[Music] [Music] hello dear students welcome to search who was accounting lessons ph and this is lesson 35 and we will be talking about the statement of financial position this is part one of the senior high school constructive accounting at the end of the video you should be able to review balance sheet elements differentiate current assets from non-current assets differentiate current liabilities from non-current liabilities prepare a statement of financial position under account form and report form and we also have to try solving accounting problems relative to the balance sheet okay so in the last lesson we learned the topics that are covered in the subject which is fundamentals of abm2 and i have also introduced you what are the lessons that we'll be taking in constructive accounting and what are the industry based lessons that we have in the subject okay so i think we're ready to start so according to international accounting standard one which is entitled presentation of financial statements so most of you uh major first time accounting standard paragraphs and paragraphs and paragraphs of guidance and transactions that you can encounter in accounting how will your record cash how will you record the cost of an equipment how will you report an equipment after depreciation things like that okay so we are being guided by what we call accounting standards okay which is under the generally accepted accounting principles in the philippines which is the international accounting standard and the international financial reporting standards anyway so that's just a quick overview of the things that you will be learning in higher accounting but first of all let's define financial statements okay now discuss if a bm1 so let's go back to it financial statements are a structured representation of the financial position and financial performance of an entity if you would look at it it's a structured representation financial position which relates to the entity's assets liabilities and capital and then financial performance which which is revenue and expenses the objective of financial statements is to provide information about the financial position financial performance and cash flows of an entity remember that the objective of financial statements is providing information and that's actually how accounting is defined right we prepare quantitative information primarily financial in nature okay now it is useful to a wide range of users in making economic decisions so the financial statements that we will be doing so someone will use that someone will read that and it will help those users of financial statements in making proper economic decisions financial statements also showed the results of the management's stewardship of the resources entrusted to it management resources to meet this objective financial statements provide information about the entities of financial statements liabilities and equity the market attends a statement of financial position income and expenses including gains and losses a statement of comprehensive income contributions buy and distributions to owners in their capacity as owners a statement of changes in equity and shampoo cash flows statement of cash flows this information along with other information in the notes assist users of financial statements in predicting the entity's future cash flows and in particular their timing and certainty and the pain notes nothing notes and disclosures or the notes to financial statements things like that okay so next slide tayo a complete set of financial statements comprises the following a statement of financial position as at the end of the period take note of the word as at okay because a statement of changes in equity for the period london and statement of cash flows for the period london positioning assets liabilities and capital and remember on asset liabilities and capital real accounts closing entries unlike drawing revenue and expenses closing entries okay you'll understand more of it when we go further with the lessons okay financial statements notes comprising a summary of significant accounting policies and other explanatory information so it is vital in preparing the financial statements the shampoo explains financial statements intermediate accounting part three so nothing nothing this is a senior high school a b c d and e but we will focus more on the preparation of a b c and d okay so let's review the balance sheet elements and the public reports a statement of financial position assets an asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity remember that an asset is a resource now what do we expect in those resources future economic benefits will flow to the entity as you use those assets economic benefits will enter the entity liabilities naman a liability is a present obligation of the entity arising from past events and the settlement of which is expected to result in an outflow of the entity of resources embodying economic benefits unliability obligations the best way to translate liabilities into a very simple manner is okay so it's a present obligation obligation okay and then equity is simply defined in the conceptual framework for financial reporting as the residual or owner's equity partnership partners equity but corporation shareholders equity okay so i hope that you understand kung okay so actually the statement of financial position the balance sheet is a detailed representation of the accounting equation remember that the accounting equation is assets is equals to liabilities plus capital f-a-b-m-1 but in the preparation of the balance sheet and the preparation of the statement of financial position we divide assets into current assets and non-current assets and we also present liabilities intercurrent liabilities and non-current liabilities s credits to accounting coach for the picture that i used in this slide okay so at the point current asset portion non-current asset portion sheet okay let's discuss this current non-current method when can we say that an asset is current an entity shall classify an asset as current when donated it expects to realize the asset or intends to sell or consume it in its normal operating cycle if you would remember some merchandising operations pinagosa panateno okay so when you say normal operating cycle it's the normal you business operations okay usually the normal operating cycle of a company is 12 months one year per companies or industry style nah longer than 12 months your normal operating cycle so anginame it's accounting standard nowhere is normal operating cycle in the 12 months so whichever is longer in the long 12 months or normal operating cycle normal operating cycle so if your asset is realizable or saleable or consumable within the normal operating cycle or within 12 months or whichever is longer then that's a current asset it holds the asset primarily for the purpose of trading best example is for trading not an asset inventories okay and then it expects to realize the asset within 12 months after the reporting period so after the reporting period belong on 12 months uh is really a current asset because you expect to receive it within 12 months okay if you would remember merchandising