Fabm2 Module 2

ACEBA Systems Technology Institute Inc.
Senior High School

Track : Academic
Strand : Accountancy, Business and Management
Specialization : Bookkeeping NCIII
Grade : 12
Grading Period : 1st Sem. (sy.2020-2021)
Prepared by : Mr. Renniel L. Apuro
Fundamentals of Accountancy, Business and Management 2

Module WEEK 2
LIABILITIES (Payables, Accrued Expenses, Unearned Income, Long-Term Liabilities)
and EQUITY
Liabilities
is a debt owed by a company that requires the entity to give up an economic benefit
(cash, assets, etc.) to settle past transactions or events.
Where can Liabilities be found?
The liabilities section can be found in the balance sheet, opposite the asset section.

This is because assets are recorded as debits, and liabilities are recorded as credits. They are
listed in order of payment terms, from shortest to longest.
Current liabilities include all liabilities that are expected to be paid within one year.
Any liabilities with a payment period of over a year are considered long-term. Current
liabilities include payments for debts, accounts payable, and other bills that are due to
suppliers and other providers. The ease with which a company can manage to pay off its
current liabilities can be determined using the ‘current ratio’, which divides the company’s
current assets by its liabilities (a high ratio is preferable).
Long-term liabilities refers to all liabilities that are not due in full within the year.
This group can include loans, deferred tax obligations, and any pension payments.
Payables
opposite of right to collect is the obligation to pay. Receivables are right to collect
payments from the debtors while payables are obligations to make payments to creditors.
2 kinds of Payables
1. Accounts Payable
2. Notes Payable
Accounts Payable- refers to obligation to the suppliers of inventories. It is evidence by the

suppliers sales invoice and delivery receipts. Most suppliers give credit terms of 30 to 90
days. A 30 day credit term means that the company should pay for the purchases 30 days
from the date of delivery. The credit term 2/10, n/30 (reads: two ten net thirty) means
payment of full amount is due in 30 days but a 2 % discount may be taken if paid within ten
days (after delivery)
Notes Payable- refers to an obligation evidenced by a promissory note.

Senior High School
Track : Academic
Grade : 12
ASTI Convenience Store: NOTES PAYABLE
Read the excerpt of the Promissory note below.
ASTI Convenience Store: ACCOUNTS PAYABLE

(Continuation) ANSWER
1. If On
JuanNovember 15, 20X1,
will pay anytime Juan
from Dela Cruz
November 15,purchased five sacks 25,
20X1 to November of rice at P1,800
20X1, paymentper
sack. due
Theis credit term is 2/10, n/30. Determine how much Juan should pay given the
following payment dates: Promissory Note
November 1, 20X1
Full cost of one sack of rice P1,800
1.1. Promise
November to Pay. For the value received, ASTI Convenience Store, represented by
25, 20X1
2. Juan Number
Dela Cruz,
December the of
15, 20X1 Sacks purchased
manager, (Borrower) promises to pay United Bank5 (lender)
P25,000 (twenty-five
Total cost
thousand)
of purchase
and interest at the yearly rate of 6% on9,000
the unpaid
balance as specifiedDiscount
below. in % 2%
2. Instalment. Borrower will pay five payments of P5,000 each at monthly intervals
Discount in Peso 180
on the 30th day of the month. First payment is due on November 30, 20X1.
3. Application Discounted
of Payments. costPayments
to be paidwill be applied first to interestP8,820
and then to
principal.
4. Prepayment. Borrower may repay all or any part of the principal without penalty.
2. If Juan will pay after November 25, 20X1, he is liable for the total cost of P9,000. He
5. Loan Acceleration. if borrower is more than five days late in making any
will forego the savings of P180.
payment, lender may declare that the entire balance of unpaid principal is due
immediately, together with the interest that has accrued.
Senior High School
Track : Academic
Grade : 12
ANSWER
1. According to the Promissory Note, the borrower is ASTI Convenience Store. A Note Payable
will be reflected on the SFP or the Statement of Financial Position of the Store.
2. According to the Promissory Note, the lender is United Bank. A Note Receivable will be
reflected on the SFP or the Statement of Financial Position of the Bank
3. Payment due in the following dates.
November 30, 20X1 December 30, 20X1
Unpaid balance, Beginning P25,000 P20,000
Stated interest 6% 6%
Interest period* 1/12 1/12
Interest to be paid 125 100
Monthly principal payment 5,0000 5,000
Payment due P5,125 P5,100
 Stated interest of 6% is expressed on a per annum basis. Simply put, it means 6%
per 12 months period. To get interest for one month, its 6% per 12 months
4. The balance of the Note Payable on December 31, 20X1 is P15,000. Following the payment
schedule, Juan should have already made two payment of P5,000 each as of December 31.
Hence, the remaining unpaid balance is (P25,000-P10,000) P15,000.
Senior High School
Track : Academic
Grade : 12
Accrued Expenses- refers to the unpaid expenses of the company as of the cut-off date of the
Statement of Financial Position.
Kinds of Accrued Expenses

