FUNDAMENTALS OF ACCOUNTANCY,

BUSINESS AND MANAGEMENT 2

GRADE 12 - ABM Tchr. MELODY

F. DOLOR
LESSON 1: STATEMENT OF FINANCIAL POSITION

 it was referred to as Balance Sheet.

LIABILITIES
ASSETS EQUITY
 reports the resources available for the company to
use,obligations that the company is required to settle and the
equity that belongs to the owners of the company
 a snapshot of the financial position of the company
ELEMENTS OF THE STATEMENT OF FINANCIAL
POSITION

LIABILITIES
ASSETS EQUITY
 ASSETS
- resources with future benefits that are within the control of the company

KINDS OF ASSETS

 CASH
 RECEIVABLES
 INVENTORY
 PREPAID EXPENSES
 PROPERTY,PLANT, and EQUIPMENT
 INTANGIBLE ASSETS
 CASH

 refers only to funds readily available to be spent for the company operations. Used for settlement of
obligations
 used for buying assets,paying suppliers,utilities,employees salaries and others
 sourced from contribution of owners,proceeds from borrowing,sale of assets or collections from
costumers
COMPONENTS OF CASH
 cash on hand - included bills,coins and bank checks kept in the company premises
 cash in bank - refers to money in the bank
 cash equivalents - technically not cash because its not immediately available for use ( time deposits )

REMEMBER
Components of cash and cash equivalents are required to be disclosed in the accompanying notes to financial
statements.
 • Friendly Convenience Store: Cash

Friendly Convenience Store is managed by Juana De la Cruz. Juana asked you to determine the balance of
the cash account as of December 31, 2001. You determined the following:

1. She kept some cash in the store as change fund [sukli]. The cash count revealed 3 pieces of 100 peso bills, 5
pieces of 50 peso bills, 5 pieces of 20 peso bills, 5 pieces of 10 peso coins, 10 pieces of 5 peso coins, 10 pieces of
1 peso coins and 25 pieces of 25 centavo coins.
2. Two of her regular customers gave Juana the following checks in payment of debts:
a. P1,540 check dated December 31, 20X1.
b. P2,432 check dated January 3, 20X2.
3. There are two bank accounts in the name of the store with the following balances:
a. Balance of the savings accounts on December 31, 20X1 according to the passbook is P26,780.
b. A time deposit certificate for P100,000 for 90-days.

• Report to Juana Dela Cruz the balance of the cash and cash equivalents account of Friendly Convenience
Store.
 RECIEVABLES
A general term that refers to the company's right to collect or claim payment. The right to collect comes from
unpaid sales or lending activities.

KINDS OF RECIEVABLE
 cash on delivery - a sale agreement may require a costumer to pay the the seller immediately upon
delivery of goods
 accounts recievables (AR ) - a credit sales agreement, a costumers may instead promise to pay the seller
at some future time after delivery. It is evidenced by sales invoice and delivery reciepts. Has a term of
30,60,180 days
 notes recievable ( NR )- evidence by promissory notes, a legal documents thats says the borrower
promises to pay on schedules payment dates, a specific sum called the principal and interest based on
principal and stated interest
 Friendly Convenience Store: Accounts Recievables

Juana asked you to compute how much Maria Reyes owed the store.Juana sells to Maria on credit. Maria
pays every 15th and 30th of the month. Maria listings are reproduced below.

Maria Reyes
Balance P124.00
September 5 2 Bottles of cola (P12 each)
September 15 1 bar of laundry soap (P50)
October 3 1 sachet of fabric softener (P50)
October 8 1 small can of sardines (P25)
October 15 Payment: P200.00
October 25 2 bag of chips (P30 each)
October 30 Payment: P100.00
November 16 1 sachet of laundry soap (P50)
November 22 2 kilo of rice (P44 per kilo)
November 30 Payment: P100
December 1 5 sachet of shampoo (P15)
December 15 Payment: P100.00
December 22 1 small cans of sardines (P25)
December 27 2 kilo of rice (P44)
December 28 1 small bar of path soap (P20)
December 29 5 sachet of shampoo (P15)
December 30 Payment: P100.00
 INVENTORY
Refers to the cost of unsold merchandise that the company purchased for the purpose of reselling to its
costumers in the normal course of its business. The Inventory account of a trading business contains
merchandise held for resale

