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 31st 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 31st 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 31st 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 31st 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