(Salaries Payable, Utilities Payable, Rent Payable and Interest Payable)
Example: Payroll Schedule. Employees are paid every 15th and 30th day of the month. Salary
paid on the 15th is for work rendered by the employees for the 29th day of the current month to
the 13th day of the following month while that paid on the 30 th is for work rendered for 14th to
28th day of the same month. As of December 31 (calendar year SFP), the company would
have owed the employees for three days of work, December 29-31. According to the payroll
schedule, these days will be paid as part of their January 15 payroll. Therefore, Salaries
Payable should reflect three days of unpaid salaries.
Senior High School
Track : Academic
Grade : 12
ASTI Convenience Store: ACCRUED EXPENSE

(Continuation)
Juan hired Elena Reyes as storekeeper with salary of P400 per day. Elena is paid every
Saturday for work rendered during the week. Sunday is her day-off. December 31, 20X1 falls
on a Thursday. Determine the balance of Salaries Payable to be reported on the Store’s SFP as
of December 31, 20X1.
ANSWER
Unearned Income
is income from investments and other sources unrelated to employment.
Daily Salary rate P400
Examples of unearned income include interest from savings accounts, bond interest,
Numberdividends
alimony, and of unpaid from
days stock. Unearned
(Monday- 4
income, known as a passive source of income,
Thursday)
is income
SalariesnotPayable,
acquired through work
December .
31, 20X1 P1.600
Senior High School
Track : Academic
Grade : 12
Long Term Liabilities ASTI Convenience Store: UNEARNED INCOME

(Continuation)
It refers to obligations with due dates that fall more than one year from the date of the
SFP. Bank
PedroLoan is one
Benitez, of the common
a neighbour example
of Juan, of Long
operates termvending
of coffee Liabilities. It is documented
machine business. Onby
a promissory
October note.
1, 20X1, he The company
entered pays interest
in a contract periodically.
with Juan The repayment
to rent a small space on the of counter-top
the principal is
based on the contractual agreement. It ANSWER can all be paid at maturity or in instalment over the
of the store where he can put his coffee vending machine. The rent is P500 per month. Pedro
term of the loan. Long-term liability is part of the financing activities of the company.
paid six months advance rent on October 1, 20X1. How much should be reflected as
Unearned rentMonthly
Income on the rate
rental store’s SFP as of December 31, 20X1 P500
Remaining unused months (January-march) 3
Unearned rent income, December 31, 20X1 P1,500

Senior High School
Track : Academic
Grade : 12
ASTI Convenience Store: UNEARNED INCOME

