Module in Fundamentals of Accountancy 2

MODULE IN FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II
(Source: Teachers’ Guide)
Quarter 1, Week 1
Content Standards:
The learners demonstrate an understanding of account titles under the assets, liabilities, and
capital accounts of the Statement of Financial Position, namely, cash, receivables, inventories,
prepaid expenses, property, plant and equipment, payables, accrued expenses, unearned
income, long-term liabilities and capital that will equip him/her in the preparation of the SFP
using the report form and account form.
Performance Standards:
The learners are able to solve exercises and problems that require preparation of an SFP for a
single proprietorship with proper classification of accounts as current and noncurrent using the
report form and the account form.
Most Essential Learning Competencies:
a. The learner identify the elements of the SFP and describe each of them.
ABM_FABM12-Ia-b-1
b. The learner prepare an SFP using the report form and the account form with proper
classification of items as current and noncurrent.
ABM_FABM12-Ia-b-4
LESSON 1: STATEMENT OF FINANCIAL POSITION (SFP)
PRE-TEST:
Multiple Choice: Choose the letter that you think the best answer to each of the following
questions. Write the letter of your choice on the space provided. (20 points)
1. This statement includes the amounts of the company’s total assets, liabilities, and owner’s
equity which in totality provides the condition of the company on a specific date.
a. Cash Flow Statement
b. Statement of Changes in Equity
c. Statement of Comprehensive Income
d. Statement of Financial Position
2. __________ are the resources owned and controlled by the firm.

a. assets
b. liabilities
c. owner’s equity
d. withdrawal
3. __________ assets are those accounts that are presented under the assets portion of the
SFP but are reductions to the company’s assets.
a. contra assets
b. contra liabilities
c. contra owner’s equity
d. contra withdrawal
4. __________ is revenue earned but not yet collected.

a. accrued income
b. receivable income
c. outstanding income
d. uncollected income
5. __________ is an expense that has already been paid for, but which has not yet been
consumed.
a. prepaid asset
b. prepaid expense
c. prepaid payable
d. prepaid receivable
6. __________ are obligations of the firm arising from past events which are to be settled in
the future.
a. assets
b. liabilities
c. owner’s equity
d. withdrawal
7. A __________ account is a liability account where the balance is expected to be a debit

balance. An example is bond discount.
a. contra assets
b. contra liabilities
c. contra owner’s equity
d. contra withdrawal
6. __________ are obligations of the firm arising from past events which are to be settled in
the future.
a. assets
b. liabilities
c. owner’s equity
d. withdrawal
8. __________ are expenses that are incurred but not yet paid. Those are payables.
a. accrued asset
b. accrued expense
c. accrued payable
d. accrued receivable
9. __________ is cash collected in advance; the liability is the services to be performed or
goods to be delivered in the future.
a. unearned asset
b. unearned expense
c. unearned income
d. unearned liability
10. __________ are the owner’s claims in the business. It is the residual interest in the assets
of the enterprise after deducting all its liabilities.
a. assets
b. equity
c. liabilities
d. withdrawal
11. A form of the SFP that shows asset accounts first and then liabilities and owner’s equity
accounts after.
a. account form
b. report form
c. standard form
d. traditional form
12. A form of the SFP that shows assets on the left side and liabilities and owner’s equity on the
right side just like the debit and credit balances of an account.
a. account form
b. report form
c. standard form
d. traditional form
13. __________ are accounts that are retained permanently in the SFP until their balances
become zero.
a. fixed account
b. permanent account
c. temporary account
d. unfixed account
14. __________ accounts which are found in the SCI and will have zero balances at the end of
the accounting period.
a. fixed account
b. permanent account
c. temporary account
d. unfixed account
15. __________ are assets that can be realized (collected, sold, used up) one year after year-
end.
a. current assets
b. intagible assets
c. noncurrent assets
d. tangible assets
16. __________ liabilities that fall due (paid, recognized as revenue) within one year after year
end date.
a. current liabilities
b. non current liabilities
c. offset liabilities
d. outstanding liabilities
17. __________ are assets that cannot be realized (collected, sold, used up) one year after
year-end date.
a. current assets
b. intagible assets
c. noncurrent assets
d. tangible assets
18. __________ liabilities that do not fall due (paid, recognized as revenue) within one
year after year-end date.
19. It is also called a Balance Sheet.

a. Cash Flow Statement
b. Statement of Changes in Equity
c. Statement of Comprehensive Income
d. Statement of Financial Position
20. STATEMENT 1: Assets are increased when debited.

STATEMENT 2: Assets are decreased when credited.
a. statement 1 and 2 are correct
b. statement 1 and 2 are incorrect
c. statement 1 is the only correct statement
d. statement 2 is the only correct statement
OBJECTIVES: At the end of the lesson, the learners will be able to identify the elements of the
SFP and describe each of them; they shall be able to prepare an SFP using the report form and
the account form with proper classification of items as current and noncurrent.
MOTIVATION: Do you still remember the Accounting Equation?
ASSETS = LIABILITIES + OWNER’S EQUITY/EQUITY
Questions to Ponder:
 What are the things you personally owned? Those are your assets.
 Are there things you owed to someone? Those are your liabilities.
 What is now your equity?
Example:
Today, you have a smart phone worth P5,000.00. You bought it using your own savings
worth P3,000.00 and your borrowed money from your mother worth P2,000.00. Can you now
identify how much is your asset? liability? equity?
Most of the companies have greater assets than liabilities, but as a STUDENT, it is
normal that you have greater liabilities than assets.
DISCUSSION:
PART 1:
What are the elements of Statement of Financial Position (SFP)?
The elements of SFP are assets, liabilities and equity/owner’s equity.
1. Assets are the resources owned and controlled by the firm. It can be categorized as:
 Current Assets – are assets that can be realized (collected, sold, used up) one
year after year-end date
Examples of Current Assets are:

