The Main Features of a Statement of Financial Position | Business Studies for GCSE/IGCSE - Year 11 PDF Download

Introduction to the Statement of Financial Position

• The Statement of Financial Position offers a snapshot of a business's financial standing at a particular moment, detailing its assets, liabilities, and the equity utilized for operations.
• This statement, also referred to as the Balance Sheet, derives its name from the equilibrium between net assets and total equity.

Different Types of Assets

Assets are possessions owned by a business.

Non-Current Assets

• Non-Current Assets are assets owned by the business for the long term. These can be tangible, like buildings, land, machinery, and vehicles, or intangible, such as patents, goodwill, or brand value.
• Examples of tangible assets include buildings, land, machinery, and vehicles.
• Tangible assets are physical assets that hold long-term value for the business.
• Intangible assets, like patents, goodwill, or brand value, have no physical presence but contribute significantly to the business's value.

Current Assets

• Current Assets are assets that can be converted into cash relatively quickly, typically within 12 months.
• The four main types of current assets are cash in hand, cash in bank, debtors (trade receivables), and inventory (stock).
• Debtors refer to the amounts owed to the business by customers for goods or services provided on credit.

Different Types of Liabilities

Liabilities are financial obligations of a business, essentially its debts.

Non-current liabilities

• Non-current liabilities consist of amounts owed by a business that do not require repayment within the next 12 months.
• An illustration of a non-current liability is a long-term loan, such as a mortgage taken by a company.

Current liabilities

• Current liabilities are debts that a business must settle within a period of 12 months.
• Examples of current liabilities encompass payables to creditors for trades and bank overdrafts.