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Statement of Financial Position

Financial statements provide a structured representation of an entity's financial position, performance, and cash flows, aiding users in economic decision-making. They include information on assets, liabilities, equity, income, expenses, and cash flows, and consist of various components such as the statement of financial position and statement of comprehensive income. The document also reviews balance sheet elements, classifying assets and liabilities as current or noncurrent, and describes the account and report forms of balance sheets.

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2 views

Statement of Financial Position

Financial statements provide a structured representation of an entity's financial position, performance, and cash flows, aiding users in economic decision-making. They include information on assets, liabilities, equity, income, expenses, and cash flows, and consist of various components such as the statement of financial position and statement of comprehensive income. The document also reviews balance sheet elements, classifying assets and liabilities as current or noncurrent, and describes the account and report forms of balance sheets.

Uploaded by

bombalesthirdy
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Financial statements

- Structured representation of the financial position and


financial performance of an entity. The objective of financial
statements is to provide information about the financial
position, financial performance and cash flows of an entity that
is useful to a wide range of users in making economic decisions.

Financial statements also show the results of the management’s


stewardship of the resources entrusted to it. To meet this
objective, financial statements provide information about an
entity’s:
a. assets;
b. liabilities;
c. equity;
d. income and expenses, including gains and losses;
e. contribution by and distributions to owner in their capacity
as owners; and
f. cash flows.

This information, along with other information in the notes,


assists users of financial statements in predicting the entity’s
future cash flows and, in particular, their timing and certainty.

A complete set of financial statements comprises:


a. a statement of financial position as at the end of the
period;
b. a statement of comprehensive income for the period;
c. a statement of changes in equity for the period;
d. a statement of cash flows for the period;
e. notes, comprising a summary of significant accounting
policies and other explanatory information; and
f. A statement of financial position as at the beginning of the
earliest comparative period when an entity applies an
accounting policy retrospectively or makes a retrospective
restatement of items in its financial statements, or when it
reclassifies items in its financial statements.

Review of balance sheet elements


Assets - Resources controlled by the entity as a result of past
events and from which future economic benefits are expected
to flow to the entity.

Liabilities - Present obligation of the entity arising from past


events, the settlement of which is expected to result in an
outflow from the entity of resources embodying economic
benefits.

Equity - Residual interest in the assets of the entity after


deducting all its liabilities

The balance sheet and accounting equation


Current assets + noncurrent assets = current liabilities +
noncurrent liabilities + capital

Current assets
An entity shall classify an assets as current when
- Its expects to realize the asset, or intends to sell or
consume it, in its normal operating cycle;
- Its holds the asset primarily for the purpose of trading;
- It expects to realize the assert within 12 months after the
reporting period; or
- The asset is cash or a cash equivalents unless the asset is
restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period.
- Example: Cash, accounts receivable, inventories, prepaid
expenses, marketable equity securities, office and store
supplies.

Noncurrent assets
All other assets (that are not current) shall be classified as
noncurrent assets.
- Example: Land (It appreciates), land improvements,
building, equipment (depreciation), machineries, intangible
assets (amortization), investment property, investment in
an associate and investment in equity securities.

Current liabilities
An entity shall classify a liability as current when
- It expects to settle the liability in its normal operating
cycle;
- It holds the liability primarily for the purpose of trading;
- The liability is due to be settled within 12 months after the
reporting period; or
- It does not have an unconditional right to defer settlement
of the liability for at least 12 months after the reporting
period.
- Example: Trade accounts payable, short-term notes
payable, salaries payable, rent payable, utilities payable
and current income tax payable.
Noncurrent liabilities
All other liabilities (that are not current) shall be classified as
noncurrent liabilities
- Example: Bonds payable and long-term notes payable

Account form balance sheet - Assets on the right and liabilities


and equity to the left, also like a T account.

Report form balance sheet - Asset, liabilities and owner's equity


are reported like receipt.

source: [FABM2] Lesson 035 - Statement of Financial Position

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