Explain Change in Financial Position Over a Period of Time © Dale R. Geiger 20111

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 20112

What if Gomer inherits $1,000,000? © Dale R. Geiger 20113

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 Ending Financial Position Statement of Activities © Dale R. Geiger 20114

Changes in Financial Position The Statement of Activities, or Income Statement, reflects activity for a PERIOD OF TIME. (Like a video) Beginning Financial Position Ending Financial Position Statement of Activities © Dale R. Geiger 20115

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 20116

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 20117

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 20118

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 20119

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

Check 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? © Dale R. Geiger

The Simmons: Financial Activity for January DateActivityCash Amount 2-JanMadge puts gasoline in the car120 4-JanGomer buys doughnuts35 7-JanGomers paycheck925 8-JanMadge buys groceries JanLacy has a dentist appointment JanBert breaks a window50 15-JanMadge babysits the neighbor kids25 21-JanGomers paycheck JanMadge pays interest on mortgage938 Task: Calculate the Net Change in Financial Position for January. © Dale R. Geiger

The Simmons: Financial Activity for January DateActivityCash Amount 2-JanMadge puts gasoline in the car120 4-JanGomer buys doughnuts35 7-Jan 8-JanMadge buys groceries JanLacy has a dentist appointment JanBert breaks a window50 15-Jan 21-Jan 22-JanMadge pays interest on mortgage938 Task: Calculate the Net Change in Financial Position for January. © Dale R. Geiger

The Simmons: Financial Activity for January DateActivityCash Amount 2-Jan 4-Jan 7-Jan 8-Jan 12-Jan 14-Jan 15-Jan 21-Jan 22-Jan Task: Calculate the Net Change in Financial Position for January. © Dale R. Geiger

The Simmons: Changes in Financial Position What are the Revenues? Gomers gross pay and Madges 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 © Dale R. Geiger

The Simmons: Changes in Financial Position What are the Revenues? Gomers gross pay and Madges 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

The Simmons: Changes in Financial Position What are the Revenues? Gomers gross pay and Madges 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

The Simmons: Changes in Financial Position What are the Revenues? Gomers gross pay and Madges 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

The Simmons: Changes in Financial Position What are the Revenues? Gomers gross pay and Madges 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

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: Gomers Salary (Gross)$1,850 Madges 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, ,327 Financial Position January 31, 2011 $9,359 © Dale R. Geiger

Graphic Representation of Net Change $32 $2025 $1993 © Dale R. Geiger

Graphic Representation of Net Change $32 $9359 $9327 © Dale R. Geiger

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

Check on Learning What activities will cause financial position to increase? What activities will cause financial position to decrease? © Dale R. Geiger

Practical Exercise © Dale R. Geiger

Statement of Activities Spreadsheet Enter Transaction Data into the register © Dale R. Geiger

Statement of Activities Spreadsheet After entering Data, Press button to Create Statement Of Activities After entering Data, Press button to Create Statement Of Activities © Dale R. Geiger

Statement of Activities Spreadsheet Statement of Activities shows: Total Revenues, Total Costs, Change in Financial Position, and Ending Financial Position Statement of Activities shows: Total Revenues, Total Costs, Change in Financial Position, and Ending Financial Position © Dale R. Geiger

Practical Exercise © Dale R. Geiger