www.shsph.blogspot.

com

FABM MODULE 2

Identify the element of the

Lesso
Statement of Financial
n 1
Position (SFP) and describe
each of them

The Statement of Financial Position (SFP), which is also known as the Balance
Sheet, shows the financial position of a business entity at a given period or a
specified date. Its purpose is to help the financial statement users in the
assessment of the financial health and soundness of a business entity in
determining its liquidity, financial, credit and business risks. It has three (3)
elements: 1. Assets (resources owned and controlled by the business); 2.
Liabilities (obligations owed to someone by the business); and 3. Equity or
Owner’s Equity (residual interest of the owners of the business or what was left
of the assets after paying the liabilities is the right of the owners).

The assets, aside from the capital investment of the owners, maybe financed
from outside sources (like loans from banks and other financial institutions or
from other creditors). The total assets should always be equal to the sum of the
total liabilities and total equity. Thus, the Accounting Equation is stated as:
Assets = Liabilities + Equity.

What’s In

As what you have learned from your Fundamentals of the Accountancy, Business
and Management 1 about the types of major accounts (Assets, Liabilities, Equity,
Income and Expenses), let us focus on the three major accounts which are also
the elements of the SFP or the Balance Sheet. These are the Assets, Liabilities
and Equity.

1
www.shsph.blogspot.com

Notes to the Teacher

Begin the lesson by letting the students do Activity: 1“HULA ME”.
Let the student answer the given worksheet which willhelp them
identify and describe the key elements of the SFP.

What’s New
The activity below will help you check how much you know about the key
elements of the Statement of Financial Position (SFP).

Activity 1: “HULA ME”

Directions:

1. Guess the account title being described in each sentence.

2. Identify what element of SFP (Assets, Liabilities or Equity) it is listed/ included.

3. Write your answers on the columns provided.

Description Account title SFP Element

1. I am used as a medium of
exchange in business
transactions. I may be held on
hand or put in banks for

2
www.shsph.blogspot.com

safekeeping.
2. I can be in the form of cash or
other assets invested by the
owner to start- up a business.
3. I am items held for resale.
4. I am expenses paid
in advance.
5. I am expenses incurred but
not yet paid.
6. I am amounts due to
suppliers for the purchase of
goods or services received on
account.
7. I am an amount taken by the
owner from the business for
personal use.
8. I am an account due with
supporting promissory notes.
9. I am an account due from
customers as a result of sale
of goods or for services
rendered.
10. I have a long- life and
acquired for use in business
operations.

What is It
In Activity 1, you were able to identify and describe some of the account titles
and the elements to which it belongs in relation to the Statement of Financial
Position (SFP). In this part of the module, you will learn further the preparation of
SFP using the report form and the account form with proper classification of
items as current and noncurrent.

The Statement of Financial Position (SFP): its classification,

its preparation and its form.
As mentioned earlier, the Statement of Financial Position (SFP) or the Balance
Sheet shows the financial position of a business entity at a given period or a
specific date. Following the accounting cycle the SFP and other financial
3
www.shsph.blogspot.com

statements (which will be discussed in the succeeding modules) are prepared

once the adjusted trial balance is done to come- up with a fair balance sheet
statement. Assets, Liabilities and Equity are properly grouped and classified to
give a meaningful information. Assets are presented and classified by the order
of its liquidity or those that are readily available for use and can easily be
converted into cash are listed first and assets that cannot be easily converted
into cash are listed last. When it comes to liabilities, maturity matters. Those
obligations that are currently due are listed first. The Balance Sheet includes
permanent and contra asset accounts. An account is said to be permanent
because their balances are carried over from one accounting date to another.
The Assets, Liabilities and Equity accounts are permanent accounts. Contra asset
accounts are accounts also presented in the SFP as a deduction to a particular
asset. These are Allowance for Doubtful Accounts and Accumulated Depreciation.
The Allowance for Doubtful Accounts, a contra- asset for Accounts
Receivable, it is an allowance made by the business for estimated uncollectible
accounts. An Accumulated Depreciation is an account that represents
depreciation of Fixed Assets (except for Land) due to its usual wear and tear.

