Statement of Financial Position (SFP) Study Notes

Vocabulary flashcards covering the key terms, definitions, and classification rules for the Statement of Financial Position (SFP) as presented in the University of Cebu ABM lecture notes.

Account

A descriptive storage unit used to collect and store information of similar nature.

Account Title

The unique and specific name assigned to an account in an accounting system that conveys the purpose of the account and prevents incorrect entries.

Chart of Accounts

A listing of all accounts used in the general ledger of an organization, sorted by account number (numeric, alphabetic, or alphanumeric).

Statement of Financial Position (SFP)

Also known as the Balance Sheet; it lists the company's total assets, liabilities, and owner's equity as of a specific date.

Permanent Accounts

Accounts whose balances remain intact from one accounting period to another, including assets, liabilities, and equity.

The Accounting Equation

$$ASSETS = LIABILITIES + CAPITAL$$

Double-Entry System

An accounting system where the dual effect of every transaction is recorded, ensuring every debit has a corresponding credit.

Debit (Dr)

From the Latin debitum (debtor/borrower), it is the amount entered on the LEFT side of an account representing value received.

Credit (Cr)

From the Latin creditum (creditor/lender), it is the amount entered on the RIGHT side of an account representing value given.

Assets

Resources owned and controlled by the entity from past transactions, from which future economic benefits are expected.

Current Assets

Assets that can be realized, collected, sold, or used up within ONE YEAR after year-end.

Noncurrent Assets

Assets that cannot be realized within one year after year-end; also referred to as long-term or fixed assets.

Contra Assets

Accounts shown under the assets section that carry an opposite (credit) balance and serve as reductions to assets.

Allowance for Bad Debts

A contra asset to Accounts Receivable representing estimated uncollectible amounts from delinquent customers.

Accumulated Depreciation

A contra asset to Property, Plant & Equipment representing the total depreciation booked against fixed assets.

Liquidity

The ease of converting an asset into cash without affecting its market price.

Liabilities

Economic obligations or payables of the business representing claims by parties other than the owners against company assets.

Current Liabilities

Liabilities due to be paid or recognized as revenue within ONE YEAR after year-end.

Accrued Expenses

Expenses incurred but not yet paid, such as Utilities Payable or Interest Payable.

Unearned Income

Income received in cash but NOT yet earned by the company.

Noncurrent Liabilities

Liabilities not due within one year, such as Mortgage Payable or long-term Loans Payable.

Contra Liability

An account paired with a liability account to reduce its balance.

Capital (Equity)

The owner's residual interest in the business after all liabilities are settled, calculated as $C = A - L$.

Report Form

An SFP presentation format that lists sections top-down: Assets first, followed by Liabilities and Owner's Equity below.

Account Form

An SFP presentation format that places Assets on the LEFT side and Liabilities and Owner's Equity on the RIGHT side.

Single rule

A notation in the SFP indicating an operation in progress such as addition or subtraction.

Double rule

A notation in the SFP indicating a final total or the end of a section.

ADE

A memory tip for accounts with a normal DEBIT balance: Assets, Drawings, and Expenses.

LCR

A memory tip for accounts with a normal CREDIT balance: Liabilities, Capital, and Revenue.