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02 SFP Assets

The document further explains the nature of specific asset accounts like cash, receivables, inventory, prepaid expenses, property and equipment, and intangible assets. It describes the components of cash, characteristics of receivables like accounts receivable and notes receivable,

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Ivan Gray Alvarez
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246 views22 pages

02 SFP Assets

The document further explains the nature of specific asset accounts like cash, receivables, inventory, prepaid expenses, property and equipment, and intangible assets. It describes the components of cash, characteristics of receivables like accounts receivable and notes receivable,

Uploaded by

Ivan Gray Alvarez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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THE

STATEMENT
OF
FINANCIAL
POSITION
LESSON OBJECTIVES:
At the end of the class period, the learners
should be able to:
 Describe each part of the Statement of
Financial Position;
 Describe the nature of the accounts
reported on the SFP;
 Classify the elements of the SFP into
current and non-current items;
 Determine the normal balances of the
Statement of Financial Position.
A SNAPSHOT OF FINANCIAL POSITION
The assets are on one side and the claims are
on the other side.

LIABILITY
ASSET
EQUITY
A SNAPSHOT OF FINANCIAL POSITION

 At the top most part of the SFP is the title


 The first line of the title shows the company
name
 The second line identifies the FS which is the
SFP.
 The third line is the date of the SFP.
ELEMENTS OF THE SFP

 The SFP is a report based on accounting


equation: ALOE
 The SFP is “balanced” as a consequence of
double-entry accounting.
 On one side of the SFP are assets.

 ASSETS are resources with future benefits


that are within the control of the company.
Meaning, the asset should be useful to the
company in the future and control means
that the company can prevent others from
benefiting from the asset.’
ELEMENTS OF THE SFP

 On the other side of the SFP are the claims.


 Liabilities and equity are sources of
financing.
 Liabilities are claims of creditors

 Equity represent claims of owners

 Creditors require payment of principal and


interest
 Owners, on the other hand, are not required
to be repaid for their investment in the
company.’
QUESTION

1. What are the elements of SFP?


2. What is an asset?
3. What is a liability?
4. Differentiate liability from equity.
ASSETS

Resources are classified into asset accounts


based on its future use in the company.
1. Cash

2. Receivables

3. Inventory

4. Prepaid Expenses

5. Property, Plant, Equipment

6. Intangible Assets
CASH
 The most well-known asset class
 Is money owned by the company,

 Cash kept in the company’s premises is called


Cash on Hand.
 Cash in Bank refers to money in the bank
which can be kept in a savings or checking
account.
 Cash refers only to funds readily available to
be spent for the company’s operations. It is
used for buying assets, paying suppliers,
utilities, employees salaries and others.
CASH
 Cash are also used for settlement of
obligations.
 On the other hand, cash are sourced from
owners, proceeds from borrowings, sale of
assets or collections from customers.
 Cash on Hand includes bills, coins and bank
checks kept in the premises of the company.
CHECKS
 Checks are bank documents used by the
issuer to instruct the bank to pay the
assigned payee from funds in the issuer’s
bank account.
 Checks maybe reported as part of cash
because these documents are accepted as
payments and deposits.
 A Check is classified as cash if the date of the
check is on or before the SFP date.
 A Check dated after the SFP date is post-
dated check is classified as receivable rather
than cash.
TIME DEPOSITS ACCOUNT
A deposit in the bank that earns higher
interest because the depositor commits not to
withdraw the funds over the agreed upon
time. Penalties are imposed if the depositor
withdraws before the maturity of the deposit.’
 An accounts that are not readily available for
use.
 Those with a term of up to 90 days are
reported as cash equivalents while those that
will mature longer than 90 days are reported
as investments.
CASH EQUIVALENTS
 Are technically not cash because it is not
immediately available for use.
 It is almost cash in the sense that it will
become cash the next 90 days.
 It is generally reported on the SFP together
with cash. The line account is cash and cash
equivalents.
 Components of cash and cash equivalents are
cash on hand, cash in bank, cash equivalents.
 These components are required to be
disclosed in the accompanying notes to
financial statement.
EXERCISE 1
Friendly
Convenience Store:
CASH
RECEIVABLES
 Is 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. Generally, the company collects
cash from its receivables.
 there are also receivables that maybe settled
in other assets or services.
RECEIVABLES
A sale agreement may require a customer to
pay the seller immediately upon the delivery
of goods called COD. In contrast to COD, a
customer may instead promise to pay the
seller at some future time after delivery. This
is a credit sales agreement and it gives rise to
Accounts Receivable, which means receivable
from customers.
 Normally has a term of 30 days, some are
lenient and give terms of 60, 90 and 180
days.
RECEIVABLES
 Notes receivable is another kind of
receivable. It is evidenced by a Promissory
Note (PN).
 Promissory Notes is a legal document that
says the borrower brushes to pay, on
scheduled payment dates, specific sum called
the principal and interest based on principal
and stated interest rate.
EXERCISE 2
Friendly
Convenience Store:
ACCOUNTS RECEIVABLE
EXERCISE 3
Friendly
Convenience Store:
INVENTORY
EXERCISE 4
Friendly
Convenience Store:
PREPAYMENTS
EXERCISE 5
Friendly
Convenience Store:
PROPERTY, PLANT AND
EQUIPMENT
EXERCISE 6
Friendly
Convenience Store:
INTANGIBLE ASSTES

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