STATEMENT OF

FINANCIAL POSITION
PROF. ZEUS A. ABOY, CPA MBA EDL (CANDIDATE)
LEARNING OBJECTIVES

• a) Be able to define statement of financial position and its use in the business.
• b) Be able to define and provide examples of the 3 elements shown in the statement of
financial position.
• c) Be able to provide the guidelines in the classification of assets and liabilities.
• d) Be familiar with the accounting equation and be able to solve problems using the
equation.
• e) Differentiate between account and report forms of the statement of financial position.
• f) Acquire mastery in the preparation of statements of financial position.
STATEMENT OF FINANCIAL POSITION

• Shows how financially healthy the business is. It shows the resources
owned by the business, the obligations and the claim of the owners in
the net assets of the business.
• Shows the liquidity and solvency of business organizations as of a
certain point in time.
THE ACCOUNTING EQUATION

Assets = Liabilities + Owner’s Equity

EXERCISE 1 ON ACCOUNTING EQUATION

Assets Liabilities Equity

P200,000 P? P100,000
P? P120,000 P80,000
P120,000 P150,000 ?
P100,000 ? 75% of total assets ?
Twice as much as Equity ? P? 210,000
ASSETS

Assets are resources owned by the business.

Examples: Cash, Buildings, Equipment

Can you give examples of your family’s assets?
LIABILITIES

Liabilities, on the other hand, are obligations that arise from

various sources as such purchase of items from the suppliers,
loans availed from banks for payment of suppliers, employees
and others in relation to the operations.
OWNER’S EQUITY

Owner’s equity represents the claim of the owner to the net

assets of the business. This represents the owner’s invested
capital into the business and the accumulated net income
and or net loss from the operations.
CLASSIFICATIONS OF ASSETS

Current
Assets
ASSETS

Non-
Current
Assets
EXERCISE 2 : ASSETS

Current Assets Non-current Assets Total Assets

P200,000 P150,000 P?
P? P120,000 P230,000
P140,000 Twice as much as current assets
? ?
P90,000 ? P240,000
CURRENT ASSETS

Current assets are resources that are expected to be used

or consumed in the operations of the business within the
company’s one year or operating cycle whichever is longer.
EXAMPLES OF CURRENT ASSETS

1) Cash
2) Receivables
3) Prepayments
CASH

Cash on hand and those kept in the banks.

Cash on hand could be in the form of petty cash fund,
revolving fund, tax fund, payroll fund and change fund.
Cash also includes Undeposited collections or
Collections that are not yet deposited in the company’s bank account.
Cash in bank could be in the form of savings deposits or current
accounts maintained in banks.
Cash could also be in the form of time deposits.
CASH AS PART OF CURRENT ASSETS

• In order that cash is presented as current asset, it should satisfy the

following criteria:
1) Available for use in current operations
2) Unrestricted as to withdrawal
ACCOUNTS RECEIVABLES

Accounts receivables represent claims of the company from its

customers and it arise from a sale transaction between the company and
its customers.
Accounts receivables are always presented as Currrent Assets in the
Statement of Financial Position.
ALLOWANCE FOR DOUBTFUL ACCOUNTS

• When customers fail to settle their obligation, as accountants we

should anticipate for this type of situation and recognize any amount
not expected to be collected.
• This is done by making an ALLOWANCE FOR DOUBTFUL
ACCOUNTS.
NON-TRADE RECEIVABLES

• These are receivables that arise from sources other the company’s
main operations.
• Examples: Advances to employees
NON-TRADE RECEIVABLES

• These receivables are presented as current asset only if these are

expected to be collected within 12 months from financial statement
date. Otherwise, they are presented as non-current asset.
PREPAYMENTS

• These are expenses that are paid in advance.

• These will become expenses when used up or consumed.
• Examples: Office supplies purchased, Rent paid in advance
EXERCISE 3 COMPOSITION OF CURRENT ASSETS

Cash Accounts Receivable Prepayments Total current assets

P100,000 P90,000 P10,000 P?
P? 120,000 12,000 P210,000
P50,000 P? P20,000 P100,000
NON-CURRENT ASSETS

Assets that are not expected to be consumed or used within

one year from the date of the statement of financial position
shall be classified as noncurrent assets.
EXAMPLES OF NON-CURRENT ASSETS

1) Land
2) Building
3) Equipment
4) Machineries
5) Transportation vehicle
LAND

Land represents an asset

where the company can
put up its building.
Land are not subject to
depreciation.
BUILDING

• Asset where the

company can hold its
office.
• Buildings are subject to
depreciation.
TRANSPORATION
VEHICLE
Asset used in the
operations of the
business.
Subject to depreciation.
MACHINERY AND
EQUIPMENT
Asset used in the
production of goods and
services.
These assets are subject
to depreciation.
INTANGIBLE ASSETS

• Assets that do not have physical existence but are being used by the
business.
• Examples: Franchise, Trademark
FAMOUS TRADEMARKS
LIABILITIES

Are Economic Obligations of an entity to another party.

