Statement of Financial Position

The statement of financial position shows the value of a business’s assets and liabilities at a particular time. 

Assets are those items of value that are owned by the business. They may be non-current or current assets.

Liabilities are debts owed by the business. They may be non-current [long-term] liabilities or [short-term] current liabilities. 

Non current assets are items owned by the business for more than one year. 

Current assets are owned by the business and used within a year. 

Example: cash, inventories and accounts receivables

Non current liabilities are long-term debts owed by the business repaid over more than a year. 

Current liabilities are short-term debts owed by the business, repaid in less than one year.

Example: bank overdraft, accounts payable

Shareholders’ equity [shareholder’s funds] is the total sum of money invested into the business by the owners of the company. 

Owners equity [shareholders’ funds]= Total assets – Total liabilities  

Working capital = Current assets – Current liabilities

Capital employed = Shareholders’ funds + Non- current liabilities

How can statements of financial position be used?

Shareholders can see if their stake in the business has increased or fallen in value over the last year.

Shareholders can also analyse how expansion by the business has been paid for 

Information on statements of financial position can be used to calculate ratios for understanding the business’s performance.