Statement of Financial

Position
Statement of Financial Position (Balance Sheet)
• Structured financial statement that shows the assets,
liabilities and equity of a business entity reported as of given
date.
• “As of Given Date” indicates that statement of financial
position can be prepared anytime of the year and the
information is considered true and correct as of the date
indicated in the statement.
• The ASSETS, LIABILITIES and EQUITY are the three accounting
elements found in the statement of financial position.
 Title of the FINANCIAL STATEMENT

Name
Name of the of the
Sierra Ulo Merchandising
Financial Statement of Financial Position
Business
Statement As of December 31, 2021

Date during the financial report

ASSETS
• Resources controlled by the entity as a result of past
events and from which future economic benefits are
expected to flow to the entity.
• In other words, these are resources that a company
uses to generate business activity such as cash and
inventories.
Liabilities
• Present obligations of the entity arising from the past
events, the settlement of which are expected to result
in an outflow from the entity of resources embodying
economic benefits.
• These includes the long – term to suppliers and short
– term debt.
Equity
• The residual interest in the assets of the
company after deducting all of its liabilities.
• Financial Position is usually expressed in terms of its
LIQUIDITY, SOLVENCY, FINANCIAL STRUCTURE (or a.k.a.
Capital Structure) and CAPACITY FOR ADAPTATION.
• Liquidity
• Refers to the ability of a business entity to settle its
currently maturing financial obligation
• Solvency
• The ability of a business to pay its long – term financial
obligation
• Financial Structure
• Indicates the amount of capital or resources financed by
the creditors and the amount provided by owners.

• Capacity for Adaptation

• Refers to the ability of a business to invest excess available
resources or raise needed funds through borrowings
without difficulty in times of needs.
Example of financial position.pdf
Statement of Comprehensive Income
(or the Income Statement)
• Structured financial statement that shows the
financial performance of a business entity for a given
period.
• The “period” indicates that the statement covers a
MONTH, QUARTER, SEMI – ANNUAL or ANNUAL.
• This statement comprises INCOME and EXPENSES
Income
• Increases in economic benefits during the
accounting period in the form of inflows or
enhancement of assets or decreases liabilities
that result in increase of equity and other than
those relating to contributions from equity
participants.
• E.g. REVENUES or SALES
Expenses
• Decreases in economic benefits during the
accounting period in the form of outflows or
depletion of assets or incurrence of liabilities that
result in decrease in equity, other than those
relating to distribution to equity participants
• E.g. OPERATING EXPENSES such as utilities and
administrative (e.g. labor) costs.
The standards mention two methods of presenting
the statement of comprehensive income, namely:
1. Nature of expense method (expense are disclosed according to
their nature, such as depreciation, transportation, rent,
utilities and salaries, wages and benefits)
2. Function of expense or cost of sales method (allocates and
combines expense items according to the activity from which
the item arises, such as combining raw material, costs, labor
costs, depreciation or amortization under cost of sales)
Example of Comprehensive Income.pdf