accounting term 2 over 10 and over 30 on you unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period if it is a cash or cash equivalent then it is a current asset that is under international accounting standard one presentation of financial statements okay so some examples of current assets include cash okay then we also have accounts receivable from rendering of service or selling products on account and then inventories the asset primarily held for the purpose of trading yanyon okay and then prepaid expenses pero depends on prepaid expenses half assembly prepaid expenses no longer than one year so uh depends a classification so your first 12 months you as non-current okay and then marketable equity securities smart trading securities among assets and operating a for the purpose of trading uh pakistan marketable equity securities from the word itself equity stocks not even company all other assets that are not current shall be classified as nankerin some examples of that include we have land land improvements building equipment machineries intangible assets investment property investment in an associate and investments in equity securities we have some words here that are very new to you so let's understand them one by one land improvements okay land improvements are improvements in land okay manga parking lots pavement in reality actually in accounting land does not depreciate it actually appreciates appreciate sana ona appreciate okay and then however always remember that land improvements is depreciable in tangible assets you are holding stocks from other companies which is 20 or higher than you will call that company as your associate pakis when can you say that a liability is current okay it expects to settle the liability in its normal operating cycle so or is this italian liability within the normal operating cycle okay so current liability and then it holds the liability primarily for the purpose of trading best example accounts payable pugnac purchase canada inventory parent debit purchases credit accounts payable and inventory and another purpose the liability is due to be settled within 12 months after the reporting period consequent hindi for the purpose of trading your liability more but if it will be settled within 12 months and the current liability things are like rent payable salaries payable utilities payable across that engine usually classification okay more than 12 months okay and number four it does not have an unconditional right to the first settlement of the liability for at least 12 months after the reporting period but if the entity does not have the unconditional right to defer settlement then automatically that is a current liability examples of current liabilities are trade accounts payable short-term notes payable salaries payable rent payable utilities payable intermediate accounting part 2 under international accounting standard 12 income taxes yeah and okay um [Laughter] and long-term notes payable examples non-current liabilities usually more than one year again usually once payable five years ago so determine if the following are current asset current liabilities non-current assets or non-current liabilities so i will be showing you some accounts so uh okay first salaries and wages payable three two one salaries and wages payable i current liability okay next property plan and equipment three two one property plant and equipment is a non-current asset okay next cash and cash equivalents three two one it's a current asset bonds payable three two one that is a non-current liability accounts payable three two one that is a current liability investment property three two one investment property is non-current asset and last item office and store supplies at the end three two one that is a current asset okay so i hope you got everything correctly huh [Music] okay so this is an example of an account form balance left side the undiabilities and capital as a right side assets on the left liabilities and capital on the right report form and balance sheet again credits to my accounting course for the picture that i used assets are above liabilities and capital and then um so assets liabilities okay so again when the balance sheet is prepared under account form the assets on the left liabilities and capital on the right but report from the man assets and then liabilities and then capital okay so we're ready to start our calculations we will now prepare a statement of financial position this is the highlight of our lesson so before anything else and before we start please download handout zero three five and the link is available in the description box okay so access or if you have access on the phone pdf so i suppose accessible in your phones and tablets let's start okay so the statement of financial positions name of company name of the financial statement and period coverage so name of company is graduation company and the name of the financial statement statement of financial position and then the period which is us at december 31 20 x1 december 31 20 x1 no problem okay my friends is so when you are being given problems like that the only thing that you can do is to classify them first okay so [Music] non-current asset current liability non-current liability or equity now equity uh we will be going through them one by one across and other current liabilities so that is a current liability bonds payable is a non-current liability cash and cash equivalency current asset current income tax payable current liability intangible assets non-current asset investment in associate yandin non-current asset investment in equity securities yan po non-current asset investment property yanpo i non-current asset long-term notes payable non-current liability merchandise inventory and po i current asset office and store supplies current asset other non-current assets other than current liabilities addition and current liability owner's equity equity okay prepayments and other current assets current asset property plan and equipment non-current asset short-term notes payable current liability trading other payables a current liability and trading other receivables a current asset after you have already distinguished the kind of the element so ego group group the first thing we need to do shampre is okay so young current asset not in the cash and cash equivalents merchandise inventory office and store supplies prepayments and other current assets and trading other receivables okay so cash and cash equivalence two million five hundred thousand trade and other receivables one million eight hundred sixty five thousand merchandise inventory two million seven hundred eighty nine thousand office and store supplies four hundred thousand prepayments and other current assets three hundred eighty five thousand indian pakistan total current assets not in a seven million nine hundred thirty nine thousand you know so i hope you understand how to prepare the current asset section so nothing you prepare in current asset section we proceed to the non-current assets okay so you know non-current asset which is intangible assets investment in associate investment in equity securities investment property other non-current assets choco property