Module 2 Accounting

Grade 12 – Fundamentals of Accountancy, Business, and Management 2 08/24/2020
Module 1
Statement of Financial Position
What this module is all about
This module is about the Statement of Financial Position.
In your Grade 11 Fundamentals of ABM 1, you learned about the basic accounts.
This year, we will start our study on one of the basic financial reports which uses these accounts with
these two lessons in this module.
Lesson 1 Identify the elements of the SFP and describe each of them
Lesson 2 Prepare an SFP using the report form and the account form with proper
classification of items as current and noncurrent
What you are expected to learn
After working on this module, the student is expected to:
a. 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.
b. Solve exercises and problems that require preparation of an SFP for a single/sole proprietorship with
proper classification of accounts as current and noncurrent using the report form and the account form.
How to learn from this module
This is your guide for the proper use of the module:
1. Read the items in the module carefully.

2. Follow the directions as you read the materials.
1
3. Answer all the questions that you encounter. As you go through the module, you will find help to
answer these questions. Sometimes, the answers are found at the end of the module for immediate
feedback.
4. To be successful in undertaking this module, you must be patient and industrious in doing the
suggested tasks.
5. Take your time to study and learn. Happy learning!
The following flowchart serves as your quick guide in using this module.
Start
Take the Pretest
Check your paper and count

your correct answers.
Is your score Yes Scan the items you

80% or missed.
above?
No
Study this module Submit answers to

“Assessment” and “What you
will do” portions on 1 whole
piece of paper the following
week together with any
Take the Posttest
question /clarification on any
of the topic/s in the previous
module written at the back of
the answer sheet.
2
Review
Before you take the pretest, answer the following Review.
Can you still remember what you learned from your Fundamentals of Accountancy, Business and Management
1? Let’s find out by answering this pretest.
Multiple Choice. Choose the letter of the correct answer and write your answer on the space provided.
1. The Accounting Equation.

a. Assets = Liabilities + Capital b. Liabilities = Assets + Capital
b. Capital = Assets + Liabilities d. Assets = Liabilities – Capital
2. These are known as the Assets of a company.
a. are the resources owned and controlled by the firm
b. are obligations of the firm arising from past events which are to be settled in the future
c. are the owner’s claims in the business
3. These are the Liabilities of a company.
4. The Capital of the company.
5. Cash and Accounts Receivables are examples of
a. Assets b. Liabilities c. Capital
6. Accounts Payable and Loans Payable are examples of
a. Assets b. Liabilities c. Capital
7. Equity is a/an
a. Asset b. Liability c. Capital
8. _____ refer to future expenses that the company had paid for in advance. It is placed
in this account until the services or items are used and become expenses.
a. Unearned Income b. Prepaid Expenses
c. Accrued Expenses d. Accounts Payable
9. _____ refers to the unpaid expenses of the company as of the cut-off date such as
Salaries Payable, Utilities Payables, Rent Payable, and Interest Payable.
10. These are customer deposits or down payments received before the delivery of
goods or services. These will not count as sales until deliveries are made.
11. A Single/sole proprietorship is a business with _____
a. one owner b. two owners c. many owners
12. It is important to know the normal balance of each account because an account is
increased by an entry on the side of its normal balance and is decreased by an
entry on the opposite side of its normal balance. True or False?
13. Which of the following statements is TRUE?
a. Asset accounts increase on the CREDIT side.
3
b. Liability accounts increase on the DEBIT side.

