Chapter 6 - Statement of financial position

Assets

An asset is a resource with economic value that a business owns with the expectation that it will provide a future benefit. There are two types of assets

Non current assets

These are acquired to be used in the business for a long period of time to increase the earning capacity of the entity. It is not purchased for resale. For example:

Property, plant and equipment
Machinery
Motor vehicles
Land and Buildings
Fixtures and fittings

Current assets

Current assets are short-term economic resources that are expected to be converted into cash within one year. They are own by the business and their value changes almost everyday. For example:

Inventory of goods
Trade receivables (Credit customers)
Cash in hand/ cash at bank/ cash and cash equivalents / petty cash
Other receivables (Expenses paid in advance/income due)

Liabilities

Liabilities are debts or obligations the company owes as a result of past transactions. There are two types of liabilities:

Non current liabilities

These are amount of money owed by the business for a long period of time (usually more than one year). These are normally utilised to increase total capital of the business. For example:

Loan from bank
Loan from friend
Mortgage of premises

Current liabilities

These are amount of money owed by the business for a short period of time (usually less than one year). They are mostly used for sustainability of working capital of the business. For example:

Trade payables (Credit suppliers)
Other Payables (Expenses due / Income prepaid)
Bank overdraft (Bank – credit balance)

Capital

The capital of a business refers to the money used to start or expand an entity. It also refers to money available to pay for its day to day operations and to fund future growth. Capital may be in the form of assets brought in by the owner. It is known as owner’s equity.

FORMAT

Statement of financial position as at 31st December 2016
	$	$
Non-Current assets
Property, plant and equipment		***
Fixtures and Fittings		***
Total non-current assets		***
Current Assets
Closing inventory	***
Trade receivables	***
Cash and cash equivalents (Cash in hand & bank)	***
Other receivables	***
Total current assets		***
Total Assets		****
Equity
Capital		***
Add Profit for the year		***
Less Drawings		(**)
Capital owned / Owner's capital		***
Non Current liabilities
Loan		***
Capital Employed		***
Current Liabilities
Trade payables	**
Other payables	**
Bank overdraft (CR)	**
Total current liabilities		**
Equity and Liabilities		****

Q1 – Prepare a statement of financial position as at 31^st December 2010 from the following information.
	DR	CR
Motor Van	23 000
Plant and machinery	112 000
Trade receivables	32 000
Cash and cash equivalents	12 000
Closing inventory	25 500
Trade payables		11 000
Other payables		1 500
Other receivables	2 300
Bank loan		45 000
Capital		143 600
Drawings	9 800
Profit for the year		15 500
	216 600	216 600

Q2 – Prepare a statement of financial position as at 31^st December 2011 from the following information.
	DR	CR
Office equipment	24 600
Plant and machinery	140 300
Trade receivables	34 000
Cash and Bank	11 000
Closing inventory	13 600
Trade payables		12 980
Other payables		1 100
Other receivables	2 240
Bank loan		43 000
Capital		156 400
Drawings	5 740
Profit for the year		18 000
	231480	231480

Q3 – Prepare a statement of financial position as at 31^st December 2012 from the following information.
	DR	CR
Fixtures and Fittings	18 000
Land and buildings	120 000
Trade receivables	21 000
Cash and cash equivalents	11 000
Closing inventory	12 000
Trade payables		9 000
Other payables		2 000
Other receivables	1 200
Bank loan		32 000
Capital		110 200
Drawings	4 500
Profit for the year		34 500
	187 700	187 700

Q4 – Prepare a statement of financial position as at 31^st December 2013 from the following information.
	DR	CR
Warehouse	112 500
Plant and machinery	130 000
Trade receivables	34 000
Cash and cash equivalents	13 000
Closing inventory	28 000
Trade payables		23 000
Other payables		3 400
Other receivables	1 400
Bank loan		29 000
Capital		229 500
Drawings	15 000
Profit for the year		49 000
	333 900	333 900

Q5. Prepare a statement of financial position from the following details as at 31st December 2014
	DR	CR
Other payables		400
Machinery	40 000
Equipment	30 000
Inventory - 31st Dec	15 000
Trade Receivables	18 000
Cash and Bank	12 000
Trade payables		14 000
Loan from bank		11 000
Capital		66 800
Drawings	8 000
Profit for the year		32 000
Other receivables	1 200
	124 200	124 200

Q6. Prepare a statement of financial position from the following details as at 31st December 2013
	DR	CR
Trade receivables	21 350
Other receivables	1 250
Inventory - 31st Dec	18 240
Plant and machinery	140 000
Cash and bank	23 000
Office computer	34 000
Capital		167 800
Profit for the year		32 490
Loan		21 900
Drawings	4 400
Trade payables		18 950
Other payables		1 100
	242 240	242 240

Q7. Prepare a statement of financial position from the following details as at 31st December 2012
	DR	CR
Cash in hand	4 670
Drawings	670
Trade receivables	3 249
Motor van	11 451
Other payables		890
Land and Buildings	21 700
Loan from bank		3 300
Profit for the year		1 564
Capital		34 250
Other receivables	690
Trade payables		4 566
Inventory-31st Dec	2 140
	44 570	44 570

Q8. Prepare a statement of financial position from the following details as at 31st December 2019
	DR	CR
Equipment	560
Machinery	1 280
Other receivables	120
Inventory - 31st Dec	1 680
Trade Receivables	890
Cash and Bank	1 010
Trade payables		650
Loan from bank		1 800
Capital		2 640
Drawings	660
Other payables		130
Profit for the year		980
	6 200	6 200