Fundamentals of

Accountancy, Business
& Management 2
Quarter 1 – Week 1

Prepared by:
Mary Mildred de Jesus
Let us Pray
1.Identify the elements of the SFP and
describe each of them.
2.Prepare an SFP using the report form and
the account form with proper classification
of items as current and non-current. OBJECTIVES
ABM_FABM12-Ia-b-1 - 4
IDENTIFY THE ELEMENTS
OF THE STATEMENT OF
FINANCIAL POSITION AND
DESCRIBE EACH OF THEM.
What is Statement
of Financial
Position?
 STATEMENT OF FINANCIAL POSITION
 The statement of financial position, often called
the balance sheet, is a financial statement that
reports the assets, liabilities, and equity of a
company on a given date. In other words, it lists
the resources, obligations, and ownership details
of a company on a specific day. You can think of
this like a snapshot of what the company looked
like at a certain time in history.
 Statement of Financial Position
 This definition is true in the sense that this statement is a
historical report. It only shows the items that were present on
the day of the report. This is in contrast with other financial
reports like the income statement that presents company
activities over a period of time. The statement of financial
position only records the company account information on the
last day of an accounting period.

 In this sense, investors and creditors can go back in time to

see what the financial position of a company was on a given
date by looking at the balance sheet.
 ELEMENTS OF THE STATEMENT OF
FINANCIAL POSITION (SFP)
a. ASSETS – Similar to the accounting equation, assets are
always listed first.
o The asset section is organized from current to non-
current and broken down into two or three
subcategories.
o This structure helps investors and creditors see what
assets the company is investing in, being sold, and
remain unchanged. It also helps with financial ratio
analysis. Ratios like the current ratio are used to
identify how leveraged a company is based on its
current resources and current obligations.
 ELEMENTS OF THE STATEMENT OF
FINANCIAL POSITION (SFP)
a. ASSETS
The first subcategory lists the current assets in order of their
liquidity. Here’s a list of the most common accounts in the current
section:
Current
 Cash
 Accounts Receivable
o Trade and other receivables
• advances to employees
 Prepaid Expenses
 Inventory
 Due from Affiliates
a. ASSETS
The second subcategory lists the long-term assets. This
section is slightly different than the current section because
many long-term assets are depreciated over time. Thus, the
assets are typically listed with a total accumulated
depreciation amount subtracted from them. Here’s a list of
the most common long-term/non-current accounts in this
section:
Long-term
o Equipment
o Leasehold Improvements
o Buildings
o Vehicles
o Long-term Notes Receivable
a. ASSETS
Many times there will be a third subcategory for
investments, intangible assets, and or property that doesn’t
fit into the first two. Here are some examples of these
balance sheet items:

Other or Intangible
o Investments
o Goodwill
o Trademarks
o Mineral Rights
 ELEMENTS OF THE STATEMENT OF
FINANCIAL POSITION
b. LIABILITIES – are also reported in multiple subcategories. There
are typically two or three different liability subcategories in the
liabilities section: current, long-term, and owner debt.
 The current liabilities section is always reported first and
includes debt and other obligations that will become due
in the current period. This usually includes trade debt and
short-term loans, but it can also include the portion of
long-term loans that are due in the current period. The
current debts are always listed by due dates starting with
accounts payable.
 ELEMENTS OF THE STATEMENT OF
FINANCIAL POSITION
b. LIABILITIES –
Here’s a list of the most common current liabilities in order of
how they appear:
Current Liabilities
o Accounts Payable
• Trade and other payables
 Advances to suppliers
o Accrued Expenses
o Unearned Revenue
o Lines of Credit
o Current Portion of Long-term Debt
 ELEMENTS OF THE STATEMENT OF
FINANCIAL POSITION
b. LIABILITIES –
The second liabilities section lists the obligations that will
become due in more than one year. Often times all of the long-
term debt is simply grouped into one general listing, but it can be
listed in detail. Here are some examples:

Long-term Liabilities
o Mortgage Payable
o Notes Payable in 2 years
o Loans Payable
Example: Which is an example of Current
liability?
a. Bank indebtedness
b. Mortgage payable
c. Accumulated amortization
 CLASSIFICATION OF THE STATEMENT OF FINANCIAL POSITION AND
ELEMENTS INTO CURRENT AND NON-CURRENT
If you answer a. bank From the perspective of the
indebtedness you are absolutely borrower, the mortgage is
correct! Bank indebtedness considered a long-term liability.
And Accumulated amortization is
means a short-term loan from a
the total sum of amortization
bank typically occurring when a expense recorded for an
company uses an operating line intangible asset. In other words,
of credit to cover cash shortfalls. it’s the amount of costs that have
Mortgage payable is the liability been allocated to the asset over
of a property owner to pay a its useful life.
loan that is secured by
property.
 ELEMENTS OF THE STATEMENT OF
FINANCIAL POSITION
c. EQUITY – which is the residual interest in the Net Assets of a
business that remains after deducting its liabilities.

