Statement of Financial Position 

A statement of financial position, or balance sheet, considers key financial information that allows a business to monitor where the money comes from and where it has been spent, along with the overall value of a business. 

Statement of financial position – summary at a point in time of business assets, liabilities and capital. A balance sheet shows: 

• assets – what the business owns 
• liabilities – what the business owes 

Features of a Statement of Financial Position 

• Assets are split into two different categories, current and fixed (or non-current):
  • Current assets are short term, they will be owned for, or last for, less than a year. This may include things such as stock, raw materials, and cash. 
  • Fixed (non-current) assets are long term, they will be owned, or last for, more than a year. These may include things such as vehicles, equipment and buildings. 
• Liabilities are also split into two different categories, current and long-term (or non-current):
  • Current liabilities, or short-term debts, are any debts a business owes that will need to be paid back within a year, for example an overdraft, trade credit or a short-term business loan. 
  • Long-term (non-current) liabilities is money borrowed that is paid back in more than a year, for example mortgages or a long-term bank loan. 
• Net current assets/working – This is calculated by subtracting current liabilities from current assets. Net current assets is the money available for the day-to-day running and operation of a business, such as paying wages and purchasing stock. 
• Net assets are essentially what a business is worth. This is calculated by adding fixed assets and net current assets (working capital) together. It can also be calculated as the difference between total assets and total liabilities. 
• Capital employed is achieved by adding any equity and reserves, such as shareholder funds, to the long-term liabilities. This figure should always match the net assets figure, to make the sheet balance.