Statement of Financial

Position
Fundamentals of Accounting, Business, and Management 2
 Objectives
•identify the elements of the SFP and
describe each of them.
•prepare an SFP using the report form and
the account form with proper classification of
items as current and noncurrent.
Statement of Financial
Position
 Statement of Financial Position
•aka Balance Sheet
•Presents the financial position of an entity at
a given date
•Three main components: assets, liabilities,
and equity
 Statement of Financial Position
•The total assets of a business is equal to the
sum of equity and liabilities

ASSETS = LIABILITIES + EQUITY

 Purpose and Importance
•Help users to assess the financial health
or soundness of an entity
•Assists in identifying underlying trends in
the financial position of the entity
•Helpful in determining the state of the
entity’s liquidity risk, financial risk, credit risk
and business risk
 Purpose and Importance
•Help to identify relationships and trends
which are indicative to potential problems
or areas for further improvement.
•Assist the users to predict the amount,
timing and volatility of entity’s future
earnings.
 Elements of Statement of Financial
Position
•Assets – owns or control to derive economic
benefit
•Liabilities – obligation that a business owes
to someone
•Equity – business owes to its owners
 Classification of Elements of
Statement of Financial Position
1. Classification of Assets
A. Current Assets – Useful life of one year
or less; Expected to be converted into
cash within one fiscal year
 Classification of Elements of
Statement of Financial Position
Examples:
1. Cash
2. Accounts Receivable
3. Notes Receivable
4. Prepaid Expenses
5. Inventory
6. Supplies
 Classification of Elements of
Statement of Financial Position
1. Classification of Assets
B. Non-current Assets – Useful life of
longer than one year; long-term asset
that a company expects to hold over
one fiscal year; that cannot be readily
converted to cash within a year
 Classification of Elements of
Statement of Financial Position
Examples:
1. Fixed assets: equipment, vehicles,
machinery, computers
2. Intangible assets: goodwill, stock,
investments, patents, websites
 Classification of Elements of
Statement of Financial Position
2. Classification of Liabilities
A. Current Liabilities – debts that becomes
due within the year; Expected to be
settled within 12 months of the date on
the balance sheet
 Classification of Elements of
Statement of Financial Position
Examples:
1. Accounts Payable
2. Notes Payable (Short-Term)
3. Unearned Income
4. Wages Payable
5. Taxes Payable
6. Accrued Expenses
 Classification of Elements of
Statement of Financial Position
2. Classification of Liabilities
B. Non-current Liabilities – debts that
becomes due greater than one year in
the future; Not expected to be liquidated
within 12 months of the balance sheet
 Classification of Elements of
Statement of Financial Position
Examples:
1. Bonds Payable
2. Notes Payable (Long-Term)
3. Unearned Revenue
4. Long-term Bank Loans
5. Mortgage Payable
 Classification of Elements of
Statement of Financial Position
3. Categories of Equity
A. For Sole proprietorship – Owner’s
Equity (net of withdrawal)
B. For Partnership – Partners’ Equity (net
of partners’ withdrawal and share in net
income/loss)
 Classification of Elements of
Statement of Financial Position
3. Categories of Equity
C. For Corporation
a. Share Capital – amount invested by
owners
b. Retained Earnings – total net profit/loss
retained in the business after distribution
to the owners in the form of dividends
 Classification of Elements of
Statement of Financial Position
3. Categories of Equity
C. For Corporation
c. Revaluation Reserve – net surplus of any
upward revaluation of property, plant and
equipment recognized directly in equity
Statement of Financial Position of a
Single Proprietorship

Remember!
You need a trial balance to prepare a SFP.
 A. De Guzman
Trial Balance
As of December 31, 2022
Accounts Dr. Cr.
Cash P 215,000
Accounts Receivable 85,000
Prepaid Expenses 35,000
Delivery Equipment 450,000
Accumulated Depreciation (7,500)
Accounts Payable 55,000
Taxes Payable 12,000
Loans Payable (5 years to pay) 500,000
De Guzman’s Capital 210,500
777,500 777,500
 Forms of Statement of Financial
Position
1. Report Form
- Vertical format, one column
- Assets, Total Assets, Liabilities, Equity, Total
Liabilities and Equity
 Forms of Statement of Financial
Position
1. Report Form
- Vertical format, one column
- Assets, Total Assets, Liabilities, Equity, Total
Liabilities and Equity
 SBM Co.
Statement of Financial Position
As of December 31, 2022
Assets
Current Assets
xxxx xxxx
Total Current Assets
Non-current Assets
xxxx xxxx
Total Non-current Assets
TOTAL ASSETS xxxx

Liabilities
Current Liabilities
xxxx xxxx
Total Current Liabilities
Non-current Liabilities
xxxx xxxx
Total Non-current Liabilities
Total Liabilities xxxx

Equity
xxxx xxxx
Total Equity xxxx
TOTAL LIABILITIES AND EQUITY xxxx
 Forms of Statement of Financial
Position
2. Account Form
- Horizontal format, two column
- Column 1: Assets, Total Assets
- Column 2: Liabilities, Equity, Total Liabilities
and Equity
 SBM Co.
Statement of Financial Position
As of December 31, 2022
ASSETS LIABILITIES
Current Assets Current Liabilities
xxxx xxxx xxxx xxxx
Total Current Assets Total Current Liabilities
Non-current Assets Non-current Liabilities
xxxx xxxx xxxx xxxx
Total Non-current Assets Total Non-current Liabilities
TOTAL ASSETS xxxx Total Liabilities xxxx

EQUITY
xxxx xxxx
Total Equity xxxx
TOTAL LIABILITIES AND EQUITY xxxx
Statement of Financial
Position
Fundamentals of Accounting, Business, and Management 2