Unlike the asset and liability sections, the equity section

changes depending on the type of entity. For example,
corporations list the common stock, preferred stock, retained
earnings, and treasury stock.

Capital according to ownership:

a. Owner's Equity– Sole/Single Proprietorship
b. Partner's Equity or Partner’s Capital – Partnership
c. Stockholder's Equity - Corporations
 ELEMENTS OF THE STATEMENT OF
FINANCIAL POSITION
c. Shareholders' Equity
is the amount contributed by the shareholders/owners of
the business in shares. Alternatively, Shareholder’s Equity is the
Net value of the business, which is derived by subtracting Assets
from Liabilities.
Briefly Equity comprises of:
 Common Stock
 Retained Earnings - which includes the number of
profits retained by the business;
c. Shareholders' Equity

 Common stock is a representation of partial ownership in a

company and is the type of stock most people buy. Common
stock comes with voting rights, as well as the possibility of
dividends and capital appreciation.
 Preferred stock is a type of stock that pays shareholders a
specified dividend and has priority over common stock for
receiving dividends but no power of voting.
 Retained earnings refer to a company’s net profit after paying
out dividends to shareholders. This amount gives companies
clarity on how much money their business has after paying off
all their dues, including the share of the investors.
 TWO FORMS OF SFP
REPORT FORM AND
THE ACCOUNT FORM

A company’s balance
sheet can be presented in
one of two ways, account
form and report form,
depending on the preference
of those who will review the
document.
 SFP REPORT FORM
Balance sheet is presented in a Vertical
orientation, and is essentially one column that
spans the entire width of a page. Starting with
assets, the report form balance sheet provides a
total value at the end of the assets section, followed
by liabilities and equity, with the final line of the
report form balance sheet providing the total
combined value of liabilities and equity.
 SFP ACCOUNT FORM
Balance sheet is presented in a Horizontal format, with
information in two columns beside each other. The left column of
the account form balance sheet lists assets, while the right
column lists liabilities and equity. Naturally, the last line in each
column lists the total value of all assets and liabilities and equity,
respectively. The account form balance sheet can be easier to
use when information is being presented for multiple periods,
and it allows the reader to verify that the ledger is in balance at a
glance
 Having gone
through different I realized
that……
activities, do you
realize now the
importance of
statement of
financial position,
elements and
classification of
elements into
current and non-
current. Write your
realization below by
plotting your ideas.
 1. Accounting-Simplified.com. “Statement of Financial Position [Balance Sheet].”
https://accountingsimplified.com/financial/statements/statement-of-financial-position.html
2. AMA Computer University- QC. “FABM Module 02 Statement of Financial Position Part
1.pdf.”, uploaded 2017,https://www.coursehero.com/file/32295775/FABM-Module-02-
Statement-of-Financial-Position-Part-1pdf/
RE 3. Published by the Commission on Higher Education “FUNDAMENTALS OF
ACCOUNTANCY, BUSINESS, AND MANAGEMENT 2.”, 2016, file:///C:/Users/miles
FE %20de%20jesus/Downloads/Teaching_Guide_for_Senior_High_School_FU.pdf
4. My Accounting Course. “Statement of Financial Position.”,
RE https://www.myaccountingcourse.com/financial-statements/statement-of-financial-position
5. Accounting Financial & Tax. “Classification and Elements Of Balance Sheet.”,
http://accounting-financial-tax.com/2008/10/classification-and-elements-of-balance-sheet/
NC 6. Small business.chron.com. “Difference Between Report Form and Account Form
Balance Sheets.”, https://smallbusiness.chron.com/difference-between-report-form-
ES account-form-balance-sheets-54993.html
7. Arnold Quinto Malaluan- Assistant Professor II at Batangas State University-Lipa City
Campus (College of Accountancy, Business and Economics).” Instructional Materials for
FABM 2”.
“There are no secrets to
success. It is the result
of preparation, hard
work and learning
from failure”.
-Colin Powell, Any questions?

statesman & 4-star You can E-mail me at:

@marymildred.dejesus@deped.gov.ph
general- You can contact me at:
0939-8428177