Interpret Change in Financial Position Over a Period of Time Principles of Cost Analysis and Management

Terminal Learning Objective Action: Interpret Change in Financial Position over a period of time. Condition: FM Leaders in a classroom environment working individually and as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion. Standard: With at least an 80% accuracy (70% for international Learners): Identify Changes in Financial Position Analyze Financial Activity; Detailed Breakdown

What if Gomer inherits $1,000,000? Changes in Financial Position What if Gomer inherits $1,000,000?

Changes in Financial Position (Cont.) 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 Ending Statement of Activities

Changes in Financial Position (Cont.) The Statement of Activities, or Income Statement, reflects activity for a period of time. (Like a video) Beginning Financial Position Ending Statement of Activities

Changes in Financial Position (Cont.) Under the Cash Basis of Accounting: Revenues: Represent earnings received in cash Increase Assets and Increase Financial Position sent earnings rec in cash Costs: Represent cash payments for goods and services received Decrease Assets and Decrease Financial Position payments for goods and services ncial Position Revenues – Costs = Net Change in Financial Position

The Simmons: Statement of Financial Position 1/1/XX 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 NOTE: ‘XX’ represents current FY

LSA #1 Check on Learning Q1: What is the equation for the change in financial position? A1. Q2: What is the name of the statement that describes changes in financial position? A2. Q1: What is the equation for the change in financial position? A1. Revenues – Costs = Net Change Q2: What is the name of the statement that describes changes in financial position? A2. Statement of Activities

LSA #1 Summary During this block, we discussed Financial Position, the various terms associated with Financial Position, along with changes. We also viewed a detailed breakdown of the Simmons family financial activities.

The Simmons: Financial 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.

Changes in Financial Position (Cont.) Q1. What are the Revenues? A1. Gomer’s gross pay and Madge’s babysitting Q2. What are the Costs? A2. Tax withholding , gasoline, doughnuts, groceries, dentist, window, and mortgage interest Q.3 What is the Net Change in Financial Position? A3. Revenues $1,875 – Costs $1,843 = 32 Increase Q4. What is the Ending Financial Position? A4. ?????Discuss?????

LSA #2 Check on Learning Q1. Revenues are counted when they are? A1. ________ __ ____ Q2. Costs are counted when they are? A2. ____ __ ____ Q1. Revenues are counted when they are? A1. Received in Cash Q2. Costs are counted when they are? A2. Paid in Cash This is known as the Cash basis of accounting. We will look at other ways of counting revenues and costs in future lessons. 12

LSA #2 Summary During this learning Activity, we delved a bit deeper into Activity sheets, discerning the difference between revenues and costs. Also covered is the “Net change in Financial Position” formula. 13

The Simmons: Statement of Activities for month of January 20XX Revenues: Gomer’s Salary (Gross) $1,850 Madge’s babysitting 25 Total Revenues $1,875 Costs: Interest $938 Groceries 600 Gasoline 120 Dentist 100 Broken Window 50 Doughnuts 35 Total Costs 1,843 Net Change in Financial Position 32 Add: Financial Position January 1, 20XX 9,327 Financial Position January 31, 20XX $9,359

Graphic Representation of Net Change $1875 $32 $1843

Graphic Representation of Net Change (Cont.) $9359 $32 $9327

The Simmons: Statement of Financial Position 1/31/XX 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

LSA #3 Check on Learning Q1. What activities will cause financial position to increase? A1. Q2. What activities will cause financial position to decrease? A2. Q1. What activities will cause financial position to increase? A1. Revenues Q2. What activities will cause financial position to decrease? A2. Cost

LSA #3 Summary During this block of instruction, we discussed another Simmons “Statement of Activities” scenario and provided a graphic representation.

Practical Exercise / Review

Statement of Activities Spreadsheet Enter Transaction Data into the register

Statement of Activities Spreadsheet (Cont.) After entering Data, Press button to Create Statement Of Activities

Statement of Activities Spreadsheet (Cont.) Statement of Activities shows: Total Revenues, Total Costs , Change in Financial Position, and Ending Financial Position

TLO Check on Learning Q1. The Statement of Financial Position can also be called this. A1. Q1. The Statement of Financial Position can also be called this. A1. Balance Sheet

TLO Summary Action: Interpret Change in Financial Position over a period of time. Condition: FM Leaders in a classroom environment working individually and as a member of a small group, using doctrinal and administrative publications, self-study exercises, personal experiences, practical exercises, handouts, and discussion. Standard: With at least an 80% accuracy (70% for international Learners): Identify Changes in Financial Position Analyze Financial Activity; Detailed Breakdown Review the GFEBS Budget Reporter (Role)