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Fundamentals of

Accountancy,
Business &
Management 2
The learners shall be able to
1. identify the elements of the SFP and describe each of them.

2. classify the elements of the SFP into current and noncurrent


items.

3. prepare the SFP of a single proprietorship.

4. prepare an SFP using the report form and the account form
with proper classification of items as current and noncurrent.
1. Statement of Financial Position
2. Income Statement/Statement of Comprehensive
Income
3. Statement of Changes in Equity
4. Statement of Cash Flows
5. Notes, comprising a significant accounting policies
and other explanatory information
Responsibility for
financial statement
The management of an
entity has the primary
responsibility for the
preparation and
presentation of financial
statements.
1.
Statement of
Financial
Position
Assets, Liabilities and Equity

1. What is Statement of Financial
Position?
2. How the other financial statements
are linked to the SFP?
STATEMENT OF
FINANCIAL POSITION
Is a formal statement showing the three
elements comprising the financial
position.
Interrelationships among the
Financial Statements

The income statement and the statement of owners equity are interrelated.

Net income or net loss appears


on both statements.
Interrelationships among the
Financial Statements

The owners capital at the end of


the period on the statement of
owners equity also appears on
the balance sheet as owners
capital.
Interrelationships among the
Financial Statements

The balance sheet and the cash flow statement are interrelated.

The cash reported on the


balance sheet is also reported as
the end-of-period cash on the
cash flow statement.
SEQUENCE OF 1. Income statement
PREPARATION
2. Statement of owners equity
3. Statement of Financial Position
4. Statement of Cash Flow

1. What are the elements of SFP?
2. Differentiate each elements.
Assets are resources owned by a
business.
They are things of value used in
carrying out such activities as
production and exchange.
Liabilities are claims against
assets.
They are existing debts and
obligations.
Owners Equity is equal to total assets minus total
liabilities.
Owners Equity represents the ownership claim on
total assets.
Subdivisions of Owners Equity:
1. Capital
2. Drawings
3. Revenues
4. Expenses
ELEMENTS Assets
OF
STATEMENT Liabilities
OF SFP
Equity

What are the examples of Assets, Liabilities


and Equity?

1. When is the presentation of assets, liabilities
with separate current & non-current
classification useful?
2. Why is it important to know the normal balance
of each account?
3. What are the two common formats of SFP?
Accounting Equation: ???
__________ = _____________ + __________
BASIC FORM OF ACCOUNT
In its simplest form, an account consists of
1. the title of the account,
2. a left or debit side, and
3. a right or credit side.
The alignment of these parts resembles the letter T,
and therefore the account form is called a T account.
Title of Account

Left or debit side Right or credit side

Debit balance Credit balance


DEBITS AND CREDITS
The terms debit and credit mean left and
right, respectively.

The act of entering an amount on the left


side of an account is called debiting the
account and making an entry on the right
side is crediting the account
DR CR
NORMAL BALANCE OF AN ACCOUNT
NORMAL BALANCES
ASSETS AND LIABILITIES
Assets
Increase Decrease
Debit Credit
Normal
Balance
Liabilities
Decrease Increase
Debit Credit
Normal
Balance
NORMAL BALANCE OWNERS DRAWINGS

Owners Drawings
Increase Decrease
Debit Credit
Normal
Balance
NORMAL BALANCES REVENUES AND EXPENSES
Revenues
Decrease Increase
Debit Credit
Normal
Balance

Expenses
Increase Decrease
Debit Credit
Normal
Balance
TWO
ACCEPTABLE
FORMATS
ACCOUNT FORM
REPORT FORM
Thanks!
Any questions?
You can find me at facebook RUBEN SOSING LEYBA
CONTACT NO. 09163131801
1. The SFP provides readers with the
information as to the companys

TRUE financial position as of a specified


date.
OR 2. Assets=Liabilities + Owners Equity is
FALSE the governing equation of the SFP.

3. Asset is an element of the SFP that


has a normal balance of credit.

4. Debit means to increase an account

5. Credit means to decrease an account


ASSIGMNMENT
page 31
Problem 4
AMIHAN COMPANY-
Nos. 1-5
Please prepare for
Summative Test
tomorrow.
THEORY & PROBLEM