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Lesson 1 SFP
Lesson 1 SFP
MODULE
MELC : A. Identify the elements of the SFP and describe each of them
(ABM_FABM12- Ia-b-1)
Introduction:
The learners must be able to recall the difference of Assets and Liabilities
Tell the learners that having more assets does not mean that the business is
earning
The learners must be familiar with the following terms:
a. Permanent Account – these accounts are permanent in a sense that their
balances remain intact from one accounting period to another.
c. 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.
Elements of SFP
I. Assets –are resources with future benefits that are with the control of the company.
Current Assets - are those that are expected to be realized or used within the company's
normal operating cycle or 1 year, whichever is longer. They include properties that are held
primarily for the purpose of selling them in the near future. In essence, current assets are
short-term in nature.
Non-Current Assets - are properties held for a long period of time (i.e. more than 1 year).
1. Property, Plant, and Equipment (PPE) also known as Fixed Assets
PPE includes tangible assets that are expected to be used for more than
one year. PPE accounts include: Land, Building, Machinery, Service
Equipment, Computer Equipment, Delivery Equipment, Furniture and
Fixtures, Leasehold Improvements, etc.
Take note that land that is not used by the business in its operations but is
rather held for appreciation is not part of PPE but of investments.
Accumulated Depreciation - a contra-asset account deducted from the
related PPE account. It represents the decrease in value of the asset due
to continuous use, passage of time, wear & tear, and obsolescence.
2. Long-Term Investments
Investment in Long-Term Bonds, Investment in Associate, Investment in
Subsidiary, Investment Property, Long-Term Funds; these are
investments that are intended to be held for more than one year.
3. Intangibles
An intangible has no physical form but from which benefits can be derived
and its cost can be measured reliably.
Intangibles include Patent for inventions, Copyright for authorship,
compositions and other literary works,Trademark, Franchise, Lease
Rights, and Goodwill.
4. Other Non-Current Assets
Assets which cannot be classified under the usual non-current asset
categories
Includes: Advances to Officers, Directors, and Employees not collectible
within one year, Cash in Closed Banks, and Abandoned or Idle Property
There you have a list of asset accounts. Take note that different companies may use
different (although similar) sets of account titles. It will depend upon the company's
business and industry, and what specific accounts were adopted in its chart of
accounts.
II. Liabilities
- refer to economic obligations of an entity.
- A liability is technically defined as a "present obligation of an enterprise
arising from past transactions or events, the settlement of which is expected
to result in an outflow from the entity of resources embodying economic
benefits".
Current liabilities - are those that entity expects to settle within the entity's normal
operating cycle or 1 year, whichever is longer
Non-Current Liabilities - are long-term obligations, i.e. expected to be settled beyond one
year.
1. Long-Term Notes Payable - obligations evidenced by promissory notes
which are to be paid beyond 1 year; also commonly referred to as Loans
Payable
2. Bonds Payable - liabilities supported by a formal promise to pay a specified
sum of money at a future date and pay periodic interests. A bond has a stated
face value which is usually the final amount to be paid. Bonds can be traded in
bond markets.
For serial bonds (bonds paid in installments), the portion which is to be
paid within one year is considered as a current liability; the rest are non-
current. The same rule applies to other long-term obligations paid in
installments.
3. Mortgage Payable - long-term obligation to a bank or other financial
institution, secured by real properties of the business
4. Any other long-term payable, i.e. any obligation that is to be paid beyond
1 year
https://www.accountingverse.com/financial-accounting/elements/expense-
accounts.html
Sample of Statement of Financial Position
MELC: . Identify the elements of the SFP and describe each of them
(ABM_FABM12- Ia-b-1)
Direction: From the box select the best answer which will complete
each statements.
1. Accounts Receivable
2. Capital
3. Revenue
4. Liabilities
5. Prepaid Expense
6. Cash Equivalents
7. Inventory
8. Accounts Payables
9. Liabilities
MELC: . Identify the elements of the SFP and describe each of them
(ABM_FABM12- Ia-b-1)
1. Accrued Expenses
2. Accounts Receivable
3. Loan Payable
4. Cash
5. Inventory
6. Prepaid Expenses
7. Utilities Expense
8. Utilities Payable
9. Cash on Hand
3. Loan Payable
✔
4. Cash
✔
5. Inventory
✔
6. Prepaid Expenses
✔
7. Utilities Expense
8. Utilities Payable
✔
9. Cash on Hand
MELC: . Identify the elements of the SFP and describe each of them
(ABM_FABM12- Ia-b-1)
______________________________________________________________________
2. Why is it that to have a good accounting form suggests that a single line is
drawn every time an amount is computed?
______________________________________________________________________
______________________________________________________________________
Rubrics for Difficult
Grading Factors:
1. Completeness (5 points)
Does your response directly answer each part of the assignment
question(s)?
3. Analysis (5 points)
Have you clearly state analysis and give examples to back them up?
Does your response provide analysis to the larger concepts of the lesson?
MELC: . Identify the elements of the SFP and describe each of them
(ABM_FABM12- Ia-b-1)
Prepare a Statement of Financial Position for Rivera Sari-Sari store using the
following accounts:
Cash – 5,000
Loans Payable – 77,500
Accounts Receivable – 2,600
Supplies – 2,300
Equipment – 17,000
Owner’s equity – 40,000
Accounts Payable – 22,400
Building –113,000
Answer: Enhancement
Assets
Current Assets
Cash P5,000
Accounts Receivable 2,600
Supplies 2,300
Total Current Assets P 9,900
Non-Current Assets
Building P113,000
Equipment 17,000
Total Non-Current Assets P130,000
TOTAL ASSETS P139,900
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References:
- https://www.accountingverse.com/financial-
accounting/elements/expense-accounts.html
- http://qm.riosalado.edu/resources/SyllabusDB/SocialSciences/Rubric_S
hort_Answer.pdf