 CONSIGNMENT is an important issue in inventory accounting. The owner places his goods “ on
consignment” in the premises of the store owner.
 only merchandise held for sale are reported as INVENTORY
Before Juana opened the store on January 1, 20X2, she asked you to help her count the merchandise inside the store.
The result of the count are given below:

Merchandise Cost
2 bags of candy P30 per bag
10 sachets of coffee P6 per sachet
10 sachets of laundry powder P15 per sachet
1 sack rice (50 kilos) P1,800 per sack
10 cans of sardines P15 per can
10 chocolate bars P20 per bar
5 notebooks P25 per notebook
Note:

1. The chocolate bars were on consignment from tsokolate-eh.

2. Of the 5 notebooks inside the store, one is used for listings of customer credit.

Report to Juana Dela Cruz the balance of the merchandise inventory account of Friendly Convenience Store.
 PREPAID EXPENSES
Is an asset account that refers to future expenses paid in advance before the services
or goods are used.
Examples: mobile phones services, insurances

Friendly Convenience Store: Prepayments

(continuation)
Juana paid premium of P2,500 for one-year fire insurance in the name of the
store on October 1, 20X1. How much should prepaid insurance be on December 31
20X1?
 PROPERTY,PLANT and EQUIPMENT ( PPE )
Are long term assets ( non current asset ) which are used in the operations of the company.
Examples: land, building, warehouse,automobiles, delivery vehicle,computer equipment
and manufacturing equipment. Rented facilities and equipment are excluded from PPE

Friendly Convenience Store: Property, Plant, and Equipment

(continuation)
On January 1, 20X0, Juana purchased electronic cash register to be used in the
Friendly Convenience Store. The cash register was purchased at a cost of P15,000. Juana
depreciates the cash register over five years. Determine the following:
1. Equipment
2. Annual depreciation
3. Accumulated depreciation as of December 31, 20X1
4.Net book value of equipment as of December 31, 20X1
 INTANGIBLE ASSETS

Long term assets similar to PPE.Used in the business for more than one year. The
allocationof the cost of intangible assets to the year it was used is called amortization.

Examples: patent,brand name, trademark

 LIABILITIES
These are obligations that the company is required to pay.

KINDS OF LIABILITIES

1. PAYABLES
2. ACCRUED EXPENSES
3. UNEARNED INCOME
4. LONG TERM LIABILITIES
 PAYABLES
The obligations to make payments to creditors

2 KINDS OF PAYABLES

1. ACCOUNTS PAYABLE ( AP )
- refers to the obligation to the supplier of inventories
- evidenced by suppliers sales invoice and delivery reciepts
- credit terms 2/10,n/30 ( two ten net thirty )
2. NOTES PAYABLE ( NP )
- refers to an obligation evidenced by a promissory note expresses the
borrowers promise to pay
- the issuer of the promissory note reports this as NP IN SFP
- the holder of the promisory note has the right to collect and reports NR in
SFP
 Friendly Convenience Store: Accounts Payable
(continuation)

On November 15,20X1, Juana Dela Cruz purchased five sacks of

rice at P1,800 per sack. The credit term is 2/10, n/30. Determine how
much Juana should pay given the following payment dates:

1. November 25, 20X1

2. December 15, 20X1
 Friendly Convenience Store: Notes Payable

Promissory Note
November 1, 20X1

1. Promise to pay. For value received, Friendly Convenience Store, represented by Juana Dela Cruz, the
manager,(Borrower) promises to pay United Bank (Lender) P25,000 (twenty-five thousand pesos) and interest at the
yearly rate of 6% on the unpaid balance as specified below.

2. Installments. Borrower will pay five payments of P5,000 each at monthly intervals on the 30th day of the month.
First payment is due on November 30, 20X1.

