Slides 1 2 calculate financial position and net change in fi

 • Second, they aren’t “owned” • Third, their value cannot be quantified monetarily • Monetary Unit Assumption: • Financial information must be measured and reported in a monetary uni

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Calculate Financial Position and Net Change in Financial Position

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Why is it useful to know an entity’s

financial position?

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Terminal Learning Objective

• Action: Calculate Financial Position and Change in

Financial Position

• Condition: You are training to become an ACE with

access to ICAM course handouts, readings, and

spreadsheet tools and awareness of Operational

Environment (OE)/Contemporary Operational

Environment (COE) variables and actors

• Standard: With at least 80% accuracy:

• Classify assets & liabilities

• Classify revenues and expenses (cash basis)

• Enter relevant report data to solve Financial Position

equation (using macros provided in Excel template)

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Meet the Simmons Family

• Gomer, Madge and kids:

• Bert, Lacy and baby Maddie

• Stunt doubles for a popular cartoon family

• Task: Calculate the family’s

Financial Position

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What is Financial Position?

• Financial position is represented by the

equation:

Assets – Liabilities = Financial Position

OrAssets = Liabilities + Financial Position

• Financial Position may also be called Equity or Net Assets

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What’s an Asset?

• An Asset is:

• Something you OWN

• Represents FUTURE BENEFIT

• What kinds of assets might the Simmons

family own?

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What’s an Asset?

• An Asset is:

family own?

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What’s an Asset?

• An Asset is:

family own?

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What’s an Asset?

• An Asset is:

family own?

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What’s a Liability?

• A Liability is:

• Something you OWE

• Represents FUTURE SACRIFICE

• A creditor’s CLAIM against your assets

• What kinds of Liabilities might the Simmons family have?

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• A Liability is:

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• A Liability is:

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• A Liability is:

• A CREDITOR’S CLAIM against your assets

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• A Liability is:

• A CREDITOR’S CLAIM against your assets

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Learning Check

• What is the equation to represent financial

position?

• Which element of the equation represents

future benefits of the entity?

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Sorting the Data

• Madge’s stack of papers contains the following:

-0-• Hospital bill for Maddie 950

• Bank Statement (reconciled balance) 305.47

• Task: Calculate the Simmons’ Net Worth 16

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Sorting the Data

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Sorting the Data

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Classifying Assets & Liabilities

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Graphic Solution

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Reporting Financial Position

• The Statement of Financial Position presents the financial position of an entity as of a

SINGLE DATE

• May also be called:

• Balance Sheet (for-profit entity)

• Statement of Net Assets (not-for-profit entity)

• Statement of Net Worth (individual or family)

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Statement of Financial Position

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• What about the groceries?

• Items that will be consumed during the current month are considered Expenses

• What about the kids?

• First, would they be assets or liabilities? 

• Second, they aren’t “owned”

• Third, their value cannot be quantified monetarily

• Monetary Unit Assumption:

• Financial information must be measured and reported

in a monetary unit such as U.S Dollars

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• Items purchased and consumed during the current

period are considered Expenses

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• Report only the level of detail that will affect a user’s

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• Report only the level of detail that will affect a user’s

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Learning Check

• What is the name of the report that presents a government organization’s financial position?

An individual’s?

• What is the time frame of this report?

• What principle defines the value that should

be reported for an asset on the Statement of Financial Position?

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What if Gomer inherits $1,000,000?

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Changes in Financial Position

• The Statement of Financial Position (Balance Sheet) reflects the Assets, Liabilities and Net Assets as of a SINGLE DATE (Like a snapshot)

Beginning

Financial

Position

Ending Financial Position Statement of Activities

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• The Statement of Activities, or Income

Statement, reflects activity for a PERIOD OF

TIME (Like a video)

Beginning

Financial

Position

Ending Financial Position Statement of Activities

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• Under the Cash Basis of Accounting:

• Revenues:

• Represent earnings received in cash

• Increase Assets and Increase Financial Position

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• Revenues:

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• Revenues:

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• Revenues:

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Learning Check

• What is the equation for the change in

financial position?

• What is the name of the statement that

describes changes in financial position?

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The Simmons:

Financial Activity for January

Task: Calculate the Net Change in Financial Position for January.

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The Simmons:

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The Simmons:

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The Simmons:

• What are the Revenues?

• Gomer’s gross pay and Madge’s babysitting

• What are the Costs?

• Tax withholding , gasoline, doughnuts, groceries, dentist, window, and mortgage interest

• What is the Net Change in Financial Position?

• Revenues $2,025 – Costs $1,993 = 2 Increase

• What is the Ending Financial Position?

• Beginning $9,327 + Increase $32 = Ending $9,359

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The Simmons:

• Gomer’s gross pay and Madge’s babysitting $2025

• Revenues $2,025 – Costs $1,993 = Increase

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The Simmons:

• Tax withholding, gasoline, doughnuts, groceries, dentist, window, and mortgage interest = $1933

• Revenues $2,025 – Costs $1,993 = 32 Increase

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The Simmons:

• Tax withholding, gasoline, doughnuts, groceries, dentist, window, and mortgage interest = $1933

• Revenues $2,025 – Costs $1,993 = $32 Increase

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The Simmons:

• Gomer’s gross pay and Madge’s babysitting

• Revenues $2,025 – Costs $1,993 = $32 Increase

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The Simmons:

Statement of Activities for month of January 2011

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Graphic Representation of Net Change

$32

$2025

$1993

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Graphic Representation of Net Change

$32

$9359

$9327

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Financial Position Spreadsheet

Enter data in the white spaces

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Use Tabs to Navigate

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The spreadsheet uses the data you entered to produce the Statement of Financial Position and the pie graph

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Statement of Activities Spreadsheet

Enter Transaction Data into the register

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After entering Data, Press button to Create Statement

Of Activities

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Statement of Activities shows: Total Revenues, Total Costs , Change in Financial Position, and Ending Financial Position

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Practical Exercise

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