Statement of Financial Position (PDF)

STATEMENT OF FINANCIAL POSITION - These are resources owned by the company that can be used or realized for more than 1 year Accounting - Is the process of identifying,...

STATEMENT OF FINANCIAL POSITION - These are resources owned by the company that can be used or realized for more than 1 year Accounting - Is the process of identifying, NOTE: Realized means it could be measuring and communicating converted into cash, disposed or sold economic information to permit informed judgments and Assets decisions by users of information - These are economic resources with future benefits that are Types of Financial Statements: owned and controlled by the 1. Statement of Finacial Position company 2. Statement of Comprehensive - They may be Income tangible—something you can see 3. Statement of Changes in Equity and touch—or they may be 4. Statement of Cash Flows intangible—representing rights the business possesses STATEMENT OF FINANCIAL POSITION Assets - CURRENT - Shows what the business is 1. Cash worth in terms of the properties - This refers to all money it owns, the debts it owes, and received and paid by the the investment of its owners company - Informs the financial condition of - It can be cash in bank, the business at a given date cash on hand, or petty cash. It is made of bills, ASSET = LIABILITIES + EQUITY coins, checks and includes cash equivalents Current 2. Receivable - These are resources owned by - This refers to accounts the company that can be used or that are unpaid by realized within 1 year customers towards the company. In other words, Non-Current  amount collectible by a - Note: it may be current or company. on-current - It can be accounts receivables if it arises from Assets - NON CURRENT the trade of the business 1. Property, Plant or Equipment or notes receivables if it (PPE) arises from a written DEPRECIATION EXPENSE = COST OF promise to pay. It may be PPE - SALVAGE VALUE / ESTIMATED settled in other ways USEFUL LIFE 3. Inventories 2. Furnitures & Fixtures - This refers to products or - This refers to all seating goods held for sale by a and surface tools needed company. It is the cost of to facilitate office tasks, unsold merchandise. such as sofas, chairs, 4. Supplies tables, and other such - This refers to products or equipment goods not held for sale 3. Equipment and consumed by a - This refers in-room company during the equipment needed to run day-to-day operations. operations that require 5. Prepaid Expenses human intervention. - This refers to amounts - Examples are computers, that have been paid for in calculators, electric advance for goods and sharpeners, photocopy services that the company machines, etc. has not yet used. 4. Machinery - It includes prepaid rent, - This refers to out-of-room prepaid insurance, prepaid equipment needed for supplies, etc. operations that usually do 6. Investments not require human - This refers to allocating intervention such as cars, money to acquire assets trucks, tractors, with the expectation of generators, and etc. earning income 5. Building  - This refers to the cost of the buildings used by the Liabilities - CURRENT company 1. Accounts Payable 6. Land - This refers to obligations - This refers to the cost of arising from the normal the land used by the operations of the business company that are unpaid by the 7. Intangible Assets company - Assets with no physical 2. Notes Payable form or those that can - Written promises to pay neither be seen nor sums of money at future touched. dates or debts by a - Examples are computer company with a software, patent, promissory note attached goodwill, copyright, and 3. Accrued Expenses any other intellectual - This refers to obligations properties that have been incurred AMORTIZATION EXPENSE = COST OF but have not yet been paid INTANGIBLE ASSET / ESTIMATED for. USEFUL LIFE - Examples are salaries payable, utilities payable, Liabilities licensing payable, repairs - Obligations of the business, or payable. claims of creditors against the 4. Unearned Revenue assets of the business. It may - This refers to obligations include obligations to provide arising from paid goods or services or goods in the future services by client but have for which a customer may have not yet delivered or paid in advance performed by the - These debts do not always have company to be paid in money. Some of 5. Loans Payable these liabilities are in the form of - This refers to loans that obligations to do some service or are unpaid by the even give something  company usually from the - This one comes from the bank and lending firms income of the business 6. Bonds Payable from its normal operations - This refers to a form of long-term debt, often in Equity - DECREASE huge sums, contained in 1. Withdrawals an agreement called as - This one is derived from the bond indenture drawings of the owner 7. Long Term Payable against his or her capital - All other obligations that 2. Expenses are due for more than 1 - These are the costs year required to be spent to gain something Equity - The excess of the assets over the REMEMBER! liabilities - These accounts reported in the - These are sources of financing Statement of Financial position which represent the claims of are real accounts. They do not owners