explain change in financial position over a period of time © dale r. geiger 20111
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Explain Change in Financial Explain Change in Financial Position Over a Period of TimePosition Over a Period of Time
© Dale R. Geiger 2011 1
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Terminal Learning ObjectiveTerminal 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 2
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What if Gomer inherits $1,000,000?What if Gomer inherits $1,000,000?
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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
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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
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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
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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
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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
© Dale R. Geiger 2011 8
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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
© Dale R. Geiger 2011 9
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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
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Check on LearningCheck on Learning
• 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: 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 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 925
22-Jan Madge pays interest on mortgage 938
Task: Calculate the Net Change in Financial Position for January. © Dale R. Geiger 2011 12
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The Simmons: The Simmons: Financial Activity for JanuaryFinancial Activity for January
Task: Calculate the Net Change in Financial Position for January. © Dale R. Geiger 2011 13
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The Simmons: The Simmons: Financial Activity for JanuaryFinancial Activity for January
Task: Calculate the Net Change in Financial Position for January. © Dale R. Geiger 2011 14
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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
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The Simmons:The Simmons:Changes in Financial PositionChanges 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
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The Simmons:The Simmons:Changes in Financial PositionChanges 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
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The Simmons:The Simmons:Changes in Financial PositionChanges 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
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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?• 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
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Check on LearningCheck on Learning
• Revenues are counted when they are
• Costs are counted when they are
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The Simmons: The Simmons: Statement of ActivitiesStatement of Activities
for month of January 2011for month of January 2011Revenues:Gomer’s Salary (Gross) $1,850Madge’s babysitting 25
Total Revenues $1,875Costs:Interest $938Groceries 600Gasoline 120Dentist 100Broken Window 50Doughnuts 35
Total Costs 1,843Net Change in Financial Position 32Add: Financial Position January 1, 2011 9,327Financial Position January 31, 2011 $9,359
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Graphic Representation of Net ChangeGraphic Representation of Net Change
$32
$2025
$1993
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Graphic Representation of Net ChangeGraphic Representation of Net Change
$32
$9359
$9327
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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
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Check on LearningCheck on Learning
• What activities will cause financial position to increase?
• What activities will cause financial position to decrease?
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Practical ExercisePractical Exercise
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Statement of Activities SpreadsheetStatement of Activities SpreadsheetEnter Transaction Data into the register
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Statement of Activities SpreadsheetStatement of Activities Spreadsheet
After entering Data, Press button to
Create StatementOf Activities
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Statement of Activities SpreadsheetStatement of Activities Spreadsheet
Statement of Activities shows:Total Revenues,
Total Costs ,Change in Financial
Position, and Ending Financial Position
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Practical ExercisePractical Exercise
© Dale R. Geiger 2011 30