(Continuation)
In order to construct the store, Juan borrowed P50,000 from Universal bank and
P25,000 from United Bank. Terms of the loans are as follows:
Universal Bank: the bank requires Juan to pay interest of 7% payable monthly. The principal
is payable on October 1, 20x3.
United Bank: the bank requires Juan to pay five monthly instalments of P5,000 plus interest
on the unpaid balance. The loan was taken on November 1, 20X1 and first monthly
instalment is due on November 30, 20X1
Which of the two loans should be reported as Long-term Liability on the Store’s calendar
year 20X1 SFP?
Equity
ANSWER
Is the net assets of the business. It is composed of the owner’s investments and the
accumulated net income of the company, net of any distributions to the owners. It reflects the
portion of theinterest
1. While asset that belongs monthly,
is payable to the owners of the business.
the principal on the Universal Bank loan is
payable on October 1, 20X3. The due date is one year and 10 months from the date
of the Statement of Financial Position December 31, 20X1. The loan is classified as
long-term liability because due date is beyond one year of SFP date.
Sample questions:
2. Given the monthly principal payments, the United Bank loan will be fully paid by
the end of March 20X2. This is only three months from the SFP date of December
31, 20X1. Hence, the United Bank loan is current liability. It may be reported as
Note Payable.
Senior High School
Track : Academic
Grade : 12
Easy:
1. Learning is Fun Company had current assets amounting to Php 100,000. Noncurrent
assets for the year totaled Php 76,000. How much is the company’s total assets?
Answer: P176,000.
2. Happy Selling Company’s total liabilities amounted Php 10,000. Total equity had an
ending balance of Php 20,000. How much is total assets?
Answer: P30,000.
Medium:
1. Happy Selling’s had the following accounts at year end: Cash-250,000, Accounts
Payable-70,000, Prepaid Expense-15,000. Compute for the company’s current assets.
Answer: P265,000.
2. Happy Selling’s Accounts Receivable amounted to Php 500,000. Prepaid Expense and
Unearned Income totaled Php 30,000 and Php10,000 respectively. Cash balance
amounted to Php 100,000 while Accounts Payable and Inventory totaled to
Php 20,000 and Php 10,000respectively. How much is the company’s current assets? Current
liabilities?
Answer: P640,000 and P30,000

Difﬁcult
1. Company’s Total Liabilities and Equity amounted to Php 285,000. Total noncurrent assets ended at Php
85,000. Cash totaled Php50,000.Inventory amounted to Php100,000. Assuming the company
had no other assets, how much is Accounts Receivable?
Answer: P50,000.
2. Total assets amounted to Php575,000. Total equity amounted to Php 250,000.
Accounts Payable amounted to Php 50,000 while Unearned Income totaled Php
85,000. Assuming there are no other current liabilities, compute for the company’s
noncurrent liabilities.
Answer: P190,000
Activity No. 2
Identify the name of the liability that matches the description below:
1. Obligations payable after one year

2. Obligations to pay suppliers of merchandise inventory
Senior High School
Track : Academic
Grade : 12
3. Unpaid expenses such as utilities and salaries

4. Liabilities supported by a legal document that promises to pay specific amount to the
creditor.
5. Cash deposit received from the customer.
Presentation of Statement of Financial Position
There are two acceptable format of the SFP- the account form and the report form.
The account form mimics the general T-account format. The asset is reported on the left and
the list of liabilities and equity are on the right. In the account format, the total asset and the
total liabilities and equity are shown side by side to highlight that both totals are equal.
ASSETS LIABILITIES and EQUITY
Cash *** Accounts Payable ***

Account Receivable *** Accrued Expenses ***
Inventory *** Unearned Income ***
Prepaid Expenses *** Notes Payable ***
Notes receivable *** Long-Term Payable ***
PPE ***
Intangible Assets *** Owner, Capital ***
Total Assets *** Total Liabilities & Equity ***
LIABILITIES AND EQUITY

ASSETS
Accounts Payable ***

Cash ***
Accrued Expenses ***
Account receivable ***
STATEMENT OF FINANCIAL POSITION ACCOUNT FORM
Unearned income ***
Inventory ***
Classified Statement of Financial Position Notes Payable ***
Prepaid expense ***
Long-term Payable ***
Notes receivable ***
PPE ***
Owner, Capital ***
Intangible asset ***
Total liabilities & Equity ***

Total assets ***
Senior High School
Track : Academic
Grade : 12
Is a financial statement that reports asset, liability, and equity accounts in meaningful

subcategories for readers' ease of use. In other words, it breaks down each of the balance
sheet accounts into smaller categories to create a more useful and meaningful report.
ASSETS LIABILITIES AND EQUITY
Cash *** Accounts Payable ***

Normal Balances
Account receivable *** Accrued Expenses ***
Inventory *** Unearned income ***
Prepaid expense *** Notes Payable ***
ACCOUNT NAME
Notes receivable *** Current portion of long-term debt ***
DEDIT ASSETS LIABILITIES AND EQUITY