CLASSIFICATIONS OF LIABILITES

Current
Liabilities
LIABILITIES

Non-
Current
Liabilities
CURRENT LIABILITIES

Obligations that the business is required to pay within 12 months from

the date of the statement of financial position.
Examples : Accounts payable and Accrued expenses
ACCOUNTS PAYABLE

• Are accounts with the company’s suppliers.

• Are normally under 30-day credit term.
ACCRUED EXPENSES

• These are obligations for goods and services purchased or used but
are not yet paid by the Company.
• Examples: Water bills, Electric bills
LONG-TERM LIABILITIES

• Are obligations that are not expected to be settled within 12 months

from financial statement date.
OWNER’S EQUITY

Represents the residual interest of the owners in the net assets of the
business.
Net Assets = Assets - Liabilities
OWNER’S EQUITY

Owner’s Equity
Owner’s Capital Pxx
Additional Investments xx
Withdrawals (xx)
Net income xx
Net loss (xx)
Owner’s Equity, End Pxx
 Assets = Liabilities + Owner’s Equity

Current Noncurrent = Current Noncurrent + Capital Drawing

Cash Property and Accounts Long-term Initial Net income

equipment payable notes payable investment (loss)

Receivables
Intangible Accrued Additional Withdrawals
assets expenses investments
Prepayments

Short-term

Notes
payable

Current
portion of
long-term
notes
payable
FORMAT OF PRESENTATION

1) account form
2) report form
Account form, the presentation is like a T-account with the assets on the left side and the
liabilities and owners’ equity on the right side.
Report form, assets are shown first followed by the liabilities and the owner’s equity.
ETHICS

The ethical accountant’s role is to ensure that the items and the amounts presented in the
statement of financial position are the reasonable values of the assets and liabilities of the
business. By presenting the items in their proper amounts and proper classification
(whether current or non-current), the users of the statement of financial position are
assured that they are looking at the reasonable figures that they can rely on in making the
decision of whether to grant credit or not to the company.
EXERCISE 1

1) These are things of value owned by the business.

2) These are assets without physical existence but brings benefits to the
company.
3) The statement that shows the things owned by the business, amounts
owed to creditors and the residual interest of the owner in the net
assets of the business.
EXERCISE 1 (CONTINUATION)

4) Total Assets Minus Total Owner’s Equity

5) This refers to the ability of the Company to pay currently maturing
obligations.
6) An asset that does not depreciate in value.
7) These are expenses paid in advance.
EXERCISE 2

IDENTIFY IF THE ITEM IS AN ASSET, A LIABILITY OR PART OF OWNER’S EQUITY

1) Cash
2) Land
3) Accounts payable
4) Owner’s capital
5) Accrued expenses
6) Accounts receivable
EXERCISE 3 PREPARATION OF SIMPLE STATEMENT
OF FINANCIAL POSITION
From the following information, prepare the statement of financial position of Quick Shoe
Repair as of December 31, 2015.

Current assets P630,000

Noncurrent assets 170,000

Current liabilities 200,000

Noncurrent liabilities 300,000

Owner’s equity 300,000

EXERCISE 4

You have been provided the following information by Ms. Normita Cunanan, the owner of
Quick Key Duplicator. You have been asked to prepare the statement of financial position
as of December 31, 2015 using the report form.

Cash P120,000

Supplies on hand 6,000

Equipment 10,000

Accounts payable 16,000

Normita Cunanan, Capital 120,000

EXERCISE 5

For each item below, identify if the item is an Asset by

writing (A) on the blank, if the item is a liability write (L) on
the blank provided and if part of Owner’s Equity, write OE.
1) Accounts payable 10) CJ Fajardo, Capital
2) Checking account with Bank of Commerce 11) Prepaid rent
3) Undeposited collections 12) Land
4) Accounts receivables 13) Prepaid insurance
5) Loans payable payable in 5 months 14) Advances to employee
6) Building 15) Transportation vehicle
7) Accrued expenses
8) Accrued revenue
9) Supplies on hand
EXERCISE 6

Identify the proper classification of the items. Use CA if

current asset, NCA if non-current asset, CL if current
liability or NCL if non-current liability.
1) Accounts payable 10) Accrued salaries
2) Checking account with Bank of Commerce 11) Prepaid rent
3) Undeposited collections 12) Land
4) Accounts receivables 13) Prepaid insurance
5) Loans payable payable in 5 months 14) Advances to employee collectible in 6 months
6) Building 15) Transportation vehicle
7) Accrued expenses
8) Accrued revenue
9) Supplies on hand
EXERCISE 7. FILL IN THE BLANKS

