Slide 8.

1

Chapter 8 Statements of financial position

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012

Slide 8.2

Learning objectives
 Explain

the meanings of the terms noncurrent asset, current asset, current liability and non-current liability  Describe the sequence in which each of the five main categories of items appear in the statement of financial position  Describe the sequence in which each noncurrent asset is entered in the statement of financial position
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012

Slide 8.3

Learning objectives (Continued)
 Describe

the sequence in which each current asset is entered in the statement of financial position  Draw up a statement of financial position from information given in a trial balance

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012

Slide 8.4

Definition
The statement of financial position is a list of balances arranged according to:
whether they are assets, capital or liabilities and so depict the financial situation on a specific date.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012

Slide 8.5

The statement of financial position
 The

statement of financial position used to be called the balance sheet.  The statement of financial position contains details of assets, liabilities and capital – all those accounts with balances that were not included in the income statement.  The statement of financial position is not part of the double entry system.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012

Slide 8.6

The format for a statement of financial position
Non-current assets – assets that are:  Not bought primarily to be sold.  Bought to be used in the business.  Are expected to be of use in the business for a long time.

Non-current assets are listed first in the statement of financial position starting with those the business will keep the longest.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012

Slide 8.7

The format for a statement of financial position (Continued)
Current assets – assets that are:  Likely to change in the short term and certainly within 12 months.  Include: items held for resale, accounts receivable, cash in the bank and in hand. Current assets are listed in increasing order of liquidity.
Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012

Slide 8.8

The format for a statement of financial position (Continued)
Current liabilities:
 Liabilities

that have to be paid within a year of the date of the statement of financial position.  Examples include bank overdrafts and accounts payable.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012

Slide 8.9

The format for a statement of financial position (Continued)
Non-current liabilities:
 Liabilities

that have to be paid more than a year after the date of the statement of financial position.  Examples include bank loans and loans from other businesses.

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012

Slide 8.10

The format for a statement of financial position (Continued)

Frank Wood and Alan Sangster, Frank Wood’s Business Accounting 1, 12th Edition, © Pearson Education Limited 2012