c. Capital accounts increase on the DEBIT side.
d. Expenses increase on the DEBIT side.
14. Which of the following statements is FALSE?
a. Asset accounts increase on the DEBIT side.
b. Liability accounts increase on the CREDIT side.
c. Capital accounts increase on the CREDIT side.
d. Expenses increase on the CREDIT side.
15. Which transaction is recorded as a DEBIT to the Cash account?
a. Cash sale of a product or service
b. Sale on account of a product or service
c. Payment of accounts payable
d. Purchase of a product or service on cash
16. Which transaction is recorded as a CREDIT to the Cash account?
a. Cash sale of a product or service
b. Sale on account of a product or service
c. Collection of Accounts Receivable
d. Cash purchase of a product or service
17. The following accounts have Debit as their normal balances.
a. Cash, Expenses b. Accounts Payable, Notes Payable
c. Capital c. Accumulated Depreciation-Building
18. The following accounts have Credit normal balances.
a. Accounts Receivables b. Land
c. Building d. Stockholders’ Equity
19. The following statements are true EXCEPT one. Which one is incorrect?
a. Assets are increased when debited while liabilities and equity are increased
when credited.
b. Assets are decreased when debited while liabilities and equity are decreased
when credited.
c. Assets are decreased when credited while liabilities and equity are increased
when credited.
d. Assets are increased when debited while liabilities and equity are decreased
when debited.
20. Complete the accounting cycle with the correct word.
a. posting b. journalizing c. recording d. balancing
What to do before (Pretest)
Before you use this module, take the following Pretest.

MODIFIED MATCHING TYPE
1. Identify the element of the SFP that matches with the account on the table below. Write the account under the
column of the element of SFP to which it belongs.
Long-term payable Accounts payable Notes receivable
Notes payable Cash Prepaid expense
Property, plant, and equipment Owner’s capital Accrued expenses
Accounts receivable Unearned income
Asset Liability Answer

EquityKey on page 19
________________ ________________ ________________
________________ ________________
4
________________ ________________
________________ ________________
________________ ________________
2. Use the accounts in the table above to prepare a pro forma SFP using the report format. Just fill in the missing
accounts.
What you will do
1. Prepare a Personal SFP:
On the space provided below, write the following:
a. Your current savings and everything that you own (clothes, pen, pencil, etc.)
_____________________________________________________
c. The amount that you owe your friends, family members, parents (tuition)
_____________________________________________________
d. Deduct the amount you owe from the amount you own.
_____________________________________________________
e. Associate the amounts you own with assets and the amount you owe with liabilities. How much is your
assets? How about your Liabilities?
Assets: _______________ Liabilities: ________________
f. How do you get the net amount of something? Do you add or subtract? _______
g. How much is the net amount between Assets and Liabilities?

Assets – Liabilities = ______________
Answer Key on page 19
h. There might be some cases that the result of your computation is zero or even
negative. When will the net amount become negative? The net amount becomes negative when
______________ is larger than the _______________.
This means that your ______________ to your friends, relatives and/or parents are
higher than your ________________.
i. Companies usually have assets that are bigger than their liabilities and that some persons have bigger
liabilities than assets. Do you agree to this? _____.
i. In the Accounting Equation, does having more assets always mean that the business is earning? (Yes or No)
______
j. Associate the net amount with capital or equity. How much is your Equity? ________
5
Exploration
1. Let’s define the term Statement of Financial Position and the terms Permanent
Accounts and Contra Asset Accounts.
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 accounts 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 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.
Deprecation refers to the
2. Current Assets, Noncurrent Assets, Current Liabilities, Noncurrent Liabilities and

Owner’s Equity
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.
 Current Assets are arranged based on which asset can be realized first (liquidity). Current assets are
also called short-term assets.
Noncurrent Assets – Assets that cannot be realized (collected, sold, used up) one year after yearend date.
 Examples include Property, Plant and Equipment (equipment, furniture, building, land), Long Term
investments,Intangible Assets etc.
 Noncurrent assets are also called long term assets.
Current Liabilities – Liabilities that fall due (paid, recognized as revenue) within one year after yearend date.
 Examples include Notes Payable, Accounts Payable, Accrued Expenses (example: Utilities Payable),
Unearned Income, etc.
 Current liabilities are also called short-term liabilities.
6
Noncurrent Liabilities – Liabilities that do not fall due (paid, recognized as revenue) within one year after year-
end date.
 Examples include Loans Payable, Mortgage Payable, etc.
 Noncurrent liabilities are also called long term liabilities.
3. Difference of the Statement of Financial Position of a Service Company and of a

Merchandising Company
The main difference of the Statements of the two types of business lies on the inventory account.
 A service company has supplies inventory classified under the current assets of the company.
 While a merchandising company also has supplies inventory classified under the current assets of the
company, the business has another inventory account under its current assets which is the
Merchandise Inventory, Ending.
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4. A sample SFP is given below.