Classification of Assets, Liabilities and Equity

1. Assets are divided into current or non- current.
Current Assets- are items that are listed on a business’ statement of financial
position that are expected to be used or realized into cash within one accounting
period or a year. It usually includes cash, accounts receivable, inventories and
prepaid expenses. Cash is considered the most liquid asset because it is readily
available for use. It is used as a medium of exchange in business transactions
and may be held on hand or put in banks for safekeeping. Accounts
Receivables are accounts due from customers as a result of sale of goods or for
services rendered that are collectible within one year. Inventories are regarded
as a current asset because these are items held for resale because they are
readily available (either raw materials or finished goods). Prepaid expenses are
considered current assets because they are expenses paid in advance to be
consumed within a year.

Non- Current Assets- are items that are listed on a business’ statement of
financial position that cannot be used or realized into cash within one accounting
period or a year. It includes assets that are long- term in nature like fixed assets,
long-term investments and intangibles. Fixed assets includes Property, Plant
and Equipment (Furniture, equipment, land, building, vehicles, etc.) that are used
acquired for use in operations and have an estimated useful life of more than
one year. Long- term investments are investments made by the owners of the
business for long- term purposes like marketable securities. Intangible assets
are non- physical assets like Patents, Copyright and Franchise.

2. Liabilities are also divided into current or non- current.

Current Liabilities- are liabilities that should be paid and realized within a year
after the year- end date. These include Accounts Payable, Notes Payable,
Accrued Expenses and Unearned Income. Accounts Payable is amount due to

4
www.shsph.blogspot.com

suppliers for the purchase of goods or services received on account to be paid

within a year. Notes Payable is account due with supporting promissory notes
with short-term mode of payments. Accrued Expenses are expenses incurred
but not yet paid, examples are Salaries Payable, Taxes Payable, etc. Unearned
Income is cash collected or given in advance from customers for future delivery
of goods or services to be performed.

Non- Current Liabilities- are liabilities that are to be paid for more than a year
from the year- end date. These include Loans Payable, Mortgage Payable, etc.
Loans Payable is account due from third parties which was agreed to be paid
for longer terms. Mortgage Payable is account due from third parties with
associated collaterals to be paid for longer terms.

3. Equity
Equity or Owner’s Equity is the residual interest of the owners of the business
or what was left of the assets after paying the liabilities is the right of the
owners. It includes the Capital and Drawing accounts. Capital is the investment
made by the owner to start- up a business in the form of cash or other assets.
Drawing or withdrawal is an amount taken by the owner from the business for
personal use.
Steps in preparing a simple Statement of Financial Position (SFP):
1. You should start with a heading. The heading includes the name of the
business or entity (ex. JD Gardens), name of the financial statement (ex.
Statement of Financial Position) and the reporting date/ period (ex. As of
December 31, 2019). We use as of in SFP because the amounts (in
Philippine Peso) of the items are cumulative from the start of the
operations of the business up to the accounting date.

2. Assets are presented first. These are classified into current and non-
current assets.

3. Next is to present the Liabilities. These should also be classified into

current and non- current liabilities.

4. Equity/ Owner’s Equity is then added after the liabilities to complete the
accounting equation (Assets= Liabilities + Equity).

Dale’s Garden
Statement of Financial Position
As of December 31, 2019

ASSETS
Current Assets
Cash PhP 250,000.00
Accounts Receivable 85,000.00

5
www.shsph.blogspot.com

Garden Supplies and Materials 185,000.00 Prepaid Expenses

48,000.00
Total Current Assets Php 568,000.00

Non- Current Assets

Garden Tools and Equipment PhP 285,000.00
Accumulated Depreciation ( 95,000.00) PhP
190,000.00
Delivery Vehicle 500,000.00
Accumulated Depreciation ( 62,500.00) 437,500.00
Land 1,500,000.00 Building 550,000.00
Accumulated Depreciation ( 55,000.00) 495,000.00

Total Non- Current Assets PhP

2,622,500.00
TOTAL ASSETS PhP
3,190,500.00
============
====
LIABILITIES

Current Liabilities
Accounts Payable PhP 355,000.00
Notes Payable, 1 year 150,000.00
Salaries Payable 35,500.00
Total Current Liabilities PhP 540,500.00

Non-Current Liabilities
Notes Payable, 7 years 350,000.00

TOTAL LIABILITIES PhP 890,500.00

OWNER’S EQUITY

Owner’s Equity
D. Ramos, Capital PhP
2,300,000.00

TOTAL LIABILITIES AND OWNER’S EQUITY PhP

3,190,500.00

================

The illustration is an example of a simple statement of financial position of a

single/ sole proprietorship. Other forms of business organizations (partnership
and corporation) have different presentation depending on the nature of its
business. The total assets must be always equal to the total liabilities and
owner’s equity. The total assets, as well as, the total liabilities and equity are
double ruled showing that it is the end part of a financial statement.

