Professional Documents
Culture Documents
A statement of financial position is a formal statement showing the three elements comprising financial position,
namely assets, liabilities and equity.
Shows the entity’s financial condition as at a certain date
It includes line items
Presentation
a. Classified presentation shows distinction between the current and noncurrent assets and current and noncurrent liabilities.
b. Unclassified presentation (also called based on liquidity) shows no distinction between current and noncurrent items.
Report Form – this form sets forth the three major sections in a downward sequence of assets, liabilities and equity
Account Form – the presentation follows that of an account, meaning, the assets are shown on the left side and the liabilities and
equity on the other side of the financial position.
PAS 1 does not prescribe the order of presenting items in the statement of financial position. An entity may modify the
description used and the sequence of their presentation to suit the nature of the entity and its transactions. Moreover, additional
line item may be presented whenever relevant to the understanding of the entity’s financial position.
PAS 1 also permits a mixed presentation, i.e., presenting some assets and liabilities using a current/noncurrent classification and
other in order of liquidity.
CLASSIFIED UNCLASSIFIED
ASSET
S ASSETS
X
Current Assets Cash and cash equivalents X
X
Cash and cash equivalents XX Trade and other receivables X
X
Trade and other receivables XX Inventories X
X
Inventories XX Investments in equity instruments X
X
Other current assets XX Property, plant and equipment X
X
Total Current Assets XX Other intangible assets X
X
Non-current Assets Goodwill X
Investments in equity X
instruments XX Other assets X
X
Property, plant and equipment XX Total Assets X
Other intangible assets XX
Goodwill XX
Total Non-current assets XX
Total Assets XX
Investors, creditors and other statement users analyze the statement of financial position to evaluate such factors as liquidity,
solvency and the need to of the entity for additional financing.
Information about liquidity and solvency is useful in predicting the ability of the entity to comply with future financial
commitments and to pay dividends to shareholders.
Assets
The revised conceptual framework defines an asset as a present economic resource controlled by the entity as a result of
past events.
Current Assets
The asset is a cash or cash equivalent unless the asset is restricted to settle a liability for more than twelve months after
the reporting period.
The entity holds the asset primarily for the purpose of trading
The entity expects to realize the asset within twelve months after the reporting period
The entity expects to realize the assets or intends to sell or consume it within the entity’s normal operating cycle.
This includes cash on hand, petty cash fund, cash in bank and any cash equivalent
Shall be unrestricted in use, meaning available anytime for the payment of current obligations.
PAS 7, defines cash equivalents as short-term, highly liquid investments that are readily convertible in known amount of cash
and which are subject to insignificant risk of changes in value.
Current assets are usually listed in the statement of financial position on the order of liquidity.
PAS 1, provides that as a minimum the line items under the current assets are:
Noncurrent Assets
PAS 1, simply states that “an entity shall classify all other assets not classified as current as noncurrent assets”.
Long-term Investments
The International accounting Standards Committee defines investments as an asset held by an entity for the accretion of wealth
through capital distribution, such as interest, royalties, dividends and rentals, for capital appreciation or for other benefits to the
investing entity such as those obtained through trading relationships.
Intangible Assets
PAS 38, simply defines an intangible asset as an identifiable nonmonetary asset without physical substance.
The most common examples of identifiable intangible assets include patent, franchise, copyright, trademark and computer
software.
Liabilities
Under the revised conceptual framework, a liability is defined as a present obligation of an entity to transfer an economic
resource as a result of past events.
Current liabilities
The entity expects to settle the liability within the entity’s normal operating cycle
The entity’s hold the liability primarily for the purpose of trading
The liability is due and to be settled within twelve months after reporting period
The entity’s does not have an unconditional right to defer settlement of the liability for at least twelve months after the
reporting period
PAS 1, provides that as a minimum, the face of the statement of financial position shall include the following line items for
current liabilities:
Noncurrent Liabilities
PAS 1, simply states that all liabilities not classified as current liabilities are classified as noncurrent liabilities.
Working Capital
Is the excess of current assets over current liabilities
The entity’s liquidity is of primary concern to most statement users.
Equity
Is the residual interest in the assets of the entity after deducting all of the liabilities
Increased by profitable operations and contribution by owners
Decreased by unprofitable operation and distribution to owners
Accounts Dr Cr
Petty cash fund 15,000.00
Cash in Bank 1,900,000.00
90-day money market instruments 800,000.00
Accounts receivable 122,000.00
Allowance for bad debts 30,000.00
Notes receivable (trade) 8,000.00
Inventory 200,000.00
Land 6,000,000.00
Building 10,000,000.00
Accumulated Depreciation – Building 7,200,000.00
Equipment 800,000.00
Accumulated Depreciation – Equipment 250,000.00
Patent 350,000.00
Accumulated Amortization – Patent 315,000.00
Trademark 120,000.00
Accounts payable 100,000.00
Notes payable - short term loan 200,000.00
Notes payable - long term loan (P50,000 due 1 year 1,450,000.00
Income tax payable 670,000.00
Interest payable 65,000.00
Salaries payable 105,000.00
Utilities payable 8,000.00
Unearned income 35,000.00
Provision for warranty obligation 260,000.00
Deferred tax liability 70,000.00
Share capital 3,500,000.00
Retained earnings 5,440,000.00
Revaluation surplus 260,000.00
Cumulative translation gain - foreign operation 357,000.00
Totals 20,315,000.00 20,315,000.00
Land 6,000,000.00
Building 10,000,000.00
Accumulated Depreciation -Building (7,200,000.00)
Equipment 800,000.00
Accumulated Depreciation -Equipment (250,000.00)
Property, plant and equipment 9,350,000.00
Patent 350,000.00
Accumulated depreciation - Patent (315,000.00)
Trademark 120,000.00
Intangible assets 155,000.00
Shares Amounts