Slides calculate financial position

Calculate Financial Position © Dale R Geiger 2011 Why is it useful to know an entity’s financial position? © Dale R Geiger 2011 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 Enter relevant report data to solve Assets, Liabilities, and Capital equation (using macros provided in Excel template) • Solve for missing variables in the balance sheet equation © Dale R Geiger 2011 Meet the Simmons Family • Gomer, Madge and kids: • Bert, Lacy and baby Maddie • Stunt doubles for a popular cartoon family Task: Calculate the familys Financial Position â Dale R Geiger 2011 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 © Dale R Geiger 2011 What’s an Asset? • An Asset is: • Something you OWN • Represents FUTURE BENEFIT • What kinds of assets might the Simmons family own? © Dale R Geiger 2011 What’s an Asset? • An Asset is: • Something you OWN • Represents FUTURE BENEFIT • What kinds of assets might the Simmons family own? © Dale R Geiger 2011 What’s an Asset? • An Asset is: • Something you OWN • Represents FUTURE BENEFIT • What kinds of assets might the Simmons family own? © Dale R Geiger 2011 What’s an Asset? • An Asset is: • Something you OWN • Represents FUTURE BENEFIT • What kinds of assets might the Simmons family own? © Dale R Geiger 2011 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 Questions • 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 Questions • 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 27 Questions • 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 Questions • 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 29 Questions • 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 Questions • Isn’t the house worth more now than when they bought it? • Possibly, but it’s difficult to objectively determine its value • Cost Principle: • The most objective measure of an asset’s value is its HISTORICAL COST: the price paid for it in an arm’s length transaction • Is it necessary to report the 47₵ from the bank account? • Materiality Constraint: • Report only the level of detail that will affect a user’s decision â Dale R Geiger 2011 31 Questions Isnt the house worth more now than when they bought it? • Possibly, but it’s difficult to objectively determine its value • Cost Principle: • The most objective measure of an asset’s value is its HISTORICAL COST: the price paid for it in an arm’s length transaction • Is it necessary to report the 47₵ from the bank account? • Materiality Constraint: • Report only the level of detail that will affect a user’s decision © Dale R Geiger 2011 32 Questions • Isn’t the house worth more now than when they bought it? • Possibly, but it’s difficult to objectively determine its value • Cost Principle: • The most objective measure of an asset’s value is its HISTORICAL COST: the price paid for it in an arm’s length transaction • Is it necessary to report the 47₵ from the bank account? • Materiality Constraint: • Report only the level of detail that will affect a user’s decision © Dale R Geiger 2011 33 Questions • Isn’t the house worth more now than when they bought it? • Possibly, but it’s difficult to objectively determine its value • Cost Principle: • The most objective measure of an asset’s value is its HISTORICAL COST: the price paid for it in an arm’s length transaction • Is it necessary to report the 47₵ from the bank account? • Materiality Constraint: • Report only the level of detail that will affect a user’s decision © Dale R Geiger 2011 34 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? © Dale R Geiger 2011 35 Practical Exercise © Dale R Geiger 2011 36 Financial Position Spreadsheet Enter data in the white spaces © Dale R Geiger 2011 37 Financial Position Spreadsheet Use Tabs to Navigate © Dale R Geiger 2011 38 Financial Position Spreadsheet The spreadsheet uses the data you entered to produce the Statement of Financial Position and the pie graph © Dale R Geiger 2011 39 Practical Exercise © Dale R Geiger 2011 40 ... • Task: Calculate the family’s Financial Position © Dale R Geiger 2011 What is Financial Position? • Financial position is represented by the equation: Assets – Liabilities = Financial Position. .. relevant items, what is the financial position? © Dale R Geiger 2011 21 Reporting Financial Position • The Statement of Financial Position presents the financial position of a government entity...Why is it useful to know an entity’s financial position? © Dale R Geiger 2011 Terminal Learning Objective • Action: Calculate Financial Position • Condition: You are a cost advisor technician