CREDIT
Total current asset *** Total current liabilities ***
Cash *** Long-term
AccountsPayable
Payable ***
***
PPEAccount receivable ******
GENERAL LEDGER T-ACCOUNT FORMAT
Accrued Expenses ***
Intangible asset
Inventory ****** Total liabilities
Unearned income ***
***
Prepaid expense *** Owner, Capital
Notes Payable ***
***
Total non-current
Notes asset
receivable ****** Long-term Payable ***
PPE *** Total liabilities & Equity ***
Total assets asset
Intangible ****** Owner, Capital ***
Total assets *** Total liabilities & Equity ***

CLASSIFIED SFP
Senior High School
Track : Academic
Grade : 12
Why is it important to know the normal balances of each account?
An account is increased by an entry on the side of its normal balances. Similarly, it is

decreased by an entry on the opposite side of its normal balances.
Example: an asset account has a beginning balance of P1,000. Asset have debit normal
balances, therefore the beginning balance is on the debit side. During the year, the total debit
and credit entries amount to P900 and P990, respectively. This asset account will have an
ending balance of P910.
Asset Account
ACCOUNT NAME
Beg. Balance P ***
DEBIT CREDIT
+ -
ACCOUNT
Ending Balance=Beg + Debits FORM SFP vis-a-vis T-ACCOUNT
- Credits
Asset Account
Beg. Balance P1000

900 990
P1900 990
Ending Balance P910

Senior High School
Track : Academic
Grade : 12
ANALYSIS OF ASSET ACCOUNT USING T-ACCOUNT

Example: assume the same beginning balance as well as the same debit and credit entries
made during the year. However, the account is liability instead of an asset. The normal
balance of liability account is credit. Hence, the beginning balance should be on the credit
side and credit entries will increase this account. Liability account will have an ending
balance of P1,090
Liability and Equity Account
Beg. Balance P ***

- +
Ending Balance=Beg + Credits - Debits
Liability and Equity Account
Beg. Balance P1000
900 990
900 1,990
Ending Balance P1,090
ANALYSIS OF ASSET ACCOUNT USING T-ACCOUNT
Asset account have debit normal balances and are thus increased by debits. Liability and
equity accounts have credit normal balances and are thus increased by credits.
Activity No. 3
1. What are the two common formats of the SFP?

Senior High School
Track : Academic
Grade : 12
2. What is the SFP format that presents asset on to the left and liabilities and equity on
the right?
3. What is the normal balance of an asset account?
4. What is the normal balance of a liability account?
5. What is the normal balance of an equity account?
Comprehensive Illustrative Problem: Renn’s Store

