explain change in financial position over a period of time © dale r. geiger 20111

Explain Change in Financial Explain Change in Financial Position Over a Period of TimePosition Over a Period of Time

© Dale R. Geiger 2011 1

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

What if Gomer inherits $1,000,000?What if Gomer inherits $1,000,000?

© Dale R. Geiger 2011 3

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

© Dale R. Geiger 2011 4

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

© Dale R. Geiger 2011 5

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 6

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 7

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

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

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

© Dale R. Geiger 2011 10

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?

© Dale R. Geiger 2011 11

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

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

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

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

© Dale R. Geiger 2011 15

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

© Dale R. Geiger 2011 16

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

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

© Dale R. Geiger 2011 18

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

© Dale R. Geiger 2011 19

Check on LearningCheck on Learning

• Revenues are counted when they are

• Costs are counted when they are

© Dale R. Geiger 2011

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

© Dale R. Geiger 2011 21

Graphic Representation of Net ChangeGraphic Representation of Net Change

$32

$2025

$1993

© Dale R. Geiger 2011 22

Graphic Representation of Net ChangeGraphic Representation of Net Change

$32

$9359

$9327

© Dale R. Geiger 2011 23

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

© Dale R. Geiger 2011 24

Check on LearningCheck on Learning

• What activities will cause financial position to increase?

• What activities will cause financial position to decrease?

© Dale R. Geiger 2011 25

Practical ExercisePractical Exercise

© Dale R. Geiger 2011 26

Statement of Activities SpreadsheetStatement of Activities SpreadsheetEnter Transaction Data into the register

© Dale R. Geiger 2011 27

Statement of Activities SpreadsheetStatement of Activities Spreadsheet

After entering Data, Press button to

Create StatementOf Activities

© Dale R. Geiger 2011 28

Statement of Activities SpreadsheetStatement of Activities Spreadsheet

Statement of Activities shows:Total Revenues,

Total Costs ,Change in Financial

Position, and Ending Financial Position

© Dale R. Geiger 201129

Practical ExercisePractical Exercise

© Dale R. Geiger 2011 30