STATEMENT OF FINANCIAL POSITION (SFP)

Content Standards

The learners demonstrate an understanding of account titles under assets, liabilities, and capital
accounts of the Statement of Financial Position, namely, cash, receivables, inventories, prepaid
expenses, property, plant and equipment, payables, accrued expenses, unearned income, long-term
liabilities and capital that will equip him/her in the preparation of the SFP using the report form and
account form.

Performance Standards

The learners will be able to solve exercises and problems that require preparation of an SFP for a
single/sole proprietorship with proper classification of accounts as current and concurrent using the
repost form and the account form.

Learning Competencies

The learners should be able to:

1. Identify the elements of the SFP and describe each of the items (ABM_FABM12-la-b-1)
2. Classify the elements of the SFP in the current and concurrent items (ABM_FABM12-la-b-2)
3. Prepare the SFP of a single/sole proprietorship (ABM_FABM12-la-b-3)
4. Prepare an SFP using the report form and the account form with proper classification of items as
current and noncurrent (ABM_FABM12-la-b-4)

REVIEW

1. Ask the learners if they can still remember the following terms :
a. Accounting Equation
b. Assets
c. Liabilities
d. Equity
e. Single/Sole Proprietorship Business
2. Write the learners’ answers of the board as they cite them even if there are wrong answers and
differentiate them one by one
3. Ask the learners to give specific account titles for each of the terms above and give examples of
single/sole proprietorship businesses and merchandising businesses. Teacher can refer to topics
discussed in ABM 1 – The Accounting Equation, Types of Major Accounts, Business Transactions
and Their Analysis as Applied to the Accounting Cycle of a Service Business
a. Accounting Equation-Assets = Liabilities + Equity
b. Assets – Cash, Accounts Receivable
c. Liabilities – Accounts Payable, Loan Payable
d. Equity – Capital
e. Single/Sole Proprietorship business – as long as there is one owner
4. Ask the learners to identify the normal balance of asset (debit), liabilities (credit) and equity
(credit). Review on how these accounts are increased/decreased.
MOTIVATION

1. Prepare a Personal SFP:

a. Ask the learners to get a ¼ piece of paper (any paper will do if they don’t have a ¼ sheet)
b. Ask them to write their current savings and everything that they own (clothes, pen, pencil,
etc.)
c. Ask them to write the amount that they owe their friends, family members, parents (tuition)
d. Tell learners to deduct the amount they owe from the amount they own
e. Associate amounts owned with assets and amount owed with liabilities with the net amount
as equity
2. Discuss the importance of the SFP:
a. Reinforce the difference between assets and liabilities
b. Tell whether that having more assets does not mean that business is earning

INSTRUCTION/DELIVERY

1. Define the term Statement of Financial Position and introduce the term Permanent Accounts

STATEMENT OF FINANCIAL POSITION – Also known as the balance sheet. This statement
includes the amounts of the company’s total assets, liabilities, and owner’s equity which in
totality provides the condition of the company on a specific date. (Haddock, Price, & Farina,
2012)

PERMANENT ACCOUNTS – As the name suggests, these accounts are permanent in a sense that
their balances remain intact from one accounting period to another. (Haddock, Price, & Farina,
2012) Examples of permanent account include Cash, Accounts Receivable, Accounts Payable,
Loans Payable and Capital among others. Basically, assets, liabilities and equity accounts are
permanent accounts. They are called permanent accounts because the accounts are retained
permanently in the SFP until their balances become zero. This is in contrast with temporary
accounts which are found in the Statement of Comprehensive Income (SCI). Temporary accounts
unlike permanent accounts will have zero balances at the end of the accounting period.

CONTRA ASSETS – Contra assets are those accounts that are presented under the assets portion
of the SFP but are reductions to the company’s assets. These include Allowance for Doubtful
Accounts and Accumulated Depreciation. Allowance for Doubtful Accounts is a contra asset to
Accounts Receivable. This represents the estimated amount that the company may not be able
to collect from delinquent customers. Accumulated Depreciation is a contra asset to the
company’s Property, Plant and Equipment. This account represents the total amount of
depreciation booked against the fixed assets of the company.