On February 1, 20A4, Renn Delima opened a store that sells school supplies. His main
customer are the students and teachers of Beautiful and Handsome Students School that is suited
in front of his store. Renn wanted to know the financial position of Renn’s Store. Renn knew you
were studying accounting so he asked for your help.
The following information were made available to you;
1. To start his business, Renn opened a checking account in the name of Renn’s Store. The
statement account from the bank shows that the checking account has a balance of
P31,535 as of December 31, 20A4.
c. A 2.meralco
Renn told
bill you that he keeps
for electricity P1,000, in small
consumption from bills and coins,
December 1-31infor
his P3,400.
store which
The he uses
bill is as
payable ona change
January(sukli) fund.
15, 20A5.
3. As ofPLDT
d. February December
bill for31, 20A4,
P600. Thecash
bill on hand from
is payable sales and17,collection
on January 20A5. for the day amounted
to P12,000.
e. Renn hired Lester This
to helpnothis
include
insideRenn’ change
the store. fund.salary is P500/day. Renn’s wages were
Lester
4. December
paid on Renn showed you a for
30, 20A4, delivery receipt for
work rendered P575.
until The receipt
December dated
29. His payDecember
for December 29, 20A4
30
showed that manila papers
and 31 will be included in his January wages.and color markers were delivered to a Mr. Lloyd Di who is a
grade school teacher in Beautiful and Handsome Students School. Mr. Lloyd noted on
9. Renn the delivery
showed you receipt that he
an official will pay
receipt for Renn
P1,395.on He
January
told 15,
you20A5.
that this is a down payment
5. Renn’s Store is located on the groud floor of a
from Ms. Aira Mae, a grade 5 teacher in Beautiful and Handsome Students commercial building.School.
The commercial
Ms. Aira uit
costsgreen,
Mae ordered his P5,000
red, andper month
blue posterforpaints
rent.for
Asherof students.
December The31, 20A4.
total priceRenn’s Storewas
of the order has a
remaining to
P2,790. According one month
their advanceRenn
agreement, rent with the landlord.
will deliver the paints on January 3, 20A5.
6. Renn purchased shelves and cabinets amounting to P30,000 to be used as display racks
and storage
10. On December 30,for his store.
20A4, RennThe shelvesP23,000
borrowed and cabinets
from are
his expected
bank. He to tookbe used in the of
advantage store
the for
5 years.terms
bank’s special Rennfor started
smallusing the shelvesHe
entrepreneurs. andsigned
cabinets on December
a promissory note1, 20A4.
for his loan. The
7. After closing the store on December 31, 20A4, Renn counted
principal is payable on December 30, 20A6. The interest is payable monthly beginning all the unsold merchandise
January
31, 20A5. inside the store. Renn does not have any other storage space except for the store premises.
Based on Renn’s count; the remaining unsold merchandise cost P15,345.
8. Renn
11. Renn startedshowed you a by
his business folder where P30,000
depositing he kept to hisopen
unpaid receipt and
the checking bills. You
account. noted the
On October
15, 20A4,following
the business is in need of additional cash so Renn deposited P5,000 to the checking
a. A
account. Renn sales
also invoice
withdrewdatedP15,000 December 25, 20A4
from the business overfrom Long Lasting Ballpoint Pens
the year.
Incorporated amounting to P2,645. The invoice term is 30 days.
b. A sales invoice from Papier Paper Company dated December 15, 20A4 for P5,465. The
payment terms on the invoice is 40 days.
REQUIREMENTS:
1. Prepared a classified Statement of Financial Position for Renn’s Store as of December
3, 20A4.
2. Determine net income for the month –ended December 31, 20A4.
Senior High School
Track : Academic
Grade : 12
ANSWER/SOLUTION:
No. SFP Element > Classification Account Name

Senior High School
Track : Academic
Grade : 12
1 Asset > Current Cash

4 Asset > Current Accounts Receivable
5 Asset > Current Prepaid Expense/Prepaid Rent
6 Asset > Non-current PPE
6 Contra-Asset > Non-current Accumulated Depreciation
7 Asset > Current Inventory
Renn Store
8a & 8b Liabilities >
Statement
Current of Financial Position Accounts Payable
As of December 31, 20A4
8c & 8d Liabilities > Current Accrued Expense
8e Liabilities > Current ASSETS Accrued Expense
Current
9 assets Liabilities > Current Unearned Income
Cash P44,535.00
10
Accounts Liability > Non-current
receivable Long-Term Note Payable
575.00
Inventory
11 Equity 15,345.00
Renn, Capital
Prepaid rent 5,000.00
Total current assets 65,455.00
Non Current Assets
Property, Plant & Equipment 30,000.00
Accumulated Depreciation (500.00)
Net book Value 29,500.00
Total Assets P94,955.00
LIABILITIES AND OWNER’S EQUITY

Current liabilities
Accounts payable P8,110.00
Salaries payable 1,000.00
Utilities payable 4,000.00
Unearned income 1,395.00
Total current liabilities 14,505.00
Non-current liabilities
Long-term note payable 23,000.00
Total Liabilities 37,505.00
Owner’s Equity
Renn, Capital 57,450.00
Total Liabilities and Equity P94,955.00
Senior High School
Track : Academic
Grade : 12
B
A
L
A
N
C
E
CLASSIFIED STATEMENT OF FINANCIAL POSITION OF RENN STORE AS OF

DECEMBER 31, 20A4
Senior High School
Track : Academic
Grade : 12
Based on the aboveRenn,

T-account,
Capitalit can be determined that the net income of Renn’s
Store for 20A4 is P37,450.
Long Quiz No.1 Beg. Balance P0

Withdrawal 15,000 Contribution 30,000
TRUE or FALSE. Read each sentenceAdditional Contribution
carefully and 5,000
determine whether the statement is True
or False. Write your answer in the spaceNet
provided
Incomebefore the number.?
Ending Balance P57,450