a. In Report Form
Heading
Current Assets
Noncurrent Assets
Current Liabilities
Noncurrent
Liabilities
Equity
b. The same SFP in Account Form

8
a. Heading
i. Name of the Company
ii. Name of the Statement
iii. Date of preparation (emphasis on the wording – “as of”)
The use of “as of”

The amounts in the SFP are permanent meaning that the amounts are cumulative from the beginning of the life of the
company.
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)
- is a simple list where all the assets are listed first, followed by liabilities and finally the equity account.
Account Form – A form of the SFP 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. (Haddock, Price, & Farina, 2012)
- this mimics the general ledger T-account format.
Remember:
a. The two are only formats and will yield the same amount of total assets, liabilities and equity.
b. Assets should always be equal to liabilities and equity.
9
5. A Pro Forma SFP in Account Form
Assets Liabilities and Equity

Cash xxx Accounts Payable xxx
Accounts Receivable xxx Accrued Expenses xxx
Inventory xxx Unearned Income xxx
Prepaid Expenses xxx Notes Payable xxx
Notes Receivable xxx Long-term Payables xxx
Property, Plant, and Equipment xxx
Intangible Assets xxx Owner, Capital xxx
Total Assets xxx Total Liabilities and Capital xxx
6. A Pro Forma SFP in Report Form
Assets
Cash xxx
Accounts Receivable xxx
Inventory xxx
Prepaid Expenses xxx
Notes Receivables xxx
Intangible Assets xxx
Total Assets xxx
Liabilities and Equity
Accounts Payable xxx

Accrued Expenses xxx
Unearned Income xxx
Notes Payable xxx
Long-term Payables xxx
Total Liabilities xxx
Owner, Capital xxx
Total Liabilities and Equity xxx
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7. CLASSIFIED SFP
Assets
Cash xxx
Accounts Receivable xxx
Inventory xxx
Prepaid Expenses xxx
Notes Receivables xxx
Total Current Assets xxx
Intangible Assets xxx
Total non-current Assets xxx
Total Assets xxx
Liabilities and Equity
Accounts Payable xxx

Accrued Expenses xxx
Unearned Income xxx
Notes Payable xxx
Current Portion of Long-term Debt xxx
Total Current Liabilities xxx
Long-term Payables xxx
Total Liabilities xxx

Owner, Capital xxx
Total Liabilities and Equity xxx
Think of These
1. Can a company have a lot of assets but still have very low equity?
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.
2. Without the SFP, the company cannot know if it truly owns anything because in case
of bankruptcy, liabilities are paid first.
11
- 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.
3. The importance of the format:
i. Report form vs Account form – these are just formats. Usually depends on the reader for preference.
ii. Report form is the normal format for those not familiar with accounting.
Account form easily shows that the SFP is balanced and separates assets from liabilities and equities.
iii. Separation of the current and noncurrent –

Current liabilities are upcoming liabilities and the company should be prepared to pay them. Companies should prepare as
early as today for payment of noncurrent liabilities as these usually have large balances.
Current assets shows the company’s ability to sustain its current operations while noncurrent assets shows the company’s
ability to sustain long-term operations.
Let’s Practice
1. 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? _____________
2. 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 Accrued
Expenses totaled to Php 20,000 and Php 10,000 respectively.
How much is the company’s current assets? _____________. Current liabilities? _____________.
3. 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 only Cash, Inventory and Accounts Receivable as its assets, how much is the Accounts
Receivable? _____________.
4. Prepare a Statement of Financial Position using the following accounts in report form.
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
Learners can use any business name and the
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end of the current year for the heading.

