Statement of financial position
A statement of financial position (also known as a balance sheet) is a snapshot of the financial position of a business. It shows the assets, liabilities and capital of the business.
You can see an example below. Click on the terms for more information. Bear in mind that the balance sheets of different types of businesses may look a little different.
Fixed assets
Assets held for more than one year
Current assets
Assets expected to be converted to cash within a year.
Current liabilities
Debts required to be paid within a year.
Net current assets
Net current assets are also known as working capital.
They can be calculated like this
net current assets = current assets – current liabilities
Total assets minus current liabilities
This figure can be calculated like this:
(fixed assets + current assets) – current liabilities
Creditors – amounts payable after one year
These are long-term liabilities, that is, they have to be paid over a period longer than a year.
Net assets
Net assets = Total assets – total liabilities
Capital and reserves
The money invested in the business.
Watch the video to see more information on statements of financial position:
Adjustments
Depreciation is shown in the statement of financial position as a decrease in the value of the fixed assets. Depreciation is calculated as demonstrated earlier in the unit and subtracted from the value of the fixed assets each year.
Other adjustments will be made to ensure the statement is correct.