What is the statement of Financial Position/Balance Sheet?

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For me as a POA teachers for almost 20 years, I feel that after pupils understand the accounting elements, they will need to learn how to draw up a statement of financial position or balance sheet.  This will help them to further strengthen their understanding of the accounting elements.

So, I will start by introducing the simple Statement of financial position/balance sheet.  

The more advance statement of financial position or balance sheet will be introduced later.

Statement of Financial position is a list of the Assets, Liabilities and Equity belonging to the business at a given point in time.

Statement of Financial position must always balance
Total Assets = Total Equity + Total Liabilities 

This is the Accounting Equation

For Sec 3 pupils who just started doing accounting, they will need to know how to differentiate between current assets and non current assets, current liabilities and non current liabilities before the statement can be prepared.

Assets can be classified into Current Assets and Non Current Assets.


Question 1 :
Classify the following as Current Assets (CA) or Non Current Assets (NCA)
Hint : Try to look at each items by deciding whether the asset will last more than a year or less than a year

1. Property
2. Equipment
3. Trade receivable
4. Cash in hand
5. Cash at bank
6. Motor Vehicle
7. Fixtures and Fittings
8. Inventory

Answer : Current Assets =3.4.5,8 Non Current Assets = 1,2,6,7

Liabilities can be classified into Current Liabilities and Non Current Liabilities.




Question 2 :
Classify the following as Current liabilities (CL) or Non Current Liabilities (NCL)
Hint : Try to look at each items by deciding whether the liability will last more than a year or less than a year

1. 10-year bank loan
2. Trade payable
3. Short term borrowing/bank overdraft
4. 5-year mortgage loan
5. Other payable

Answer : Current liabilities =2,3,5 Non Current Liabilities = 1,4

How the statement of Financial Position look like?


To draw up the statement of financial position, students must first know how to classify Assets and liabilities accordingly to whether it will last more than a year or less than a year, ie Current or Non current.

Question 3
Rina Enterprise has the following extracted from the Trial balance
as at 31 Dec  2019
Cash at bank 2100 CA
Motor Vehicle 10000 NCA
Property 30000 NCA
Trade receivable 2000 CA
Trade Payable 1100 CL
Cash in hand 100 CA
Long term borrowing 15000 NCL
Capital 31000 Equity
Inventory 2900 CA
You are required to draw up a Statement of financial position as at 31 Dec 2019


Rina Enterprise
Statement of financial position as at 31 December 2019
Assets $ $
Non-Current Assets
Motor Vehicle 10000
Property 30000
40000
Current Assets
Inventory 2900
Trade  receivable 2000
Cash at bank 2100
Cash in hand 100
7100
Total Assets 47100
Equity and liabilities
Owner's Equity
Capital 31000
Non-Current Liabilities
Long term borrowing 15000
Current liabilities 
Trade payable 1100
total equity and liabilities 47100


Now , let's try this question : 


Question 4
Nicole Del  has the following extracted from the Trial balance
as at 31 December 2019 $
Cash in hand 200 CA
Fixtures 3000 NCA
Property 12000 NCA
Trade receivable 3100 CA
Trade Payable 1700 CL
other payable 100 CL
Mortgage 15000 NCL
Capital 3060 Eq
Inventory 2900 CA
Short term borrowing 1340 CL
You are required to draw up a Statement of financial position  as at 31 Dec 2019

Nicole del 
Statement of financial position  as at 31 December 2019
Assets
         $
      $
Non Current Assets


Fixtures
3000

Property
12000



15000
 Current Assets


 Inventory
 2900

 Trade Receivable
 3100

 Cash in hand
 200



 6200
 Total Assets

 21200



 Equity and liabilities


 Equity


 Capital

 3060



 Non Current Liabilities


 Long Term borrowing

 15000



 Current Liabilities


 Trade Payable
 1700

 Other Payable
 100

 Short Term borrowing
 1340




 3140
Total Equity and Liabilities

 21200

For more questions to practise on Statement of Financial position. please click here More practice questions


                               




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