General
What are the elements of statement of financial position?
Assets | Liabilities | Owner's Equity
A startup company spends money to register its logo and protect its brand name. These items don’t have physical form but provide long-term benefit. What type of asset do they represent?
intangible assets
It refers to the obligations or debts of a business that it needs to pay in the future, such as loans, accounts payable, or salaries payable.
Liabilities
It refers to the amount of money or assets invested by the owner into the business, which represents the owner's claim on the business assets.
Owner's Equity
At the end of the month, a business has total assets of ₱850,000 and total liabilities of ₱325,000. Using the accounting equation, compute the amount of Owner’s Equity and identify how it will be reported in the Statement of Financial Position.
₱525,000 as Owner’s Equity
(Assets ₱850,000 – Liabilities ₱325,000)
Often referred to as a “snapshot” of a company’s financial condition, this report lists what a company owns and owes at a specific date—but unlike the income statement, it does not cover a period of time.
Statement of Financial Position
Types of cash in statement of financial position.
Cash on hand | Cash in Bank | Cash Equiavalents
A business receives ₱100,000 from a customer for a service that will be provided next month. This amount is not yet earned but is recorded on the books.
What type of account does this transaction create for the business?
Unearned revenue
What the business owes to the owner
Equity
At the end of the month, a company has ₱80,000 in its bank account, ₱5,000 in its petty cash fund, and receives a customer’s check worth ₱10,000 that hasn’t been deposited yet. How much total cash should the company report under current assets in the Statement of Financial Position?
P 95,000 in cash and cash equivalents
In the Statement of Financial Position, this section shows the owner's residual interest in the company after deducting liabilities from assets. It increases when the company earns profit and decreases when the owner withdraws funds — but it is not considered a liability.
Equity
This type of intangible asset arises from the acquisition of another company and represents the excess of the purchase price over the fair value of the identifiable net assets. It cannot be sold separately and is tested annually for impairment rather than amortized.
Goodwill
This type of liability arises when a company has received goods or services but has not yet paid for them, and there is no formal written agreement or promissory note.
Accounts Payable
This component of owner’s equity appears in the statement of financial position of a corporation and represents the total par or stated value of shares issued to shareholders. It excludes premiums or additional paid-in capital and does not fluctuate with market value changes.
Share Capital
A company received ₱150,000 as advance payment from a client for services to be rendered over the next three months. As of the reporting date, only one month of service has been provided. How should the remaining amount be reported in the Statement of Financial Position?
₱100,000 as unearned revenue under current liabilities
These are structured reports prepared periodically to present an entity’s financial activities and condition. While often associated with showing profit or loss, they also include statements that reflect financial position, changes in equity, and cash flows.
Financial Statement
A company developed software for its internal use, which will help improve its operations for the next five years. It is not available for sale to customers. The development costs were significant and met the recognition criteria for assets. How should this software be reported in the Statement of Financial Position?
Intangible Asset under non current Asset
This type of liability is recorded when a business has already received goods or services but has not yet paid for them, and the payment is due in the future. It usually involves salaries, utilities, or interest that have accumulated but are unpaid.
Accrued Expenses
In the statement of financial position, this part of owner’s equity decreases the total capital and reflects the amount the owner has taken out of the business for personal use. It is not considered an expense and does not appear on the income statement.
Drawings / Owner Drawings
A company purchased equipment for ₱800,000. After recording ₱300,000 in accumulated depreciation over time, what line item and value should be reported in the Statement of Financial Position under non-current assets?
Net Book Value P 500,000
This the foundation of the Statement of Financial Position by showing that a company’s resources are financed either through debts or owner’s interest. Also, distinguish between the part of the equation that represents what the company owes and the part that represents the owner’s claim.
Accounting equation (Assets = Liabilities + Equity), where liabilities are what the company owes, and equity is the owner’s claim after liabilities
A company owns a piece of land that it purchased five years ago for future expansion. The land is currently unused and is not part of its regular business operations. It is not for sale either. How should this land be classified in the Statement of Financial Position?
Property under non-current assets
This type of non-current liability involves a formal agreement to repay borrowed funds over a period longer than one year and often includes interest payments. It is classified under long-term obligations and may impact both the statement of financial position and the notes to the financial statements due to future repayment terms.
Notes Payable
This component of owner's equity represents the cumulative amount of earnings retained in the business rather than distributed to the owner, and it increases or decreases based on net income or loss, excluding additional investments or withdrawals.
Retained Earnings
Ana's tailoring shop has ₱850,000 in total assets and ₱330,000 in total liabilities at the end of the year. She withdrew ₱50,000 for personal use and earned ₱120,000 in net income during the year.
Identify the amount of her original Owner’s Capital at the beginning of the year.
P 450,000