6
www.shsph.blogspot.com

Forms of Statement of Financial Position (SFP)

The Statement of Financial Position (SFP) has two forms, the Report form and the
Account Form. The format in the preparation of the SFP depends on the
preference but most financial users prefer to use the report form because it is
easier to read especially when comparing multiple years SFP.

Report Form- it is a form of SFP wherein accounts are presented vertically, the
Assets first, followed by the Liabilities and then the Equity. The above presented
Balance Sheet is an example of a Report Form SFP.

Account Form- it is a form of SFP wherein accounts are presented horizontally,

the Assets are presented on the left side while the Liabilities and the Equity are
on the right side of the Balance Sheet. It will look like the debit and credit
balances of an account.
Dale’s Garden
Statement of Financial Position
As of December 31,2019

ASSETS LIABILITIES AND OWNER’S EQUITY

Current Assets Current Liabilities

Cash ₱250,000.00 Accounts Payable ₱355,000.00
Accounts Receivable 85,000.00 Notes Payable, 1 year 150,000.00
Garden Supplies and Materials 185,000.00 Salaries payable 35,500.00
Prepaid Expenses 48,000.00 Total Current Liabilities ₱540,500.0
0
Total Current Assets ₱568,000.00
Non-Current Liabilities
Non- Current Assets Notes Payable, 7 years ₱350,000.00
Total Non-Current ₱350,000.0
Garden Tools and Equipment ₱285,000.00 Liabilities 0
Accumulated Depreciation (95,000.00) ₱190,000.00
Delivery Vehicle 500,000.00 Total Liabilities ₱890,500.0
0
Accumulated Depreciation (62,500.00) 437,500.00
Land 1,500,000.00 Owner's Equity
Building 550,000.00 D. Ramos, Capital ₱2,300,000.00
Accumulated Depreciation (55,000.00) 495,000.00 Total Owner's Equity ₱2,300,000.0
0
Total Non- Current Assets ₱2,622,500.00

TOTAL LIABILITIES &

₱3,190,500.00 ₱3,190,500.0
TOTAL ASSETS OWNER'S EQUITY
0

7
www.shsph.blogspot.com

Notes to the
Teacher
The brief discussion above provided enough information for the
students to do the activities on succeeding
the pages. Such
activities are designed for individual preparation and lesser
teacher
intervention.

What’s More
Activity 2: “LET’S CLASSIFY”
Directions: Determine the classification of the following accounts as to ASSET,
LIABILITY AND EQUITY. For Asset and Liability accounts, determine also how it is
treated as to CURRENT OR NON- CURRENT.

No. ACCOUNT TITLE ACCOUNT CLASSIFICATION

1. Cash
2. Furniture and Fixtures
3. Land
4. Notes Payable
5. Notes Receivable
6. DSD, Capital
7. Accounts Receivable
8. Vehicle
9. Building
10. Taxes Payable
8
www.shsph.blogspot.com

11. Mortgage Payable

12. DSD, Drawings
13. Prepaid Rent
14. Utilities Payable
15. Marketable Securities

Activity 3: “PRAKTISADO AKO 1”

Directions: Prepare a properly classified Statement of Financial Position using
the report form.
Mr. Dale Ramos, owned a plant shop named Dale’s Gardens. He hired you to
prepare his plants shop’s Statement of Financial Position for the year 2019. The
following shows the assets and liabilities of Mr. Ramos:
a. His plant shop has cash in bank account amounting to P150,000.
b. His plant shop has uncollected sales from customers amounting to P125,000.
c. The total amount of garden supplies and materials after inventory showed
P80,000 on hand.
d. He already paid one year’s advertisement in advance in a local newspaper
amounting to P12,000
e. Total value of all the shop’s garden tools and equipment amounted to
P150,000
f. He bought garden supplies and materials on account from his supplier
amounting to P155,000 to be paid within three months after the year- end. g.
Salaries unpaid to his three employees totaled P21,000.00.
h. Utilities amounting to P6,000.00 remained unpaid as of year- end.
i. His outstanding loan balance amounted to P45,000 will be paid within 5
years.

