Calculate Financial Position and Net Change in Financial Position © Dale R. Geiger 20111.

Calculate Financial Position and Calculate Financial Position and Net Change in Financial Position Net Change in Financial Position

© Dale R. Geiger 2011 1

Why is it Why is it usefuluseful to know an entity’s to know an entity’s financial position?financial position?


Terminal Learning ObjectiveTerminal 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)© Dale R. Geiger 2011 3

Meet the Simmons FamilyMeet 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?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?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?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?











• A Liability is:• Something you OWE• Represents FUTURE SACRIFICE• A CREDITOR’S CLAIM against your assets




• A Liability is:• Something you OWE• Represents FUTURE SACRIFICE• A CREDITOR’S CLAIM against your assets



Learning CheckLearning Check

• What is the equation to represent financial position?

• Which element of the equation represents future benefits of the entity?


Sorting the Data 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 201117

Sorting the Data Sorting the Data


Classifying Assets & LiabilitiesClassifying Assets & Liabilities

Assets:House $230,000Car 6,000Furniture 3,000Clothing 750Cash (Bank + purse) 327.47

Total $240,077.47

Liabilities:Mortgage $225,000Credit Card 2,300Property Tax 2,500Hospital 950Total $230,750

Financial Position or Net Worth = $240,077.47 - $230,750 = $9,327.47


Graphic SolutionGraphic Solution



• Which of the following would be considered a liability?• Checking account $327• Credit card account $246• Groceries $50

• Assuming these are the only relevant items, what is the financial position?


Reporting Financial PositionReporting 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)


Statement of Financial PositionStatement of Financial Position

Assets:House $230,000Car 6,000Furniture 3,000Clothing 750Cash (Bank + purse) 327.47

Total $240,077.47

Liabilities:Mortgage $225,000Credit Card 2,300Property Tax 2,500Hospital 950Total Liab. $230,750Net Worth 9,327.47

Total $240,077.47


QuestionsQuestions

• 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


QuestionsQuestions

• 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




QuestionsQuestions






QuestionsQuestions






QuestionsQuestions






QuestionsQuestions






QuestionsQuestions• 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 30























• 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?


What if Gomer inherits $1,000,000?What if Gomer inherits $1,000,000?


Changes in Financial PositionChanges 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)

BeginningFinancial Position

EndingFinancial PositionStatement of Activities


Changes in Financial PositionChanges in Financial Position• The Statement of Activities, or Income

Statement, reflects activity for a PERIOD OF TIME. (Like a video)

BeginningFinancial Position

EndingFinancial PositionStatement of Activities


Changes in Financial PositionChanges 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


















• What is the equation for the change in financial position?

• What is the name of the statement that describes changes in financial position?


The Simmons: The Simmons: Statement of Financial PositionStatement of Financial Position

1/1/111/1/11Assets:House $230,000Car 6,000Furniture 3,000Clothing 750Cash 327

Total $240,077

Liabilities:Mortgage $225,000Credit Card 2,300Property Tax 2,500Hospital 950Total Liabilities $230,750Net Assets: 9,327Total $240,077


The Simmons: The Simmons: Financial Activity for JanuaryFinancial Activity for January

Date Activity Cash Amount

2-Jan Madge puts gasoline in the car 120

4-Jan Gomer buys doughnuts 35

7-Jan Gomer’s paycheck (net of $75 tax) 925

8-Jan Madge buys groceries 600

12-Jan Lacy has a dentist appointment 100

14-Jan Bert breaks a window 50

15-Jan Madge babysits the neighbor kids 25

21-Jan Gomer’s paycheck (net of $75 tax) 925

22-Jan Madge pays interest on mortgage 938

Task: Calculate the Net Change in Financial Position for January.© Dale R. Geiger 2011 44





The Simmons:The Simmons:Changes in Financial PositionChanges in Financial Position

• 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



• What are the Revenues?• Gomer’s gross pay and Madge’s babysitting $2025



• What is the Net Change in Financial Position?• Revenues $2,025 – Costs $1,993 = Increase





$2025

• What are the Costs?• Tax withholding, gasoline, doughnuts, groceries,

dentist, window, and mortgage interest = $1933

• 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 49


• What are the Revenues?• Gomer’s gross pay and Madge’s babysitting $2025

• What are the Costs?• Tax withholding, gasoline, doughnuts, groceries,

dentist, window, and mortgage interest = $1933

• What is the Net Change in Financial Position?• Revenues $2,025 – Costs $1,993 = $32 Increase







• What is the Net Change in Financial Position?• Revenues $2,025 – Costs $1,993 = $32 Increase



The Simmons: The Simmons: Statement of ActivitiesStatement of Activities

for month of January 2011for month of January 2011Revenues:Gomer’s Salary (Gross) $2,000Madge’s babysitting 25

Total Revenues $2,025Costs:Interest $938Groceries 600Tax Withholding 150Gasoline 120Dentist 100Broken Window 50Doughnuts 35

Total Costs 1,993Net Change in Financial Position 32Add: Financial Position January 1, 2011 9,327Financial Position January 31, 2011 $9,359


Graphic Representation of Net ChangeGraphic Representation of Net Change

$32

$2025

$1993


Graphic Representation of Net ChangeGraphic Representation of Net Change

$32

$9359

$9327


The Simmons: The Simmons: Statement of Financial PositionStatement of Financial Position

1/31/111/31/11Assets:House $230,000Car 6,000Furniture 3,000Clothing 750Cash (327+32) 359

Total $240,109

Liabilities:Mortgage $225,000Credit Card 2,300Property Tax 2,500Hospital 950Total Liabilities $230,750Net Assets: 9,359Total $240,109



• What activities will cause financial position to increase?

• What activities will cause financial position to decrease?


Financial Position SpreadsheetFinancial Position SpreadsheetEnter data in the white spaces


Financial Position SpreadsheetFinancial Position Spreadsheet

Use Tabs to Navigate


Financial Position SpreadsheetFinancial Position Spreadsheet

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


Statement of Activities SpreadsheetStatement of Activities SpreadsheetEnter Transaction Data into the register


Statement of Activities SpreadsheetStatement of Activities Spreadsheet

After entering Data, Press button to

Create StatementOf Activities


Statement of Activities SpreadsheetStatement of Activities Spreadsheet

Statement of Activities shows:Total Revenues,

Total Costs ,Change in Financial

Position, and Ending Financial Position


Practical ExercisePractical Exercise


Calculate Financial Position and Net Change in Financial Position © Dale R. Geiger 20111.

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