Explain Change in Financial Position Over a Period of Time © Dale R Geiger 2011 Terminal Learning Objective • Action: Explain Change in Financial Position Over a Period of Time • Condition: Given access to all regulations/course handouts, and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors • Standard: With 80% accuracy: • Classify revenues and expenses (cash basis) • Calculate net income (cash basis) for a period of time • Enter relevant report data to solve financial position equation (using macros provided in Excel template) © Dale R Geiger 2011 What if Gomer inherits $1,000,000? © Dale R Geiger 2011 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 Statement of Activities © Dale R Geiger 2011 Ending Financial Position Changes in Financial Position • The Statement of Activities, or Income Statement, reflects activity for a PERIOD OF TIME (Like a video) Beginning Financial Position Statement of Activities © Dale R Geiger 2011 Ending Financial Position Changes in Financial Position • Under the Cash Basis of Accounting: • Revenues: • Represent earnings received in cash • Increase Assets and Increase Financial Position • Costs: • Represent cash payments for goods and services received • Decrease Assets and Decrease Financial Position Revenues – Costs = Net Change in Financial Position © Dale R Geiger 2011 Changes in Financial Position • Under the Cash Basis of Accounting: • Revenues: • Represent earnings received in cash • Increase Assets and Increase Financial Position • Costs: • Represent cash payments for goods and services received • Decrease Assets and Decrease Financial Position Revenues – Costs = Net Change in Financial Position © Dale R Geiger 2011 Changes in Financial Position • Under the Cash Basis of Accounting: • Revenues: • Represent earnings received in cash • Increase Assets and Increase Financial Position • Costs: • Represent cash payments for goods and services received • Decrease Assets and Decrease Financial Position Revenues – Costs = Net Change in Financial Position © Dale R Geiger 2011 Changes in Financial Position • Under the Cash Basis of Accounting: • Revenues: • Represent earnings received in cash • Increase Assets and Increase Financial Position • Costs: • Represent cash payments for goods and services received • Decrease Assets and Decrease Financial Position Revenues – Costs = Net Change in Financial Position © Dale R Geiger 2011 The Simmons: Statement of Financial Position 1/1/11 Assets: House $230,000 Car 6,000 Furniture 3,000 Clothing 750 Cash 327 Total $240,077 Liabilities: Mortgage $225,000 Credit Card 2,300 Property Tax 2,500 Hospital 950 Total Liabilities $230,750 Net Assets: 9,327 Total $240,077 © Dale R Geiger 2011 10 The Simmons: Changes in Financial Position • What are the Revenues? • Gomer’s gross pay and Madge’s babysitting $1875 • 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 = Increase • What is the Ending Financial Position? • Beginning $9,327 + Increase $32 = Ending $9,359 © Dale R Geiger 2011 16 The Simmons: Changes in Financial Position • What are the Revenues? • Gomer’s gross pay and Madge’s babysitting $1875 • What are the Costs? • Gasoline, doughnuts, groceries, dentist, window, and mortgage interest = $1843 • What is the Net Change in Financial Position? • Revenues $2,025 – Costs $1,993 = 32 Increase • What is the Ending Financial Position? • Beginning $9,327 + Increase $32 = Ending $9,359 © Dale R Geiger 2011 17 The Simmons: Changes in Financial Position • What are the Revenues? • Gomer’s gross pay and Madge’s babysitting $1875 • What are the Costs? • Gasoline, doughnuts, groceries, dentist, window, and mortgage interest = $1843 • What is the Net Change in Financial Position? • Revenues $1875 – Costs $1843 = $32 Increase • What is the Ending Financial Position? • Beginning $9,327 + Increase $32 = Ending $9,359 © Dale R Geiger 2011 18 The Simmons: Changes in Financial Position • What are the Revenues? • Gomer’s gross pay and Madge’s babysitting • What are the Costs? • Gasoline, doughnuts, groceries, dentist, window, and mortgage interest • What is the Net Change in Financial Position? • Revenues $1875 – Costs $1843 = $32 Increase • What is the Ending Financial Position? • Beginning $9,327 + Increase $32 = Ending $9,359 © Dale R Geiger 2011 19 Check on Learning • Revenues are counted when they are • Costs are counted when they are © Dale R Geiger 2011 The Simmons: Statement of Activities for month of January 2011 Revenues: Gomer’s Salary (Gross) Madge’s babysitting Total Revenues Costs: Interest Groceries Gasoline Dentist Broken Window Doughnuts Total Costs Net Change in Financial Position Add: Financial Position January 1, 2011 Financial Position January 31, 2011 © Dale R Geiger 2011 $1,850 25 $938 600 120 100 50 35 $1,875 1,843 32 9,327 $9,359 21 Graphic Representation of Net Change $2025 $32 $1993 © Dale R Geiger 2011 22 Graphic Representation of Net Change $9359 $32 $9327 © Dale R Geiger 2011 23 The Simmons: Statement of Financial Position 1/31/11 Assets: House $230,000 Car 6,000 Furniture 3,000 Clothing 750 Cash (327+32) 359 Total $240,109 Liabilities: Mortgage $225,000 Credit Card 2,300 Property Tax 2,500 Hospital 950 Total Liabilities $230,750 Net Assets: 9,359 Total $240,109 © Dale R Geiger 2011 24 Check on Learning • What activities will cause financial position to increase? • What activities will cause financial position to decrease? © Dale R Geiger 2011 25 Practical Exercise © Dale R Geiger 2011 26 Statement of Activities Spreadsheet Enter Transaction Data into the register © Dale R Geiger 2011 27 Statement of Activities Spreadsheet After entering Data, Press button to Create Statement Of Activities © Dale R Geiger 2011 28 Statement of Activities Spreadsheet Statement of Activities shows: Total Revenues, Total Costs , Change in Financial Position, and Ending Financial Position 29 © Dale R Geiger 2011 Practical Exercise © Dale R Geiger 2011 30 ... 2011 Ending Financial Position Changes in Financial Position • Under the Cash Basis of Accounting: • Revenues: • Represent earnings received in cash • Increase Assets and Increase Financial Position. .. 2011 Ending Financial Position Changes in Financial Position • The Statement of Activities, or Income Statement, reflects activity for a PERIOD OF TIME (Like a video) Beginning Financial Position. .. Decrease Financial Position Revenues – Costs = Net Change in Financial Position © Dale R Geiger 2011 Changes in Financial Position • Under the Cash Basis of Accounting: • Revenues: • Represent earnings