Suggested Answer:
(Topic: Preparation of the statement)
Self-check 1
1. If assets are Php17,000 and owner's equity is Php10,000, liabilities are ___________________.
(Topic: Assets = Liabilities + Owner’s Equity)
2. At the end of the first month of operations for Juana’s Delivery Service, the business had the
following accounts: Accounts Receivable, Php1,200; Prepaid Insurance, Php500; Equipment,
Php36,200 and Cash, Php40,650. On the same date, Juana owed the following creditors: Nena’s
Supply Company, Php12,000; Maria’s Equipment, Php9,500. Answer Key on page 21
The noncurrent assets are Php36,200 and the current assets for the Juana’s Delivery Service are _________.
(Topic: Identifying current assets)
3. At the end of the first month of operations for Juana’s Delivery Service, the business had the
following accounts: Accounts Receivable, Php1,200; Prepaid Insurance, Php500; Equipment,
Php36,200 and Cash, Php40,650. On the same date, Juana owed the following creditors: Nena’s
Supply Company, Php12,000 (due in 6 months); Maria’s Equipment, Php9,500 (due after 2
years).
Noncurrent liabilities are Php9,500 and Current liabilities are _________.
(Topic: Identifying current liabilities)
4. Prepare a Statement of Financial Position using the following accounts in Account Form.
Cash 5,000
Supplies 2,300
Equipment 17,000
Building 113,000
Learners can use any business name and the end of the current year for the heading.
Suggested Answer: (Topic: Preparation of the statement)
13
Self-check 2
1. 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? _____________ Answer Key on page 21
2. 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. _____________
3. Happy Selling’s Accounts Receivable amounted to Php 400,000. Prepaid Expense and Unearned Income totaled Php
20,000 and Php 10,000 respectively. Cash balance amounted to Php 200,000 while Accounts Payable and Accrued
Expenses totaled to Php 30,000 and Php 20,000 respectively.
How much is the company’s current assets? _____________. Current liabilities? _____________.
4. Prepare a Statement of Financial Position using the following accounts (in report form):
Cash 15,000
Supplies 2,300
Equipment 27,000
Building 123,000
Learners can use any business name and the end of the current year for the heading.
Suggested Answer: (Topic: Preparation of the statement)
Assessment
MODIFIED MATCHING TYPE
3. Identify the element of the SFP that matches with the account on the table below. Write the account under the
column of the element of SFP to which it belongs. Answer Key on page 22
14
Long-term payable Accounts payable Notes receivable

Notes payable Cash Prepaid expense
Property, plant, and equipment Owner’s capital Accrued expenses
Accounts receivable Unearned income
Asset Liability Equity

________________ ________________ ________________
________________ ________________
________________ ________________
________________ ________________
________________ ________________
4. Use the accounts in the table above to prepare a pro forma SFP using the report format. Just fill in the missing
accounts.
15
Enrichment
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
Prepare a Statement of Financial Position for the company in Account Form.
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Answer Key
Review What to do before (Pretest)

1. a.
Asset Liability Equity
2. a. Cash Accounts payable Owner’s capital
3. b. Accounts receivable Accrued expenses
Notes receivable Unearned income
4. c. Prepaid expense Notes payable
5. a. Property, plant, and Long-term payable
equipment
6. b.
7. c.
8. b.
9. c.
10. a.
11. a.
12. True
13. d.
14. d.
15. a.
16. d.
17. a.
18. d.
19. b.
20. a.
What you will do 17

