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Dec 20, 2025
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FABM 2: Understanding Asset Classifications for Quarter 1
P
Paul Daniel Eduarte
@pauldanieleduar
1 / 4
Statement of Financial Position (Balance Sheet)
Think of the balance sheet as a financial snapshot that shows what a company owns versus what it owes at a specific moment in time. The fundamental equation you need to memorize is: Assets = Liabilities + Owner's Equity. This equation must always balance - that's why it's called a balance sheet!
Current assets are resources the company can turn into cash within one year. These include cash, accounts receivable (money customers owe you), inventory (goods for sale), and prepaid expenses (like paying rent in advance). They're listed in order of liquidity - how quickly they can become cash.
Non-current assets stick around for more than a year and help generate long-term value. Property, plant, and equipment (buildings, machinery, vehicles) are the most common, along with long-term investments and intangible assets like patents or trademarks.
Pro Tip: Current assets are arranged by liquidity - cash first, then accounts receivable, then inventory. This order matters for financial analysis!
Don't forget about contra assets like Allowance for Doubtful Accounts and Accumulated Depreciation - these reduce the value of assets to show their true worth. Liabilities work similarly, splitting into current (due within a year) and non-current (due after a year).
Statement of Comprehensive Income
Your income statement is where the action happens - it shows whether a company made money or lost it over a specific period. Unlike the balance sheet's snapshot, this report covers a timeframe like a month, quarter, or year. The bottom line? Net income when revenues exceed expenses, or net loss when expenses are higher.
The statement has four main components: revenues (money earned from sales), expenses (costs to run the business), gains , and losses (the opposite of gains). Service companies keep it simple, but merchandising businesses get more complex with cost of goods sold.
Cost of goods sold (COGS) is crucial for retail businesses. The formula is: Beginning Inventory + Net Purchases - Ending Inventory = Cost of Sales. This shows exactly how much you spent on the products you actually sold, not just what you bought.
Remember: Revenue minus expenses equals net income - but don't forget about gains and losses from selling company assets!
You can prepare this statement using either a single-step approach (simple: total revenues minus total expenses) or a multi-step approach (more detailed with subtotals like gross profit). Most service companies use single-step, while merchandising companies prefer multi-step.
Key Elements and Components
Revenue recognition varies by business type - a sari-sari store earns through sales, while property owners generate rental income. The key is identifying your main revenue sources and any additional income from investments or other activities.
Expense classification depends on your business model. Service companies typically separate expenses into cost of service and operating expenses like rent and utilities. Merchandising businesses get more detailed with selling expenses (advertising, delivery) and administrative expenses (office supplies, management salaries).
Understanding purchase transactions is essential for merchandising. Gross purchases minus purchase discounts and returns, plus freight-in costs equals net purchases. These details affect your cost of goods sold calculation and ultimately your profit margins.
Key Insight: Gains and losses are different from regular revenue and expenses - they come from unusual activities like selling equipment, not daily operations.
Other comprehensive income items include income taxes and special transactions. While smaller businesses rarely deal with complex items, understanding the complete picture helps you analyze any company's financial performance accurately.
Statement of Changes in Equity
The Statement of Changes in Equity tracks every change in the owner's financial interest during a specific period. Think of it as a detailed record of how much the owner's stake in the business increased or decreased, and why those changes happened.
For single proprietorships, this statement is straightforward. Start with beginning capital, add any additional investments the owner made, add net income (or subtract net loss), then subtract any withdrawals the owner took. The result is your ending capital balance.
These elements are called permanent accounts because they carry forward from period to period - unlike revenue and expense accounts that reset each year. The ending capital from this statement goes directly to your balance sheet, making this a crucial linking document.
Essential Formula: Beginning Capital + Additional Investments + Net Income - Withdrawals = Ending Capital
The two main approaches for income statements serve different business types. Service companies often use the single-step approach (straightforward revenue minus expenses), while merchandising businesses prefer the multi-step approach with subtotals showing gross profit before operating expenses. Choose based on your business complexity and user needs.
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What is the Knowunity AI companion?
Our AI companion is specifically built for the needs of students. Based on the millions of content pieces we have on the platform we can provide truly meaningful and relevant answers to students. But its not only about answers, the companion is even more about guiding students through their daily learning challenges, with personalised study plans, quizzes or content pieces in the chat and 100% personalisation based on the students skills and developments.
Where can I download the Knowunity app?
You can download the app in the Google Play Store and in the Apple App Store.
Is Knowunity really free of charge?
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The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
FABM 2: Understanding Asset Classifications for Quarter 1
P
Paul Daniel Eduarte
@pauldanieleduar
Ready to master financial statements? These three key reports - the Statement of Financial Position (Balance Sheet), Statement of Comprehensive Income, and Statement of Changes in Equity - are like a company's report card that shows its financial health and... Show more
Statement of Financial Position (Balance Sheet)
Think of the balance sheet as a financial snapshot that shows what a company owns versus what it owes at a specific moment in time. The fundamental equation you need to memorize is: Assets = Liabilities + Owner's Equity. This equation must always balance - that's why it's called a balance sheet!
Current assets are resources the company can turn into cash within one year. These include cash, accounts receivable (money customers owe you), inventory (goods for sale), and prepaid expenses (like paying rent in advance). They're listed in order of liquidity - how quickly they can become cash.
Non-current assets stick around for more than a year and help generate long-term value. Property, plant, and equipment (buildings, machinery, vehicles) are the most common, along with long-term investments and intangible assets like patents or trademarks.
