Slides 1 2 calculate financial position and net change in fi

Calculate Financial Position and
Net Change in Financial Position

© Dale R. Geiger 2011

1


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

© Dale R. Geiger 2011

2


Terminal 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 Family
• Gomer, Madge and kids:
• Bert, Lacy and baby Maddie
• Stunt doubles for a popular cartoon family

• Task: Calculate the family’s
Financial Position

© Dale R. Geiger 2011

4


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
© Dale R. Geiger 2011

5


What’s an Asset?

• An Asset is:
• Something you OWN
• Represents FUTURE BENEFIT

• What kinds of assets might the Simmons
family own?

© Dale R. Geiger 2011

6


What’s an Asset?
• An Asset is:
• Something you OWN
• Represents FUTURE BENEFIT

• What kinds of assets might the Simmons
family own?

© Dale R. Geiger 2011

7


What’s an Asset?
• An Asset is:
• Something you OWN
• Represents FUTURE BENEFIT

• What kinds of assets might the Simmons
family own?

© Dale R. Geiger 2011

8


What’s an Asset?
• An Asset is:
• Something you OWN
• Represents FUTURE BENEFIT

• What kinds of assets might the Simmons
family own?

© Dale R. Geiger 2011

9


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?

© Dale R. Geiger 2011

10


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?

© Dale R. Geiger 2011

11


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?

© Dale R. Geiger 2011

12


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?

© Dale R. Geiger 2011

13


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?

© Dale R. Geiger 2011

14

Learning Check
• What is the equation to represent financial
position?
• Which element of the equation represents
future benefits of the entity?

© Dale R. Geiger 2011

15


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
-0Hospital 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

© Dale R. Geiger 2011

17


Sorting the Data

© Dale R. Geiger 2011

18


Classifying Assets & Liabilities
Assets:
House
$230,000
Car
6,000
Furniture
3,000
Clothing
750
Cash (Bank + purse) 327.47
Total
$240,077.47

Liabilities:
Mortgage
Credit Card
Property Tax
Hospital

Total

$225,000
2,300
2,500
950
$230,750

Financial Position or Net Worth =
$240,077.47 - $230,750 = $9,327.47
© Dale R. Geiger 2011

19


Graphic Solution

© Dale R. Geiger 2011

20


Learning Check
• 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?

© Dale R. Geiger 2011

21


Reporting 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)

© Dale R. Geiger 2011

22


Statement of Financial Position
Assets:
House
$230,000
Car
6,000
Furniture
3,000
Clothing

750
Cash (Bank + purse) 327.47
Total

$240,077.47

Liabilities:
Mortgage
Credit Card
Property Tax
Hospital
Total Liab.
Net Worth
Total

© Dale R. Geiger 2011

$225,000
2,300
2,500
950
$230,750
9,327.47
$240,077.47

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Questions
• 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
© Dale R. Geiger 2011

24


Questions
• 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

• Monetary Unit Assumption:
• Financial information must be measured and reported
in a monetary unit such as U.S. Dollars
© Dale R. Geiger 2011

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