1. Prepare a Personal SFP:
On the space provided below, write the following:
a. Your current savings and everything that you own (clothes, pen, pencil, etc.)
Answer will varies per student. For illustration purposes, let’s assume P1,400
b. The amount that you owe your friends, family members, parents (tuition)
Answer will varies per student. For illustration purposes, let’s assume P500
c. Deduct the amount you owe from the amount you own.
Answer will varies per student. P1,400 – P500 = P900
d. Associate the amounts you own with assets and the amount you owe with liabilities. How much is your
assets? How about your Liabilities?
Assets: P1,400 Liabilities: P500
e. How do you get the net amount of something? Do you add or subtract? Subtract
f. How much is the net amount between Assets and Liabilities?
Assets – Liabilities = P1,400 – P500 = P900
g. There might be some cases that the result of your computation is zero or even negative. When will the net
amount become negative? The net amount becomes negative when Liabilities is larger than the Assets.
This means that your liabilities or borrowings to your friends, relatives and/or parents are higher than your
assets.
h. Companies usually have assets that are bigger than their liabilities and that some persons have bigger
liabilities than assets.
i. In the Accounting Equation, does having more assets always mean that the business is earning? (Yes or No)
No. It is possible the higher assets were acquired because of increased borrowings and not from
increased earnings.
j. Associate the net amount with capital or equity. How much is your Equity? P900
Sample Personal Statement of Financial Position
Juan dela CruzJuan dela Cruz
Personal
Personal Statement StatementPosition
of Financial of Financial Position
As of
As of July 31, 2020 July 31, 2020
ASSETS
Cash ASSETS P200 LIABILITIES & EQUITY
Receivables
Cash from classmates
P200 100 Payables to classmates 200
Receivables from classmates 100 600
Cellphone Borrowings from parents 300
Cellphone
Bag 600100 Total Liabilities 500
Bag 100400 Equity or Capital 900
Shoe
Shoe 400
Total Assets
Total Assets
P1,400
P1,400 Total Liabilities & Equity 1,400
LIABILITIES & EQUITY
Payables to classmates 200
Borrowings from parents 300
Total Liabilities 500
Equity or Capital 900
Total Liabilities & Equity P1,400
Account Form
18
Let’s Practice
4.
1. Answer: P176,000.
2. Answer: P640,000 and P30,000
3. Answer: P50,000.
Self-check 1
1. Answer: Php 7,000 (Topic: Assets = Liabilities + Owner’s Equity)
2. Answer:Php42,350 (Topic: Identifying current assets)
3. Answer: Php12,000 (Topic: Identifying current liabilities)
4.
19
Self-check 2
4.
1. Answer: P30,000.
2. Answer: P265,000.
3. Answer: P630,000 and P50,000
4.
Assessment
Answers to be submitted on another sheet of one whole piece of paper the following week.
Enrichment
20
BIBLIOGRAPHY
Commision on Higher Education. (2016). Teaching Guide for Senior High School, Fundamentals of
Accountancy,Business, And management 2. 1st ed. Quezon City: EC-TEC Commercial.
Salazar, Dani Rose C. (2017). Fundamentals of Accountancy, Business, and Management 2. First
ed. Quezon City: Rex Printing Company, Inc.
END OF MODULE
21

Module 2 Accounting

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Grade 12 – Fundamentals of Accountancy, Business, and Management 2 08/24/2020

What this module is all about

This module is about the Statement of Financial Position.

What you are expected to learn

After working on this module, the student is expected to:

How to learn from this module

This is your guide for the proper use of the module:

1. Read the items in the module carefully.

Take the Pretest

Check your paper and count

Is your score Yes Scan the items you

Study this module Submit answers to

Before you take the pretest, answer the following Review.

1. The Accounting Equation.

b. Liability accounts increase on the DEBIT side.

What to do before (Pretest)

Before you use this module, take the following Pretest.

Asset Liability Answer

What you will do

1. Prepare a Personal SFP:

On the space provided below, write the following:

g. How much is the net amount between Assets and Liabilities?

These include Allowance for Doubtful Accounts and Accumulated Depreciation.

2. Current Assets, Noncurrent Assets, Current Liabilities, Noncurrent Liabilities and

3. Difference of the Statement of Financial Position of a Service Company and of a

4. A sample SFP is given below.

b. The same SFP in Account Form

The use of “as of”

5. A Pro Forma SFP in Account Form

Assets Liabilities and Equity

Total Assets xxx Total Liabilities and Capital xxx

6. A Pro Forma SFP in Report Form

Liabilities and Equity

Accounts Payable xxx

Owner, Capital xxx

Total Liabilities and Equity xxx

Liabilities and Equity

Accounts Payable xxx

Total Liabilities xxx

Total Liabilities and Equity xxx

3. The importance of the format:

iii. Separation of the current and noncurrent –

end of the current year for the heading.

Long-term payable Accounts payable Notes receivable

Asset Liability Equity

Prepare a Statement of Financial Position for the company in Account Form.

Review What to do before (Pretest)

What you will do 17

1. Prepare a Personal SFP:

On the space provided below, write the following:

Total Liabilities & Equity P1,400

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