close at the end of the reporting - Depending on the form in which period and are carried over to the business is organized, equity become the beginning balance of may be called owner’s equity (for the next accounting period. a sole proprietorship) or partner’s - All these accounts, except equity, equity (for a partnership) or are classified into current and stockholder’s equity (for a noncurrent, depending on corporation). whether it is realizable or payable within the period of the Equity - INCREASE normal operations of the 1. Investment business or what you would - This one comes directly recall as the NOOB. This is the from the owners in the criteria used to classify accounts. form of investments of capital NOTE! 2. Revenue  - At the topmost part of the the end of the accounting period, statement is the header. It balances under these accounts contains three lines. On the first are only temporary amounts line, you must write the name of because it goes back to zero at the company followed by the the beginning of the following name of the financial statement. year. Finally, you will write “As of - single-step format is used by December 31, 20XX” which service companies while the should represent the end of the multi-step format is used by accounting period or the normal merchandising companies. operations of the business you are reporting on. As a default, we Single-Step Format are following a calendar year - it contains three lines. On the using the assumption that the first line, you must write the NOOB is 1 year. name of the company followed by the name of the financial statement. Finally, you will write STATEMENT OF COMPREHENSIVE INCOME “For the year ended, December 31, 20XX” which should - Summary of a business’ revenue represent the end of the and expenses over a period of accounting period or the normal time operations of the business you are reporting on. Profit - total amount of revenue that the - Revenues exceed our expenses company was able to generate from providing services to Loss customers. - Expenses are more than our - enumeration of the companies revenue expenses listed based on the source of the expense Note! - if the revenue exceeds expenses, - Accounts reported in the it yields a net income. If revenue Statement of Comprehensive is less than the expenses, it yield Income are nominal accounts. a net loss. They are called such because at  - This often includes Multi-Step Format salaries and wages of - header is the same for both salespeople, including single-step and multi-step commissions, payroll formats. taxes, and benefits. - net amount of revenue that the 2. Marketing company was able to generate - This may encompass from selling products while expenses directly related taking into account Sales Returns to a company's product and Sales Discounts. line, services, brand, or - the actual cost of merchandise image. A company might that the company was able to choose to aggregate sell during the year. marketing costs with - difference between Net Sales advertising costs although and Cost of Goods Sold some companies may - these expenses are not directly have enough reason to related to the merchandising segregate these costs. function of the company but are 3. Advertising necessary for the business to - This can be any form and operate effectively. It is a company can choose to categorized and listed based on further refine the way it the function of the expense. accounts for advertising - gross profit exceeds the by using different general operating expenses, it yields a ledger codes. net income. Otherwise, it yield a 4. Travel Expenses net loss. - This is often related to in-person events or trade Selling Expenses obligations such as trade - often related to expenses that shows or client meetings. are necessary for a company to directly interface with customers. General Expenses These types of expenses include: - often necessary to run a 1. Sales Expenses business. These costs would likely have to be incurred  regardless of the type of product - This is the broad coverage or industry that a company necessary for operating operates within. These types of the business. expenses include: 1. Rent Administrative Expenses - This is most often the cost - primarily related to the cost of of renting an office or personnel. These employees may headquarters space but it be internal staff or external may encompass other parties who provide services for items that are necessary a fee. They often don't directly for rent but aren't related interface with the manufacturing to the manufacturing or sale of goods. These types of process. expenses include: 2. Utilities 1. Accounting Payroll - This relates to electricity, 2. Information Technology/ IT water, sewer, or garbage Payroll expenses that aren't part 3. Human Resources Payroll of the manufacturing 4. Legal Counsel process. - These may be in-house 3. Office Equipment salaries or paid to external - This includes the cost to firms. rent equipment or to make 5. Consulting Fees one-time, non-material - These are often paid to purchases that don't meet external parties for capitalization administrative purposes. requirements. 4. Supplies - This includes general office supplies that are necessary for administrative personnel to carry out their jobs. 5. Insurance