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Fabm 2 Module 3

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84 views

Fabm 2 Module 3

Uploaded by

Giezell Babia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MODULE 2 FABM 2

THE STATEMENT OF CHANGES IN OWNER’S EQUITY

LESSON OBJECTIVES:

- Know the accounts that comprise the owner’s equity section of the statement of financial
position

- Prepare the statement of changes in owner’s equity

The Statement of Changes in Owner's Equity or Statement of Owner's Equity


shows the changes in the Capital or Owner's Equity as a result of additional investment
or withdrawals by the owner, plus or minus the net income or net loss for the year.

Capital is an account bearing the name of the owner representing the original
and additional investment of the owner of the business increased by the amount of net
income earned during the year. It is decreased by the cash or other assets withdrawn by
the owner as well as the net loss incurred during the year.

Drawing represents the withdrawals made by the owner of the business either
in cash or other assets.

Income Summary is a temporary account used at the end of the accounting


period to close income and expense accounts. The balance of this account shows the net
income or net loss for the period before it is closed to the capital account.

Below is the statement of owner’s equity of Ren Ren Merchandising

Ren Ren Merchandising


Statement of Changes in Owner’s Equity
For Year Ended December 31, 2016

Ren, Capital, Beginning ₱280,000


Add: Additional Investment ₱22,200
Net Income 407,800 ₱430,000
Total ₱710,000
Less: Drawings 30,000
Ren, Capital, End ₱680,000
MODULE 2 FABM 2
DRILL 3

The beginning capital of RodNeddie Trading is P728,000. During the year the owner made an
additional investment of P20,000 and with drew P35,000 for personal use. Net income during
the year amounted to P45,000. Prepare the statement of changes in owner's equity for year
ended December 31, 2017.

THE TWO FORMS OF STATEMENT OF FINACIAL POSITION

LESSON OBJECTIVES
- Know the two forms of the statement of financial position
- Prepare a properly classified statement of financial position

There are two forms of statement of financial position or balance sheet as follows:

1. Account Form which follows the accounting equation where assets are listed on the left
hand column of the report with the liabilities and owner’s equity listed on the right-
hand columns; and
2. Report Form which shows in one straight column the assets, followed by liabilities and
owners equity.

On this page is an example of the account form and report form balance sheet.
MODULE 2 FABM 2

TEST YOUR UNDERSTANDING


1. What are the two kinds of statement of financial position? What is their difference?
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
_________________________________________________________________________________________________
__________________________________________________________________________________________.

DRILL 4

Prepare the balance sheet of Rod Neddie Trading for year ended December 31, 2016. Refer to
drill 1 for the asset section of the balance sheet, and drill 2 for the liabilities and owner’s equity
section. Prepare the balance sheet using the account form and report form.
MODULE 2 FABM 2

Exercise 1
Below are balance sheet accounts. Classify these accounts by writing them under their proper
columns.

Land Cash Truck


Accounts Payable Building Prepaid rent
Accounts receivable Taxes Payable Mortgage payable
Loan Payable (due in 5 years) Prepaid Insurance Supplies
Notes payable (Due this Year) Unearned Rent Equipment
Furniture Notes Receivable Utilities Payable
Bonds Payable Accrued Liabilities

Current Assets Current Liabilities

_____________________________________ ________________________________________
_____________________________________ ________________________________________
_____________________________________ ________________________________________
_____________________________________ ________________________________________
_____________________________________ ________________________________________
_____________________________________ ________________________________________
_____________________________________ ________________________________________

Property, Plant and Equipment Non-Current Liabilities


_____________________________________ ________________________________________
_____________________________________ ________________________________________
_____________________________________ ________________________________________
_____________________________________ ________________________________________
_____________________________________ ________________________________________
_____________________________________ ________________________________________
MODULE 2 FABM 2
Exercise 2
Presented below are accounts of Dolly Trading for year ended December 31, 2017. Prepare the
statement of financial position. Prepare the supporting notes.

Cash ₱17,500
Accounts Receivable 6,000
Notes Receivable 5,000
Merchandise Inventory 16,500
Prepaid Insurance 1,000
Office Supplies 500
Equipment 15,000
Accumulated depreciation-Equipment 4,800
Furniture and Fixture 12,000
Accumulated Depreciation-Furniture and Fixture 4,500
Accounts Payable 10,000
Utilities Payable 4,200
Dolly, Capital 50,000

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