The statement of financial position Cambridge IGCSE Accounting (9–1) revision
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In plain words
The statement of profit or loss tells the story of a year. The statement of financial position is a photograph taken on its last day: everything the business owns, everything it owes, and what is left for the owner.
7 things to know
- It shows the assets, liabilities and owner's equity at one date, so it is headed "at" a date.
- Non-current assets are bought to be used for more than a year: premises, machinery, vehicles. Each is shown at cost, less accumulated depreciation, giving its net book value. Goodwill is an intangible non-current asset: it has no physical form.
- Current assets are cash or will turn into cash within a year: inventory, trade receivables (less any allowance), other receivables, bank and cash.
- Current liabilities are due within a year: trade payables, other payables and a bank overdraft.
- Non-current liabilities are due after more than a year, such as a long-term bank loan.
- Capital section for a sole trader: opening capital + profit for the year − drawings = closing capital. Any new capital introduced is added.
- Total assets always equal capital plus liabilities.
Worked example
A sole trader has opening capital of $40 000, makes a profit of $15 000 and takes drawings of $11 000. Non-current assets are $38 000, current assets $14 500, current liabilities $5500 and a five-year loan $3000. Show that the statement balances.
- Closing capital = 40 000 + 15 000 − 11 000 = $44 000.
- Total assets = 38 000 + 14 500 = $52 500.
- Capital and liabilities = 44 000 + 3000 + 5500 = $52 500. The two totals agree.
Tips and tricks
- "For the year ended" belongs to the statement of profit or loss. "At" belongs to the statement of financial position. The wrong heading loses a mark.
- Prepayments and accrued income are other receivables. Accruals and income received in advance are other payables.
It lands in your notebook with its questions as flashcards.
The statement of financial position: 6 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
What does a statement of financial position show?
It is a snapshot at one date.
Which is a current asset?
It will be sold, and so turned into cash, within a year.
Which is a non-current liability?
It is due after more than one year.
Under which heading is a prepaid expense shown?
It is an other receivable.
Opening capital $18 000, profit $6000, drawings $5000. What is the closing capital?
18 000 + 6000 − 5000.
What kind of asset is goodwill?
It has value but no physical form.
Quiz
6 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 7 marks. Write your answers on paper, then check them.
The statement of financial position
Cambridge IGCSE Accounting (9–1) 0985 · 7 marks · papermunch.org
Name ______________________________ Date ______________
Explain the difference between a current liability and a non-current liability.[2]
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A current liability is due to be paid within one year. A non-current liability is due after more than one year.
Opening capital is $25 000, the profit for the year is $9000, the owner introduced a further $2000 and drawings were $7500. Calculate the closing capital.[3]
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$28 500. 25 000 + 9000 + 2000 − 7500.
Machinery cost $30 000 and has accumulated depreciation of $12 500. State the net book value and the section of the statement in which it appears.[2]
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$17 500, under non-current assets.
Answers: The statement of financial position
- 1. A current liability is due to be paid within one year. A non-current liability is due after more than one year.
- 2. $28 500. 25 000 + 9000 + 2000 − 7500.
- 3. $17 500, under non-current assets.