3. Application of Payments. Payments will be applied first to interested and then to principal.

4. Prepayment. Borrower may prepay all or any part of the principal without penalty.

5. Loan Acceleration. If Borrower is more than five days late in making any payment, Lender may declare that the
entire balance of unpaid principal is due immediately, together with the interest that has accrued.

Answer the following question:

1.Who will record the Notes Payable?
2.Who will record the Notes Receivable?
3.Compute for the payment due on November 30 20X1 and December 30 20X1.
4.Determine the balance of Notes Payable as of December 31, 20X1.
 ACCRUED EXPENSES

- refers to the obligation to pay for goods and services already used in the operation of
the busines such as salaries payable,utilities payable,rent and interest payable

Friendly Convenience Store: Accrued Expense

(continuation)
Juana hired Elena Reyes as storekeeper with the salary of
P400 per day . Elena is paid every Saturday for work rendered
during the week. Sunday is her day-off. December 31, 20X1
falls on a Thursday.
Determine the balance of Salaries Payable to be reported on
the Store’s SFP as of December 31, 20X1.
 UNEARNED INCOME

refers to advance payments made by the costumers while goods and services are not
yet delivered to the costumers
Example: Advance Rent

• LONG TERM LIABILITIES

refer to obligations with due dates that fall more than one year
from the date of the SFP
Example: Bank Loan
 EQUITY

 the net assets of the business. It is composed of the owner

investments and the accumulated net income of the company,
net of any distributions to the owners. It reflects the portion of
the asset that belongs to the owners of the business.
 for a sole proprietorship, the SFP will reflect only one equity
account - owner's capital
 STATEMENT OF FINANCIAL POSITION

2 Formats of the SFP

a. account form
b. report form
Statement of Financial Position Account Form
ASSETS Liabilities and Equity
Cash xxx Accounts Payable xxx
Account Recievable xxx Accrued Expenses xxx
Inventory xxx Unearned Income xxx
Prepaid Expenses xxx Notes Payable xxx
Notes Receivable xxx Long term Liabilities xxx
PPE xxx
Intangible Assets xxx Owner,capital xxx
Total Assets xxx Total Liabilities and equity xxx
 ASSETS
Cash xxx
Account Recievable xxx
Inventory xxx
Prepaid Expenses xxx
Notes Receivable xxx
PPE xxx
Intangible Assets xxx
Total Assets xxx

Liabilities and Equity

Accounts Payable xxx
Accrued Expenses xxx
Unearned Income xxx
Notes Payable xxx
Long term Liabilities xxx

Owner,capital xxx
Total Liabilities and equity xxx
Statement of Financial Position Report
Form
 MODIFIED STATEMENT OF FINANCIAL POSITION
- it means that assets and liabilities are classified as to current and non current

• Current Assets - can be used or converted to cash within one year

( cash,account receivable and inventory )
 Prepaid expenses maybe classified current if the advance payment
is expected to be used within one year
• Non current Assets - collectibles after one year
( PPE and Intangible assets )
• Current Liabilities - payables due to be paid within one year of the
SFP date ( accounts payable, and accrued expenses )
• Non current Liabilities - long term liabilities
 ASSETS
Cash xxx
Account Recievable xxx
Inventory xxx
Prepaid Expenses xxx
Notes Receivable
Total Current assets xxx
PPE xxx
Intangible Assets xxx
Total Non Current Assets
Total Asset s xxx
Liabilities and Equity
Accounts Payable xxx
Accrued Expenses xxx
Unearned Income xxx
Notes Payable xxx
Cu r r ent potion of long ter m debt xxx
Total current liabilities xxx
Long term payable xxx

Total Liablities xxx

Owner,capital xxx
Total Liabilities and equity xxx
 NORMAL BALANCES

 Debit and credit refers to the sides of the T - account - debit on the left and credit on the right

 An account is increased by an entry on the side of its normal balance, and decrease by an entry
on the opposite side of its normal balance.

 The normal balance of asset acounts is debit

 Liabilities and equity have normal balances of credit.

CALM YOUR NERVES,

ERASE YOUR FEARS

AND
OPEN YOUR MIND

HAPPY LEARNING