Slides calculate financial position

What’s an Asset?• An Asset is: • Something you OWN • Represents FUTURE BENEFIT • What kinds of assets might the Simmons family own?... What’s an Asset?• An Asset is: • Something you OW

Calculate Financial Position

Why is it useful to know an entity’s

financial position?

Terminal Learning Objective

• Action: Calculate Financial Position

• Condition: You are a cost advisor technician with PCAM

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:

• Define terminology used in basic accounting

• Classify assets & liabilities

• Assign value to assets

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

What is Financial Position?

• Financial position is represented by the

equation:

Assets – Liabilities = Financial Position

Or Assets = Liabilities + Financial Position

• Financial Position may also be called Equity or Net Assets

What’s an Asset?

• An Asset is:

• Something you OWN

• Represents FUTURE BENEFIT

• What kinds of assets might the Simmons

family own?

What’s an Asset?

• An Asset is:

• Something you OWN

• Represents FUTURE BENEFIT

• What kinds of assets might the Simmons

family own?

What’s an Asset?

• An Asset is:

• Something you OWN

• Represents FUTURE BENEFIT

• What kinds of assets might the Simmons

family own?

What’s an Asset?

• An Asset is:

• Something you OWN

• Represents FUTURE BENEFIT

• What kinds of assets might the Simmons

family own?

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?

© Dale R Geiger 2011 10

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?

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?

© Dale R Geiger 2011 12

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?

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?

© Dale R Geiger 2011 14

Check on Learning

• What is the equation to represent financial

position?

• Which element of the equation represents

future benefits of the entity?

Sorting the Data

• Madge’s stack of papers contains the following:

• Deed to the house $230,000

• Mortgage note on house 225,000

• Title to the car 6,000

• Grocery receipts 400

• Furniture receipts 3,000

• Credit card statements 2,300

• Property tax bill 2,500

• The kids’ birth certificates

-0-• Hospital bill for Maddie 950

• Clothing receipts 750

• Bank Statement (reconciled balance) 305.47

• Cash in Madge’s purse 20

• Task: Calculate the Simmons’ Net Worth© Dale R Geiger 2011 16

Sorting the Data

Sorting the Data

© Dale R Geiger 2011 18

Classifying Assets & Liabilities

Graphic Solution

© Dale R Geiger 2011 20

Reporting Financial Position

• The Statement of Financial Position presents the financial position of a government 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)

© Dale R Geiger 2011 22

Statement of Financial Position

• 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:

• What about the groceries?

• Items purchased and consumed during the current

period 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

© Dale R Geiger 2011 26

• What about the groceries?

• Items purchased and consumed during the current

period 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:

• What about the groceries?

• Items purchased and consumed during the current

period 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

© Dale R Geiger 2011 28

• What about the groceries?

• Items purchased and consumed during the current

period 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:

• What about the groceries?

• Items purchased and consumed during the current

period 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

© Dale R Geiger 2011 30

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

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

Check on Learning

• What principle defines the value that should

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

• What constraint prevents reporting

insignificant amounts that will not affect a

user’s decision?

Practical Exercise

© Dale R Geiger 2011 36

Financial Position Spreadsheet

Enter data in the white spaces

Financial Position Spreadsheet

Use Tabs to Navigate

© Dale R Geiger 2011 38

Financial Position Spreadsheet

The spreadsheet uses the

Practical Exercise

© Dale R Geiger 2011 40