Fabm 2
Fabm 2
Fabm 2
STA. ROSA
ADAPTIVE TEACHING GUIDE
FABM 2
WEEK 3
MET # 1
Lesson: STATEMENT OF FINANCIAL POSITION
Prerequisites Assessment:
Read the statement very carefully and write your answer on the space provided before each number. Write legibly, remember you are a USA learner, right? (Understanding with Speed and Accuracy)
____________1. An art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events, and interpreting the result thereof.
_____________2. Widely accepted set of rules, concepts & principles of accounting procedures
_____________3. Assumes that all the business transactions are separate from the business owner’s personal transactions.
_____________4. All assets acquired should be valued and recorded based on acquisition cost not the prevailing market value.
_____________5. The principles that requires that expenses be matched with revenue in a given accounting period.
_____________6. Requires the business to complete the whole accounting process over a specific operating period.
For items 7-15 identify the account title as Assets, Liabilities and Owner’s Equity. Classify each if current and noncurrent assets, current and noncurrent liabilities:
7. Cash _______________ _______________
8. Accounts Receivable _______________ _______________
9. Bank Loan Payable _______________ _______________
10. Original Investment by the owner _______________ _______________
11. Equipment ________________ ______________
12. Merchandise Inventory _______________ _______________
13. Account Payable ______________ ________________
14. Land ______________ ________________
15. Owner’s Drawing _______________ _______________
Pre-lesson Remediation Activity:
1. For Students with Insufficient Level on Prerequisite Content-knowledge and/or Skill(s):
2. For Students with Fairly Sufficient Level on Prerequisite Content-knowledge and/or Skill(s):
Introduction:
TIME FRAME: 12 MINS
OBJECTIVES:
At the end of the lesson, the students are able to:
1. Identify the elements of SFP and describe each of them (ABM_FABM12-ia-b-1)
2. Prepare an SFP using the report form and account form with proper classifications of forms as current and non-current (ABM_FABM12-ia-b-4)
OVERVIEW
The statement of financial position is another term for the balance sheet. The statement lists the assets, liabilities, and equity of an organization as of the report date. As such, it
provides a snapshot of the financial condition of a business as of a specific date. Preliminary preparation of the Statement of Financial Position will be performed through the guide of
accounting equation: A = L + OE; where assets is on the left side of the equation are debits and L+C is on the right side of equation are the credits. This is their normal position and can be
interchanged depending on the transactions that has transpired.
2. Liabilities – are financial obligations of the business to its creditors. They have the claim over the assets of the business. These liabilities are classified also as current and noncurrent the
same as assets. Current Liabilities – are financial obligations of the business to their creditors and which are expected to be settled in the normal course of the operating cycle and due to
be settled within one year from the Statement of Financial Position date.
These include Accounts Payable – an oral or verbal promise to pay. This is often called as “ trade payable” because it usually paid to the named-payee or creditor. This can also be
evidenced by a note made by the owner of the business, certifying that this will be settled within one year. Accrued expense, account title used for expenses incurred or used up but not
yet paid at the end of the accounting period such as rent payable, utilities payable, salaries payable, taxes and licenses payable, etc and usually smaller in amount as compared to trade
payable. Unearned income- account title used for cash collected or received in advance but services have not been rendered (servicing) or good have not yet delivered (merchandising)
Example: a computer technician as demanding P5,000 for repair of a computer. He was asking from your a down payment of P3,000 cash and the balance payable upon completion of the
repair. While the repair is ongoing, the P3,000 cash received by the computer technician is recorded in his book as Unearned Service Income (in servicing) and later be recorded as Service
Income upon receipt of P2,000 for the completion of repair work. Please take it is not automatic to change entries, but it should undergo an adjustment. You will encounter this during the
closing of the books. Relax! This will be tackled step by step as we do bookkeeping – in accounting cycle.
Noncurrent Liabilities - are long-term liabilities like: Notes Payable (long term)- the financial obligation that will be settled for more than one year. Common example is Bank Loan. Usually
this loan req uires post-dated checks (PDC) upon release of the loan or even requires a collateral.
3. Owner’s Equity – is the residual interest in assets of the business after deducting all its liabilities. It is expressed in accounting equation as Assets - Liabilities = Owner’s Equity (A-L=
C/OE). This OE will increase also if there is profit, additional contribution by the owner, and decreased when there is loss or withdrawal by the owner. In other words OE is the amount of
money and value of property put by the owner into his business to start with the operation which is referred to initial investment, or initial capital. This is also called as Proprietorship,
Proprietary Interest or Net worth. Hereunder are example of SFP presented in two forms: Account Form: Assets appear on the left-hand side while Liabilities and OE appear on the right-
hand side. This SFP is in a horizontal position which is used when there are plenty of accounts involved.
SYNTHESIS
From now on let’s remember that SFP has three elements: Assets, Liabilities, and Owner’s Equity represented in Accounting Equation A= L+OE where assets normally belong to debit side
and the sum of Liabilities and Owner’s Equity normally on the credit side. Any changes on this equation depends on the business transactions that transpired in the course of its business
operations. Expanded Accounting Equation is A=L+OE/C – Expenses -Drawing by the owner - net loss + net income + additional investment. SCI is prepared first before SFP to get the Net
income.