__________1. The SFP provides readers with the information as to the company’s financial
position as of a specified date.
ANALYSIS OF RENN, CAPITAL USING T-ACCOUNT
__________2. Asset= Liabilities + Owner’s Equity is the governing equation of the SFP.
__________3. Asset is an elemnt of the SFP that has a normal balance of credit.
__________4. Debit means increase an account.
__________5. T-account is a representation of the general ledger account used in teaching

accounting.
__________6. An entry on the opposite side of the normal balance of an account means to
decrease the account by the amount entered.
__________7. The normal balance of liabilities and equity is credit.
__________8. The normal balance of Note Receivable is debit

Senior High School
Track : Academic
Grade : 12
__________9. Credit means to decrease an account.
__________10. The normal balance of Unearned Income is debit.
II. MODIFIED MATCHING TYPE
Long-term Payable Accounts Payable Notes Receivable

Notes Payable Cash Prepaid Expense
Property, Plant and Equipment Owner’s Capital Accrued Expenses
Accounts Receivable Unearned Income Inventory
Requirements:
1. Match the account on the table with the appropriate elements of the SFP below:
Asset Liabilities Equity
2. Use the accounts in the table above to prepare a pro format of SFP using the report
and account format.
3. Use the account in the table in item number 1 to prepare a classified SFP given the
following assumptions:
a. The prepaid expense will be used up 12 months from the SFP date.
b. The unearned income is due for delivery in six months.
c. The full amount of notes receivable is due t be collected 10 months from the SFP
date.
d. The full amount of notes payable is due to be paid 8 months from the SFP date.
III. Problems
Senior High School
Track : Academic
Grade : 12
1. Determining the balance of the account using T-accounts.
The T-account below is for the account Prepaid Expense.
Prepaid Expense
March 1, 20F4 P150,600 July 31, 20F4 45,760

August 15, 20F4 95,450 December 31, 20F4 90,000
The balance of Prepaid Expenses on January 1, 20F4 is P245,675. What is the balance
of Prepaid Expenses as of December 31, 20F4?
2. Determining the balance of the account using T-accounts.
The T-account below is for the account Accrued Expenses.
Accrued Expenses
March 1, 20R4 P150,630 July 31, 20R4 54,760

August 15, 20R4 95,170 December 31, 20R4 60,000
The balance of Accrued Expenses on January 1, 20R4 is P245,675. What is the

balance of Accrued Expenses as of December 31, 20R4?
3. Using T-Accounts
The cash has a January 1, 20S4 balance of P567,000.
1. During the year, the following transactions increased the cash account.
a. Company was able to collect P890,000 from its receivables
b. Cash sales totalled P376,855.
2. During the year, the following transactions decreased the cash account:
a. The company paid P755,000 to suppliers and for other administrative expenses.
b. The owner withdrew P100,000 for his personal expenses.
Fill in the T-account for the effects of the above transactions.