plant and equipment if you would remember our lesson on depreciation in the previous videos diba we report assets at their carrying value and for property plant and equipment the carrying value is the asset cost less all accumulated depreciation accumulated depreciation for intangible assets pointing them and depreciation so property plant equipment net of accumulated depreciation intangible assets net of accumulated amortization okay so not in a statement format okay so property plan and equipment nine million eight hundred fifty six thousand two hundred fifty intangible assets of two million six hundred fifty four thousand seven hundred investment in equity securities of three million six hundred fifty thousand four hundred investment in associate of one million eight hundred ninety thousand six hundred investment property of one million hundred sixty eight thousand seven hundred forty and other non-current assets of six hundred thousand which will give you a total non-current assets of twenty million six hundred twenty thousand six hundred ninety total current assets of seven million and hundred thirty nine thousand plus total non-current assets of twenty million six hundred twenty thousand six hundred ninety will give us total assets of twenty eight million five hundred fifty nine thousand six hundred ninety okay then we proceed with our current liabilities naman [Music] for current liabilities we have across and other current liabilities current income tax payable short-term notes payable and trade and other payables of 1 562 890 short-term notes payable of 320 000. current income tax payable of 589 6660 and then acro walls and other current liabilities of 125 890 which will give you total current liabilities of two million five hundred ninety eight thousand four hundred forty and then after your current liabilities we proceed to your non-current liabilities bonds payable long-term notes payable and other non-current liabilities and then you'll also prepare the statement format for that so bonds payable is 5 million long-term notes payable of 2 million and then other non-current liabilities of 750 000 for a total of non-current liabilities 7 million 750 000. same thing that we will do in liabilities young current liabilities and non-current liabilities abilities portion balance sheet 4 total current liabilities of 2 million eight thousand four hundred forty eight total non-current liabilities at seven million seven hundred fifty thousand which will give you total liabilities of ten million three hundred forty eight thousand four hundred forty indicated remember the other side of the accounting equation is liabilities plus capitals equity so owner's equity nathan is 18 million 211 250. the liabilities and equity portion of the statement of financial position total liabilities of ten million three hundred forty eight thousand four hundred forty plus owner's equity in eighteen million two hundred eleven thousand two hundred fifty total liabilities and equity punatin which is same as the total assets twenty eight million five hundred fifty nine thousand six hundred ninety now uh we will be on the requirement we will be preparing the balance sheet or the statement of financial position both in report form and account form report report graduation company statement of financial possession as a december 31 20 x1 then we start with your current assets okay and then we proceed also with your non-current assets and then yana puyo total assets liabilities and then eternal young equity for total liabilities and equity of 28 million five five nine six ninety which is equal total assets 28 million five five nine six ninety total liabilities and equity 28 559 690. industry or actual practice and balance it prepare in report form okay in liabilities and equity nasa right side of the account and what makes it more uh interesting is kaya form normal balance opposition diabetes liabilities uh prepared in account form okay so take new screenshots i suggest you separate handout for today okay so on expectation attend by this time the pat maruno another knowledge uh the another additional knowledge is problem solving the multiple choice so if you want to become a certified public accountant you need to take the cpa board exam and the cpa board exam is multiple choice problems so let's try some problems okay let us try some multiple choice problems regarding the accounting equation and the statement of financial position problem number one giselle company has current assets of four million three hundred fifty thousand and total liabilities of two million eight hundred ninety thousand if capital is eight million how much is the entity's non-current assets a six million five hundred forty thousand b nine million four hundred thirty thousand c ten million eight hundred ninety thousand or d there is insufficient information that will not allow you to answer the problem okay so prediction video and then try to answer it first okay so um which is 10 890 and remember total liabilities and equity is equal to total assets so on total assets not in 10 million 899. so the answer for problem one is letter a okay we proceed with problem number two an entity has the following account balances at december 31 cash 890 000 trade receivables 450 000 trade payables 300 000 land improvements seven hundred thousand short term notes payable one hundred thousand investment in associate one million two hundred fifty thousand bonds payable six million if the entity maintains four hundred thousand worth of inventories at the end of every year how much is the entity's current assets a one million three hundred forty thousand b one million seven hundred forty thousand c two million four hundred forty 000 d 2 million 540 thousand so possible okay assuming [Laughter] in answering a hunting problems you read first the question you mean question stem okay is a problem so for example it is a problem if the entity maintains 400 000 pesos worth of inventories at the end of every year how much is the entity's care and assets so by that way was a problem we just carry assets [Music] we need to answer problems in 3.5 minutes and that's just three minutes and 30 seconds so imagine so explains the computing 3 minutes 30 seconds per problem then per problem item but anyway that's the technique company solve the problem since our problem is just asking about current assets that is a problem so cash of 890 000 trade receivable of 450 000 and your inventories now 400 000. so major little maintains four hundred thousand inventories at the end of every year ebooks will be in london your inventories every end of the year four hundred thousand dollars ok our next lesson is income statement the statement of comprehensive income for all questions comments and suggestions please put them down in the comment section below okay and then please have please represent your school mag [Music] this online learning that we have right now okay so for webinar and speakership invites please send me a message to kevin troy the chuwa 1994 at gmail.com this is sir tu as accounting lessons ph to god be all the glory honor and praise saparino every single moment of our lives thank you and have a great day [Music] me