Statement Of Financial Position: The Main Elements Of A Statement Of Financial Position (Copy)
Cheat Sheet: 5.4.1 Statement of Financial Position – Main Elements
Purpose
- A Statement of Financial Position (Balance Sheet) shows a business’s financial position at a point in time.
- It lists assets, liabilities, and owner’s equity.
Main Classifications of Assets
| Type | Definition | Examples |
|---|---|---|
| Non-current (fixed) assets | Resources owned for more than 1 year | Land, buildings, machinery |
| Current assets | Resources convertible to cash within 1 year | Cash, inventories, trade receivables |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course
Main Classifications of Liabilities
| Type | Definition | Examples |
|---|---|---|
| Non-current liabilities | Debts payable after more than 1 year | Bank loan, debentures |
| Current liabilities | Debts payable within 1 year | Overdraft, trade payables |
Equity (Owner’s Capital)
| Element | Explanation |
|---|---|
| Capital/Shareholders’ Equity | Owner’s stake in the business (assets – liabilities) |
| Retained Earnings | Profits kept in the business instead of paid as dividends |
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course
Example Format (Simple)
| Statement of Financial Position | $ |
|---|---|
| Assets | |
| Non-current Assets | 50,000 |
| Current Assets | 20,000 |
| Total Assets | 70,000 |
| Liabilities | |
| Non-current Liabilities | 25,000 |
| Current Liabilities | 15,000 |
| Total Liabilities | 40,000 |
| Owner’s Equity (Capital) | 30,000 |
Equation:
Assets = Liabilities + Owner’s Equity
Quick Revision Bullets
- Assets = resources owned (current or non-current)
- Liabilities = debts owed (current or non-current)
- Equity = owner’s share = Assets – Liabilities
- Balance Sheet shows financial position at a point in time
Written and Compiled By Sir Hunain Zia, World Record Holder With 154 Total A Grades, 7 Distinctions and 11 World Records For Educate A Change O Level And IGCSE Business Studies Full Scale Course