2. Provide a sample SFP to the learners (PowerPoint or acetate or hard copy) as an overview.
Teacher can use the sample below or find a new one.
 LEARNING IS FUN COMPANY
STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 2016
Assets
Current Assets
Cash Php 100,000.00
Accounts Receivable Php 500,000.00
Less: Allowance for Doubtful Accounts (50,000.00) 450,000
Accrued Income 350,000
Inventory 200,000
Prepaid Expenses 50,000
Total Current Assets Php 1,100,000.00
Noncurrent Assets
Long Term Investments Php 1,250,000.00
Intangible Assets 500,000
Property, Plant and Equipment
Cost Php 1,000,000.00
Less: Accumulated Depreciation (300,000.00) 700,000.00
Total Noncurrent Assets Php 1,450,000.00
Total Assets Php 3,550,000.00

Liabilities and Owner’s Equity

Current Liabilities
Accounts Payable Php 250,000.00
Accrued Expenses 100,000.00
Unearned Income 80,000.00
Notes Payable 150,000.00
Total Current Liabilities 1,500,000.00
580,000.00
Noncurrent Liabilities
Mortgage Payable Php 500,000.00
Loans Payable 1,000,000.00
Total Noncurrent Liabilities Php 1,500,000.00
Total Liabilities Php 3,080,000.00
Owner’s Equity 470,000.00
Total Liabilities and Owner’s Equity Php 3,550,000.00\

3. Differentiate the Report Form and Account Form

Report Form – A form of the SFP that shows asset accounts first and then liabilities and owner’s
equity accounts after. (Haddock, Price, & Farina, 2012)The balance sheet shown earlier is in report
form.

Account Form – A form of the SFP that shows assets on the left side and liabilities and owner’s
equity on the right side just like the debit and credit balances of an account. (Haddock, Price, &
Farina, 2012)
a. Emphasize that the two are only formats and will yield the same amount of total assets,
liabilities and equity
 b. Emphasize that assets should always be equal to liabilities and equity
4. Group accounts under Current Assets, Noncurrent Assets, Current Liabilities, Noncurrent Liabilities
and Owner’s Equity
Current Assets – Assets that can be realized (collected, sold, used up) one year after year-end
Examples include Cash, Accounts Receivable, Merchandise Inventory, Prepaid Expense,

Current Liabilities – Liabilities that fall due (paid, recognized as revenue) within one year after
yearend date. Examples include Notes Payable, Accounts Payable, Accrued Expenses (example:
Utilities Payable), Unearned Income, etc.

Current Assets are arranged based on which asset can be realized first (liquidity). Current assets
and current liabilities are also called short term assets and shot term liabilities.

Noncurrent Assets – Assets that cannot be realized (collected, sold, used up) one year after
yearend date. Examples include Property, Plant and Equipment (equipment, furniture, building,
land), long Term investments, Intangible Assets etc.

5. Noncurrent assets and noncurrent liabilities are also called long term assets and long term
liabilities.

6. Point out the different parts of the Statement of Financial Position

 LEARNING IS FUN COMPANY
STATEMENT OF FINANCIAL POSITION
AS OF DECEMBER 31, 2016

Noncurrent Assets

Long Term Investments

Php 1,250,000.00
Intangible Assets 500,000.00

Property, Plant and Equipment NON CURRENT ASSETS

Cost Php 1,000,000.00

Less: Accumulated Depreciation (300,000.00) 700,000.00

Total Noncurrent Assets

Php 1,450,000.00
Noncurrent Assets

Long Term Investments

Php 1,250,000.00
Intangible Assets 500,000.00

Property, Plant and Equipment NON CURRENT ASSETS

Cost Php 1,000,000.00

Less: Accumulated Depreciation (300,000.00) 700,000.00

Total Noncurrent Assets

Php 1,450,000.00