Liabilities
Owner’s Equity
AAA, Capital
Total Liabilities and Owner’s Equity
IV. Rule on single and double rule
a. Use single rule when there is addition or subtraction.
b. Use double rule in Total Assets and Total Liabilities and Equity
Sample illustration:
ACCOUNT FORM

REPORT FORM

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 What I have learned?
ACTIVITY 1.1: You were hired by Andres B. Mahusay to prepare his store’s Statement of Financial Position for
December 31, 2020. The following were the identified assets and liabilities of ABM Grocery.
a. Cash deposited in a bank account amounting to Ᵽ50,000.
b. Uncollected sales from customers amounting to Ᵽ 75,000.
c. The total amount of merchandise left inside the store is Ᵽ 30,000.
d. He already paid one year’s rent in advance amounting to Ᵽ 12,000.
e. The value of all the company’s furniture amounted to Ᵽ 100,000.
f. He bought merchandise from his supplier amounting to Ᵽ 25,000 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 Ᵽ 5,000.
h. The sari-sari store had outstanding liabilities to utility companies amounting to Ᵽ 3,000.
i. He had a loan from the bank amounting to Ᵽ 50,000 to be paid in 5 years.
Required:
A.) Prepare the Statement of Financial Position in Report Form. (10 points)
B.) Use the account titles provided below:
Cash; Accounts Receivable; Merchandise Inventory;Prepaid Rent; Furniture; Accounts Payable; Utilities
Payable, SSS, Philhealth and Pagibig Payable; Loans Payable; ABM Capital.
Activity 1.2. (10 points)
B.) Answer the questions below. Write your answers on a separate sheet. (CAPITAL LETTER only for B)
1. Total current assets of ABM Grocery amounted to
A. Ᵽ155,000 C. 167,000
B. 125,000 D. 267,000
2. Total current liabilities of ABM Grocery amounted to
A. 88,000 C. 25,000
B. 50,000 D. 33,000
3. Noncurrent liabilities amounted to
A. 55,000 C. 88,000
B. 75,000 D. 50,000
4. Total Liabilities and Owner’s Equity on December 31, 2020 were stated at
A. 179,000 C. 167,000

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 B. 267,000 D. 534,000
5. SSS, Philhealth and Pag-ibig Payables for his one employee was classified under
A. Current Assets C. Current Liabilities
B. Noncurrent Assets D. Noncurrent Liabilities
6. What was owed by the ABM Grocery are classified as
A. Assets C. Capital
B. Liabilities D. Net Income
7. Those items owned by ABM Grocery fall under the
A. Assets C. Capital
B. Liabilities D. Expenses
8. The Statement of Financial Position shows the ______ condition of an enterprise.
A. operating C. financial
B. investing D. financing
9. Cash, Accounts Receivable, Equipment, and Supplies are examples of
A. Current Assets C. Noncurrent Assets
B. Assets D. Capital
10. It shows how financial resources are being managed in an organization.
A. Statement of Financial Position C. Income Statement
B. Balance Sheet D. Financial Statement

ACTIVITY 1.3: THINK AND WRITE

Think and reflect on the activities that you did, then write your reflection and insights.
Reflection Questions: (15 points)
1. What have you realized as to the elements of the SFP and why is there a need to classify assets and liabilities
into current and noncurrent?
2. What areas of the activity do you consider difficult and easy to answer? Why?
3. Explain your most important learnings from the topic and how can you apply those in your daily life?
DIRECTION:
a. Limit your answers to FIVE (5) sentences for each question.
b. Share your own thoughts and reflections honestly.
c. Points will be deducted from answers searched through the internet.

Prepared: Checked: Noted:

MA. AURORA C. ALONZO MARICRIS G. PETELO LIBRADA A. VIDALLON

Subject Teacher ABM Subject Coordinator Curriculum and Instruction Coordinator

“Specific instructions are embedded in this packet, hence WHLP is not needed.”