Activity 4: “PRAKTISADO AKO 2”

Directions: Using the same data in Activity 3, prepare a properly classified
Statement of Financial Position using the account form.

9
www.shsph.blogspot.com

Notes to the
Teacher
Activities 2, 3 and 4 are designed to develop and enrich students’
knowledge on the Statement of Financial Position (SFP). The
activities ensure that students’ full understanding of the lesson is
achieved
.

10
www.shsph.blogspot.com

What I Have Learned

At this point, let us see how much you have gained from the discussions and
activities you have undergone.

Activity 5: “PROBLEM MO, SOLVE KO”

Directions: Analyze the given situations, solve and give the appropriate
answers. Use a separate sheet of paper.
1. Wash and Wear Laundry has current assets amounting to Php 300,000.
Noncurrent assets for the year totaled Php 89,000. How much is the laundry’s
total assets?
2. Read Me Book Shop has assets of Php 2,000,000.00 and owner’s equity of
Php 600,000.00. How much is the book shop’s total liabilities?
3. No Melt Ice Cream parlor has liabilities of Php 395,000.00 and assets of Php
524,000.00. How much is the ice cream parlor owner’s equity?
4. Everyday Bake Shop has total liabilities amounting to Php 35,000. Total
equity had an ending balance of Php 42,000. How much is total assets?
5. Choose Me Boutique had the following accounts at year end: Cash-
PhP250,000, Accounts Payable-PhP70,000, Prepaid Expense-PhP15,000. Compute
for the company’s current assets.
6. A hotel company has owner’s equity of PhP 5,000,000.00 and liabilities of
PhP 2,560,000.00. How much is the company’s total assets?
7. At the beginning of the year, the assets of Dale’s Services were PhP
560,000.00 and its Owner’s Equity was PhP 250,000.00. During the year, assets
were increased by PhP 120,000.00 and liabilities increased by PhP 20,000.00.
What was the owner’s equity at the end of the year?
8. Happy Selling’s Accounts Receivable amounted to Php 500,000. Prepaid
Expense and Unearned Income totaled Php 30,000 and Php 10,000 respectively.
Cash balance amounted to Php 100,000 while Accounts Payable and Inventory
totaled to Php 20,000 and Php 10,000 respectively. How much is the company’s
current assets? Current liabilities?
9. Company’s Total Liabilities and Equity amounted to Php 285,000. Total
noncurrent assets ended at Php 85,000. Cash totaled Php 50,000. Inventory
amounted to Php100,000. Assuming the company had no other assets, how
much is Accounts Receivable?
10. Total assets amounted to Php575,000. Total equity amounted to Php
250,000. Accounts Payable amounted to Php 50,000 while Unearned Income
totaled Php 85,000. Assuming there are no other current liabilities, compute for
the company’s noncurrent liabilities.

11
www.shsph.blogspot.com

What I Can Do

This activity will help you transfer into real-life situations the knowledge and
skills you have gained or learned from this module.

Activity 6: “OWNED and OWED KO” (Make your own SFP)

Direction:

1. On a separate sheet of paper, make a list of your savings (if you have any)
and then everything that you personally own (cellphone, clothes,
accessories, bags, jewelries, etc.). Make sure to estimate the amounts/
values of what you have listed.

2. Next is to list down what you owed from your parents, other family
members and friends.

3. Deduct the amount you owe (liabilities) from the amount of what you own
(assets).

4. Determine what was left of you (equity).

Guide Questions:

1. What did you feel while doing the activity?

2. Were you able to differentiate what you owned from what you owed?

3. What do you think is the importance of knowing one’s SFP?

4. Do you think having more assets in a business means that the business is
earning?

Rubrics in Rating Activity 4: “OWNED and OWED KO” (Make your own
SFP)
Standard Identifying one’s own assets, liabilities and equity
5 Comprehensively and clearly answered the guide questions.
4 Satisfactorily and clearly answered the guide questions.
3 Fairly and clearly answered the guide questions.
2 Provided short discussions on the guide questions.

1 Provided a little idea about the guide questions.

12
www.shsph.blogspot.com

Assessment

Directions: Choose the letter of the best answer and write your answer on a
separate sheet of paper.

1. A non-current item is _________________________________.

a. expected to be used/realizable into cash or to be paid for more than
one year.
b. expected to be converted or realizable into cash within a year.
c. expected to be used or paid within a year.
d. item bought for readily consumption/ production.