Pro Tip: Current assets are arranged by liquidity - cash first, then accounts receivable, then inventory. This order matters for financial analysis!
Don't forget about contra assets like Allowance for Doubtful Accounts and Accumulated Depreciation - these reduce the value of assets to show their true worth. Liabilities work similarly, splitting into current (due within a year) and non-current (due after a year).
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Statement of Comprehensive Income
Your income statement is where the action happens - it shows whether a company made money or lost it over a specific period. Unlike the balance sheet's snapshot, this report covers a timeframe like a month, quarter, or year. The bottom line? Net income when revenues exceed expenses, or net loss when expenses are higher.
The statement has four main components: revenues (money earned from sales), expenses (costs to run the business), gains , and losses (the opposite of gains). Service companies keep it simple, but merchandising businesses get more complex with cost of goods sold.
Cost of goods sold (COGS) is crucial for retail businesses. The formula is: Beginning Inventory + Net Purchases - Ending Inventory = Cost of Sales. This shows exactly how much you spent on the products you actually sold, not just what you bought.
Remember: Revenue minus expenses equals net income - but don't forget about gains and losses from selling company assets!
You can prepare this statement using either a single-step approach (simple: total revenues minus total expenses) or a multi-step approach (more detailed with subtotals like gross profit). Most service companies use single-step, while merchandising companies prefer multi-step.
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Key Elements and Components
Revenue recognition varies by business type - a sari-sari store earns through sales, while property owners generate rental income. The key is identifying your main revenue sources and any additional income from investments or other activities.
Expense classification depends on your business model. Service companies typically separate expenses into cost of service and operating expenses like rent and utilities. Merchandising businesses get more detailed with selling expenses (advertising, delivery) and administrative expenses (office supplies, management salaries).
Understanding purchase transactions is essential for merchandising. Gross purchases minus purchase discounts and returns, plus freight-in costs equals net purchases. These details affect your cost of goods sold calculation and ultimately your profit margins.
Key Insight: Gains and losses are different from regular revenue and expenses - they come from unusual activities like selling equipment, not daily operations.
Other comprehensive income items include income taxes and special transactions. While smaller businesses rarely deal with complex items, understanding the complete picture helps you analyze any company's financial performance accurately.
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Statement of Changes in Equity
The Statement of Changes in Equity tracks every change in the owner's financial interest during a specific period. Think of it as a detailed record of how much the owner's stake in the business increased or decreased, and why those changes happened.
For single proprietorships, this statement is straightforward. Start with beginning capital, add any additional investments the owner made, add net income (or subtract net loss), then subtract any withdrawals the owner took. The result is your ending capital balance.
These elements are called permanent accounts because they carry forward from period to period - unlike revenue and expense accounts that reset each year. The ending capital from this statement goes directly to your balance sheet, making this a crucial linking document.
Essential Formula: Beginning Capital + Additional Investments + Net Income - Withdrawals = Ending Capital
The two main approaches for income statements serve different business types. Service companies often use the single-step approach (straightforward revenue minus expenses), while merchandising businesses prefer the multi-step approach with subtotals showing gross profit before operating expenses. Choose based on your business complexity and user needs.
We thought you’d never ask...
What is the Knowunity AI companion?
Our AI companion is specifically built for the needs of students. Based on the millions of content pieces we have on the platform we can provide truly meaningful and relevant answers to students. But its not only about answers, the companion is even more about guiding students through their daily learning challenges, with personalised study plans, quizzes or content pieces in the chat and 100% personalisation based on the students skills and developments.
Where can I download the Knowunity app?
You can download the app in the Google Play Store and in the Apple App Store.
Is Knowunity really free of charge?
That's right! Enjoy free access to study content, connect with fellow students, and get instant help – all at your fingertips.
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4.8/5
Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
I think it’s very much worth it and you’ll end up using it a lot once you get the hang of it and even after looking at others notes you can still ask your Artificial intelligence buddy the question and ask to simplify it if you still don’t get it!!! In the end I think it’s worth it 😊👍 ⚠️Also DID I MENTION ITS FREEE YOU DON’T HAVE TO PAY FOR ANYTHING AND STILL GET YOUR GRADES IN PERFECTLY❗️❗️⚠️
Thomas R
iOS user
Knowunity is the BEST app I’ve used in a minute. This is not an ai review or anything this is genuinely coming from a 7th grade student (I know 2011 im young) but dude this app is a 10/10 i have maintained a 3.8 gpa and have plenty of time for gaming. I love it and my mom is just happy I got good grades
Brad T
Android user
Not only did it help me find the answer but it also showed me alternative ways to solve it. I was horrible in math and science but now I have an a in both subjects. Thanks for the help🤍🤍
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
I found this app a couple years ago and it has only gotten better since then. I really love it because it can help with written questions and photo questions. Also, it can find study guides that other people have made as well as flashcard sets and practice tests. The free version is also amazing for students who might not be able to afford it. Would 100% recommend
Aubrey
iOS user
Best app if you're in Highschool or Junior high. I have been using this app for 2 school years and it's the best, it's good if you don't have anyone to help you with school work.😋🩷🎀
Marco B
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This app is phenomenal down to the correct info and the various topics you can study! I greatly recommend it for people who struggle with procrastination and those who need homework help. It has been perfectly accurate for world 1 history as far as I’ve seen! Geometry too!
Paul T
iOS user