Statement of financial position: worked examples

Method and where the marks are

The statement of financial position is a snapshot of what the business owns and owes at one moment. So it is dated "as at" a particular day, not for a period. It shows the accounting equation: assets equal capital plus liabilities.

Before you write anything, group every balance under a standard heading. The marks reward classification and order as much as the totals.

Draw the framework first: non-current assets, current assets, current liabilities, non-current liabilities and the capital section. A balance under the wrong heading loses marks even if the figure is right.

Begin with non-current assets, which the business keeps and uses for more than one year, such as premises, machinery, fixtures and vehicles. Show each at cost, less accumulated depreciation, equals carrying amount, ideally in three columns. This links the statement to the depreciation in the income statement.

Only the part of cost not yet written off is carried forward as an asset. List the most permanent asset first, so premises appear before vehicles.

Next come current assets, which should turn into cash within a year. List them from least to most liquid: inventory, trade receivables, prepayments, cash at bank, then cash in hand. Examiners look for this order.

Show trade receivables after deducting any allowance for doubtful debts. Prepayments belong here because they are a future benefit already paid for. For example, inventory of RM9,000, receivables of RM6,500 and cash at bank of RM2,000 give current assets of RM17,500.

Current liabilities are due within a year: trade payables, accruals, a bank overdraft and short-term loans. Current assets minus current liabilities gives net current assets (working capital). Show it explicitly, because it tells the reader whether the business can meet its short-term debts.

Then deduct non-current liabilities, such as a long-term bank loan, which fall due after more than a year. Classify by settlement date, not by name. The same loan can be current or non-current depending on when it must be repaid.

The capital section closes the statement. Start with opening capital, add profit for the year, and deduct drawings to reach closing capital. Show profit and drawings on separate lines.

Closing capital must equal net assets (total assets less total liabilities). If they do not agree, look for an omitted adjustment or a misclassified balance.

Marks are mostly lost on classification. A prepayment is an asset, because value is owed to the business. An accrual is a liability, because the business owes for something already used.

Forgetting to carry closing inventory into current assets, or showing a non-current asset at cost and not at carrying amount, also loses marks. Every adjustment in the income statement, such as depreciation or an accrued expense, must reappear here, because each is one half of a double entry. Finish by checking the date, that both sides balance, and that closing capital equals net assets.

If your statements balance only when you force them to, we can help. One of our teachers can help you find the missing figure and set out the classification so it stays clear. Book a trial class