2. An item is considered current

when__________________________________________?
a. It is expected to be used or converted into cash or to be paid for more
than one year.
b. It cannot be converted or realizable into cash within a year.
c. It is expected to be used or realizable into cash or to be paid within a
year.
d. It has an expected life for more than 12 months

3. It is a form of the Statement of Financial Position that is presented in a

vertical format.
a. Report form c. Digital form
b. Account form d. Line form

4. It is a form of the Statement of Financial Position that is presented in a

horizontal format.
a. Report form c. Digital form
b. Account form d. Line form

5. The following are elements of Statement of Financial Position EXCEPT:

a. Assets c. Equity
b. Liabilities d. Expenses

6. In which part of Statement of Financial Position does the Salaries Payable

be listed?
a. Assets c. Owner’s Equity
b. Liabilities d. Expenses

13
www.shsph.blogspot.com

7. Which of the following is classified as a current asset?

a. Prepaid Rent c. Investments
b. Unearned Rent d. Drawings

8. Which of the following is classified as a non-current liability?

a. Accounts Payable c. Utilities Payable
b. Mortgage Payable d. Unearned Revenue

9. All of the following are classified as Assets, EXCEPT:

a. Accounts Receivable c. Building
b. Inventory d. Accounts Payable

10. Which of the following financial statements presents the financial position
of an entity at a given or specific date?
a. Income Statement c. Statement of Changes in Equity
b. Statement of Financial Position d. Statement of Cash Flows

11. Which of the following is classified as Current Asset?

a. Prepaid Expenses c. Delivery Vehicle
b. Land d. Copyright

12. Which of the following is the correct Accounting Equation?

a. Assets + Liabilities = Equity c. Assets = Liabilities + Equity
b. Assets = Liabilities - Equity d. Assets + Equity = Liabilities

13. Which of the following pertains to the obligations that the business owed
to other entities arising from past events which are to be settled in the
future?
a. Assets c. Equity
b. Liabilities d. Resources

14. It is derived from deducting the total liabilities to the total assets of a
company.
a. Assets c. Equity
b. Liabilities d. Resources

15. It pertains to resources which are controlled and owned by the business.
a. Assets c. Equity
b. Liabilities d. Resources

14
www.shsph.blogspot.com

Additional Activities

Let us reinforce the skills/knowledge that you have gained from this lesson by
doing the next activity.

Activity 7: PROBLEM SOLVING AND ANALYSIS

Direction: From these randomly ordered accounts of Josh Trading prepare a

properly classified Balance Sheet (in report form). The balances shown are as of
12/31/2019.

Sales Returns and Allowances PhP 11,000.00

Accumulated Depreciation 50,000.00
Merchandise Inventory, December 31, 2019 80,000.00
Sales 1,050,000.00
Merchandise Inventory, January 1, 2019 100,000.00
Purchases 400,000.00
Selling Expenses 190,000.00
Accounts Payable 100,000.00
Purchase Returns and Allowances 2,000.00
Cash 50,000.00
Office Equipment 220,000.00
Withdrawals 50,000.00
Sales Discounts 29,000.00
Transportation-In 10,000.00
15
www.shsph.blogspot.com

General and Administrative Expense 200,000.00

Office Supplies 30,000.00
Accounts Receivable 220,000.00
Notes Payable 200,000.00
Prepaid Rent 100,000.00
Josh, Capital, Jan. 1, 2019 200,000.00
Purchase Discounts 8,000.00
Net Income from operation 200,000.00

References
Ballada, W. Fundamentals of Accountancy, Business and Management 2 Made
Easy. Philippines: DomDane Publishers, 2018
De Guzman, A. Fundamentals of Accountancy, Business and Management 2 For
Senior High School. Philippines: Lorimar Publishing, Inc., 2018
Monfero, R.P. , et. Al. Teaching Guide for Senior High School: Fundamentals of
Accountancy, Business and Management 2. Philippines: Published by
Commission on Higher Education (CHED), 2016

16
www.shsph.blogspot.com

For inquiries or feedback, please write or call:

Department of Education – SDO Palawan

Curriculum Implementation Division Office

2nd Floor Deped Palawan Building
Telephone no. (048) 433-6392

Learning Resources Management Section

LRMS Building, PEO Compound
Telephone no. (048) 434-0099