 Cash is money on hand, or in banks, and other items considered as
medium of exchange in business transactions
 Accounts Receivable are amounts due from customers arising from
credit sales or credit services
 Notes Receivable are amounts due from clients supported by
promissory notes.
 Inventories are assets held for resale
 Supplies are items purchased by an enterprise which are unused as of
the reporting date.
 Prepaid Expenses are expenses paid in advance. They are assets at the
time of payment and become expenses through the passage of time.
 Accrued Income is revenue earned but not yet collected
 Short term investments are the investments made by the company
that are intended to be sold immediately
 Noncurrent Assets – are assets that cannot be realized (collected, sold, used
up) one year after year-end date
Examples of Noncurrent Assets are:
 Property, Plant and Equipment (PPE) are long-lived assets which

have been acquired for use in operations (buildings, machinery, motor
vehicle, furniture and fixtures, office equipment, store equipment,
computer equipment, etc.)
 Long term Investments are the investments made by the company for
long-term purposes (real estate, bonds, stocks, etc.)
 Intangible Assets are assets without a physical substance
 Tangible Assets – are physical and measurable assets that are used in the
operation of the company such as cash, equipment, inventories, supplies, etc.
 Intangible Assets – are non-physical assets
Examples of Intangible Assets are:
 Franchise – is a type of license that a party (franchisee) acquires to

allow them to have access to a business's (franchisor) proprietary
knowledge, processes, and trademarks in order to allow the party to sell
a product or provide a service under the business's name (source:
www.investopedia.com)
 Patent – is a grant that provides the inventor exclusive rights to the
patented process, design, or invention for a designated period in
exchange for a comprehensive disclosure of the invention (source:
Investopedia)
 Trademark – is a recognizable insignia, phrase, word, or symbol that
denotes a specific product and legally differentiates it from all other
products of its kind (source: www.investopedia.com)
2. LIABILITIES are obligations of the firm arising from past events which are to be
settled in the future. It can be categorized as:
 Current Liabilities – are liabilities that fall due (paid, recognized as revenue)
within one year after year-end date
Examples of Current Liabilities:
 Accounts Payable are amounts due, or payable to, suppliers for goods
purchased on account or for services received on account
 Notes Payable are amounts due to third parties supported by
promissory notes
 Accrued Expenses are expenses that are incurred but not yet paid such
as salaries payable, utilities payable and taxes payable
 Unearned Income/Deferred Income is cash collected in advance; the
liability is the services to be performed or goods to be delivered in the
future
 Noncurrent Liabilities – are liabilities that do not fall due (paid, recognized as
revenue) within one year after year-end date
Examples of Noncurrent Liabilities:
 Loans payable is usually based on the earlier receipt of a sum of cash

from a lender and it charges interest (source:www.accountingtools.com)
 Mortgage payable is the liability of a property owner to pay a loan that
is secured by property (source:www.accountingtools.com)
3. EQUITY OR OWNER’S EQUITY are the owner’s claims in the business and the
residual interest in the assets of the enterprise after deducting all its liabilities
The account titles use for equity account are:
 Capital is the value of cash and other assets invested in the business by
the owner of the business
 Drawing is an account debited for assets withdrawn by the owner for
personal use from the business
Activity No. 1
Analyze if the given account is a current asset (CA), noncurrent asset (NCA), tangible asset
(TA), intangible asset (IA), current liabilities (CL), noncurrent liabilities (NCL) or capital (C).
There can be two classification under one account. Write the account inside the column where
it belongs. (24 points)
Accounts Payable Accounts Receivable Accrued Expenses Accrued Income

Building Capital Cash Drawing
Equipment Franchise Intangible Assets Inventories
Loans payable Long term Mortgage payable Notes Payable
Investments
Notes Receivable Patent Prepaid Expenses Property, Plant and
Equipment
Short term Supplies Trademark Unearned
investments Income/Deferred
Income
CA NCA TA IA CL NCL C
PART 2:

Module in Fundamentals of Accountancy 2

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MODULE IN FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT II

(Source: Teachers’ Guide)

Most Essential Learning Competencies:

LESSON 1: STATEMENT OF FINANCIAL POSITION (SFP)

2. __________ are the resources owned and controlled by the firm.

4. __________ is revenue earned but not yet collected.

7. A __________ account is a liability account where the balance is expected to be a debit

19. It is also called a Balance Sheet.

20. STATEMENT 1: Assets are increased when debited.

MOTIVATION: Do you still remember the Accounting Equation?

ASSETS = LIABILITIES + OWNER’S EQUITY/EQUITY

What are the elements of Statement of Financial Position (SFP)?

The elements of SFP are assets, liabilities and equity/owner’s equity.

Examples of Current Assets are:

Examples of Noncurrent Assets are:

 Property, Plant and Equipment (PPE) are long-lived assets which

 Intangible Assets – are non-physical assets

Examples of Intangible Assets are:

 Franchise – is a type of license that a party (franchisee) acquires to

Examples of Current Liabilities:

Examples of Noncurrent Liabilities:

 Loans payable is usually based on the earlier receipt of a sum of cash

The account titles use for equity account are:

Accounts Payable Accounts Receivable Accrued Expenses Accrued Income

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