Additional Total
Capital Investment Net Income Owner’s Equity,
Beginning (withdrawal) (Net loss) Ending
Case 1 200,000 ? 100,000 500,000
Case 2 310,000 (50,000) (40,000) ?
Case 3 120,000 72,100 90,000
Case 4 ? 30,000 90,000 300,000
Case 5 60,000 30,000 (10,00) ?
EXERCISE 8. STATEMENT OF FINANCIAL POSITION
PREPARATION
The owner of AMA Tours have provided you the following information.
Prepare a properly classified statement of financial position.
Accounts receivables P300,000
Land 600,000
Office equipment 500,000
Cash 540,000
Allowance for doubtful accounts (150,000)
Prepaid rent 30,000
Furniture and fixture 450,000
Accumulated depreciation – Furniture and fixture (150,000)
Accumulated depreciation – Office equipment (50,000)
Accounts payable 600,000
Accrued expenses 30,000
Arnold M. Aboy, Capital 1,000,000
Unused supplies 2,000
Net income 442,000
EXERCISE 9. FROM THE DATA BELOW, PREPARE THE
PROPERTY AND EQUIPMENT PORTION OF THE
STATEMENT OF FINANCIAL POSITION.
Accounts payable P400,000
Land 700,000
Office equipment 300,000
Transportation equipment 500,000
Cash 890,000
Accumulated depreciation – Office equipment 30,000
Accumulated depreciation – Transportation equipment 50,000
Accounts receivable 250,000
EXERCISE 10. FOR EACH ITEM COMPUTE WHAT IS
BEING ASKED.
1) Fast Key Duplicator Shop has current assets totaling P105,000; total
liabilities of P450,000 and total owner’s equity of P300,000.
From the above information, how much is the total noncurrent assets?
2) Using the same information above, how much is the total assets?
3) The bookkeeper of the professional firm has provided you with the
following information: total current assets P400,000; total liabilities and
owner’s equity of P900,000; noncurrent liabilities of P100,000 and total
owner’s equity of P500,000.
From the data above, how much is the noncurrent assets?
4) How much is the total current liabilities?
5) On June 20, 2017, Daisy decided to open a key duplication center and
invested her savings of P100,000. On June 25, she purchased an
equipment for P20,000 using P10,000 from the amount invested and the
remaining will be paid within 20 days.
How much is the total current assets of the business as of June 30, 2017?
6)Using the facts above, what is the total assets of the business as of June
30, 2017?
7) Using the facts in number 1, how much is the total owner’s equity as
of June 30, 2017?
8) Ms. Pearl established a service business in December 1, 2015 with
total assets amounting to P200,000. Total liabilities amounted to
P80,000 as of December 31, 2017.
How much is the owner’s equity as of December 31, 2017?
9) Troy John opened his Troy’s Shoe Repair Shop. At a certain date, the
shop has cash of P10,000, supplies on hand amounting to P4,000,
equipment of P5,000, accounts payable amounting to P4,000.
Assuming no other accounts aside from those mentioned above, how
much is the capital invested by Troy John?
10) Using the information how much is the total current assets of
Troy’s Shoe Repair Shop?
11) Using the information, how much is the total liabilities and owner’s
equity?
THEORIES

1) The statement of financial position shows which of the following:

I Assets
II Liabilities
III Owner’s equity
a) I, II, and III
b) I only
c) I and II only
d) I and III only
2) Which of the following should be shown as part of current assets?
I Cash on hand and in banks
II Accounts receivables
III Advances to employees
a) I, II, and III
b) I only
c) I and II only
d) I and III only
3) Assets are
a) Obligations of the business
b) Resources owned by the business.
c) Claim of the owner in the net asset of the business
d) None of the above
4) Liabilities are
a) Claims of the owner in the net asset of the business
b) Resources owned by the business
c)Claims of suppliers and other creditors in the net assets of the
business.
d) None of the above
5) Owner’s equity represents
a) The excess of total assets over the total liabilities.
b) The capital of the owner.
c) The accumulated income or loss.
d) None of the above.
6) Which of the following is not a current asset?
I Cash on hand and in banks
II Accrued expenses
III Accounts receivable
a) I, II and III
b) I and II
c) II only
d) III only
7) Which of the following is not part of the total assets?
I Supplies unused
II Land
III Accounts payable
a) I, II and III
b) I and III
c) III only
d) I and II
8) The value of this item of property, plant and equipment is not adversely affected with
usage and time.
a) Machinery
b) Land
c)Franchise
d) Equipment