Statement of financial position

• Statement of Financial Position

  Shows the financial structure of a business at a specific point in time
• Statement of Financial Position

  • Identifies a businesses assets and liabilities and specifies the capital (equity) used to fund the business operations
• Balance Sheet


  Another name for the Statement of Financial Position, as the net assets are equal to the total equity
• Types of Assets


  • Non-Current Assets (tangible such as buildings, land, machinery and vehicles; intangible such as patents, goodwill or brand value)
  • Current Assets (cash, items that can be turned into cash relatively quickly, usually within 12 months such as cash in hand, cash in bank, debtors (trade receivables) and inventory (stock))
• Types of Liabilities


  • Non-current liabilities (amounts owed that do not need to be paid back for at least 12 months, e.g. long-term loans such as mortgages)
  • Current liabilities (amounts owed that must be repaid within 12 months, e.g. creditors (trade payables) and bank overdrafts)
• Interpreting the Statement of Financial Position

  Provides information about how a business finances its activities, what it owns, and what it owes
• The statement of financial position is a key document that is part of a businesses annual accounts
• The statement of financial position generally follows a standard structure
• Packer Sports Limited is funded through share capital of $1.500 and retained earnings of $13,235
• Packer Sports Limited has long-term liabilities of $20.000, likely a long-term loan
• Packer Sports Limited has a high gearing as its long-term liabilities are significantly greater than its share capital
• Packer Sports Limited owned assets worth $39,795 in total, including $24,250 in non-current assets and $15.545 in current assets
• Packer Sports Limited had total liabilities of $25,060, including $5,060 in current liabilities and $20,000 in long-term liabilities
• In the exam, you will not be required to construct a Statement of Financial Position, but you do need to understand how they work and how the information can be used to make decisions