Statement of financial position
It is a list that is prepared to show the financial position of the enterprise on a specific date, where through this list all the assets owned by the enterprise and its liabilities (liabilities) are known at a specific point in time, so that the asset accounts appear on one side and the accounts for liabilities and property rights on the other. Another aspect, and the sum of the two sides must be equal, and the list is prepared either in the form of an account or in the form of a report.
It is a list that is prepared to show the financial position of the enterprise on a specific date, where through this list all the assets owned by the enterprise and its liabilities (liabilities) are known at a specific point in time, so that the asset accounts appear on one side and the accounts for liabilities and property rights on the other. Another aspect, and the sum of the two sides must be equal, and the list is prepared either in the form of an account or in the form of a report.
Elements and items of the statement of financial position:
From the previous form of the list, you will find that the statement of the financial position or what is known as the balance sheet includes two equal sides, one side for the assets accounts and one for the liabilities and property rights, which are the accounts of the accounting equation or what is known as the budget equation:
From the previous form of the list, you will find that the statement of the financial position or what is known as the balance sheet includes two equal sides, one side for the assets accounts and one for the liabilities and property rights, which are the accounts of the accounting equation or what is known as the budget equation:
The enterprise's resources and assets (assets) = liabilities (towards others) + liabilities to the owners (property rights)
First: the elements and items of the asset side
First: the elements and items of the asset side
The assets owned by the establishment are divided into current assets and non-current assets:
Current assets (short term):
These are the assets that the establishment owns in the form of cash or that are expected to be converted into cash during the next financial period, such as cash in the cash and bank, receivables, goods, notes (bills) and others.
Fixed assets (non-current):
They are the assets that the establishment owns for the purpose of assisting the establishment in carrying out its activity and using it for several years or for several subsequent financial periods, and the aim of their acquisition is not to resell them, such as lands, buildings, machinery, equipment, furniture, and others.
Intangible assets (non-current):
These are the assets owned by the establishment that lack a tangible physical entity, such as the fame of the shop, trademark, patent rights, and others.
Other assets and debit balances:
Second: Elements and clauses on the side of obligations and property rights
These are the assets that the establishment owns in the form of cash or that are expected to be converted into cash during the next financial period, such as cash in the cash and bank, receivables, goods, notes (bills) and others.
Fixed assets (non-current):
They are the assets that the establishment owns for the purpose of assisting the establishment in carrying out its activity and using it for several years or for several subsequent financial periods, and the aim of their acquisition is not to resell them, such as lands, buildings, machinery, equipment, furniture, and others.
Intangible assets (non-current):
These are the assets owned by the establishment that lack a tangible physical entity, such as the fame of the shop, trademark, patent rights, and others.
Other assets and debit balances:
Second: Elements and clauses on the side of obligations and property rights
This side contains short-term and long-term liabilities, and a special item for property rights.
Short term liabilities:
These are the obligations that the facility must pay during the next financial period (less than a year) such as accounts payable, short-term loans, notes (the bill of exchange) and others.
Long term commitments:
They are the obligations that the facility must pay during the subsequent financial periods (more than a year).
Property rights:
These are the accounts that represent the obligations of the establishment towards the owners of the establishment (partners), such as the capital account, the personal withdrawals account, the retained earnings account, and others.
The accounts and items are arranged in the list, starting with the most liquid accounts, which are cash accounts or those that are expected to be converted into cash during the next fiscal period.
These are the obligations that the facility must pay during the next financial period (less than a year) such as accounts payable, short-term loans, notes (the bill of exchange) and others.
Long term commitments:
They are the obligations that the facility must pay during the subsequent financial periods (more than a year).
Property rights:
These are the accounts that represent the obligations of the establishment towards the owners of the establishment (partners), such as the capital account, the personal withdrawals account, the retained earnings account, and others.
The accounts and items are arranged in the list, starting with the most liquid accounts, which are cash accounts or those that are expected to be converted into cash during the next fiscal period.
Example
These are the balances of the accounts shown from the trial balance of the Peace Consulting Office on 12/31/2015:
These are the balances of the accounts shown from the trial balance of the Peace Consulting Office on 12/31/2015:
Debit balances Credit balances Account name
5000
box
5300
the bank
4000
owe
8000
Furniture and Decoration
5000
box
5300
the bank
4000
owe
8000
Furniture and Decoration
1000 creditors
8000 capital
3000
Personal withdrawals
3000
Personal withdrawals
30,000 consulting revenues
10,000
Salary expenses
3000
Rental expenses
300
Electricity expenses
200
Telephone and internet expenses
500
Advertising expenses
10,000
Salary expenses
3000
Rental expenses
300
Electricity expenses
200
Telephone and internet expenses
500
Advertising expenses
500 profit from the sale of shares
200
Miscellaneous losses
36,500 36,500 Total
Required :
Preparing the financial position statement on 12/31/2015.
200
Miscellaneous losses
36,500 36,500 Total
Required :
Preparing the financial position statement on 12/31/2015.
Solution method:
The statement of financial position as it is on 31/12/2015
The amount of assets, the amount of liabilities, and equity
The statement of financial position as it is on 31/12/2015
The amount of assets, the amount of liabilities, and equity
Assets
short term liabilities
5000 fund 1000 creditors
5300 Bank 1000 Total short-term liabilities
4,000 debtors
Property rights
14300 Total assets in circulation 8000 Capital on 1/1
short term liabilities
5000 fund 1000 creditors
5300 Bank 1000 Total short-term liabilities
4,000 debtors
Property rights
14300 Total assets in circulation 8000 Capital on 1/1
Fixed assets 16,300 profit for the period
8000 Furniture and decoration (3000) personal withdrawals
8000 total fixed assets 21300 net property rights
22,300 total assets 22,300 total liabilities and property rights
Notes on the solution:
The assets side is equal to the liabilities side, and this means that the information transfer from the trial balance is correct in terms of balance.
The net equity has been transferred from the list of changes in equity, see the example in the previous lesson.
8000 Furniture and decoration (3000) personal withdrawals
8000 total fixed assets 21300 net property rights
22,300 total assets 22,300 total liabilities and property rights
Notes on the solution:
The assets side is equal to the liabilities side, and this means that the information transfer from the trial balance is correct in terms of balance.
The net equity has been transferred from the list of changes in equity, see the example in the previous lesson.
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