Statement of financial position
A statement of financial position shows the value of a business on a particular date.
A balance sheet shows:
- - what the business owns
- - what the business owes
| Statement of financial position for Business Ltd as at 31 March 2019 | |||
| £000 | £000 | £000 | |
| Non-current assets | |||
| Premises | £500,000 | ||
| Vehicles | £100,000 | ||
| £600,000 | |||
| Current assets | |||
| Inventory | £100,000 | ||
| Cash at bank | £50,000 | £150,000 | |
| Current liabilities | |||
| Trade payables | £30,000 | ||
| Wages payable | £20,000 | £50,000 | |
| Net current assets | £100,000 | ||
| Total assets less current liabilities | £700,000 | ||
| Non-current liabilities | |||
| Bank loan | £100,000 | £100,000 | |
| Net assets | £600,000 | ||
| Equity and reserves | |||
| Shares | £250,000 | ||
| Retained profits | £100,000 | ||
| Net worth | £950,000 |
| Statement of financial position for Business Ltd as at 31 March 2019 |
| £000 |
| £000 |
| £000 |
| Non-current assets |
| Premises |
| £500,000 |
| Vehicles |
| £100,000 |
| £600,000 |
| Current assets |
| Inventory |
| £100,000 |
| Cash at bank |
| £50,000 |
| £150,000 |
| Current liabilities |
| Trade payables |
| £30,000 |
| Wages payable |
| £20,000 |
| £50,000 |
| Net current assets |
| £100,000 |
| Total assets less current liabilities |
| £700,000 |
| Non-current liabilities |
| Bank loan |
| £100,000 |
| £100,000 |
| Net assets |
| £600,000 |
| Equity and reserves |
| Shares |
| £250,000 |
| Retained profits |
| £100,000 |
| Net worth |
| £950,000 |
Non-current assets
Non-current assets show the current value of major purchases that help in the running of the business, like delivery vans, premises or PCs.
In this case £600,000 of non-current assets are owned. Non-current assets are usually owned for longer than a year.
Current assets
Current assets show the cash or near-cash available to the firm. This includes inventory (stock) ready to sell, money owed to them by debtors and cash in the bank.
There is £150,000 worth of current assets. The value of current assets is likely to change in the short term.
Current liabilities
Current liabilities are any debts a business owes that will need to be paid back within a year (short-term debts).
Net current assets
Net current assets show the value of the company once all current have been taken from the .
Non-current liabilities
Non-current liabilities usually include long-term loans such as a long-term bank loan or that do not need paid back within a year.
In this case the businses has non-current liabilities worth £100,000
Equity and reserves
Equity and reserves show the money that has been invested by the owners and any profit that has been kept by the business .
Net worth
Net worth adds together the businesses equity and reserves, and its net assets. This shows the overall worth of the business on the day the statement of financial position was drawn up.
In this case, the business has a net worth of £950,000.
Purpose of a statement of financial position
- A statement of financial position shows the overall value of the business. It is a legal requirement for all limited companies to prepare a statement of financial position
- Investors and potential investors can use a statement of financial position to determine whether they will get a good return on their investment.
- and can use it to determine the level of risk involved in lending or supplying to the business
- A statement of financial position can be used to which can be compared with previous years or those of competitors. This will better aid future decision-making
- A statement of financial position can be used to show the value of all , , and
