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    Lesson 1.1 Statement of Financial Position

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    Angel Nichole Valencia
    The statement of financial position records a company's assets, liabilities, and equity at a point in time. It shows what a company owns (assets), what it owes (liabilities), and the owner's equity. Assets are things of value owned, and are divided into current assets (used within a year) and non-current assets. Liabilities are obligations owed, classified as current (due within a year) or non-current. Equity represents the owner's claim and includes capital contributed and retained earnings. The statement of financial position presents a snapshot of a company's financial condition at a specific date.

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    Lesson 1.1 Statement of Financial Position

    Uploaded by

    Angel Nichole Valencia
    8 views1 page
    The statement of financial position records a company's assets, liabilities, and equity at a point in time. It shows what a company owns (assets), what it owes (liabilities), and the owner's equity. Assets are things of value owned, and are divided into current assets (used within a year) and non-current assets. Liabilities are obligations owed, classified as current (due within a year) or non-current. Equity represents the owner's claim and includes capital contributed and retained earnings. The statement of financial position presents a snapshot of a company's financial condition at a specific date.

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    The statement of financial position records a company's assets, liabilities, and equity at a point in time. It shows what a company owns (assets), what it owes (liabilities), and the owner's equity. Assets are things of value owned, and are divided into current assets (used within a year) and non-current assets. Liabilities are obligations owed, classified as current (due within a year) or non-current. Equity represents the owner's claim and includes capital contributed and retained earnings. The statement of financial position presents a snapshot of a company's financial condition at a specific date.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    8 views1 page

    Lesson 1.1 Statement of Financial Position

    Uploaded by

    Angel Nichole Valencia
    The statement of financial position records a company's assets, liabilities, and equity at a point in time. It shows what a company owns (assets), what it owes (liabilities), and the owner's equity. Assets are things of value owned, and are divided into current assets (used within a year) and non-current assets. Liabilities are obligations owed, classified as current (due within a year) or non-current. Equity represents the owner's claim and includes capital contributed and retained earnings. The statement of financial position presents a snapshot of a company's financial condition at a specific date.

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    © All Rights Reserved
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    of 1

    Lesson 1.

    1: Statement of Financial Position


    Introduction to Statement of Financial Position
    A Statement of Financial Position is a document that records the company's resources through its assets
    while also providing records of its debts and other liabilities and the interest of the company's owners in the
    business. It has a lot of different uses inside and outside of a company, but it is generally used to know how a
    business is positioned financially. From this financial statement, users of accounting information can make
    decisions concerning a business’s liquidity and solvency.

    Statement of Financial Position than a year, such as land, equipment, building, and
    the like.
    The Statement of Financial Position shows a
    business's financial condition as of a given period. It Liabilities
    shows what a business owns and what it owes to its
    creditors and owners. Hence, the Statement of Liabilities are obligations or debts of a
    Financial Position records the assets, liabilities, and business to other entities, individuals, or institutions.
    equity of a company. Through this financial There are two types of liabilities, namely,
    statement, users of accounting information can current/short-term liabilities and non-current/long-
    assess a company's ability to pay its short-term term liabilities. Current liabilities are due to be paid
    (liquidity) and long-term debts (solvency). within the next 12 months. Some examples are
    accounts payable, short-term loans, interest
    payable, and the like. Non-current liabilities, on the
    other hand, are debts that will mature beyond the
    one-year period, such as long-term loans,
    mortgages, and bonds.

    Equity
    Equity is the total amount of the capital
    invested by the owner into a business, affected by
    withdrawals made by the owner and the net
    income or net loss that the business entity gained or
    incurred during its operations. It is the residual
    interest after liabilities are deducted from the assets.
    Through equity, a company can secure loans from
    financial institutions. Banks and creditors compare a
    business's equity to its liabilities and determine if a
    business is running through the owner's capital or
    debts.

    In a partnership, the equity section lists the


    capital balances of each of the partners. While in
    corporations, the equity section contains the shares
    of stocks and the retained earnings. The shares of
    stocks can be common stock or preferred stock,
    and the retained earnings are the accumulated
    profits of the corporation during its operations.
    The Statement of Financial Position shows the
    company’s assets, liabilities, and owner’s equity.

    Elements of Statement of Financial Position


    The Statement of Financial Position follows
    the formula of the accounting equation, Assets =
    Liabilities + Equity. For this reason, Assets are listed
    first in the Statement of Financial Position, followed
    by Liabilities and Equity.

    Assets
    Assets are the things that a company owns.
    They are used to generate revenue by producing
    goods or offering services. Assets are divided into
    two categories: current and noncurrent assets.
    Current assets are easy to liquidate and can be
    used within a year. Examples of current assets are
    cash, accounts receivable, cash equivalents, and
    inventories. In contrast, non-current assets are
    difficult to dispose of and can be used for more

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