Senior High School
Track : Academic
Grade : 12
Cash
Particulars Debit Credit

January 1, 20S4 balance
1. A.
1. B
2. A
3. B.
December 31, 20S4 balance

4. Comprehensive Problem
The following were taken from the books of Amihan Company:
Long-term payable P500,000

Notes payable 120,000
Property, plant and equipment 750,000
Accounts receivable 56,000
Accounts payable 65,000
Accumulated depreciation 100,000
Cash 77,000
Owner’s Capital ?
Unearned income 15,345
Notes receivable 244,000
Prepaid expense 56,700
Accrued expense 37,890
Inventory 157,840
Intangible asset 124,500
Requirements:
1. Based on the above set of accounts, determine total assets to be reported in the SFP.
2. Based on the above set of accounts, determine total liabilities to be reported in the
SFP.
3. Based on the above set of accounts, determine the balance of the Owner’s Capital to
be reported in the SFP.
4. Based on the above set of accounts, identify all the accounts with normal debit
balances. Compute the total of all accounts with debit balances.
5. Based on the above set of accounts, identify all the accounts with normal credit
balances. Compute the total of all accounts with credit balances.
Senior High School
Track : Academic
Grade : 12
6. The owner’s capital has a beginning balance of P500,545. The owner gave P100,000
additional contribution during the year. Based on the Statement of Comprehensive
Income, net income for the year was 120,445. How much money did the owner
withdrew from the business?
7. Prepare a classified SFP given the following additional information:
a. Note payable is due 6 months from now.
b. Note receivable is collectible 9 months from now.
c. Prepaid expense will be used during the year.
Problem:
You were hired by Mr. Juan Dela Cruz to prepare his sari-sari store’s Statement of
Financial Position. In order to prepare the statement,
you identified the following assets and liabilities of Mr. Dela Cruz:
a. His sari-sari store has cash deposited in a bank account amounting to P50,000
b. His sari-sari store had a lot of uncollected sales from customers amounting to P75,000
c. The total amount of merchandise left inside the store is P30,000
d. He already paid one year’s rent in advance amounting to P12,000
e. The value of all the company’s furniture amounted to P100,000
f. He bought merchandise from his supplier amounting to P25,000 and the supplier agreed
that payment can be made 2 months after
year-end
g. SSS, Phil-health and Pag-ibig Payables for his one employee totaled P5,000
h. The sari-sari store had outstanding liabilities to utility companies amounting to P3,000
i. He had a loan from the bank amounting to P50,000 to be paid in 3 years
Prepare a Statement of Financial Position for the company (one in report form and one in
account form) – This can be given as a group work which can be taken home to be prepared
using a spreadsheet program.

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ACEBA Systems Technology Institute Inc.

Senior High School

Fundamentals of Accountancy, Business and Management 2

Where can Liabilities be found?

The liabilities section can be found in the balance sheet, opposite the asset section.

Accounts Payable- refers to obligation to the suppliers of inventories. It is evidence by the

Notes Payable- refers to an obligation evidenced by a promissory note.

ASTI Convenience Store: NOTES PAYABLE

Read the excerpt of the Promissory note below.

ASTI Convenience Store: ACCOUNTS PAYABLE

Kinds of Accrued Expenses

ASTI Convenience Store: ACCRUED EXPENSE

Long Term Liabilities ASTI Convenience Store: UNEARNED INCOME

Remaining unused months (January-march) 3

Unearned rent income, December 31, 20X1 P1,500

ASTI Convenience Store: UNEARNED INCOME

Answer: P640,000 and P30,000

1. Obligations payable after one year

3. Unpaid expenses such as utilities and salaries

Presentation of Statement of Financial Position

ASSETS LIABILITIES and EQUITY

Cash *** Accounts Payable ***

Total Assets *** Total Liabilities & Equity ***

LIABILITIES AND EQUITY

Accounts Payable ***

Total liabilities & Equity ***

Is a financial statement that reports asset, liability, and equity accounts in meaningful

ASSETS LIABILITIES AND EQUITY

Cash *** Accounts Payable ***

DEDIT ASSETS LIABILITIES AND EQUITY

Total assets *** Total liabilities & Equity ***

Why is it important to know the normal balances of each account?

An account is increased by an entry on the side of its normal balances. Similarly, it is

Beg. Balance P1000

Ending Balance P910

ANALYSIS OF ASSET ACCOUNT USING T-ACCOUNT

Liability and Equity Account

Beg. Balance P ***

Ending Balance=Beg + Credits - Debits

Liability and Equity Account

Beg. Balance P1000

Ending Balance P1,090

ANALYSIS OF ASSET ACCOUNT USING T-ACCOUNT

1. What are the two common formats of the SFP?

Comprehensive Illustrative Problem: Renn’s Store

No. SFP Element > Classification Account Name

1 Asset > Current Cash

LIABILITIES AND OWNER’S EQUITY

CLASSIFIED STATEMENT OF FINANCIAL POSITION OF RENN STORE AS OF

Based on the aboveRenn,

Long Quiz No.1 Beg. Balance P0

Ending Balance P57,450

__________4. Debit means increase an account.

__________5. T-account is a representation of the general ledger account used in teaching

__________7. The normal balance of liabilities and equity is credit.

__________8. The normal balance of Note Receivable is debit

__________9. Credit means to decrease an account.

__________10. The normal balance of Unearned Income is debit.

II. MODIFIED MATCHING TYPE

Cash * Accounts Payable *

Total Assets * Total Liabilities & Equity *

Cash * Accounts Payable *

Total assets * Total liabilities & Equity *